Tag: Dodd-Frank

Massad Says CFTC Hampered by Budget Constraints

Recently appointed CFTC Chairman Tim Massad announced last week that there were “a lot of things” he would like to do to continue the CFTC’s goal of regulating financial markets, but that he is held back by strict congressional budget constraints. Referring to the CFTC’s role in promulgating regulations under Dodd-Frank, Massad pointed out, “Our budget hasn’t really increased very much, and yet we were given vastly expanded responsibilities in terms of the markets we cover.” Pointing to a shortfall in staff necessary to carry out the CFTC’s mandate, Massad stated that the CFTC was forced to “rely heavily on the [financial] industry to regulate itself.”

The CFTC’s budget woes have been exacerbated by House Republicans, who will not approve funding requests by the agency and by the White House, even while House Democrats claim that their congressional counterparties are trying to scuttle Dodd-Frank. The CFTC’s current budget is $215 and is unlikely to increase in the next fiscal year.

Massad, who had previously overseen the Troubled Asset Relief Program (TARP) assured that he would be able to improve staff morale at the CFTC. Quoting Theodore Roosevelt, Massad said that he tells staff, “We’re going to do what we can with what we have.”

Congresswoman Urges Review of Bank Guarantees of Offshore Affiliates

Maxine Waters, ranking member of the House Financial Services Committee, urged the CFTC this week to begin investigating the offshore actions of Wall Street banks in avoiding certain mandates set forth in the Dodd-Frank Act. In a letter to Timothy Massad, the CFTC’s recently-confirmed chairman, Representative Waters criticized the removal by banks of parent guarantees from overseas affiliates, which allows banks to trade in the interdealer market while skirting Dodd-Frank restrictions aimed at increasing price competition and transparency. By cutting off these guarantees, banks are able to trade in the United States through swap execution facilities established under Dodd-Frank, while their non-guaranteed subsidiaries are subject only to local laws of foreign jurisdictions.

Rep. Waters also sent letters to the Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, and Federal Deposit Insurance Corporation. In these correspondences, Rep. Waters reiterated that the CFTC should take a more aggressive stance in reviewing changes to the guarantees.

Senate Confirms Three New CFTC Commissioners

The US Senate Monday voted to approve the nomination of three new commissioners to the CFTC, including Timothy Massad, who will replace Gary Gensler as CFTC chairman. Mr. Massad had served from 2011 to October 2013 as the Assistant Secretary for Financial Stability at the Treasury Department and has overseen the Troubled Asset Relief Program created in response to the 2008 US financial crisis.

In addition, the Senate approved the nominations of Sharon Bowen and Christopher Giancarlo to serve as CFTC commissioners. While both Mr. Massad and Mr. Giancarlo were confirmed by voice votes, the Bowen’s confirmation proved more controversial, and she was ultimately confirmed by a 48-46 vote. Criticism of Ms. Bowen came mainly from the of the political spectrum, with Republican senators criticizing her role in overseeing a panel that denied compensation to victims of a $7 billion ponzi scheme.

The three new regulators will join Commissioners Mark Wetjen and Scott O’Malia on to fill out the CFTC’s five-member panel to continue the implementation of Dodd-Frank regulations begun under the oversight of Mr. Gensler.

CFTC Announces First Whistleblower Award

The CFTC announced last week its first award under the whistleblower award program initiated pursuant to the Dodd-Frank Act. Under the program, eligible whistleblowers are entitled to a financial award where original information provided leads to a successful enforcement action and the collection of at least $1 million. Whistleblowers who file successful claims are also entitled to job security and confidentiality.

Though the identity of the awardee remains undisclosed, the CFTC Whistleblower Award Determination Panel deemed the information “sufficiently specific, credible, and timely to cause the Commission to open an investigation.” The unnamed whistleblower received an award of $240,000 for providing the information. Pursuant to CFTC Regulation 165.8, awards granted under the whistleblower program amount to between 10 and 30 percent of the total amount of sanctions collected from the enforcement action.

Prior to finalization of the relevant regulations, the CFTC received over 600 letters arguing that the proposed regulation provided insufficient protection to whistleblowers and instead sought to protect financial entities by limiting the pool of potential whistleblowers. Prior to the issuance of the award last week, the CFTC denied 25 whistleblower claims.

Commissioners Unhappy With CFTC No-Action Letters

Several commissioners have spoken out over the CFTC’s no-action letters, claiming that many of them were instituted hastily, leaving little time to review or edit them.

The Commodity Futures Trading Commission has put in place almost 70 rules since the 2010 regulatory reform law was put into place. Of these rules, 36 were related to Dodd-Frank. However, within these 36 rules, over 200 no-action letters or other forms of guidance have had to be issued after the rules were instituted.

Some commissioners have defended the CFTC no-action letters, saying that their use was inevitable, as overhauling the operations of the $600 trillion dollar derivatives market is no small task. As former commissioner Micheal Dunn explained it to Risk.net, “You can’t make an omelette without breaking some eggs.”

Most commissioners agree that some no-action letters will be necessary. However, it seems for many commissioners, the issue revolves around how the CFTC no-action letters were instituted.

Commissioners have pointed out that while some of the no-action letters are only temporary, quite a few of them are indefinite or permanent. Many of the commissioners only received notice of the letters the night before they were issued, which has them feeling as though their input had not been considered over what is essentially a complete change in policy.

CFTC chairman nominee Timothy Massad recognized the need for a more streamlined and organized rule making process while being questioned at a confirmation hearing by the Senate.

While former CFTC chairman Gary Gensler spent most of his time putting many of the Dodd-Frank rules into place, it seems Massad’s focus will fall on figuring out how to amend and enforce these rules.

Commissioner Chilton to Leave CFTC Next Week

CFTC Commissioner Bart Chilton has announced that he will be leaving the Commodity Futures Trading Commission by the end of next week.

Chilton, who had said he would be leaving the CFTC in November, has stated that he will step down from the Commission by March 22nd.

Though he announced his departure months ago, Chilton had decided to stay on for a little longer than planned, most likely to serve as an extra hand at the commission, which would have been running with only two of the five commissioners it requires had he left.

However, now that the Senate has met with, and seems likely to accept, the three replacement nominees set to join the CFTC, Chilton may feel as though he can step down without causing any issues.

Along with former chairman Gary Gensler, Chilton was among the most vocal supporter within the CFTC for stricter position limits for traders and other largely contested rules formed from the Dodd-Frank Act.

Chilton plans to finish writing his book, “Theft” which will detail the relationship between Wall Street and Washington, telling Bloomberg in an interview “I have a book to write, and I want to get to it.”

Chilton will be succeeded by Sharon Y. Bowen, pending her likely approval from the Senate.

Judge OK’s DTCC CFTC Lawsuit

A US federal judge has ruled that part of a lawsuit filed by Depository Trust & Clearing Corp (DTCC) against the Commodity Futures Trading Commission (CFTC) will be allowed to proceed.

The DTCC CFTC lawsuit was filed by the DTCC over the how the CFTC allowed CME Group Inc and IntercontinentalExchange to gather market data.

The DTCC had actually filed 4 claims against the CFTC in the lawsuit. However, US District Judge Amy Jackson dismissed three of them, citing that the court could not review claims that did not involve a final action by the CFTC. Two of the claims involved actions approved via the CFTC’s “self-certification” process, with a third being about changes made the frequently asks questions section on the CFTC’s website.

The Dodd-Frank Act requires all trade data for over-the-counter derivatives  to be stored in swap data warehouses for easy monitoring. The DTCC is suing the CFTC for allowing CME Group Inc and IntercontinentalExchange to use their own proprietary data warehouses. The DTCC, which operates its own rival data warehouse, has claimed this to be anticompetitive.

With this being the main purpose behind the DTCC CFTC lawsuit, it seems the DTCC is happy to be able to move forward, even without the other aspects of the suit. A member of the DTCC tell Reuters, “We are pleased that the judge has given the green light to the core of our case. We continue to believe that CME Rule 1001 is anticompetitive and undermines the core pro-competitive principles of the Dodd-Frank Act.”

CFTC Chairman Nominee Timothy Massad Likely to Be Approved by Senate

It looks as though CFTC chairman nominee Timothy Massad will be approved by the Senate, after dispelling any doubt about his commitment and experience at a hearing in Washington yesterday.

The Senate was initially unsure about President Obama’s choice in replacement for Gary Gensler, based on a lack of experience in many of the areas the CFTC regulates. However, after discussing his relevant experience and vowing to uphold a strong enforcement program, it seems the Senate has found no reason to doubt the CFTC chairman nominee.

Massad, having recently lead the unwinding of the Troubled Asset Relief Program (TARP), feels that this, along with his time as a corporate finance attorney, has given him enough experience with regulation and derivatives to be able to handle the responsibilities of the CFTC position.

Massad will be replacing Gary Gensler as the new CFTC chairman. While Gensler spent his time as chairman putting a large portion of the rules instituted by the Dodd-Frank Act into play, it seems Massad’s time will be spent enforcing these rules.

Massad was one of several CFTC nominees to speak on their experience in front of the Senate yesterday, being joined by Sharon Bowen and J. Christopher Giancarlo, who also seem likely to be approved.

Should all three be approved, the CFTC will have a full staff in terms of commissioners once again, as the commission is currently operating with only three of the five it requires.

Senate Questions New CFTC Nominees

The three CFTC nominees waiting for approval to join the Commodity Futures Trading Commission are now facing some questions at a Washington approval hearing from the Senate over how much they will be willing to enforce the rules put in place by the Dodd-Frank Act.

Among the nominees is President Obama’s choice for CFTC chairman, Timothy Massad. Drawing skepticism from the senate, some are worried that Massad doesn’t have much of a record or policy in regards to what the CFTC regulates.

Outside of Massad, CFTC nominees Sharon Y. Bowen and J. Christopher Giancarlo, who are slated to take on roles as commissioners, will also be answering some questions for the Senate.

Among the concerns, it seems those involved in the matter are eager to hear about the CFTC nominees’ views on speculation in commodity markets and the reach of Dodd-Frank rules overseas.

Upon, approval, these CFTC nominees will significantly change the make-up of the Commission’s current leadership. The CFTC is already only operating with three of the five commissioners it’s supposed to, and with commissioner Chilton on his way out, they will actually be making up the majority of the Commission’s leadership.

EU and CFTC to Work Together on Cross-Border Regulation

The EU and the CFTC have announced that they will be working together in their implementation of cross-border regulation, after talks in Washington.

The regulators have been piecing together new laws in the hopes of preventing a similar financial crisis to the one in 2008, which had significant negative effects on both country’s economies.

The EU and the CFTC have agreed to “minimize the divergence on margin requirements” for over the counter derivatives, according to a report by Bloomberg. They have also promised to work together and create consistent standards for cross-border regulation.

This is actually the second time the EU and CFTC have discussed cohesion on cross border regulation. Back in July of 2013, the two regulators had agreed to work together on these issues. However, the CFTC was very quick to act on derivative regulation while ex-chairman Gary Gensler was in charge, implementing many of the initiatives of the Dodd-Frank act before the EU had even finished discussions on how they would go about regulating the industry.

Included in the CFTC’s initiatives were rules for cross-border regulation that had been criticized for affecting many of Europe’s banks, which lead to tension between the two regulators.

Now that Gensler has left the CFTC, it seems likely the Commission may slow down on its rule making, giving the EU a chance to catch up.

The two regulators will be meeting again in July.