In a speech at the 2012 Allegro Customer Summit in Dallas, CFTC Commissioner Bart Chilton generally discussed the following topics:
- transparency,
- lowering systemic risk,
- accountability,
- market integrity,
- betting limits for speculators,
- issues with electronic trading, and
- the need for a culture change in the financial sector.
Among other things, Commissioner Chilton argued the need to have “Cheetahs” (High Frequency Traders) register with the CFTC.
As to enforcement, Commissioner Chilton urged a rethink of the term “per violation” in determining fines, and effectively suggested a shift from a fines-per-day model to a fines-per-second model, stating: “if you’re making millions in seconds, then you should be liable for fines for bad conduct, counted in seconds.”
Lofchie Comment: Many of Commissioner Chilton’s remarks repeated previous themes of his, in particular the comments that he had previously made that high-frequency traders should be required to register with the CFTC. It is implicit in Commissioner Chilton’s remarks that there is no current requirement that such traders should be registered with the CFTC. Accordingly, Commissioner Chilton’s suggestion would require legislation.
Some of the remarks in the Commissioner’s statements were, although less prominently featured than his statements on high-frequency traders, equally worth attention. As to the implementation of the CFTC’s rules, Commissioner Chilton said
” . . . [the CFTC had received] a couple hundred requests for clarification and or regulatory relief in some fashion on approximately three dozen distinct issues. . . . It was truly intense, but our staff pulled through in a miraculable manner, bustin’ long hours and doing not just adequate, but superlative work. Quite frankly, this was a fulcrum point for Dodd-Frank as far as the CFTC goes. If we had not crafted these responses, the guidance and clarity of the new law could have been stymied, but we have crossed the Rubicon and we are on our way. Since clarity has been provided, compliance with all final rules is required.” [Emphasis supplied.]
In substance, Commissioner Chilton’s statement could be contrasted with separate statements made the prior day by CFTC (i) Commissioner Summers and (ii) Commissioner O’Malia, each of whom sounded a more measured knell as to the quality of the CFTC’s rulemaking. What is perhaps of more concern to market participants is that Commissioner Chilton seems to have been reversing an earlier statement in which he conceded that because many of the rules were so unclear, it would not be appropriate for the CFTC to insist on strict compliance.
View speech in full here (links externally to CFTC website).