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A Commissioner’s Power of Persuasion

The recent speech by CFTC commissioner Giancarlo raises questions around the rigorousness of the lengthy and elaborate process followed by the CFTC to arrive at the current swaps regulation.

With little more than 6 months on the job, the new commissioner published a white paper on Jan 29 coupled with a public appearance pointing out fundamental differences of opinion with the current CFTC’s implementation of its swap trading regulatory framework.

The white paper is made available with the official seal of the CFTC on its first page. However, it is prominently pointed out (on page 2) that the expressed views are only those of the commissioner and are in no way the official position of the CFTC nor are shared with other CFTC commissioners or staff.

I’m not familiar with the policies governing similar situations but my take on this duality is that it shows dissent within the CFTC and Mr. Giancarlo is rallying the industry for support.

Commissioner Giancarlo is not a new face in this field of the capital markets industry. He was, until recently, EVP of GFI, an interdealer broker very much at the center of the financial swaps market. His criticisms and suggestions are derived from his deep knowledge of the business and its ecosystem.

What is really striking about the commissioner’s observations is their logic and simplicity. As EVP of GFI, Mr. Giancarlo must have enjoyed a front row seat in the consultations conducted by the CFTC within the industry before it arrived at the current regulatory framework.

The question that should be asked is what really happened during CFTC industry consultations with respect to the points made by Mr. Giancarlo. The speech and the white paper did not provide an answer. It is either that Mr. Giancarlo’s observations and opinions are very recent (which is very doubtful) or these observations were made to the CFTC earlier but got voted down despite their obvious practicality and common sense.

We should wait and see if the CFTC is going to issue a response to the recommendations made by one of its commissioners. We hope that this time it will be the official position of the CFTC.