By John McCrank and Katanga Johnson
BOCA RATON/WASHINGTON (Reuters) -The head of the U.S. derivatives markets regulator said on Wednesday that markets are “operating well” amid extreme volatility sparked by Russia’s invasion of Ukraine and retaliatory Western sanctions, although there are unknown risks.
Rostin Benham, chair of the Commodity Futures Trading Commission (CFTC), said at the International Futures Industry Conference that he has told the agency’s surveillance unit to remain “surgically focused” on analyzing trading for manipulative, inappropriate or disruptive conduct.
“By and large, the markets are reacting and operating well and as anticipated given the challenging situation,” Benham told the audience. “There remain unknowns, especially in the derivatives space, as we hit upcoming delivery marks or if we have any number of supply constraints that could affect different products and asset classes.”
Wild swings in the prices of oil, metals and other raw materials last week generated more margin calls at clearinghouses and trading firms, forcing counterparties out of the money to stump up liquid collateral they must pledge to secure their trades.
Sudden, large margin calls can put financial stress on counterparties that do not hold sufficiently liquid assets.
The U.S. Securities and Exchange Commission this week issued a rare public warning to broker dealers that they should “remain vigilant” to such counterparty risks.
Benham said U.S. and overseas financial regulators are working together to maintain market resilience and stability, and that the CFTC was also coordinating with the U.S. Treasury to ensure market participants could use sanctions waivers to cover their exposures.
(Reporting by John McCrank in Boca Raton, FloridaWriting by Katanga Johnson in Washington; editing by Michelle Price and Jonathan Oatis)
