On Tuesday, June 18th 2013, CFTC Commissioner Bart Chilton gave the keynote address in the conference Hedge Fund Industry in 2013, which was held in Chicago, Illinois. In the address, he gives some insight into the working parts behind the Commodities Futures Trading Commission, and why they see some aspects of the financial industry as potential threats to the stability of the market.
Chilton, who has been a CFTC Commissioner since August, 2007, gave a speech that he prefaced by saying that “while this is a talk about trouble, I assure you it isn’t a lecture about trouble.” His speech seemed lighthearted and relaxed, and he even made a quip about Dodd-Frank; “And so, in 2010 Congress and President Obama put in place a new law: Dodd-Frank. I’m sure you guys have your own euphemism for it, but let’s keep this PG.” However, the rest of his speech was less humorous.
In discussing the development of High Frequency Trading (HFT), which he referred to as cheetahs, he mentioned that given the right circumstances, HFT was beneficial.
Look, these cats have some true attributes and they shouldn’t become an endangered species. At the same time, they are impacting markets in ways we barely understand, and it ain’t all good all the time. If we don’t have some rules and transparency about their activities, we run a market risk that some cheetah-related event that harms markets, could put them on an endangered list, and rapidly.
Another one of the subjects he covered was global markets, which is very topical. He explained that balancing domestic and international regulatory policy was difficult, because trading and other financial transactions are globally linked. He went onto explain several global transitions that regulatory policy will influence, and said “we need to give the market a reasonable amount of time to adjust to global derivatives market regulation. The markets will need time to adapt to a new interpretation of the term ‘U.S. person.’ In many instances we’ll have a pretty good idea when the first set of foreign rules come online. In Europe, trade repository reporting is likely to begin in November. We should be cognizant of that as we assign CFTC phased-in compliance.”
Chilton summed up the address by saying that these markets don’t just effect the key players like regulators or traders, but also the everyday consumer, and put the regulations into the context of risk management.