The new CFTC Director of the Division of Market Oversight ("DMO"), Amir Zaidi, discussed a shift in priorities within the division, and described structural changes that will affect the DMO and the Division of Enforcement.

In an interview  with Risk Desk editor John R. Sodergreen, Mr. Zaidi explained that the DMO has paid a significant amount of attention to enforcement and surveillance in the recent past, and that attention now will shift to market intelligence and engagement with market participants. This is consistent with the new direction of CFTC Acting Chair J. Christopher Giancarlo (who is President Trump's nominee for permanent Chair), Mr. Zaidi explained.

Under an organizational restructuring, the DMO's surveillance group will move to the Division of Enforcement, and a new Market Intelligence unit will be created in the DMO. Mr. Zaidi clarified that Market Intelligence will pay attention to both long- and short-term trends, with "an eye toward how these developments might impact market structure and market policies going forward." He cited Regulation AT as the "perfect example" of the kind of policy that the division would try to account for with this new unit, since the regulation was created without a "comprehensive understanding of what's really going on in the market."

Mr. Zaidi also talked about the new holistic approach that will be taken by the DMO:

"[W]e're trying to streamline processes and procedures, reduce costs and burdens where the benefits just aren't there, or are hard to justify. . . . We're also looking for new ways to increase participation and liquidity in the markets. Better price discovery and better harmonized data with the rest of the world."

Commentary/ Steven Lofchie

This is another meaningful and positive step in the direction of financial regulatory policy. Historically (and not just under the Obama administration), financial regulators have overweighted their attention toward enforcement actions, perhaps because that is where they find glamour and glowing newspaper reports. But enforcement is just one aspect of financial regulation, and in the best of all possible worlds (not to downplay the eternal significance of keeping people honest), enforcement should not be the most important task of financial regulators. The most important part is the design of a regulatory structure that facilitates economic growth (only some of which is about enforcement).

In keeping with what should be the priority of the financial regulatory agencies, as a general matter, their Chairs ideally should not be litigators. By training and experience, litigators view the market from the perspective of armed conflict, whereas the overarching purpose of the market is for parties to come together under the terms of an economic agreement. Thus, it is a positive that under the new administration, both the CFTC and the SEC are to have leaders with transactional experience.

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