Release: 4751-03
For Release: February 6, 2003

CFTC Chairman James E. Newsome Talks About the Benefits and Challenges of Clearing at First-Ever Joint Technical Conference by CFTC with FERC

Washington, D.C.—Commodity Futures Trading Commission (CFTC) Chairman James E. Newsome addressed the first-ever joint technical conference hosted by the CFTC and the Federal Energy Regulatory Commission (FERC) on February 5, telling the participants and audience about the potential benefits of clearing as one possible solution for some of the credit problems facing the energy markets, while highlighting some of the challenges that are involved in using clearing as such a solution.

Chairman Newsome commented: “On the front lines in defense against such problems are the futures clearinghouses and the clearing members of the futures exchanges. By serving as a centralized counterparty the clearinghouse serves an invaluable role in mitigating credit risks for market participants.”

The aim of the conference, “Credit Issues & Potential Solutions in Energy Markets,” was to educate FERC and energy market participants about how clearing works and to explore the feasibility of utilizing clearing to address the credit issues that exist in the energy markets. More than 300 people attended the conference, which was held at FERC headquarters.

In addition to the Chairman Newsome, a number of CFTC staff made presentations. Jane Kang Thorpe, Director of the Division of Clearing and Intermediary Oversight (DCIO), discussed the CFTC’s role in promoting the economic, operational and financial integrity of the futures markets. In his presentation Michael Gorham, Director of the Division of Market Oversight, told the audience about how the CFTC oversees whether both futures markets and products are designed properly and are free of manipulation. Ananda Radhakrishnan, Special Counsel to the Director of DCIO, spoke about the direct authority that the CFTC now has over clearinghouses as a result of the passage of the Commodity Futures Modernization Act of 2000, and discussed the specific elements of such authority.

Among the other panel participants were CFTC-regulated clearing facilities and exchanges as well as energy market participants.

For more information, please contact: Anne Marie Kelly, CFTC: (202) 418-5431, R. David Gary, CFTC: (202) 418-5085, or Bryan Lee, FERC: (202) 502-8004.