The Washington outlook panel at the Futures Industry Association’s annual conference on March 14, in Boca Raton Fl. lacked the star power of past panels but the political and regulatory issues facing the industry are as significant as ever. Acting Commodity Futures Trading Commission Chairman Michael Dunn said the most important thing to watch is Gary Gensler’s nomination as CFTC Chairman to be reported out of the Senate Ag committee, which he expects to happen in the next week or two.
FIA President John Damgard said that despite some comments that indicated otherwise, House majority leader Barney Frank is not looking to merge the CFTC and Securities Exchange Commission. He gave a rundown of the various bills out there that could potentially affect the industry.
CME Group Executive Chairman Terry Duffy said, “Government is definitely getting bigger.”
Duffy is not supportive of efforts to force all over-the-counter trading on exchange, which is part of a bill sponsored by Sen. Tom Harkin (Dem Ia.). “There are a lot of different OTC markets that work right now,” Duffy said.
Regarding the talk of a merger between the CFTC and SEC Duffy pointed out that the original recommendation in former Treasury Secretary Paulson’s blueprint called for reform of the SEC before such a merger could happen. However, recent calls for a merger have come from the securities side and have not brought up reform of the SEC as a precondition.
Damgard said the industry needs to do a better job telling its story. “This industry has worked remarkably well,” he said noting that there has been no clearing member defaults as a result of the financial crisis.
Both Damgard and Duffy pointed out how several studies suggested speculation in Futures markets was not the main driver in higher commodity prices in general and crude oil futures in particular last year despite the growing conventional belief that it was. Dunn seemed more open to the possibility that speculation drove prices and distanced himself from the study on speculation released by the CFTC in September. The study presented evidence showing speculation in crude oil futures was not a factor in the run-up to $148 but Dunn pointed out that they only looked at a six-month time frame, which was too short of a time to draw a definitive conclusion.
Duffy wasn’t particularly concerned by comments of CFTC Chairman nominee Gensler at confirmation hearings that suggested he saw the run up in commodities as the fault of speculators and he was looking to restrict speculation. Duffy distinguished between confirmation hearing comments and how Gensler would operate as Chairman. Damgard added, in regard to the testimony, “[Gensler] left himself some wiggle room.”
While Dunn said he is a strong believer in the exclusive jurisdiction of futures by the CFTC, he added that does not mean that the commission will not work cooperatively with other regulators. “We can work together to see each [of our regulations] work better,” Dunn said.
