By JIM RUTLEDGE
WASHINGTON, D.C. — Republican senators are pushing back on the Trump administration’s 2019 budget proposal to tack on user fees in the futures industry to fund the Commodity Futures Trading Commission (CFTC), the nation’s top derivatives regulator.
The pushback was apparent recently in a Senate oversight hearing on the CFTC’s budget after Chair Christopher Giancarlo sought a 12 percent to increase the agency’s funding by $31.5 million, the first appropriations increase over the past four years. The regulator’s annual budget has remained flat at $250 million.
The 700-employee CFTC currently lacks the authority to collect fees, unlike more powerful market regulator Securities and Exchange Commission, and changes to user fees would require Congress to adopt new rules.
“My position is the agency needs $281.5 million, and Congress will decide where that money comes from,” Giancarlo told reporters after the hearing.
“User fees are a tax on farmers and ranchers” who depend on the CFTC to make sure their risk management strategy is protected, said Sen. Pat Roberts (R-Kan.), chair of the Senate Agriculture Commission. “I’m not happy with that.”
Committee member Sen. John Boozman (R-Ark.) said he too “was very much opposed to user fees.”
Ranking Committee Member Debbie Stabenow (D-Mich.) joined in opposing the fees, saying, “We must continue to advocate for the CFTC to have resources – so you can truly do your job,” she told reporters, referring to the regulator’s role in policing fraud in the trading of futures contracts.
“As the Chairman has long maintained, a budget of $281.5 million will allow the Commission to effectively accomplish its mission, by providing increased resources for economic analysis, examinations of clearinghouses, cybersecurity, fintech (financial tech) and enforcement,” said CFTC spokeswoman Erica Richardson.
If the fees were approved, they would be assessed on derivatives users for activities such as product registration and reimbursing regulators for examinations and supervision.
The United States’ largest futures exchange, which is overseen by CME Group, said it has long opposed CFTC user fees. CME Chair Terry Duffy told a Senate hearing a few years ago that user fees are “not a smart thing to do.” (CME did not respond to further inquiries from Farm World for this article.)
Most consumers don’t directly participate in agricultural derivatives and swaps markets. Farmers, ranchers, producers, food processors and other businesses in the ag supply chain use futures, options and swaps to manage costs and limit risk by locking in prices for future delivery or purchase.
In an emergency, the CFTC can order an exchange to take specific action or to restore orderliness in any futures contract being traded.