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CFTC gets new Head Chef

The U.S. Senate has confirmed the appointment of President Obama’s three nominees to the CFTC, restoring the five-member Commission to its full complement.

The confirmation of Timothy Massad as Chairman is the more consequential, and potentially more interesting, of the three. Massad is something of an enigma, although previously active in a number of high-profile Democratic campaigns, his career to date has not evinced any overt political bias. Widely regarded as an expert in derivatives law, despite being instrumental in the drafting of initial ISDA agreement, in 2009 Massad relinquished a lucrative partnership at prestigious law firm Cravath, Swaine and Moore for public service at the US Treasury. He was swiftly promoted from legal adviser to the TARP Congressional Oversight Panel to heading the Programme itself; a controversial post which he has handled with a notable lack of drama, although reports of TARP’s profitability are open to question. Although it was never likely that Gensler’s successor would replicate, let alone exceed, his absolutist leadership style; Massad’s low profile itself speaks to a highly collaborative approach. He has laid some emphasis on the CFTC’s enforcement role, “I believe there is nothing more important than a robust enforcement program…Strong enforcement is vital to maintaining the public’s confidence in our markets. Therefore, I will make it a top priority to fulfill the CFTC’s responsibility to enforce the laws protecting these markets vigorously.” Most commentators, seemingly at a loss for material, have pointed to his passion for gourmet home cooking; expect to see an unfortunate melange of culinary and financial metaphors- recipe for disaster, the necessity to break eggs, too many cooks etc.

J. Christopher Giancarlo will fill the Republican Commission seat, previously inhabited by Jill E. Sommers. A senior executive at interdealer broker GFI and a recent chairman of the industry lobbying group Wholesale Market Brokers’ Association; Giancarlo has been an outspoken critic of excessive regulation, with specific regard to cross-border legislation, swaps futurisation and flexibility in SEF implementation. He told the confirmation hearing, “Regulatory effectiveness must be a higher priority than speed,” and that he intended to focus on end-users of derivatives.

The full confirmation of Sharon Bowen completes the trio. Ms. Bowen replaces the charismatic, but ultimately lightweight, Democrat Commissioner Bart Chilton. A partner at law firm Latham and Watkins, Bowen is acting head of the Securities Investor Protection Corp and has faced widespread criticism following the agency’s decision not to compensate victims of Allen Stanford’s $7bn Ponzi scheme. “The next phase of the C.F.T.C.’s mandate requires effective implementation of these rules, with the participation and coordination of regulatory bodies both inside and outside of the U.S.,” she insightfully told her confirmation hearing.

Although the seats are not even warm at the “CFTC 2.0”, the past history and confirmation testimony of the new Commissioners confirms the change of focus and approach evident since Gensler’s departure. Such changes are not solely character-driven, the vast majority of the CFTC rules are now in place, their task has rapidly evolved from primary legislation to detailed clarification and implementation. We anticipate an increased focus on enforcement, combined with a more generally collaborative approach, a continued emphasis on data and technology solutions, a reduction and rollback of cross-border ambition and a consequent olive-branch offering to foreign counterparts. It remains to be seen if the recent outbreak of amity at the top of the CFTC will survive the arrival of a new Chairman and two new Commissioners; however, it seems clear that the reconfigured Agency will be, if not bank-friendly, at least less hostile.

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