CFTC Chairman Gary Gensler delivered a statement before the Technology Advisory Committee regarding the need for financial systems and rules to remain resilient in the face of technological changes. Chairman Gensler discussed the use of modern technology to sort and search data in an accessible place, noting that the CFTC has worked with self-regulatory organizations about direct electronic access to bank accounts and custodial statements. Gensler also discussed finalizing (i) a concept release on “testing and supervision, which is about risk controls and system safeguards for automatic trading environments” and (ii) added “…ownership and control reporting . . . so that we can know the actual owners and controllers of futures accounts in a similar way to what is the swap data repositories for swaps.” Chairman Gensler further criticized LIBOR. He also said that the CFTC needs more money, otherwise “it’s going to be hard for us to be nimble.”
Lofchie Comment: It sounds as if, now that the SEC has proposed Regulation SCI, the CFTC must have its own version.
There is some dissonance between the CFTC’s saying that it does not have enough money and its constant proposal of new rules and assertion of ever-wider jurisdiction. Each of the rules may be defensible in theory, but ultimately all of the rules must be paid for both by government and market participants. How much will it cost to adopt and implement each of these rules, on the part of both government and the private sector? If the CFTC has a budget that is only 2/3 as large as it wants, and if on that budget the CFTC claims that it has accomplished 60% of its goals, does it really make sense to launch major new rule initiatives, particularly since Commissioner Chilton has said that even existing CFTC initiatives would have to be paid for with a user tax?
Fellow Commissioner Chilton argued in a April 30th speech for the regulation of (i) large passive investors and (ii) electronic traders. Whether these are also goals that Chairman Gensler supports is uncertain, but we have passed the point at which it is incumbent on the CFTC to establish priorities.