At a CFTC Energy and Environmental Markets Advisory Committee
meeting, members debated the impact that the Supplemental
Leverage Ratio ("SLR") imposed by prudential regulators
may have on the "provision of clearing services for energy
derivatives transactions."
CFTC Chair J. Christopher Giancarlo criticized application of the SLR (a capital
requirement for banks) to swap clearing customer margin, arguing
that it "reflects a flawed understanding" of central
counterparty clearing. He added that the implementation of the SLR
is "biased against derivatives," as it does not take into
consideration that outstanding derivatives in a portfolio "can
offset each other and thus reduce the potential risk
exposure." Conversely, Mr. Giancarlo applauded the role that
energy derivatives have played in allowing the industry and its
financial backers to price hedge during times of price squeezes
fostered by Russia and OPEC.
