Position Limits Needs Full CFTC for Action, Giancarlo Says

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

The CFTC probably won’t adopt a long-awaited rule limiting speculative trading until it has a full complement of commissioners, acting Chairman J. Christopher Giancarlo said at a banking conference in Washington March 13.

The Commodity Futures Trading Commission currently has only two commissioners out of five and no pending nominees, meaning a rule might not come until the fourth quarter of the year or later.

Giancarlo has faulted the rule—proposed in 2013 and reproposed late last year—even though he voted to issue it for public input. At the time, he told Bloomberg BNA that position limits were a “perfect example” of an outdated Dodd-Frank mandate that should be deprioritized.

“Once we move forward, it would be on the basis of a full commission,” Giancarlo said at the Institute of International Bankers’ annual conference.

The speech was Giancarlo’s first since being named acting chairman in January. He reportedly is a leading contender to be nominated to the job full time.

Advance American Interests

Giancarlo said he also intends to embrace President Donald Trump’s order to advance American interests in international financial regulatory negotiations while “work[ing] positively” with overseas counterparts,

The agency’s postponement of compliance with a new rule requiring collateral for certain swaps trades is an example of its influence among international regulators, Giancarlo said. “Thanks to CFTC leadership, other major nation-state regulators are taking the same sensible approach to enforcement of the rule,” he said.

Strict implementation would have forced swaps users to exit the marketplace and take on more risk, the acting chairman said. “No longer should we implement regulation in a manner that makes no sense for market participants based on a narrow, one-dimensional view” of oversight, he said.

Dodd-Frank Implementation

Giancarlo called himself a “strong supporter” of Dodd-Frank Act swaps reforms, but he said implementation has been troublesome. Too often, CFTC rulemaking hasn’t reflected the law’s intent and has caused market disruptions, he said.

Giancarlo highlighted swaps trading rules as a prime example of a flawed interpretation of Dodd-Frank. The CFTC’s rules for trading swaps on a regulated platform are “fundamentally mismatched” with the characteristics of the swaps marketplace, he said. The CFTC’s approach is “highly over-engineered,” inflexible and limits technological innovation, he said.

Meanwhile, the Financial Stability Oversight Council has failed to consider the cumulative effect of dozens of new rules implementing Dodd-Frank, Giancarlo said. The result has been diminished market liquidity, leading to higher costs and increased market risk. “The time has come to recalibrate bank capital requirements to better balance systemic risk concerns” and aid economic growth, he said.

Overall, regulators and market participants are in a “post-Dodd-Frank era” in which reform is largely complete, and it’s now up to regulators to figure out its impact. “What’s working, what’s not working, with the ultimate goal being, how do we restimulate economic growth and activity” while mitigating systemic risk, he said.

To contact the reporter on this story: Richard Hill in Washington at rhill@bna.com

To contact the editors responsible for this story: Phyllis Diamond at pdiamond@bna.com; Seth Stern at sstern@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law