Market Participants Assess CFTC Makeover

Terry Flanagan

The Commodity Futures Trading Commission has a new permanent chairman and two new commissioners as it steers the commodities and futures markets through a turbulent era.

Timothy Massad, the CFTC’s chairman and new commissioners Sharon Bowen and Chris Giancarlo will be confronting the continuing evolution of OTC derivatives from a bilateral, bespoke product to one that’s traded on exchanges and SEFs, centrally cleared, and reported to swap data repositories. They also need to deal with cross-border regulatory issues and the continuing “electronification” of derivatives markets.

Massad and Bowen have previous regulatory experience, Massad having served as assistant secretary for financial stability at the U.S. Department of the Treasury, where he oversaw the Troubled Asset Relief Program (TARP), the principal U.S. governmental response to the 2008 financial crisis, and Bowen, a former corporate lawyer, having served as served as Acting Chair of the Board of Directors of the Securities Investor Protection Corporation (SIPC).

Giancarlo, a former executive at interdealer broker GFI Group, is a lawyer with deep knowledge of the OTC markets. A former board member and chairman of the Wholesale Markets Brokers’ Association, Americas, he has written and spoken extensively on public policy, legal and other matters concerning regulation, technology and the financial markets, including testimony on implementation of the Dodd Frank Act before the U.S. Congress and regulatory agencies.

“Chris Giancarlo is bringing OTC experience to the Commission,” Chris Ferreri, managing director at Icap, told Markets Media. “His background isn’t in futures; it’s in intermediating OTC markets. He is able to hit the ground running with his knowledge of the role of the market, the critical nature of the intermediaries, the competing nature of interdealer brokers as the model for SEFs. He understands the legislative history of SEFs.”

The confirmation of Commissioners Giancarlo and Bowen and of chairman Massad marks a significant milestone for the CFTC as the Commission and the industry continue to work toward implementation of Dodd-Frank.

“We all want to ensure that the new regulations are not only implemented in a manner consistent with the legislative intent, but also preserve liquidity and avoid disruptions in the global swaps marketplace,” Shawn Bernardo, chief executive officer of Tullett Prebon SEF, told Markets Media. “I am hopeful that the new Commissioners will bring to the process a level of reason, judgment and market knowledge that will complement that expertise and insight demonstrated by Commissioners Wetjen and O’Malia. I also hope their involvement will result in greater coordination – not only within the CFTC – but between the CFTC and the industry as we all continue to work through this process.”

Ferreri added, “There are some who suggest there will be shifts or changes, but the law’s the law. The Commission has the obligation to write and enforce rules that are true to the statute. I don’t think there will be a major shift in direction. I think there will be continuing implementation of the statute.”

Since joining GFI in 2001, Giancarlo has been responsible for the company’s strategic relationships and transactions, including M&A, equity finance, investment banking, strategy development, analyst communications and investor and government relations.

“Chris is deeply knowledgeable about the global swaps and futures markets. His business leadership and legal expertise will be of tremendous help to the Commission as it completes the implementation of financial regulatory reform,” Colin Heffron, CEO of GFI Group, said in a statement.

CME Group said of the new CFTC members in a statement: “We welcome their leadership at this critical time as our industry works through Dodd-Frank rule implementation, addresses competitive challenges abroad, and considers market structure dynamics.”

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