MIAMI Jan 31 After years of battling tighter
regulations in the wake of the 2008 financial crash, the U.S.
grain industry is hoping a change in the regulators can bring
Agricultural executives at the annual Commodity Council
Markets gathering in Florida this week pointed to coming changes
in the composition of the Commodity Futures Trading Commission
as a ray of hope. Three of the CFTC's five commissioners have
left and will be replaced this year.
Speculation about future reforms centered on the biggest
change: the departure of CFTC Chairman Gary Gensler, the
one-time Goldman Sachs swaps trader who came to embody
President Barack Obama's push for Wall Street reforms in the
trillion-dollar derivatives market. Gensler's five-year term as
chairman expired at the beginning of January.
Under Gensler, as he told staff in farewell remarks on Dec.
19, the CFTC pushed through most of the new rules required by
the landmark Dodd-Frank Wall Street reform law, far more than
other U.S. regulators and years ahead of a similar process in
Because Gensler's CFTC finished about 70 percent of the
rules it was required to write, his successor, Timothy Massad,
seemingly has little scope to push through big policy changes.
Massad is a former Treasury official and Wall Street lawyer.
The U.S. grain trade - which invented the futures industry
about a century ago when it needed a way to hedge price risk -
has generally viewed as needless disruptions the sweeping new
rules aimed at global banks and the $400 trillion global swaps
Among the restrictions that they would like to ease are
requirements for accurate audio recording and record-keeping of
phone and text messages with farmers or tighter regulations on
"We stopped using mobile devices for dealing with clients
because we can't record on mobile phones in an indexable,
searchable way. Most commercial companies are doing the same
thing," Lance Kotschwar, compliance lawyer at Gavilon Global Ag
Holdings, the big grain company, said in an interview at the CMC
"That's a problem. Farmers would prefer to be able to text
us these days. They exempted us from having to record the phone
calls but not the 21st century analog to a phone call: a text
'LESS ONEROUS' LANDSCAPE
James Newsome, who was CFTC chairman in 2001 and is now an
industry lobbyist and consultant, said hedgers like grain
handlers were hoping the transition to new CFTC commissioners
could provide a chance for their concerns to be heard.
"While Chairman Gensler was sensitive to some of the
concerns and issues, commercial end-user issues were not a
priority. So there was no relief given," Newsome told Reuters at
the meeting. "Acting Chairman (Mark) Wetjen is very sensitive to
Along with Gensler, CFTC Commissioner Bart Chilton, another
reform-minded Democrat, has also departed, along with Jill
Sommers, a Republican commissioner. Remaining are Wetjen, a
Democrat appointed in 2011, and Scott O'Malia, a Republican
appointed in 2009.
Obama nominated Democrats Massad and Sharon Bowen in
November and December to replace Gensler and Chilton,
respectively. Confirmation hearings before the U.S. Senate
Agriculture Committee have yet to be scheduled.
Both are perceived as Wall Street lawyers who are less
inclined to continue Gensler's aggressive pace of reform. Senate
Democrats may have objections, especially with Obama's August
nominee to replace Sommers, Wall Street executive J. Christopher
Giancarlo, as the other Republican at the commission.
"The takeaway is that the regulatory landscape is less
onerous now with the new commissioners coming than we've had the
last couple years," Rich Feltes, a veteran grain analyst and
research director at R.J. O'Brien, said in an interview.
Critics say that Gensler's aggressive tenure leaves plenty
of scope to fine-tune certain rules that produced some
"We still hear a lot of concern from the ADMs (Archer
Daniels Midland Co ), the Cargills and Bunges
saying we don't know if we're going to be able to make
this work," Sommers told Reuters. "So if they can't do it, you
really can't expect some of the smaller guys to do it."
"We went so quickly and we didn't take the time to see the
implications," O'Malia told the group at the Miami meeting.
"2014 should be about fixing rules."
He cited the new rule on recording broker-client
conversations as a good example. There was not "off the shelf"
technology available to keep records as CFTC staff said, O'Malia
"We just didn't do our homework," he told the meeting.
O'Malia also said he hopes there is an appetite to revisit a
new rule covering "residual interest" that will force firms to
put more capital into futures margin accounts.
The big battle to restrict the size of futures positions a
trader can hold also looms in 2014. CFTC's proposal includes a
new definition of "hedging" that could permanently change how
the grain industry uses futures contracts in anticipation of
buying or selling grain, critics say.
The lack of agricultural background in the new CFTC
commissioners may also present some obstacles for the Senate.
"When I was at the commission we had some very competent
people who understood how markets work, how they developed and
what commercial end users do," said Newsome. "Unfortunately, the
commission has lost a lot of that historical knowledge."