Mark Wetjen, commissioner at the Commodity Futures Trading Commission (CFTC) has joined industry leaders in voicing doubts the regulator can effectively fulfil its mandate given Government budget issues and staffing problems.
Speaking at an annual derivatives conferences run by the Futures Industry Association in Chicago on Thursday, Wetjen warned key Commission oversight duties were limited due to stretched resources and senior staff members resigning.
Labelling recent comments by CFTC chair Gary Gensler and outgoing Commission Bart Chilton that the Commission had not pursued key cases due to a lack of resources as "disconcerting", Wetjen said the government should increase the CFTC budget to fulfill it's company oversight requirements and retain key staff members.
"With the [staff] turnover you lose a core knowledge base on the part of the staff that market participants find very valuable," he said. " It ends up causing additional delays to providing the answers for the market place, which is not a good thing in light of the historical regulatory change to the swaps market."
The agency’s budget is currently $195 million, Gensler said in testimony in July. President Obama has sought to increase this to US$315 million for 2014, a demand Congress has not yet passed.
The Commission has long warned it lacks resources to oversee the US$650 trillion OTC derivatives market and implement post-crisis rules, such as those governing new swap execution facilities (SEFs).
Terrance Duffy, executive chairman of derivatives exchange operator CME Group, added that building a strong Commission was vital for an industry still seeking stability after the events of 2008.
"We're seeing too many businesses not invest in their business plans and not just exchanges, but brokerage firms and banks, with plans up in the air waiting to see the final rules," he said.
Although the CFTC is nearing the end of developing rules around Title VII of the Dodd-Frank Act, key implementation will continue such as SEFs' made available to trade, or MAT, rules that mandate SEF trading in instruments once offed by a SEF.
Speaking at the Washington Outlook panel session, Duffy added that political bargaining around the selection process for new Commissioners could further delay new rules.
Commissioner Chilton this week declared his intentions to step down, joining Gensler, who will depart at year's end, and leaving Wetjen - who has held the position since 2011 - with one other Commissioner and three vacant roles. The Senate is yet to confirm White House nominee J. Christopher Giancarlo as Commissioner and it is understood a shortlist has been draw for potential Gensler replacements.
"I don't quite know how it's going to play out," Wetjen said, agreeing with panelists recruiting and vetting new Commissioners would likely occur well into 2014.
Wetjen said senior staffers had also decided to leave the 680-strong regulator, which he in part attributed to October's Government shutdown that cut agency staff to just 25 for 16 days.
The four panelists agreed a repeat of the US government shutdown would not happen in February next year when Treasury repayments will again raise the debt ceiling issue. Panelists agreed Congress should find the necessary money to expand CFTC funding.
However, all called for greater harmony in Washington to avoid short-term thinking and called for the Republican Party to reduce input from its increasingly powerful Tea Party faction.