WASHINGTON, Oct. 11, 2017 - The new GOP chairman of the Commodity Futures Trading Commission said he will seek a one-year delay in a registration rule for swap dealers so the agency can review a change he says would unfairly sweep in agribusiness traders.
The “de minimis” threshold for being required to register as a swap dealer is scheduled to drop from $8 billion to $3 billion in December 2018. Chris Giancarlo told the House Agriculture Committee on Wednesday that the commission, which has two new members and two vacancies, needs time to review the rule in order to give CFTC members and staff time to thoroughly analyze data and decide what the rule should be. Swap dealers handle transactions involving everything from oil and natural gas to corn, wheat and soybeans.
“The goal is to get the right result, not a rushed result,” Giancarlo said. He said he intends to propose a new rule during the first six months of 2018. “I do not intend to roll over this decision again,” he said. Giancarlo has previously told lawmakers that the $3 billion threshold would force utilities, refiners and agribusiness companies to cut back on their trading to make sure they stay under the $3 billion threshold.
Rep. David Scott, D-Ga., said the lower threshold would “would raise the cost of providing the hedges that are so imprint for risk management.”
In his written testimony to the committee, Giancarlo said the rule was an “enormously important undertaking that will impact America’s farmers, ranchers, and manufacturers and their ability to hedge legitimate production costs."
The commission’s other members appeared to have reservations about delaying the rule. Democrat Rostin Behnam said in a statement, “Instead of kicking this critical issue into the future again, the commission should take further action now or let the current rule take effect.”
GOP Commissioner Brian Quintenz said that “too much uncertainty has surrounded the de minimis threshold’s reduction and its damaging economic consequences. While we should always consider new data in the ongoing evaluation of public policy, it is well past time to address this issue head-on, finalize a rational and effective threshold, and provide the market with clarity.”
But the chairman of the Senate Agriculture Committee, Pat Roberts, R-Kan., praised Giancarlo for the announcement. Without CFTC action, he said, "it would be to the detriment of many community banks and agricultural co-ops and would remove market liquidity from agriculture and energy markets."
The Senate confirmed Giancarlo as chairman and Behnam and Quintenz as new commissioners in August.
Separately Wednesday, Giancarlo sought to reassure the House committee that the CFTC was taking steps to prevent hackers from getting access to private information about market participants that the agency has on its computers. The agency is cataloging such data and will decide what should be kept and how best to protect it, he said. Unneeded data will be purged.
Committee member Frank Lucas, R-Okla., expressed concern that the hack of the Securities Exchange Commission last year would be repeated at the CFTC.
“We all need to have a healthy, mature concern about cyber security in this day and age,” Giancarlo told him. “Sometimes we have to think about it not as a question of if, but when, and how do we minimize the damage?”
Giancarlo also assured the committee that he was fighting a possible move by European regulators to impose their rules on U.S. clearinghouses. European regulators are in the process of determining whether U.S. entities meet their equivalency requirements. Giancarlo said that imposing European requirements on U.S. clearinghouses would break an agreement that his Democratic predecessor, Timothy Massad, had worked out with European regulators.
“A deal is a deal,” Giancarlo said. “This Congress makes the laws, this agency implements the laws,” said Giancarlo, referring to the CFTC. “We are a rule maker, we are not a rule taker.”