An Analysis of CFTC's Committees - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

CFTC Logo, Dodd/Frank

An Analysis of CFTC’s Committees

October 22, 2018
Christopher Giancarlo
Christopher Giancarlo, CFTC chairman

With the Commodities Futures Trading Commission putting on a renewed emphasis on its committees, The Industry Spread has done an in-depth analysis of its committees.

An analysis found several issues however.

Last week, in a speech in Chicago, CFTC Chair Christopher Giancarlo said with a full slate of five CFTC Commissioners, the CFTC would also put each of its six committees into overdrive. The CFTC is made up of these six committees

  • Agricultural Advisory Committee.
  • Energy & Environmental Markets Advisory Committee.
  • Global Markets Advisory Committee.
  • Market Risk Advisory Committee.
  • Technology Advisory Committee.
  • CFTC-SEC Joint Advisory Committee.

The two committees most relevant to traders are 1) the Technology Advisory Committee: not only does the committee deal with high edge technology- namely fintech, crypto, blockchain, etc- but its members represent a who’s who if trading and investing power brokers. 2) Market Risk Advisory Committee, which also has a who’s who industry heavyweights in its membership.

Technology Advisor Committee (TAC)

TAC is made up of twenty-nine members, which includes representatives of exchanges the CME, ICE, and NASDAQ.

FINRA is represented along with the National Futures Association (both self-regulatory organizations), but no other regulator is on the committee.

The committee also includes representatives from financial heavyweights Goldman Sachs, Blackrock, and Bloomberg.

It also includes trendsetters in trading like the Eris Exchange.

Eris Exchange“Eris operates a CFTC regulated futures exchange, listing and trading Eris USD Swap Futures. These contracts clear at CME Group. On May 10th 2018, Eris and CME announced that in Q4 2018, the Eris USD Swap Futures complex traded on Eris Exchange will delist, immediately re-listing for trading at CME. The re-listed Eris contracts will continue to clear at CME Group.”According to its website.

The committee also includes LedgerX (the first CFTC approved bitcoin derivative exchange), Fidessa (which settles approximately 70% of British securities trades), and Tradeweb.

“(Tradeweb is) a world leader in building and operating electronic over-the-counter marketplaces. Since 1998 the company has helped transform the way that business gets done in the fixed income and derivatives markets. Tradeweb’s position as the hub of electronic trading in fixed income and derivatives business has been made possible through a longstanding partnership with the industry.” According to Tradeweb’s website.

TAC also appears to no longer be operable. The charter for the committee was renewed on October 14, 2016, stating: “The TAC will operate for two years from the date of renewal unless the Commission directs that the TAC terminate on an earlier date.”

CFTC has not yet renewed its charter.

TAC last held a meeting on October 5, 2018; that meeting can be viewed on You Tube.

Market Risk Advisory Committee (MRAC)

The MRAC has thirty-six members.

It includes Virtu Trading, Citadel Trading, Eurex Clearing, and the Options Clearing Corporation.

It also includes a representative of the Federal Reserve, Blackrock, Goldman Sachs, ICE, and CBOE.

Its charter states: “In support of the Commission’s mission ofensuring the integrity of the derivatives markets as well as the monitoring and management ofsystemic risk, the MRAC’s objectives and scope of activities shall be to conduct public meetings, advise, and submit reports and recommendations to the Commission on: (I) systemic issues that impact the stability of the derivatives markets and other related financial markets; and (2) the impact and implications of the evolving market structure ofthe derivatives markets and other related financial markets.”

The last time it held a meeting was on July 12, 2018.

Global Markets Advisor Committee (GMAC)

GMAC has no current members, according to its site. The committee also has a sub-committee on FX, which also has no current members.

The committees charter states: “The GMAC’s objectives and scope of activities shall be to conduct public meetings, and to submit reports and recommendations on matters of public concern to the exchanges, firms, market users, and the Commission regarding the regulatory challenges of a global marketplace, which reflect the increasing interconnectedness of markets and the multinational nature of business.”

But it doesn’t appear as though that charter has been executed, the committee is required to produce reports and recommendations for the CFTC, none of which have been submitted.

The last report produced by the committee in December 2014.

Energy and Environmental Markets Advisory Committee (EEMAC)

EEMAC has nine members and another fourteen associate members.

NODAL ExchangeThe members include the CME and ICE. It also has the NODAL Exchange: “Nodal Exchange is a derivatives exchange providing price, credit and liquidity risk management to participants in the North American commodity markets. Nodal Exchange is a leader in innovation, having introduced the world’s largest set of electric power locational (nodal) futures contracts.  Nodal Exchange currently offers over 1,000 power and gas contracts on hundreds of unique locations, providing the most effective basis risk management available to its energy market participants.” According to its website.

The committee also includes the industry group the Natural Gas Supply Association.

The committee has not held a meeting in more than two years; its last meeting was on February 25, 2016.

Agriculture Advisory Committee

The AAC has thirty-six members. It is made up entirely of industry groups, though not exclusively agriculture industry groups.

The committee includes a representative of the American Bankers Association, the American Farm Bureau Federation, the Futures Industry Association, and the Farm Credit Council.

The charter of the AAC, “shall be to assist the Commission in assessing issues affecting agricultural producers, processors, lenders and others interested in or affected by the agricultural commodity derivatives markets through public meetings, and Committee reports and recommendations.”

Its last meeting was held on April 5, 2018.

The CFTC-SEC Joint Advisory Committee (JAC)

JAC has ten members.

Besides representatives of the CFTC and SEC, FINRA is represented, along with several academics.

Maureen O’Hara of Cornell University, Susan Phillips of The George Washington University, and David Ruderof Northwestern University.

According to its site, JAC’s mission is: “The Securities and Exchange Commission and Commodity Futures Trading Commission established the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues to develop recommendations on emerging and ongoing issues relating to both agencies. The establishment of the Joint Committee was one of the 20 recommendations included in the agencies’ harmonization report issued in 2009. Subjects to be addressed by the Joint Committee shall include the identification of emerging regulatory risks, assessment and quantification of the impact of such risks and their implications for investors and market participants, and the agencies’ efforts on regulatory harmonization.”

The site appears to have not been updated in a while; Gary Gensler, who was CFTC chair until 2014, is still listed as the CFTC representative of the committee.

Its last meeting was in 2011.

An email to Dennis Holden, press person for the CFTC, for more clarification was left unreturned.

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