Opening Statement by Chairman Timothy Massad before the Agricultural Advisory Committee Meeting
September 22, 2015
As Prepared For Delivery
Thank you all very much for taking the time to be here today. And welcome to this meeting of the CFTC’s Agricultural Advisory Committee.
For those of you who live outside of Washington, D.C. – welcome. As you may know, later today our city –which is already ranked as the one of the worst cities in the nation for gridlock, traffic and otherwise – welcomes Pope Francis. So it’s very possible that over the next couple of days, we will see Washington’s traffic problems reach even biblical proportions.
I’m pleased to be joined by my fellow Commissioners Bowen and Giancarlo. Their presence is important and I applaud their commitment to the concerns of those in the agricultural industry.
Before we begin, let me just underscore the importance of these meetings to our work here at the CFTC. Advisory Committees provide us with a much-needed opportunity to hear directly from those who are affected by our work. Since taking office, I’ve had opportunities to meet with many agricultural companies and associations, give speeches at industry conferences, and visit production facilities, such as a feedlot in Texas and, just a few weeks ago, a grain mill in Kansas City. Like today’s meeting, these visits provide important insight into the challenges and issues you deal with every day. And I look forward to doing more of it.
We are keenly aware of the importance of the agricultural derivatives markets to your businesses and to many aspects of American life. While most Americans do not participate in derivatives trading, these markets have a profound impact on the price of countless necessities – from the price of food to the cost of heating one’s home and filling one’s gas tank– among many other goods and services. They are critical to the ability of many sectors – and the agricultural sector, in particular – to hedge the routine commercial risks you face every day.
I’d like to thank Dr. Randy Fortenbery for his service as Committee Chair – for his work facilitating today’s meeting and for helping to put together the agenda. I’m looking forward to a robust discussion. I’d also like to thank the CFTC staff who have worked so hard in planning this meeting, and for those who have put together the presentations that we will see throughout the day.
Our first session will include presentations related to developments and innovations in the agricultural derivatives markets, such as changes to some of the most heavily traded agricultural commodity contracts and a new World Cotton product that ICE intends to launch this fall.
We will then have a discussion about trends in the Futures Commission Merchant industry, and how those trends may affect your ability to participate in the derivatives markets. There has been a decline in the number of FCMs, one that began at least ten years ago and is likely the result of many factors. At the same time, overall volumes in the derivatives markets have increased, and there has been more concentration of business among the largest firms. These are trends that we can discuss today.
It’s very important that we have a robust FCM industry. It’s very important that all customers—particularly smaller ones—are able to access the markets effectively and efficiently. I want to hear your thoughts and suggestions about what is going on in the industry and whether there are issues that the CFTC should examine further.
Finally, we will talk about position limits. We want to hear from participants about the possibility of exchanges granting non-enumerated hedge exemptions. This is an idea that I am open to considering as a change to the proposed position limit rules issued in 2013. And we will discuss a proposal to modify another aspect of the proposed position limit rules. This one pertains to the aggregation provisions, and I’m pleased to announce that this proposed change will be released for public comment today. This new proposal aims to make a significant, streamlined change to the process for waiving aggregation requirements. Under the proposal, instead of requiring a participant to apply for and obtain prior approval from the Commission to waive aggregation, we would rely instead on a notice filing. A participant who owns 50percent or more of an entity can obtain the exemption simply by attesting to the Commission that it has no control over its trading – and no access to its information. This is the same process we now have if you own more than 10 percent but less than 50.
The position limit proposed rules issued by the Commission two years ago are important and complex. I know all of you are very interested in these rules and have expressed some concerns about them. All of us currently on the Commission were not here when these rules were proposed, and therefore we are taking time to make sure we listen to you and other market participants and consider carefully the implications of these rules. We appreciate the input you’ve given us. We understand it is vitally important that we finalize rules that work; that enable commercial end-users to continue to use the markets efficiently for risk management and price discovery.
All of the presentations and discussions today will provide a greater understanding of what is going on in the markets today, which will help the CFTC better do its job of ensuring that our markets function with integrity and without fraud or manipulation.
To that end, we’ve been continuing to listen to market participants on a wide range of subjects, particularly as we work on the remaining new rules required by Congress and fine-tune existing ones. As always, our goal is avoid creating unnecessary burdens for commercial end-users – who deeply rely on these markets. Rather, it is to ensure we have a framework for oversight that is reliable and sound – allowing these markets to thrive.
Since we last met in December, we have taken a number of actions important to commercial end-users, such as our final rule on “residual interest.” We have proposed changes to record keeping requirements and we have made some important rule adjustments and clarifications addressing trade options and contracts with embedded volumetric optionality. And we will continue to focus on end-user concerns.
This fall, I expect that we will consider ways to strengthen the security and resilience of our financial markets against cyber-attacks and technological failures. We are currently working on additional proposals to minimize the chance that automated trading will cause market disruptions or result in unfairness. And we hope to finalize a proposed rule on margin for uncleared swaps, which will exempt commercial end-users.
So again, thank you very much for being here today and lending your voice – and perspective – to this important conversation. I look forward to a productive discussion.
Last Updated: September 22, 2015