CFTC Chair Massad Criticizes Budget Deal

CFTC Chair Timothy Massad criticized the failure of the 2016 budget agreement to provide “even a small increase” for the CFTC’s “critical work” in a market with a budget of $1.1 trillion.

Chair Massad asserted that “[t]he failure to provide the CFTC even a modest increase in the fiscal year 2016 budget agreement sends a clear message that meaningful oversight of the derivatives markets, and the very types of products that exacerbated the global financial crisis, is not a priority.”

Lofchie Comment: It is difficult not to feel sympathy for Chair Massad. It is a tough budgetary situation. Considering the CFTC’s enhanced responsibilities, the expansive rulemaking that has taken place over the last several years and the seeming lack of regard for the costs of implementing those rules, a zero budget increase is a serious problem.

The CFTC should consider scaling back on regulatory requirements that serve no material purpose. A good place to start is CFTC’s double regulation of SEC-registered investment companies that use CFTC-regulated instruments. Given the acknowledged risks created by central clearing and the absence of systemic risk benefits provided by mandatory exchange trading, the CFTC should hit the brakes on mandatory expansion and allow the market to determine whether these market structure changes actually are useful. Even though Chair Massad cannot control his revenue, he still can control his expenses, and he should pare them down as necessary to meet areas of genuine priority.