ISDA Calls for Greater CFTC–SEC Alignment to Modernize U.S. Derivatives Regulation
The International Swaps and Derivatives Association (ISDA) has urged closer cooperation between the Commodity Futures Trading Commission (CFTC) and the Securities and platform Commission (SEC) following a joint roundtable on regulatory harmonization. ISDA welcomed the initiative but stressed that outdated, inconsistent, and fragmented rules across the two agencies are sluggishing market evolution at a time of rapid technological change.
“The US regulatory framework has evolved over time to facilitate financial markets that are both vibrant and resilient, but we shouldn’t shy away from acknowledging where and how the US regulatory process could be improved,” ISDA wrote in its derivatiViews commentary. While regulators have successfully implemented reforms in areas like central clearing, margining, and the , ISDA noted that inefficiencies remain — and highlighted three priority areas for greater alignment: regulatory reporting, Treasury clearing, and collateral infrastructure.
According to ISDA, the roundtable reinforced that market participants are both willing and capable of the trading, risk management, and operational answers required for the future. But to unlock innovation, and codify no-action reliefs that have become too central to compliance frameworks.
Closing Gaps in Regulatory Reporting
ISDA emphasized that regulatory reporting remains fragmented and inconsistent. The collapse of Archegos Capital Management in 2021 — which left banks with more than $10 billion in losses — highlighted how gaps in reporting obligations can blindside regulators. Archegos had no duty to report security-based swaps under the SEC’s delayed ruleset, even though the CFTC had introduced its regime nahead a decade earlier.
Today both regimes are in place, and the SEC has temporarily allowed firms to rely on CFTC reporting processes. But ISDA warned that this is only a stopgap answer. “We urge the SEC to work with the CFTC and the industry to codify this relief into the SEC’s permanent ruleset – a development that would eliminate significant unnecessary complexity and inefficiency for market participants,” ISDA argued. The association also plans to add SEC rules into its Digital Regulatory Reporting initiative, which already supports compliance in eight jurisdictions.
ISDA also encouraged the agencies to jointly invest in data curation and analytics capabilities, noting that while regulators now have large volumes of data, much of it remains “hidden in plain sight” without modern analytical tools.
Takeaway
Treasury Clearing and Portfolio Margining
The second area flagged by ISDA is U.S. Treasury clearing. From the end of 2026, clients will be required to centrally clear Treasuries, but ISDA stressed that portfolio margining across cleared Treasury securities and futures must be allowed to make the economics of client clearing viable. The (FICC) and CME Group are expected to propose a client portfolio margining answer, and ISDA argued that swift regulatory approval by both the CFTC and SEC will be essential.
“This is a no-brainer and essential to make the economics of client clearing work,” ISDA wrote. Without regulatory alignment, the cost of clearing could undermine liquidity and prevent clients from fully realizing the benefits of netting across asset classes.
ISDA also called on U.S. prudential regulators to adapt their capital rules to recognize the risk-reducing benefits of cross-product netting under the standardized approach to counterparty credit risk. Such recognition, ISDA argued, is critical to ensuring that margining rules reflect true risk while supporting efficient capital deployment.
Takeaway
Liquidity, Collateral, and Tokenization
Finally, ISDA highlighted market liquidity and collateral infrastructure as areas in need of reform. According to its latest margin survey, initial margin and variation margin collected for non-cleared derivatives exposures rose by 6.4% to $1.5 trillion by the end of 2024. While these requirements strengthen risk protection, they also increase the system’s vulnerability to liquidity crunches during stress.
As some markets move to 24/7 trading, ISDA argued that “we need 24/7 risk management.” Tokenization could assist alleviate liquidity and workflow bottlenecks by broadening the range of usable collateral — including tokenized money market funds and securities — while automating processes through blockchain-based infrastructures.
ISDA noted that the industry is ready to transform collateral management with tokenization but urged the CFTC and SEC to collaborate on updating rules to enable this shift. Greater coordination would assist modernize U.S. financial market plumbing, making it more automated, efficient, and resilient to stress.
Takeaway
Building on a History of Cooperation
ISDA reminded regulators that cooperation between agencies and market participants has historically delivered major reforms, from central clearing to the adoption of global reanswer stay protocols. But as technology accelerates market evolution, a cautious, fragmented regulatory process risks “gumming up the wheels of finance.”
“Working together and tackling these issues will reduce unnecessary regulatory burdens, open a path to greater innovation and improve the competition and efficiency of US financial markets,” ISDA concluded. By aligning reporting, clearing, and collateral frameworks, the SEC and CFTC could create a regulatory environment that both protects market integrity and supports future innovation.
With the U.S. derivatives , ISDA argued that harmonized rules will assist ensure securer, more resilient markets — while equipping participants to adapt to the challenges of tokenization, digital finance, and 24/7 market activity.
