February 13, 2012
I support the President’s budget request for Fiscal Year 2013. It goes to the heart of the matter by proposing funding to ensure we have the rudimentary resources to do our job.
When Congress passed the Dodd/Frank Act, it gave our Agency urgently needed authorities to police financial markets in the wake of the 2008 Wall Street collapse. That’s a good thing. But, policing can’t happen without putting more cops on the beat and getting technology up to full speed to oversee a marketplace whose speed and breadth are enormous.
We will move from regulating $5 trillion in trading to hundreds of trillions. To do that, in total, we will have finalized dozens of rules when that process is complete this year. And, all of that occurs at a time when the agency has anywhere from 750 to 1,000 enforcement investigations going on at any one time.
What the CFTC does in market oversight and enforcement is a public good and should be funded publicly. But, if that’s not likely to happen at the levels we need—levels required to do our jobs—then resorting to user fees to fund the agency’s work makes sound sense. Our financial markets are too important to the nation and to consumers to let them run wild and break the heart of our economy like they did a few years ago.
For those that support user fees, there is also an obligation to suggest how such a funding mechanism might work. Without giving specifics, it is all just budget smoke and mirrors. We have seen that in the past and we should do better. The fear of the unknown with regard to fees has, in my opinion, retarded any serious movement forward.
For my part, as a reluctant supporter of such fees, I think there should be three key features of such user fees. First, they should be part and parcel of all trading. That means both in the futures and swaps world. Second, to be fair, fees cannot be simply based solely upon the number of transactions, since in the swaps space there are many fewer transactions, but at larger volumes than occur on the currently regulated exchanges. Some type of formula must be developed to accommodate this difference, to fairly apportion fees across both markets. Third, the fees need to cover agency expenses, but no more. We shouldn't be building up a large reserve, for example. And, if the mechanism to collect such fees brings in more than needed, the fee structure needs to be recalibrated to reflect genuine needs and no more.
These ideas and others can help educate everyone interested in or potentially impacted by user fees. There needs to be leadership if this approach is going to work. Discussion and actual proposals are indispensable to moving the matter forward and adequately funding this agency to ensure we get to the heart of the matter: safe, efficient, and effective markets devoid of fraud, abuse and manipulation.
Last Updated: February 16, 2012