January 30, 2020

ICYMI: Chairman Tarbert Discusses Position Limits on Bloomberg TV

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Chairman Tarbert on the CFTC’s Proposed Rule on Position Limits for Derivatives

“Speculative position limits were something that Congress passed 10 years ago as part of the Dodd-Frank Act. And the goal essentially is to not allow people that are coming into our markets purely to speculate—they’re not hedging anything—to get positions above a certain threshold.  And the reason we’re putting these in place is to prevent things like corners and squeezes. But they were never meant to focus on anyone who’s actually hedging. Prior proposals … didn’t get that right. And so we have really focused on American agriculture, [and] the energy sector, to make sure if you’re going to these markets and you’re actually hedging risk, you can do so … We have had countless proposals, countless drafts, four actual proposals that were put before the Commission. We had only one that was finalized, and unfortunately that was struck down by the courts. So here we are—that was one issue … but the bigger issue in my opinion, and the one that Congress is most concerned about, is that previous proposals did not include the right hedging exemptions.”

Chairman Tarbert on the Importance of Protecting Bona Fide Hedging for American Agriculture

“I was out in Kansas over the summer and I actually met with a farmer who said she uses the futures markets to hedge … The way it works is the farmer needs to hedge his or her exposure. Now sometimes they do that directly in the futures markets like the farmer I talked to. She does it directly. But more often than not, they’ll enter a forward agreement with their local grain elevator. The local grain elevator will enter into an agreement with a large agricultural company and that agricultural company will use the futures markets to hedge their exposure. So ultimately, that price stability goes all the way back down the chain to farmers and ranchers.”

Chairman Tarbert on the CFTC’s Upcoming Agenda

“We‘ve been working tremendously hard to get things done, to get them done in the right way. We’ve done cross border rule proposals, capital proposals. What’s next on the agenda are a couple of different things. First of all, swap data reporting ... We have hundreds and hundreds of fields that the U.S. requires. The CFTC requires different fields than the SEC. The Europeans require different fields from us. It’s a bit of a mess … The other thing we’re doing is that for 37 years—since 1983—we have not changed our regulations to update them for bankruptcy. So my concern is, look, things are going great now but every now and again we may have a futures commission merchant fail and that person has customer money and we want to make sure those customers are protected. So things like that, that people haven’t thought about for decades, I am putting on the agenda.”

Chairman Tarbert on Digital Assets

“I want the United States of America to lead in this. So I want to encourage innovation … [R]ight now, the two biggest types of digital assets, bitcoin and ether, actually fall within our jurisdiction. So we are doing a lot in the digital asset space. We are seeing exchanges starting to list. Certainly, we’ve seen bitcoin futures, both cash settled as well as physically delivered. My guess is we’ll see ether futures as well. As things start to migrate into the commodities space, we’ll see even more.”

-CFTC-