Chairman of the U.S. Commodity Futures Trading Commission (CFTC) Gary Gensler began what would be an almost four-hour hearing on several rules that may be applied to the Dodd-Frank Act. Declaring that the hearing was about promoting transparency, developing internal business conduct rules, and compliance rules to protect the public, he seemed very collected and charismatic.
Patiently awaiting her term for introductions, Ms. Jill Sommers, however was not as optimistic about the proposed rules as Gensler. Admitting that the challenges for implementing the Dodd-Frank Act are ongoing, she has come to the conclusion that she cannot support the final product. Ms. Sommers concluded that there are too many provisions in the final rules, too many redundant regulations, and was becoming to value form over substance. Specifically, she feels their rules are going too far beyond the intent of their statute. For example, the walls that the CFTC are erecting are having a negative effect on the communication between trading and clearing units of swap dealers and affiliated SCM’s
Nothing Set In Stone
Co-commissioner Bart Chilton, after praising Ms. Sommers statements stated that there was a lot to be learn from her testament. His first comments were to reassure everyone that the discussion they were having today was a proposal and it was open for comments, and debates, and because the commissioners “messed up” on the first one, they are back again. One point he hoped to solidify was that the safety net needs to be better and the balance needs to be better as well. Additionally, Mr. Chilton wants to widen the scope of the board to see that they cannot look at things in isolation and realize that things are interconnected and one change could affect another.
Committing Regulatory Malpractice
Scott O’Malia, showed evidence from an Economist magazine, in which there was an article on how the CFTC are under the impression that they could foresee, predict, and do damage control one very eventuality. He reiterated that he has always been for that any regulations should be accessible to the public, hold a type of consistency, be written in plain terms, and backed by legitimate information. Today in the hearing, O’Malia could not support the final rules being governed over the final business conduct standards or the block-trading rule. It should be noted that he voted “nay” on both movements in the hearing, and so did Sommers. Additionally, O’Malia admitted that the cost-benefit analysis of the cost of the ruling did not comply with the OMB how to create cost benefit analysis standards. He even went as far as to say that it was amounting to “regulatory malpractice.”
Last to speak was Commissioner Mark Wetjen, whose monotone speech, wanted to focus on the conflicts of interest requirements and qualifications of a compliance officer. Toward the end of the ruling it will require targeting firewalls, which will ensure that trading personnel do not tamper with decisions made by conglomerates. Admitting that the public benefits from the block thresholds, as they are allowed a window of opportunity to assume and deal with lay off risks, he admits to it being a double-edged sword. On the other side, if the CFTC sets block thresholds too low liquidity providers are given the chance to skew the market and gain advantages.
Follow the Rules!
In dealing with procedures, the first rule deals with the people and companies that perform swap deals, major swap participant record keeping, which includes both a digital voice bank, and regular computer databases. Additionally it includes conflict of interest policies and procedures, and also the job descriptions and influence of compliance officers. The proposed rule dealt with the procedures to establish appropriate minimum block sizes for large notional off-facility swaps and block trades. Both rules passed with a vote of 3-2.
By: Conor O’Malley