Former CFTC boss knows energy and commodity markets.
Scott O’Malia’s appointment as head of the lobbying/wonking hybrid ISDA could be a big leg up for end users. ISDA has been a talking shop for dealers ever since that IBM swap deal was done in the Jurassic era. But despite attempts to pull in end users and buy side participants, ISDA remains, in most people’s eyes, a sell side talking shop.
Bob Pickle, the last CEO of ISDA, is admittedly a brilliant guy who wrote many of the documents that make the world of risk management possible. Mr. O’Malia, by contrast, is a bit of an iconoclast. He opposed a lot of the CFTC rules limiting commodity derivatives trading, and worried in an articulate manner about the possibility that regulation would drive futures trading overseas (see related article, The Dean of Dissent: O’Malia at the CFTC, here).
Mr. O’Malia’s understanding of the energy and commodity markets should be welcomed by corporates. He’s no pushover, at least he doesn’t seem to be, but judging from his track record, he is a realist who understands the necessity of hedging, but within sane limits.
A useful roundup article on the Swap Report notes Mr. O’Malia’s main interests while at the CFTC and elsewhere:
- the international nature of the energy and other physical commodity markets;
- the importance of maintaining liquid commodity and derivative trading markets to enable commercial end users to hedge the risks that arise from ongoing business operations; and
- the regulatory challenges faced by global commercial business enterprises, as distinguished from financial institutions and investors.
That sort of individual at the helm of ISDA – which, frankly has not been leveraged to its potential, especially during the financial crisis – bodes well for the interests of corporates looking to hedge their risks in a transparent and liquid market.