Senate Agriculture Committee Considers CFTC Chair Nomination

Steven Lofchie Commentary by Steven Lofchie

The U.S. Senate Committee on Agriculture, Nutrition and Forestry (the "Committee") considered the nomination of Dr. Heath P. Tarbert to become the next Chair of the CFTC. Dr. Tarbert is currently the U.S. Treasury Department ("Treasury") Assistant Secretary for International Markets.

In testimony before the Committee, Dr. Tarbert stated that, if confirmed as CFTC Chair, one of his obligations would be to ensure that the derivatives markets are "transparent, competitive, financially sound and also free from fraud." He said that an understanding of the derivatives market was insufficient, and that CFTC staff also must understand the cash commodity markets. In addition, Dr. Tarbert declared that "there is no sector more important than agriculture," and stated that he would take advantage of the Committee's expertise gained from meetings with agricultural stakeholders.

Dr. Tarbert stated that Congress's enactment of the Dodd-Frank Act has led to critical improvements in margining, execution, clearing and reporting within the swaps market. He noted, however, that because the derivatives markets have been changed by digital technologies that pose risks and opportunities, the CFTC must remain vigilant in preventing new threats. In response to a question from Senator Kirsten Gillibrand (D-NY) regarding the impact of "flash" trading on the markets, Dr. Tarbert indicated that he would look into measures such as speed bumps to ensure that pricing reflects supply and demand.

In response to questions, Dr. Tarbert said:

  • U.S. clearinghouses and exchanges in the United States need to be exclusively supervised and regulated by U.S. regulators - that while a collaborative relationship with foreign regulators is beneficial, it is important for the United States to have the sovereignty to regulate its own markets;

  • Regulation AT (Automated Trading) is an issue he would want to "get back up and running";

  • it is important for the CFTC to continue conducting analytical studies;

  • the position limits rule should be finalized; and

  • clearinghouses must have necessary capital, liquidity and risk management tools, as well as recovery plans.

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