CTFC's Gensler Trying to Put on the Big Bad Regulator Face

Thursday, March 11, 2010 , , , , 0 Comments

Yeah ok, just months ago Gensler was giving Goldman Sachs the old wink and rub while putting the smackdown on Deutsche Bank for no apparent reason but now make no bones about it, he's sick of all of their shit. Sure, I totally buy that!


U.S. Commodity Futures Trading Commission Chairman Gary Gensler took another swipe at Wall Street Thursday, saying financial firms' objections to over-the-counter derivatives regulations could leave a large portion of the market in the dark.

"Let there be no mistake: Wall Street has not been enthusiastic about this reform," Mr. Gensler planned to tell a room full of derivatives industry experts at the Futures Industry Association's annual conference. "They would prefer transparency only be brought to the regulators or at most that regulators just publish aggregate trading data rather than real-time trade information," he said.

Mr. Gensler has been among the most vocal Washington regulators in his push to bring more transparency to the over-the-counter market. His plan, which is largely aligned with the Obama administration's views, calls for mandating that all routine derivatives be traded on regulated platforms and routed through clearinghouses, which guarantee trades.

Derivative dealers such as Goldman Sachs Group Inc. or Morgan Stanley, meanwhile, would also be subject to strict capital and margin requirements as well as reporting and record-keeping rules and new business conduct standards.

Are we talking about the same chief of the Commodity Futures Trading Commission who used to work for Goldman Sachs? Just want to make sure before I start foaming at the mouth and attacking the guy. Quick refresher (from my August 20 2009 CFTC Chair to Deutsche Bank: Goldman's Cojones are Larger than Yours):

Huh? Did anyone else see what they did there?

From the CFTC:

Release: 5695-09

For Release: August 19, 2009

CFTC Withdraws Two No-Action Letters Granting Relief from Federal Speculative Position Limits on Soybeans, Corn and Wheat Contracts

Washington, DC – The U.S. Commodity Futures Trading Commission today announced that it is withdrawing two no-action letters that provided relief from federal agricultural speculative positions limits set forth in CFTC regulations (17 C.F.R §150.2).

“I believe that position limits should be consistently applied and vigorously enforced,” CFTC Chairman Gary Gensler said. “Position limits promote market integrity by guarding against concentrated positions.”

In CFTC Letter 06-09 (May 5, 2006), the agency’s Division of Market Oversight (DMO) granted no-action relief to DB Commodity Services LLC, a commodity pool operator (CPO) and commodity trading advisor (CTA), permitting the DB Commodity Index Tracking Master Fund to take positions in corn and wheat futures that exceed federal speculative position limits set forth in CFTC Regulation 150.2. Subsequently, in CFTC Letter 06-19 (September 6, 2006), DMO granted similar no-action relief to a CPO/CTA employing a proprietary commodity investment strategy that includes positions in Chicago Board of Trade corn, soybeans and wheat futures contracts. Among other things, DMO’s no-action position in both cases stated that any change in circumstances or conditions could result in a different conclusion. DMO has previously stated that the trading strategies employed by these entities would not qualify for a bona fide hedge exemption under the Commission’s regulations.

DMO will work with each of these entities as they transition to positions within current federal speculative limits. The withdrawal of these no-action positions is very specific and limited and does not affect any other no-action or regulatory positions taken by the CFTC or its staff with regard to these entities or other market participants.

Or in other words:

The U.S. Commodity Futures Trading Commission Thursday announced that it is withdrawing two no-action letters that provided relief from federal agricultural speculative positions limits set forth in CFTC regulations (17 C.F.R §150.2). The PowerShares DB Commodity Index Tracking Fund (DBC: 22.77 -0.19 -0.83%) and the PowerShares DB Agriculture Fund (DBA: 24.99 -0.40 -1.58%), will no longer be exempt from U.S. position limits in soybeans, wheat and corn, forcing a shift in their holdings to comply with federal trading restrictions.

Bloomberg reports, “The CFTC move will curtail the commodity holdings of PowerShares DB Commodity Index Tracking Fund, the largest broad- based commodity index fund in the U.S., and PowerShares DB Agriculture Fund, the largest agricultural exchange-traded fund. Both track Deutsche Bank indexes. The Deutsche Bank funds will have to comply with caps designed to keep a single investor from gaining too much control of the market, the Commodity Futures Trading Commission said today. The agency has been tightening restrictions on commodity speculation amid concerns it’s pushing up prices and increasing risks.”

The ex-Goldman head of the CFTC has not removed GS' exemption, has he? Maybe I missed that part. Maybe everyone else saw what they did there too. I only know this makes me want some bacon.

I really believe an ex-Goldman rat would suddenly get tough on the big boys. Really. Maybe it is Gensler's experience behind the scenes that makes him so adamant about bringing much-needed transparency to the swaps market but uh, what else does his experience behind the scenes make him do? Just curious.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.