Monday, May 20, 2019

CFTC Chairman Giancarlo lets his hair down in first installment of FIA Speaks podcast

By Brad Rosen, J.D.

CFTC Chairman J. Christopher Giancarlo recently sat down with FIA President and CEO Walt Lukken for the association’s newly launched podcast, FIA speaks. In a candid and engaging interview, the two industry leaders looked back at the chairman’s tenure at the agency, including his many accomplishments, as well as ongoing challenges for the agency and the industry. The chairman also shared some personal insights including how he acquired the “Crypto Dad” moniker, and the role music has played in his personal and professional life.

Becoming a commissioner and embracing Dodd-Frank. At the onset of the interview, Giancarlo shared his backstory and his unlikely path to becoming the Chairman of the world’s preeminent derivatives regulatory agency. “I never aspired to a Washington career” he recollected. After practicing law for 16 years, in 2000 Giancarlo went into business and was a key player in a company that built one of the world’s largest hybrid trading platforms for OTC derivatives, and then helped take that company public.

Then came 2008, and Giancarlo found himself at the center of the financial crisis. He noted, the response was passing and implementing the Dodd-Frank Act. Giancarlo was supportive of all elements of Title VII of the act which centered around the clearing mandate, data reporting mandate, and trading on licensed platforms. Despite his support for the reforms, Giancarlo still had differences with how the CFTC was implementing Dodd-Frank. As a result, Giancarlo reconsidered an opportunity to serve in government and was delighted when he was nominated to serve as a minority commissioner by President Obama in 2014, and then renominated to serve as CFTC Chairman by President Trump in 2017.

It’s all about the calibration. Responding to Luken’s surprise that as a Republican, Giancarlo supported all aspects of the G-20 reforms set forth in Pittsburg in 2009, the chairman noted that Congress had gotten it right with respect to Dodd–Frank. He indicated that that he has been working with these reforms from a commercial point of view, and looking to take the politics out of it. “It’s about calibrating – how do you get these rules to work that is suitable for market activity, he observed. The chairman continued, “ We operate in a global marketplace. We want to have the most optimal regulatory system in world.” Giancarlo, agreed that the KISS initiative is geared to assure that Dodd-Franks elements work practically and efficiently.

An agency that punches above its weight. When asked what makes the CFTC special in its role as one of the world's leading derivatives regulators, Giancarlo responded with the following: 
  • The agency reports to the Congressional Agriculture Committees. Ag folks have a long tradition of working together on a bipartisan basis. As a result, the CFTC is much less of a political agency; that flows down from the top.
  • The staff is sophisticated and highly expert in their areas of specialization.
  • The CFTC is the world’s only exclusive regulator of derivative markets. That may be a reason why U.S. has the largest.
  • Internationally, the CFTC is regarded as a premier regulatory agency. It trains other global regulators and it has a reputation as an extraordinary and leading governmental.
Some highs and some lows. Giancarlo said he wants to be remembered for making the case for having robust well-regulated derivative market at every opportunity. He noted well-functioning derivative markets are vital and essential for enabling stable interest rates as well as stable energy and food prices.

On the downside, Giancarlo pointed to the flat funding he has seen for the agency during his years as a commissioner. “Flat funding means you are a victim of attrition – when people leave you can’t fill that spot”, he observed. The Chairman noted that this cycle may have been broken, as agency funding has increased, although not everything the agency asked for was granted in the most recent round of appropriations.

The legacy of “Crypto Dad.” Giancarlo will certainly be remembered for his opening remarks before the Senate Banking Committee, when he abandoned his prepared statement, and instead shared experieces a recent family gathering, when the younger generation expressed their enthusiasm for virtual currencies. He shared that experience with the legislators and urged them to take cryptocurrencies seriously and not dismiss them out of hand. As a result, the Chairman gained some 46,000 twitter followers, as well as the nickname “Crypto Dad”.

Giancarlo also expressed his long-term bullishness for blockchain technologies. “It here to stay” he told Lukken. Specifically, he thinks blockchain innovations have greater potential in the developing world where payment systems and currencies remain problematic.

Getting the band back together. Giancarlo and Lukken concluded their discussion by talking about how music has shaped there lives, personally and professionally. Both are accomplished musicians. Giancarlo plays banjo and guitar and performs regularly. Once leaving the CFTC, the Chairman indicated he intends to play a lot more music and get the band back together. In fact, Giancarlo indicated that he is booked later in the summer to appear at the Stone Pony, a legendary venue on the Jersey shore where Bruce Springsteen played back in the day.

Chairman Giancarlo will be leaving the CFTC later this year. For him, the beat will go on.