CFTC Commissioner Sharon Y. Bowen reviewed the current status of market regulation initiatives on Regulation Automated Trading ("Regulation AT"), cybersecurity, governance and position limits.

In remarks delivered at the Futures Industry Association, BOCA 2017 International Futures Industry 42nd Annual Conference, Commissioner Bowen emphasized that the Regulation AT proposal would require (i) only those firms that use Direct Electronic Access to register if they also "have an average of 20,000 or more trades each day over a six-month period," and (ii) all electronic trading to have "two separate layers of pre-trade risk controls." She called on the CFTC to finalize Regulation AT "later this year."

Commissioner Bowen expressed disappointment that the CFTC has yet to complete a corporate governance rulemaking pursuant to Dodd-Frank Act requirements. Nevertheless, she stated, she felt "optimistic that strong governance regulation [could] be completed in the next year or two" because it "is not a partisan topic." Lastly, Commissioner Bowen affirmed that she remains "steadfast" in her belief that the CFTC "needs this rule," and encouraged regulators and industry participants to "reach a compromise."

Commentary

Seeing the world through a regulatory prism often leads to a false sense of consensus regarding the need for a regulatory solution. For example, in declaring that "governance is not a partisan topic – regardless of your views," and in endorsing "rigorous governance rules," Commissioner Bowen seems to imply that there is a consensus for adopting what two scholars characterize as "[t]he usual prescription . . . of some form of public control." Frank H. Easterbrook and Daniel R. Fischel, "The Corporate Contract," 89 Columbia Law Review 1416 (1989). But, as Easterbrook and Fischel illustrate, there are important differences among legal and economic scholars on what constitutes optimal corporate control and what form it should take. Indeed, their view that the interests of corporate managers can be aligned with those of investors through contractual and market devices – devices that they argue "are useless when those in control are 'disinterested,'" as reform advocates often aspire to – is directly at odds with the proposed scheme that Commissioner Bowen supports.

Likewise, whether there is "a clear need" for new regulatory requirements to deal with automated trading and excessive speculation, as Commissioner Bowen claims, is something that needs to be demonstrated beyond assertion, especially in light of the development of industry best practices in the case of the former, and the depressed prices of energy commodities in the case of the latter.

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