Tag: Gensler

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.

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.

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.

US CCPs Feeling Confident over EC Approval

US central counter parties (CCPs) seem to be gaining confidence that the European Commission (EC) will overlook differences in their clearing house rules, preventing US CCPs from losing European clients.

The rules set out by the European Market Infrastructure Regulation (Emir) vary from those followed by US CCPs. While EMIR requires  a minimum holding period for futures margining in Europe to be two days, its only one in the US, for example.

Because of this and a list of other differences, US CCPs have been concerned over whether or not they would be prevented, or at least delayed, from being approved by the EMIR as qualified CCPs in Europe.

However, it seems these fears are being put to rest as things begin to move forward. Perhaps one of the biggest factors in this is the Commodity Futures Trading Position’s new attitude toward working with European regulators after the departure of previous chairman Gensler.  The CFTC has recently agreed to allow US entities to trade on European platforms, provided they meet certain standards.

Because of this, many are now assuming that the EC will be much more inclined to allow US CCPs that have adopted similar internal practices to Europe’s to qualify.

CFTC and EU Work Out Cross-Border Trading Agreement

The Commodity Futures Trading Commission (CFTC) and the European Union (EU) have been butting heads over how to jointly regulate international swap trades for some time now. But after meeting yesterday, it seems the two regulators have finally worked out a cross-border trading agreement.

The CFTC and the EU have agreed to allow US firms to trade over European platforms, rather than forcing them to be traded through US swap execution facilities, or SEFs. The cross-border trading agreement will keep liquidity within the market, as well as ease tensions between the US and Europe over the CFTC’s foreign trading policy.

The agreement is not without restrictions however. In order for trades to be executed outside of US facilities, the country handling the trade must have standards in place that can be considered comparable to the CFTC’s. While this may seem simple enough, the requirement has so far only been met by the UK, according to the commission.

It also may be some time before other European countries are considered up to par by the Commission, as the EU isn’t planning to have its trading rules in place until 2016.

This new cross-border trading agreement is quite the turnaround for the CFTC— which was actually sued for its overbearing foreign trading policies toward the end of last year. This is no doubt due in part to former chairman Gary Gensler stepping down, and it will be interesting to see how the market fares with a more lenient CFTC.

Blythe Masters Joins CFTC Advisory Committee

JP Morgan’s commodities chief, Blythe Masters, is now a member of a CFTC advisory committee, according to an announcement made yesterday by the Commodity Futures Trading Commission.

Masters has been working in the swaps industry for well over a decade, and helped JP Morgan begin using credit default swaps to hedge bank risks.

She will be taking part in a discussion the CFTC advisory committee will be having next week over the Commission’s cross-border regulation policy.

The policy, which has been bemoaned by both foreign and domestic banks, says that trades made by foreign banks still fall under CFTC rules if U.S.-located personnel arrange, execute or negotiate the transactions.

The CFTC was sued by several banks recently for this policy, and it seems the Commission is now seeking to amend its guidelines.

Masters is joining the CFTC advisory committee just as JP Morgan is selling of its physical commodities business. The reason for the bank’s decision to sell off its multi-billion dollar operation seems to be the amount of headaches many of the new rules have created for banks in recent times.

The CFTCs apparent change of heart over cross-border regulation has come quickly after former chairman Gary Gensler stepped down, and it seems likely that banks will see a softer side of the CFTC over the next few months, and possibly years because of this.

US an EU Close to Deal on Cross-Border Derivatives Rules

The US and European Union have been working on an agreement over cross-border derivatives rules for a while now, and are finally closing in on a deal, according to Bloomberg.

The agreement will relieve EU trading platforms from being affected by US derivative trading rules, at least for the time being.

The deal is being handled by the Commodity Futures Trading Commission (CFTC) and European Union officials, and while it seems they’ve come to an agreement over cross border-trading rules, nothing will be finalized until February 15th.

The US’s policy on cross-border trading had been a point on contention for many large banks, some of which have recently sued the CFTC over its ability to police trades that are made from banks outside of the country.

The CFTC claimed that any trades made by an outside bank that was essentially at all linked to a US trader would have to do so according to the CFTC’s rules. This policy however, was causing foreign banks to stop trading with the US and creating fragmentation within the market, according to banks involved with the issue.

This turnaround for the CFTC seems to mark the beginning of a different type of Commission, quite possibly caused by Gary Gensler stepping down as CFTC chairman. Gensler was known for policing the derivative market very strictly, and it seems likely that the CFTC will loosen up a bit with him gone.

Grain Industry hoping for More Lenient CFTC

Leaders in the grain industry discussed the future of the Commodity Futures Trading Commission (CFTC) at the Commodity Council Markets gathering recently.

With the CFTC currently going through major changes, it seems the grain industry is hoping it will lead to a more lenient Commission. And, as Mark Wetjen is currently taking over the reins, it’s very possible that this will be the case.

The CFTC has already lost chairman Gensler, and with commissioner Chilton is on his way out, the CFTC will be without its two most vocal proponents for a strict hold on the derivatives market.

Timothy Massad and Sharon Bowen, considered to be Wall Street lawyers, are currently slated to take over for Gensler and Chilton respectively, and are less likely to be as strict.

Gensler managed to push through upwards of 70 percent of all the rules the CFTC was required to write during his term according to Reuters, which will leave Massad with little more to do in terms of large scale change. And Commissioner O’Malia has stated that he is hoping that the CFTC can focus more on tweaking the rules put in place to make things easier before continuing with new reform.

The main cause of concern for the grain industry seems to be how the CFTC will be defining “hedging” which could seriously affect the way farmers use futures contracts to anticipate the buying and selling of grain.

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.