SEC and CFTC Merger?

2 06 2009

The New York Times published an article this morning which had a large part devoted to a possible merger of two agencies charged with monitoring securities, the Securities Exchange Commission, and the Commodity Futures Trade Commission.  Both bodies have faced accusations of weak oversite over their prospective areas.   Many reform minded people feel that this would be a good way of changing business in Washington, by consolidating two government agencies which do similar jobs.  The article does touch on amajor roadblock, turf.  One source of this is in congress itself. With oversight commities looking over both agencies, members of congress would be hard pressed to give up their territory.  Another turf battle would be largely territorial.  With most of the Securities Trading occuring in New York, and the Commodities Trading taking place in Chicago, some would fear that the smaller commodities trading institutions will be swallowed by the larger securities institutions (I am a bit partial to this concern as a native Chicagoan).  With that there is a fear that regarding oversite, the commodities division would be largely ignored.  Here is the article from the New York Times:

A merger of two other federal agencies — the S.E.C. and the Commodity Futures Trading Commission — would face fierce political resistance. In recent years, both agencies have been accused of weak oversight. But the industries regulated by the agencies have traditionally opposed a merger, and the Congressional committees with jurisdiction over each agency historically have been reluctant to cede any authority….

A central goal of the plan is to more tightly control companies that are now largely unregulated but could pose risks to the financial system if they failed, such as hedge funds. Under the proposal, hedge funds would be required to register with the S.E.C. and provide access to their books. Many hedge funds already do so….

As part of its overhaul, the Obama administration announced three weeks ago that it would seek new authority over the complex financial instruments known as derivatives, which were a major cause of the financial crisis and have gone largely unregulated for decades. While some in Congress are pushing for tougher oversight, the financial industry is lobbying hard against it, arguing that too much regulation would thwart financial innovation. On Thursday, Gary Gensler, the new chairman of the C.F.T.C., is expected to provide more details about that proposal at a Senate Agriculture Committee hearing.

For years, the debate over how to regulate such instruments has been mired in disagreement between the C.F.T.C. and the S.E.C., reflecting the rivalries between markets in Chicago and New York. But officials said this week that Mr. Gensler and Mary L. Schapiro, his counterpart at the S.E.C., had reached an informal understanding that would enable their respective agencies to share authority over the derivatives market.

The understanding, which the regulators hope Congress will ultimately ratify, would essentially give the S.E.C. authority over derivatives that are related to publicly traded securities and other instruments under the S.E.C.’s jurisdiction, such as credit-default swaps, while the C.F.T.C. would oversee commodities-based derivatives, the officials said.




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