Good morning, and welcome to the Energy and Environmental Markets Advisory Committee (EEMAC) meeting.  I am very pleased to see all of you by video today.

Last month, a panel of scientists convened by the United Nations issued a landmark report warning of the dire effects of climate change.[1]  The report “unequivocally” linked the earth’s warming to human activities and called for urgent action to significantly reduce emissions of carbon dioxide and other greenhouse gases.

Derivatives markets, and particularly those for carbon allowances and offsets, have an important role to play in achieving these reductions.  They can help companies optimize emission reductions, protect against the financial risks associated with global climate change, and manage the risks arising from the transition to a carbon-neutral economy.

This past June, the Committee met to examine the role of carbon markets in the transition to a carbon-neutral economy.  We heard from leaders of cap-and-trade programs in the United States and abroad, from our U.S.-based exchanges that offer carbon derivative products, and from market participants and other stakeholders with experience in the carbon markets.

At our June meeting, EEMAC Associate Member Matt Picardi, on behalf of the Commercial Energy Working Group, proposed that the EEMAC take a closer look at how the Commission can support this energy transition by examining the design of carbon markets.  Mr. Picardi recommended that the Commission establish a subcommittee to examine the interplay between secondary cash markets for carbon allowances and offsets and the derivative markets for those products, with the goal of promoting uniformity across the various markets and enhancing liquidity.  The Committee is meeting today to discuss this proposal and we will call for a vote at the end of the meeting.

Should members recommend the establishment of a subcommittee and the recommendation is approved by the Commission, the CFTC would then publish a request in the Federal Register for subcommittee nominations.  As we do with our EEMAC membership, we would strive for a subcommittee comprised of a broad and diverse range of viewpoints.  Membership on the subcommittee would not be limited to those who are already members or associate members of the EEMAC, so I urge all interested stakeholders with expertise in and experience with these issues to submit a nomination.  Subcommittee members would be tasked with defining the mission of the subcommittee and ultimately, preparing a report to the EEMAC setting forth guiding principles for the design of carbon markets, as well as addressing any other topics that the subcommittee deems relevant to its mission. 

I am very much looking forward to a robust discussion today and to any further action recommended by the EEMAC members.

As many of you already know, I will be leaving the Commission next month.  One of the things I’ll miss the most about my time as a Commissioner is sponsoring this advisory committee and working with each of you in your capacity as members and associate members of the EEMAC.  Some of you I have known for decades and others I have been fortunate to meet when you were nominated to the EEMAC, and I am grateful for each of those relationships.

I would like to thank all of you for the contributions you have made over the years to educate and inform the Commission about issues important to our energy and environmental markets.  I never cease to be impressed with your dedication and enthusiasm, and the wealth of knowledge and experience you bring to this Committee.  I wish we could be together in Washington today so I could speak to each of you individually, but I look forward to continuing to stay in touch.

I would like to thank all of the people who have made these meetings such a success.  First, thank you to Acting Chair Behnam and Commissioner Stump for participating in today’s meeting, as well as your ongoing support for the EEMAC throughout my tenure.  My relationships with both of you over the past three years have only strengthened and the public is fortunate to have such dedicated public servants overseeing our financial markets.  I would also like to thank Dena Wiggins, who has chaired this Committee for the full three years of my sponsorship.  She brings her deep experience in the energy markets to her role as Chair and the EEMAC has greatly benefitted from her leadership.  I am very grateful to Abigail Knauff for her exceptional work as Secretary of the EEMAC.  She volunteered for this role in addition to her “day job” in the Division of Clearing and Risk and has planned thoughtful and informative meetings on issues vital to our energy and environmental markets.  I also thank Lucy Hynes for all of her efforts liaising with the membership on behalf of my office and supporting Abigail in planning Committee meetings.  And finally, many thanks to Michelle Ghim in the Legal Division for her counsel to the Committee over the years, and to our IT and facilities staff who have made these remote meetings so seamless.

With that, I’ll turn it back to you, Abigail.

[1] Intergovernmental Panel on Climate Change, Climate Change 2021: The Physical Science Basis (Aug. 7, 2021), available at https://www.ipcc.ch/assessment-report/ar6/.

I plan to depart the CFTC on October 15, 2021.  To every thing there is a season, and now is a time for me to turn to other challenges.

For the last twenty years I have had the privilege of working with and for the Commodity Futures Trading Commission (CFTC), as well as the U.S. Congress and the private sector, to strengthen the integrity of our financial markets.  Legislation enacted in 2008 to “close the Enron loophole” and the subsequent passage of the comprehensive Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated legislative gaps that permitted excessive market speculation and contributed to the 2008 financial crisis.  Since 2010, the CFTC has worked tirelessly to issue rules to implement the Dodd-Frank Act, vigorously enforce the requirements of the Commodity Exchange Act, and harmonize our regulations with those of other federal agencies and our international counterparts. As a result of these efforts, the U.S. swaps market today—with mandatory clearing and transparent trading of standardized swaps, registered and regulated swap dealing, margin requirements for uncleared swaps, and comprehensive swap data reporting—is more resilient, more transparent, more liquid, less susceptible to manipulation, and more cost-effective for end users.  Our derivative markets are stronger than ever and as a result, our economy is stronger too.

It is tempting to measure one’s accomplishments by the number of policies implemented, rulemakings voted for, enforcement actions approved, or written statements issued.  But as I look back over my years of service at the CFTC, many of my most valued accomplishments are the intangibles—the personal relationships established, careers supported, and friendships fostered. 

It has been a great honor to serve alongside such a talented and dedicated staff.  Although the Commissioners may get most of the visibility, the staff does most of the work.  Virtually every day over the past three years I have relied upon CFTC staff for expertise and guidance.  As the CFTC gained responsibility over the swaps market, and new products like cryptocurrencies have emerged, the staff has worked diligently to expand its expertise and capabilities.  Today, the CFTC is both a national and a global leader in financial market regulation.  This well-deserved reputation is largely due to our talented staff.

I would like to express my appreciation to the Commissioners with whom I have served for their support and consideration throughout my tenure:  Acting Chairman Russ Behnam, Commissioner Dawn Stump, Chairman Heath Tarbert, Chairman Chris Giancarlo, and Commissioner Brian Quintenz.  Ever since its founding, the Commission has been a collegial body.  Nevertheless, entrusted with public office at this time of polarization in our country, I have felt a heightened responsibility to show that people from different political parties with different backgrounds and different views can come together in our government to work for the common good.  Sometimes we have acted in unison, sometimes we have compromised, and sometimes we have disagreed.  We may have passionately believed in and expressed our views, but we never disagreed disagreeably.  Our markets are stronger as a result of our collaboration, our collegiality, and our diversity.   For Russ, Dawn, and Chris, serving together on the Commission has strengthened our friendships.  For Heath and Brian, I value the new friendships that we formed.

The Commission’s accomplishments in strengthening our financial markets would not be possible without the strong direction, oversight, and support of the Congress, particularly the CFTC’s authorizing Committees, the Senate and House Agriculture Committees.  It has been an honor to work with the Members and staff of the House and Senate Agriculture Committees to ensure that our financial markets work for American businesses and consumers and are not susceptible to systemic risks or fraud and manipulation.  I would like to thank Senate Agriculture Committee Chairwoman Debbie Stabenow, Ranking Member John Boozman, and prior Chairman Pat Roberts; House Agriculture Committee Chairman David Scott, Ranking Member Glenn “GT” Thompson, prior Chairman Collin Peterson, and prior Ranking Member Mike Conaway for the leadership they have provided to the Commission and our commodity markets.

I always will appreciate the support of Senate Majority Leader Schumer for my nomination.

I have been fortunate to have worked daily with three of the agency’s best professional staff and attorneys—Erik Remmler, Lucy Hynes, and Sebastian Pujol.  Erik, Lucy, and Sebastian have counseled me on every matter I have dealt with over the past three years.  Erik helped manage my office and his expertise on swaps has been a great asset to me and the Commission.  Erik was instrumental in finalizing and clarifying numerous swap dealer and swap market regulations in the wake of the Dodd-Frank Act.  Lucy has advised me on enforcement matters, energy and environmental issues, and digital assets.  Lucy also provided key support to the agency in defense of my right as Commissioner to publicly speak on Commission matters without constraint, a right vindicated by the U.S. Court of Appeals in In re CFTC, 941 F.3d 869 (7th Cir. 2019).  Sebastian has advised on all market regulatory and oversight issues, as well as digital assets.  Sebastian’s deep knowledge of the commodity markets was invaluable during the Commission’s revision of its position limits rule, our adoption of new rules for automated and algorithmic trading, and our review of the extraordinary collapse in the price of WTI crude oil futures contracts on April 20, 2020.  Erik, Lucy, and Sebastian share credit for any successes that anyone may attribute to me as Commissioner.

I’d also like to thank Abigail Knauff for her extraordinary dedication and support as Secretary of the Energy and Environmental Markets Advisory Committee (EEMAC).  The smooth functioning of the EEMAC is in large part due to Abigail’s tireless work.

I owe a large debt of gratitude to my Executive Assistant, Latonia Williams, for keeping me and my office all together and functioning as a team during the COVID pandemic.

I have tremendously benefitted, both as Commissioner and personally, from meeting with the diverse groups of CFTC employees represented in the CFTC affinity groups.  I am proud to have promoted the agency’s dialogue on how to improve its diversity, equity, and inclusion practices and championed a more diverse, equitable, and inclusive workplace.

The CFTC relies heavily on information and comments provided by market participants and the public to conduct its oversight and fashion effective and efficient regulations.  I have learned much about our markets and how the CFTC can better accomplish its regulatory mission from engaging with these stakeholders.  I am particularly grateful to the members of the EEMAC for their voluntary service and contributions to the Commission’s oversight and understanding of the energy and environmental markets.  The EEMAC meetings that I have had the privilege of sponsoring have provided a wealth of information and insight into these markets.

I’d also like to recognize the press and media for providing informed and objective coverage of the CFTC’s activities, which is no small feat for a complex, technical, and controversial subject matter.  A free press is a cornerstone of our democracy and helps keep those who hold governmental power accountable to the American people—the ultimate source of that power.

Finally, I would like to thank the late Senator Carl Levin for his support and encouragement for me to devote my career to improving our financial markets.  As a member of his staff on the Senate Permanent Subcommittee on Investigations, Senator Levin taught me the value of meticulous preparation in pursuit of a vision.  Senator Levin also taught me the value of tenacity in pursuit of that vision, but also that maintaining one’s integrity and achieving long-term successes are more important than winning short-term victories.  And he showed me the value and intrinsic rewards of a life dedicated to public service.

I am most fortunate to have had the opportunity to work with so many extraordinary people to strengthen our financial markets.  Serving the public in my role as a CFTC Commissioner has been, and will always remain, a great honor.

The CFTC’s regulatory oversight authority, as well as the application of our enforcement authority, must be well understood by the public.  Only then can proper regulatory compliance be demanded.  The recent growth in popularity of crypto products and other digital assets has drawn much attention to the question of how this new financial asset class is regulated in the United States.  In response, there has often been a grossly inaccurate oversimplification offered which suggests these are either securities regulated by the Securities and Exchange Commission, or commodities regulated by the Commodity Futures Trading Commission.  The prevalence of this misunderstanding about U.S. regulatory delineations has grown to a point that I believe requires correction.

Therefore, I have laid out 10 concise points to clarify how and what the CFTC regulates, as well as how Congress has distinguished our enforcement authority from our regulatory oversight.  The CFTC does not regulate commodities (regardless of whether or not they are securities); rather, it regulates derivatives—and this is true for digital assets just as for any other asset class.  Before considering whether to redesign the regulatory structure in the crypto context, let’s get the facts straight about our current system.

I am deeply honored to have served as a Commissioner of the Commodity Futures Trading Commission over the last four years.  My statutory term expired in April of 2020.  At that point, I announced I would not seek re-nomination to another five-year term.  I originally anticipated stepping down from my role by either October-end of last year or once my replacement had been confirmed.  Without a successfully appointed replacement, I decided to remain in my role this year to ensure my voice was heard as important derivatives market and financial innovation issues were raised during the administration’s transition.

Now, with four years having passed since I was sworn in and an end-of-year hard stop to my ability to continue serving in this role, it is time for me to pursue new challenges and opportunities. I will step down as a Commissioner on August 31^st, 2021.

Since joining the agency, I have strived to build my service around three broad themes: ensuring the Commission is focused on risks, with rules appropriately tailored to those risks; embracing the rapid advancement of technology, opportunity, and innovation in finance; and working for enhanced coordination, harmonization, and deference among domestic and international regulators.

One of my top priorities as a Commissioner has been to ensure that the CFTC focuses its expertise and resources on identifying risks in our derivatives markets and developing targeted, appropriate responses to those specific risks—as opposed to prior approaches that too often imposed one-size-fits-all regimes.  From calling for an overhaul of the swap dealer de minimis threshold, to tailoring the re-proposal of the swap dealer capital rule, changing the CFTC’s proposed approach to cross-border swap dealer regulation, completing a ten-year-in-the-making final rule on position limits, and opposing the ill-conceived Regulation Automated Trading while helping replace it with a principles-based approach, I am proud to have played a positive role in promoting sound regulation respectful of risk, the law, the markets, and the public.

I’ve been particularly honored to sponsor the CFTC’s Technology Advisory Committee (TAC), where we’ve had the opportunity to explore the extraordinary technological renaissance transforming our financial markets.  During my term, the CFTC has overseen the listing of Bitcoin futures contracts; the custody of digital assets within the traditional clearing infrastructure; the proliferation of blockchain technology; the creation of cryptographic, tokenized commodities; and the rapid expansion of decentralized finance (DeFi), which purports to realize the ultimate transparency-competition-innovation-reward dynamic of a true free market.  In addition, the TAC and its subcommittees have explored the evolution of state-of-the-art risk control mechanisms at exchanges and firms, cryptographic proofing mechanisms, digital asset trading platform self-regulation standards, and scalable cybersecurity programs.  I look forward to keeping innovation, particularly related to crypto and DeFi, relevant to my career and will continue advocating for the freedom, innovation, inclusion, and prosperity they offer.

While the CFTC is a domestic regulator, the markets we oversee are global in nature, and our regulations have global impact.  During my tenure, I have traveled extensively overseas, meeting with authorities and financial institutions to discuss the impact of financial regulations on international commerce.  I have long advocated for authorities across the globe to adopt a deference-based regulatory framework that respects other jurisdictions’ supervisory interests in regulating their own local markets.  I am proud to have helped craft the Commission’s rules regarding the treatment of non-U.S. derivatives clearing organizations (DCOs), including the conditions under which the non-U.S. DCOs may seek an exemption from registration or registration with alternative compliance, as well as the final rule codifying the cross-border regulation of swap dealers, all of which are grounded in respect for our legal authorities, market participants’ needs, and deference to foreign sovereignty.

In addition, I have worked to harmonize financial market rules across agencies.  I am incredibly fortunate to have worked closely with Securities and Exchange Commission Commissioner Hester Peirce on coordinating and harmonizing regulations, processes, and overlapping jurisdictional issues between our agencies and am especially grateful for her thoughtful advocacy, extensive communication, extraordinary productivity, and personal friendship.  Her leadership on issues related to crypto assets and DeFi is the model for regulatory clarity and the appropriate role of governmental regulation balanced with individual freedom and dynamic innovation.

I am proud of the regulatory philosophy I articulated, the policy agenda I promoted, and the relationships I built over the last four years.

I am grateful to President Obama for my initial nomination, to President Trump for my successive nomination and appointment, and to Republican Leader McConnell for his recommendation.  The agency has been fortunate to have enormously dedicated public officials leading our Congressional committees of jurisdiction over the last many years, including Senate Agriculture Committee Chairwoman Debbie Stabenow, Ranking Member John Boozman, and prior Chairman Pat Roberts; House Agriculture Committee Chairman David Scott, Ranking Member Glenn “GT” Thompson, prior Chairman Collin Peterson, and prior Ranking Member Mike Conaway.  It has been a true pleasure to work with them and their staffs, as well as to visit each of their states and districts.  I am also fortunate to have served alongside two fantastic former CFTC Chairmen, Christopher Giancarlo and Heath Tarbert, current Acting Chairman Rostin Behnam, as well as Commissioners Dawn Stump and Dan Berkovitz.

I would also like to recognize the CFTC’s excellent staff.  The staff at the CFTC is second to none, and I greatly value the staffers’ dedication to public service and the hard work they perform to oversee and protect our markets.

Lastly, I would like to thank all of my prior commissioner-office staff – Kevin Webb, Margo Bailey, Peter Kals, Elie Mishory, and Ben DeMaria – without whom the above accomplishments would not have been possible.  They are simply the best attorneys in the business, enormously respected within the agency and by market participants, wonderful people, and close friends.

In sum, I am incredibly proud to have played a role in promoting the integrity of the U.S. financial system through advocating for freedom and innovation and helping develop sound, risk-focused regulation so that U.S. financial markets, especially the risk-hedging derivatives markets, remain the most liquid, dynamic, accessible, robust, and resilient in the world.  The proof of that resiliency is evident in the derivative markets’ performance in the face of unprecedented volatility, margin calls, and trading volume in the spring of 2020 due to the COVID-19 crisis and economic shut down.  The extraordinarily dedicated and talented CFTC staff, as well as exchange operators, intermediaries, and market participants, should be proud of those results.

I look forward to returning to the private sector for the next chapter of my career and will continue to be a strident advocate for financial market innovation, freedom of market participation, derivatives market integrity, and sound financial regulation.

Washington, D.C. — Commodity Futures Trading Commission Acting Chairman Rostin Behnam issued the following statement on the passing of former CFTC Chairman Philip McBride Johnson:

“The CFTC shares in mourning the recent passing of former Chairman Philip McBride Johnson, who served as Chairman from 1981 until 1983. In 1982, as Chairman, he reached an agreement with the Securities and Exchange Commission Chairman John Shad on the Shad-Johnson Accord, which paved the way for futures on stock indexes. A true CFTC trailblazer, Chairman Johnson was instrumental in drafting key provisions of the Commodity Futures Trading Commission Act of 1974 that created the CFTC, giving life to a small independent agency that would become a world leader in the regulation and oversight of derivatives.

“We at the CFTC offer our sincere condolences to his family, friends, and colleagues and recognize former Chairman Philip McBride Johnson as one of the CFTC’s most influential leaders.”

Today the United States District Court for the Southern District of New York entered an order imposing a $100 million civil penalty against the operators[1] of the BitMEX trading platform.  This order is the result of an enforcement investigation by the Commodity Futures Trading Commission (Commission) and demonstrates our resolve to prosecute violations of the Commodity Exchange Act (CEA) and the Commission’s regulations with respect to the trading of cryptocurrency.

Congress entrusted the Commission with the mission to promote market integrity, avoid systemic risk, and protect market participants across all products and all markets within the Commission’s jurisdiction.  The CEA does not carve out cryptocurrency products or markets.  Today’s order enforces our registration, exchange-trading, and anti-money laundering requirements as they apply to cryptocurrency trading.

The Commission’s statutory mission also includes promoting “responsible innovation and fair competition” among markets and market participants.  Blockchains, smart contracts, and other new technologies have the potential to improve the transparency and efficiency of our derivatives markets.  However, for innovation to be responsible and competition to be fair, it must comply with the CEA and our regulations.

I would like to recognize the Division of Enforcement staff who vigorously pursued this matter: Carlin R. Metzger, Joy McCormack, Joseph Platt, Elizabeth N. Pendleton, Scott R. Williamson, and Robert T. Howell.  Their efforts to address this new segment of our markets and bring this matter to a successful conclusion are commendable.