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Automated Trader interview with CFTC's O'Malia: transcript

First Published 31st October 2012

The CFTC's Scott O'Malia outlined his philosophy about regulating markets in general and high frequency trading in particular. Read the full transcript here.

Chicago - Scott O'Malia of the Commodity Futures Trading Commission, spoke with Automated Trader Editor Adam Cox about his philosophy as a regulator, his views about waging public campaigns and transparency and where he believes the focus should be in high frequency trading regulation.

Below is a transcript of the interview.

AC: Commissioner O'Malia, you've been one of the most, or more outspoken regulators, and at times you've actually criticised your own institution, or at least it's come across that way, in terms of its approaches. I'm wondering if you could talk a little bit about the dynamic at the CFTC. Do you feel it's a healthy, transparent debate? Do you feel you ever feel like you're fighting a losing battle? Talk a little bit about that.

SOM: It is a transparent system, and I do have a great amount of respect for all of my colleagues. And we do work cooperatively to try to resolve the issues in a successful fashion. That means a successful vote is a 5-0 vote - everybody has had their input and made some changes et cetera. So that's my goal, is to always contribute to the debate. And I have my staff, we share drafts, different concepts, different ideas, edits, changes to the proposed rules and final rules that we want to have advocated for. I do use, in my outspokenness if you will, the opportunity to articulate my position early and often, and it's not something that I'm worried about. You know, I try to give a sound reasoning and the justification for why I believe what I believe and advocate for. So I use the opportunity to speak publicly, to talk about and to raise awareness of the issues, and if I can sway the debate, all the better. It is a useful, transparent process. It's not perfect, I'm not winning every vote, we are not getting 5-0 votes. And it's reflected in the rules. I have serious concerns about some of our rule-making process because we have gone so quickly. We've put forward over 50 rules in draft form and we've finalised over 30 of them. That's an immense amount of work, and the ability of the industry to digest it and the market participants to understand what their obligations are going forward under the new regulations is a massive responsibility. In fact, it's a massive responsibility for the Commission itself. Our ability to oversee these markets in a credible fashion requires us to be as clear as possible with the market. They benefit (from) the clarity and specificity by having good compliance and straight-forward objectives to meet the market. We'll benefit by getting good data and clearing and having them abide by the rules. So, I think we have gone too quickly. In fact, an interesting anecdote the other day: the chairman was speaking at a conference and had to clarify one of our rule-makings … to comply with the clearing mandate. And he said, 'I know what I voted for, even if that's not what the rule said'. So even the chairman occasionally doesn't even know what's in his own rules - partly because we've moved so quickly. It's a massive amount of workload for any one person, let alone the Commission, to get through.

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