The coming Administration of Barack Obama and Democratic control of the House and Senate raise several questions about futures industry regulation. How will new Congressional committee appointments affect current regulation? Which anti-speculation bills will Congress revisit in 2009? Who will be appointed to lead the Commodity Futures Trading Commission (CFTC)? Will the CFTC even exist by this time next year? A panel of experts tried to untangle these knots at the Futures Industry Association’s annual expo in Chicago yesterday, and the consensus was that anything could happen.
Since the futures industry doesn’t seem to be as broken as the securities side, change could come later rather than sooner, the panelists said. “The new administration…is going to be focused on things that are broke, not things that are not broke,” said Terry Duffy, CEO of CME Group. “I don’t see them going after merging [the SEC and CFTC].”
“The Obama administration has some real problems they have to deal with and they can’t deal with everything. [The futures industry] is not at the top of the radar screen,” said David Keene, managing director of the Carmen Group, a D.C. lobbying organization.
CFTC Commissioner Michael Dunn called for open meetings about regulatory coordination between the SEC and CFTC. “The principles-based regime that we have in the futures industry has been great [but the CFTC] is underfunded and understaffed. If we have to regulate clearing of over the counter credit default swaps, that’s going to take an enormous amount of resources,” Dunn said. A new chairman of the CFTC is expected to be announced in April or May, according to FIA President John Damgard.
Ronald Oppenheimer, general counsel at Merrill Lynch Commodities, said that of the 30-plus speculation bills floating around in Congress, three will be at the top of the radar in 2009: H.R. 6604, the Commodity Markets Transparency and Accountability Act, S. 3268, the Stop Excessive Energy Speculation Act (sponsored by Senate Majority Leader Harry Reid) and S. 3577, the Prevent Excessive Speculation Act (introduced by Senators Carl Levin, Tom Harkin and Jeff Bingaman). One panelist expected Congress to revisit a proposal introduced in July by Senators Ron Wyden and Chuck Grassley that aims to reduce excess speculation by doing away with 60-40 tax treatment for U.S. futures contracts. 60-40 tax treatment allows 60% of gains to be considered long-term gains, taxed up to 15%, and the remaining 40% to be considered short-term gains, taxed up to 35%.
