When Commissioner Scott O’Malia left the CFTC last month to become the head of ISDA, many of us were worried the commission lost its voice of reason. For it was O’Malia to whom we turned when we wanted the real story, unbiased by ulterior motive or hidden agenda. He routinely asked the tough questions of his fellow commissioners, such as whether they were going in the right direction with all these new swap rules, or whether the commission was spending its resources wisely, especially in the area of technology. He was not afraid to criticize the agency itself when it was deserved.

This morning I saw that I need not have worried, for the commission has a new voice, and that voice is Chris Giancarlo, who was sworn in this summer after waiting nearly a year to be confirmed after the departure of Jill Sommers. Giancarlo, an attorney and derivatives executive who also led the Wholesale Markets Brokers’ Association Americas (WMBAA), an advocacy group made up of the five largest inter-dealer brokers, understands the importance of freely functioning markets. He kicked off the morning session with a stern reminder of what happens when global powers dig in their heels and default to protecting their respective turfs rather than work in harmony to the betterment of all. He pointed the finger squarely at his own commission as the source of controversy, and suggested that this same commission can and should make the next move toward setting it right. (View Giancarlo’s Keynote Address)

His remarks, subtitled “A Return to Smoot-Hawley” centered on the unresolved cross-border derivatives issues creating a drag on the industry. He says that while entrenched interests on both sides of the Atlantic are holding back progress on central counterparty recognition, part of the problem rests with last July’s interpretive guidance on cross-border compliance and its far-reaching definition on who must comply with U.S. regulations.  Unless steps are taken by global regulators to force a compromise, Giancarlo envisions a series of retaliatory measures that could further fragment the market, and thus of the capital formation process itself, at a time when the world’s economies desperately need a properly functioning market. He reminds us that the Great Depression was bad for everyone, not just the bankers, brokers and traders.

Today marks the five-year anniversary of the famous “Pittsburgh Summit” at which the G-20 finance ministers agreed to a harmonized framework for regulation to ensure a safer system after the global financial crisis. Giancarlo suggests an olive branch – the withdrawal of the CFTC’s November 2013 staff advisory that spelled out the reach of transaction-level requirements to non-U.S. persons (a move that CFTC Chairman Timothy Massad hinted he might be open to considering). It is hoped that this olive branch would put the ball back into the Europeans’ court to loosen up on its CCP rules.

It’s so crazy of an idea it might just work.

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