Opening Statement of Chairman Heath P. Tarbert Before the April 22 Agricultural Advisory Committee Meeting

Opening Statement of Chairman Heath P. Tarbert Before the April 22 Agricultural Advisory Committee Meeting

April 22, 2020

I am humbled to be the sponsor of the Agricultural Advisory Committee. The members of this committee and the industry groups that you are a part of have mobilized and risen to the challenge of feeding the nation during this COVID-19 (coronavirus) pandemic.  During these unprecedented times, agriculture plays an essential and critical role in addressing our country’s most basic needs. I realize a lot of you and your members are struggling, but I want to say thank you on behalf of the CFTC for the important work you are doing. It is truly an honor to know you.

Agriculture is essential to the fundamental needs of everyone around the world, and we are reminded of that now more than ever.  If the derivatives markets are not working for the American agriculture sector, then in my view they are simply not working. Many agricultural producers and end users rely on these markets to mitigate and hedge risk.  Given the unique circumstances we are facing because of COVID-19, it is important to me that we have this meeting to discuss what we are seeing, to hear from you, and to answer any questions you have.

Our job at the CFTC is to ensure that the derivatives markets are doing their job of providing opportunities for end users to manage and mitigate risk.  Even though we are physically separated due to social distancing, the agency’s commitment to our critical mission is stronger than ever.

In recent weeks, the CFTC has established a livestock markets task force that is monitoring in real time contracts such as Live Cattle, Feeder Cattle, and Lean Hogs.  Our market analysts are watching for any indication that prices are moving in an uneconomic manner relative to the underlying commodity’s cash prices.  Specifically, we are monitoring to see if, for example, traders are attempting to manipulate futures prices through disruptions caused by supply and demand shocks.

It also brings me great excitement to announce that we will soon appoint a CFTC Liaison to the U.S. Department of Agriculture for the first time in our 45 years of existence.  The original Commodity Exchange Act requires that the USDA appoint a liaison officer for purposes of maintaining a connection between the USDA and the CFTC.  Reciprocating with our own liaison will ensure robust dialogue and continued coordination regarding matters of mutual interest.

I want to especially thank Agriculture Secretary Sonny Perdue for being a part of this meeting.  He and the Department of Agriculture are on the front lines of the nation’s response to the coronavirus pandemic.  Given the extraordinary times we are facing, I cannot think of anyone more qualified or better equipped to lead the Department.  Our partnership with the USDA is critical to our work here at the CFTC, and we are grateful to the Secretary and USDA staff for the insight and knowledge they continue to bring to our discussions.

I would also like to recognize a number of other individuals who have helped make today’s meeting possible.  First, I extend my thanks to my fellow Commissioners for participating.  I would also like to thank Derek Sammann from the CME Group and David Farrell from ICE Futures US. Finally, we are fortunate to have with us today Rob Johansson, the Chief Economist for the USDA, as well as a number of members of the CFTC’s Division of Market Oversight.

-CFTC-

Statement of Commissioner Dan M. Berkovitz—Meeting of the Agricultural Advisory Committee on the COVID-19 Pandemic and Agricultural Commodity Markets

Statement of Commissioner Dan M. Berkovitz—Meeting of the Agricultural Advisory Committee on the COVID-19 Pandemic and Agricultural Commodity Markets

April 22, 2020

Thank you Mr. Chairman for convening this meeting of the CFTC’s Agricultural Advisory Committee.  I am pleased to join you in your first meeting as sponsor of the Committee.  I am also pleased to welcome Secretary of Agriculture Sonny Perdue.  Commitment and cooperation among all levels and branches of government are critically important as our country seeks to overcome the COVID-19 pandemic and its economic consequences, including in the agricultural sector.  We are meeting with the Secretary of Agriculture in this spirit today.

America’s farmers, ranchers, and other participants in the agricultural economy have long been a focus of the Commission’s work in promoting price discovery and effective risk management in derivatives markets and ensuring that these markets are free of fraud and abuse.  Last summer, I had the privilege of traveling the country to meet with farmers, ranchers, and agricultural market participants throughout the United States.  Each of these visits emphasized the importance of agriculture to the U.S. economy and to our national well-being through safe, abundant, and affordable domestic food supplies.  I saw firsthand how American farmers and ranchers were diligently working to overcome the threats posed by floods, tariff wars, and collapsing prices.

The COVID-19 pandemic has added a myriad of new existential challenges to our agricultural sector.  In this environment, it is critical that our commodity markets serve their purpose to help overcome these challenges, and not contribute to them.  We must ensure that the commodity markets continue to serve their intended functions of risk management and price discovery, so that farmers, ranchers, and others in the agricultural sector can manage the risks posed by the current situation.

I look forward to the discussion today, including with respect to livestock markets and processing facilities.  I thank each of today’s panelists for making the time to help inform the Commission so we can better ensure that CFTC-regulated agricultural markets are working effectively for all farmers, ranchers, and commercial businesses involved in feeding America during these challenging times.  Thank you.

-CFTC-

Opening Statement of Commissioner Brian D. Quintenz before the CFTC Agricultural Advisory Committee

Opening Statement of Commissioner Brian Quintenz before the CFTC Agricultural Advisory Committee

April 22, 2020

Thank you Chairman Heath P. Tarbert for your leadership in convening today’s meeting of the Agricultural Advisory Committee (AAC).  Given the ongoing, unprecedented volatility in the agricultural cash and futures markets, I am pleased that this Committee could come together today to share their insights regarding the liquidity, integrity, and accessibility of the futures markets with the Commission.  America’s agricultural producers and growers tirelessly dedicate themselves to putting food on our kitchen tables while they, themselves, constantly struggle to ensure the solvency of their farms and ranches.  The CFTC, along with the futures exchanges and market intermediaries, must work just as tirelessly to ensure that our futures markets remain a reliable, efficient hedging tool for them.  I am honored to join this important conversation and look forward to when we can convene again in person. 

This agency has a unique role to play in protecting America’s farmers and ranchers.  Since becoming a Commissioner, I have had the privilege of traveling all across America – to wheat fields in Kansas, soybean farms in Michigan, rice farms in Louisiana and Arkansas, a cotton gin in Georgia, corn fields in Iowa, Minnesota, South and North Dakota, and cattle ranches in Montana, to name a few.  I have been consistently impressed and humbled by these families’ work ethic, sophistication, and dedication to growing their businesses, many of which are family-owned, in the face of historically low commodity prices, international trade disputes, and intense competition.  Indeed, the combination of steep declines in commodity prices and global supply and demand forces has put unrelenting pressure on America’s farmers to increase yields, cut costs, and drive efficiencies to remain profitable.  The severe supply and demand shocks caused by COVID-19 are the latest of many challenges the heartland has withstood in recent years.  These difficult circumstances make it all the more vital that farmers and ranchers feel like they can depend upon liquid, well-functioning agricultural futures and swaps markets to hedge their risks. 

I am eager to hear from the Secretary of Agriculture, Sonny Perdue, about how the USDA is marshalling its considerable resources and expertise to combat the unprecedented challenges COVID-19 is posing to our agricultural markets.  Similarly, I am interested to learn the perspectives of Derek Sammann, the Global Head of Commodities & Options Products at the CME Group, and David Farrell, the Chief Operating Officer of ICE Futures U.S., regarding how the financial markets have performed during this period of market turbulence.  I also look forward to hearing insights from Rob Johansson, the USDA’s Chief Economist, Tom LaSala, the Managing Director & Global Chief Regulatory Officer of the CME Group, and David Amato, a Supervisory Market Analyst in the CFTC’s Division of Market Oversight.  The Commission is closely monitoring the evolving conditions in our futures markets.  I am committed – as I am sure all of my fellow Commissioners are – to ensuring that the futures markets retain their integrity and provide viable hedging opportunities to farmers and ranchers.

Market Integrity and Vigilant Oversight

Market integrity is essential to ensuring that Ag producers, processors, and merchants feel comfortable participating in our futures market.  One of the CFTC’s core duties is to promote futures markets that reflect supply and demand fundamentals and remain free from fraud and market manipulation.[1]  In order to have well-functioning, efficient markets, the terms of the futures contracts themselves must be sound.  This is why the CFTC requires all futures exchanges to monitor the terms and conditions of any futures contract that it offers.[2]  In particular, exchanges monitor to ensure that the terms of futures contracts keep pace with developments in the underlying cash markets and that futures and cash price convergence occurs.[3]  Without consistent convergence, market participants will not trust the contract to provide a reliable hedge, with the long term result that the futures markets will no longer provide a means of price discovery and risk mitigation. 

Recently, some have expressed concerns regarding the performance of certain futures contracts.  I take these concerns very seriously.  While it is not the CFTC’s role to design futures contracts – that job belongs to the futures exchanges – it is the CFTC’s responsibility to oversee the exchanges and ensure they are proactively and appropriately monitoring the performance of their contracts.  The Commission is committed to working with the exchanges and market participants to understand and resolve any issues.  I encourage market participants to continue voicing their concerns and experiences, to the exchanges, CFTC staff, and the Commissioners.  In particular, I commend the Chairman for convening the Livestock Market Task Force to examine conditions in the cattle markets and ensure contracts are working as intended. 

For over 150 years, the U.S. futures markets have enabled farmers and ranchers to hedge their commercial risk in the most liquid, competitive, and vibrant futures market in the world.  This is no small accomplishment.  It has taken generations of hard-working, creative, and aspirational thinkers to build today’s futures industry.  I am committed to working with the agricultural community and the exchanges to strengthen the trust that Ag producers have in our futures markets and ensure this longstanding tradition continues for America’s next generation of farmers. 

-CFTC-

 

[1]  CEA Section 3(a) (noting that transactions subject to the CEA “are affected with a national public interest by providing a means for managing and assuming price risks, discovering prices, or disseminating pricing information through trading in liquid, fair and financially secure trading facilities”); CEA Section 3(b) (“[I]t is further the purpose of this Act to deter and prevent price manipulation or any other disruptions to market integrity; to ensure the financial integrity of all transactions subject to this Act and the avoidance of systemic risk…”)

[2]  17 C.F.R. § 38.252.

[3]  17 C.F.R. § 38.252.   See also Core Principles and Other Requirements for Designated Contracts Markets; Final Rule, 77 Fed. Reg. 36612, 36636 (June 19, 2012) (“The Commission is of the view that a DCM must monitor the performance of its contracts to ensure they continue to perform their economic function.”).

 

 

External Meetings: Call with DDR

External Meetings: Call with DDR

DMO and DDR staff had a call in which DDR sought to clarify various items from the Part 43 NPRM, including the scope of "free" data in 43.3(c)(2), potentially short implementation time for changes to post-initial cap sizes for late-month changes,use of Eastern Time vs. UTC in various places and relationship between business day (proposed to be removed) and lack of a definition of "holiday" in 1.3 business day definition.

Final Exemptive Order Regarding Compliance With Certain Swap Regulations

Final Exemptive Order Regarding Compliance With Certain Swap Regulations

On July 12, 2012, the Commodity Futures Trading Commission (``Commission'' or ``CFTC'') published for public comment, pursuant to section 4(c) of the Commodity Exchange Act (``CEA''), a proposed order (``Proposed Order'') that would grant market participants temporary conditional relief from certain provisions of the CEA, as amended by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'' or ``Dodd-Frank''), and the Commission also published its proposed interpretive guidance and policy statement (``Proposed Guidance'') regarding the cross-border app

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