The Head of the Commodities Futures Trading Commission reiterated his commitment to fighting excessive regulation in the derivative markets.
Christopher Giancarlo, speaking at the Montana Agriculture Summit, said excessive regulations in derivatives have been hurting Americans.
“Now, it’s recognized the world over that America’s derivatives markets are the best and most innovative in the world, but they have been struggling recently, under the weight of flawed and excessive regulation.” Giancarlo stated. “Our markets today are more fragmented, more concentrated, less liquid and less supportive of economic growth and renewal than in the past. The overly prescriptive regulation of American derivatives markets is part and parcel of the over-regulation of the U.S. economy. It thwarts the revival of American prosperity.”
Giancarlo noted that derivatives like commodities futures help farmers manage risk.
“Farmers and ranchers that use our markets typically do so directly or indirectly through a FCM – the “stockbrokers” of the futures world. However, America’s FCMs are becoming an endangered species. FCMs continue to consolidate at an alarming rate with dire consequences for American agriculture and manufacturing.”
But he noted that the derivative market has been decreasing.
“Since 2008, there are over forty percent fewer FCMs in the marketplace – and many of those that left were ones that exclusively served the agricultural community.3 Some of the remaining FCMs have refused to retain their smaller, less active clients, including many small agricultural producers.”
In March, when Giancarlo was appointed as acting head of the CFTC, he quickly announced Project KISS, or keep it simple stupid, an initiative which attempted to reduce burdensome regulations of derivatives.
This speech continued with that theme.
“We must not allow Washington regulations and Fed monetary policy to wipe out smaller, rural FCMs and their customers the same way Dodd-Frank regulations have wiped out small community banks across America’s agricultural landscape.” Giancarlo stated. “I can’t speak for other agencies, but under President Trump, the CFTC is now under new management and we’re open for business with a new focus on customer service. The main job is to keep the main job, the main job. From here on out, the CFTC will call for changes in ill-considered rules adopted by federal bank regulators.”
Noting that farmers were not responsible for the 2008 financial crisis, Giancarlo vowed to make derivatives more conducive to them.
“The American people have entrusted the Trump Administration to turn the tide of over-regulation. Accordingly, financial market regulators, like the CFTC, must pursue their missions to foster open, transparent, competitive and financially sound markets in ways that best promote American economic growth and prosperity.
“The time has come for our financial markets – and the efforts of those who regulate them – to be put more fully into the service of American economic recovery.”
Giancarlo said he believes that Project KISS will play an important role in doing this.
“The initiative is Project KISS. It stands for “Keep It Simple Stupid.” Project KISS is an agency-wide review of CFTC rules, regulations and practices to make them simpler, less burdensome and less costly..
“As part of that effort, Project KISS recently issued a call for recommendations from the public on regulatory reform. We now have portals on our website for the public to provide suggestions that we can look to implement.”
While focusing on smart and less burdensome regulation, Giancarlo noted that this does not mean that cheaters will thrive while he’s sheriff.
“One of the CFTC’s core responsibilities is to ensure that the prices discovered in the United States’ commodity markets reflect market fundamentals and are free from fraud and manipulation. Each and every day, our surveillance staff sifts through over 300 million trading records to identify anomalies and trades that are inconsistent with the forces of supply and demand.”