Wednesday, December 11,
2019 / 08:57AM / By Heath P. Tarbert , Chairman CFTC /
Header Image Credit: European Patients' Forum
Being the statement of CFTC
Chairman, Heath P. Tarbert before the December 10, 2019 Open Meeting - Tripling
Down on Transparency
regulators, we must be mindful not only of what we do, but how we do it.
Our shared vision for the CFTC is to be
the global standard for sound derivatives regulation. Soundness is built on transparency: we serve our markets
best when we act with the benefit of public input and dialogue.
also owe it to those who rely on our derivatives markets to regulate in the
open. With this in mind, our agency recently adopted Clarity-which we describe as "[p]roviding transparency to market participants about our rules
and processes"-as one of the four core values of the CFTC.
Given the importance of transparency, I am committed to holding
Commission deliberations in public view. I have long considered the CFTC
to be the most important regulator most Americans have never heard of. We
are working to change this: during the last few months of 2019, our current
Commission will have held six open meetings-the same number the Commission held
during 2015, 2016, 2017, and 2018 combined. In 2020, I intend to continue to hold open meetings on a
monthly or bimonthly basis so we can continue to decide important policy
matters before the public.
While transparency is important for all regulators, it is
especially critical for us. When the Dodd-Frank Act gave the CFTC jurisdiction over the swaps market, we were
entrusted with overseeing more than $400 trillion in notion value. That
is a humbling level of responsibility. It demands that we give the public
ample opportunity to see what the Commission is doing and to engage with
us. We will not regulate from behind a curtain.
Reaffirming the value of transparency is vital because the need to "get things done" has not always lent itself to getting them done the right
way. Commentators have argued that in implementing the Dodd-Frank Act,
the CFTC sometimes stumbled in its commitment to transparency by focusing too
much on the deliverables and not enough on the delivery. In
particular, the CFTC was criticized for regulating through staff no-action
letters, policy statements, and enforcement actions rather than "a transparent,
notice-and-comment rulemaking process." Given
the immense demands placed on this agency in the immediate wake of the
Dodd-Frank Act, our predecessors surely did not make opacity the goal.
Nevertheless, opacity was the result: the agency too often traded openness for
what some have dubbed the quiet expediency of '"backroom rulemaking.'"
As we approach the year 2020 and beyond, I am pleased to announce
that the CFTC will triple down on transparency by taking action in the
following three areas: (1) how we make regulations; (2) how we apply them; and
(3) how we enforce them.
1. Transparency in Rulemaking
First, we will reaffirm the importance of notice-and-comment
rulemaking established under the Administrative Procedure Act (APA) as the
foundation for providing transparency in how we make regulations. Today
the Commission is voting to approve a final rule to amend Part 13 of our
regulations to clarify how we receive, process, and respond to petitions for
rulemakings filed under the APA. Apart from being fully consistent the
APA, our Part 13 also retains Section 13.2, which permits any person to petition
the Commission for a rulemaking. This is a unique feature of the CFTC's
rulemaking framework that reinforces transparency and the right of the public
to participate in our regulatory process. Most importantly, we will
publish petitions for rulemakings on the CFTC website, facilitating public
engagement in our rulemaking process.
In addition to updating Part 13, we will be publishing a summary
of our rulemaking process on the CFTC website. The summary is written for the general public and is
designed to explain in plain English how the CFTC proposes and finalizes
regulations. I believe the summary is an important step in improving the
public's understanding of our regulatory process.
Transparency in No-Action, Interpretive, and Exemptive Relief
Second, I am committed to ensuring our agency is transparent in
how we apply our regulations through the use of no-action, interpretive, and
exemptive relief letters. To be sure, the Commission is most transparent
when we regulate through public notice-and-comment rulemakings that require a
majority vote of presidentially-nominated, Senate-confirmed officials. We
should do so whenever possible. Staff relief should be a supplement,
rather than a substitute, for the APA rulemaking process. I am therefore
pleased to announce that the CFTC is finalizing guidance to ensure staff
no-action, interpretive, and exemptive letters are limited only to those
situations where they are truly appropriate. Examples include those
situations with unique circumstances not suitable for a general rulemaking or
where only temporary relief is contemplated pending either the rulemaking
processor one or more market events (e.g., Brexit, SOFR transition,
We must also increase transparency even where staff relief is
appropriate. Today I am also announcing that as of January 1, 2020, the
CFTC will publish all requests for staff no-action, interpretive, and exemptive
relief on our website when such relief is granted. Publishing
requests alongside our relief letters will harmonize our agency's practices
with those of other federal financial regulators. This practice will
likewise provide greater public visibility into issues before our
Commission. Publicly disclosing requests for staff relief further
demonstrates our commitment to putting transparency into practice.
Transparency in Enforcement Settlements
Finally, we must be transparent in how we enforce the law. One
goal of our enforcement program is to change behavior in a positive way by
deterring misconduct before it happens. Deterrence requires clarity about
how our laws work. Long gone are the days when kings would post their
edicts high on columns to make the law harder to read and easier to transgress. Our Founders instead adopted a system in which "the law is
king." Indeed, it has been said that in our American system, the
rule of law is a law of rules.
Consistent with this mandate, our Division of Enforcement will
soon publish an updated Enforcement Manual that will inform the public about a
number of changes designed to increase transparency. We take seriously
the need to inform the public about our enforcement priorities and
In the same vein, the Commission and its staff must be free to
speak publicly about enforcement matters. Beginning January 1, 2020, I
will not present to the Commission any enforcement settlement or consent order
that restricts the Commission or our staff from publicly stating their views on
the case. Affirming this right to
speak ensures the CFTC can inform the public of our enforcement
priorities. It also advances customer protection: the facts of past cases
can serve as early warning signs of new types of fraudulent or manipulative
At the same time, genuine transparency cannot be one-sided.
Just as the Commission should be able to speak freely about enforcement
actions, so too should defendants. Also beginning on January 1, 2020, I
will not put before the Commission any settlement agreement or consent order
that unduly restricts a defendant's ability to speak publicly about an enforcement
matter. While the Commission
will continue to require that defendants who agree to settle a matter not deny
liability, or any fact or statement to which the parties have agreed, the CFTC
will not limit any defendant's ability to discuss his or her case publicly or
to criticize our agency. This approach is good for transparency as well
as accountability: defendants may speak freely, but will be unable to hide
behind the language of settlements to avoid answering tough questions about
Transparency is sometimes avoided because it opens the door to
criticism. But as Aristotle purportedly reminds us, "[c]riticism is
something we can avoid easily by saying nothing, doing nothing, and being
nothing." That has never been of
the path of the CFTC during our nearly 45 years of regulating our markets and
enforcing our rules. Nor will it ever be. Just as we will not
shrink from carrying out our duties, calling out wrongdoing, and enforcing the
law, so too will we ensure market participants have true insight into the
operation of our agency.
Criticism is not always pleasant, but it is a core facet of
democracy. The Commission is an agency of the U.S. Government, and
it should be
scrutinized when it acts. When asked what type of government came out of
the Constitutional Convention, Benjamin Franklin famously answered, "A
Republic, if you can keep it." Our Commission will do its part.
1.  See CFTC Vision Statement, available at https://www.cftc.gov/About/Mission/index.htm.
2.  See CFTC Core Values, available at https://www.cftc.gov/About/Mission/index.htm (emphasis
 Remarks of CFTC Chairman Heath P. Tarbert to the 35th
Annual FIA Expo 2019 (Oct. 30, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opatarbert2.
4.  See CFTC website, "Upcoming Events," available at https://www.cftc.gov/PressRoom/Events/CommissionMeetings/index.htm.
 Pub. L. No. 111-203, 124 Stat. 1376 (2010).
6.  See CFTC, "Dodd-Frank Act," available at https://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.
 Hester Peirce, Regulating
through the Back Door at the Commodity Futures Trading Commission 61 (Geo. Mason Univ. Mercatus Inst. Working Paper
 Id. at 35; 4.
 Id. at 4 n.5..
 See CFTC website, "Commission Rulemaking Explained," available at https://www.cftc.gov/LawRegulation/CommissionRulemakingExplained/index.htm.
 The CFTC expects to release the aforementioned guidance on
staff relief in early 2020.
 In line with this commitment to regulating via public
notice-and-comment rulemaking whenever possible, today the Commission will also
vote on a proposal to codify no-action relief that has been in place since
2014. The no-action relief makes certain anti-evasionary conditions of
the inter-affiliate swap clearing exemption practicable for non-U.S.
affiliates. Codifying this relief in the Commission's regulations is good
policy and good government. The Commission will vote on codifying other
no-action letters in a number of areas-with appropriate revisions where
needed-in 2020 and beyond.
 Requests for staff relief prior to January 1, 2020,
will not be affected.
 See Antonin Scalia, The Rule of Law as a
Law of Rules, 56 U. Chi. L. Rev. 1175,
 Thomas Paine, "Common Sense," in Common Sense and
Related Writings 72, 98 (Thomas P. Slaughter ed., 2001).
 See Scalia, supra note 14, at 1175.
 The U.S. Court of Appeals for the Seventh Circuit has already
affirmed the right of an individual CFTC Commissioner to state publicly the
reason for his or her votes on any matter before the Commission. CFTC
v. Kraft Foods Grp., Inc., No. 19-2769
(7th Cir. Oct. 22, 2019) (quoting Sec. 2(a)(10)(C) of the Act).
 While this approach is largely consistent with the
CFTC's past practices, I believe that formalizing it will ensure consistency in
the years to come.
 James C. Price, "A Lesson on Criticism from
Aristotle," Refresh Leadership Blog (Jan. 22, 2013), available at http://www.refreshleadership.com/index.php/2013/01/lesson-criticism-aristotle. One should note that while many websites appear
to attribute this quote to the philosopher Aristotle, others contend the saying
was coined first in the Nineteenth Century by, among others, the American
writer Elbert Hubbard. Regardless of its author, the quote is almost certainly
something in which Aristotle would concur fully. See Aristotle, Nicomachean
Ethics 49 (Hippocrates G. Apostle, Trans.) (1984) ("[T]o die
in order to avoid poverty or the pain of rejected love or anything that is
painful is a mark not of a brave man but rather of a coward; for it is softness
to avoid painful effort.").
1. CPMI and IOSCO
Share Authorities' Experiences in Cooperation to Increase FMI Safety and
Finance and Financial Technology Review By IOSCO
Operational Resilience: Impact Tolerances For Important Business Services
The View from
the Regulator on Operational Resilience
A Call For
Review and Comments On Investments And Securities Bill 2019
Amendments To Its Rules On Sub-broker, Records of Transactions and Risk Mgmt
Amendments to SEC Rules, Regulations On Fidelity Bond and Removal From Listing
IOSCO Study of Emerging Global Stablecoin Proposals
Discusses Policy and Supervisory Initiatives, Approves Implementation Reports
Guidelines On The Operations Of Nominee Accounts By CMOs
2018 Financial Stability Report
Guidance To Rules On Order Handling And Best Execution
New Rule on Direct Cash Settlement, Electronic Offering And Transmission of
Annual Report on Implementation and Effects of Financial Regulatory Reforms
NSE Notifies of
Effective Date of Its Rules On Online Trading Portals