The U.S. House Committee on Agriculture held a hearing to review the futures, options and swaps markets overseen by the CFTC. CFTC Chair Timothy Massad was the sole witness.
Chair Massad focused his testimony on the CFTC’s key priorities for 2015 and on reviewing what it has accomplished since his time as Chair began. Chair Massad stated that the CFTC intends to make markets work for commercial end users and has undertaken actions to achieve this goal. The actions include, among other things: (i) proposing a rule on margin for uncleared swaps; (ii) amending its rules for transactions with special entities to allow local utility companies to hedge risks in the energy swaps market; (iii) proposing rules to exempt end users and commodity trading advisors from certain recordkeeping requirements; (iv) clarifying the CFTC’s position on when forward contracts with embedded volumetric optionality may be excluded from being considered swaps; (v) harmonizing rules (such as those for certain commodity pools) with those of the SEC; and (vi) adjusting the settlement deadline for FCMs to post “residual interest” so as not to burden the margin collection process.
Chair Massad also outlined areas on which the CFTC will focus in 2015, including:
- the new regulatory framework for swaps;
- a harmonized cross-border framework;
- robust enforcement and compliance efforts;
- cybersecurity, information security and business continuity challenges; and
- retrospective regulatory reviews of CFTC rules.
Chair Massad also advocated for the CFTC FY 2016 budget increase, stating that the new budget is necessary in order to fulfill the CFTC’s goals and responsibilities.
Lofchie Comment: Quite a bit in Dodd-Frank and in the rules thereunder genuinely needs fixing. No doubt the process will continue for many years to come. Accordingly, it is good to see that “retrospective regulatory review” is high on Chair Massad’s agenda. In a reasonable world (if that is not a contradiction in terms), “retrospective statutory review” would be high on the Congressional agenda as well, since it is a review that could be accomplished more easily if every attempt at a correction were not painted as an attack on The Night Watch.