Opening Statement of Commissioner Sharon Y. Bowen before the CFTC’s Energy and Environmental Markets Advisory Committee

February 25, 2016

Thank you and good morning. It’s good to be here for another meeting of the Energy and Environmental Markets Advisory Committee. This meeting is particularly timely given the multiplicity of challenges that energy end-users face today, including volatile fuel prices, global pressures and the reduced capacity of their traditional counterparties – the banks – to enter into transactions because of their own capital pressures. Thus, as a general matter, I am very interested in hearing from our market participants about how they are coping in the current environment.

The specific topics of today’s discussion are also very important. I look forward to feedback from this Committee about the proposed Southwest Power Pool (SPP) Order. Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) play a crucial role in providing a reliable power grid for our nation. Thus, a 4(c) exemption for SPP, an RTO, as we have extended for other RTOs and ISOs for specified transaction types, makes sense. I am interested in hearing about market participants’ issues or concerns about the different aspects of this relief, including permitting private rights of action.

I am also looking forward to the discussion about the preliminary study on the de minimis exception to the swap dealer definition. After the 2008 crisis, it became clear that we needed robust, specialized regulation of firms that acted as “swap dealers,” so that no one could be a massive player in the swaps market without being subject to appropriate oversight. At the same time, we did not want to cast the net so wide that the swap dealer definition encompassed small market players, who continue to play an essential role in critical markets, but pose little systemic risk. Thus was born the de minimis threshold: firms that engaged in swap dealing under a certain threshold would not be subject to swap dealer regulation.

We set that threshold at $3 billion, with an $8 billion phase-in that would terminate at the end of 2017. Now that we have had half of a decade of post-crisis swap activity and reporting, it is time to assess whether there is any data-based rationale for deviating from the path laid out in the rules, namely ending the phase-in in 2017, and then dropping to the $ 3 billion threshold. I will be following this discussion closely to discern if there is strong evidence that such a rationale exists. Given our past actions though, I believe we should be hesitant to change course unless, as the rulemaking noted, “subsequent developments in the markets or the evaluation of new data”¹ provide clear, overwhelming evidence that the $3 billion threshold is a mistake.

I would also like to renew my call to finalize the position limits rule. We have discussed the same issues in multiple forums and for far too long, while end-users wait for clarity and certainty. It is time to make a decision on outstanding issues like aggregation and delegation, finalize this rule and close the book on this chapter of the position limits saga.

Thank you again to the Committee and the sponsorship of Commissioner Giancarlo for providing this opportunity to hear from you.

¹ See Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Contract Participant”, 77 Fed. Reg. 30634 (May 23, 2012).

Last Updated: February 24, 2016