Commissioner Michael V. Dunn
Thank you all for joining us today for this important meeting regarding the implementation of the Dodd-Frank Act. Today’s meeting will address proposed rules regarding:
– Commodity Options and Agricultural Swaps; and
– Swap Trading Relationship Documentation Relating to Termination Provisions Implicated Under Title II of the Dodd-Frank Act
The proposed rule regarding agricultural swaps is of particular interest to me. In September, the Commission published an Advanced Notice of Proposed Rulemaking requesting comments regarding rules governing the trading of swaps in agricultural commodities. The comments received by the Commission were nearly unanimous in their support for treating agricultural swaps under the same regulatory scheme as other categories of swaps, and the rules proposed today do just that. Among others, I found the comments from the National Council of Farmer Cooperatives particularly helpful. The rules we promulgate must not diminish the ability of farmer cooperatives to provide their producers with risk management tools. I look forward to receiving comments on today’s proposed rule, so that we can be certain that the ultimate rule regarding swaps in agricultural commodities provides an appropriate framework for these important transactions.
The proposed rule regarding Documentation Relating to Termination Provisions is also vitally important. The events of 2008 demonstrated that our financial regulatory authorities lacked an orderly mechanism for resolving the insolvency of certain large financial companies. Congress has sought to address that issue through the Dodd-Frank Act, and it is important that swaps be included as part of the orderly liquidation process envisioned by the Act in the event of the insolvency of a systemically important swap dealer or major swap participant. Today’s proposed rule provides a mechanism for including swaps in this orderly liquidation process. I look forward to the public’s comments on this proposed rule, particularly in regard to whether there are any unforeseen anti-competitive consequences that may arise out of its application.
I would like to once again thank the staff at the CFTC for all their hard work in regard to these very important proposed rules. They have been working late nights and weekends in order to implement Dodd-Frank, while simultaneously working to fulfill their existing duties under the Commodity Exchange Act. They do this against the backdrop of the budget crisis currently facing the CFTC. We continue to operate under a continuing resolution, with funds insufficient to implement and enforce the Dodd-Frank Act. In essence, we face an unfunded mandate – a situation where the CFTC has been given enormous responsibilities, without the corresponding increase in resources necessary to fulfill them. My fear is that the only way to fulfill our duties under the law with our current budget constraints is to become a restrictive regulator, rather than a principles based one. Such a change in our approach to regulation may be detrimental to the current swap industry. Our current staff knows the existing futures industry. In order to adequately understand the swaps industry on the same level, we need more staff and resources. Without adequate staff and resources, my fear is that applications from entities we are unfamiliar with will take substantially longer than applications from entities we are familiar with.
Once again, I would like to thank all of our staff for the hard work they have put in on these rules. Thank you.
