Opening Statements

Remarks as prepared:

Good morning. Thank you for joining the Commodity Exchanges, Energy, and Credit Subcommittee for our last installment of our three-part hearing series examining the implementation of the derivatives market reforms envisioned by world leaders following the 2008 global financial crisis. Today, we will wrap up the series with a focus on clearing and trade execution requirements.

Throughout this series, we’ve reiterated many times that our goal is not an indictment of the reform objectives, but rather an analysis of its implementation by United States regulators and the interaction of the U.S. regulatory regime with that of other global jurisdictions. A vibrant and resilient derivatives marketplace is crucial for the market participants and end users who rely on it to manage their diverse business risks. It is also critical for the consumers, Americans in the Eighth District of Georgia and across the nation, who rely on the price stability afforded by these risk management practices.

Crucially, the global nature of this marketplace cannot be taken for granted. Regulations must not unnecessarily fragment the market, defining liquidity pools by borders instead of market needs. We have already had many conversations on cross-border equivalence and recognition in the clearing space.

While we are encouraged by recent steps toward U.S.-E.U. regulatory harmonization for clearinghouses, applications to ESMA for U.S. Clearinghouses remain outstanding with a quickly approaching deadline. This must be resolved. Regulators also need to be working now to prevent similar protracted negotiations for trading execution facilities in the future.

We are glad to have witnesses before us today who can expound on the changes to the clearing ecosystem. While transaction clearing has long played a role in the marketplace, Dodd Frank’s swaps clearing mandate has significantly expanded the volume of cleared transactions. I’m sure that the insights and perspectives offered today will be vital as we think through the related implications for resilience and recovery of clearinghouses in times of market stress.

Many questions have been raised about the workability of the CFTC’s trade execution rules.

• Do they accurately reflect Congressional intent and sufficiently take into account the intricacies of the marketplace they regulate?

• Do they restrict market access for the end users who need to meet specific and custom hedging needs?

• And perhaps most importantly, do they impose arbitrary barriers to trading that diminishes liquidity?  We look forward to exploring these and other issues more deeply today.

In developing their market reform framework, G20 leaders were clear about the need for global regulators to collaborate and coordinate on these rules. They saw consistent implementation of reforms as preventing regulatory arbitrage, protecting financial stability, and promoting competition and innovation. This, too, is the standard by which we measure our regulatory progress.

With that, I want to welcome our panel of accomplished witnesses who bring their diverse viewpoints on clearing and trade execution. Thank you each for the time and effort you put into being here today. We look forward to leaving here with a deeper understanding of the issues at hand.

I’ll recognize our Ranking Member, Mr. Scott, for any remarks he’d like to make.