Commissioner Chilton Speech: "Sin-Orgy and Energy" (with Lofchie Comments)

Commissioner Bart Chilton delivered a speech to the Globalization and Energy Markets: Investment and Commodity Price Cycles Conference at Rice University, Houston, Texas. Commissioner Chilton begins by discussing the "sin-orgy" culprits (regulators and, what Chilton refers to as, the captains of Wall Street) responsible for the financial meltdown. Chilton then goes on to discuss the following topics:

• Dodd-Frank, and the three main goals of the CFTC;
• Position Limits, and the problem with Massive Passives (i.e., traders with a long-term passive investment strategy);
• Provisions to place restrictions on Cheetahs (i.e., High Frequency Traders); and
• Chilton's proposal of a stronger deterrent against HFTs (e.g., violations should be penalized by the second).

Lofchie Comment: Commissioner Chilton identifies as problems for the market both those traders who trade quickly in small quantities (whom he calls "cheetahs") and those who trade slowly in large quantities ("massive passives"). According to Commissioner Chilton, the market would be more likely to find and hold the right price without either of these two types of traders.I think Commissioner Chilton raises an important philosophical question: can the government design a market that produces the right price? It seems to me that one's views as to the answer to that question bear heavily on Commissioner Chilton's policy proposals. That is, those who are more optimistic that the government can accomplish this end of devising a means to find the right price would be more likely to favor those proposals; on the other hand, those who are skeptical of achieving the end would be more likely to view these proposals as imposing a regulatory burden and cost that will not achieve a concomitant benefit.

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