Regulation talk was all the rage at the Futures Industry Association’s annual expo in Chicago today. In his keynote address, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler reiterated past talk about over the counter (OTC) derivatives clearing reform and CFTC-SEC harmonization. Exchange leaders also weighed in with thoughts about how some of the proposals coming down the pike could make the U.S. futures industry less competitive.
Gensler said he believes that as many OTC transactions should be “put under the regulatory umbrella” as possible. He added that hedge funds, financial firms and other investment firms should not be exempt from clearing requirements, and said that all standardized products should be moved onto regulated exchanges or trade execution facilities, a requirement that was included in the two regulatory bills now being floated by the House Financial Services Committee and the House Agriculture Committee. He also highlighted some of the recommendations in the CFTC-SEC harmonization report, including expediting the product approval process and proposals to allow for portfolio margining (allowing for certain securities and futures to be brought into the same account).
Exchange leaders offered their opinions about upcoming regulation as well. Chicago Board Options ExchangeChairman Bill Brodsky said that while the harmonization study was well written, it doesn’t answer many of the questions that the Treasury originally asked for about where regulation should go next. He also said the document didn’t address the issue of harmonization between the U.S. and the European Union.
CME Group Executive Chairman Terry Duffy said he would like Congress to move quickly on its reforms. “People need regulation that makes sense on a global scale. We do not feel it’s fair for us to compete with our hands tied behind our back in the global marketplace,” he said. He added that the crackdown on excessive speculation and push for position limits has already caused market participants to move out of the U.S. markets. “We are all for regulated markets, but it’s so perverse what’s going on right now. They’re actually taking business off the regulated market and putting it into dark pools and foreign competitors.”
Johnathan Short, senior vice president and general counsel at the Intercontinental Exchange, said the issue of position limits and excessive speculation “has almost spun out of control. There really hasn’t been any study that has shown that excessive speculation led to higher prices in the last year.” FIA President John Damgard said telling Congress that speculation and manipulation are not the same thing is “falling on deaf ears.” Now that reform is looking like more of a reality, it seems more important than ever for Congress to listen.
Tags: Bill Brodsky, CFTC, Futures Industry Association, Gary Gensler, John Damgard, OTC, regulation, Terry Duffy
