FIA CEO Asks President Trump to Ease Marketplace Regulation

Steven Lofchie Commentary by Steven Lofchie

FIA President and CEO Walt Lukken urged President Trump to reduce the "cumulative regulatory burden" of the Dodd-Frank Act and other post-crisis regulations on derivatives markets, particularly the extension of Dodd-Frank requirements that apply to certain swaps. In a letter to President Donald Trump, Mr. Lukken offered suggestions for the new Administration to consider when making policy decisions concerning financial marketplace regulation.

Noting that Dodd-Frank had "generated more than 20,000 pages of regulations and fundamentally changed the regulatory structure of financial markets," Mr. Lukken recommended that the Administration:

  • review all financial reform regulation comprehensively and immediately, and include input from the public;

  • evaluate whether rules (i) are tailored properly to the risks they address, (ii) reflect public input, and (iii) are subject to adequate cost-benefit analyses;

  • eliminate "duplicative rules that serve as barriers to access [by] recognizing jurisdictions where comparable rules apply" in order to promote cross-border access and globally accessible markets; and

  • incentivize "innovation and healthy market behavior," particularly technological innovation.

Mr. Lukken stated that "[n]ow is the appropriate time to take stock of how these regulations are functioning in practice rather than concept." He challenged the President to consider the following:

"Why is volume and growth stagnating? Why is there consolidation among members of this industry such that risk is now more concentrated? Why are commercial enterprises that had nothing to do with the crisis being saddled with dozens of new rules?"

Commentary

The number of futures commission merchants has declined steadily, as this linked chart shows. The incoming regulators may be reasonably concerned about this exodus from the industry. It is not possible to say the extent to which the decrease in the number of firms is due to increased regulatory costs, but it would be surprising if that were not a material factor.

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