CFTC Commissioner Chilton Speech Before SEFCON ("Bedrock, Country and My Dog")

CFTC Commissioner Bart Chilton delivered a speech before SEFCON (Swaps Execution Facilities Conference) in New York, New York.The SEF challenge is unlike anything the CFTC has done before, according to Chilton. Prior to Dodd-Frank, the CFTC did not have a system making the platforms registered entities, with concomitant regulatory responsibilities.

In his speech, Chilton first addressed the need to have the most up-to-date technologies in the markets for both the industry and regulators. He argues that what is being done today is unacceptable. Chilton then discussed the lack of preparedness of some major firms in the aftermath of Hurricane Sandy, in that some firms hadn't adequately tested their connections to emergency back-up electronic equities trading, leading to anxiety as to how, and whether, transition to back-up equities trading would work. Chilton states that, in our post-9/11 world, it is senseless to not have "appropriate systems in place, tested to the max and ready to go." To that end, Chilton called for the creation of a panoptic, private/public sector "Financial Market Multi-Agency Command" (i.e., MAC). Chilton says that securities, derivatives and banking regulators need to work together with the industry, and spell out the systems and requirements that should be in place in the event of an emergency. In addition, he suggests considering timetable guidelines for recover in order to provide some "temporal structure" during a market emergency.

The Commissioner also notes the importance of position limits and the need to have a short comment period and a turn-around on a final rule that will get a robust position limits system in place nationwide promptly. Accordingly, we also need the Administrative Procedure Act (APA) now more than ever as it hits the right balance between governmental authority and protection of individual rights. The Act is intended to provide guidelines for enactment of federal regulations governing private conduct, and Chilton stresses the need for a full comment period for rules.

View speech in full here (links externally to CFTC website).