Remarks Of CFTC Chairman J. Christopher Giancarlo At The 2018 Agricultural Commodity Futures Conference, Overland, Kansas

Thank you and good morning.  Welcome to the First Agriculture Commodity Futures Conference.  Good to have you with us.

The Commodity Futures Trading Commission is pleased to co-sponsor this event with the Center for Risk Management and Education at Kansas State University.  They have been a sound, reliable, and credible partner.  I would especially like to thank Dr. John Floros, Dean of the College of Agriculture.  He has been a steady and helpful presence throughout the sponsorship and planning stages of the conference.

His voice, and yours, are heard across the nation and around the world.

Like many of you, I was impressed by the recent movie about Winston Churchill, “Darkest Hour.”

As you know, in 1946, Churchill made his famous “Iron Curtain” speech in nearby Fulton, Missouri, just a couple of hours from here on I-70.  His speech was titled “The Sinews of Peace.”[1]

Much was made at the time about its location.  Many said it was a favor to President Truman.  But, others argued this was the ideal location.  Churchill traveled from Great Britain, and then together with President Truman from Washington, to speak in the American Heartland.

Why?  Churchill answered that question at the start of the speech.  Here in the heartland was the “opportunity” to speak to the world.  And, here, the world would listen.   The setting demanded attention.

We have such an “opportunity” in the next two days. We will discuss issues in agricultural markets, risk, regulation, global needs, futures trading, virtual currencies, consumer awareness and customer education.   These are the “sinews” of the economy.  And, we will talk about potential cash manipulation, spoofing, the lack of convergence between cash and futures prices in some markets, and other ways American farmers can protect themselves against fraud and violations of the Commodity Exchange Act.[2]

The American agricultural market is significant, foundational to the economy.  Agricultural, food, and related industries contributed $992 billion to the U.S. economy in 2015, 5.5 percent of the gross domestic product. [3]   And, in 2016, agriculture provided 21.4 million full-and-part time jobs, 11 percent of total U.S. employment.[4]  In that same year, 2016, food accounted for 12.6 percent of American household expenditures.[5] 

The figures in international trade are also sizable.  In Fiscal Year 2018, the Department of Agriculture projects that agriculture exports will exceed $140 billion, with imports at $119 billion, for a net balance of trade over $20 billion.[6]  That balance of trade is good for the nation and for American famers.  You are the breadbasket to the nation and the world. 

At CFTC, we have taken some actions that should help the bottom line.

One project is called “Project KISS.”  It is a process to identify and eliminate overlapping, burdensome, duplicative regulations, especially those that add costs to agricultural products.   The time has come to re-examine the implementation of our regulations. So, we established a process to work with the public to identify areas where regulations could be simpler, more coherent, clearer, and more understandable. We developed an initiative called “Project KISS,” gathering input both within the agency and from the public. Now, Project KISS is not about changing policy. It's designed to simplify and make our rules and regulations less complex, less costly, less time-consuming, and less burdensome. Simpler rules make our markets more accessible to small and medium-size entities, which, as we know, are the engines of economic growth and job creation.  Look for a series of “Kissable” rule improvements over the course of the year to come.

In the CFTC’s work overseeing the world’s most dynamic markets, we must also anticipate the development and direction of markets.  That is why we have created a new market intelligence branch. Its function is to understand, analyze and communicate current and emerging derivatives market dynamics, developments and trends – such as the impact of new technologies and trading methodologies. We also created a Chief Market Intelligence Officer, who engages with industry participants, other regulators, and the new Market Intelligence branch. Together, they are a key part of the CFTC’s goal of being a 21st Century regulator.

We also developed another initiative to keep pace with technological innovation: LabCFTC. It is the focal point of our effort to engage with innovators, facilitate market-enhancing technology and fair competition, and manage the interface between technological innovation, regulatory modernization, and existing rules and regulations.

In less than a year of operation, LabCFTC has met with over 150 FinTech innovators, from startups to large institutions in New York, to Chicago and elsewhere in the Heartland, to the West Coast and Silicon Valley. It has observed demonstrations of many new technologies with the potential to improve our markets and enable the Commission to carry out its mission more effectively and efficiently.

Going forward, LabCFTC seeks ways to collaborate with external organizations, including domestic and international regulators, focused on sharing information and best practices in FinTech innovation.

We are also committed to right-sizing the CFTC’s regulatory footprint following years of expansive Dodd-Frank rule writing. This means resumption of normalized operations and practices, including greater care and precision in rule drafting, more thorough econometric analysis, less contracted time frames for public comment and a reduced docket of new rules and regulations to be absorbed by market participants.

Enforcement of regulations is also central to our mission and important to the bottom line.  A year ago, I issued a warning to those who may seek to cheat or manipulate America’s derivatives markets. I said, there will be no pause, no let up and no reduction in our duty to enforce the law and punish wrongdoing in our derivatives markets. The American people are counting on us.

In the year that has passed, the CFTC Division of Enforcement has made good on my warning. As the Wall Street Journal recently reported, the Division of Enforcement has filed almost as many fraud and manipulation cases in the past five months as it has in any prior fiscal year.[7]

In January alone, the CFTC worked with the Department of Justice and FBI in bringing criminal charges against six individuals and several large market participants involved in commodities fraud and spoofing schemes. That action was the largest futures market criminal enforcement action in American history.

I am committed to punishing bad actors in the marketplace. That commitment is not only that of a regulator, but as a former marketplace operator, who knows that market integrity is essential to fostering robust trading and responsible risk taking.

Market growth and surveillance are also assisted, even stimulated, through consumer education.  The CFTC’s Office of Consumer Education and Outreach engages with a range of audiences such as retail investors, industry professionals, seniors, and vulnerable populations who may be targeted by unscrupulous individuals with the intent to defraud them of their savings. We plan to expand this engagement in the year to come.

I want to thank both Senators from Kansas for coming to this conference.  Senator Roberts is a graduate of Kansas State.  This is a homecoming for him.  And, Senator Moran went to college at Ft. Hays State, down the other way on I-70, with its outstanding Department of Agriculture and the valuable degree in Agricultural Business. They have both been very helpful in setting up this conference, very supportive and encouraging.  Both will be speaking here. 

I started by mentioning Churchill.  In 1946, the same year Churchill came to Fulton, he also purchased a farm contiguous to his home.  He wanted to experience the life of agriculture, feel the soil on his hands, grow crops, and study the weather.  He knew agriculture was important to the British economy.  He wanted to be part of the farming community.  Above all, he wanted to listen to other famers, to learn from them, to understand their fears and doubts, their joys and triumphs.

We have come here primarily to listen.  I want to hear your voice, and, in turn, be your voice in Washington.  We are now living through a technological revolution, which effects agriculture just as it does very sector of the American economy.  These changes can be confusing, even frightening.  Let’s not live in fear. 

Through our discussions we will help each other.  And, help the consumer and the economy.

Thank all of you for attending.