Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
By Richard Hill
Acting CFTC Chairman J. Christopher Giancarlo is signaling his intention to increase the agency’s market intelligence capabilities by moving certain surveillance functions to the Division of Enforcement, derivatives lawyers told Bloomberg BNA.
Monitoring for suspicious trading patterns that may indicate fraud or manipulation will be shifted to Enforcement, in the reorganization announced March 15, shortly after Giancarlo was tapped to head the Commodity Futures Trading Commission on a permanent basis. Surveillance of trading activity for significant market developments and other information will remain in the Division of Market Oversight under a newly created market intelligence branch. Giancarlo also will appoint a chief market intelligence officer who will report directly to him.
The move reflects Giancarlo’s long-standing goal of making the CFTC a “smarter regulator” by learning more about the derivatives marketplace and how it is operating.
“The CFTC must get smarter by focusing on current and emerging market structure and dynamics and not just on participant behavior,” the former derivatives industry executive said earlier this month at an industry conference in Florida. At the same time, the acting chairman warned that enforcement will remain “aggressive and assertive.”
Dividing surveillance between Enforcement and DMO will sharpen the agency’s market monitoring capabilities and increase its understanding of an evolving marketplace, Giancarlo told the gathering. The move is intended to “inform sound policymaking at the commission and promote efficient and sound markets,” he said.
The surveillance restructuring is part of a multi-part plan that also includes fixing the agency’s “flawed” swaps rules and addressing bank capital requirements.
Surveillance is often associated with ferreting out wrongdoing, but it is equally important for assessing the state of the marketplace. CFTC staff can learn about risk concentrations, what contracts aren’t performing as intended, trading patterns and whether regulations are working for the good of the market.
Giancarlo may well feel that there hasn’t been enough emphasis on getting market intelligence for non-enforcement reasons, Daniel Waldman, a former CFTC general counsel who now heads the derivatives practice group at Arnold & Porter Kaye Scholer LLP, Washington, told Bloomberg BNA. “I think it’s more likely the emphasis is in doing more surveillance for purposes” other than enforcement, he said.
Waldman’s colleague Peter Haveles, a partner in the firm’s New York office, said the “more dramatic and significant” change isn’t moving parts of surveillance to Enforcement but the establishment of a market intelligence officer who reports directly to the chairman.
“He’s saying, `there’s been a lack of focus on this kind of intense data analytical work with respect to the operation and the functionality of the marketplace, and that is the more important task—to make sure the markets are liquid and serve their purpose,’ ” Haveles said. "[T]his person’s going to do what [Giancarlo] says and get the kind of data he needs to analyze and improve the marketplace.”
“I think it’s a positive. It’s getting back to the role that the Division of Market Oversight had years ago,” said Paul Architzel, co-head of the futures and derivatives group at Wilmer Cutler Pickering Hale and Dorr LLP, Washington. “Certainly people [are] more willing to share information with the division if they don’t feel it’s acting in an enforcement capacity.”
The reorganization still could improve enforcement functions, according to one attorney. “Moving surveillance to Enforcement is going to make it easier for surveillance staff to communicate directly with the staff that’s going to investigate the lead,” said Brian Walsh, a former CFTC attorney now at Murphy & McGonigle, Washington. “This to me is a move of efficiency and is a process improvement for essentially investigating aberrant market activity.”
To contact the reporter on this story: Richard Hill in Washington at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)