CFTC Chair Massad Advocates Larger CFTC Budget (with Lofchie Comment)

CFTC Chair Timothy Massad spoke about fine-tuning and finishing CFTC rules in progress, increasing the "vigorous financial surveillance" of futures commission merchants ("FCMs"), and maintaining strong and stable clearinghouses. He delivered his remarks at the National Grain and Feed Association's annual convention.

According to Chair Massad, the biggest challenge faced by the CFTC is a lack of resources, particularly financial resources, which hampers the CFTC's ability to respond quickly to market participants, deal with cybersecurity threats and properly address the challenges posed by high-frequency trading.

Chair Massad acknowledged that excessive swap risk was not caused by agricultural futures or other commercial businesses that hedged routine price risk, and noted that the CFTC aims to fine-tune its rules to take into account how they impact commercial end users. He mentioned the CFTC's modifications to a rule regarding the residual interest deadline, as well as revisions to recordkeeping requirements to provide relief to end users and commodity traders from particular reporting requirements regarding text messages and phone calls. He also mentioned ensuring that FCMs meet their financial obligations to clearinghouses. He stated that the CFTC is working currently with SROs to conduct periodic onsite examinations of FCMs to assess their compliance with financial requirement rules. Chair Massad also mentioned briefly that cybersecurity is a priority for CFTC enforcement and examinations.

Lofchie Comment: The CFTC is too understaffed to manage the overbroad agenda it undertook as a result of the Dodd Frank legislation. If the CFTC were to establish finite priorities, it would have a stronger case for requesting a larger budget. It may be productive for the CFTC to consider where to scale back. One area to consider may be the double regulation of SEC-registered investment companies as commodity pools. The establishment of reasonable priorities would be the best hope for reasonable funding.

See: Chair Massad's Remarks.