(As prepared for delivery at the FIA Forum: Commodities 2022)

Thank you all for the opportunity to talk with you today.  I am very excited to be here at the FIA Forum: Commodities 2022.  It is a real honor to speak as part of this forum, and even more so as the keynote for today’s lunch.  

I need to give my standard disclaimer that the views I share today are my own and do not reflect the views of the Commission or my fellow commissioners.  I will go ahead and add another disclaimer: this is my first keynote address.  Maybe that is more of a warning than a disclaimer.  But, with that in mind, if you would like to offer feedback at the end of this speech in lieu of asking me detailed, technical questions, I will have no issues with that approach.  

Even constructive criticism is welcome.  I have four children and the oldest two are teenage girls, so there is a lot of feedback shared in our house and it is almost always criticism – and rarely constructive.

Before I begin, I want to take a moment to say thank you to my rockstar team – my senior counsels, Terry Arbit and Libby Mastrogiacomo, and my chief of staff, Chris Lucas.  By the way, Chris is right up front here if you have any suggestions or complaints to share.  

My team suggested that I come up with a title for my inaugural speech: something clever that accurately sums up all my thoughts in a catchy phrase.  After some deep thought, and a deeper Google search, I happened upon a song written and performed by Ernest Tubb in 1946 called “There’s a Little Bit of Everything in Texas.”[1]

Well, there is a little bit of everything in this speech…and we are in Texas…

Along those lines, I will start with…

A little bit about me…

For those of you who do not know me, I am Summer Mersinger and I am one of four new Commissioners at the Commodity Futures Trading Commission (“CFTC” or “Commission”).  I was nominated at the beginning of the year, confirmed by the Senate and sworn in just in April.  

I started my career working on Capitol Hill, and prior to becoming a commissioner, I spent a few years working at the CFTC: first, as the director of legislative and intergovernmental affairs under former Chairman Heath Tarbert, and more recently as chief of staff to former Commissioner Dawn Stump.  

The position is new to me, but the agency is not.  Spending two years getting to know the agency and the staff has prepared me for this job, and I feel incredibly fortunate to have this opportunity.

That covers the more recent entries on my resume, but it does not provide a very full picture of the experience I bring to the job.  I am a farm girl, born and raised in central South Dakota where my dad still grows wheat, sunflowers, corn, and soybeans.  

My great-grandparents immigrated to South Dakota from Eastern Europe in the late 1800s and my dad’s childhood home, which my grandfather built with his own hands, still stands amidst the fields of wheat and corn growing on the virgin soil my ancestors first plowed.  Each of my parents was one of seven children, and they had to make their own way in life with a lot of hard work.  They scrimped and saved every penny to eventually build up our own farm operation that now stands at 5600 acres of land.  

In fact, in my younger years, we lived on a cattle ranch near the Missouri River where my dad worked as a ranch-hand as he slowly acquired farmland.  In an interesting turn of events, that cattle ranch is now a world-class, exclusive golf and hunting resort where my brother works as a hunting guide and my dad does some custom farming, planting cover crops for pheasants, which are the main attraction for the resort guests in the fall and winter.  When I go home, I can revisit the pasture my 4-H show calves grazed and play a few holes of golf, literally at the same time.

I share with you all of this background to highlight why I am so invested in the work we do at the CFTC.  We all know that our commodity futures markets were formed to help producers and end-users of agricultural commodities discover the price for these commodities and to manage the risks that are inherent in producing, selling, buying, and consuming these commodities.[2]  I know firsthand about these risks because I lived them.  

That mostly covers my background.  So now, again keeping with my theme, I will turn to…

A little bit about my interests…

I often get asked about my agenda as a new commissioner and, honestly, I have struggled to answer that question.  I think the reason answering that question seems difficult to me is because I do not have an agenda that is distinct from the mission of the CFTC.  

I want to help promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound oversight.[3]  And while I cannot predict what will happen next in our markets, what I can tell you is that I will prioritize my efforts on making sure the CFTC remains focused on ensuring that these derivatives markets continue to serve their intended price discovery and risk management functions for physical commodities in our agriculture and energy sectors.

The derivatives markets have grown exponentially since their inception, including the expansion of derivatives trading into numerous new asset classes, the development of important new financial products such as swaps, and the introduction of new contracts focusing on emerging market trends such as “ESG” criteria[4] and – everyone’s favorite – cryptocurrency.  But this evolution and growth does not negate the need for these markets to continue to work for those in the agriculture and energy sectors of our economy.  

The record prices for a barrel of crude oil, as well as soaring natural gas and food prices, we are seeing today demonstrate just how important derivatives contracts are in times of increasingly volatile physical commodity markets.  The derivatives markets impact business bottom lines and individuals’ pocketbooks across the economy.

Recently, I became the sponsor of the CFTC’s Energy and Environmental Markets Advisory Committee (“EEMAC”).  During this time of intense geopolitical turbulence and volatility, I see this advisory committee as critical to the work we are doing at the CFTC.  

As part of my work on this committee, I want to hear from the real experts in industry and the broader public regarding how the CFTC can best promote price discovery and risk management.  Regulators cannot operate in a vacuum, and consulting with those who are experienced and knowledgeable about these markets is vital to our ability to do our job and understand how the CFTC’s policies, rulemakings, and oversight impact these markets.  

But as a new commissioner, I am quickly learning that sometimes the agenda is set by matters currently before or on the horizon for Commission consideration, so I guess this is the point where I talk about…

A little bit of everything…

Let’s start with the increased interest, and certain emerging trends, in providing retail access in our cleared derivatives markets.  Some of you – especially any of you that may have seen our recent staff roundtable on this topic[5] – may be thinking, “This is where she starts talking about crypto.”

But I am not talking just about crypto.  New technology and new registrants are increasingly focused on offering retail traders access to our cleared derivatives markets through new business models that can apply equally to crypto and non-crypto derivatives.  

In some cases, there is a desire to offer retail access outside of the traditional model of placing futures orders through intermediaries such as futures commission merchants (“FCMs”), which has been used in derivatives trading for decades.  Currently, non-intermediated retail access to our markets is primarily limited to fully collateralized products, but there is now a desire to offer retail traders non-intermediated access to margined products, too.  This is something we must grapple with as an agency.

I appreciate innovation, and I welcome new technology that leads to innovation.  I also understand that just because the old way of doing things is working, that does not mean there cannot be a new and improved way that we should embrace.  Indeed, the purpose of the CEA as stated by Congress includes “promot[ing] responsible innovation,”[6] and historically, the U.S. derivatives markets under the CFTC’s oversight have been some of the most innovative markets in the world.  

All other things being equal, the success or failure of a particular innovation should be determined by the marketplace, not the regulator.  And it is the role of the CFTC as regulator to evaluate whether all other things are equal – that is, whether a proposed innovation poses an undue risk of disruption or other harm to the markets and those who participate in them.  There can be times when these risks are too high to experiment with substantial changes to a system that is working well.

The simple fact is that the CEA, and the CFTC’s implementing regulations, were written at a time when all futures trading was done through intermediaries such as FCMs.  We should, therefore, have a fulsome discussion around whether or not changes can or should be made to our rules in order to accommodate new and previously unforeseen business models in our space made possible by technology.

An important part of that discussion must focus on protecting our legacy agriculture and energy derivatives markets, which must continue to function as effective price discovery and hedging tools for commercial enterprises in our economy.  

I also would like to discuss the recent actions by federal regulatory agencies, including the CFTC, with the stated goal of addressing financial risk related to climate change.  

I do not want anyone to be confused or assume I am oblivious to the financial risks of extreme weather.  As I mentioned in discussing my background, I have lived these risks.  My family’s livelihood was often threatened by severe storms, drought, and other weather-related conditions.  The financial risk was real and often a harsh reality of operating a farm.  So, let’s just set aside any of those thoughts that maybe I am not committed to the environment or mitigating climate-related financial risks.  

I am concerned, however, that we are seeing significant mission-creep across the federal financial regulatory agencies in the name of addressing climate change.  Just this month, the CFTC released a Request for Information on climate-related financial risk[7] where, as I detailed in a separate statement,[8] the agency is seeking information on questions far outside of our jurisdiction.  

I did concur in the vote to allow these questions to be published in the Federal Register, but only because I support efforts to engage the public in our work.  That being said, I question what we plan to do with much of the information we are requesting because we do not have the statutory authority under the CEA to promulgate rules on many of these topics.  

I also am disappointed that these questions seem to exclude agriculture from the discussion.  This is particularly unfortunate since our agency’s roots and history are embedded in the agriculture community, which has been using legacy agriculture futures contracts to hedge climate risk since the inception of the futures markets decades ago.  Any discussion of the financial risks deriving from extreme weather and climate must include America’s farmers and ranchers, who are at the whim of the weather in their mission to feed and clothe the world.

And if you don’t mind, I would like to share…

Just a little bit more…

Ending on a positive note, I want to share with you that the CFTC is again at full force with five commissioners and a confirmed chairman.  My fellow commissioners all bring unique backgrounds and expertise to their role, which will be a real benefit to the agency as well as the derivatives markets.  

The Commission has historically worked in a bipartisan manner, focusing on progress vs. politics, and I hope to see that tradition continue.  I do not know what all we will address or accomplish over the next few years, but I can tell you that my colleagues are all wonderful people who value integrity above all else in fulfilling the mission of the CFTC.  

Thank you all so much for your time and attention, and thanks to FIA for allowing me this opportunity to address all of you today.  

[1] Ernest Tubb, “There’s a Little Bit of Everything in Texas” (Unichappell Music Inc. 1946).

[2] Congress recognized this as well when it enacted the Commodity Exchange Act (“CEA”), which is the CFTC’s governing statute.  In the CEA, Congress found that commodity derivatives transactions “are affected with a national public interest by providing a means for managing and assuming price risks, discovering prices, or disseminating pricing information through trading in liquid, fair and financially secure trading facilities.”  CEA Section 3(a); 7 U.S.C. § 5(a).

[3] As stated by Congress, the purpose of the CEA, and the CFTC, is to serve the public interests in the use of derivatives transactions to manage and assume price risks, discover prices, and disseminate pricing information “through a system of effective self-regulation of trading facilities, clearing systems, market participants and market professionals under the oversight of the Commission.”  CEA Section 3(b); 7 U.S.C. § 5(b).

[4] See Environmental, Social, and Governance (ESG) Criteria, Investopedia, available at Environmental, Social, and Governance (ESG) Criteria (investopedia.com) (last visited June 22, 2022).

[5] See CFTC Announces Staff Roundtable Discussion on Non-Intermediation (May 25, 2022), available at https://www.cftc.gov/PressRoom/Events/opaeventstaffroundtable052522, for agenda, participant list, and archived webcast for this roundtable. 

[6] CEA Section 3(b), 7 U.S.C. §5(b).

[7] Request for Information on Climate-Related Financial Risk, 87 Fed. Reg. 34856 (June 8, 2022).

[8] Concurring Statement of Commissioner Summer K. Mersinger Regarding Request for Information on Climate-Related Financial Risk, 87 Fed. Reg. at 34861.