CBOE Chairman William Brodsky Tells Congress Consolidation of Regulatory Agencies Is Necessary

William Brodsky, chairman and CEO of the Chicago Board Options Exchange (CBOE), will testify before the House Committee on Financial Services today that he “heartily endorses” the Obama Administration’s recommendations for “comprehensive regulatory reform.”

However, Brodsky’s testimony will focus primarily on “the harm caused by the split jurisdiction between securities and futures in the U.S. and the partial, but incomplete, steps the Reform Proposal takes to address this situation,” according to a transcript of his testimony released today.

Brodsky is one of only seven financial industry spokespersons and the only exchange official to testify before the Committee today. In addition to his role as CBOE Chairman, Brodsky currently serves as chairman of the World Federation of Exchanges (WFE).

CBOE supports the Obama Financial Regulatory Reform Plan’s recommendation for the creation of a Financial Regulatory Oversight Council (FSOC) chaired by Treasury to resolve potential disputes between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). CBOE also supports the plan’s recommendation for harmonization of SEC and CFTC rules and urges Congress to adopt it.

While the Reform Proposal outlines interim steps that can be taken to dampen some ill effects of divided jurisdiction, eventual consolidation of the agencies is the only true comprehensive solution, according to Brodsky’s testimony to Congress.

Brodsky also threw the CBOE’s support behind the Reform Proposals plan to give a single authority, such as the Federal Reserve Board, the authority to supervise all firms that could pose a risk to financial stability.

CBOT also agrees with the Administration’s proposal that greater regulatory oversight is needed for over-the-counter derivatives. “These products serve many useful functions, but will continue to introduce significant risks into the financial systems if left unregulated,” states Brodsky in his testimony.

But he cautioned that determining which agency will be responsible for regulation of these products would be a key issue. “The split jurisdiction between SEC and CFTC may introduce an unnecessary complication in creating efficient regulation of these products, once again highlighting the compelling need for a merger of the two agencies,” states Brodsky. “…the most sensible path, at a minimum, would be to vest jurisdiction over all OTC derivatives involving securities (including corporate events) with the SEC,” Brodsky suggested in his testimony on the Obama reform plan.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio