Wall Street is buzzing today about the U.S. Department of Treasury‘s blueprint for reform on the financial regulatory structure. Major players in the futures industry, like the CME Group and the Commodity Futures Trading Commission (CFTC), are weighing in too, more specifically on Treasury’s intermediate-term recommendation to merge the Securities and Exchange Commission (SEC) and CFTC. While cheering Treasury’s decision to overhaul the financial services regulatory system, both the CME and CFTC’s messages were clear: fix what’s broken with the SEC (or, rather, harmonize the regulatory approaches of the two agencies) before considering any merger activity. CME said the merger proposal “should be addressed following further harmonization of the separate and very distinct regulatory frameworks applicable to futures and securities markets. We agree with Secretary [Henry] Paulson’s conclusion that the SEC and Congress need to act promptly to align more closely the SEC’s systems and procedures with the governing philosophy of the CFTC. We understand that this reform of the SEC needs to be completed before the process of considering a merger between the two agencies can begin.”
CFTC Acting Chairman Walt Lukken said, “Unless the securities laws are first rationalized with those governing the futures markets, a merger may ironically make the U.S. futures industry less competitive globally and run counter to the explicit goal of this important endeavor.” CFTC Commissioner Bart Chilton was more blunt, saying, “Merging prior to reaching consensus on agency functions, critical processes and the appropriate regulatory approach would be premature, ill-advised and potentially result in an unmitigated disaster.”
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