Welcome to Futures Industry
Editorial Staff
Published 11/1/2005

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Farewell to a Friend
At the end of next January, Alan Greenspan will finally retire after 18 years at the helm of the Federal Reserve. Most observers will focus on his legacy in monetary policy, and with good reason; he is by far the most influential and widely respected central banker of this generation. But for the futures industry, his most important legacy will be his deep understanding and respect for futures markets. Unlike so many others who view derivatives with suspicion, Greenspan understood how derivatives worked and championed these products as efficient tools for risk management and essential components of a modern financial system. Just as importantly, his profound commitment to free markets has had a major influence on regulatory policy in Washington and the willingness of the government to encourage competition.

CESR Salad
As the European Union moves towards a single market in financial services, the issue of cross-border access for firms outside the EU is becoming a critical concern for U.S. banks and broker-dealers. Few have more influence over this issue than Fabrice Demarigny, the secretary general of the Committee of European Securities Regulators. This body is fast emerging as the central forum for pan-European discussions as well as the principal counterparty for transatlantic talks with the Commodity Futures Trading Commission and the Securities and Exchange Commission. Demarigny stays out of public view, but futures market participants would be well advised to keep a close watch on his actions. In 2006, he will have a central role in CESR’s efforts to improve the transparency of EU rules and regulations and strengthen its relationships with its US counterparts. In particular, he is likely to continue hosting the highly successful roundtable discussions with other regulators and industry representatives on ways to improve the regulatory framework for transatlantic business in futures.

Team Player
The President’s Working Group on Financial Markets is fast becoming one of the most powerful influences on financial regulation in Washington. The PWG operates on an ad-hoc basis and has no direct power of its own, but as the only body that can rise above the particular interests of any one regulator and see the financial system as a whole, it has a uniquely objective view on policy issues. This means a key role for Randy Quarles, the recently appointed Treasury Undersecretary for Domestic Markets and Treasury Secretary John Snow’s delegate to the PWG. Treasury chairs the group, so Quarles is the informal coordinator of the group. Washington insiders say Quarles, a top-notch financial lawyer at Davis Polk & Wardwell before he joined Treasury, has an impressive grasp on the regulatory rules of the game. He also has the diplomatic skills essential to steering the four agencies to common ground, particularly useful when the regulators quarrel over jurisdiction, as is so often the case when derivatives come up. Look for Congress to turn to Quarles and the PWG more frequently in the future whenever it seeks impartial advice on complex regulatory and public policy issues relating to the financial system.

Full House
G2005 turned out to be a momentous year for the Commodity Futures Trading Commission. The White House filled three vacancies at the agency and named a new chairman, giving it a full complement of commissioners for the first time in four and a half years. While the agency can operate perfectly well with just a handful of commissioners, having a full house bolsters the agency’s ability to tackle tough issues and anticipate market trends. At the moment, the five commissioners are united in their focus on CFTC reauthorization, but once that is out of the way, what direction will they take? Perhaps then the agency can move ahead on a number of items that have been stalled on its agenda for some time, such as the study of self-regulation in the futures industry and the fight between Euronext.liffe and Chicago Mercantile Exchange over Eurodollar trading years.
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