The second day of the Future Industry Association’s EXPO 2018 held in Chicago, Illinois began with a fireside chat between FIA President and CEO Walt Lukken and newly minted CFTC Commissioner Dan Berkovitz. Their talk, before a room filled with industry participants, touched on Berkovitz’s observations about the state of commission since his departure as the CFTC’s general counsel in 2013, as well as his view of a wide range of challenges currently the facing the agency.
No stranger to the CFTC or the derivatives industry. Before being sworn into office on September 7, 2018, Berkovitz was a partner and co-chaired the futures and derivatives practice at the global law firm of WilmerHale from 2013 through 2018. Berkovitz’s tenure at CFTC began in 2009, at the height of the financial crisis where he played a key role in the drafting and enactment of rules related to the Dodd-Frank market reform legislation. Berkovitz noted working on 50 to 55 rulemakings. “It was a great time to be at the agency” he recalled.
Five is better than three—the significance of a full commission. While noting it may be counterintuitive, Berkovitz underscored the benefits of have a fully functioning five-member commission. He pointed out that with a three-person commission, Sunshine Act prohibitions prevent any two commissioners from communicating directly with each other. Rather, they must do so through staff which is inefficient. Berkovitz also observed that a full commission makes it easier to express a minority view and reduces partisan pressures. It also leads to a more unified commission overall.
Avoiding DC swampiness and dysfunction. Berkovitz observed that the CFTC, as an independent regulatory agency, is not subject to the same level of dysfunction that permeates much of the current day federal government bureaucracy. “There is trust and respect among the commissioners, and we have all worked together over the years,” Berkovitz stated. “Respect and trust is critical to getting things done and obviates the swampiness of DC,” he added.
Looking to the future. Berkovitz indicated that he is in basic agreement with the agenda set by Chairman Giancarlo to move forward on rulemaking in a number of areas, including swap dealer de minimis requirements, SEFs, trade execution, and cross-border matters. He observed these are all very timely issues. Berkovitz also believes matters involving the health of the markets is center stage. He is concerned about liquidity and market fragmentation in the swaps and cross-border context.
EEMAC sponsorship. Commissioner Berkovitz also noted that he was very much looking forward to being the sponsor of the commission’s Energy and Environmental Markets Advisory Committee (EEMAC) to which he was recently appointed. This committee advises the commission on new developments in energy and environmental derivatives markets, and appropriate regulatory responses to ensure market integrity, competition, and consumer protection. Berkovitz is especially well qualified for this appointment. Before the joining CFTC in 2009, he was a senior staff lawyer for the U.S. Senate Permanent Subcommittee on Investigations where he led several investigations into oil markets and energy prices. Berkovitz also served as Deputy Assistant Secretary in the Department of Energy’s Office of Environmental Management.
A consistent view on virtual currencies. Berkovitz is also in agreement with Chairman Giancarlo’s active approach regarding technology and innovation. In particular, he favors the enhanced review of new contracts related to cryptocurrencies. He noted that additional futures and options on these products can help grow these markets. Berkovitz also noted that he was pleased with recent decisions from federal courts in Massachusetts and the Eastern District of New York affirming the CFTC’s jurisdictional authority with regard to virtual currencies. Berkovitz stated, “These markets must be free from fraud and manipulation. Its critical for moving forward, but I’m not sure we are there yet.”
No stranger to the CFTC or the derivatives industry. Before being sworn into office on September 7, 2018, Berkovitz was a partner and co-chaired the futures and derivatives practice at the global law firm of WilmerHale from 2013 through 2018. Berkovitz’s tenure at CFTC began in 2009, at the height of the financial crisis where he played a key role in the drafting and enactment of rules related to the Dodd-Frank market reform legislation. Berkovitz noted working on 50 to 55 rulemakings. “It was a great time to be at the agency” he recalled.
Five is better than three—the significance of a full commission. While noting it may be counterintuitive, Berkovitz underscored the benefits of have a fully functioning five-member commission. He pointed out that with a three-person commission, Sunshine Act prohibitions prevent any two commissioners from communicating directly with each other. Rather, they must do so through staff which is inefficient. Berkovitz also observed that a full commission makes it easier to express a minority view and reduces partisan pressures. It also leads to a more unified commission overall.
Avoiding DC swampiness and dysfunction. Berkovitz observed that the CFTC, as an independent regulatory agency, is not subject to the same level of dysfunction that permeates much of the current day federal government bureaucracy. “There is trust and respect among the commissioners, and we have all worked together over the years,” Berkovitz stated. “Respect and trust is critical to getting things done and obviates the swampiness of DC,” he added.
Looking to the future. Berkovitz indicated that he is in basic agreement with the agenda set by Chairman Giancarlo to move forward on rulemaking in a number of areas, including swap dealer de minimis requirements, SEFs, trade execution, and cross-border matters. He observed these are all very timely issues. Berkovitz also believes matters involving the health of the markets is center stage. He is concerned about liquidity and market fragmentation in the swaps and cross-border context.
EEMAC sponsorship. Commissioner Berkovitz also noted that he was very much looking forward to being the sponsor of the commission’s Energy and Environmental Markets Advisory Committee (EEMAC) to which he was recently appointed. This committee advises the commission on new developments in energy and environmental derivatives markets, and appropriate regulatory responses to ensure market integrity, competition, and consumer protection. Berkovitz is especially well qualified for this appointment. Before the joining CFTC in 2009, he was a senior staff lawyer for the U.S. Senate Permanent Subcommittee on Investigations where he led several investigations into oil markets and energy prices. Berkovitz also served as Deputy Assistant Secretary in the Department of Energy’s Office of Environmental Management.
A consistent view on virtual currencies. Berkovitz is also in agreement with Chairman Giancarlo’s active approach regarding technology and innovation. In particular, he favors the enhanced review of new contracts related to cryptocurrencies. He noted that additional futures and options on these products can help grow these markets. Berkovitz also noted that he was pleased with recent decisions from federal courts in Massachusetts and the Eastern District of New York affirming the CFTC’s jurisdictional authority with regard to virtual currencies. Berkovitz stated, “These markets must be free from fraud and manipulation. Its critical for moving forward, but I’m not sure we are there yet.”
Will consider Project Kiss reforms as they come down the pike. Berkovitz noted that he is in favor of the Project Kiss initiative regarding the codification of certain no-action letters granting relief from CPO registration in certain specified circumstance. Project Kiss is the agency undertaking that has sought industry and public input on simplification and modernization of CFTC’s rules. As for other changes that might result from Project Kiss, Commissioner Berkovitz indicated that he need to consider each issue and proposed change as it is proposed, and will respond in appropriate fashion.
Berkovitz concluded his comments by expressing his optimism about the future of the industry, and his desire to contribute to the health and safety of these markets.
Berkovitz concluded his comments by expressing his optimism about the future of the industry, and his desire to contribute to the health and safety of these markets.