CFTC Chairman Timothy Massad Testifies on the Resources Required by the Agency to Help Meet Its Responsibilities
In testimony regarding the President’s request for the Commodity Futures Trading Commission’s budget for the 2016 fiscal year, Chairman Timothy Massad spoke before the U.S. Senate Committee on Appropriations, the Subcommittee on Financial Services and General Government in Washington DC. He discussed the steps the CFTC has taken to enhance transparency and market integrity, working collaboratively with other agencies like the SEC and international regulators to harmonize swap trading rules and requirements, while continuing to remain engaged in compliance, surveillance and enforcement.
Chairman Massad noted that the agency needed an increase in funding from the previous year to help meet its growing responsibilities as trading continues to move to electronic platforms:
“…the CFTC’s budget is not at a level that is commensurate with its responsibilities. Our responsibilities in the last few years have increased significantly, and now include overseeing the swaps market, an over $400 trillion market in the U.S., measured by notional amount. In addition, the markets the Commission has traditionally overseen have grown in scale, technological sophistication, and complexity. The number of actively traded futures and options contracts has doubled since 2010 and increased six times over the last 10 years. Trading is increasingly conducted in an automated, electronic fashion, and cybersecurity has become a major new threat to the integrity and smooth functioning of the critical market infrastructure that the Commission regulates. While these developments, among others, have brought new responsibilities and challenges to the Commission, its capabilities have not kept pace. Our resources continue to be stretched far too thinly over many important responsibilities.”
His testimony touched on a number of different areas. He first discussed the importance of derivatives and oversight efforts:
“The derivatives markets are profoundly important to a wide variety of businesses in our country. They enable businesses of all kinds to hedge commercial risk, whether it is a farmer locking in a price for his crops, a utility hedging the cost of fuel or an exporter managing foreign currency risk. Those businesses depend on the Commission to do its job efficiently and sensibly. The Commission’s budget is a small, but vital, investment to make in order to make sure these markets operate with integrity and transparency.
It is also helpful to remember how excessive risk related to swaps contributed to the 2008 financial crisis, and the cost of that crisis to American families and our economy, to recognize the value of this investment. That crisis resulted in eight million jobs lost, millions of foreclosed homes, countless retirements and college educations deferred, and businesses shuttered. Indeed, the amount of taxpayer dollars that were spent just to prevent the collapse of AIG as a result of its excessive swap risk was over 700 times the size of the CFTC’s current budget. Another perspective on the size of our budget is the fact that from 2009 through 2014, the Commission collected fines and penalties of approximately twice its cumulative budgets. This year the fines and penalties collected are already about 10 times our budget.”
To read his full testimony, please click here.