CFTC Commissioner: Dodd-Frank process needs more certainty to regulate morphing markets
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WASHINGTON, March 8, 2012- Finalizing stricter regulatory oversight through the Dodd-Frank Act is needed in a world of rapidly changing financial markets, Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton said in his speech for the Trade Tech 2012 conference today in New York.
“To fix a complex problem, sometimes there isn't an easy fix,” he said. “For those that say Dodd-Frank should be repealed, I guess I don't understand why they'd want to go back to the set of circumstances that led to the ultimate demise of our economy.”
Although not calling for repeal, House Agriculture Committee Chairman Frank Lucas (R-Okla.) is outspoken about the fears he has that the rules in more than 2,000 pages of the Dodd-Frank Act could place a heavy burden on the economy, specifically on non-swap dealing end-users in the agriculture markets. Concerns regarding Title VII of the Act, which deals with derivatives, are high among members of the House Agriculture Committee. Title VII is a key focus issue of the Committee, which describes derivatives as “financial tools that allow businesses across the country to manage the risks they face every day.”
“New rules required by Dodd-Frank should not unnecessarily burden businesses or the economy with overly broad or cumbersome requirements,” said Lucas during a hearing on CFTC's agenda last month. “Making policy without regard for the economic consequences is a luxury we cannot afford even in the strongest economy.”
So far, the CFTC has issued 28 final rules, and needs to write 21 additional rules. Chilton said he expects the commission to complete this task within the next few months, but acknowledged that a lack of certainty revolves around the timeline to finish the rules, including when they will be implemented and when compliance is necessary.
“Aside from complexity and changing menu options, one of the worst things for our industry, from anyone's perspective, is uncertainty,” he said.
To gain more certainty, he said CFTC should finalize Dodd-Frank compliance dates and provide more simplified break-downs of the rule-making process. Certainty is vital, because “we are in a rapidly changing environment,” he said. “Markets are morphing. Laws from less than two years ago don't even mention things like high frequency traders that are clearly issues for regulators today. It is all moving and changing fast, fast, fast.”
The collapse of MF Global “was a fresh slap-in-the-face reminder that we need appropriate regulations in place now,” he said. Chilton's suggestions include allowing customers a choice of how their funds in segregated accounts are used, if used at all.
“People make choices about the types of investment that can be made with their money in their pension funds,” he said. “They should be able to do the same with segregated funds.”
He also suggested that Congress approve legislation to establish an insurance fund to serve as a backstop for customers in the futures market, like the Federal Deposit Insurance Corporation for the banking world and the insurance fund for the securities world.
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