Markets are ‘functioning smoothly,’ with no signs of default despite severe volatility, according to CFTC Chair

Markets are “functioning well” despite unprecedented volatility caused by Russia’s invasion of Ukraine, according to the chair of the US Commodity Futures Trading Commission on Wednesday. While the financial sector is “definitely” stressed, there are no red lights indicating probable defaults, according to Rostin Behnam at the International Futures Industry Conference.

The agency’s monitoring section is “surgically focused” on assessing trade for manipulative, improper, or disruptive behavior, but given the hard environment, the markets are “reacting and performing effectively.” “There are still unknowns, particularly in the derivatives market, as we approach impending delivery dates or if we face any variety of supply restrictions that might influence various products and asset classes,” he added.

This month, a series of Western retaliatory measures against Russia’s financial system and oil exports caused huge swings in the pricing of oil, metals, and other raw commodities, as well as increased margin calls at clearinghouses and trading businesses. As a result, certain counterparties may have to provide more liquid collateral to safeguard their deals. Sudden, substantial margin calls can place financial strain on banks that do not keep enough liquid assets on hand. The Securities and Exchange Commission issued a rare public warning to broker dealers this week, advising them to “be attentive” to such counterparty dangers. Behnam stated that US and international financial authorities are collaborating to preserve market resilience and stability, and that the CFTC is also liaising with the US Treasury to guarantee market participants may use sanctions exemptions to cover their exposures.