New Administration, New Direction? What Swap Dealers Can Expect From CFTC Post-2024 Election

The 2024 US presidential elections may signal a shift in the Commodity Futures Trading Commission’s (CFTC or Commission) regulatory and enforcement approach. Under the incoming Trump administration, the CFTC could steer toward a more cooperative relationship with regulated entities, representing a potential shift in regulatory approach. For swap dealers, these potential changes could herald a more business-friendly regulatory environment with increased emphasis on practical oversight rather than strict enforcement.[1] Republican commissioners have already signaled their preference for examination-based compliance verification over enforcement actions for technical regulations, suggesting movement toward greater regulatory cooperation.[2]

This potential regulatory shift does not mean reduced oversight. Rather, it suggests continued evolution in the agency's regulatory approach, with an increased focus on clarity and cooperation. Swap dealers should prepare for these potential changes while maintaining robust compliance programs that can adapt to evolving regulatory expectations.

Potential Rulemaking and Guidance

Several key rulemakings and guidance updates could be considered under the new administration. 

• Finalizing the Operational Resilience Framework (ORF) Rules:  The CFTC will likely finalize the ORF proposal, with potential modifications to better align with international standards and US prudential regulations.[3] Recent commissioner statements suggest this framework could maintain a principles-based approach rather than imposing overly prescriptive requirements,[4] particularly given that most CFTC-registered swap dealers already operate under comprehensive operational resilience requirements through other regulatory regimes. This regulatory overlap raises important considerations about how new CFTC requirements might work alongside existing frameworks, particularly for non-US swap dealers that may be eligible for substituted compliance.
• Amendments to Risk Management Program Rules: Risk Management Program Rules (Regulation 23.600) may also receive attention, with updates focusing on emerging risks and new technologies.[5] Modifications will need to account for the CFTC’s unique position among global regulators in lacking a swap dealer examination program — a structural difference that currently channels operational and technical issues into enforcement actions rather than routine supervision.
• Further Amendments to Swap Data Reporting: Similarly, swap data reporting requirements may see improvements, particularly regarding the handling of minor reporting errors and error correction processes. The current framework’s approach to technical reporting errors and cooperation credit has been questioned by commissioners, suggesting the new administration may consider developing a more streamlined system for handling such matters, especially in cases involving no misconduct, harm to clients, or financial losses.[6]

Enforcement Priorities

Beyond these possible regulatory changes, under the new administration, the CFTC may also recalibrate how it pursues its oversight objectives. Of particular interest to swap dealers will be potential shifts in the Commission’s enforcement approach. Although the Commission is likely to maintain its traditional focus on pursuing cases involving fraud and market manipulation, which remain core to its market protection mandate, the Commission under the Trump administration may place less emphasis on technical violations, concentrating enforcement resources on matters involving significant market impact. The Commission may also reverse its current policy requiring admissions of wrongdoing in certain enforcement actions.[7]

A new self-reporting and cooperation framework might also emerge, featuring clearer criteria for what constitutes “prompt” self-reporting and specific guidelines for determining cooperation credit.[8] This framework could potentially integrate with annual compliance reporting requirements, streamlining the overall compliance process for swap dealers.

The enforcement referral process may also see updates, with the publication of specific criteria for referrals by operating divisions and implementation of more transparent procedures for handling compliance issues.[9] These changes could provide swap dealers with greater clarity on how potential violations will be addressed.

Looking Forward

The period ahead suggests a shift in the policy orientation of how the CFTC approaches its regulatory and enforcement mandate. While oversight will remain robust, the emphasis may move toward collaboration and practical solutions rather than punitive measures. Swap dealers should view this transition as an opportunity to engage constructively with regulators while maintaining strong compliance programs. In particular, swap dealers could consider reviewing their current compliance frameworks to identify areas where they could benefit from potential changes in regulatory approach. This could include evaluating their self-reporting procedures, reassessing their risk management programs in light of expected modernization efforts.

Market participants should remember that fundamental obligations around market integrity, risk management and regulatory reporting will remain essential components of the regulatory framework, even as the approach to oversight becomes more business-friendly. A shift toward examination-based compliance verification for technical regulations could offer swap dealers an opportunity to develop more collaborative relationships with CFTC staff, potentially leading to more efficient resolution of routine compliance matters.

[1] This post is part of a series exploring changes expected under the new administration across various sectors of the derivatives markets. For analysis focused on futures commission merchants and introducing brokers, see Katten's Passle post on this topic here.

[2]See e.g., Caroline D. Pham, CFTC, “Statement on Self-Reporting and Cooperation Credit in Enforcement Actions” (Aug. 19, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement081924.

[3]See Katten’s Passle post on this topic here.

[4] See Caroline D. Pham, CFTC, “Statement on Operational Resilience Proposal for Swap Dealers and Futures Commission Merchants” (Dec. 18, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement121823b.

[5]Id.

[6]Supra note 2; see also Caroline D. Pham, CFTC, “Statement on Swap Data Reporting Settlement Order and the Examination Process” (Oct. 1, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement100124.

[7]See Katten’s Passle post on this topic here.

[8]Supra note 2.

[9]Id.