Could the U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) ever merge? The prevailing logic is no: the appropriations committees in Congress would never relinquish their turf. Yet the recent merger between InterContinental Exchange (ICE) out of Atlanta and the New York Stock Exchange has renewed calls for a robust regulatory body that could combine the terrain of the CFTC and SEC.
CFTC + SEC = Markets and Trading Reorganization Act
U.S. Congressman Barney Frank, co-author of the one of the most wide-sweeping pieces of legislation in U.S. history – the Dodd-Frank Act – has made combining the agencies his final task as congressman. On November 21, Frank introduced the Markets and Trading Reorganization Act, which calls for a new regulatory body – the Securities and Derivatives Commission – that would combine securities and commodities into a single regulatory regime. Both agencies currently oversee derivatives trading.
After the merger between ICE and the NYSE, many commentators and industry participants are renewing their calls for a merger of regulatory bodies.
“This merger just screams out for a consolidated regulator,” said Jaret Seiberg of Guggenheim Securities to The Washington Post. “History tells us that having regulation split up between multiple entities doesn’t work.”
A potential CFTC-SEC merger, however unlikely, has found friends on both sides of the aisle. In November, House GOP members published a report that criticized the two regulatory agencies for failing to communicate in advance of the collapse of MF Global. Their prescription included a call to combine the agencies – call that was quickly silenced by members of the GOP who would stand to lose coveted lobbying money.
How to Fund the CFTC-SEC Merger?
One of the purported advantages of merging the agencies in the age of ICE would be the ease with which the new super-agency could be funded. But how would it be funded? Frank’s bill includes a transaction tax that would adjust according to the required budget of the super-agency. Critics of the transaction tax suggest it gives the government a free card – outside of any congressional approval – to determine funding for the regulatory regime. Although watered down transaction taxes are making their way through European parliaments in Italy and France, it seems unlikely that such a tax would easily pass through a Republican house, especially amidst talks of a fiscal cliff.