According to an article in the Financial Times last week, the CFTC is frustrated with the CME Group in what seems to parallel a typical adult/adolescent disagreement that arises when new rules are put in place. The disagreement stems from the mandatory position limits that are to be introduced into the futures market as outlined in the Dodd-Frank bill. The CFTC thinks the CME Group is intentionally “hiding behind wording” in the legislation and refusing to comply in what the CME Group feels ‘might be up for interpretation.’ The CME Group has also apparently refused to speak with the CFTC directly on this matter. The CFTC then praises its more reasonable and well behaved child, the Intercontinental Exchange (ICE ), who has apparently been ‘very helpful and thoughtful’ on this matter.
While I don’t mean to make light of this issue, a bit of humor and many parent-child similarities can be found in this story. The child (the CME Group) is testing its limits a bit to see what exactly it can get away with; the parent (the CFTC) doesn’t stand for it and gets angry; the child then refuses to speak to the parent and finds holes in the new rules that are in its favor; the parent then comes back and says the loophole was clearly part of the original rule leaving no resolution to the agreement and both parties still annoyed with one another. What needs to happen here is better communication and understanding on both parties. The CFTC has to see that the regulation, while it might be clear to them, might not be clear to the entities it affects, and the CME Group needs to understand that these regulations are not a punishment exclusively directed at them but are being put in place to make our financial system safer. In order for this to happen, however, both parties need to get over their differences and resume talks.