CFTC nomination sought by Senate Republicans so Giancarlo can move on rules

27 September 2017 1:15pm

22 September 2017. By Neil Haggerty

Senate Republicans are prepared to move quickly to confirm a Democratic member for the US Commodity Futures Trading Commission so that the derivatives regulator will have a full commission, a Senate staffer said.

CFTC Chairman J. Christopher Giancarlo has said he wants a full complement of five members before finalizing major rules such as commodities position limits.

With two CFTC positions about to be vacant, Senate Democrats have held up confirmation of President Donald Trump's appointment of Republican Dawn Stump until he nominates a Democrat as well, Senate Agriculture Committee staffer Darin Guries told an industry conference* this week.

In the past, the White House has customarily paired commissioner appointments from each party.

"The Democrats want to make sure that we have an impetus to actually report a nominee," Guries, a senior Republican aide, said in Washington Monday.* "We wish that they had gone a different direction, but it's fair, and we understand that we possibly would have done the same thing."

Republican majority 

Giancarlo, a Republican, expects to ultimately head a commission with a 3-2 Republican majority.

Trump nominees Brian Quintenz, a Republican, and Rostin Behnam, a Democrat, were confirmed by the full Senate in August after an Agriculture Committee hearing.

Democratic Commissioner Sharon Bowen has said she plans to step down at the end of the month. That will leave Republicans with a 2-1 margin starting in October.

Republican nominee Stump was not acted on by the Senate Agriculture Committee last month following Democratic objections.

The fifth commission spot is expected to be filled by a Democrat suggested by Senate Minority Leader Chuck Schumer and nominated by Trump.

"As soon as Commissioner Bowen steps down and Minority Leader Schumer talks to the White House and they are able to get someone put forward, we'll hold a hearing as soon as possible," Guries said.

Slow process

Senate confirmation will take time because of a backlog. Trump has been slow to fill senior posts, and Senate Democrats haven't moved quickly on a number of nominations.

"Nominees have been taking 30 hours on the floor," Michelle Mesack, a senior Republican staffer on the Senate Banking Committee, told the conference. "We have a number of nominees that still need floor time."

For example, two nominees to senior posts, Randal Quarles for Federal Reserve vice chairman and Joseph Otting for Comptroller of the Currency, were cleared by committee this month but haven't yet been confirmed.

Giancarlo plans

Giancarlo said shortly after his appointment this year that he wanted to await a full complement of commissioners before adopting position limits and other major rules. Position limits would curb speculation in 28 physical commodity futures and their financially equivalent swaps.

Other major standards pending adoption include an automated trading rule and an $8 billion swap dealer registration threshold.

The automated trading rule would impose risk controls and transparency measures for automated trading, which accounts for 70 percent of the futures market.

The swap dealer threshold subjects derivatives traders with at least $8 billion in derivatives business to heightened oversight. Unless the agency proposes a new rule, the cutoff will fall to $3 billion in 2018 automatically.

The lower threshold would put stiffer requirements on a number of energy and agricultural companies and potentially decrease liquidity in the derivatives market.

*Derivatives and Risk Management: The US Public Policy Agenda in 2017 and Beyond. International Swaps and Derivatives Association. Washington, DC. Sept. 18, 2017.

Fintech Regulation in 2018