Timothy Massad, the Treasury Department official named to head the U.S. Commodity Futures Trading Commission, said he would work to approve speculation limits in oil, natural gas and other commodities that have been resisted by banks and parts of the energy industry.
Massad and commission nominees Sharon Y. Bowen and J. Christopher Giancarlo told Senate Agriculture Committee lawmakers at a confirmation hearing today that they would look to review data and public comments on a current CFTC proposal to set limits on how large a position a trader can have in commodity markets.
“It is very important that we work to finalize that rule,” Massad, 57, said at the hearing in Washington. “They are a very important tool in the toolkit, and Congress obviously has directed us to take action in this regard. I will make that a priority.”
The agency’s proposal for so-called position limits has been among the most contentious rules at the CFTC, with banks and energy-trading firms lobbying against the regulation while Delta Air Lines Inc. (DAL:US) and other energy consumers have been in support. A federal judge in 2012 blocked the agency’s previous final rule in a case filed by the International Swaps and Derivatives Association and Securities Industry and Financial Markets Association.
The ruling said the CFTC failed to assess whether limits were necessary and appropriate under the 2010 Dodd-Frank Act financial-regulatory overhaul. The CFTC proposed a new rule last year to set limits in 28 commodities for derivatives traded on exchanges owned by CME Group Inc. and IntercontinentalExchange Group Inc. and in the swaps market. The agency hasn’t set a date for completing the proposal.
The CFTC, which oversees trading by Goldman Sachs Group (GS:US) Inc., JPMorgan Chase (JPM:US) & Co., BP Plc (BP/) and other agricultural, energy and financial traders, is in a period of transition as it implements expanded oversight under Dodd-Frank. The agency has asked for greater resources to add staff and technology necessary to oversee markets and enforce the Dodd-Frank rules.
“There is nothing more important than a robust enforcement program in order to protect the integrity of our financial markets,” Massad said.
Massad has drawn skepticism from interest groups about his views on regulation and how he’d lead the agency.
“He’s really something of a blank,” Marcus Stanley, policy director for Americans for Financial Reform, a coalition including the AFL-CIO labor federation, said of Massad in a telephone interview yesterday. “He doesn’t have a policy or substantive record at least in the areas regulated by the CFTC.”
The three nominees, who require approval by the full Senate, would change the face of an agency designed to have five sitting members. Mark P. Wetjen, 39, has been serving as acting chairman since Gary Gensler’s term ended in January.
Gensler, 56, led a five-year effort to regulate much of the $693 trillion global market by seeking to have most swaps guaranteed at central clearinghouses and traded on public execution facilities. Credit-default swaps helped fuel the 2008 credit crisis and prompted the U.S. rescue of American International Group Inc.
Giancarlo, an executive at inter-dealer broker GFI Group (GFIG:US) Inc., was an active participant in debates over the new rules. He stepped down last year as chairman of the Wholesale Market Brokers’ Association Americas, which includes GFI Group and four other brokers, that lobbied for flexible rules on how swaps are traded using new execution facilities. Giancarlo would take the seat of Jill E. Sommers, a Republican who stepped down in July.
The agency must achieve a “proper balance” in regulations to ensure markets can remain competitive and open without regulation artificially increasing the costs of risk management, Giancarlo told lawmakers.
Bowen, a securities lawyer at Latham & Watkins LLP, would take the seat to be vacated by Bart Chilton, a Democrat and supporter of limits on speculation and high-frequency trading. Bowen, 57, is also acting chairman of the Securities Investor Protection Corp., which insures customers against losses caused by broker theft.
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