Jackie Mesa, FIA Chief Operating Officer and Global Head of Public Policy, and Kyle Glenn, VP of US Government Relations, speak to Bob Currie about the Association’s policy priorities and early takeaways from the initial weeks of President Trump’s second term
Rarely have the initial weeks of a new US presidency been monitored with such attention, as business leaders and policymakers evaluate the opening moves of Donald Trump’s Mar-a-Lago Gambit and plan how to reap advantage as this game of strategy moves into its mid-phase.
For investment markets, there is broad optimism that a second Trump term will encourage business growth, at least in the US, as well as promoting technology innovation and a comprehensive review of existing regulation. This optimism is veined with uncertainty, however, given the President’s commitment to tariffs, tax cuts and a strong border policy, leading market watchers to monitor for inflationary signals and indicators of a more unstable environment for global trade.
Mesa indicates that tariffs may have a pricing impact on goods and services in the US, including in the commodities markets, and notes that derivatives markets help companies to manage risk in times of high volatility. In the energy sector, the new administration is targeting increased exploration and production from US producers. This, again, is likely to have an impact on energy prices in the US and globally.
The markets will also be watching the interplay between the Commodity Futures Trading Commission (CFTC) and government in developing a more extensive and detailed legislative framework for trading in digital assets. This may deliver few changes for exchange-traded contracts that already sit within the regulated space – CME Group and CBOE Global Markets offer a range of futures and options on bitcoin and ether for example.
However, there is a sizeable volume of trading in digital assets that operates outside of these regulated perimeters – and it is important to establish a clear rulebook to guide how this digital asset ecosystem operates and is supervised.
“Congressional action is required to set this legislation in place,” explains Mesa. “Policymakers initiated efforts to establish a legislative framework for cryptocurrencies and digital assets, but they did not get this over the line before the elections. This policymaking process will now recommence and this will guide what firms need to do to act in line with the law.”
In 2022, a Financial Stability Oversight Council report highlighted gaps in the regulation of the spot market for digital assets that are not securities. Subsequently, former CFTC Chairman Benham has called for additional powers of oversight to be accorded to the CFTC to provide effective supervision for this activity, recognising that this gap for non-security tokens represents a major component of the digital asset market by market capitalisation.
“During the last Congress, the Republican leadership on the House Financial Services Committee and the House Agricultural Committee worked together, with bipartisan support, to develop a bill that would define the rules of the road for this digital asset ecosystem,” explains Glenn. This activity built on complementary subcommittee hearings in April and May 2023 that charted the regulatory gaps and prepared the ground for legislation that protects consumers without stifling responsible innovation.
“Now that the Senate has moved to Republican control, subsequent to the November 2024 elections, there is discussion around whether the House and the Senate may form a working group to develop a solution that can be approved through both Chambers,” comments Glenn. President Trump has specified that he wishes this action to take place during his first 100 days of office.
Mesa indicates that the FIA will contribute to this dialogue where this adds greatest value, particularly where trading in digital commodities intersects with traditional finance. “When this involves similar business use cases to those arising in the traditional finance world, they should meet the time-tested principles of our markets: same activity, same risk, same rules. We believe that comparable legislation should apply for digital and traditional assets,” she says.
Clarification over Derivatives Clearing
In the EU, European Commission President Ursula von der Leyen embarks on her second term with a new college of commissioners, including a new Commissioner for Financial Services and for the Savings and Investments Union Maria Luis Albuquerque.
“It is still early days, but the FIA has identified positive signals from her statements at her confirmation hearing – when the commissioner designate responded to questions from the Monetary and Economic Affairs Committee and from MEPs – along with her broader public statements since her nomination,” says Mesa.
In her confirmation hearing, Albuquerque promised to deliver the major goals of the Savings and Investment Union, to promote coherent cross-border supervision, to provide a balanced approach to digital finance and to expand opportunities for capital raising and investment within the EU. “She has considerable previous experience in economic policy and financial services, having previously served as Finance Minister in Portugal, and that instills confidence that she has expertise to carry through these commitments,” adds Mesa.
Significantly, the new commissioner has focused early in her public statements on the importance of promoting central clearing in the EU. She noted that safe and efficient clearing mechanisms in the EU require scale and that this expansion should be powered by industry-led initiatives – it cannot be delivered simply through legislation.
“The FIA welcomes this position from the new Commissioner,” says Mesa, “In regulating derivatives markets in the EU, it is important to have a framework that supports efficient cross-border movement of capital and investment – and this should not impose rules that close off access for EU market participants to external pools of liquidity.”
CCP equivalence and treatment of third-country CCPs is a particularly pressing issue at the current time. As part of post-Brexit negotiations, the EU extended temporary equivalence for UK CCPs – running from February 2022 to June 2025 – thereby enabling EU market participants to continue to clear derivative transactions through UK CCPs.
Under EMIR 2.2, third-country CCPs (TC-CCPs) are categorised according to the perceived risk that they present to the EU and its member states. TC-CCPs that are classified as systemically important (‘Tier 2’ CCPs) are required to comply with additional requirements under EMIR (Titles IV and V and Article 16), and are subject to supervision by the European Securities and Markets Authority (ESMA) alongside their home regulators.
The two Tier 2 third-country CCPs currently appearing on ESMA’s TC-CCP list are both in the UK, namely LCH Limited and ICE Clear Europe Limited.
“The FIA would like to see the EU have more trust in their third-country partners, particularly the UK, and believe that granting permanent equivalence for UK CCPs would send a strong message that the EU is serious about promoting open competition and making its markets as attractive as possible to foreign investors,” Jackie Mesa
“The FIA would like to see the EU have more trust in their third-country partners, particularly the UK, and believe that granting permanent equivalence for UK CCPs would send a strong message that the EU is serious about promoting open competition and making its markets as attractive as possible to foreign investors,” says Mesa.
With this in mind, FIA was one of a group of 12 trade associations that sent a letter to Commissioner Albuquerque on 12 December 2024 relating to equivalence and recognition of UK CCPs.
The joint associations argued that the continued uncertainty around the time-limited equivalence decision harms EU firms and is counter to the development of the Savings and Investment Union. Without this, the Associations suggest that EU counterparties may be forced to operate at a disadvantage to third-country entities which have wider choice of clearing location globally. Specifically, this may limit access for EU counterparties to pools of liquidity outside of the EU for a range of derivatives instruments, including products currently only cleared on UK CCPs (some commodity derivatives, interest rate swaps) and products with limited liquidity on EU CCPs.
Consequently, the FIA has welcomed the decision of the Commission on 24 January to grant an extension. “While our members prefer a non-time limited equivalence determination, once finalised, the three-year extension will provide much needed certainty to EU market participants for the moment,” says Mesa.
More broadly, the EMIR 3.0 Active Account Requirement (AAR) will require EU financial counterparties – and non-financial counterparties falling into scope of the AAR – to hold an active account at a CCP established in the EU and to clear at least five trades in the most relevant subcategories of derivatives contract over the reference period. This will apply to OTC interest rate derivatives denominated in euro and in Polish zloty, and to short-term interest rate derivatives denominated in euro.
“FIA has spent a lot of time and effort in helping our members to prepare for EMIR 3.0,” says Mesa. “The reporting requirements specified in the proposed rule are onerous and the FIA, alongside other industry associations, has urged ESMA to ensure that the implementation is as simple as possible.”
Basel III Endgame and G-SIB Surcharge
In the US, FIA has also been active in lobbying against rules changes that, it fears, will substantially increase capital requirements for derivatives clearing services that banks offer to their clients. These are changes to the capital treatment applicable to large banks under Basel III regulations (the “Basel III Endgame” proposals) and capital surcharges applicable to global systemically-important banks (the G-SIB Surcharge).
For the six largest US banks that offer clearing, FIA estimates that these provisions would increase their capital requirements for client clearing by more than 80%.
If enacted, these rules would make it considerably more expensive for banks to provide client clearing services for futures, options, and OTC derivatives. FIA believes that the proposed rules may also increase systemic risk by reducing clearing capacity at banks. This consolidates risk into fewer players and may impair the ability of end-users to hedge risk.
“FIA advocated on behalf of our members on this issue, looking to provide additional information to regulators about what this would look like in dollar terms and what the potential implications would be for the clearing sector,” says Mesa. “We highlighted that this would not be good for the stability of derivatives markets and the financial system more broadly.”
There are signs that financial supervisors may be listening. On 10 September, then Federal Reserve Vice-chair for Financial Supervision Michael Barr made a statement indicating that he would be recommending changes to the initial proposal, including reducing the capital required for the client-facing leg of a client-cleared derivatives transaction. This, he said, would reflect the risks associated with this activity more accurately, given that these positions are highly collateralised and subject to netting and daily margin requirements. Changes to the initial proposal are also necessary, he said, to ensure the new capital rules did not provide a disincentive to client clearing.
“We took that statement as very positive, indicating that the FIA’s message had been recognised and understood by the Prudential Regulators,” says Mesa. “We are hopeful that this progress will extend into the new administration and that we do not need to recommence this advocacy and educational exercises over again. This, we believe, is hugely important to the security of the clearing system.”
Digital resilience
The Digital Operational Resilience Act (DORA) is a EU regulation that entered into force on 16 January 2023 and was applied from 17 January 2025. Its overarching objective is to strengthen the IT security of financial entities – including banks, insurance firms, asset managers and market infrastructure – and to ensure that the financial sector in Europe remains resilient in the event of severe operational disruption.
The FIA supports the primary aims of DORA, confirms Mesa, strengthening the ability of financial services firms to withstand cyber-related disruptions. “However, the design of the Act is quite prescriptive,” she says, “and FIA has been working with policymakers to ensure that Level 2 rules are proportionate – enabling financial entities to focus resources on managing key risks at a time of operational disruption, rather than diverting these to compliance or to non-essential requirements during times of stress.”
Moreover, FIA was one of five industry associations which issued a joint statement on 1 October questioning whether regulated financial services should be treated as information and communications technology (ICT) services under DORA and asking the European Commission and the European Supervisory Agencies to review their guidance in this area. The most recent clarification from the Commission on this subject was not issued until 22 January.
Closing thoughts
In leading FIA’s global public policy team, Mesa reinforces the point that the Association’s priority during 2025 remains to promote open and competitive global markets for futures, options and cleared derivatives products.
In doing so, FIA continues to monitor the evolution of technology that can make derivatives trading and clearing safer and more efficient. This has included a focus on tokenisation of collateral settlement, exploring potential for collateral to be mobilised and transferred in close to real time, with transfer of title taking place on blockchain, without need to move the referenced underlying securities between custody accounts. This will enhance speed and efficiency of collateral transfers to meet CCP margin requirements and other uses.
From a US perspective, there was significant attention during the US elections to the direction of policy for digital commodities and cryptoassets. Glenn notes that towards the end of the campaign, and since the results were announced, there has also been a strong focus on event contracts – contracts which enable traders to speculate on the outcome of future events. “We expect to monitor developments in the event derivatives marketplace closely as demand for these contracts continues to grow,” concludes Glenn.
Related Reading:
Clearing the Air – the Both Sides of the Active Account Mandate – Derivsource
Derivatives Market Sentiment – Green Shoots of Optimism – Derivsource
Policymakers Review Opening Moves of Basel III Endgame – Derivsource
2025 Regulatory Roundup – The Never-ending Roundabout – Derivsource
