Public Statements & Remarks

Statement of Commissioner J. Christopher Giancarlo Regarding the October 7, 2016 Flash Crash in the British Pound

October 11, 2016

It has been almost two years since I sounded the alarm about heightened market liquidity risk in the global financial system.1 The increased risk is in part due to untested bank capital constraints imposed by U.S. and overseas bank regulators under the Dodd-Frank Act and similar laws.2

Last Friday, the British pound suddenly crashed six percent against the U.S. dollar in volatile trading. The abrupt “flash crash” of the world’s fourth-most-traded currency was exacerbated by a lack of tradeable market liquidity.3

There have been at least twelve major flash crashes since the passage of the Dodd-Frank Act.4 The growing incidence of these events shakes confidence in world financial markets.

We can no longer continue to avoid the question of whether the amount of capital that bank regulators have caused financial institutions to take out of trading markets is at all calibrated to the amount of capital needed to be kept in global markets to support the health and durability of the global financial system.

Today, I repeat my call for a thorough and unbiased analysis by U.S. financial regulators and their overseas counterparts of the systemic risk of unprecedented capital constraining regulations on global financial and risk-transfer markets.5

How big will the next flash crash have to be before we realize that markets in which few are able to take risks are markets that are very risky?6

1 J. Christopher Giancarlo, Pro-Reform Reconsideration of the CFTC Swaps Trading Rules: Return to Dodd-Frank, White Paper, at 52-54, Jan. 29, 2015,

2 Id. and Michael S. Piwowar and J. Christopher Giancarlo, Banking Regulators Heighten Financial Market Risk, Reuters, Jul. 12, 2015,

3 Lananh Nguyen and Andrea Wong, Liquidity Illusion Burns Traders Blindsided by Pound’s Crash, Bloomberg, Oct. 9, 2016,

4 Id. and Max Colchester and Alistair MacDonald, A Short History of Sudden Market Moves, The Wall Street Journal, Oct. 7, 2016,

5 Keynote Address of CFTC Commissioner J. Christopher Giancarlo before the Cato Summit on Financial Regulation, The New Mediocre Is Not Good Enough, Jun. 2, 2015,

6 Steven Lofchie, Comment, Center for Financial Stability President Discusses the Era of “Never Before”, The Cadwalader Cabinet, May 27, 2015, visited Oct. 11, 2016).

Last Updated: October 11, 2016