CFTC's O'Malia warns timetable could cause 'unforeseen perils'
First Published 10th May 2012
The CFTC's O'Malia welcomes the regulator's move to give itself breathing space, but he expresses concern it still could be rushing things and that this could lead to 'unforeseen perils.'
Scott O'Malia, Commissioner, CFTC
"I am pleased that the Commission is delaying its consideration of the series of rules, guidance and acceptable practices."
Washington - Scott O'Malia, one of five commissioners at the U.S. Commodity Futures Trading Commission, warned of "unforeseen perils" if the regulator moved too quickly in trying to meet an end-2012 deadline on rule-making.
O'Malia said he was happy to see that the regulator was delaying its consideration of the so-called revised Core Principle 9 so that it could weigh alternatives and investigate costs and benefits.
O'Malia also announced that a temporary exemption relief order, made regarding various regulatory requirments under Title VII of the Dodd-Frank Act, would be extended through to the end of the year.
Nonetheless, the Republican commissioner, who has expressed concern in the past about possible over-regulation of the markets, said he was still worried about the commission being forced to rush some of its decision-making.
O'Malia said the Commission's "accelerated rulemaking schedule will likely result in many unforeseen perils."
He said many of the problems arising out of the Commission's final rulemaking for large trader reporting for physical commodity swaps led to temporary and conditional relief. "These actions were intended to act as a Band-Aid fixing what the Commission could have addressed in the final rulemaking if it were not rushed."
O'Malia made the comments in an opening statement as the Commission held an open meeting to consider one final rule on Core Principles and requirements for Designated Contract Markets.
"While I support the protection of price discovery of trading on centralised markets, I am pleased that the Commission is delaying its consideration of the series of rules, guidance and acceptable practices under the revised Core Principle 9 to take place alongside the Commission's swap execution facility core principles final rulemaking," the commissioner said.
He said the extra time will allow the Commission to consider alternatives to a proposed 85-percent requirement that has led to complaints from some parts of the market.
"Under the proposed 85-percent requirement, a DCM would be forced to delist any futures or swap contract that failed to maintain a total trading volume of 85 percent on the DCM's centralised market based on the prior 12-month period," O'Malia said. "Unsurprisingly, the 85-percent centralised market trading requirement was wildly unpopular and controversial both inside and outside of the Commission."