The annual meeting of the International Swaps and Derivatives Association (ISDA) began Wednesday in Madrid. United States Securities and Exchange Commission (SEC) Chair Gary Gensler and U.S. Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam were both featured as keynote speakers at the event, with Behnam speaking at the morning session and Gensler in the afternoon.
Behnam spoke at length about “a request for an amended order of registration as a derivatives clearing organization (DCO) by an entity seeking to offer non-intermediated clearing of margined products to retail participants,” which was transparently a reference to FTX US’s request.
“As other registered entities have expressed interest in exploring similar models, and given the potential impact on clearing members and FCMs [futures commission merchants] […] it is paramount to be transparent and provide an opportunity to hear from the public,” Behnam said, plugging the CFTC roundtable on the subject coming up later this month.
FTX CEO Sam Bankman-Fried may have been listening as Behnam spoke, as Bankman-Fried was present at the conference and participated in a fireside chat a few hours later.
Behnam went on to recall his February Senate testimony to say:
“I will continue advocating for and supporting legislative authority for the CFTC to develop a regulatory framework for the cash digital asset commodity market.”
Currently, the CFTC only regulates derivatives markets, although it has exerted enforcement authority over cash markets, such as the fine it imposed on Coinbase for improper reporting of exchange volume and “self-trading” in 2021.
Gensler spoke about “the intersection of crypto assets with derivatives” in his significantly shorter speech. He said:
“If platforms — whether in the decentralized or centralized finance space — offer security-based swaps, they are implicated by the securities laws and must work within our securities regime.”
Gensler stressed the need for the ISDA “to recognize that if the underlying asset is a security, the derivative must comply with securities regulations” as it develops legal standards for crypto derivatives.