Monday, March 26, 2018

CFTC funding cut will put markets at risk, Commissioner Behnam warns

By Lene Powell, J.D.

CFTC Commissioner Rostin Behnam sharply criticized the omnibus spending bill’s $1 million funding cut for the CFTC, warning that inadequate funding will leave derivatives markets and the public vulnerable to systemic risk and manipulation. Noting that derivatives played a significant role in the 2008 financial crisis, he said that new challenges have also arisen since then.

"Growing cyber threats, domestically and internationally, examinations of our clearinghouses at home and abroad, and the rapid growth of the FinTech industry present new, challenging issues that the CFTC will not have the resources to address in a timely and adequate manner. Simply put, the CFTC cannot responsibly innovate and meet the needs of rapidly evolving markets and market participants absent additional funding,” said Behnam.

Funding cut. The omnibus spending bill, H.R. 1625, was passed by the House and Senate on March 22 at an overall amount of $1.3 trillion, and was signed on March 23 by President Trump.

For the CFTC, the bill will lower the agency’s annual funding $249 million from $250 million, which has been the funding level for several years now. This falls short of Chairman J. Christopher Giancarlo’s FY 2019 budget request of $289.5 million.

The spending bill also limits how funds may be spent. At least $48 million must be available to spend on information technology, and $2.7 million is earmarked for the Office of the Inspector General. If there are any staff furloughs or reductions in force, the CFTC must explain to the appropriations committee why that was the only reasonable course of action.

“Hard decisions.” In testimony on March 7 before the House Appropriations Subcommittee on Agriculture, Giancarlo said "if we only get $250 million, we will be making a lot of hard decisions at the agency." Although opposed to transaction-based user fees as a funding mechanism, he said the CFTC would use any tools appropriators and authorizers give it.