The US House Agriculture Committee held a committee hearing March 9 titled "Rising Risks: Managing Volatility in Global Commodity Derivatives Markets.”
Alicia Crighton, Chair of the FIA Board and head of the clearing businesses for Goldman Sachs and the co-head of its global futures business, testified at the hearing on behalf of FIA.
Crighton noted in her opening statement that during periods of increased market volatility, futures markets take on additional importance as a critical risk management tool for agriculture and energy end-users. Crighton explained the role of clearing firms including Futures Commission Merchants (FCMs) in helping end-users manage risk. She also identified areas that warrant attention from policymakers related to margin transparency and floors, and the alignment of incentives between a clearinghouse and FCMs for effective risk management.
Other witnesses at the hearing included Michael Gelchie, Louis Dreyfus Company; Derek Sammann, CME Group; Chris Edmonds, ICE; and Dan Berkovitz, former CFTC Commissioner.
Chairman GT Thompson (R-Pa.) opened the hearing noting that over the past several years, there have been unexpected events that “shocked global commodity markets” and that US derivatives markets showed resiliency throughout these events. Thompson went on to say that “the strength of our derivatives markets should not be taken for granted” and that “deep, liquid, and safe derivatives markets is the result of informed trade-offs and negotiated compromises between the needs of different market participants.”
The hearing covered a wide range of topics including a discussion about clearinghouse margin practices, climate risk, prudential bank capital rules and the impact on clearing capacity, and exchange risk controls.
Overall, Members of the Committee expressed strong support for the commodity derivatives markets, noting their importance to end users for risk management and improving access these markets to small and mid-size farms. Witnesses agreed that through recent volatile periods, CFTC regulated markets remained strong.
Official statements and documents, including an archived webcast, are available on the House Agriculture Committee's website.