Opening Statement of Commissioner Bowen, Open Meeting of the Commodity Futures Trading Commission

September 17, 2014

Thank you, Chairman Massad.

Before we proceed to the rules before the Commission today, I want to thank Chairman Massad and Commissioner Wetjen for their assistance during my first weeks here at the Commission. You have both been extremely helpful during my transition.  I would also like to acknowledge Commissioner Giancarlo, who joined at nearly the same time as I did, and has been very supportive as we each moved into our new roles.  I have sincerely enjoyed working with each of you, and I am very optimistic about how we as a Commission will be able to move forward on the many issues before us.

And indeed there are a wide variety of issues.  Over these last three months, I have been meeting with the staff from all of the Divisions and Offices.  I am very impressed by their expertise, professionalism and commitment.  They are handling a broad range of activities and responsibilities, with very limited resources.  I want to express my appreciation of their efforts.

The broad range of issues we are working on is exemplified by the two rules before us today.  First, the proposed margin rules would affect swap dealers, MSPs and the largest financial end users of swaps.  Second, the adjustment to the de minimis rule will affect municipal electric and natural gas utilities – a few large and many small – when they are in the market to hedge their commodity risks.  From the largest financial conglomerate to a municipal utility serving a small locality, the range of market participants before us is as broad as it could be.

Although these two rules affect different types of companies, they both serve, in different ways, the same purpose of maintaining our well-functioning, stable markets.  As we continue on this path, we must be mindful of our need to coordinate with our fellow domestic and international regulators.  In fact, our consideration of today’s re-proposed rule on margin for uncleared swaps is a result of a domestic and international cooperative effort to reduce global systemic risk.  It focuses particularly on the risks arising at the largest global financial institutions from the use of uncleared swaps.

There is a place for uncleared, bespoke swaps, but we don’t want the risk from those swaps to accumulate unchecked.  Collection of margin helps manage and attenuate risk.  Our goal is to reduce systemic leverage and discourage the excessive growth of risky, uncleared derivatives positions.  I’m interested to hear from commenters whether the proposed rules will achieve our goal.

As for the de minimis rule, I understand that, in many areas, electricity and natural gas service is provided to consumers and businesses by municipal utilities, also known as special entities under Dodd Frank. Provision of electricity and natural gas is different from other services provided by local governments, in that it involves providing a continuous supply of gas and electricity to homes and businesses around the clock.  The electricity and natural gas markets are particularly complex, in part because there are interlocking swap arrangements between the various participants and demand and supply fluctuates in real time.

So this is a crucial corner of the special entity world where I think it makes sense to take a different approach, and depart from the $25 million threshold in the rule that applies to other special entities.

Last, I’d like to just take a moment to acknowledge the point we have reached today.  This is the first meeting of the CFTC where all of the Commissioners have arrived after passage of the Dodd Frank Act.  We have a responsibility to preserve and continue the good work done by our predecessors.  Although I understand that tweaks may need to be made, and details added, I wouldn’t want to give up the market improvements that have already resulted from the new rules.

As a Commissioner, my door will always be open to hear the viewpoints of the many stakeholders who are affected by our rule making.  As I stated during my confirmation hearing, I feel a special obligation to be the voice of those who have not had a seat at the table, as do I.  I saw the devastating effects from our financial crisis and the burdens placed on many individuals who lost their jobs, life savings, retirement funds and homes.

My vision is to get it right.  As we build upon the incredible progress the Commission has achieved to date, I look forward to improving upon our well-functioning markets in a way that’s transparent and fair without barriers and undue burdens.

Thank you, and I look forward to hearing the staff’s presentations.

Last Updated: November 6, 2014