Energy Working Group Discusses CMC-EWG Collaboration on Policy Call

Yesterday, on CMC’s member-only policy call, the Energy Working Group (as represented by the law firm of Hunton & Williams) discussed their past and future collaboration with CMC on various policy and regulatory issues pertaining to Title VII. They briefed CMC members on how CMC and the Working Group have worked closely and productively together in a mutually beneficial manner on topics such as product and entity definitions, bona-fide hedging, position limits, aggregation, effective dates for swap regulation and many others.

CMC and the Working Group look forward to further collaboration on derivatives regulatory topics of mutual interest. This is a partnership that has been noticed and recognized by the CFTC as being effective because it broadly represents commodity interests across the energy and agricultural realms.

Dates To Note

In case you are keeping track, here are the available terms for each Commissioner.  Discuss.

Gary Gensler

Joined the Commission: 5/26/09

Term Available: 4/13/12

 

Bart Chilton

Joined the Commission: 8/8/07

Term Available: 4/13/13

 

Jill Sommers

Joined the Commission: 8/8/07

Term Available: 4/13/14

 

Scott O’Malia

Joined the Commission: 10/16/09

Term Available: 4/15/15

 

Mark Wetjen

Joined the Commission: 10/25/11

Term Available: 6/19/16

Things to Remember This Week

  1. If you have Christmas shopping to finish, you’ve got five days.  Good luck!
  2. If you haven’t yet registered for State of the Industry 2012, it’s not too lateClick here.
  3. If you’ve registered for SOTI but haven’t yet made your hotel reservation, hurry!  The deadline is 10 days awayClick here.
  4. No matter the weather where you are today, Palm Beach is a balmy 77 degrees Fahrenheit.  See you there!

Hunton-Williams to Participate in CMC’s Policy Call Today

Learn more about The Hunton & Williams Team that will be participating on today’s policy call.

Many thanks to Michael Sweeney

Dave McIndoe

Alex Holtan

CMC Meets with House Leadership Staff

As part of the Coalition for Derivatives End Users, CMC met with House Republican Leadership staff earlier today to discuss legislative strategy behind policy initiatives that we support on margin and inter-affiliate transactions. It was a productive discussion about the intricacies of congressional floor strategy and coalition building on the aforementioned topics on both sides of the aisle.

CMC Hosts John Lothian on Policy Call

Famed futures trader, industry consultant and newsletter publisher John Lothian spoke with CMC members on the policy call yesterday. Always forthright, knowledgeable and opinionated, John sparked a constructive and wide-ranging discussion on potential regulatory reforms stemming from the MF Global fiasco.

CMC Recap of House Ag Hearing on MF Global

Last week, CMC participated in the House Agriculture Committee hearing on the bankruptcy of MF Global.  It was an important opportunity that positioned the Council as a thought leader on the issue.  We were one of only two witnesses that spoke about the bankruptcy from a market participant perspective.  The hearing garnered significant media attention as it was the first public appearance of former MF Global CEO Jon Corzine since the bankruptcy of the firm.

Highlights

  • CMC testified at the first Congressional hearing on the MF Global bankruptcy
  • The Trustee currently estimates the customer shortfall to be $1.2 billion
  • Investigations into missing customer segregated funds continue and include CFTC (civil penalties) and the US Attorney’s office (criminal penalties)
  • If in a legal proceeding the CFTC successfully collects restitution from MF Global, it would be distributed to customers.
  • Corzine testified for the first time and will subsequently testify in two more hearings this month (12/13 and 12/15)
  • Congress understands the magnitude of this situation and will explore policy options.  While nothing appears to be imminent, bills have already been introduced and Ranking Member Peterson may introduce a bill requiring third party segregation of customer funds.

The hearing stretched well over 8 hours and started with three hours of tough questioning for CFTC Commissioner Jill Sommers and Mr. James Kobak (lead counsel for the Trustee).

Mr. Kobak estimates the potential shortfall of customer funds at $1.2 billion.  He also indicated that customers would have priority in any asset distribution and the Trustee will pursue any legal theory to “claw back” customer money.  He also explained that today the trustee is asking the bankruptcy court to allow distribution of an additional $2 billion.  If the distribution is granted, it would bring everyone up to 69-70% and customers should have their money in 2-4 weeks.

When Mr. Corzine came forward in the afternoon he proved to be contrarian.  He apologized and took questions.  However, the critical questions – what did he know and when – remain unanswered.

CMC joined several other witnesses on the third panel.  Gerry Corcoran, our witness, gave an abbreviated statement and fielded questions.  Rep. Conaway spoke directly to Mr. Corcoran and asked if it was possible for the market to fix itself after all the dust settled.  Mr. Corcoran suggested that customers are already looking more closely at their FCMs and greater transparency may help customers choose the right FCM.

House Ag Committee Chairman Lucas (R-OK) refrained from advocating for any particular policy change and focused on fact-finding.  Ranking Member Collin Peterson (D-MN), however, took a different approach.  He appears to be giving deep consideration to two options:

  1. The capital requirements of a combined FCM/BD; and
  2. Third party holder of segregated funds or full physical segregation.

Peterson made clear he opposed any proposal for a SIPC-like insurance fund.

Witnesses

Panel I

Panel II

Panel III