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THE COMMODITY FUTURES 

TRADING COMMISSION: 

EFFECTIVE ENFORCEMENT 

AND THE FUTURE OF 

DERIVATIVES REGULATION 

HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

DECEMBER 10, 2014 

Printed for the use of the 

Committee on Agriculture, Nutrition and Forestry 

( 

Available via the World Wide Web: http://www.fdsys.gov/ 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

DEBBIE STABENOW, Michigan, Chairwoman 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

SHERROD BROWN, OHIO 

AMY KLOBUCHAR, MINNESOTA 

MICHAEL BENNET, COLORADO 

KIRSTEN GILLIBRAND, NEW YORK 

JOE DONNELLY, INDIANA 

HEIDI HEITKAMP, NORTH DAKOTA 

ROBERT P. CASEY, Jr., PENNSYLVANIA 

JOHN WALSH, MONTANA 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

SAXBY CHAMBLISS, Georgia 

JOHN BOOZMAN, Arkansas 

JOHN HOEVEN, North Dakota 

MIKE JOHANNS, Nebraska 

CHARLES E. GRASSLEY, Iowa 

JOHN THUNE, South Dakota 

CHRISTOPHER J. ADAMO, Majority Staff Director 

JONATHAN J. CORDONE, Majority Chief Counsel 

JESSICA L. WILLIAMS, Chief Clerk 

THOMAS ALLEN HAWKS, Minority Staff Director 

ANNE C. HAZLETT, Minority Chief Counsel and Senior Advisor 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

The Commodity Futures Trading Commission: Effective Enforcement and 

the Future of Derivatives Regulation ................................................................. 1 

Wednesday December 10, 2014 

STATEMENTS PRESENTED BY SENATORS 

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, Chairwoman, Committee on Agriculture, Nutrition and Forestry ............................ 1 

Cochran, Hon. Thad, U.S. Senator from the State of Mississippi ....................... 3 

Grassley, Hon. Charles, U.S. Senator from the State of Iowa ............................. 3 

Hoeven, Hon. John, U.S. Senator from the State of North Dakota ..................... 4 

Witness 

Massad, Hon. Timothy G., Chairman, Commodity Futures Trading Commission, Washington, DC .......................................................................................... 6 

APPENDIX 

PREPARED STATEMENTS: 

Boozman, Hon. John ........................................................................................ 32 

Cochran, Hon. Thad ......................................................................................... 35 

Massad, Hon. Timothy G. ................................................................................ 36 

QUESTION AND ANSWER: 

Massad, Hon. Timothy G.: 

Written response to questions from Hon. Debbie Stabenow ......................... 62 

Written response to questions from Hon. Heidi Heitkamp ........................... 66 

Written response to questions from Hon. Thad Cochran .............................. 67 

Written response to questions from Hon. Charles Grassley ......................... 77 

(1) 

THE COMMODITY FUTURES 

TRADING COMMISSION: 

EFFECTIVE ENFORCEMENT 

AND THE FUTURE OF 

DERIVATIVES REGULATION 

Wednesday, December 10, 2014 

UNITED STATES SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 10:06 a.m., in room 

328A, Russell Senate Office Building, Hon. Debbie Stabenow, 

Chairwoman of the Committee, presiding. 

Present: Senators Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Donnelly, Casey, Walsh, Cochran, Roberts, Chambliss, Boozman, Hoeven, Johanns, Grassley, and Thune. 

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR 

FROM THE STATE OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairwoman STABENOW. Well, good morning. I will call to order 

the Committee on Agriculture, Nutrition and Forestry, and we 

have several things we need to do today. 

First, happy birthday to Senator Boozman. We want to celebrate. 

As you can see, we have a package of goodies for everyone, and I 

want to thank my staff and thank Jessie and everybody who put 

this together from the team as we honor four members that will 

be leaving us. When we look in this room, we are reminded every 

day of two—multiple Chairmen but certainly two, Senator Harkin 

and Senator Chambliss, whose portraits are here in front of us 

every day. We are losing both of them, which will be a real loss 

to the Committee, along with Senator Johanns and Senator Walsh, 

who are four distinguished members. 

In their honor today, we did reach out to do something as a 

snack from each State, so we do have popcorn from Iowa, and Nebraska, caramel corn in honor of Senator Johanns, and we have 

beef jerky from Montana, and we also have some Georgia pecan 

pralines in honor of Senator Chambliss. 

So I just want to take a moment in all seriousness to say that 

it has been a wonderful honor to chair this Committee, and with 

all of you, again, even though it may feel like old news talking 

about the farm bill, it certainly is an accomplishment that we were 

able to do together. That was something that was not only difficult 

2 

but not replicated in many places, and it is something that we 

should, I think, together all feel very proud of. 

As we are having the change of the guard, I want to also thank 

Senator Cochran for his leadership as Ranking Member and Senator Roberts, who will be assuming the Chair. I was fortunate to 

have the opportunity to work with two distinguished Ranking 

Members in order to be able to get the farm bill passed twice—not 

once but twice. It reflects a lot of work of people around this table, 

and I want to start with just mentioning Senator Harkin, who is 

overseas for a day honoring a gentleman. He will be coming back 

and joining us tomorrow, but I do want to recognize Senator Harkin first as the—in order of seniority, Senator Harkin not only has 

chaired the Committee but really is the ‘‘Father of Modern Conservation,’’ as he has been called. He has been in both the House 

and Senate Agriculture Committees for 40 years and chaired the 

farm bill in 2002 and wrote the Conservation Stewardship Program 

and strengthened the farm safety net, he really was a driving force 

around bioenergy and nutrition. The Fresh Fruit and Vegetable 

Program we have in our schools today would not be there without 

Senator Harkin, and so we are very, very grateful to him and cannot imagine this Committee without his service. 

We equally cannot imagine, I cannot imagine this Committee 

without Senator Chambliss both as Chair, former Chair, and as 

someone who as Chair and Ranking Member, you have played an 

integral role, in fact, in passing this bill, all the way through to the 

conference committee. I appreciate your advice. I appreciate your 

involvement both publicly and behind the scenes to be able to help 

us move forward in a balanced way to be able to get this done. You 

played a critical role, as you always do, and will be greatly missed. 

I appreciate your personal interest in hunger issues and promoting nutrition and healthy lifestyles for young people as well. 

We share a common interest in that as well. You have made it 

clear that you are fighting for Georgia always, but understanding 

the differences in agriculture and working to have something that 

is an important piece of policy that works for all parts of agriculture. You will be missed, and we are very, very grateful for your 

leadership. 

Let me also mention—I feel like I should say ‘‘Secretary 

Johanns,’’ our only member who is a former Secretary of Agriculture and actually began talking about conservation and ways to 

modernize and reform it before we ever did a farm bill back when 

you were Secretary. We took a lot of your ideas and put them into 

what we did, which I am very proud that we have a Conservation 

Title that is reformed and streamlined, and I appreciate your efforts. I very much appreciate all of your advocacy around conservation, Sodsaver, and, again, working for a balanced approach but 

moving us in reform, which I know is very, very important for you 

as well. Risk management, both your time as Secretary and on the 

Committee, you have been a big advocate of letting the market and 

risk management and so on. So we are going to miss you. You have 

been a very, very important part. I hope you will continue in some 

way, I hope all of our members leaving will continue in some way 

to be a part of helping us move forward to support and strengthen 

agriculture. 

3 

Let me finally just mention our newest member, Senator Walsh, 

who is no stranger to public service, and we thank you first for 

your incredible service in the Army National Guard and your service in Montana and your passion. One of the things I am proudest 

of in the farm bill is we actually have a new position and help for 

veterans who want to go back into farming, and we appreciate your 

fighting for Montana from day one, Montana agriculture, as well as 

all of the other issues you have been involved with. But you made 

it clear to me from the beginning what your focus was in terms of 

this Committee for Montana, and we are sorry to see you go. We 

appreciate all four of you. 

So I will be happy to turn to Senator Cochran, if he would like 

to make any comments, but we did not want to let this last official 

meeting of the Agriculture Committee come and go without saluting tremendous leaders who have made a permanent impact in our 

country. So in a moment, I will call on Senator Grassley. I do not 

know if Senator Cochran would want to make a comment, but I 

certainly would welcome it. 

STATEMENT OF HON. THAD COCHRAN, U.S. SENATOR FROM 

THE STATE OF MISSISSIPPI 

Senator COCHRAN. Madam Chairman, I appreciate your continued leadership of our Committee. I want to join you in welcoming 

the Chairman of the Commodity Futures Trading Commission to 

this hearing. After being confirmed, I am sure he is off to a good 

start over there, organizing and pepping up the Commission so 

that we can be assured of the integrity of the process and the marketplace. We are happy to be able to have this opportunity to thank 

him for his service. 

Chairwoman STABENOW. Thank you. 

Senator Grassley? 

STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR 

FROM THE STATE OF IOWA 

Senator GRASSLEY. I appreciate the opportunity to say something 

about our retiring members. I have enjoyed working with them, 

and what I would like to do now is take an opportunity to say to 

each of them—I know Senator Harkin is not here, but Senator Harkin would believe I would say this anyway, and the other people 

that—and I hope I have said this to most every member I have 

served with when they have left. At least in recent years, I have 

tried to make a point of saying that to almost everybody. These colleagues after they leave the Senate, as long as I am in the Senate, 

they are always welcomed in my office, and I hope that they will 

call on us, whatever their life is after the Senate. I wish them well 

and have enjoyed serving with them. 

Chairwoman STABENOW. Thank you very much. 

Well, again, we appreciate it. One of the hallmarks of the Committee is our working together, and the four members that I mentioned—Senator Harkin, Senator Chambliss, Senator Johanns, and 

Senator Walsh—have been very, very important in that process. 

Yes, Senator Hoeven? 

4 

STATEMENT OF HON. JOHN HOEVEN, U.S. SENATOR FROM THE 

STATE OF NORTH DAKOTA 

Senator HOEVEN. Madam Chair, I would like to echo the comments of Senator Grassley and point out that to get a farm bill, we 

needed the North, we needed the South, and we needed the big ‘‘I’’ 

States, and these four represent the North, the South, and the big 

‘‘I’’ States, and so obviously we could not have done a farm bill 

without them, and we are going to miss them a lot. 

Thank you. 

Chairwoman STABENOW. Thank you very much. 

Any other comments? We will let everybody munch on their 

goodies and are counting on all of you coming back and being a 

part in some way of helping us as we move forward here. I do not 

want to think about the next farm bill because we are still implementing this one, but we have got a lot of work to do moving forward on implementation. 

So let us now turn to the business before the Committee today, 

and we welcome Chairman Massad being back with us. 

More than 6 years ago, our country was hit with the largest financial crisis since the Great Depression. Trillions of dollars of 

wealth evaporated almost overnight, devastating millions of families, leaving them unemployed, underwater, and unable to keep a 

roof over their head or food on the table. This crisis also caused 

Americans to seriously doubt our Government’s ability to properly 

oversee all of the players in the increasingly complex global financial system. 

Thankfully, we have come a long way since those dark days. We 

have had 59 straight months of job creation, and we are now creating jobs at a rate that we have not seen since the 1990s. But we 

still have a lot to do if people are going to have a real opportunity 

to get back to work and have the American Dream. There is more 

that needs to be done to ensure our financial markets are safe, 

transparent, and accountable. 

In the wake of the crisis, the CFTC was given important new authority to more effectively oversee and regulate our derivatives 

markets. Unfortunately, this new authority did not come with new 

resources. For the past 4 years as Chair of the Committee, I have 

repeatedly stopped efforts to unwind protections for families and 

farmers and businesses. 

I have made it also my priority to protect the integrity of financial reform and to secure the resources necessary for the Commission to enforce the law we passed in 2010. 

Unfortunately, the omnibus released last night does neither. Because of that fact, I do not support the policy rider in the appropriations bill. This policy rider is masked by a meager increase in 

the CFTC’s budget. 

But that increase comes with conditions—handcuffs on the agency that Congress tasked with enforcing the law that Congress 

passed—in such a way that it represents what looks to me actually 

as a very serious cut. 

Given that the funding levels are well below the President’s 

budget request, this should serve as a bucket of very cold water to 

those of us who want reform in our financial markets. 

5 

Let me be clear: Dodd-Frank Wall Street reform is being undermined every day we underfund the agencies responsible for enforcing the law. That is clearly what is happening in the omnibus bill 

announced in the House yesterday. Failing to properly fund the 

Commission leaves our families, our farmers, and our businesses 

vulnerable to bad actors. 

We all remember the mass fraud committed by Peregrine Financial and MF Global in 2011 and 2012. Billions of dollars in customers’ funds went missing at just those two firms. How can we 

expect Americans to trust in our markets when all of this money 

in U.S. accounts simply disappears overnight? 

Everyone benefits when our markets are safe and reliable. Financial institutions and end users benefit when our Nation’s markets are recognized around the globe as being ultimately the most 

trusted in the world. 

Since the Dodd-Frank Act was signed into law in 2010, the CFTC 

has been a leader among our financial regulators, completing almost all of its new Wall Street reform rules. 

The Commission continues to show flexibility and improve on its 

earlier work to ensure that our commercial end users, energy firms, 

and agriculture producers are able to safely use derivatives markets to manage risk without undue burdens. 

In just the past 3 months, the Commission has undertaken to resolve several end-user concerns—we appreciate that—including 

margin and recordkeeping requirements and relief for local, publicly owned utility companies. 

Some of the most critical work lies ahead on rules that have serious consequences on all market participants. The Commission continues to work on the position limits rule, which I know has been 

a focus of the Chairman and the CFTC Commissioners. Whether it 

is paying for gas at the pump or providing food to feed our families, 

when these markets do not work, consumers feel the pain. 

The CFTC’s Enforcement Division, despite limited resources, also 

continues to work hard to keep our derivatives markets safe from 

fraud and abuse. Their numbers continue to prove it. 

In the past fiscal year, the CFTC collected over $3 billion in monetary penalties against companies across the country. 

The Commission also took a hard stance on the manipulation of 

foreign currency benchmarks, issuing orders that cost unlawful 

companies over a billion dollars. This is a success given the difficulty and the resources needed to successfully investigate and 

close a case of this scale. 

Despite the recent successes, the Commission has much work to 

do in 2015 and beyond. 

While we discuss the need to give CFTC resources to effectively 

enforce its responsibilities here at home, we must also be considering resources needed to take on cybersecurity attacks and global 

threats. 

The Commission must have the resources needed to effectively 

examine clearinghouses and exchanges to keep U.S. markets from 

being at risk to broader threats. 

We look forward to the Chairman’s report on yesterday’s meeting 

of the CFTC’s Agricultural Advisory Committee, a Committee obviously very important to all the members of this Committee. I was 

6 

pleased to see Secretary Vilsack in attendance to address the state 

of the agriculture economy. 

These are considerations that the Commission must focus on as 

the markets continue to grow and change and market participants 

continue to get comfortable with the new model of derivatives regulation. 

With the right enforcement and resources, I am confident the 

CFTC will create stronger, more transparent markets. 

I would turn to my Ranking Member, Senator Cochran, if he 

would like to add anything. 

Senator COCHRAN. Madam Chair, only to ask unanimous consent 

that my full statement welcoming our distinguished witness and 

challenging our Committee to do its job of oversight, as you are 

leading us, and I thank you for that. I am happy to yield to others—we have a big crowd here—to get their questions in, so I will 

withhold any questions until later 

[The prepared statement of Senator Cochran can be found on 

page 35 in the appendix.] 

Chairwoman STABENOW. Thank you very much, and we will now 

turn to our first and only witness this morning, Chairman Timothy 

Massad, who we all know. The Committee held a nomination hearing in March of this year, followed by confirmation in early June. 

We very much appreciate your coming back before the Committee. 

We, of course, welcome your public statements, anything for the 

record as well, and then we will open it for questions. Thank you. 

STATEMENT OF THE HONORABLE TIMOTHY G. MASSAD, 

CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION, 

WASHINGTON, DC 

Mr. MASSAD. Thank you, Chairwoman Stabenow, Ranking Member Cochran, and members of the Committee. I am pleased to testify before you today on behalf of the Commission. I appreciate the 

opportunities I have had to meet with many of you, and I look forward to this Committee’s continued input. 

Let me also add my thanks and recognition to the retiring members—Senators Harkin, Chambliss, Johanns, and Walsh. It has 

been a pleasure working with you. 

I also want to thank you, Chairwoman Stabenow, for your leadership of this Committee and your advice and counsel. I look forward to continuing to work with you, and, of course, I look forward 

to working with Senator Roberts as the new Chair. 

In June of this year, two of the other Commissioners and I took 

office, and the last 6 months have been a busy and productive time 

for us. I want to thank my fellow Commissioners, all of whom are 

extremely dedicated and bring good experience and judgment to the 

table. 

Chairwoman Stabenow, I think you really said it best in terms 

of the importance of the additional responsibilities we were given 

in light of the crisis, which was the worst financial crisis this country has experienced. In my written testimony, I discuss our work 

in implementing those new responsibilities to regulate the swaps 

market. 

We have been just as focused on our traditional areas of responsibility: the futures and options markets. These markets cover 

7 

many diverse products today, and as they had their origins in agricultural products, and those remain very important to our work. 

Just yesterday, we did have a very productive meeting of our Agricultural Advisory Committee, of which I am the sponsor. 

We were honored to have Secretary Vilsack join us to discuss the 

state of the agricultural economy. It was an excellent opportunity 

to gather input directly from farmers, ranchers, and others who 

rely on these markets day in and day out. 

As the Committee knows, Title VII of the Dodd-Frank Act was 

a response to the part swaps played in the worst financial crisis 

since the Great Depression. The CFTC was given primary regulatory responsibility for bringing this market out of the shadows. 

Thanks to the agency’s hard-working professional staff, we have 

made substantial progress in implementing these reforms. 

Today swaps transactions are being cleared and reported. We 

have increased oversight of key market participants. Trading of 

swaps on regulated platforms is increasing, and transparency and 

strong risk management are being achieved. 

But in all of these areas, there is more work to do. For the last 

6 months, we have made it a priority to review our roles, particularly to address some of the concerns of commercial end users. 

To that end, the Commission has taken a number of actions designed to make sure that our markets work well for the manufacturers, farmers, ranchers, and other businesses that rely on these 

markets to hedge commercial risk. 

This includes matters related to margin and the posting of collateral, reporting and recordkeeping, forward contracts, and other 

areas. We have been listening carefully to market participants and 

working with them to make sure the rules work. 

We are also working on the few Dodd-Frank rules that remain 

to be finalized, including the position limits rule and a margin rule 

for un-cleared swaps that, consistent with congressional intent, exempts end users. 

In all this, a priority is working with our international counterparts to build a strong global regulatory framework. We are currently working with our international colleagues in particular on 

clearinghouse recognition and regulation, an issue that concerns 

the futures and options market just as much as the swaps market. 

We are also very focused on data collection and analysis and 

swaps trading issues, and cybersecurity, which is perhaps the single most important new risk to financial stability, is also a priority. 

We are also monitoring developing issues, including the increasing use of automated trading strategies and virtual currencies like 

bitcoin. 

We continue to maintain a strong compliance and enforcement 

program. Robust enforcement is crucial to the integrity of our markets. Most recently, we ordered five of the world’s largest banks to 

pay $1.5 billion in fines and take remedial actions because they attempted to manipulate foreign exchange rate benchmarks. 

In all of these areas, there is much more we could and should 

be doing, but we simply are not able to do so, to do as much as 

I believe the American public deserves because of resource constraints. We are fortunate to have a dedicated professional staff, 

8 

and we will do all we can with what we have. But our current 

budget significantly limits our ability to respond. 

We are grateful that the omnibus currently being considered 

would provide an increase, but I am convinced the need is far 

greater than that. 

Although this would start to address some of the very dire needs 

we have, without additional resources our markets cannot be as 

well supervised, customers cannot be as well protected, our technology cannot keep up, and market transparency cannot be as fully 

achieved. 

The United States has the best financial markets in the world, 

the most dynamic, innovative, competitive, and transparent. They 

have been an engine of our economic growth and prosperity. Good 

regulation is necessary to keep them that way, regulation that ensures integrity and transparency and creates the foundation for the 

markets to thrive. 

Thank you again for inviting me today, and I look forward to 

your questions. 

[The prepared statement of Mr. Massad can be found on page 36 

in the appendix.] 

Chairwoman STABENOW. Thank you very much. 

First let me ask a follow-on as it concerns resources. One of the 

most frustrating challenges that market participants face is regulatory uncertainty, and a common complaint I hear relates to registration and compliance delays. Given the CFTC’s new responsibilities regulating the swaps market and considering the growth of 

the futures and options markets, does the Commission have the 

needed resources to provide regulatory certainty to meet deadlines? 

Mr. MASSAD. Thank you, Chairwoman Stabenow, for the question. It is very, very difficult. We are stretched in so many areas. 

We have over 100 applications from swap dealers that are simply 

provisionally registered that we need to get through. 

We have 22 applications for swap execution facilities that, again, 

are just temporarily registered. We have a variety of other applications pending. 

We are stretched in all these areas. We cannot respond in the 

timely and thorough manner that we need to do our job well, and 

that includes not just registrations and applications. But, of course, 

whenever industry has an issue with how our rules are working, 

we would like to be able to be very responsive, to look into it quickly, but it is simply very, very challenging with the resources we 

have. 

Chairwoman STABENOW. Thank you. On a different note, 2 weeks 

ago my colleague from Michigan and friend, Senator Levin, held a 

2-day investigative hearing regarding the relationship between 

banks and commodity ownership, and a significant part of that focused on aluminum prices in the London Metal Exchange. I asked 

the CFTC over a year ago to report on its authority to regulate the 

LME, and in December of 2013, you responded, confirming that the 

CFTC has authority and stated that the LME’s foreign board of 

trade registration was pending. 

Can you provide an update on LME’s registration status and 

what the Commission is currently doing to resolve this aluminum 

issue with its current authority? 

9 

Mr. MASSAD. Certainly, Senator. Thank you for the question, and 

I share your concern about this situation. I have also visited with 

Senator Levin about it. It is an issue that we are paying a lot of 

attention to. 

Let me just say I have personally met with the Aluminum Users 

Group, I have met with the LME and their regulator in the U.K., 

and we are watching this very, very closely. The LME has proposed 

some reforms. We are looking at how those work as they implement them, and we are looking at whether more is needed. 

With respect to our authority, we have indirect authority, given 

their FBOT application, but their primary regulator is in the U.K., 

and the contract is one regulated by the U.K. We do not have direct 

jurisdiction over the warehouses which are at issue here. But I can 

assure you that we will continue to follow this situation very closely and engage with the LME, the U.K. authorities, and the aluminum users and work toward resolving this problem. 

Chairwoman STABENOW. So you are speaking about indirect authority. 

Mr. MASSAD. Yes. 

Chairwoman STABENOW. But from the American interest standpoint, do you think at this point that you have enough authority 

to prevent fraud and manipulation of commodity prices? 

Mr. MASSAD. Well, we always have the authority to go after 

fraud and manipulation in the markets, and so we are very mindful of that, and we will use that authority anywhere we can. As I 

say, in this case, what is going on in part is the LME is looking 

at trying to reform some of its warehouse arrangements. We are 

hopeful that can help address this problem, but we will continue 

to look at whether additional actions are needed if those reforms 

do not work. 

Chairwoman STABENOW. Back to talking about resources, the 

Commission has recently been very successful, as you said, in closing benchmark manipulation enforcement cases, including benchmarks like foreign exchange and LIBOR which have affected everything from home mortgages to student loans. Can you discuss just 

a little bit more about the amount of resources and technology that 

is needed to bring these types of cases? 

Mr. MASSAD. It is very challenging. You know, in the foreign exchange benchmark case, we were negotiating with a number of 

banks. We issued orders with respect to five. We had to have separate teams working on each of those. These are very intensive investigations to look at all the e-mails and all the documents and 

look at the market practices here. So, again, we are very stretched. 

Now, we are also at the same time pursuing all sorts of other 

matters in our Enforcement Division, whether it is traditional 

Ponzi schemes or commodity pool fraud, precious metal scams that 

we have seen a lot of against retirees, spoofing, and other sorts of 

more sophisticated types of fraud that we are seeing now that our 

markets are becoming increasingly electronic. 

But it is essentially a triage operation. We simply do not have 

the resources to go after all the things that we should be going 

after and that would enhance the integrity and strength of our 

markets. That is why I think additional resources are such a good 

investment for our economy and for the American people. 

10 

Chairwoman STABENOW. Thank you. I could not agree more. 

Senator Cochran? 

Senator COCHRAN. Let me ask you in reference to the last comments you made, what is your impression of what a fair level of 

appropriation would be to maintain the staffing and the quality of 

the staff that is necessary to restore morale at the Commission? 

Mr. MASSAD. Well, the President’s most recent budget request was for $280 million. I think that was entirely justified, and we are 

looking with respect to fiscal year 2016 as well. 

Again, we are just stretched in all areas. Our markets, our responsibilities were so greatly increased by Dodd-Frank. The swaps 

market, it depends on how you measure it, but people will say it’s 

a $600 trillion market, in many ways much bigger than the futures 

market. The complexity of these markets is great. The technology 

that drives these markets is so important. Things like cybersecurity is such a big risk to our markets. We simply do not have the 

resources to be examining critical infrastructure such as our clearinghouses and exchanges frequently enough on issues like cybersecurity. So it is just a real challenge for us. 

Senator COCHRAN. Well, thank you very much. 

Chairwoman STABENOW. Thank you. 

Senator Brown is next on the list, but I do not—at this point, unless he appears in 2 seconds, we shall move on. 

Let me also say it is wonderful to see so many colleagues here, 

and we will ask everyone to be mindful of the 5-minute rule. So 

at this point, Senator Walsh—and Senator Walsh is also not here, 

so we move on to Senator Bennet. 

Senator BENNET. Thank you, Madam Chair. It is nice to be recognized no matter how hard you try to get somebody else to talk. 

[Laughter.] 

Senator BENNET. Chairman Massad, it is great to see you again. 

I want the Committee to know that I appreciate very much your 

help a number of years ago drafting what became the ‘‘Pay It Back 

Act’’ that made sure that the money that came back from TARP 

was actually used for deficit, not spent again, and I want to thank 

you for your help with that. 

I was pleased to see in your written testimony that 70 percent 

of the transactions you regulate are being cleared today compared 

to 15 percent in 2007. When we worked on Dodd-Frank, we wanted 

to ensure that the clearinghouses themselves did not become a 

source of systemic risk. 

Could you share with the Committee your sense of just how concentrated the clearing process has become? Are the majority of 

these transactions occurring through many clearinghouses or just 

a few? How many clearinghouses are there? I will submit my other 

questions for the record and yield to my friend, or however you 

want to do it. 

Chairwoman STABENOW. Well, go right ahead, and we will just 

go back and forth. 

Senator BENNET. All right, Mr. Chairman. So that is the question. We did not want the clearinghouses to become a systemic risk. 

How are things going? 

Mr. MASSAD. Senator, that is an excellent question, and I share 

your concern about clearinghouse risk. It is something that we 

11 

need to be paying a lot of attention to; we are paying a lot of attention to it. You know, the mandate that we clear a lot of these transactions I think was a very, very good policy decision. It does allow 

us, clearinghouses do allow us to monitor and mitigate the risk of 

these bilateral transactions much better, but they do not eliminate 

the risk. We have to be very vigilant with respect to CCP risk, and 

we are focusing on that quite a bit in terms of looking at financial 

resources that they have, managerial/operational resources. There 

are systems for margining and measuring the risk, cybersecurity, 

as I alluded to before. 

You asked about the concentration. Most swaps are cleared in 

just a couple of clearinghouses, and this also goes to our cross-border issues where I have worked very hard with the Europeans on 

working out a good arrangement on clearinghouse supervision because some of the main clearinghouses are in Europe, and a lot of 

our transactions are cleared over there. 

Senator BENNET. So how would you evaluate the systemic risk? 

Mr. MASSAD. Well, again, I think it was the right thing to do to 

mandate clearing, but we have got to be constantly vigilant on the 

issue of clearinghouse strength and stability. 

Senator BENNET. Is there any evidence—you mentioned your discussions with your European markets. Is there any evidence to indicate that the swap transactions are migrating to less regulated 

markets than our own? 

Mr. MASSAD. Well, in terms of the clearing, a lot of it is happening in a couple of clearinghouses, one in particular in Europe. 

We are working very closely with the Europeans to make sure we 

have a good system of regulation, and I think we will land in a 

good place there. 

The other thing I would say about the overall risk is I am working very closely with the Federal Reserve on these questions, too, 

since we have designated a couple of the clearinghouses as systemically important. That means the Fed does have certain interests 

here as well. Governor Powell and I in particular maintain a constant dialogue on these issues. 

Senator BENNET. Okay. Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Senator Roberts? Then we will come back to Senator Brown. 

Senator ROBERTS. I would be more than happy, Madam Chairman, to yield to my good friend. 

Senator BROWN. I have got no more important schedule than the 

rest of you. 

[Laughter.] 

Senator BROWN. That is really kind of you. You are going to be 

the Chairman. 

Senator ROBERTS. Well, you are going to have more time since 

you got off the Ethics Committee, which I bitterly oppose. 

[Laughter.] 

Senator BROWN. The word is out. 

Senator ROBERTS. The word is out. I am sorry. That is all classified. But everything else in the world is not classified now, so it 

does not make any difference. 

Chairwoman STABENOW. All right. Now that you have used your 

time, we will move on—— 

12 

[Laughter.] 

Chairwoman STABENOW. We will start the clock again. Senator 

Roberts? 

Senator ROBERTS. Madam Chair, I want to thank you for your 

hard work, your dedication, and your passion for agriculture. If 

there is a synonym for ‘‘perseverance,’’ it has to be ‘‘Debbie Stabenow,’’ and I truly want to thank you for that and am looking forward to working with you and also the CFTC. Mr. Chairman, 

thank you for coming. 

I have got quite a bit of commentary here about Dodd-FrankBennet—what happened—— 

Chairwoman STABENOW. He is leaving. 

Senator ROBERTS. He just left. I would, too. At any rate, on the 

regulatory framework that the Commission has created after DoddFrank, we made some progress. I call that ‘‘low-hanging fruit,’’ so 

I have some others a little higher up on the branches, but I want 

to get right to the questions. 

Are you worried about the significant number of small and medium-sized future commission merchants—those are the folks that 

help the farmers and ranchers, the FCMs—which primarily serve 

agricultural producers that are closing and consolidating? I would 

point out that 10 years ago, in 2003–04, we had 102; now we have 

69. That is a 30-percent reduction. Any comments? 

Mr. MASSAD. Thank you for the question, Senator. I share your 

concern about this. We want to make sure we have a very strong 

and diverse futures commission merchants sector so that the smaller players can continue to operate effectively and serve their customers. 

We have seen concentration. I think it is driven by a number of 

things. One of them is a very low interest rate environment since 

a lot of these firms make some of their money on the interest on 

the funds that they hold. 

In terms of our regulation, we have certainly been mindful of 

this. Recently we proposed amendments to one of our rules that I 

think will help some of the smaller FCMs in terms of the residual 

interest issue, and I would be happy to work with you on this because we are—— 

Senator ROBERTS. Well, I appreciate that. I do not mean to interrupt here, but we are going to be on a time schedule here, and I 

apologize for doing that. 

Mr. MASSAD. Sure. 

Senator ROBERTS. Thank you for taking a second look at several 

of the consumer protection rules. I want to point out that Senator 

Heitkamp and I introduced legislation so farmers and ranchers 

would be certain that this would not occur at any point in the future. 

I am talking about basically the automatic change in how future 

commission merchants collect residual interest. But you are studying it after, I think, we have solved it. You are studying it. I would 

just as soon use that very scarce money for something else if, in 

fact, we fixed it. 

Basically, I wanted to ask you about 140 staff-issued no-action 

letters that delayed or replaced rulemakings by the Commission. 

These were issued with little or no oversight and zero transVerDate Nov 24 2008 12:41 May 27, 2015 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\USERS\MW42035\DESKTOP\DOCS\94366.TXT MICAH
13 

parency. Come to think of it, Madam Chair, I think this is a discussion that we probably ought to have, that this is going to take a 

little while, I think, in regards to time. But I am very concerned 

about the no-action letters. Sometimes they work to our favor; 

sometimes they do not. Many of them just are not—I do not think 

the members of the Commission are aware of them. 

Are you also worried that foreign businesses are choosing to relocate their businesses and capital away from the United States markets? 

Mr. MASSAD. Senator, I am very mindful of the cross-border 

issues, but I think we are working on them, and we are making 

good progress. I think it is important to remember that we started 

with a market that was entirely unregulated and that was global. 

It is also a highly mobile market. This Congress made the policy 

decisions—I think they were good ones—that we bring this market 

out of the shadows, and that was consistent with the commitments 

of the G–20 nations. But all of these nations are moving at different paces. They all have their own political process and regulatory traditions. 

We were first in a lot of ways, which is a good thing, in terms 

of implementing these rules, and we are working with other jurisdictions to harmonize things, and I think we will get there. 

So I think we are addressing the concern, but we are very mindful of it. 

Senator ROBERTS. Chairperson Stabenow mentioned the budget. 

I just want to point out that the CFTC’s budget has already seen 

a 27-percent increase since fiscal year 2010. That is up from $169 

million to 215. The new omnibus will add another 16 percent to 

$250 million. 

That is about a 50 percent increase to 2010. I know the CFTC 

is faced with many new issues, many new challenges. Almost any 

regulatory agency that we have is in the same boat. But that is a 

50-percent increase. Somehow or other we are going to have to 

learn to live within our means. We are going to try to be as helpful 

as we possibly can. But I simply wanted to point that out. 

For the first time in a long time, I am yielding back with 20— 

no, I am not. I am 24 seconds in the red. I apologize. 

Chairwoman STABENOW. Thank you very much. 

Senator Brown? 

Senator BROWN. Thank you. Thank you, Madam Chair, and 

thank you, Senator Roberts. Thanks for the work you have done on 

this Committee, especially with CFTC and financial rules and enforcing and oversight. 

I think a number of us are not happy with how the appropriations process this year is, particularly with potential repeal of the 

716 provision, a provision written in this Committee by one of your 

predecessors, the Chairwoman from Arkansas, on financial regulations and derivatives. 

Clearly doing that through the appropriations process rather 

than this Committee undermines this Committee and also undoubtedly puts taxpayers at risk, something that I would think we 

would have learned that lesson, so that is unfortunate. 

Let me follow up on something that the Chairwoman mentioned, 

the discussion, Mr. Chairman, of the banks’ involvement in physVerDate Nov 24 2008 12:41 May 27, 2015 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\USERS\MW42035\DESKTOP\DOCS\94366.TXT MICAH
14 

ical commodities, particularly aluminum. Your predecessor told me 

that CFTC ‘‘has clear authority to address fraud, manipulation, 

and other abuses in the aluminum market.’’ Another Senator from 

Michigan has had a number of hearings in his oversight committee. 

I have had a couple of hearings in the Banking Committee on this 

issue of manipulation in aluminum and oil tankers and electricity 

generation and other things. 

Chairman Gensler specifically cited CFTC’s authority over foreign boards of trade, but in an October letter and today’s testimony, you say that your authority there is limited. 

My first question is: Who is right—Chairman Gensler or you? 

Mr. MASSAD. I agree with Chairman Gensler’s statements. I do 

not think mine are inconsistent, Senator. We do have authority 

over fraud and manipulation. We also have authority with respect 

to their FBOT status, but that is a different status than our own, 

than for direct registrants. My comments earlier were simply 

meant to underscore that we take this issue very, very seriously. 

We are looking at it in a number of ways, and we will continue to 

do so and continue to work on it. I know it is a concern. I know 

it is a concern of yours with respect to the queues that we are seeing in these aluminum warehouses. 

As to the issue of banks’ ownership, also, as I have said before, 

I think the issue of whether banks should even be in some of these 

businesses is an important one for us to consider. It is not under 

our jurisdiction, but I have always said I would be happy to help 

the banking regulators— 

Senator BROWN. Good. Whatever is in your jurisdiction, time 

really is of the essence here. The Levin report recently said that 

Goldman’s activity in aluminum—this is just narrowly aluminum— 

‘‘raises troubling issues involving conflicts of interest, market distortions, and the potential to gain unfair trading advantages.’’ 

You can see that if there is a huge oil spill with billions of dollars 

of liability, what that can do to the stability of the financial markets if owned by one of the large banks. You can see that even 

though they say there is a wall between the trading desks and the 

information gleaned from their ownership of energy markets, part 

of the energy markets, there may be a wall, but somewhere at the 

top of that firm somebody knows something—knows everything 

about both sides of that wall. 

So the trading desk may be walled off from the ownership decisions, but in the end they are not, and that causes a clearly unfair 

market—clearly causes unfair market advantages for a bank 

versus others in the real economy. 

So I hope you will be as aggressive as you can be there. 

Let me ask one more question, Madam Chair, if I could. 

Chairwoman STABENOW. Sure. 

Senator BROWN. The need for CFTC’s cross-border swaps rules, 

clearly you were speaking to Senator Roberts at it a minute ago, 

from Long Term Capital Management in 1998 to AIG to 

JPMorgan’s London whale just a couple years ago. Five of my colleagues in 2013 joined me in warning that banks would ‘‘de-guarantee affiliates in order to opt out of CFTC rules.’’ To no one’s surprise, they did just that. In September, you said you were conVerDate Nov 24 2008 12:41 May 27, 2015 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\USERS\MW42035\DESKTOP\DOCS\94366.TXT MICAH
15 

sulting with bank regulators on the risks that de-guaranteeing 

would pose to our whole financial system. 

Tell me what specifically you are doing to protect the U.S. financial system and taxpayers from risks in the foreign offices of U.S. 

banks. Will you make the results of this review public? 

Mr. MASSAD. Thank you for the question, Senator. We are very 

concerned about this. Shortly after I got into office, I asked our 

staff to look into this, examine it, ask the banks a number of questions. 

We got some answers from that. We have shared those with the 

banking regulators, and I am happy to talk about that. Basically 

a number of these banks have de-guaranteed a lot of their swaps. 

I think the question, though, is: Is there still a risk posed when you 

have an unguaranteed offshore affiliate engaging in these transactions? 

Now, it may comply with our rules, but because it is still part 

of that overall banking enterprise, the bank holding company, I 

think it is a question for us, for the prudential regulators to think 

about. That is why I took the action of sharing what we are doing 

with the banking regulators, and we are engaging with them on 

that. 

Senator BROWN. Thank you. 

Chairwoman STABENOW. Thank you very much. 

Now we will move to Senator Boozman. Again, happy birthday. 

Oh, excuse me. I had Senator—did you wish to defer? 

Senator BOOZMAN. Well, I think he was here first. 

Senator JOHANNS. I think we walked in together. 

Chairwoman STABENOW. Well, if you would like to defer to Senator Johanns, that—this is the day of people deferring to other people to speak. I apologize. On the list here, Senator Boozman—— 

Senator JOHANNS. That is all right. 

Chairwoman STABENOW. Senator Johanns. 

Senator JOHANNS. I think it was a tie, actually. 

Let me start off, Madam Chair, and offer a couple of things. One 

is my appreciation for the way you have handled this Committee. 

I have seen you work the floor, if you will, and I could observe 

my opinion was as valued as the opinion of anybody on your side 

of the aisle. I think we all knew that, and we all appreciated that 

immensely. 

The second thing I would say is this is, I think, one of those committees here in the Senate where you just leave your party registration at the door. We worked to solve problems and pass farm 

bills, do a lot of good things for the country, and that is what has 

made this Committee so enjoyable. 

I am going to miss it, and it is somehow appropriate that my last 

Committee hearing as a United States Senator is in Agriculture. I 

have always said that for me working on agriculture, any day is 

a good day. So it is great to be here. 

Mr. Chairman, I will offer an observation on capital, but I really 

want to talk to you about position limits. The cross-border issues, 

as you know, are real. I have been talking about the cross-border 

issues since the idea of Dodd-Frank first came about in my role as 

a member of the Banking Committee and my role here. 

16 

My observation over the years is that capital tends to flow to the 

areas of least resistance from a regulatory standpoint. You know, 

I remember as a mayor when we were in competition with the city 

across the State line, we would offer to fast-track permits and do 

a whole bunch of things. That regulatory atmosphere had a huge 

impact on the decision making. The same way when I was Secretary of Agriculture, same way when I was Governor of Nebraska. 

So I just offer to you we cannot pass laws that bind Singapore 

or London. We can ask for their cooperation. We can plead for their 

cooperation. We can do other things. But at the end of the day, I 

think in an atmosphere of overregulation, we are always going to 

lose. That is just the unfortunate reality we are dealing with. So 

I think it is incumbent upon you to tell us when we are overdoing 

it, when we have gone too far. 

Now, if I do not jump into position limits, we are not going to 

get there, because we could have a huge conversation, and I would 

welcome that, but maybe not in this Committee here. 

Mr. MASSAD. I would be happy to try to address it briefly, Senator. I share your concern that we have to look at this as a global 

market, that capital is highly mobile. We also have our responsibilities under the law to implement the reforms, and Congress has 

made it very clear. They gave us deadlines to do that, and that I 

think has created a situation where we moved faster than other jurisdictions. 

But I am very committed to trying to work this out, and I think 

we are getting there. I view it as a glass half full. It will take time. 

It is not going to happen overnight, but I think we are making good 

progress. We have a new Commissioner in Europe, Lord Hill, who 

has taken over. He and I are off to a good start. I have had a lot 

of meetings. 

I have been overseas three times on a number of these issues 

and met with my international counterparts here. There is work 

going on a lot of fronts to try to harmonize rules. 

Senator JOHANNS. Let me shift to position limits before I run out 

of time here. I appreciate the fact that you have the Agricultural 

Advisory Committee up and running. Thank you for that. I think 

that is important, very, very important. 

One of the issues—and I think it was yesterday that you had the 

group together. One of the issues raised probably by a lot of industries, but I will focus specifically on the cattle industry, is the 

whole issue of position limits. They need liquidity in the marketplace. They need to be able to manage their risk. They worry that 

the proposed rules are going to damage their ability in the arena 

of managing risk. You have heard all of this, I am sure. 

Explain to us, if you would, where are they right and where do 

you think they are missing the point? I have heard from both Nebraska cattlemen and national cattlemen on this, and like I said, 

I suspect you have, too. In fact, I have had copies of the letters sent 

to your attention. Where are they right and where are they wrong? 

Mr. MASSAD. Thank you for the question, Senator. I think we are 

very mindful of their comments, and as to where they are right and 

where they are wrong, I guess I would answer in the following way: 

Position limits are a very important tool in the toolkit to address 

17 

excessive speculation, but at the same time, we have to make sure 

we allow bona fide hedging. 

The question is: How do you draw the bright lines that distinguish between true bona fide hedging by commercial players versus 

what speculators might do? We do not have the resources, we will 

never have the resources to look at facts and circumstances of 

every transaction, to look at intent. 

So the challenge for us is trying to write bright-line rules in an 

area that is very complicated so that we allow what is really legitimate hedging versus excessive speculation. 

Senator JOHANNS. Madam Chair, thank you. I am out of time. 

Chairwoman STABENOW. Thank you very much. 

Senator Boozman? Oh, excuse me. You know what? Actually, I 

was so intent on getting you back in order that I am missing my 

side of the table, so I am going to retract that. I was trying to get 

back to you, and I apologize because it is actually Senator Casey’s 

turn. 

Senator CASEY. Madam Chair, thanks very much, and I first 

want to commend your work leading this Committee and your efforts on an ongoing basis, as Senator Johanns noted, to be collaborative on both sides of the aisle. We are grateful for that and your 

team who made that possible. We are looking forward to a new session of Congress under new leadership, but we are certainly going 

to miss your leadership. We appreciate that. 

Mr. Chairman, I wanted to walk through maybe one fundamental issue, but before that, I do want to touch on the issue of 

resources. When I was the auditor general of my State, my main 

job was to audit hundreds and hundreds of State agencies, and we 

would often conduct financial audits which were kind of routine, 

but it was a way to discharge the responsibility to be a watchdog. 

We also did a lot of performance audits where we looked at results 

and effectiveness. 

I was very critical of agencies across the board when they 

misspent money, when they were not getting the job done, so I 

think I have pretty good credentials on the ‘‘spend taxpayer dollars 

wisely’’ concerns that people have. I do think, though, that you 

need more resources. We were told this morning—and I know this 

is by way of repetition, maybe—that the omnibus we are considering now would fund CFTC at $250 million, we are told, which 

would be $30 million below the President’s request. I am troubled, 

more than troubled by that. I am concerned about that, especially 

in the context of what happened, the prelude of the foundation of 

the Great Recession and what you and your agency can do to prevent the next Great Recession, God forbid. I believe resources are 

part of it, so I will be one of many people arguing for the next number of months and years to give you the resources you need. 

One of the reasons you need resources is because of enforcement. 

It is not something new but something that I know has been a priority for you. I am told that in fiscal year 2014 CFTC imposed $3.3 

billion in monetary sanctions, almost double the previous record 

total from fiscal year 2013 of $1.7 billion. I just want to ask you, 

let us set aside the resource question for now, important though it 

is: What are the factors driving that increase in the monetary sanctions? 

18 

Mr. MASSAD. Well, it is really, Senator, a question or an issue of 

the fact that there are a lot of things that we are going after. Unfortunately, there is still a lot of fraud out there. You know, a big 

part of it was the foreign exchange benchmark case. We are continuing to see attempted manipulation with respect to benchmarks, 

and it is so important that we continue to address that. We addressed it previously with respect to LIBOR. But this will be ongoing. 

At the same time, it is compromised, that number is compromised of a lot of smaller actions. We had a number of cases with 

respect to precious metal frauds. We had a number of—each year 

we have a number of Ponzi schemes that we go after. 

Again, the challenge for us is we simply do not have the resources to go after all the things that we would like to go after, and 

you are constantly making choices about whether you even investigate something or how far you carry that investigation. 

Senator CASEY. Well, I would hope that more of us would be— 

even as we are advocates for greater resources in the context of law 

enforcement, for police and other law enforcement across the country, in the world of the markets, in the world of making sure that 

folks do the right thing in that context, we hope we can continue 

to provide the resources so that you can be the cop on the beat in 

this world that we hope you could be. 

Lastly, I will just make a comment, and if you want to follow up, 

you could, and you can do it more extensively in writing. The efforts you have undertaken—I know you still have a ways to go, but 

the efforts you have undertaken to focus on some regulatory relief 

for end users, in our State, like a lot of States here, that becomes 

important to folks in a whole range of different industries, steel 

being one, often any manufacturing-based industries. So we appreciate that effort. 

I know it is difficult to manage when you have new legislation, 

new regulations to be able to calibrate that, but we are grateful for 

your efforts. 

Mr. MASSAD. Yes, well, thank you, Senator, for that. I am very 

committed to that. My focus is very much the following: Our task 

is not simply to implement this regulatory framework and bring 

the swaps market out of the shadows, continue to oversee the futures and options markets, but to do so in a way that allows these 

markets to thrive. That means making sure that these markets 

continue to work effectively and efficiently for end users. That is 

why we have tried to be very responsive to their concerns. 

Again, it does come back to resources. You know, we want to be 

able to respond as quickly as possible and look into these things 

and study them and then take the appropriate action. So we are 

hopeful that we can do all we can in this area. 

Senator CASEY. Thank you. I appreciate it. 

Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Finally, Senator Boozman. 

Senator BOOZMAN. Thank you Madam Chair, and I want to echo 

the comments of the rest of the Committee about enjoying working 

with you and how you have always been very, very open, always 

willing to listen, and really do your best to solve the problems that 

19 

we have. Also your staff, they have done a tremendous job likewise 

working with our staff, working with myself. So thank you very 

much. 

Mr. Chairman, I also have concerns about the commercial end 

users, and I know that you have had several questions in that regard. In regard to agriculture, can you talk a little bit about the 

Agricultural Advisory Committee, if that is going to be a help in 

that regard of trying to sort some of these things out? 

Mr. MASSAD. Absolutely, Senator. Thank you for the question. 

You know, I am sponsoring that committee because I recognize the 

importance of the agricultural products in our markets, and I think 

the committee is a very, very helpful way for us to get input. All 

of our advisory committees are, and let me just say that the other 

Commissioners I think are equally committed to using the advisory 

committees to get good input from market participants. 

We had an excellent meeting yesterday. Not only did Secretary 

Vilsack come and share his thoughts, but we had a good discussion 

of some of the issues related to position limits, to residual interest, 

and we will continue to do that and continue to get input, not just 

through the committee but separately in other meetings. I have 

made it very clear that my door is open. I will try to meet with people as much as I can to hear their concerns. We have acted on 

things. We acted on the residual interest issue. We have acted on 

some reporting and recordkeeping issues that I know were of concern to agricultural interests. The margin rule exempts end users. 

We will continue to take these sorts of actions. 

Senator BOOZMAN. Good. Very good. 

In regard to the morale issue, I know that you feel like a situation of maybe not getting the funding that you need. What other 

areas are out there? What can the Committee help you with in regard to that particular area? 

Mr. MASSAD. I am sorry. To the funding? 

Senator BOOZMAN. To the morale issue. Funding is one thing, but 

it goes beyond that. Again, what can we do to help? 

Mr. MASSAD. I appreciate the concern. Let me say on the morale 

issue I think there are probably a number of historical reasons that 

have affected that. We recently had some feedback on that was 

done from a survey done in April. 

My view of it is the following: that we start from there, we are 

going to address it. I think a lot of it is just making sure that people understand the mission, they understand how their work is 

connected to the mission, and they have sufficient opportunity for 

input. 

Obviously the funding issue has been a big one. The sequestration and furloughs were important. But we will address this. I am 

already seeing some changes. 

I appreciate your offer in terms of the Committee’s help. Let me 

give that some thought, but certainly the fact that this Committee 

does act, as a number of members have said, in a bipartisan fashion and has shown great interest and support for our issues, and 

obviously your support and increasing our funding, all those things 

will help. 

20 

Senator BOOZMAN. I was going to ask you about your priorities, 

but you mentioned that right at the very top is the cybersecurity 

issue. 

Mr. MASSAD. Yes, absolutely. 

Senator BOOZMAN. That is such an important issue not only for 

you but the rest of Government. I am almost thinking out loud in 

asking the question, but do we do that independently? Does your 

agency do that as an agency and somebody else in a similar situation do that? How do we address this? Talking about funding, there 

is a finite amount of money to go around. How can we be efficient 

in solving this huge task that really is the problem of the day? 

Mr. MASSAD. That is an excellent question, Senator. I think there 

is actually a lot of coordination going on among Government agencies. I attended earlier this week a meeting that Treasury Deputy 

Secretary Raskin holds periodically of a number of the financial 

regulators to talk about cybersecurity. There is a number of vehicles that have been set up to share information, share ideas, coordinate action. 

I am actively coordinating with the Federal Reserve on this, 

given their interest. Governor Powell and I have met, and our 

teams have met. Their staff has participated in some of our reviews. 

So I think we will continue to coordinate this, and I could not 

agree with you more as to the importance of this issue. It is clearly 

an issue that we have to be devoting a lot of attention to. 

Senator BOOZMAN. Good. Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Senator Donnelly? 

Senator DONNELLY. Thank you, Madam Chair. I also want to say 

thank you for your leadership on the Committee, how privileged I 

felt to be a part of this, how devoted you have been to the ag community in my State and to the whole country, and your staff as 

well. Thank you very, very much. 

Mr. Chairman, good to see you again, sir. As you know, I have 

had concerns about excessive speculation and its effect on increasing prices for working families for various products. The last time 

you were here, I asked about finalizing a good position limits rule 

in a timely manner. 

We recently extended the comment period, and I understand 

that. I understand the need to get this right. But what I am trying 

to understand is, Are we still committed to finalizing a good position limits rule in a timely manner? 

Mr. MASSAD. Absolutely, Senator. Thank you for the question. 

What we did on the comment period was simply the following: 

We had the Agricultural Advisory Committee meeting. As we 

talked to members about what they wanted to talk about, the issue 

of deliverable supply came up, and so we decided that we would 

have some conversation about that. 

Simply as a matter of good Government practice—we were not 

required to do this, but we felt that if that is going to be discussed 

at the Agricultural Advisory Committee, then it is only fair to open 

up the comment period on that part of the rule, just on those 

issues. That will not slow us down. There is a lot of other work—— 

Senator DONNELLY. So we are making progress. 

21 

Mr. MASSAD. Absolutely. There is a lot of other work. This is a 

very complicated rule. There are a lot of issues. We have received 

a lot of input. But we are proceeding on multiple tracks here. 

Senator DONNELLY. One other thing I wanted to mention is I 

wanted to thank you for the CFTC’s work to create a level playing 

field between public and investor-owned utilities. The efforts that 

have been made to make sure that we have a rule that levels the 

playing field have been extraordinary helpful. We will continue to 

work on the legislative side, but our municipal utilities are now 

less likely to be exposed to greater risks, less likely to be exposed 

to increased prices which are passed on to our families. I just wanted to thank you for your hard work on that. 

Mr. MASSAD. Certainly. 

Senator DONNELLY. Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Senator Thune? 

Senator THUNE. Thank you, Madam Chair, and thank you for 

your leadership of this fine Committee and the hard work that we 

have accomplished here in the last couple years. Hopefully there 

will be some more to come, and we can get something done on this 

next year. 

But thank you for your leadership, and thank you and Senator 

Cochran for having the hearing today as we kind of wrap up this 

year’s Congress and look at next year’s priorities. I think the Commodities Exchange Act reauthorization will be one of many pieces 

of legislation that we are going to have to consider. 

I want to mention one area of concern which we have discussed 

before on this Committee, and that has to do with staff guidance 

letters that are not subject to the Administrative Procedures Act 

and its mandatory cost-benefit analysis requirements. 

The letters have the same regulatory effect as rulemaking. I also 

want to mention no-action letters, which has been referred to earlier, which are used to amend or withdraw new rules, and I would 

encourage you, Mr. Chairman, to take a more measured and conventional approach to issuing regulatory guidance. 

Commodity futures trading continues to become increasingly important to the agricultural community, especially in States like my 

home State of South Dakota, with agriculture as its number one industry, and because of currently lower commodity prices, managing 

risk is even more important to our farmers and ranchers, grain elevators, cooperatives, and suppliers who utilize the trading tools 

under the jurisdiction of the CFTC to better manage their risk. 

I appreciate you being here today and hope you will continue to 

put that appropriate focus on agriculture. 

I wanted to mention your proposed rule excluding certain legitimate hedging activities used by agricultural businesses from qualifying as bona fide hedging. What is the CFTC doing to ensure that 

those legitimately hedging their risk will qualify for the exemption 

afforded to bona fide hedgers? 

Mr. MASSAD. Well, thank you for the question, Senator. It is a 

very important area. We have received a lot of comment on the proposed rule, and particularly on the subject of bona fide hedging, 

and we are taking that very seriously. We had a very good roundtable earlier this summer with a number of industry participants 

22 

where we talked about this, and we recognize hedging strategies 

are often very complex. 

The challenge for us is, again, to try to write bright-line rules 

that work, that distinguish between the bona fide hedging, which 

we want to allow, and the preventing the excessive speculation. 

We are in a situation where we cannot look at people’s intent, 

we cannot look at particular transactions, so we have to come up 

with that bright-line rule. We have asked industry for suggestions 

in that regard so that we make sure the rule does work to allow 

people to hedge commercial risk. It has to. These markets are so 

fundamental. We recognize the importance of that. I think all the 

Commissioners recognize the importance of that. 

Senator THUNE. The CFTC and banking regulators recently proposed margin rules that would take effect in December of next 

year. I understand the deadline was set by a group of international 

regulators sometime ago under the assumption that the rules 

would be completed by now. I also understand that these changes 

would force the industry and their end-user clients to implement 

massive system changes which could take years to develop. 

Do you think this timing is realistic given that the rules have not 

yet been finalized? 

Mr. MASSAD. Well, thank you for the question. I think that, first 

of all, the margin for uncleared swaps rule is extremely important 

because, although we have mandated clearing of some products, 

there will always be uncleared swaps, and that is why we need a 

margin rule. I think it is important that we implement it in a way 

that works. We do not want to disrupt the market. 

But I would say that most financial firms are already taking 

margin for these uncleared swaps. We are now 5, 6 years after the 

crisis, and a lot of them were taking margin even before that. 

Many of them obviously have increased that. 

We want, though, to come up with a good implementation timetable. It has delayed implementation as it is written. It generally 

does not apply to end users, commercial end users. Our rules and 

the prudential regulators’ rules exempt end users. We want to do 

it in a way where we are coordinating internationally because we 

do not want a situation of regulatory arbitrage. 

I hear the concern. We are working on it. But I think we should 

try to get this rule in place as quickly as we can. 

Senator THUNE. Are any of your international counterparts talking about perhaps a longer implementation period? 

Mr. MASSAD. There is discussion currently that we are also part 

of, and people are balancing, well would this really be needed or 

not. We have received some comments from industry saying a delay 

is needed. We will certainly look at that. I think sometimes we 

have to look at these proposals for delay with a good amount of 

skepticism. That is part of our job. But we will certainly try to 

come up with a reasonable approach here. 

Senator THUNE. Okay. Yesterday the first Agricultural Advisory 

Committee meeting took place, and I am wondering if you can 

share with the Committee what you see as the role of that committee in making future regulatory decisions. Is it going to be a 

committee that is created simply for symbolism purposes or will 

you really look in a substantive way to that committee for advice 

23 

when it comes to making some of these decisions, particularly with 

regard to agricultural commodities? 

Mr. MASSAD. Well, thank you for the question. I think it is extremely important. It is a very good vehicle for us to get input. We 

have about 40 members representing a number of interests in the 

agricultural sector, whether it is producers or the co-ops or financiers or others. We had a very good meeting yesterday. I am 

committed to having a couple of meetings a year. 

We are also consulting with the members about the things that 

they want to talk about and want to share with us. 

So I think it will be extremely important to our efforts together, 

but I think generally you have a Commission today, four Commissioners who all are very pragmatic, who are all listening to market 

participants’ concerns as well as to this Committee, and who are 

very committed to working together to try to do the right thing. 

Senator THUNE. All right. Thank you, Mr. Chairman. 

Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Senator Gillibrand? 

Senator GILLIBRAND. First, I want to thank you, Madam Chairwoman, for your excellent chairmanship. You have done a great 

job. It has been a privilege to serve on this Committee with you, 

and I am grateful for all the hard work you did in wielding the 

gavel, and I really enjoyed it. 

Mr. Massad, I want to talk a little bit about two issues: first, 

cyber; and, second, high-frequency trading. 

So on cyber, nearly every week we learn of a data or systems 

breach by cyber criminals. From Nasdaq to JPMorgan, it is clear 

that our Nation’s financial institutions are prime targets for data 

and intellectual property theft. 

One significant concern for the options market is that the Commodity Futures Trading Commission’s budget is so limited that you 

cannot effectively test the cyber defenses of the entities you oversee. While yesterday we saw that the CFTC could get a 16-percent 

funding increase, I still believe this is inadequate, and I understand that there may be restrictions on this money. 

Considering your budget crunch, how is the CFTC working with 

market participants, both big and small, to address the growing 

threat? What are the limits on your systems’ safeguards procedures 

of the entities you regulate? Second, are you seeing the same obstacles in the financial sector with regards to cyber incidents that 

other sectors are facing, whether the need for capital improvements, better information sharing in the industry, and with appropriate regulators or better training? 

Mr. MASSAD. Well, thank you for the excellent question, Senator. 

We are very focused on this issue. Resources are a challenge. Let 

me try to address all of your concerns. 

First of all, you have highlighted the need very well. This is just 

a huge concern. We are seeing cyber risks obviously posed by a 

number of different types of actors, whether it is theft, whether it 

is cyber crimes committed in order to profit, whether it is espionage, or whether it is disruption. They are coming from a variety 

of types of players. So there is a need to be extremely vigilant and 

active on this. 

24 

We, as you say, do not have the money to do independent testing. 

We cannot possibly do that. You know, some of the big banks are 

spending more on cybersecurity than our entire budget. So what we 

are trying to do is do examinations that look at is the institution 

sufficiently focused on this. We look at things like: Is the board 

paying enough attention? 

Is this rising to the board’s attention, and is it rising to the risk 

committee’s attention? 

What are the policies? But also are the policies actually enforced? 

You know, a lot of times institutions have good policies on the 

books, but they do not really enforce them. 

Then when an incident does happen, is the institution responding in a way that not only looks at the incident but at potentially 

taking a broader look at whether the incident suggests a need to 

shore up practices more generally? 

That is sort of how we are going about it. We are coordinating 

with other arms of the Federal Government on this. As I mentioned earlier, there is a lot of coordination going on cyber. But the 

resource challenge is a big one, and it worries me. 

Senator GILLIBRAND. Have you guys considered different funding 

mechanisms like a user fee based on size of actor, making sure it 

does not sap liquidity but given we have a market that is 450 million trillions, I think there is capacity there. Have you guys 

thought through that? Would you ever recommend that to Congress? 

Mr. MASSAD. It is a very good question. I would be happy to work 

with you or members of this Committee on this issue. We, I think, 

are one of the very few financial regulators that does not have a 

separate fee. Presidents ever since, and including Ronald Reagan, 

have suggested that fees be used. I think they can be done in a way 

that works. Obviously we have to be mindful of impact on market 

liquidity, but I think it is possible. But it is a decision for the Congress. My desire, quite frankly, is to increase the budget however 

we can. 

Senator GILLIBRAND. Okay. So high-frequency trading poses a 

dual risk: one, by creating a mechanism for bad actors to manipulate the markets through disruptive practices such as spoofing; 

and, two, by creating propensity to negatively affect market stability. These risks are not confined to the U.S. As a result, risks 

develop in foreign jurisdictions that have direct impacts on our 

markets. 

What role is the CFTC playing in conjunction with domestic and 

international regulators in examining the institutionalizing of best 

practices with the goal of avoiding regulatory arbitrage? Two, as 

the CFTC works with these different regulators, what are some of 

the obstacles you are facing as it seeks to avoid the race to the bottom? 

Mr. MASSAD. Thank you, Senator. We are looking at automated 

trading and high-frequency trading both from a policy and regulatory standpoint as well as from an enforcement standpoint. On 

the enforcement side, just to note that quickly we brought some actions with respect to spoofing and obtained some penalties and remedial actions as a result. In fact, one of our recent cases led to 

one of the first indictments of an individual for spoofing. 

25 

On the regulatory and policy side, we are very focused on this. 

We had a concept release where we asked for a lot of input on a 

number of issues to look at market practice. It is important to note 

that our markets are different than the cash equity markets. We 

do not have the multiplicity of trading platforms that the cash equity markets have, which is in many people’s minds one of the reasons that we have seen some of these high-frequency trading 

issues. 

But, nevertheless, automated trading is increasing in our markets. It is a significant part of our markets, and so we are looking 

at whether our institutions, the exchanges under our supervision, 

have adequate policies in place. We recently had a rule enforcement action against one of our exchanges on the fact that we did 

not feel they were looking enough at their own rules on spoofing 

and enforcing those rules. But we are also looking at additional 

rule changes that we might propose to address this issue. 

So we will continue to be very focused on this and happy to meet 

with you further on it and get your ideas. 

Senator GILLIBRAND. Thank you, Mr. Chairman. 

Chairwoman STABENOW. Thank you very much. 

Senator Hoeven? 

Senator HOEVEN. Thanks, Madam Chairman. Thanks for your 

leadership of this Committee and for your hard work and, of 

course, all your work on the farm bill. It was greatly appreciated. 

Also to our Ranking Member, Senator Cochran, thank you as well. 

I have appreciated working very much with both of you. Thank 

you. 

Chairman, my first question is: You have proposed a new margin 

rule that would take effect in December of next year. The industry 

is saying that the changes called for in this new margin rule could 

take years to implement, so talk about it. I mean, are they going 

to be able to meet that implementation requirement? 

Mr. MASSAD. Thank you, Senator, for the question. We are aware 

that some industry participants have said that, and we will certainly evaluate those comments and work with other regulators on 

the timetable here. The timetable as it is written, as it is proposed, 

is phased in over 4 years. Currently most large financial institutions are already collecting variation margin, and so while some 

have said that they cannot do this, we want to look at, well, why 

is that if they are already doing it in part. 

But we are certainly mindful of the need to implement a rule in 

a way that does not unnecessarily disrupt the market, and we are 

mindful of doing it in a way where we are coordinating with other 

regulators. So I can assure you that we will keep those concerns 

foremost in mind and try to work on a good solution. 

Senator HOEVEN. On an interactive process to make it work. 

Mr. MASSAD. Sure. 

Senator HOEVEN. So then how does the rule mitigate risk, both 

systemic risk and product risk, and increase transparency? Then at 

what cost to the end user? 

Mr. MASSAD. Sure. A very good question, Senator. The way the 

rule does that is the following: While we have mandated clearing 

for some swaps that are standardized or clearable, there will always be a lot of swaps that are not subject to centralized clearing, 

26 

that remain bilateral. That is what we had in the crisis. We had 

this whole opaque network of bilateral transactions, and what happened was when one participant then had trouble, that risk could 

easily cascade through the system because of the interconnections 

among participants. 

By mandating clearing, we have dealt with some of that. But 

there will always be swaps that will not be cleared because there 

is not enough liquidity in that particular product or they might be 

new or for other reasons. For those swaps, what this rule does is 

say you have to evaluate the mark-to-market risk and take margin 

for that. 

Now, a lot of big institutions will tell you they are already doing 

that. They did not wait around for this rule in many ways. The 

rule, though, formalizes the practice. We are working with international regulators. 

There is a set of international standards that we are all trying 

to basically use to make sure the rules are the same. One of those 

standards is that we exempt end users, commercial end users, 

which is what we have done, and which is what the prudential regulators have done as well. 

Senator HOEVEN. So by exempting those end users, you feel that 

they are not picking up substantial costs for implementation of the 

new rule. 

Mr. MASSAD. That is correct. 

Senator HOEVEN. Do you feel that with this new rule you can 

truly assess both systemic risk and product risk that is out there 

at any given time. So you can monitor how it is working in terms 

of the industry, the positions they are taking, the products they are 

offering. So that if one of them goes down, one, you can reasonably 

anticipate that, but it does not create any kind of domino effect or 

you have some kind of firewall to prevent that. 

Mr. MASSAD. I guess what I would say, Senator, is this particular 

rule requires the individual financial institutions to take measures 

so that they are monitoring their risk. What we are trying to do 

from a system wide standpoint, I would say we are doing through 

our overall surveillance and our data collection to try to look at systemic risk and where that might be—— 

Senator HOEVEN. Well, I should have said you in conjunction 

with the other regulators because that was the problem before, not 

truly understanding the ramifications of the new hybrid products 

and the systemic risk created when one institution went down because they did not have the proper protections in place. So is all 

that being brought together in a way that I guess is transparent 

so that you and the other regulators can actually assess what is 

going on and communicate that to our Committee and other elected 

officials to make sure that we do not have a similar problem in the 

future? 

Mr. MASSAD. Sure. A very good question. I think we are making 

good progress on that. It is kind of like a big infrastructure bill. 

You do not get it done overnight. But a key piece of it is really 

the collection of data on this market. We had no data on this market at the time of the crisis, and now we are collecting a lot of data 

on this market. But our ability to collect that, to make sure it is 

27 

standardized, to make sure that we can analyze it and manipulate 

it is resource-driven in part. 

It is a challenge for us under the resources. It also requires a lot 

of harmonization efforts. We are working very hard to harmonize 

data collection standards. It also requires making sure industry 

participants abide by their obligations to give us good data in the 

first place. 

So I would say the data challenge is in particular where we are 

focused on that. We are working with other regulators on that, and 

I think, again, we are making very good progress. 

Senator HOEVEN. Thank you. 

Chairwoman STABENOW. Thank you very much. 

Senator Klobuchar? 

Senator KLOBUCHAR. Thank you very much, Madam Chairman. 

Thank you for these baskets, which I am sure you like. Have you 

ever had a Committee hearing where you got a basket with beef 

jerky? 

Mr. MASSAD. I have not. 

[Laughter.] 

Senator KLOBUCHAR. All right. Well, feel very welcome. You can 

report back—— 

Mr. MASSAD. I hope it continues under Chairman Roberts. 

[Laughter.] 

Chairwoman STABENOW. That is a real question. 

Senator KLOBUCHAR. All right. So I was going to ask you about 

cybersecurity, but I know my colleagues have—you have gone into 

that in depth, obviously a serious concern, so I thought I would 

switch over to a few things. 

One you have just talked about, and that is the incredibly important work the CFTC is doing, but also the careful way you have 

to look at end users. I think our economy has a wide range of businesses in Minnesota that are affected by actions of the CFTC. We 

have farmers—and, by the way, many of them that were hurt by 

some of the bad things that were happening with some of the abuse 

of processes. 

But then we also have energy producers, financial institutions, 

and commercial end users like farmers and rural energy co-ops use 

commodity markets as a form of insurance against price fluctuations. I want to make sure that the CFTC also takes into account 

how these commercial end users use hedges and derivatives in 

their day-to-day business, which you have acknowledged that you 

are doing. 

At your nomination hearing, you committed to work with them, 

and I am glad that you are doing that to ease that burden, and I 

hope that as you review the rule on position limits and bona fide 

hedges, you consider all the ways commercial end users hedge real 

commercial risk and incorporate that into the final rule. 

First of all, my first question would be: Do you think that the 

list of bona fide hedges should include the types of transactions 

that are common in agriculture? 

Mr. MASSAD. Thank you for the question, Senator. We certainly 

want to end up with a rule that allows people to engage in legitimate, bona fide hedging, and we have gotten a number of comments about this. The challenge for us is writing the bright-line 

28 

rules because we cannot look at facts and circumstances, we cannot 

look at the individual intent behind particular transactions. We 

have to write rules that are general. 

So the challenge is to write that rule in a way that works in an 

industry or multiple industries where hedging strategies can often 

be very complex. Sometimes it is hard to distinguish between what 

is really a bona fide hedge and what is maybe a cover for excessive 

speculation. 

Senator KLOBUCHAR. Exactly. 

Mr. MASSAD. But we are working on it. 

Senator KLOBUCHAR. I hope you will continue to work with those 

that trade physical commodities as well—— 

Mr. MASSAD. Absolutely. 

Senator KLOBUCHAR. —to ensure that the exemption to the position limit rule allows for their normal practices. 

Mr. MASSAD. Absolutely. 

Senator KLOBUCHAR. I appreciate that. 

The second area that I have talked with you about before is speculation, and I have been concerned in the group of Senators that 

see this as an issue most notably in the gas and oil markets in the 

past. 

Recently you noted in your testimony with Arcadia and Parnon 

Energy that they had manipulated the crude oil market, and I am 

concerned that end users who have a stake in the underlying commodity, such as wheat growers, are not able to conduct their business because of the rules put in place to curb the abuses by speculators and financial institutions. 

What steps can the CFTC take to ensure that the end users are 

able to conduct their business and the market best reflect the 

forces of supply and demand? 

Mr. MASSAD. Right. Thank you for the question, Senator. You 

know, one of the most important things we do is simply that the 

surveillance that we do on the markets. It is great to have rules 

such as the position limits rule, but one of our most important jobs 

is to engage in ongoing surveillance. 

Now, we have multiple markets to look at. In the futures market 

alone, with respect to physical commodities alone, as you know, 

there are lots of agricultural markets, lots of energy and metals 

markets. Each of those is different. 

Then we have the financial futures and options, and then we 

have the swaps. So trying to engage in surveillance over all of that 

is a real challenge, and we simply do not have the resources to do 

that today. That should really be something that this country funds 

adequately because it is such a good investment in our markets; it 

is such a good investment in making sure that end users not only 

can use these markets but have confidence in their integrity. So 

that is a real challenge for us today. 

Senator KLOBUCHAR. Okay. One last thing. It is the Renewable 

Fuel Standard. You and I have talked about this in the past. You 

understand in the Midwest and really all over the country, generating $5 billion in economic output, it is 12,000 jobs in my State 

alone. We think it is good to have a mix of fuel, and along with 

the Chairwoman, a number of us have been advocating against 

29 

some of the changes that have been suggested last year by the administration. That is all now on hold. 

But in the course of that, the Renewable Fuel Standard RINs 

market, as you know, was extremely volatile, and then the questions were raised about the impact of excessive speculation in the 

market. Given the CFTC’s experience with the commodities market, what improvements could the CFTC recommend to improve 

the price discovery transparency and liquidity in the RINs market? 

Mr. MASSAD. Well, Senator, we are happy to continue to engage 

with you and others on this. I think we have a very good relationship with EPA on these issues. Obviously they have the primary 

responsibility on some of these matters. But we will certainly be 

very mindful in terms of looking for fraud and manipulation in 

these markets and taking action if we see—— 

Senator KLOBUCHAR. Well, and if you have any recommendations 

about how to minimize the volatility and the manipulation that we 

saw in 2013 that we believe led to some of what we will call sort 

of an overreaction to what happened—and we believe outside forces 

may have caused that speculation, and if you have any recommendations how to minimize it, we would really appreciate it. 

Mr. MASSAD. Okay. 

Senator KLOBUCHAR. Thank you. 

Chairwoman STABENOW. Thank you very much, and I would echo 

what Senator Klobuchar has said. It is very, very important. 

This has been a very important hearing. We appreciate your ongoing efforts. I could not agree more with you when we look at the 

fact that, to be effective, to make sure that we have safety and reliability in the U.S. markets, there has to be the resources to provide 

the accountability and to make sure things are functioning well for 

those who need actions from the Commission. 

So it is certainly something we will continue to focus on. We encourage you to continue to move forward all of the issues that you 

have to address, and we appreciate your steps, and thank you for 

joining us. 

Any additional questions for the record should be submitted to 

the Committee clerk 5 business days from today, which is 5:00 p.m. 

on Wednesday, December 17th. 

The meeting is adjourned. 

Mr. MASSAD. Thank you. 

[Whereupon, at 11:40 a.m., the Committee was adjourned.] 

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A P P E N D I X 

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