The Commodity Futures Trading Commission (CFTC) has embarked on a radical restructuring of the over-the-counter (OTC) derivatives market, at a pace that hardly allows us to even consider the impact of our new rules. We owe it to the markets we regulate, and to the American people who rely on them, to slow down and develop a carefully considered plan to carry out our mission. I believe we should not vote on any more final rules until the commission settles on an implementation strategy and a timeline that are realistic.
Our tight schedule, dictated by the 2010 Dodd-Frank Act, does not allow market participants enough time to fully evaluate the impact of the new rules and submit meaningful comments. Since just August of last year, the CFTC has published over 40 rule proposals, totaling around 975 Federal Register pages, and plans to release the entirety of its Dodd-Frank rule proposals by March. Based on a 30- to 60-day comment period for each proposed rule, the comment periods run consecutively would take over 2,514 days, or just under seven years. However, the commission is faced with the unrealistic statutory deadline of completing the rule-making process within 360 days from the date President Obama signed the law on July 21, 2010. Moreover, the frenetic pace of rule-making has resulted in layers of proposed rules that create a confusing web of cross-references that lack clarity and fail to provide guidance to the industry because essential terms are still undefined. This uncertainty necessarily requires assumptions as to what other yet-to-be proposed rules might dictate, and consequently undermines the rule-making process.
The President’s recent Executive Order, “Improving Regulation and Regulatory Review,” admonishes us to take into account the “costs of cumulative regulations” by undertaking rigorous cost-benefit analyses in drafting rule proposals. Although the Executive Order does not apply to independent agencies like the CFTC, this should not be an excuse for failing to develop cost-effective regulations. Congress has mandated a similar requirement under the Commodity Exchange Act. The first step in complying with this directive is for the commission to improve its capability to estimate the true costs of each rule proposed under the Dodd-Frank Act.