In one of his last addresses at the helm of the agency (he will step down at the start of the new Obama administration), Commodity Futures Trading Commmission (CFTC) Acting Chairman Walt Lukken called for an overhaul of the U.S. regulatory system at the Futures Industry Association‘s annual expo in Chicago yesterday. Lukken proposed a three-pronged objectives-based regulatory system consisting of a systemic risk regulator, a market integrity regulator and an investor protection regulator. Under his proposal, the functions of the CFTC, SEC and banking regulators would be dispersed among the three regulatory authorities. Like countless other industry leaders, Lukken vetoed the idea of an SEC-CFTC merger, saying it “would be ineffective and would only reinforce our outdated regulatory structure.”
In a statement, the FIA called Lukken’s comments a “bold declaration for change in the financial regulatory status quo,” adding, “The FIA is more than willing to participate in a dialogue to strengthen both our regulatory systems and our markets, nationally and internationally. All options should be on the table and explored fully, as Chairman Lukken has recommended.”
A panel of exchange leaders also explored the immense regulatory issues the industry faces. CME Group CEO Craig Donohue said “It was a positive statement in the Treasury Blueprint that the SEC move toward principles-based regulatory regime.” Still, he said, “It’s a gross oversimplification to say that the only issue is whether it’s principles-based or rules-based. The issues go well beyond that. It’s not as simple as waving a magic wand and saying if the SEC were principles-based everything would be fine. Those will be issues that we’ll have to [increase] education and awareness on so people understand the way this industry needs to survive and thrive.”
“More regulation is necessary, but overregulation and misguided regulation should be avoided, and there’s a risk of that happening if the industry doesn’t get its act together,” said Hugh Freedberg, group executive vice president at NYSE Euronext.
