[Senate Hearing 113-640]
[From the U.S. Government Publishing Office]




                                                      S. Hrg. 113-640

                         THE COMMODITY FUTURES
                          TRADING COMMISSION:
                         EFFECTIVE ENFORCEMENT
                           AND THE FUTURE OF
                         DERIVATIVES REGULATION

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                       
                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION


                               __________

                           DECEMBER 10, 2014

                               __________

                       Printed for the use of the
            Committee on Agriculture, Nutrition and Forestry


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            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi
TOM HARKIN, Iowa                     MITCH McCONNELL, Kentucky
SHERROD BROWN, OHIO                  PAT ROBERTS, Kansas
AMY KLOBUCHAR, MINNESOTA             SAXBY CHAMBLISS, Georgia
MICHAEL BENNET, COLORADO             JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, NEW YORK         JOHN HOEVEN, North Dakota
JOE DONNELLY, INDIANA                MIKE JOHANNS, Nebraska
HEIDI HEITKAMP, NORTH DAKOTA         CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, Jr., PENNSYLVANIA   JOHN THUNE, South Dakota
JOHN WALSH, MONTANA

             Christopher J. Adamo, Majority Staff Director

              Jonathan J. Cordone, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Thomas Allen Hawks, Minority Staff Director

       Anne C. Hazlett, Minority Chief Counsel and Senior Advisor

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

The Commodity Futures Trading Commission: Effective Enforcement 
  and the Future of Derivatives Regulation.......................     1

                              ----------                              

                      Wednesday December 10, 2014
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1
Cochran, Hon. Thad, U.S. Senator from the State of Mississippi...     3
Grassley, Hon. Charles, U.S. Senator from the State of Iowa......     3
Hoeven, Hon. John, U.S. Senator from the State of North Dakota...     4

                                Witness

Massad, Hon. Timothy G., Chairman, Commodity Futures Trading 
  Commission, Washington, DC.....................................     6
                              ----------                              

                                APPENDIX

Prepared Statements:
    Boozman, Hon. John...........................................    32
    Cochran, Hon. Thad...........................................    35
    Massad, Hon. Timothy G.......................................    36
Question and Answer:
Massad, Hon. Timothy G.:
    Written response to questions from Hon. Debbie Stabenow......    62
    Written response to questions from Hon. Heidi Heitkamp.......    66
    Written response to questions from Hon. Thad Cochran.........    67
    Written response to questions from Hon. Charles Grassley.....    77


 
                         THE COMMODITY FUTURES

                          TRADING COMMISSION:

                         EFFECTIVE ENFORCEMENT

                          AND THE FUTURE OF

                        DERIVATIVES REGULATION

                              ----------                              


                      Wednesday, December 10, 2014

                              United States Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:06 a.m., in 
room 328A, Russell Senate Office Building, Hon. Debbie 
Stabenow, Chairwoman of the Committee, presiding.
    Present: Senators Stabenow, Brown, Klobuchar, Bennet, 
Gillibrand, Donnelly, Casey, Walsh, Cochran, Roberts, 
Chambliss, Boozman, Hoeven, Johanns, Grassley, and Thune.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
 OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION 
                          AND FORESTRY

    Chairwoman Stabenow. Well, good morning. I will call to 
order the Committee on Agriculture, Nutrition and Forestry, and 
we have several things we need to do today.
    First, happy birthday to Senator Boozman. We want to 
celebrate. As you can see, we have a package of goodies for 
everyone, and I want to thank my staff and thank Jessie and 
everybody who put this together from the team as we honor four 
members that will be leaving us. When we look in this room, we 
are reminded every day of two--multiple Chairmen but certainly 
two, Senator Harkin and Senator Chambliss, whose portraits are 
here in front of us every day. We are losing both of them, 
which will be a real loss to the Committee, along with Senator 
Johanns and Senator Walsh, who are four distinguished members.
    In their honor today, we did reach out to do something as a 
snack from each State, so we do have popcorn from Iowa, and 
Nebraska, caramel corn in honor of Senator Johanns, and we have 
beef jerky from Montana, and we also have some Georgia pecan 
pralines in honor of Senator Chambliss.
    So I just want to take a moment in all seriousness to say 
that it has been a wonderful honor to chair this Committee, and 
with all of you, again, even though it may feel like old news 
talking about the farm bill, it certainly is an accomplishment 
that we were able to do together. That was something that was 
not only difficult but not replicated in many places, and it is 
something that we should, I think, together all feel very proud 
of.
    As we are having the change of the guard, I want to also 
thank Senator Cochran for his leadership as Ranking Member and 
Senator Roberts, who will be assuming the Chair. I was 
fortunate to have the opportunity to work with two 
distinguished Ranking Members in order to be able to get the 
farm bill passed twice--not once but twice. It reflects a lot 
of work of people around this table, and I want to start with 
just mentioning Senator Harkin, who is overseas for a day 
honoring a gentleman. He will be coming back and joining us 
tomorrow, but I do want to recognize Senator Harkin first as 
the--in order of seniority, Senator Harkin not only has chaired 
the Committee but really is the ``Father of Modern 
Conservation,'' as he has been called. He has been in both the 
House and Senate Agriculture Committees for 40 years and 
chaired the farm bill in 2002 and wrote the Conservation 
Stewardship Program and strengthened the farm safety net, he 
really was a driving force around bioenergy and nutrition. The 
Fresh Fruit and Vegetable Program we have in our schools today 
would not be there without Senator Harkin, and so we are very, 
very grateful to him and cannot imagine this Committee without 
his service.
    We equally cannot imagine, I cannot imagine this Committee 
without Senator Chambliss both as Chair, former Chair, and as 
someone who as Chair and Ranking Member, you have played an 
integral role, in fact, in passing this bill, all the way 
through to the conference committee. I appreciate your advice. 
I appreciate your involvement both publicly and behind the 
scenes to be able to help us move forward in a balanced way to 
be able to get this done. You played a critical role, as you 
always do, and will be greatly missed.
    I appreciate your personal interest in hunger issues and 
promoting nutrition and healthy lifestyles for young people as 
well. We share a common interest in that as well. You have made 
it clear that you are fighting for Georgia always, but 
understanding the differences in agriculture and working to 
have something that is an important piece of policy that works 
for all parts of agriculture. You will be missed, and we are 
very, very grateful for your leadership.
    Let me also mention--I feel like I should say ``Secretary 
Johanns,'' our only member who is a former Secretary of 
Agriculture and actually began talking about conservation and 
ways to modernize and reform it before we ever did a farm bill 
back when you were Secretary. We took a lot of your ideas and 
put them into what we did, which I am very proud that we have a 
Conservation Title that is reformed and streamlined, and I 
appreciate your efforts. I very much appreciate all of your 
advocacy around conservation, Sodsaver, and, again, working for 
a balanced approach but moving us in reform, which I know is 
very, very important for you as well. Risk management, both 
your time as Secretary and on the Committee, you have been a 
big advocate of letting the market and risk management and so 
on. So we are going to miss you. You have been a very, very 
important part. I hope you will continue in some way, I hope 
all of our members leaving will continue in some way to be a 
part of helping us move forward to support and strengthen 
agriculture.
    Let me finally just mention our newest member, Senator 
Walsh, who is no stranger to public service, and we thank you 
first for your incredible service in the Army National Guard 
and your service in Montana and your passion. One of the things 
I am proudest of in the farm bill is we actually have a new 
position and help for veterans who want to go back into 
farming, and we appreciate your fighting for Montana from day 
one, Montana agriculture, as well as all of the other issues 
you have been involved with. But you made it clear to me from 
the beginning what your focus was in terms of this Committee 
for Montana, and we are sorry to see you go. We appreciate all 
four of you.
    So I will be happy to turn to Senator Cochran, if he would 
like to make any comments, but we did not want to let this last 
official meeting of the Agriculture Committee come and go 
without saluting tremendous leaders who have made a permanent 
impact in our country. So in a moment, I will call on Senator 
Grassley. I do not know if Senator Cochran would want to make a 
comment, but I certainly would welcome it.

STATEMENT OF HON. THAD COCHRAN, U.S. SENATOR FROM THE STATE OF 
                          MISSISSIPPI

    Senator Cochran. Madam Chairman, I appreciate your 
continued leadership of our Committee. I want to join you in 
welcoming the Chairman of the Commodity Futures Trading 
Commission to this hearing. After being confirmed, I am sure he 
is off to a good start over there, organizing and pepping up 
the Commission so that we can be assured of the integrity of 
the process and the marketplace. We are happy to be able to 
have this opportunity to thank him for his service.
    Chairwoman Stabenow. Thank you.
    Senator Grassley?

STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. I appreciate the opportunity to say 
something about our retiring members. I have enjoyed working 
with them, and what I would like to do now is take an 
opportunity to say to each of them--I know Senator Harkin is 
not here, but Senator Harkin would believe I would say this 
anyway, and the other people that--and I hope I have said this 
to most every member I have served with when they have left. At 
least in recent years, I have tried to make a point of saying 
that to almost everybody. These colleagues after they leave the 
Senate, as long as I am in the Senate, they are always welcomed 
in my office, and I hope that they will call on us, whatever 
their life is after the Senate. I wish them well and have 
enjoyed serving with them.
    Chairwoman Stabenow. Thank you very much.
    Well, again, we appreciate it. One of the hallmarks of the 
Committee is our working together, and the four members that I 
mentioned--Senator Harkin, Senator Chambliss, Senator Johanns, 
and Senator Walsh--have been very, very important in that 
process.
    Yes, Senator Hoeven?

 STATEMENT OF HON. JOHN HOEVEN, U.S. SENATOR FROM THE STATE OF 
                          NORTH DAKOTA

    Senator Hoeven. Madam Chair, I would like to echo the 
comments of Senator Grassley and point out that to get a farm 
bill, we needed the North, we needed the South, and we needed 
the big ``I'' States, and these four represent the North, the 
South, and the big ``I'' States, and so obviously we could not 
have done a farm bill without them, and we are going to miss 
them a lot.
    Thank you.
    Chairwoman Stabenow. Thank you very much.
    Any other comments? We will let everybody munch on their 
goodies and are counting on all of you coming back and being a 
part in some way of helping us as we move forward here. I do 
not want to think about the next farm bill because we are still 
implementing this one, but we have got a lot of work to do 
moving forward on implementation.
    So let us now turn to the business before the Committee 
today, and we welcome Chairman Massad being back with us.
    More than 6 years ago, our country was hit with the largest 
financial crisis since the Great Depression. Trillions of 
dollars of wealth evaporated almost overnight, devastating 
millions of families, leaving them unemployed, underwater, and 
unable to keep a roof over their head or food on the table. 
This crisis also caused Americans to seriously doubt our 
Government's ability to properly oversee all of the players in 
the increasingly complex global financial system.
    Thankfully, we have come a long way since those dark days. 
We have had 59 straight months of job creation, and we are now 
creating jobs at a rate that we have not seen since the 1990s. 
But we still have a lot to do if people are going to have a 
real opportunity to get back to work and have the American 
Dream. There is more that needs to be done to ensure our 
financial markets are safe, transparent, and accountable.
    In the wake of the crisis, the CFTC was given important new 
authority to more effectively oversee and regulate our 
derivatives markets. Unfortunately, this new authority did not 
come with new resources. For the past 4 years as Chair of the 
Committee, I have repeatedly stopped efforts to unwind 
protections for families and farmers and businesses.
    I have made it also my priority to protect the integrity of 
financial reform and to secure the resources necessary for the 
Commission to enforce the law we passed in 2010.
    Unfortunately, the omnibus released last night does 
neither. Because of that fact, I do not support the policy 
rider in the appropriations bill. This policy rider is masked 
by a meager increase in the CFTC's budget.
    But that increase comes with conditions--handcuffs on the 
agency that Congress tasked with enforcing the law that 
Congress passed--in such a way that it represents what looks to 
me actually as a very serious cut.
    Given that the funding levels are well below the 
President's budget request, this should serve as a bucket of 
very cold water to those of us who want reform in our financial 
markets.
    Let me be clear: Dodd-Frank Wall Street reform is being 
undermined every day we underfund the agencies responsible for 
enforcing the law. That is clearly what is happening in the 
omnibus bill announced in the House yesterday. Failing to 
properly fund the Commission leaves our families, our farmers, 
and our businesses vulnerable to bad actors.
    We all remember the mass fraud committed by Peregrine 
Financial and MF Global in 2011 and 2012. Billions of dollars 
in customers' funds went missing at just those two firms. How 
can we expect Americans to trust in our markets when all of 
this money in U.S. accounts simply disappears overnight?
    Everyone benefits when our markets are safe and reliable. 
Financial institutions and end users benefit when our Nation's 
markets are recognized around the globe as being ultimately the 
most trusted in the world.
    Since the Dodd-Frank Act was signed into law in 2010, the 
CFTC has been a leader among our financial regulators, 
completing almost all of its new Wall Street reform rules.
    The Commission continues to show flexibility and improve on 
its earlier work to ensure that our commercial end users, 
energy firms, and agriculture producers are able to safely use 
derivatives markets to manage risk without undue burdens.
    In just the past 3 months, the Commission has undertaken to 
resolve several end-user concerns--we appreciate that--
including margin and recordkeeping requirements and relief for 
local, publicly owned utility companies.
    Some of the most critical work lies ahead on rules that 
have serious consequences on all market participants. The 
Commission continues to work on the position limits rule, which 
I know has been a focus of the Chairman and the CFTC 
Commissioners. Whether it is paying for gas at the pump or 
providing food to feed our families, when these markets do not 
work, consumers feel the pain.
    The CFTC's Enforcement Division, despite limited resources, 
also continues to work hard to keep our derivatives markets 
safe from fraud and abuse. Their numbers continue to prove it.
    In the past fiscal year, the CFTC collected over $3 billion 
in monetary penalties against companies across the country.
    The Commission also took a hard stance on the manipulation 
of foreign currency benchmarks, issuing orders that cost 
unlawful companies over a billion dollars. This is a success 
given the difficulty and the resources needed to successfully 
investigate and close a case of this scale.
    Despite the recent successes, the Commission has much work 
to do in 2015 and beyond.
    While we discuss the need to give CFTC resources to 
effectively enforce its responsibilities here at home, we must 
also be considering resources needed to take on cybersecurity 
attacks and global threats.
    The Commission must have the resources needed to 
effectively examine clearinghouses and exchanges to keep U.S. 
markets from being at risk to broader threats.
    We look forward to the Chairman's report on yesterday's 
meeting of the CFTC's Agricultural Advisory Committee, a 
Committee obviously very important to all the members of this 
Committee. I was pleased to see Secretary Vilsack in attendance 
to address the state of the agriculture economy.
    These are considerations that the Commission must focus on 
as the markets continue to grow and change and market 
participants continue to get comfortable with the new model of 
derivatives regulation.
    With the right enforcement and resources, I am confident 
the CFTC will create stronger, more transparent markets.
    I would turn to my Ranking Member, Senator Cochran, if he 
would like to add anything.
    Senator Cochran. Madam Chair, only to ask unanimous consent 
that my full statement welcoming our distinguished witness and 
challenging our Committee to do its job of oversight, as you 
are leading us, and I thank you for that. I am happy to yield 
to others--we have a big crowd here--to get their questions in, 
so I will withhold any questions until later
    [The prepared statement of Senator Cochran can be found on 
page 35 in the appendix.]
    Chairwoman Stabenow. Thank you very much, and we will now 
turn to our first and only witness this morning, Chairman 
Timothy Massad, who we all know. The Committee held a 
nomination hearing in March of this year, followed by 
confirmation in early June. We very much appreciate your coming 
back before the Committee. We, of course, welcome your public 
statements, anything for the record as well, and then we will 
open it for questions. Thank you.

    STATEMENT OF THE HONORABLE TIMOTHY G. MASSAD, CHAIRMAN, 
      COMMODITY FUTURES TRADING COMMISSION, WASHINGTON, DC

    Mr. Massad. Thank you, Chairwoman Stabenow, Ranking Member 
Cochran, and members of the Committee. I am pleased to testify 
before you today on behalf of the Commission. I appreciate the 
opportunities I have had to meet with many of you, and I look 
forward to this Committee's continued input.
    Let me also add my thanks and recognition to the retiring 
members--Senators Harkin, Chambliss, Johanns, and Walsh. It has 
been a pleasure working with you.
    I also want to thank you, Chairwoman Stabenow, for your 
leadership of this Committee and your advice and counsel. I 
look forward to continuing to work with you, and, of course, I 
look forward to working with Senator Roberts as the new Chair.
    In June of this year, two of the other Commissioners and I 
took office, and the last 6 months have been a busy and 
productive time for us. I want to thank my fellow 
Commissioners, all of whom are extremely dedicated and bring 
good experience and judgment to the table.
    Chairwoman Stabenow, I think you really said it best in 
terms of the importance of the additional responsibilities we 
were given in light of the crisis, which was the worst 
financial crisis this country has experienced. In my written 
testimony, I discuss our work in implementing those new 
responsibilities to regulate the swaps market.
    We have been just as focused on our traditional areas of 
responsibility: the futures and options markets. These markets 
cover many diverse products today, and as they had their 
origins in agricultural products, and those remain very 
important to our work. Just yesterday, we did have a very 
productive meeting of our Agricultural Advisory Committee, of 
which I am the sponsor.
    We were honored to have Secretary Vilsack join us to 
discuss the state of the agricultural economy. It was an 
excellent opportunity to gather input directly from farmers, 
ranchers, and others who rely on these markets day in and day 
out.
    As the Committee knows, Title VII of the Dodd-Frank Act was 
a response to the part swaps played in the worst financial 
crisis since the Great Depression. The CFTC was given primary 
regulatory responsibility for bringing this market out of the 
shadows. Thanks to the agency's hard-working professional 
staff, we have made substantial progress in implementing these 
reforms.
    Today swaps transactions are being cleared and reported. We 
have increased oversight of key market participants. Trading of 
swaps on regulated platforms is increasing, and transparency 
and strong risk management are being achieved.
    But in all of these areas, there is more work to do. For 
the last 6 months, we have made it a priority to review our 
roles, particularly to address some of the concerns of 
commercial end users.
    To that end, the Commission has taken a number of actions 
designed to make sure that our markets work well for the 
manufacturers, farmers, ranchers, and other businesses that 
rely on these markets to hedge commercial risk.
    This includes matters related to margin and the posting of 
collateral, reporting and recordkeeping, forward contracts, and 
other areas. We have been listening carefully to market 
participants and working with them to make sure the rules work.
    We are also working on the few Dodd-Frank rules that remain 
to be finalized, including the position limits rule and a 
margin rule for un-cleared swaps that, consistent with 
congressional intent, exempts end users.
    In all this, a priority is working with our international 
counterparts to build a strong global regulatory framework. We 
are currently working with our international colleagues in 
particular on clearinghouse recognition and regulation, an 
issue that concerns the futures and options market just as much 
as the swaps market.
    We are also very focused on data collection and analysis 
and swaps trading issues, and cybersecurity, which is perhaps 
the single most important new risk to financial stability, is 
also a priority.
    We are also monitoring developing issues, including the 
increasing use of automated trading strategies and virtual 
currencies like bitcoin.
    We continue to maintain a strong compliance and enforcement 
program. Robust enforcement is crucial to the integrity of our 
markets. Most recently, we ordered five of the world's largest 
banks to pay $1.5 billion in fines and take remedial actions 
because they attempted to manipulate foreign exchange rate 
benchmarks.
    In all of these areas, there is much more we could and 
should be doing, but we simply are not able to do so, to do as 
much as I believe the American public deserves because of 
resource constraints. We are fortunate to have a dedicated 
professional staff, and we will do all we can with what we 
have. But our current budget significantly limits our ability 
to respond.
    We are grateful that the omnibus currently being considered 
would provide an increase, but I am convinced the need is far 
greater than that.
    Although this would start to address some of the very dire 
needs we have, without additional resources our markets cannot 
be as well supervised, customers cannot be as well protected, 
our technology cannot keep up, and market transparency cannot 
be as fully achieved.
    The United States has the best financial markets in the 
world, the most dynamic, innovative, competitive, and 
transparent. They have been an engine of our economic growth 
and prosperity. Good regulation is necessary to keep them that 
way, regulation that ensures integrity and transparency and 
creates the foundation for the markets to thrive.
    Thank you again for inviting me today, and I look forward 
to your questions.
    [The prepared statement of Mr. Massad can be found on page 
36 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    First let me ask a follow-on as it concerns resources. One 
of the most frustrating challenges that market participants 
face is regulatory uncertainty, and a common complaint I hear 
relates to registration and compliance delays. Given the CFTC's 
new responsibilities regulating the swaps market and 
considering the growth of the futures and options markets, does 
the Commission have the needed resources to provide regulatory 
certainty to meet deadlines?
    Mr. Massad. Thank you, Chairwoman Stabenow, for the 
question. It is very, very difficult. We are stretched in so 
many areas. We have over 100 applications from swap dealers 
that are simply provisionally registered that we need to get 
through.
    We have 22 applications for swap execution facilities that, 
again, are just temporarily registered. We have a variety of 
other applications pending.
    We are stretched in all these areas. We cannot respond in 
the timely and thorough manner that we need to do our job well, 
and that includes not just registrations and applications. But, 
of course, whenever industry has an issue with how our rules 
are working, we would like to be able to be very responsive, to 
look into it quickly, but it is simply very, very challenging 
with the resources we have.
    Chairwoman Stabenow. Thank you. On a different note, 2 
weeks ago my colleague from Michigan and friend, Senator Levin, 
held a 2-day investigative hearing regarding the relationship 
between banks and commodity ownership, and a significant part 
of that focused on aluminum prices in the London Metal 
Exchange. I asked the CFTC over a year ago to report on its 
authority to regulate the LME, and in December of 2013, you 
responded, confirming that the CFTC has authority and stated 
that the LME's foreign board of trade registration was pending.
    Can you provide an update on LME's registration status and 
what the Commission is currently doing to resolve this aluminum 
issue with its current authority?
    Mr. Massad. Certainly, Senator. Thank you for the question, 
and I share your concern about this situation. I have also 
visited with Senator Levin about it. It is an issue that we are 
paying a lot of attention to.
    Let me just say I have personally met with the Aluminum 
Users Group, I have met with the LME and their regulator in the 
U.K., and we are watching this very, very closely. The LME has 
proposed some reforms. We are looking at how those work as they 
implement them, and we are looking at whether more is needed.
    With respect to our authority, we have indirect authority, 
given their FBOT application, but their primary regulator is in 
the U.K., and the contract is one regulated by the U.K. We do 
not have direct jurisdiction over the warehouses which are at 
issue here. But I can assure you that we will continue to 
follow this situation very closely and engage with the LME, the 
U.K. authorities, and the aluminum users and work toward 
resolving this problem.
    Chairwoman Stabenow. So you are speaking about indirect 
authority.
    Mr. Massad. Yes.
    Chairwoman Stabenow. But from the American interest 
standpoint, do you think at this point that you have enough 
authority to prevent fraud and manipulation of commodity 
prices?
    Mr. Massad. Well, we always have the authority to go after 
fraud and manipulation in the markets, and so we are very 
mindful of that, and we will use that authority anywhere we 
can. As I say, in this case, what is going on in part is the 
LME is looking at trying to reform some of its warehouse 
arrangements. We are hopeful that can help address this 
problem, but we will continue to look at whether additional 
actions are needed if those reforms do not work.
    Chairwoman Stabenow. Back to talking about resources, the 
Commission has recently been very successful, as you said, in 
closing benchmark manipulation enforcement cases, including 
benchmarks like foreign exchange and LIBOR which have affected 
everything from home mortgages to student loans. Can you 
discuss just a little bit more about the amount of resources 
and technology that is needed to bring these types of cases?
    Mr. Massad. It is very challenging. You know, in the 
foreign exchange benchmark case, we were negotiating with a 
number of banks. We issued orders with respect to five. We had 
to have separate teams working on each of those. These are very 
intensive investigations to look at all the e-mails and all the 
documents and look at the market practices here. So, again, we 
are very stretched.
    Now, we are also at the same time pursuing all sorts of 
other matters in our Enforcement Division, whether it is 
traditional Ponzi schemes or commodity pool fraud, precious 
metal scams that we have seen a lot of against retirees, 
spoofing, and other sorts of more sophisticated types of fraud 
that we are seeing now that our markets are becoming 
increasingly electronic.
    But it is essentially a triage operation. We simply do not 
have the resources to go after all the things that we should be 
going after and that would enhance the integrity and strength 
of our markets. That is why I think additional resources are 
such a good investment for our economy and for the American 
people.
    Chairwoman Stabenow. Thank you. I could not agree more.
    Senator Cochran?
    Senator Cochran. Let me ask you in reference to the last 
comments you made, what is your impression of what a fair level 
of appropriation would be to maintain the staffing and the 
quality of the staff that is necessary to restore morale at the 
Commission?
    Mr. Massad. Well, the President's most recent budget 
request was for $280 million. I think that was entirely 
justified, and we are looking with respect to fiscal year 2016 
as well.
    Again, we are just stretched in all areas. Our markets, our 
responsibilities were so greatly increased by Dodd-Frank. The 
swaps market, it depends on how you measure it, but people will 
say it's a $600 trillion market, in many ways much bigger than 
the futures market. The complexity of these markets is great. 
The technology that drives these markets is so important. 
Things like cybersecurity is such a big risk to our markets. We 
simply do not have the resources to be examining critical 
infrastructure such as our clearinghouses and exchanges 
frequently enough on issues like cybersecurity. So it is just a 
real challenge for us.
    Senator Cochran. Well, thank you very much.
    Chairwoman Stabenow. Thank you.
    Senator Brown is next on the list, but I do not--at this 
point, unless he appears in 2 seconds, we shall move on.
    Let me also say it is wonderful to see so many colleagues 
here, and we will ask everyone to be mindful of the 5-minute 
rule. So at this point, Senator Walsh--and Senator Walsh is 
also not here, so we move on to Senator Bennet.
    Senator Bennet. Thank you, Madam Chair. It is nice to be 
recognized no matter how hard you try to get somebody else to 
talk.
    [Laughter.]
    Senator Bennet. Chairman Massad, it is great to see you 
again. I want the Committee to know that I appreciate very much 
your help a number of years ago drafting what became the ``Pay 
It Back Act'' that made sure that the money that came back from 
TARP was actually used for deficit, not spent again, and I want 
to thank you for your help with that.
    I was pleased to see in your written testimony that 70 
percent of the transactions you regulate are being cleared 
today compared to 15 percent in 2007. When we worked on Dodd-
Frank, we wanted to ensure that the clearinghouses themselves 
did not become a source of systemic risk.
    Could you share with the Committee your sense of just how 
concentrated the clearing process has become? Are the majority 
of these transactions occurring through many clearinghouses or 
just a few? How many clearinghouses are there? I will submit my 
other questions for the record and yield to my friend, or 
however you want to do it.
    Chairwoman Stabenow. Well, go right ahead, and we will just 
go back and forth.
    Senator Bennet. All right, Mr. Chairman. So that is the 
question. We did not want the clearinghouses to become a 
systemic risk. How are things going?
    Mr. Massad. Senator, that is an excellent question, and I 
share your concern about clearinghouse risk. It is something 
that we need to be paying a lot of attention to; we are paying 
a lot of attention to it. You know, the mandate that we clear a 
lot of these transactions I think was a very, very good policy 
decision. It does allow us, clearinghouses do allow us to 
monitor and mitigate the risk of these bilateral transactions 
much better, but they do not eliminate the risk. We have to be 
very vigilant with respect to CCP risk, and we are focusing on 
that quite a bit in terms of looking at financial resources 
that they have, managerial/operational resources. There are 
systems for margining and measuring the risk, cybersecurity, as 
I alluded to before.
    You asked about the concentration. Most swaps are cleared 
in just a couple of clearinghouses, and this also goes to our 
cross-border issues where I have worked very hard with the 
Europeans on working out a good arrangement on clearinghouse 
supervision because some of the main clearinghouses are in 
Europe, and a lot of our transactions are cleared over there.
    Senator Bennet. So how would you evaluate the systemic 
risk?
    Mr. Massad. Well, again, I think it was the right thing to 
do to mandate clearing, but we have got to be constantly 
vigilant on the issue of clearinghouse strength and stability.
    Senator Bennet. Is there any evidence--you mentioned your 
discussions with your European markets. Is there any evidence 
to indicate that the swap transactions are migrating to less 
regulated markets than our own?
    Mr. Massad. Well, in terms of the clearing, a lot of it is 
happening in a couple of clearinghouses, one in particular in 
Europe. We are working very closely with the Europeans to make 
sure we have a good system of regulation, and I think we will 
land in a good place there.
    The other thing I would say about the overall risk is I am 
working very closely with the Federal Reserve on these 
questions, too, since we have designated a couple of the 
clearinghouses as systemically important. That means the Fed 
does have certain interests here as well. Governor Powell and I 
in particular maintain a constant dialogue on these issues.
    Senator Bennet. Okay. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Roberts? Then we will come back to Senator Brown.
    Senator Roberts. I would be more than happy, Madam 
Chairman, to yield to my good friend.
    Senator Brown. I have got no more important schedule than 
the rest of you.
    [Laughter.]
    Senator Brown. That is really kind of you. You are going to 
be the Chairman.
    Senator Roberts. Well, you are going to have more time 
since you got off the Ethics Committee, which I bitterly 
oppose.
    [Laughter.]
    Senator Brown. The word is out.
    Senator Roberts. The word is out. I am sorry. That is all 
classified. But everything else in the world is not classified 
now, so it does not make any difference.
    Chairwoman Stabenow. All right. Now that you have used your 
time, we will move on----
    [Laughter.]
    Chairwoman Stabenow. We will start the clock again. Senator 
Roberts?
    Senator Roberts. Madam Chair, I want to thank you for your 
hard work, your dedication, and your passion for agriculture. 
If there is a synonym for ``perseverance,'' it has to be 
``Debbie Stabenow,'' and I truly want to thank you for that and 
am looking forward to working with you and also the CFTC. Mr. 
Chairman, thank you for coming.
    I have got quite a bit of commentary here about Dodd-Frank-
Bennet--what happened----
    Chairwoman Stabenow. He is leaving.
    Senator Roberts. He just left. I would, too. At any rate, 
on the regulatory framework that the Commission has created 
after Dodd-Frank, we made some progress. I call that ``low-
hanging fruit,'' so I have some others a little higher up on 
the branches, but I want to get right to the questions.
    Are you worried about the significant number of small and 
medium-sized future commission merchants--those are the folks 
that help the farmers and ranchers, the FCMs--which primarily 
serve agricultural producers that are closing and 
consolidating? I would point out that 10 years ago, in 2003-04, 
we had 102; now we have 69. That is a 30-percent reduction. Any 
comments?
    Mr. Massad. Thank you for the question, Senator. I share 
your concern about this. We want to make sure we have a very 
strong and diverse futures commission merchants sector so that 
the smaller players can continue to operate effectively and 
serve their customers.
    We have seen concentration. I think it is driven by a 
number of things. One of them is a very low interest rate 
environment since a lot of these firms make some of their money 
on the interest on the funds that they hold.
    In terms of our regulation, we have certainly been mindful 
of this. Recently we proposed amendments to one of our rules 
that I think will help some of the smaller FCMs in terms of the 
residual interest issue, and I would be happy to work with you 
on this because we are----
    Senator Roberts. Well, I appreciate that. I do not mean to 
interrupt here, but we are going to be on a time schedule here, 
and I apologize for doing that.
    Mr. Massad. Sure.
    Senator Roberts. Thank you for taking a second look at 
several of the consumer protection rules. I want to point out 
that Senator Heitkamp and I introduced legislation so farmers 
and ranchers would be certain that this would not occur at any 
point in the future.
    I am talking about basically the automatic change in how 
future commission merchants collect residual interest. But you 
are studying it after, I think, we have solved it. You are 
studying it. I would just as soon use that very scarce money 
for something else if, in fact, we fixed it.
    Basically, I wanted to ask you about 140 staff-issued no-
action letters that delayed or replaced rulemakings by the 
Commission. These were issued with little or no oversight and 
zero transparency. Come to think of it, Madam Chair, I think 
this is a discussion that we probably ought to have, that this 
is going to take a little while, I think, in regards to time. 
But I am very concerned about the no-action letters. Sometimes 
they work to our favor; sometimes they do not. Many of them 
just are not--I do not think the members of the Commission are 
aware of them.
    Are you also worried that foreign businesses are choosing 
to relocate their businesses and capital away from the United 
States markets?
    Mr. Massad. Senator, I am very mindful of the cross-border 
issues, but I think we are working on them, and we are making 
good progress. I think it is important to remember that we 
started with a market that was entirely unregulated and that 
was global.
    It is also a highly mobile market. This Congress made the 
policy decisions--I think they were good ones--that we bring 
this market out of the shadows, and that was consistent with 
the commitments of the G-20 nations. But all of these nations 
are moving at different paces. They all have their own 
political process and regulatory traditions.
    We were first in a lot of ways, which is a good thing, in 
terms of implementing these rules, and we are working with 
other jurisdictions to harmonize things, and I think we will 
get there.
    So I think we are addressing the concern, but we are very 
mindful of it.
    Senator Roberts. Chairperson Stabenow mentioned the budget. 
I just want to point out that the CFTC's budget has already 
seen a 27-percent increase since fiscal year 2010. That is up 
from $169 million to 215. The new omnibus will add another 16 
percent to $250 million.
    That is about a 50 percent increase to 2010. I know the 
CFTC is faced with many new issues, many new challenges. Almost 
any regulatory agency that we have is in the same boat. But 
that is a 50-percent increase. Somehow or other we are going to 
have to learn to live within our means. We are going to try to 
be as helpful as we possibly can. But I simply wanted to point 
that out.
    For the first time in a long time, I am yielding back with 
20--no, I am not. I am 24 seconds in the red. I apologize.
    Chairwoman Stabenow. Thank you very much.
    Senator Brown?
    Senator Brown. Thank you. Thank you, Madam Chair, and thank 
you, Senator Roberts. Thanks for the work you have done on this 
Committee, especially with CFTC and financial rules and 
enforcing and oversight.
    I think a number of us are not happy with how the 
appropriations process this year is, particularly with 
potential repeal of the 716 provision, a provision written in 
this Committee by one of your predecessors, the Chairwoman from 
Arkansas, on financial regulations and derivatives.
    Clearly doing that through the appropriations process 
rather than this Committee undermines this Committee and also 
undoubtedly puts taxpayers at risk, something that I would 
think we would have learned that lesson, so that is 
unfortunate.
    Let me follow up on something that the Chairwoman 
mentioned, the discussion, Mr. Chairman, of the banks' 
involvement in physical commodities, particularly aluminum. 
Your predecessor told me that CFTC ``has clear authority to 
address fraud, manipulation, and other abuses in the aluminum 
market.'' Another Senator from Michigan has had a number of 
hearings in his oversight committee. I have had a couple of 
hearings in the Banking Committee on this issue of manipulation 
in aluminum and oil tankers and electricity generation and 
other things.
    Chairman Gensler specifically cited CFTC's authority over 
foreign boards of trade, but in an October letter and today's 
testimony, you say that your authority there is limited.
    My first question is: Who is right--Chairman Gensler or 
you?
    Mr. Massad. I agree with Chairman Gensler's statements. I 
do not think mine are inconsistent, Senator. We do have 
authority over fraud and manipulation. We also have authority 
with respect to their FBOT status, but that is a different 
status than our own, than for direct registrants. My comments 
earlier were simply meant to underscore that we take this issue 
very, very seriously. We are looking at it in a number of ways, 
and we will continue to do so and continue to work on it. I 
know it is a concern. I know it is a concern of yours with 
respect to the queues that we are seeing in these aluminum 
warehouses.
    As to the issue of banks' ownership, also, as I have said 
before, I think the issue of whether banks should even be in 
some of these businesses is an important one for us to 
consider. It is not under our jurisdiction, but I have always 
said I would be happy to help the banking regulators--
    Senator Brown. Good. Whatever is in your jurisdiction, time 
really is of the essence here. The Levin report recently said 
that Goldman's activity in aluminum--this is just narrowly 
aluminum--``raises troubling issues involving conflicts of 
interest, market distortions, and the potential to gain unfair 
trading advantages.''
    You can see that if there is a huge oil spill with billions 
of dollars of liability, what that can do to the stability of 
the financial markets if owned by one of the large banks. You 
can see that even though they say there is a wall between the 
trading desks and the information gleaned from their ownership 
of energy markets, part of the energy markets, there may be a 
wall, but somewhere at the top of that firm somebody knows 
something--knows everything about both sides of that wall.
    So the trading desk may be walled off from the ownership 
decisions, but in the end they are not, and that causes a 
clearly unfair market--clearly causes unfair market advantages 
for a bank versus others in the real economy.
    So I hope you will be as aggressive as you can be there.
    Let me ask one more question, Madam Chair, if I could.
    Chairwoman Stabenow. Sure.
    Senator Brown. The need for CFTC's cross-border swaps 
rules, clearly you were speaking to Senator Roberts at it a 
minute ago, from Long Term Capital Management in 1998 to AIG to 
JPMorgan's London whale just a couple years ago. Five of my 
colleagues in 2013 joined me in warning that banks would ``de-
guarantee affiliates in order to opt out of CFTC rules.'' To no 
one's surprise, they did just that. In September, you said you 
were consulting with bank regulators on the risks that de-
guaranteeing would pose to our whole financial system.
    Tell me what specifically you are doing to protect the U.S. 
financial system and taxpayers from risks in the foreign 
offices of U.S. banks. Will you make the results of this review 
public?
    Mr. Massad. Thank you for the question, Senator. We are 
very concerned about this. Shortly after I got into office, I 
asked our staff to look into this, examine it, ask the banks a 
number of questions.
    We got some answers from that. We have shared those with 
the banking regulators, and I am happy to talk about that. 
Basically a number of these banks have de-guaranteed a lot of 
their swaps. I think the question, though, is: Is there still a 
risk posed when you have an unguaranteed offshore affiliate 
engaging in these transactions?
    Now, it may comply with our rules, but because it is still 
part of that overall banking enterprise, the bank holding 
company, I think it is a question for us, for the prudential 
regulators to think about. That is why I took the action of 
sharing what we are doing with the banking regulators, and we 
are engaging with them on that.
    Senator Brown. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Now we will move to Senator Boozman. Again, happy birthday. 
Oh, excuse me. I had Senator--did you wish to defer?
    Senator Boozman. Well, I think he was here first.
    Senator Johanns. I think we walked in together.
    Chairwoman Stabenow. Well, if you would like to defer to 
Senator Johanns, that--this is the day of people deferring to 
other people to speak. I apologize. On the list here, Senator 
Boozman----
    Senator Johanns. That is all right.
    Chairwoman Stabenow. Senator Johanns.
    Senator Johanns. I think it was a tie, actually.
    Let me start off, Madam Chair, and offer a couple of 
things. One is my appreciation for the way you have handled 
this Committee.
    I have seen you work the floor, if you will, and I could 
observe my opinion was as valued as the opinion of anybody on 
your side of the aisle. I think we all knew that, and we all 
appreciated that immensely.
    The second thing I would say is this is, I think, one of 
those committees here in the Senate where you just leave your 
party registration at the door. We worked to solve problems and 
pass farm bills, do a lot of good things for the country, and 
that is what has made this Committee so enjoyable.
    I am going to miss it, and it is somehow appropriate that 
my last Committee hearing as a United States Senator is in 
Agriculture. I have always said that for me working on 
agriculture, any day is a good day. So it is great to be here.
    Mr. Chairman, I will offer an observation on capital, but I 
really want to talk to you about position limits. The cross-
border issues, as you know, are real. I have been talking about 
the cross-border issues since the idea of Dodd-Frank first came 
about in my role as a member of the Banking Committee and my 
role here.
    My observation over the years is that capital tends to flow 
to the areas of least resistance from a regulatory standpoint. 
You know, I remember as a mayor when we were in competition 
with the city across the State line, we would offer to fast-
track permits and do a whole bunch of things. That regulatory 
atmosphere had a huge impact on the decision making. The same 
way when I was Secretary of Agriculture, same way when I was 
Governor of Nebraska.
    So I just offer to you we cannot pass laws that bind 
Singapore or London. We can ask for their cooperation. We can 
plead for their cooperation. We can do other things. But at the 
end of the day, I think in an atmosphere of overregulation, we 
are always going to lose. That is just the unfortunate reality 
we are dealing with. So I think it is incumbent upon you to 
tell us when we are overdoing it, when we have gone too far.
    Now, if I do not jump into position limits, we are not 
going to get there, because we could have a huge conversation, 
and I would welcome that, but maybe not in this Committee here.
    Mr. Massad. I would be happy to try to address it briefly, 
Senator. I share your concern that we have to look at this as a 
global market, that capital is highly mobile. We also have our 
responsibilities under the law to implement the reforms, and 
Congress has made it very clear. They gave us deadlines to do 
that, and that I think has created a situation where we moved 
faster than other jurisdictions.
    But I am very committed to trying to work this out, and I 
think we are getting there. I view it as a glass half full. It 
will take time. It is not going to happen overnight, but I 
think we are making good progress. We have a new Commissioner 
in Europe, Lord Hill, who has taken over. He and I are off to a 
good start. I have had a lot of meetings.
    I have been overseas three times on a number of these 
issues and met with my international counterparts here. There 
is work going on a lot of fronts to try to harmonize rules.
    Senator Johanns. Let me shift to position limits before I 
run out of time here. I appreciate the fact that you have the 
Agricultural Advisory Committee up and running. Thank you for 
that. I think that is important, very, very important.
    One of the issues--and I think it was yesterday that you 
had the group together. One of the issues raised probably by a 
lot of industries, but I will focus specifically on the cattle 
industry, is the whole issue of position limits. They need 
liquidity in the marketplace. They need to be able to manage 
their risk. They worry that the proposed rules are going to 
damage their ability in the arena of managing risk. You have 
heard all of this, I am sure.
    Explain to us, if you would, where are they right and where 
do you think they are missing the point? I have heard from both 
Nebraska cattlemen and national cattlemen on this, and like I 
said, I suspect you have, too. In fact, I have had copies of 
the letters sent to your attention. Where are they right and 
where are they wrong?
    Mr. Massad. Thank you for the question, Senator. I think we 
are very mindful of their comments, and as to where they are 
right and where they are wrong, I guess I would answer in the 
following way: Position limits are a very important tool in the 
toolkit to address excessive speculation, but at the same time, 
we have to make sure we allow bona fide hedging.
    The question is: How do you draw the bright lines that 
distinguish between true bona fide hedging by commercial 
players versus what speculators might do? We do not have the 
resources, we will never have the resources to look at facts 
and circumstances of every transaction, to look at intent.
    So the challenge for us is trying to write bright-line 
rules in an area that is very complicated so that we allow what 
is really legitimate hedging versus excessive speculation.
    Senator Johanns. Madam Chair, thank you. I am out of time.
    Chairwoman Stabenow. Thank you very much.
    Senator Boozman? Oh, excuse me. You know what? Actually, I 
was so intent on getting you back in order that I am missing my 
side of the table, so I am going to retract that. I was trying 
to get back to you, and I apologize because it is actually 
Senator Casey's turn.
    Senator Casey. Madam Chair, thanks very much, and I first 
want to commend your work leading this Committee and your 
efforts on an ongoing basis, as Senator Johanns noted, to be 
collaborative on both sides of the aisle. We are grateful for 
that and your team who made that possible. We are looking 
forward to a new session of Congress under new leadership, but 
we are certainly going to miss your leadership. We appreciate 
that.
    Mr. Chairman, I wanted to walk through maybe one 
fundamental issue, but before that, I do want to touch on the 
issue of resources. When I was the auditor general of my State, 
my main job was to audit hundreds and hundreds of State 
agencies, and we would often conduct financial audits which 
were kind of routine, but it was a way to discharge the 
responsibility to be a watchdog. We also did a lot of 
performance audits where we looked at results and 
effectiveness.
    I was very critical of agencies across the board when they 
misspent money, when they were not getting the job done, so I 
think I have pretty good credentials on the ``spend taxpayer 
dollars wisely'' concerns that people have. I do think, though, 
that you need more resources. We were told this morning--and I 
know this is by way of repetition, maybe--that the omnibus we 
are considering now would fund CFTC at $250 million, we are 
told, which would be $30 million below the President's request. 
I am troubled, more than troubled by that. I am concerned about 
that, especially in the context of what happened, the prelude 
of the foundation of the Great Recession and what you and your 
agency can do to prevent the next Great Recession, God forbid. 
I believe resources are part of it, so I will be one of many 
people arguing for the next number of months and years to give 
you the resources you need.
    One of the reasons you need resources is because of 
enforcement. It is not something new but something that I know 
has been a priority for you. I am told that in fiscal year 2014 
CFTC imposed $3.3 billion in monetary sanctions, almost double 
the previous record total from fiscal year 2013 of $1.7 
billion. I just want to ask you, let us set aside the resource 
question for now, important though it is: What are the factors 
driving that increase in the monetary sanctions?
    Mr. Massad. Well, it is really, Senator, a question or an 
issue of the fact that there are a lot of things that we are 
going after. Unfortunately, there is still a lot of fraud out 
there. You know, a big part of it was the foreign exchange 
benchmark case. We are continuing to see attempted manipulation 
with respect to benchmarks, and it is so important that we 
continue to address that. We addressed it previously with 
respect to LIBOR. But this will be ongoing.
    At the same time, it is compromised, that number is 
compromised of a lot of smaller actions. We had a number of 
cases with respect to precious metal frauds. We had a number 
of--each year we have a number of Ponzi schemes that we go 
after.
    Again, the challenge for us is we simply do not have the 
resources to go after all the things that we would like to go 
after, and you are constantly making choices about whether you 
even investigate something or how far you carry that 
investigation.
    Senator Casey. Well, I would hope that more of us would 
be--even as we are advocates for greater resources in the 
context of law enforcement, for police and other law 
enforcement across the country, in the world of the markets, in 
the world of making sure that folks do the right thing in that 
context, we hope we can continue to provide the resources so 
that you can be the cop on the beat in this world that we hope 
you could be.
    Lastly, I will just make a comment, and if you want to 
follow up, you could, and you can do it more extensively in 
writing. The efforts you have undertaken--I know you still have 
a ways to go, but the efforts you have undertaken to focus on 
some regulatory relief for end users, in our State, like a lot 
of States here, that becomes important to folks in a whole 
range of different industries, steel being one, often any 
manufacturing-based industries. So we appreciate that effort.
    I know it is difficult to manage when you have new 
legislation, new regulations to be able to calibrate that, but 
we are grateful for your efforts.
    Mr. Massad. Yes, well, thank you, Senator, for that. I am 
very committed to that. My focus is very much the following: 
Our task is not simply to implement this regulatory framework 
and bring the swaps market out of the shadows, continue to 
oversee the futures and options markets, but to do so in a way 
that allows these markets to thrive. That means making sure 
that these markets continue to work effectively and efficiently 
for end users. That is why we have tried to be very responsive 
to their concerns.
    Again, it does come back to resources. You know, we want to 
be able to respond as quickly as possible and look into these 
things and study them and then take the appropriate action. So 
we are hopeful that we can do all we can in this area.
    Senator Casey. Thank you. I appreciate it.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Finally, Senator Boozman.
    Senator Boozman. Thank you Madam Chair, and I want to echo 
the comments of the rest of the Committee about enjoying 
working with you and how you have always been very, very open, 
always willing to listen, and really do your best to solve the 
problems that we have. Also your staff, they have done a 
tremendous job likewise working with our staff, working with 
myself. So thank you very much.
    Mr. Chairman, I also have concerns about the commercial end 
users, and I know that you have had several questions in that 
regard. In regard to agriculture, can you talk a little bit 
about the Agricultural Advisory Committee, if that is going to 
be a help in that regard of trying to sort some of these things 
out?
    Mr. Massad. Absolutely, Senator. Thank you for the 
question. You know, I am sponsoring that committee because I 
recognize the importance of the agricultural products in our 
markets, and I think the committee is a very, very helpful way 
for us to get input. All of our advisory committees are, and 
let me just say that the other Commissioners I think are 
equally committed to using the advisory committees to get good 
input from market participants.
    We had an excellent meeting yesterday. Not only did 
Secretary Vilsack come and share his thoughts, but we had a 
good discussion of some of the issues related to position 
limits, to residual interest, and we will continue to do that 
and continue to get input, not just through the committee but 
separately in other meetings. I have made it very clear that my 
door is open. I will try to meet with people as much as I can 
to hear their concerns. We have acted on things. We acted on 
the residual interest issue. We have acted on some reporting 
and recordkeeping issues that I know were of concern to 
agricultural interests. The margin rule exempts end users. We 
will continue to take these sorts of actions.
    Senator Boozman. Good. Very good.
    In regard to the morale issue, I know that you feel like a 
situation of maybe not getting the funding that you need. What 
other areas are out there? What can the Committee help you with 
in regard to that particular area?
    Mr. Massad. I am sorry. To the funding?
    Senator Boozman. To the morale issue. Funding is one thing, 
but it goes beyond that. Again, what can we do to help?
    Mr. Massad. I appreciate the concern. Let me say on the 
morale issue I think there are probably a number of historical 
reasons that have affected that. We recently had some feedback 
on that was done from a survey done in April.
    My view of it is the following: that we start from there, 
we are going to address it. I think a lot of it is just making 
sure that people understand the mission, they understand how 
their work is connected to the mission, and they have 
sufficient opportunity for input.
    Obviously the funding issue has been a big one. The 
sequestration and furloughs were important. But we will address 
this. I am already seeing some changes.
    I appreciate your offer in terms of the Committee's help. 
Let me give that some thought, but certainly the fact that this 
Committee does act, as a number of members have said, in a 
bipartisan fashion and has shown great interest and support for 
our issues, and obviously your support and increasing our 
funding, all those things will help.
    Senator Boozman. I was going to ask you about your 
priorities, but you mentioned that right at the very top is the 
cybersecurity issue.
    Mr. Massad. Yes, absolutely.
    Senator Boozman. That is such an important issue not only 
for you but the rest of Government. I am almost thinking out 
loud in asking the question, but do we do that independently? 
Does your agency do that as an agency and somebody else in a 
similar situation do that? How do we address this? Talking 
about funding, there is a finite amount of money to go around. 
How can we be efficient in solving this huge task that really 
is the problem of the day?
    Mr. Massad. That is an excellent question, Senator. I think 
there is actually a lot of coordination going on among 
Government agencies. I attended earlier this week a meeting 
that Treasury Deputy Secretary Raskin holds periodically of a 
number of the financial regulators to talk about cybersecurity. 
There is a number of vehicles that have been set up to share 
information, share ideas, coordinate action.
    I am actively coordinating with the Federal Reserve on 
this, given their interest. Governor Powell and I have met, and 
our teams have met. Their staff has participated in some of our 
reviews.
    So I think we will continue to coordinate this, and I could 
not agree with you more as to the importance of this issue. It 
is clearly an issue that we have to be devoting a lot of 
attention to.
    Senator Boozman. Good. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Donnelly?
    Senator Donnelly. Thank you, Madam Chair. I also want to 
say thank you for your leadership on the Committee, how 
privileged I felt to be a part of this, how devoted you have 
been to the ag community in my State and to the whole country, 
and your staff as well. Thank you very, very much.
    Mr. Chairman, good to see you again, sir. As you know, I 
have had concerns about excessive speculation and its effect on 
increasing prices for working families for various products. 
The last time you were here, I asked about finalizing a good 
position limits rule in a timely manner.
    We recently extended the comment period, and I understand 
that. I understand the need to get this right. But what I am 
trying to understand is, Are we still committed to finalizing a 
good position limits rule in a timely manner?
    Mr. Massad. Absolutely, Senator. Thank you for the 
question.
    What we did on the comment period was simply the following: 
We had the Agricultural Advisory Committee meeting. As we 
talked to members about what they wanted to talk about, the 
issue of deliverable supply came up, and so we decided that we 
would have some conversation about that.
    Simply as a matter of good Government practice--we were not 
required to do this, but we felt that if that is going to be 
discussed at the Agricultural Advisory Committee, then it is 
only fair to open up the comment period on that part of the 
rule, just on those issues. That will not slow us down. There 
is a lot of other work----
    Senator Donnelly. So we are making progress.
    Mr. Massad. Absolutely. There is a lot of other work. This 
is a very complicated rule. There are a lot of issues. We have 
received a lot of input. But we are proceeding on multiple 
tracks here.
    Senator Donnelly. One other thing I wanted to mention is I 
wanted to thank you for the CFTC's work to create a level 
playing field between public and investor-owned utilities. The 
efforts that have been made to make sure that we have a rule 
that levels the playing field have been extraordinary helpful. 
We will continue to work on the legislative side, but our 
municipal utilities are now less likely to be exposed to 
greater risks, less likely to be exposed to increased prices 
which are passed on to our families. I just wanted to thank you 
for your hard work on that.
    Mr. Massad. Certainly.
    Senator Donnelly. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Thune?
    Senator Thune. Thank you, Madam Chair, and thank you for 
your leadership of this fine Committee and the hard work that 
we have accomplished here in the last couple years. Hopefully 
there will be some more to come, and we can get something done 
on this next year.
    But thank you for your leadership, and thank you and 
Senator Cochran for having the hearing today as we kind of wrap 
up this year's Congress and look at next year's priorities. I 
think the Commodities Exchange Act reauthorization will be one 
of many pieces of legislation that we are going to have to 
consider.
    I want to mention one area of concern which we have 
discussed before on this Committee, and that has to do with 
staff guidance letters that are not subject to the 
Administrative Procedures Act and its mandatory cost-benefit 
analysis requirements.
    The letters have the same regulatory effect as rulemaking. 
I also want to mention no-action letters, which has been 
referred to earlier, which are used to amend or withdraw new 
rules, and I would encourage you, Mr. Chairman, to take a more 
measured and conventional approach to issuing regulatory 
guidance.
    Commodity futures trading continues to become increasingly 
important to the agricultural community, especially in States 
like my home State of South Dakota, with agriculture as its 
number one industry, and because of currently lower commodity 
prices, managing risk is even more important to our farmers and 
ranchers, grain elevators, cooperatives, and suppliers who 
utilize the trading tools under the jurisdiction of the CFTC to 
better manage their risk.
    I appreciate you being here today and hope you will 
continue to put that appropriate focus on agriculture.
    I wanted to mention your proposed rule excluding certain 
legitimate hedging activities used by agricultural businesses 
from qualifying as bona fide hedging. What is the CFTC doing to 
ensure that those legitimately hedging their risk will qualify 
for the exemption afforded to bona fide hedgers?
    Mr. Massad. Well, thank you for the question, Senator. It 
is a very important area. We have received a lot of comment on 
the proposed rule, and particularly on the subject of bona fide 
hedging, and we are taking that very seriously. We had a very 
good roundtable earlier this summer with a number of industry 
participants where we talked about this, and we recognize 
hedging strategies are often very complex.
    The challenge for us is, again, to try to write bright-line 
rules that work, that distinguish between the bona fide 
hedging, which we want to allow, and the preventing the 
excessive speculation.
    We are in a situation where we cannot look at people's 
intent, we cannot look at particular transactions, so we have 
to come up with that bright-line rule. We have asked industry 
for suggestions in that regard so that we make sure the rule 
does work to allow people to hedge commercial risk. It has to. 
These markets are so fundamental. We recognize the importance 
of that. I think all the Commissioners recognize the importance 
of that.
    Senator Thune. The CFTC and banking regulators recently 
proposed margin rules that would take effect in December of 
next year. I understand the deadline was set by a group of 
international regulators sometime ago under the assumption that 
the rules would be completed by now. I also understand that 
these changes would force the industry and their end-user 
clients to implement massive system changes which could take 
years to develop.
    Do you think this timing is realistic given that the rules 
have not yet been finalized?
    Mr. Massad. Well, thank you for the question. I think that, 
first of all, the margin for uncleared swaps rule is extremely 
important because, although we have mandated clearing of some 
products, there will always be uncleared swaps, and that is why 
we need a margin rule. I think it is important that we 
implement it in a way that works. We do not want to disrupt the 
market.
    But I would say that most financial firms are already 
taking margin for these uncleared swaps. We are now 5, 6 years 
after the crisis, and a lot of them were taking margin even 
before that. Many of them obviously have increased that.
    We want, though, to come up with a good implementation 
timetable. It has delayed implementation as it is written. It 
generally does not apply to end users, commercial end users. 
Our rules and the prudential regulators' rules exempt end 
users. We want to do it in a way where we are coordinating 
internationally because we do not want a situation of 
regulatory arbitrage.
    I hear the concern. We are working on it. But I think we 
should try to get this rule in place as quickly as we can.
    Senator Thune. Are any of your international counterparts 
talking about perhaps a longer implementation period?
    Mr. Massad. There is discussion currently that we are also 
part of, and people are balancing, well would this really be 
needed or not. We have received some comments from industry 
saying a delay is needed. We will certainly look at that. I 
think sometimes we have to look at these proposals for delay 
with a good amount of skepticism. That is part of our job. But 
we will certainly try to come up with a reasonable approach 
here.
    Senator Thune. Okay. Yesterday the first Agricultural 
Advisory Committee meeting took place, and I am wondering if 
you can share with the Committee what you see as the role of 
that committee in making future regulatory decisions. Is it 
going to be a committee that is created simply for symbolism 
purposes or will you really look in a substantive way to that 
committee for advice when it comes to making some of these 
decisions, particularly with regard to agricultural 
commodities?
    Mr. Massad. Well, thank you for the question. I think it is 
extremely important. It is a very good vehicle for us to get 
input. We have about 40 members representing a number of 
interests in the agricultural sector, whether it is producers 
or the co-ops or financiers or others. We had a very good 
meeting yesterday. I am committed to having a couple of 
meetings a year.
    We are also consulting with the members about the things 
that they want to talk about and want to share with us.
    So I think it will be extremely important to our efforts 
together, but I think generally you have a Commission today, 
four Commissioners who all are very pragmatic, who are all 
listening to market participants' concerns as well as to this 
Committee, and who are very committed to working together to 
try to do the right thing.
    Senator Thune. All right. Thank you, Mr. Chairman.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Gillibrand?
    Senator Gillibrand. First, I want to thank you, Madam 
Chairwoman, for your excellent chairmanship. You have done a 
great job. It has been a privilege to serve on this Committee 
with you, and I am grateful for all the hard work you did in 
wielding the gavel, and I really enjoyed it.
    Mr. Massad, I want to talk a little bit about two issues: 
first, cyber; and, second, high-frequency trading.
    So on cyber, nearly every week we learn of a data or 
systems breach by cyber criminals. From Nasdaq to JPMorgan, it 
is clear that our Nation's financial institutions are prime 
targets for data and intellectual property theft.
    One significant concern for the options market is that the 
Commodity Futures Trading Commission's budget is so limited 
that you cannot effectively test the cyber defenses of the 
entities you oversee. While yesterday we saw that the CFTC 
could get a 16-percent funding increase, I still believe this 
is inadequate, and I understand that there may be restrictions 
on this money.
    Considering your budget crunch, how is the CFTC working 
with market participants, both big and small, to address the 
growing threat? What are the limits on your systems' safeguards 
procedures of the entities you regulate? Second, are you seeing 
the same obstacles in the financial sector with regards to 
cyber incidents that other sectors are facing, whether the need 
for capital improvements, better information sharing in the 
industry, and with appropriate regulators or better training?
    Mr. Massad. Well, thank you for the excellent question, 
Senator. We are very focused on this issue. Resources are a 
challenge. Let me try to address all of your concerns.
    First of all, you have highlighted the need very well. This 
is just a huge concern. We are seeing cyber risks obviously 
posed by a number of different types of actors, whether it is 
theft, whether it is cyber crimes committed in order to profit, 
whether it is espionage, or whether it is disruption. They are 
coming from a variety of types of players. So there is a need 
to be extremely vigilant and active on this.
    We, as you say, do not have the money to do independent 
testing. We cannot possibly do that. You know, some of the big 
banks are spending more on cybersecurity than our entire 
budget. So what we are trying to do is do examinations that 
look at is the institution sufficiently focused on this. We 
look at things like: Is the board paying enough attention?
    Is this rising to the board's attention, and is it rising 
to the risk committee's attention?
    What are the policies? But also are the policies actually 
enforced? You know, a lot of times institutions have good 
policies on the books, but they do not really enforce them.
    Then when an incident does happen, is the institution 
responding in a way that not only looks at the incident but at 
potentially taking a broader look at whether the incident 
suggests a need to shore up practices more generally?
    That is sort of how we are going about it. We are 
coordinating with other arms of the Federal Government on this. 
As I mentioned earlier, there is a lot of coordination going on 
cyber. But the resource challenge is a big one, and it worries 
me.
    Senator Gillibrand. Have you guys considered different 
funding mechanisms like a user fee based on size of actor, 
making sure it does not sap liquidity but given we have a 
market that is 450 million trillions, I think there is capacity 
there. Have you guys thought through that? Would you ever 
recommend that to Congress?
    Mr. Massad. It is a very good question. I would be happy to 
work with you or members of this Committee on this issue. We, I 
think, are one of the very few financial regulators that does 
not have a separate fee. Presidents ever since, and including 
Ronald Reagan, have suggested that fees be used. I think they 
can be done in a way that works. Obviously we have to be 
mindful of impact on market liquidity, but I think it is 
possible. But it is a decision for the Congress. My desire, 
quite frankly, is to increase the budget however we can.
    Senator Gillibrand. Okay. So high-frequency trading poses a 
dual risk: one, by creating a mechanism for bad actors to 
manipulate the markets through disruptive practices such as 
spoofing; and, two, by creating propensity to negatively affect 
market stability. These risks are not confined to the U.S. As a 
result, risks develop in foreign jurisdictions that have direct 
impacts on our markets.
    What role is the CFTC playing in conjunction with domestic 
and international regulators in examining the 
institutionalizing of best practices with the goal of avoiding 
regulatory arbitrage? Two, as the CFTC works with these 
different regulators, what are some of the obstacles you are 
facing as it seeks to avoid the race to the bottom?
    Mr. Massad. Thank you, Senator. We are looking at automated 
trading and high-frequency trading both from a policy and 
regulatory standpoint as well as from an enforcement 
standpoint. On the enforcement side, just to note that quickly 
we brought some actions with respect to spoofing and obtained 
some penalties and remedial actions as a result. In fact, one 
of our recent cases led to one of the first indictments of an 
individual for spoofing.
    On the regulatory and policy side, we are very focused on 
this. We had a concept release where we asked for a lot of 
input on a number of issues to look at market practice. It is 
important to note that our markets are different than the cash 
equity markets. We do not have the multiplicity of trading 
platforms that the cash equity markets have, which is in many 
people's minds one of the reasons that we have seen some of 
these high-frequency trading issues.
    But, nevertheless, automated trading is increasing in our 
markets. It is a significant part of our markets, and so we are 
looking at whether our institutions, the exchanges under our 
supervision, have adequate policies in place. We recently had a 
rule enforcement action against one of our exchanges on the 
fact that we did not feel they were looking enough at their own 
rules on spoofing and enforcing those rules. But we are also 
looking at additional rule changes that we might propose to 
address this issue.
    So we will continue to be very focused on this and happy to 
meet with you further on it and get your ideas.
    Senator Gillibrand. Thank you, Mr. Chairman.
    Chairwoman Stabenow. Thank you very much.
    Senator Hoeven?
    Senator Hoeven. Thanks, Madam Chairman. Thanks for your 
leadership of this Committee and for your hard work and, of 
course, all your work on the farm bill. It was greatly 
appreciated. Also to our Ranking Member, Senator Cochran, thank 
you as well. I have appreciated working very much with both of 
you. Thank you.
    Chairman, my first question is: You have proposed a new 
margin rule that would take effect in December of next year. 
The industry is saying that the changes called for in this new 
margin rule could take years to implement, so talk about it. I 
mean, are they going to be able to meet that implementation 
requirement?
    Mr. Massad. Thank you, Senator, for the question. We are 
aware that some industry participants have said that, and we 
will certainly evaluate those comments and work with other 
regulators on the timetable here. The timetable as it is 
written, as it is proposed, is phased in over 4 years. 
Currently most large financial institutions are already 
collecting variation margin, and so while some have said that 
they cannot do this, we want to look at, well, why is that if 
they are already doing it in part.
    But we are certainly mindful of the need to implement a 
rule in a way that does not unnecessarily disrupt the market, 
and we are mindful of doing it in a way where we are 
coordinating with other regulators. So I can assure you that we 
will keep those concerns foremost in mind and try to work on a 
good solution.
    Senator Hoeven. On an interactive process to make it work.
    Mr. Massad. Sure.
    Senator Hoeven. So then how does the rule mitigate risk, 
both systemic risk and product risk, and increase transparency? 
Then at what cost to the end user?
    Mr. Massad. Sure. A very good question, Senator. The way 
the rule does that is the following: While we have mandated 
clearing for some swaps that are standardized or clearable, 
there will always be a lot of swaps that are not subject to 
centralized clearing, that remain bilateral. That is what we 
had in the crisis. We had this whole opaque network of 
bilateral transactions, and what happened was when one 
participant then had trouble, that risk could easily cascade 
through the system because of the interconnections among 
participants.
    By mandating clearing, we have dealt with some of that. But 
there will always be swaps that will not be cleared because 
there is not enough liquidity in that particular product or 
they might be new or for other reasons. For those swaps, what 
this rule does is say you have to evaluate the mark-to-market 
risk and take margin for that.
    Now, a lot of big institutions will tell you they are 
already doing that. They did not wait around for this rule in 
many ways. The rule, though, formalizes the practice. We are 
working with international regulators.
    There is a set of international standards that we are all 
trying to basically use to make sure the rules are the same. 
One of those standards is that we exempt end users, commercial 
end users, which is what we have done, and which is what the 
prudential regulators have done as well.
    Senator Hoeven. So by exempting those end users, you feel 
that they are not picking up substantial costs for 
implementation of the new rule.
    Mr. Massad. That is correct.
    Senator Hoeven. Do you feel that with this new rule you can 
truly assess both systemic risk and product risk that is out 
there at any given time. So you can monitor how it is working 
in terms of the industry, the positions they are taking, the 
products they are offering. So that if one of them goes down, 
one, you can reasonably anticipate that, but it does not create 
any kind of domino effect or you have some kind of firewall to 
prevent that.
    Mr. Massad. I guess what I would say, Senator, is this 
particular rule requires the individual financial institutions 
to take measures so that they are monitoring their risk. What 
we are trying to do from a system wide standpoint, I would say 
we are doing through our overall surveillance and our data 
collection to try to look at systemic risk and where that might 
be----
    Senator Hoeven. Well, I should have said you in conjunction 
with the other regulators because that was the problem before, 
not truly understanding the ramifications of the new hybrid 
products and the systemic risk created when one institution 
went down because they did not have the proper protections in 
place. So is all that being brought together in a way that I 
guess is transparent so that you and the other regulators can 
actually assess what is going on and communicate that to our 
Committee and other elected officials to make sure that we do 
not have a similar problem in the future?
    Mr. Massad. Sure. A very good question. I think we are 
making good progress on that. It is kind of like a big 
infrastructure bill.
    You do not get it done overnight. But a key piece of it is 
really the collection of data on this market. We had no data on 
this market at the time of the crisis, and now we are 
collecting a lot of data on this market. But our ability to 
collect that, to make sure it is standardized, to make sure 
that we can analyze it and manipulate it is resource-driven in 
part.
    It is a challenge for us under the resources. It also 
requires a lot of harmonization efforts. We are working very 
hard to harmonize data collection standards. It also requires 
making sure industry participants abide by their obligations to 
give us good data in the first place.
    So I would say the data challenge is in particular where we 
are focused on that. We are working with other regulators on 
that, and I think, again, we are making very good progress.
    Senator Hoeven. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Klobuchar?
    Senator Klobuchar. Thank you very much, Madam Chairman. 
Thank you for these baskets, which I am sure you like. Have you 
ever had a Committee hearing where you got a basket with beef 
jerky?
    Mr. Massad. I have not.
    [Laughter.]
    Senator Klobuchar. All right. Well, feel very welcome. You 
can report back----
    Mr. Massad. I hope it continues under Chairman Roberts.
    [Laughter.]
    Chairwoman Stabenow. That is a real question.
    Senator Klobuchar. All right. So I was going to ask you 
about cybersecurity, but I know my colleagues have--you have 
gone into that in depth, obviously a serious concern, so I 
thought I would switch over to a few things.
    One you have just talked about, and that is the incredibly 
important work the CFTC is doing, but also the careful way you 
have to look at end users. I think our economy has a wide range 
of businesses in Minnesota that are affected by actions of the 
CFTC. We have farmers--and, by the way, many of them that were 
hurt by some of the bad things that were happening with some of 
the abuse of processes.
    But then we also have energy producers, financial 
institutions, and commercial end users like farmers and rural 
energy co-ops use commodity markets as a form of insurance 
against price fluctuations. I want to make sure that the CFTC 
also takes into account how these commercial end users use 
hedges and derivatives in their day-to-day business, which you 
have acknowledged that you are doing.
    At your nomination hearing, you committed to work with 
them, and I am glad that you are doing that to ease that 
burden, and I hope that as you review the rule on position 
limits and bona fide hedges, you consider all the ways 
commercial end users hedge real commercial risk and incorporate 
that into the final rule.
    First of all, my first question would be: Do you think that 
the list of bona fide hedges should include the types of 
transactions that are common in agriculture?
    Mr. Massad. Thank you for the question, Senator. We 
certainly want to end up with a rule that allows people to 
engage in legitimate, bona fide hedging, and we have gotten a 
number of comments about this. The challenge for us is writing 
the bright-line rules because we cannot look at facts and 
circumstances, we cannot look at the individual intent behind 
particular transactions. We have to write rules that are 
general.
    So the challenge is to write that rule in a way that works 
in an industry or multiple industries where hedging strategies 
can often be very complex. Sometimes it is hard to distinguish 
between what is really a bona fide hedge and what is maybe a 
cover for excessive speculation.
    Senator Klobuchar. Exactly.
    Mr. Massad. But we are working on it.
    Senator Klobuchar. I hope you will continue to work with 
those that trade physical commodities as well----
    Mr. Massad. Absolutely.
    Senator Klobuchar. --to ensure that the exemption to the 
position limit rule allows for their normal practices.
    Mr. Massad. Absolutely.
    Senator Klobuchar. I appreciate that.
    The second area that I have talked with you about before is 
speculation, and I have been concerned in the group of Senators 
that see this as an issue most notably in the gas and oil 
markets in the past.
    Recently you noted in your testimony with Arcadia and 
Parnon Energy that they had manipulated the crude oil market, 
and I am concerned that end users who have a stake in the 
underlying commodity, such as wheat growers, are not able to 
conduct their business because of the rules put in place to 
curb the abuses by speculators and financial institutions.
    What steps can the CFTC take to ensure that the end users 
are able to conduct their business and the market best reflect 
the forces of supply and demand?
    Mr. Massad. Right. Thank you for the question, Senator. You 
know, one of the most important things we do is simply that the 
surveillance that we do on the markets. It is great to have 
rules such as the position limits rule, but one of our most 
important jobs is to engage in ongoing surveillance.
    Now, we have multiple markets to look at. In the futures 
market alone, with respect to physical commodities alone, as 
you know, there are lots of agricultural markets, lots of 
energy and metals markets. Each of those is different.
    Then we have the financial futures and options, and then we 
have the swaps. So trying to engage in surveillance over all of 
that is a real challenge, and we simply do not have the 
resources to do that today. That should really be something 
that this country funds adequately because it is such a good 
investment in our markets; it is such a good investment in 
making sure that end users not only can use these markets but 
have confidence in their integrity. So that is a real challenge 
for us today.
    Senator Klobuchar. Okay. One last thing. It is the 
Renewable Fuel Standard. You and I have talked about this in 
the past. You understand in the Midwest and really all over the 
country, generating $5 billion in economic output, it is 12,000 
jobs in my State alone. We think it is good to have a mix of 
fuel, and along with the Chairwoman, a number of us have been 
advocating against some of the changes that have been suggested 
last year by the administration. That is all now on hold.
    But in the course of that, the Renewable Fuel Standard RINs 
market, as you know, was extremely volatile, and then the 
questions were raised about the impact of excessive speculation 
in the market. Given the CFTC's experience with the commodities 
market, what improvements could the CFTC recommend to improve 
the price discovery transparency and liquidity in the RINs 
market?
    Mr. Massad. Well, Senator, we are happy to continue to 
engage with you and others on this. I think we have a very good 
relationship with EPA on these issues. Obviously they have the 
primary responsibility on some of these matters. But we will 
certainly be very mindful in terms of looking for fraud and 
manipulation in these markets and taking action if we see----
    Senator Klobuchar. Well, and if you have any 
recommendations about how to minimize the volatility and the 
manipulation that we saw in 2013 that we believe led to some of 
what we will call sort of an overreaction to what happened--and 
we believe outside forces may have caused that speculation, and 
if you have any recommendations how to minimize it, we would 
really appreciate it.
    Mr. Massad. Okay.
    Senator Klobuchar. Thank you.
    Chairwoman Stabenow. Thank you very much, and I would echo 
what Senator Klobuchar has said. It is very, very important.
    This has been a very important hearing. We appreciate your 
ongoing efforts. I could not agree more with you when we look 
at the fact that, to be effective, to make sure that we have 
safety and reliability in the U.S. markets, there has to be the 
resources to provide the accountability and to make sure things 
are functioning well for those who need actions from the 
Commission.
    So it is certainly something we will continue to focus on. 
We encourage you to continue to move forward all of the issues 
that you have to address, and we appreciate your steps, and 
thank you for joining us.
    Any additional questions for the record should be submitted 
to the Committee clerk 5 business days from today, which is 
5:00 p.m. on Wednesday, December 17th.
    The meeting is adjourned.
    Mr. Massad. Thank you.
    
    [Whereupon, at 11:40 a.m., the Committee was adjourned.]
      
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