In a one-on-one discussion with FIA President Walt Lukken on Thursday, Acting CFTC Rostin Behnam talked about the commission’s new Climate Risk Unit, saying the unit will let the commission pivot its attention away from the broader concerns about the effects of climate change on financial markets raised in last year’s report from the CFTC’s Market Risk Advisory Committee to a focus on derivatives’ role in smoothing the transition to zero carbon emissions by 2050.
The effects of climate change will be felt throughout the economy, leading the unit to include staff from multiple disciplines. Behnam is talking to people throughout the agency to determine how derivatives can help manage and mitigate the physical and financial risks from climate change.
Lukken, who himself has a notable public track record in working to support the development of carbon trading markets, pushed the acting chairman on whether he was hoping to bring the CFTC further up the learning curve as it fulfills its mandates to promote innovation as well as fight fraud. Behnam said he has been talking to people about how the commission can add value to the markets’ transition to a zero-carbon emissions economy.
One of the ways, he said, is to assure there is transparency in current markets and in the growing carbon markets. Behnam wants to lend his agency’s expertise to assure integrity in markets affected by climate change.
Pivoting to other topics facing the chairman, Lukken asked about the CFTC’s thoughts on the rise of retail trading and the agency’s recent actions regarding retail involvement in silver futures. Behnam pointed to the resilience of futures markets, noting that futures market clearing had helped to contain price volatility.
Telling Lukken that “futures are futures,” Behnam shrugged off any aspirations to grab greater jurisdiction over cryptocurrency markets. Behnam said that the CFTC will continue to use its jurisdiction over those coins and tokens which are not securities to enforce anti-fraud and manipulation rules in cash market trading.
Behnam said that the current combination of self-regulation supported by state laws might be sufficient, although when pressed by Lukken, he said that a federal regulatory scheme for cash market trading of cryptocurrencies may be warranted in light of the significant retail interest in them.
Behnam sidestepped Lukken’s attempt to get him to opine about the current jurisdictional conflicts between the E.U. and the U.K. Behnam endorsed deferring to foreign regulators where prudent to avoid risking market fragmentation.