The CFTC has been given lots of power but deadlines and disagreements slow it down.
Call it growing pains or over-extension but the Commodities Futures Trade Commission (CFTC) is feeling something. As it tries to move from a diminutive commodities trading watchdog to an uber-derivatives command and control regulator, it is getting push-back from within and without, not to mention an almost crushing deadline that it may very well miss.
To be sure, CFTC Chairman Gary Gensler has been giving it his all, appearing almost daily before Congress, industry groups and other end users, trying convince them (or drag them along to believe) that what the CFTC proposes is for the greater good. But it’s not been, nor it will be, easy. Mr. Gensler is trying expand the CFTC’s sleepy precincts from keeping an eye on a $40tn futures market to watching a nearly $300tn swaps market.
From withinWithin the agency two Republican commissioners question most of the proposals, and not without cause. Last week Commissioner Scott O’Malia compared one proposal relating to swap execution facilities to his daughter’s request for a towel-warming rack for Christmas. “I didn’t think much of the towel rack until I read today’s proposal relating to swap execution facilities, namely, the parts that aim to further define what a SEF is,” Commissioner O’Malia said in his opening statement at a public hearing proposed rulemakings Under the Dodd-Frank Act. “And I thought to myself that this SEF rule is very similar to the towel rack episode: no reason, just because.” He went on to joke that he was not going to buy his 7-year-old a towel warming rack, “and I’m not supporting this proposed rulemaking today.”
Similarly, Commissioner Jill Sommers said she supports “giving the agency another year to write the rules,” according to the Wall Street Journal, but felt the agency was just “trying to meet a deadline just to meet a deadline when it may end up producing rules that don’t work.”
Deadline fast approachingAnd then there is the deadline. According to government mandated guidelines, new rules are to be written and implemented 365 days from the time of a bill’s passage. This means that the CFTC has just about six months (from its July 21st signing) to finish. To meet this deadline, it’s been looking at as many as six rules a week, which is about the same amount it used to complete in one year. Both Commissioneers O’Malia and Sommers have both said that this is not enough time to research and understand the scope – and impact on business – of the commodities futures and swaps markets.
“In making your wish lists,” Commissioner O’Malia said to fellow rule writers at the CFTC, “please continue to consider whether the items you choose are reasonable for the markets.”