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The Futures Industry Association’s annual gathering of industry leaders in Boca Raton, Florida may not start until next week, but three potential new commissioners of the Commodity Futures Trading Commission – including the nominee for Chairman -- had their inaugural day in the sun today in Washington, DC when they appeared before the US Senate Committee on Agriculture, Nutrition and Forestry.
During their appearances before the Agriculture Committee, Timothy Massad, nominated by President Barack Obama to serve as the next CFTC Chairman, Sharon Y. Bowen, and J. Christopher Giancarlo all pledged support for reform of the US swaps markets that began with the passage of Dodd Frank in 2010. However, each articulated different priorities of where they believe the CFTC should go from here.
For the potential future Chairman, Mr. Massad, his top priorities appear to revolve about ensuring that (1) the CFTC has a “robust enforcement program to protect the integrity of [the] financial markets;” (2) the many new rules adopted during the past few years by the CFTC “…work, that participants comply with the requirements and that the markets operate transparently and effectively;” and (3) the CFTC adequately address its technological and data challenges so that it can utilize the data it is now collecting “…to monitor and mitigate excessive risk and bring much-needed transparency to [derivatives] markets.”
Mr. Massad also articulated as priorities for the CFTC: adopting position limits for physical commodities; enacting margin requirements for uncleared swaps; and ensuring adequate protection of customer funds, and pledged “…to work tirelessly to lead the CFTC in fulfilling its responsibilities.”
Mr. Giancarlo reminded the Agriculture Committee that he had been a proponent of central counterparty clearing even before the 2008 financial crisis when he was involved in an effort by non-Wall Street banks to help create a clearing house for credit default swaps. He also noted that he “…publicly called for increased central counterparty clearing, regulation of trading platforms and increased regulatory and marketplace transparency” during the drafting of the Dodd Frank legislation. However, he warned that too much regulation is not necessarily the panacea for the causes of the 2008 financial crisis:
“But I am also a strong believer that vibrant, open and competitive markets are an essential element to a strong economy. Proper regulatory oversight can go hand-in-hand with open and competitive markets. But if excessive regulation artificially increases the cost of risk management, the overall economy will suffer. If confirmed, I will commit myself to ensuring the proper balance is met.”
During her opening statement, Ms. Bowen recalled her experience as the former Acting Chair of the Securities Investor Protection Corporation where she gained “significant experience” in dealing with failed broker dealers and future commission merchants. She also stressed the need for the CFTC effectively to implement its new rules, saying this required “…the participation and coordination of regulatory bodies both inside and outside the US.” She also identified a desire to see physical commodity markets protected “…from excessive speculation and manipulation.”
Following the nominees’ appearances today, members of the Agriculture Committee may ask follow-up questions. Following the submission of the nominees’ answers, the Committee will vote on their recommendation, and if their recommendation is favorable, the entire Senate will vote on the nominees subsequently. This vote is likely not to occur until at least late March, after the Senate returns from a recess scheduled during the week beginning March 17. (All quotations from nominees' prepared statements.)
The information contained in this article is not legal advice. For legal advice, please consult with your attorney. The information in this article is derived from sources believed to be reliable as of March 6, 2014, but no representation or warranty is made regarding the accuracy of any statement. To ensure compliance with requirements imposed by U.S. Treasury Regulations, Gary DeWaal and Associates LLC informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Gary DeWaal and Associates may represent one or more entities mentioned in this article.
Gary DeWaal is currently Special Counsel with Katten Muchin Rosenman LLP in its New York office.
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September 17, 2014
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Gary DeWaal
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Three Potential New CFTC Commissioners, Including New Chairman, Provide Glimpses of Their Priorities before the Senate Agriculture Committee Today
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