Mr. Chairman, Senator Harkin and other distinguished Senators, I am honored to address the Senate Agriculture Committee regarding my nomination as Commissioner of the Commodity Futures Trading Commission (CFTC). I am truly grateful that the President has provided me with this opportunity. In particular, I appreciate the introduction by my former boss, Senator Lugar, who still serves as my role model for sound and principled decision-making. Before I begin, I would like to recognize my wife, Dana, as well as several supportive friends and colleagues in the audience today. I would also like to thank my fellow Commissioner, including Acting Chairman Sharon Brown-Hruska as well as our newest additions to the Commission, Fred Hatfield and Mike Dunn. Lastly, I am honored to join Reuben Jeffery, my fellow nominee, and I hope that this hearing is only the first of many times that we collaborate in the interest of the Commission.

It has been almost three years since my first nomination hearing and that short expanse of time has brought significant change within the futures industry. In this period, the annual volume on U.S. futures exchanges surpassed one billion contracts for the first time and, incredibly, it is on pace to double that amount by year’s end. This industry has also witnessed the accelerated migration from open outcry to electronic platforms, with screen-based trading now accounting for a significant majority of all futures trading. Also worth noting is the common clearing platform between the Chicago Board of Trade and Chicago Mercantile Exchange (CME), which is expected to bring almost a billion and a half dollars worth of capital efficiencies to market participants. The CME also became the first publicly-traded U.S. exchange in either the equities or derivatives field during this time, and investors in this pioneering effort have been rewarded with a 430 percent increase in its share price. My tenure has also coincided with the arrival of new futures exchanges and products, including the launch of Eurex US and the listing of event-styled contracts and the previously-banned security futures products. It is hard to believe that all of this progress and change has occurred in the short time that I have been at the Commission. One can only imagine what this industry will look like in 2010, when the term for which I am being considered expires.

As regulators, we cannot stem the uncertainties of change but must adapt our models to fulfill the public mission entrusted to us. Thankfully, Congress – and, in particular, members of the agriculture committees – had the foresight to provide this agency with the flexible tools needed to oversee the marketplace with the passage of the Commodity Futures Modernization Act of 2000 (CFMA). Before the CFMA, some of the prescriptive rules written by the CFTC were outdated on the day they were published. This was not always the fault of the agency but the reality of the marketplace. The nature of these markets is to innovate, compete and arbitrage opportunities with lightning speed. In crafting the CFMA, policymakers recognized that, instead of struggling against this dynamic, a regulatory structure should leverage these market characteristics to the advantage of the public interest and allow the agency to better anticipate problems. Much has been made of the flexibility provided businesses by the CFMA, but the adoption of a core principles approach equally enhanced the Commission’s ability to get in front of developing regulatory problems. At a time of limited resources, this has allowed the CFTC to target our efforts effectively to areas where the risks to the public are greatest.

The CFMA may have instructed our agency to walk softly in tailoring our regulations, but it also gave us the directive to carry a big stick when the law is broken. Since the passage of the CFMA, our agency has been aggressive in its enforcement efforts – whether shutting down boiler-room operations that are defrauding the public, working with states and federal authorities to lock up criminals or pursuing corporate malfeasance as part of the President’s Corporate Fraud Task Force. As a result of our investigation of manipulation in the energy markets, the Commission has settled with 27 companies and 20 individuals for nearly $300 million in fines for violating our Act. Such robust law enforcement authority serves as a powerful deterrent to wrongful activity and represents an important component of the CFTC’s overall regulatory program.

With such a dynamic regulatory arsenal provided by Congress, I am confident that the Commission is well-positioned to meet approaching challenges. I would like to briefly mention some developing trends that will test this proposition. Unlike even five years ago, competitive forces are leading market participants to utilize alternative legal means to protect their market interests, including the increased use of intellectual property rights and antitrust law – both issues of first impression for our agency and industry. On the first point, the Commission and market participants, in consultation with the U.S. Patent and Trademark Office, have begun a dialogue on the impact of intellectual property claims in the marketplace and whether the CFTC has a facilitative role to play on this issue. On second point, the Commission has witnessed an increased use of antitrust claims among market participants and this upward trend is only expected to continue. Being mindful of other antitrust agencies, the Commission will need to better coordinate and clarify its responsibilities in this area.

Another challenge facing the agency is the increasing globalization of our markets and the regulatory structures that underlie them. Whether opening foreign markets to U.S. businesses or tracking down criminals that hide their ill-gotten gains overseas, the CFTC must work in close tandem with its foreign counterparts to ensure that the global community abides by the highest regulatory principles. As chair of the CFTC’s Global Markets Advisory Committee, I am committed to this end and will work with industry members and foreign regulators to guarantee a more harmonious regulatory structure that does not hinder the free flow of services and capital across borders.

In conclusion, Mr. Chairman, I am so proud to play a small role in this important and growing segment of our economy and to work side-by-side with the talented staff of the CFTC, observing their growth and success over the last three years. But with these changing markets, work remains for policymakers and I hope I will be given the opportunity to roll up my sleeves and lend a hand in that effort. If confirmed, I look forward to working with this Committee and my fellow Commissioners to ensure that these markets continue to thrive and compete, absent of fraud and manipulation. Thank you for allowing me to testify and I look forward to answering any questions.