During a hearing conducted by the House Subcommittee on General Farm Commodities and Risk Management Thursday, Chairman Mike Conaway, R-Texas said the Commodity Futures Trading Commission has proposed an array of rules that, as they currently stand, exceed Congressional intent and demonstrate a lack of regulatory focus amid a shortage of resources. Further exacerbating the problem is the Commission's seemingly complete disregard of conducting a comprehensive cost-benefit analysis.
The CFTC has proposed divvying up margin payments of individual swaps users at clearinghouses rather than allowing accounts to be treated as one pool by banks representing multiple customers. Futures markets now allow banks to pool all their customer accounts together when settling a day's margins.
The CFTC proposed rule states that customers of brokerages must have their margin treated on a gross basis equal to the amount of cash to back trades that would be required if the customer was a member of the clearinghouse. According to the rule a clearinghouse would not be permitted to net positions of different customers against one another.
The chairman continued that it is incumbent upon the Commission to begin gravitating towards prioritizing their regulatory focus on mitigating systemic risk in a manner that represents Congressional intent and takes heed to the overwhelming comments of concern by market participants thus far.
"As we move forward adherence to the more comprehensive qualitative and quantitative aspects of the President's Executive Order and a calculation of the impact of costs beyond entities that must directly comply with the proposed regulations would benefit all parties," Conaway said. "Efforts undertaken by the CFTC should represent help, not hindrance, towards economic recovery."