O’Malia to take helm at Isda

Scott O’Malia, who this week quit as a commissioner at the main regulator of the US swaps industry, will become head of the leading global derivatives group.

Mr O’Malia was named new chief executive of the International Swaps and Derivatives Association, known as Isda, on Wednesday. The group represents some 800 users in the $700tn over-the counter derivatives market including banks, companies, insurers and major investment firms.

It comes after Mr O’Malia told President Barack Obama in a letter on Monday that he was stepping down as a commissioner of the Commodity Futures Trading Commission.

As a Republican commissioner at the CFTC since October 2009, Mr O’Malia was noted for his criticism of the regulator’s fast-paced style of writing new rules governing how swaps in the US are transacted and recorded in the wake of wholesale financial reform.

He said the CFTC’s regulatory approach towards the US swaps industry often resulted in confusing temporary relief or no-action letters and blasted efforts to make rules based on staff guidance.

The US derivatives industry has been subject to wholesale reform in the wake of the financial crisis that highlighted systemic risk among users of swaps and options when Lehman Brothers failed in 2008.

the board was “confident that Scott is the right person to lead the industry and Isda through the many structural changes, including margin, capital, clearing, trade execution and reporting rules and regulations, that are reshaping the global derivatives markets

The CFTC has played a major role in writing the rules governing the swaps industry and in recent years Isda has undertaken a leading role in seeking a lighter regulatory touch. As the derivatives market becomes more standardised, the role of Isda is seen by some as diminishing.

Under the Dodd-Frank legislation passed in 2010, the trading of swaps has been driven towards exchange-type venues with the credit risk of users pooled into centralised clearing houses.

In an interview with the Financial Times, Mr O’Malia said he would focus his work at Isda on working out how myriad new swaps rules in various jurisdictions will be applied globally and also try to boost the availability of swaps trade data.

“This goes well beyond what’s happening in Washington,” Mr O’Malia said of current swap reform efforts. “Making sure these rules work is in everybody’s interest.”

Stephen O’Conner, Isda chairman, said the board was “confident that Scott is the right person to lead the industry and Isda through the many structural changes, including margin, capital, clearing, trade execution and reporting rules and regulations, that are reshaping the global derivatives markets”.

Mr O’Malia was also an advocate of modernising the CFTC and chaired the agency’s technology advisory committee, focusing on high-frequency trading and other matters.

“I have also advocated for transforming the commission into a 21st century regulator by utilising automated systems to identify threats posed by the concentration of risk and to perform the critical market surveillance duties,” Mr O’Malia said in his letter to Mr Obama.

Additional reporting by Gina Chon