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Regulation and Compliance > Federal Regulation

New CFTC Members Speak to Futures

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CHICAGO (–As Congress continues its work to reauthorize the Commodity Futures Trading Commission, the two newest members of the commission said they hope the renewal legislation achieves more regulatory clarity for the trading of securities futures products, along with a more explicit mandate to curb fraud in the over-the-counter foreign exchange markets and a sensible approach to energy issues.

The two commissioners, Fred Hatfield and Michael Dunn, who joined the CFTC in December 2004, shared their perspectives Wednesday with an audience of the Chicago division of the Futures Industry Association.

Mr. Hatfield said he thought the act authorizing the CFTC–one that is revisited by Congress once every five years–”is working well but shouldn’t be put to bed quietly.” Responding to a question from FIA President and panel moderator John Damgard about whether “it is time to send a message to the [Securities and Exchange Commission]” about simplifying regulation of single-stock futures and narrow-based indexes, Mr. Hatfield suggested that the SEC’s dithering and confusion over which agency holds authority had hampered the market for those products.

“It’s ludicrous that the SEC doesn’t have single-stock futures in its pilot program” for regulation of new products, Mr. Hatfield said.

Mr. Dunn said forex fraud is a pressing issue for Congress to consider. “Having seen the number of cases we review appalls me. We need a legislative fix,” he said, with Mr. Hatfield calling for a closing of loopholes in trading regulation.

At a March 3 hearing in Washington, the CFTC’s acting chair, Sharon Brown-Hruska, expressed her concern about fraud in foreign exchange, especially in light of the CFTC vs. Zelener case that cast doubt over the CFTC’s legislative authority to pursue cases.

Addressing a question from Mr. Damgard about intervention in energy markets, Mr. Hatfield noted that rising prices and post-Enron furor have pressured Congress to pass regulation that may not solve the actual problems. “We often pass prescriptions for yesterday’s problems. California’s problems were caused by a half-assed–whoops, there’s press here–not well-thought-out” approach to regulation, he said, noticing the journalists in the room.

Mr. Damgard said he thought Messrs. Hatfield and Dunn were strong additions to the CFTC. “I can’t remember when we’ve had such a strong commission,” he said, noting that Mr. Dunn had a long background in legislative work on agricultural issues and that he “knows a lot about managing risk and regulation from his work in agricultural credit and banking.”

Mr. Hatfield also has a Capitol Hill background in agriculture, as well as in energy, including service under John Breaux, the former Democratic senator from Louisiana.

Congress has until the end of the fiscal year (Sept. 30) to reauthorize the CFTC. The comment period for the renewing legislation has been extended to April 1, Mr. Hatfield said.

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Contact Bob Keane with questions or comments at: [email protected].


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