JLN spoke with Jill Sommers, chair of the Derivatives Practice Group at Patomak Global Partners, at the OIC Conference in Nashville in April. Sommers, who served two consecutive terms as a CFTC commissioner from 2007 to 2013, discussed her work with Patomak and the evolution and sticking points for regulation in the crypto and rapidly evolving derivative markets.
Since leaving the CFTC, Sommers since 2014 has been working mostly on compliance projects and strategic regulatory consulting for Patomak’s clients. In addition, she has offered expert witness testimonies for companies in the swaps arena. Sommers says she appreciated her panel with Lule Demmissie, the CEO of eToro, who stressed that diversity can come in forms ranging from racial or gender diversity to socio-economic diversity and beyond. Sommers says that in her work with Cboe, she learned what it is like to work in an SEC-regulated environment. She says that OCC enforcement actions from the SEC are out of control. “You know, everybody settles because they just want it to go away. But I think you’re just seeing that the cost to settle these cases just seems to be creeping higher and higher.”
Sommers observes that growth in retail participation in commodity markets, such as in oil and wheat, is a newer thing. The first concern of a regulator would be customer protection and asking whether customers actually understand the products they’re trading in as well as the risks. The younger demographic is trading and getting disclosures on their phones.
“How should a regulator be thinking? Should there be two or three different questions that they have to actually affirmatively answer instead of checking a box ‘I certify I just read these 14 pages,’ which you know, they didn’t,” she says. She supports efforts in Washington to restrict lawmaker trading of the markets because it would remove accusations of conflicts of interest. Blind trusts might hold some promise of a solution for that.
She believes the SEC and the CFTC do seem to be regulating the crypto markets by enforcement action. It’s not clear to market participants how they’re supposed to structure businesses if they want to be active in the digital asset space in the United States, she says. That’s leading the market players into a more integrated structure that fills several functions within one structure. The CFTC is struggling with how to regulate these structures.
As to the 50 year anniversary of this industry, Sommers says: “It was April of 1998 when we were talking about Matif doing side-by-side trading of contracts and within, like, 21 days 90% of the volume had migrated to these screens and then within like six months, they’ve closed the pits. And everybody was asking ‘How do we deal with electronic trading and what is that going to mean for the industry?’ And, you know, 25 years later, we have no shortage of other issues and challenges that we’re dealing with. It’s just kind of funny to see. It seems like that was yesterday. How quickly the industry is evolving.”
John Lothian News asked Jill Sommers these questions:
What’s new at Patomak Global Partners?
How did your panel with Lule Demmissie go?
What did you learn from being on the board of the Cboe?
What is the impact of the OCC enforcement action from the SEC? Is this a one-off or part of a crackdown?
With increased retail participation in the markets, what is the response from the regulators about it?
What will it take for the CFTC’s office of education and community outreach to have the biggest impact?
What is the legislative response to the increased retail interest in the markets?
There are efforts in Washington, DC to restrict lawmaker trading of the markets. What chance do they have to be passed and is this a good thing?
The SEC seems to be regulating the crypto markets by enforcement actions. What do you think of this approach and what is the response from the industry?
What does it mean to you to be a part of an industry celebrating its 50th anniversary?