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Tuesday, January 27, 2015

CFTC COMMISSIONER BOWEN ON REGULATION OF FOREIGN EXCHANGE DERIVATIVE REGULATION

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
Statement of U.S. Commodity Futures Trading Commissioner Sharon Bowen Regarding Recent Activity in the Retail Foreign Exchange Markets
January 21, 2015

Commissioner Sharon Bowen of the Commodity Futures Trading Commission issued the following statement on the subject of last week’s activity in the retail foreign exchange markets:

It is ironic, that following the enactment of Dodd-Frank, the retail foreign exchange industry is the least regulated part of the derivatives industry. I am concerned that lower standards are putting this industry in a precarious position and placing retail foreign exchange investors unnecessarily at risk. These concerns were underscored by recent unsettling events involving financial difficulties at retail foreign exchange dealers following the Swiss National Bank’s policy change regarding the Swiss Franc.

As I have said before, we have an obligation to prevent the establishment of “gaps” in our regulations. If we find that a part of the swaps or futures industry is so lightly regulated that investors, markets, and the public are being placed in undue risk, we have an obligation to fill that gap and establish a more efficient and effective regulatory regime. Even prior to these events, I raised the issue of whether enhanced regulation of retail foreign exchange would benefit consumers.

Therefore, in the wake of last week’s events, I believe the Commodity Futures Trading Commission has an obligation to seriously consider enhancing our regulations of retail foreign exchange dealers. Specifically, I believe we should consider establishing regulations on the retail foreign exchange industry that are at least as strong as the regulations on the rest of the derivatives industry.

Last Updated: January 21, 2015

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