According to public statements released by their respective Chairs (click here and here), the SEC and the CFTC recently participated in a joint roundtable to discuss deeper collaboration between the two agencies.
The event was hosted in Washington DC by the SEC and was touted by the sitting Chairs as a “turning point” and “historic event” for US financial markets and is thought to be the first joint roundtable involving the two federal agencies since the Dodd-Frank rules were discussed in a similar forum 15 years ago. Paul Atkins, the SEC Chair, noted explicitly that the “focus is on harmonization, not on a merger of the SEC and CFTC, which would be up to Congress and the President”, perhaps putting paid to recent speculation about the merger topic. According to Caroline Pham, the acting Chair of the CFTC, the dynamic between the CFTC and SEC in recent years has been about competition rather than collaboration, lauding the start of a “new day” with the “turf war” being over;
While substantive detail in the respective announcements is light, Acting Chair Pham noted in her announcement that there is an opportunity to “start over from a blank sheet of paper” to design a market structure that works best for liquidity and capital efficiency. On specific topics, she mentions innovations such as 24/7 markets (or extended trading hours), perpetual contracts, prediction markets and crypto asset markets. Chairman Atkins spoke more generally about building a framework where the agencies coordinate “seamlessly, reduce duplicative regulation, and give markets the clarity they deserve”. He also speaks about the end of an era of “regulatory fragmentation” and an age of “innovation-friendly oversight” beginning, referring to the US leading the “digital age”. Two industry associations were quick to offer statements of support as well as articulating several areas that they believe the CFTC and SEC should focus on in this new harmonious age;
The Chief Executive of ISDA, the OTC derivatives industry association, published this statement. In it, he highlights that there are parts of the current US regulatory framework where alignment and coordination is sorely needed. He specifically highlights regulatory reporting, Treasury clearing and collateral infrastructure as key areas. Similarly, the Chief Executive of the FIA, the futures trading industry association, published this statement. In it, he offers a laundry list of issues the two agencies should consider as they improve collaboration. As an ex-Acting CFTC Chair himself, the FIA CEO also offers several “ideas for the future” including the permanent reinstatement of the Joint Advisory Committee (JAC), a joint SEC-CFTC committee that ran between 2010 and 2014, adding responsible innovation to its remit, conferring joint rulemaking authority to the JAC on instruments that straddle securities and commodity futures, creating shared definitions and taxonomies via the JAC amongst others.
While this week’s announcement was light on detail, it likely signals the start of deeper and more meaningful collaboration between the two federal agencies which have historically often been at odds with one another over topics such as digital assets and crypto. Like many, we look forward to seeing fruitful developments in this area.