Flying backwards

Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler testified before the U.S. House Committee on Agriculture today on “progress thus far on rules relating to entity and product definitions under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

It is astonishing to us that the CFTC has promulgated whole forests of rules related to Dodd-Frank and yet has not defined the entities and products that come under those rules. Seems backwards as noted here recently by our contributor and former CFTC Chairman Philip McBride Johnson.

We are sympathetic with the volume of work the Commission has had to undertake and realize that the definition phase is particularly cumbersome as it must be undertaken in cooperation with multiple other regulators, but it still makes no sense to save the definitions for last.

People and organizations are commenting on these myriad of rules unsure what particular bucket they and the products they offer and are accessing fall into.

A clear set of definitions as a first step could have helped streamline the whole process.

Now there is the chance that rules may be rendered meaningless as there is a real threat that Dodd-Frank could be neutered through a lack of funding. This type of uncertainly is bad for the markets. As is the prospect of defunding the regulators. Markets need clear rules or standards and their enforcement should be even, not based on a resource allocation decision within an agency.

If there are parts of the law people don’t like, work to remove them but don’t turn compliance into a voluntary exercise based on a cost benefit analysis estimating the regulators ability to monitor your activity.

About the Author
Daniel P. Collins

Editor-in-Chief of Futures Magazine, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange. Dan joined Futures in 2001 and in 2005 he was promoted to Managing Editor, responsible for overseeing all the content that went into Futures and Dan’s incisive reporting and no-holds barred commentary places him among the most recognized national media figures covering futures, derivative trading and alternative investments.

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