NEW YORK, July 16, 2014 – The Commodity Futures Trading Commission (CFTC) would be best served if it uses “do no harm” approach, Commission Scott O’Malia said in a speech to a group of lawyers.

“Doctors safeguard their patients’ health and pledge to do no harm,” O’Malia said, comparing the role of financial regulators to physicians. “So, too, should financial regulators ensure that markets are healthy and well-functioning and that regulation does not impair market resiliency or robustness.” 

O’Malia, a CFTC commissioner since 2009, said working internally to fix issues is the best way to solve problems before unintended consequences take hold on the marketplace.  He was in New York Tuesday to address the Quadrilateral Meeting of the European Financial Markets Lawyers Group, Financial Law Board, Financial Markets Law Committee, and Financial Markets Lawyers Group for the Federal Reserve Bank of New York

CFTC says its mission is “to protect market participants and the public from fraud, manipulation, abusive practices and systemic risk.” The commission most directly impacts the farm community through its oversight of agriculture futures markets. Complexities of market activity can easily lead to complexities in regulations, but O’Malia said CFTC should remain proactive in adjusting regulations to keep markets running smoothly. 

“Where our rules have proven unworkable, it is incumbent upon us to fix them,” the Republican commissioner said. “And if we don’t, we shouldn’t be surprised when Congress gets involved.”

O’Malia also suggested CFTC recognize the global nature of the marketplace and work with the G20 nations and the European Commission in standardizing regulations internationally. 

“As I have stated before, it is my firm belief that the key to effective and efficient cross-border regulation of the swaps market is through an outcomes-based approach where regulators would defer to the other jurisdiction when it is justified by the quality of their respective regulation and enforcement regimes,” O’Malia said.

O’Malia said the commission has long lacked the financial backing to keep up with technological advances. For this reason, he praised the House for appropriating $52.6 million for technology investments in fiscal year 2015 and hopes to see that funding go towards improved automated surveillance. 

“The Commission’s inadequate support for technology has left the CFTC with diminished automated surveillance capacity and an inability to manage” regulatory data, he said. “It is time for the CFTC to start making serious technology investments . . . We must make automated surveillance the foundation of our oversight and compliance program.”

O’Malia said the CFTC must always take care to assure its regulations are not too burdensome to the marketplace. 

“We must take the time to thoughtfully reexamine our rules and mission objectives to make sure that we get it right, and first do no harm.”


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