Commodity Futures Trading Commission 

Office of External Affairs 

Three Lafayette Centre 

 1155 21st Street, NW 

Washington, DC 20581 

 202.418.5080 

Testimony 

Oral Testimony of Acting Chairman Walter Lukken Before the 

House Appropriations Subcommittee on Agriculture, Rural 

Development, Food and Drug Administration, and Related 

Agencies 

July 10, 2008 

Madam Chairwoman, Congressman Kingston, and other members of the subcommittee, 

thank you for inviting me to testify on the role of the CFTC in overseeing the commodity 

futures and options markets. 

The CFTC’s mission is twofold. First is protecting the public and market users from 

manipulation, fraud, and abusive practices. Second is promoting open, competitive and 

financially sound markets for commodity futures and options. These mandates are 

crucial because prices in the futures markets impact the cost of a loaf of bread, the price 

of a gallon of gas, and the interest rate on a student loan. If the futures markets fail to 

work properly, all consumers may be impacted. 

We are quite aware that many of these markets have recently been reflecting prices that 

are putting a considerable strain on American families and businesses. Although the 

Commodity Exchange Act does not give our agency the authority to set prices, our 

people work extremely hard to ensure that the futures markets are working properly and 

prices are reflecting economic factors rather than manipulative forces. 

As you know, the futures markets have changed dramatically in the last decade. Since 

2000, volume on U.S. exchanges has grown six-fold as traders increasingly seek the 

price certainty and clearing benefits of the regulated futures markets. 

The growth in the regulated marketplace has been scrutinized lately—and appropriately 

so—as prices in crude oil and agricultural commodities have climbed. Specifically, 

concerns have been raised recently regarding the role of speculators and index traders 

in commodity markets. Speculation has played a crucial role in the functioning of the 

U.S. futures markets since their founding more than 150 years ago. Without 

speculators, the futures markets would not be able to operate properly. Commercial 

participants cannot hedge their activities without someone willing to take the other side 
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of the transaction. In futures markets, this opposite role is often taken by speculators. 

The liquidity provided by speculators has tended to lower the costs of hedging to the 

benefit of commercial participants in the markets. 

Nevertheless, our agency recognizes that any participant in the markets with enough 

power, including speculators, can detrimentally affect the functioning of the markets. 

Accordingly, our Act requires all traders of sufficiently large size to report their futures 

positions to the CFTC daily. This information enables our surveillance economists to 

monitor large traders to ensure that no one is attempting to manipulate the futures 

markets. The amount and detail of trade data collected at the CFTC is unique among 

financial regulatory agencies and this system has proven to be extremely effective in the 

proper policing of this market. 

As the futures markets have changed, the CFTC has evolved to meet new challenges. 

In light of the recent market developments and the impact of high prices on consumers, 

the CFTC has embarked upon a series of steps to ensure greater transparency, 

implement tighter controls, and gather more energy market information. The 

Commission recently announced an agreement with the United Kingdom Financial 

Services Authority to expand information-sharing concerning crude oil contracts of Ice 

Futures Europe in London that is linked to the U.S. NYMEX crude benchmark. The 

CFTC also required the imposition of position limits and accountability levels on these 

products equivalent to U.S. standards. Additionally, we called for additional information 

from swaps dealers regarding their index trading and a review of whether additional 

controls or classifications for these traders are needed. And the agency also 

announced the existence of an ongoing seven-month nationwide crude oil investigation. 

More recently, the CFTC formed an interagency working group with the Federal 

Reserve, the Treasury Department, the Securities and Exchange Commission, the 

Department of Energy, and other agencies to study investor practices, fundamental 

supply and demand factors, and the role of speculators and index traders in the 

commodity markets. This group is making significant progress on completing a report to 

Congress and we hope to provide an interim report on the crude oil markets in the 

coming weeks. 

Regulatory evolution and informed responses to market conditions are keys to effective 

market oversight in this challenging global marketplace. The CFTC and its regulatory 

approach have evolved along with the futures markets, and the agency has pursued its 

mission while operating at historically low staffing levels. Over the last year, the CFTC 

worked with Congress to legislatively close the so called ‘Enron Loophole’ as part of the 

recent Farm Bill that provides the agency the data and authority to oversee these 

electronic energy markets. This is clearly a busy and challenging time for the CFTC 

and I believe the agency has risen to the occasion. But we simply cannot sustain the 

current workload – let alone what is likely in the future – under our current budgetary 

limitations. 

I am appreciative of this subcommittee approving an appropriation of 135 million dollars 

for the CFTC in Fiscal 2009. This is a strong step during this tight budgetary time. With 

the passage of new authorities over exempt markets and the additional responsibilities 

being currently asked of this agency, the Senate Appropriations subcommittee 

yesterday approved a mark of 157 million to meet these growing oversight needs. 
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I look forward to working with Congress to ensure the proper functioning of these 

important markets. Thank you again for the opportunity to appear before you today on 

behalf of the CFTC and I would be happy to answer any questions you may have.