Following the CFTC announcement that Commissioner Scott O’Malia has resigned his position effective August 8th (see our prior post about that announcement here), ISDA has now announced that O’Malia will become its CEO effective August 18th. ISDA’s Press Release is available here.

O’Malia’s leadership of ISDA could be a particularly important development for those in the energy industry and other commercial market participants, including “end-users.” O’Malia takes over the helm at ISDA from long-time financial industry stalwart Robert Pickel, and O’Malia brings his perspectives and background in the energy industry with him. With O’Malia on board, ISDA may increase its focus on the energy and physical commodity markets, and how those markets and commercial hedgers are impacted by increasingly complex global regulation.

O’Malia could expand ISDA’s traditional perspective from the financial trading and investment markets, where “sell-side” dealers provide products and the “buy-side” makes investments in those products to focus on the complex ways in which commercial enterprises use energy and other physical commodity derivatives to hedge global and dynamic commercial risks that arise from ongoing business operations.

As a CFTC commissioner, O’Malia had an open door policy when it came to the energy industry and other commercial groups. In his well documented dissents from some of the Commission’s final rules and other public statements, O’Malia focused attention on:

  1. the international nature of the energy and other physical commodity markets;
  2. the importance of maintaining liquid commodity and derivative trading markets to enable commercial end users to hedge the risks that arise from ongoing business operations; and
  3. the regulatory challenges faced by global commercial business enterprises, as distinguished from financial institutions and investors.

O’Malia also focused on understanding the complex legal structure of the OTC derivatives markets, and the policy implications of regulating the commercial world’s use of commodities and physical commodity-based derivatives. In recent months, O’Malia and former Acting Chairman/now Commissioner Wetjen repeatedly acknowledged the need to fix CFTC rules adopted in haste that are hampering commercial entities’ ability to hedge risks arising from business operations. The two-member commission also called for careful deliberation before moving forward with the important remaining CFTC rules on position limits and margin/collateralization.

We hope “soon-to-be former Commissioner” Scott O’Malia will continue his efforts on behalf of the energy industry and other commercial market participants as CEO of ISDA. The Swap Report