CFTC Chair Behnam Supports Basel III, Highlights Data on Decline of FCMs
In remarks at AgCon 2024, Chair Rostin Behnam emphasized the need for prudential regulators to move forward with the Basel III Endgame and G-Sib Surcharge, but to "be mindful about how it is implemented. ... and preserve incentives for clearing and ensure that market participants are not cost prohibited from pursuing effective risk management."
At the conference, sponsored by the Center for Risk Management Education and Research at Kansas State University, Chair Behnam said that the CFTC was monitoring potential impacts of the Basel III Endgame and G-SIB Surcharge proposals. He reiterated market participants' concerns "that these proposals could reduce banks’ ability to offer hedging services to clients such as farmers, ranchers, and other end users." He reported that the CFTC "put together a team of experts ... to work alongside our regulatory counterparts ... to educate and identify what we are seeing in our markets, the changes that have occurred, the concentration of participants, the reduction of services for smaller participants, and the importance of the diversity of participants so that producers can have access to futures markets."
Mr. Behnam reviewed recent data which included the reduction in the number of CFTC-registered FCMs over the past 20 years - from 177 in 2004 to 64 today - despite the growth in market size, as evidenced by the increase in customer funds held by FCMs from $80 billion in 2004 to around a half trillion dollars today. Mr. Behnam called this a "concentration in capacity," emphasizing that the five largest clearing members - all bank affiliates - hold about 60 percent of customer funds. He emphasized the need for a diverse set of participants to ensure resilient futures markets.
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