CME Group CEO Craig Donohue had a very relevant quote during today’s meetings on harmonization between the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC). Alluding to the differences between the securities and futures markets, Donohue said it was like “Greeks speaking Chinese to people who speak Portuguese.” Sorting out the regulatory overlaps between the CFTC and SEC and achieving the harmonization called for by President Obama’s regulatory blueprint is a complicated matter indeed. The two agencies must complete a report on harmonization by Sept. 30. Otherwise, the matter will be forwarded to the Financial Services Oversight Council. CFTC Commissioner Bart Chilton said he was optimistic that the two agencies could “solve their issues without ’Mom and Dad’ in the form of the Treasury Department stepping in.”
In his testimony, Donohue pointed out that “harmonization” of the two agencies hadn’t really been defined. “We believe that the ‘harmonization’ discussion between the CFTC and SEC must take account of the basic fact that these markets are highly dissimilar in many critical aspects and that the regulatory framework, by necessity, should be different,” he said, going on to express concern that “harmonization may be interpreted to mean abandoning the principles-based regulation of the Commodity Futures Modernization Act.”
A push towards adopting a more principles-based regulatory approach was echoed by other exchange leaders. CBOE Chairman Bill Brodsky in his testimony said “we support the Administration’s proposal that the SEC give serious consideration to shifting closer to a principles-based approach for exchanges and clearing organizations under its jurisdiction.” He mentioned that inconsistencies in regulation “have led to conflicts between the agencies over new products, clearing and portfolio margining.” Options Clearing Corporation Chairman Wayne Luthringshausen called for “combining the functions of the SEC and CFTC under a new principles-based statute to ensure holistic oversight of all derivatives products.” Another CFTC-SEC meeting tomorrow will include representatives from National Futures Association and Managed Funds Association.
Tags: Bill Brodsky, CBOE, CFTC, CME Group, Craig Donohue, Options Clearing Corporation, regulation, SEC, Wayne Luthringshausen
