September 12, 2002

It is very exciting for me to be here before the futures industry. As many of you know, I have spent most of my professional life both studying and teaching others about the value and uses of futures and other derivatives contracts. It is a real thrill to be among you folks who have been on the cutting edge of competition and market innovation.

While it is true that I have a done a good bit of work studying the financial markets, particularly as a finance professor, while at the Commission and going back to my formative years, agricultural commodities and the factors that influence their prices have been of profound personal interest to me. As a farm kid from White Hall, Virginia, surrounded by the corn fields, apple orchards, herefords and holsteins -- the first vehicle I drove was a tractor, my best friends were fellow 4-H club members, and my first job was in the local farm market. This background was a gift of my late father, who continued to pursue farming despite its lack of profitability at the time, and my mother, whose parents homesteaded in Saskatchewan, Canada.

When it came time to go to college, I received a scholarship given by Frank V. Armstrong, the founder of White House Apple Products, a business local to my hometown. I followed my older brother, whose FFA leadership had won him a scholarship to Virginia Tech. In short, agriculture nurtured and supported me and my family, and contributes to the well being of us all. So even though my work is perhaps more frequently identified with the financial side of things, I have a great appreciation for the important role futures plays in the agriculture sector, and to our economy as a whole.

As an undergrad at Virginia Tech, I majored in economics and international studies. After working for three years as a public school teacher in the same county schools I had attended as a child, I returned to graduate school to pursue a PhD in economics. This time I followed my husband, who was completing his degree, to Virginia Tech. Futures markets had always been of great interest to me, and I was fortunate that my dissertation chairman, Professor Robert Mackay, encouraged me to focus my research on derivatives markets and their relationship to the asset and commodity markets that underlie them. That research interest led me to the Commodity Futures Trading Commission, where I worked in the Division of Economic Analysis for five years. While in government service, I found that contributing to the study and analysis of the futures markets and the policy issues was rewarding for me and valued by the Commission and industry.

As a finance professor in the business schools of Virginia Tech, Tulane University, and most recently, George Mason University, I have taught courses on derivatives, risk management and financial market innovation, investments, venture capital and private finance, and international financial management. It is rewarding to teach individuals and businesses about the workings of financial markets and the uses and benefits of financial instruments like futures, options, and other derivatives. I have published papers on futures volume and volatility, market liquidity and hedging, and financial market information. Much of my work has highlighted how well these markets function, how vital they are to business and the economy, and how regulation can and has contributed to ensuring that these markets continue to perform their important functions of price discovery and risk management.

As a finance professor and as an economist at the Commission, I have seen firsthand how innovative and beneficial the derivatives markets are and how they can increase the efficiency and performance of business and the economy. While at the Commission, I spent much of my time employing economic reasoning and investigation to evaluate rules and trading practices to make certain that they were not anticompetitive, fraudulent, or manipulative. It was apparent to me then, as it is now, that the Commission plays an important role in fostering market integrity, financial integrity, and customer protection.

A lot has changed since my last stay at the Commission. At that time Congress and the Commission were taking their first steps toward creating a more flexible regulatory structure with the passage of the Futures Trading Practices Act of 1992. At that time, the CFTC was given more latitude to deal with the rise of the swaps market. With the passage of the CFMA of 2000, however, Congress has taken a much larger and important step by doing away with the highly structured and prescriptive regulatory practices of the past, and adopting a flexible regulatory approach that places government oversight where it is needed and limiting the burden of government regulation where it is not.

We will soon see the fruits of this effort when the first ever futures on individual stocks begin to trade. For years the ban on the trading of security futures has denied stock investors and fund managers the opportunity that every farmer in this country has enjoyed for more than a century—the right to hedge price risk with a futures contract. The CFMA has swept away the ban and we now look forward to new opportunities for growth and innovation in the industry.

And speaking of innovation and opportunities, the recent debate between the FCM and exchange communities on clearing issues has not escaped my attention. The issue of competition in the industry is an important one. The economy of this country is founded on the principle of free and competitive markets. And there is no more exciting place in the world to watch this competition than on the floor of a futures exchange. So the preservation of competition between exchanges to develop and trade new and innovative futures contracts is very important. But we must be careful that any steps that the Commission may take on this matter are taken with careful forethought. Personally, I am looking forward to the opportunity to hear both sides on this debate, to understand all of the issues involved and to working with the FCM community as well as the exchange community to answer the concerns of the industry and develop practical solutions.

Again, thank you for inviting me here today to meet with you and I would like extend my invitation to each and every one of you to contact me or my staff, Bob Zwirb or Greg Kuserk, to discuss concerns and suggestions that you may have on how to make these futures and options markets even better than they are today. In my life as a college professor I was used to having office hours for my students to listen to their concerns, their ideas or to help them as I could. In this life as a CFTC commissioner I intend to have the same open door policy apply. So when you have a suggestion, or a concern, or you simply want to chat, please don’t hesitate to call on me and my staff.