Eugene Grygo, Chief Content Officer, FTF News
One of the unknowns of the 35-day, partial federal government shutdown that ended on January 25 is what happens when the regulators aren’t looking.
For the U.S. Commodity Futures Trading Commission (CFTC), it “continued to perform essential market-critical functions throughout the shutdown,” says Chairman J. Christopher Giancarlo in a statement issued on Jan. 28 when the commission returned to operations.
“While the lapse in appropriations meant that much of the CFTC’s work was required by law to cease, the CFTC continued to perform essential market-critical functions throughout the shutdown,” Giancarlo says. “The agency was well prepared, utilizing its Lapse in Appropriations action plan adopted a year ago.”
The CFTC had “a small team of agency staff” monitor derivatives markets “and ensured that essential enforcement activities were carried out. Personnel performing these excepted functions remained in communication throughout with key market participants and self-regulatory organizations. They deserve our thanks and gratitude,” Giancarlo says.
However, “the particular nature and length of this shutdown required the CFTC to address many challenging and unprecedented issues,” Giancarlo adds. “This included assessing which agency activities became increasingly essential over time and recalling furloughed staff to perform these functions. Much of the analysis and response was handled by CFTC Chief of Staff Mike Gill, General Counsel Dan Davis and Executive Director Tony Thompson. They addressed complex questions in an intelligent and balanced fashion.”
Giancarlo also gave a nod to “the goodwill and cooperation” of the five commissioners. “Over five weeks, the Commissioners gathered together to hear reports from senior agency personnel about underlying market activity and discuss the handling of essential agency functions. I am indebted to Commissioners Brian Quintenz, Rostin Behnam, Dawn Stump and Dan Berkovitz for their engagement and support that enabled the CFTC to operate with bipartisan common sense during the past thirty-five days.”
The CFTC chairman also acknowledged that “the situation was a source of uncertainty, anxiety and even hardship for many CFTC employees and their families. The entire Commission and its senior staff were concerned throughout for their colleagues’ welfare.”
The resumption of government operations marks the return of “various agency activities, including publication of market data,” Giancarlo says. Although not explicitly stated, it is assumed that enforcement actions are also back in full swing.
The big question that few have asked is whether that much-needed “bipartisan common sense” will be applied to the ongoing situation as the shutdown did little to advance the immigration/border security issues. It clearly caused some very innocent folks a lot of misery.
I am also wondering if the shutdown will delay the transition process for Giancarlo who is scheduled to leave his post in April. The Trump White House has nominated a Treasury Department official, Heath P. Tarbert, to be his replacement for a five-year term that, in theory, will start April 14, 2019.
But the very busy U.S. Senate will have to review and confirm Tarbert, who now serves as assistant secretary for international markets at the Treasury Department. At about the same time, the Senate, the House of Representatives, the CFTC and SEC will also have to grapple with the seen and unseen challenges of the U.K.’s Brexit, slated to hit March 29.
This past Dec. 6 Giancarlo noted that while there have been assurances about Brexit, more needs to be done.
“Derivatives market participants should have greater detail and clarity from European authorities on a full range of issues, including when the proposed equivalence decision for the U.K. and recognition decision for U.K. CCPs will be made, whether the equivalence and recognition decisions will apply to all cleared products or only to derivatives, and whether the equivalence and recognition decisions will apply to both new and existing cleared transactions,” Giancarlo says.
“Furthermore, the relevant legal and regulatory decisions made by European authorities should be for a reasonable duration and with limited conditions. This additional clarity and certainty are necessary to limit substantial operational and market risks that will result from the sudden transfer of potentially trillions of euros in swap exposures in the remaining weeks before a possible no-deal Brexit,” Giancarlo says.
So, a potential Brexit blow-up could hit during a second shutdown.
Something tells me that given these unprecedented events, Giancarlo may be quietly happy that his term is coming to an end.
Need a Reprint?