CFTC Commissioner Giancarlo Warns of Threat Posed by "Increasing Ill-Conceived Regulatory Burdens"

CFTC Commissioner J. Christopher Giancarlo addressed the issue of the steep drop in commodity prices and the "increasing ill-conceived regulatory burdens" that pose a threat to American farmers. Given the expected decrease in farm income in 2016, and the ever-dwindling number of smaller, rural futures commission merchants ("FCMs"), it is imperative for the CFTC to promote policies that do not prevent farmers from hedging against the decrease in prices, he argued.

Commissioner Giancarlo discussed the CFTC's progress in revising the recordkeeping requirements of Rule 1.35 and asserted that the newly revised rule "generally gets the [cost-benefit] balance right." However, he observed that "what Washington regulators giveth, they can easily taketh away." Because of its broad definition of "algorithmic trading," proposed Regulation AT would subject the very market participants who were provided relief from the "unnecessary and burdensome" requirements of [pre-amended] Rule 1.35 to those same requirements. Commissioner Giancarlo encouraged market participants to consider the consequences of Regulation AT carefully and to compare that regulation to the "common-sense"-revised Rule 1.35.

Also, Commissioner Giancarlo referred to the finalization of revisions to CFTC Rule 1.22 that ensured that the residual interest deadline for FCMs would remain at the close of business on the next day rather than adjusting to the morning after a trade. This revision freed producers from the obligation to pre-fund their margin accounts, he observed.