[Senate Hearing 114-645]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-645

                             NOMINATIONS OF
                     CHRISTOPHER JAMES BRUMMER AND
                        BRIAN D. QUINTENZ TO BE
                          COMMISSIONERS OF THE
                  COMMODITY FUTURES TRADING COMMISSION

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION


                               __________

                           SEPTEMBER 15, 2016

                               __________

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


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







        Available via the World Wide Web: http://www.fdsys.gov/

                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

23-593 PDF                     WASHINGTON : 2018 






























           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                     PAT ROBERTS, Kansas, Chairman

THAD COCHRAN, Mississippi            DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky            PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas               SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota            AMY KLOBUCHAR, Minnesota
DAVID PERDUE, Georgia                MICHAEL BENNET, Colorado
JONI ERNST, Iowa                     KIRSTEN GILLIBRAND, New York
THOM TILLIS, North Carolina          JOE DONNELLY, Indiana
BEN SASSE, Nebraska                  HEIDI HEITKAMP, North Dakota
CHARLES GRASSLEY, Iowa               ROBERT P. CASEY, Jr., Pennsylvania
JOHN THUNE, South Dakota

               Joel T. Leftwich, Majority Staff Director
                Anne C. Hazlett, Majority Chief Counsel
                    Jessica L. Williams, Chief Clerk
               Joseph A. Shultz, Minority Staff Director

                                  (ii)


























  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Nominations of Christopher James Brummer and Brian D. Quintenz to 
  be Commissioners of the Commodity Futures Trading Commission...     1

                              ----------                              

                      Thursday, September 15, 2016
                    STATEMENTS PRESENTED BY SENATORS

Roberts, Hon. Pat, U.S. Senator from the State of Kansas, 
  Chairman, Committee on Agriculture, Nutrition, and Forestry....     1
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan...     2

                               Witnesses

Brummer, Christopher James, of Washington, DC, to be a 
  Commissioner of the Commodity Futures Trading Commission.......     4
Quintenz, Brian D., of Washington, DC, to be a Commissioner of 
  the Commodity Futures Trading Commission.......................     6
                              ----------                              

                                APPENDIX

Prepared Statements:
    Brummer, Christopher James...................................    26
    Quintenz, Brian D............................................    28
Document(s) Submitted for the Record:
    5-day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by Christopher James 
      Brummer....................................................    32
    5-day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by Brian D. Quintenz.....    54
Questions and Answers:
Brummer, Christopher James:
    Written response to questions from Hon. Pat Roberts..........    76
    Written response to questions from Hon. Debbie Stabenow......    77
    Written response to questions from Hon. Sherrod Brown........    88
    Written response to questions from Hon. Charles Grassley.....    85
    Written response to questions from Hon. Heidi Heitkamp.......    89
    Written response to questions from Hon. Patrick J. Leahy.....    87
    Written response to questions from Hon. David Perdue.........    81
    Written response to questions from Hon. Ben Sasse............    82
    Written response to questions from Hon. John Thune...........    86
Quintenz, Brian D.:
    Written response to questions from Hon. Pat Roberts..........    90
    Written response to questions from Hon. Debbie Stabenow......    92
    Written response to questions from Hon. Sherrod Brown........   105
    Written response to questions from Hon. Charles Grassley.....   101
    Written response to questions from Hon. Heidi Heitkamp.......   106
    Written response to questions from Hon. Patrick J. Leahy.....   103
    Written response to questions from Hon. David Perdue.........    97
    Written response to questions from Hon. Ben Sasse............    98
    Written response to questions from Hon. John Thune...........   102 
 
                             NOMINATIONS OF  
                     CHRISTOPHER JAMES BRUMMER AND  
                       BRIAN D. QUINTENZ TO BE 
                          COMMISSIONERS OF THE 
                  COMMODITY FUTURES TRADING COMMISSION

                              ----------                              


                      Thursday, September 15, 2016

                              United States Senate,
        Committee on Agricultural, Nutrition, and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:00 a.m., in 
room 328A, Russell Senate Office Building, Hon. Pat Roberts, 
Chairman of the Committee, presiding.
    Present: Senators Roberts, Boozman, Perdue, Tillis, 
Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Donnelly and 
Casey.

 STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF 
KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND 
                            FORESTRY

    Chairman Roberts. I call this hearing of the Senate 
Agriculture, Nutrition, and Forestry Committee to order. I 
welcome my colleagues, and colleagues soon to come, as we 
consider the nominations of Dr. Christopher Brummer, and Mr. 
Brian Quintenz to serve as Commissioners of the Commodity 
Future Trading Commission.
    The CFTC is charged with fostering open, transparent and 
competitive financially sound markets and to avoid systemic 
risk. Further, the Commission is tasked with protecting market 
users and their funds, consumers and the public, from fraud, 
manipulation and abusive practices related to derivatives and 
other products that are subject to the Commodity Exchange Act.
    In order to fulfill its mission, the Commission is 
comprised of five Commissioners nominated by the president with 
the advice and consent of the Senate. Unfortunately, there are 
two commissioner vacancies at the CFTC, or perhaps fortunately, 
and that is what brings us here today.
    As noted by the CFTC's own mission statement, farmers, 
ranchers, producers, and commercial companies are end users--
that includes municipalities and pension funds and others who 
use markets to lock in a price or rate and focus on what they 
do best, that is, innovating and producing goods and services 
for the economy, most importantly, creating jobs.
    It is essential that the CFTC have individuals in charge 
that truly take that mission statement to heart, as the 
innovation and hard work of our farmers and ranchers seems to 
have been forgotten in recent years. As I have said before, it 
was not the farmer, the rancher, the producer or the commercial 
end user that caused the great financial crisis of 2008, yet 
they are paying the price. Many of us here raised concerns when 
Dodd-Frank was being considered and insisted that the 
legislation should not negatively impact those who had nothing 
to do with the causes of the 2008 crisis. It is important to 
note that this was a bipartisan concern.
    Yet when Dodd-Frank became law, and the CFTC began writing 
new regulations, it was in fact our farmers, our ranchers, and 
our country grain elevator managers who felt the heavy hand of 
overregulation. We hear of the concerns from constituents who 
describe in detail, the regulatory overreach stemming from the 
Dodd-Frank Act and its implementation.
    In order to address these concerns, this Committee passed a 
bill in April titled ``The Commodity End User Relief Act.'' The 
bill champions compromise and a responsible solution to 
providing regulatory certainty to end users while increasing 
customer protections. As the futures and derivative markets 
have grown to include a producer's input costs like fuel and 
fertilizer, so too has the producer risk management toolbox, 
and more options for managing risks are a good thing.
    It is clear that Congress should not withhold needed 
regulatory relief from our farmers and ranchers and risk 
management service providers any longer, nor should the CFTC. 
The CFTC must look through the lens of regulatory practicality, 
not the lens of irrationality. I am pleased that Chairman 
Massad is recommending the automatic drop of swap dealer de 
minimis levels be pushed back one year. It is important that 
the Commission have more time to analyze the issue to better 
serve our farmers, ranchers and end users.
    It is also important the CFTC discontinue its expansion of 
its jurisdiction where systemic risk is not present. It is 
imperative that all Commissioners understand the historic 
nature of the markets the CFTC regulates and truly understand 
risk mitigation as well as associated costs of regulations.
    I thank both the nominees for being here today. I look 
forward to your testimonies, and I now turn to my colleague, 
Ranking Member Stabenow, for her opening remarks.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
                          OF MICHIGAN

    Senator Stabenow. Well, thank you very much, Mr. Chairman. 
I too want to welcome and congratulate our two CFTC nominees, 
Chris Brummer and Brian Quintenz, and welcome their families 
and friends who are here today.
    It is remarkable to think that more than eight years have 
passed since the start of the worst financial crisis to hit our 
country since the Great Depression. That is why your positions 
are so important, this responsibility is so important. Whenever 
I think about the work of the CFTC, I never forget that eight 
million hardworking Americans lost their jobs because of 
financial markets that got out of control. Small businesses 
closed, people were evicted from their homes, retirements were 
wiped out. Despite many signs of strength and continued growth 
in our nation's resilient economy, we also know that millions 
of Americans across the country are still trying to get fully 
back on their feet from what happened at that time.
    Although the Commodity Futures Trading Commission is rarely 
associated with helping to create or secure American jobs, the 
price of food in the marketplace, the supermarket, or the cost 
of gas at the pump, this Committee knows all too well the 
direct relationship between the CFTC's responsibilities and 
these fundamental elements of our economy that American 
families worry about every single day.
    The CFTC is the front line regulator of derivatives, which 
as we know, includes futures, options, and since 2010, swaps. 
As we all know, derivatives, specifically the over-the-counter 
swaps market, played a significant role in the financial 
crisis. The swaps market was once in the shadows and a virtual 
financial playground. But today, this Committee and the CFTC 
can confidently say that as a result of Wall Street reform, a 
light is shining on the swaps market.
    From strong capital and margin requirements to mandatory 
clearing, trade reporting, swap execution facilities, the 
derivative market is much more transparent and well-regulated 
in the public interest than it has ever been. There is, 
however, more to do. The CFTC must continue to build on the 
momentum of the past six years to ensure that the derivatives 
market remains strong, transparent, free from manipulation and 
fraud, and accessible to end users, and certainly the Chairman 
and I agree and have both joined together in supporting the 
accessibility and effectiveness for end users in this process.
    Today the CFTC has much more responsibility than it has 
ever had. Unfortunately, though, it carries out those 
responsibilities with limited resources, which continues to be 
a concern of mine in terms of the ability to fully respond to 
markets and be effective through the CFTC. While I will 
continue to lead the fight for additional Commission resources, 
it is critical that the Commission use existing resources in 
the most effective manner possible.
    The CFTC must also keep a sharp eye on all market 
participants, including clearing houses, exchanges, swap 
dealers, which now have significant new roles and 
responsibilities under Dodd-Frank, and new risks associated 
with automated trading and threats from cyberattacks are 
threats that could domino across the globe and knock families 
and small business down along the way.
    Finally, the CFTC must continue to work to harmonize key 
financial reform rules across borders, carefully balancing the 
need for smart financial reform with the sensitive appreciation 
of how countries may approach regulations differently. The 
CFTC's most important responsibility is to fight for every 
American who has lost their job, their home, their pension 
after the financial crisis, also for every farmer, every 
manufacturer, rancher, business person who uses the markets and 
needs it to be effective.
    I have enjoyed meeting with each of you and appreciate the 
responses, the conversations that we have had, and I look 
forward to your responses today. If confirmed, I fully expect 
both of you to work with this Committee in an open and 
responsive manner. Thank you, Mr. Chairman.
    Chairman Roberts. I thank my distinguished colleague for 
her remarks. It is now time to hear from the nominees.
    Dr. Chris Brummer is a professor of law and faculty 
director of the Institute of International Economic Law at the 
Georgetown University Law Center where he has taught since 
2009. Chris received his bachelor's from Washington University 
in St. Louis, a juris doctorate from Columbia University Law 
School, and a Ph.D. from the University of Chicago. From 2004 
to 2006, he was an associate of the law firm of Cravath Swaine 
& Moore, LLP. From 2006 to 2009, Chris was an assistant 
professor at Vanderbilt University Law School, and he served as 
an academic fellow in the Securities and Exchange Commission 
Office of International Affairs in 2008. In 2015, he completed 
a three-year term on the National Adjudicatory Council of 
Financial Industry Regulatory Authority. The acronym for that 
is FINRA.
    Welcome, Chris.
    Our next nominee, Mr. Brian Quintenz, is a founder and 
managing principal and chief investment officer of Saeculum 
Capital Management, LLC, in Washington, DC Prior to forming 
Saeculum Capital Management in late 2013, Brian worked within 
the Global Institutional Consulting Group at Merrill Lynch as 
an outside consultant. From 2009 to 2012, he was the senior 
associate for Hill-Townsend Capital, a firm established during 
the 2000 crisis to focus solely on U.S. financial company 
equity opportunities.
    Prior to working in the financial markets, from 2001 to 
2007, Brian was a senior policy aide for Congresswoman Deborah 
Pryce, an outstanding member of the House from Ohio and a good 
friend. Brian graduated Magna Cum Laude from Duke University--
it is not clear whether he is one of these Duke University's 
jumping up and down fans on the basketball court, so that will 
remain classified--who has a major in public policy studies and 
received an MBA from Georgetown.
    I welcome you. I look forward to your testimonies. But 
before that, there are two questions I will ask you under oath. 
Please stand and raise your right hand.
    Do you swear that the testimony you are about to present is 
the truth, the whole truth and nothing but the truth so help 
you God?
    Mr. Brummer. I do.
    Mr. Quintenz. I do.
    Chairman Roberts. Secondly, do you agree that if confirmed, 
you will appear before any duly constituted committee of 
Congress if asked to appear?
    Mr. Quintenz. I will.
    Mr. Brummer. Yes.
    Chairman Roberts. I thank you both. We recognize Dr. 
Brummer first.

 TESTIMONY OF CHRISTOPHER JAMES BRUMMER, TO BE COMMISSIONER OF 
            THE COMMODITY FUTURES TRADING COMMISSION

    Mr. Brummer. Thank you so much, Chairman Roberts, Ranking 
Member Stabenow, and the members of the Committee. I am honored 
to be here before you today as a nominee to serve as a 
commissioner on the Commodity Futures Trading Commission. I 
would also like to thank President Obama for nominating me and 
my amazing family, especially my wife, for supporting me.
    The CFTC has an important, significant impact on the daily 
lives of Americans and it is critical that CFTC regulated 
markets work well, and I hope to contribute to this work. I 
come from a family of teachers and farmers. My grandparents had 
a small farm in the Shenandoah Valley of Western Virginia, and 
some of my earliest memories include spending summers on that 
farm, riding on the back of my grandfather's pickup truck as we 
took produce to the local market.
    My mother, who grew up there, would become an elementary 
school teacher and move with my father to beautiful Northwest 
Arkansas, where I was raised. I grew up in a rural area just 
outside of Fayetteville, where my neighbors raised cattle and 
horses, and poultry producers were just a 10-minute walk down 
the road from my house. My upbringing taught me to respect 
different points of view and stressed basic values that have 
longed sustained the country: work hard, help your neighbor, 
think before you act, and do good.
    These values have paid dividends throughout my life. I 
worked hard in school, learned a couple of foreign languages, 
and eventually ended up a lawyer, which opened doors for me to 
educational and professional experiences around the world. I 
invested a significant amount of time studying markets and 
financial regulation as a professor, and I opted, where I 
could, to do good, from advising regulators in the United 
States, Europe and Asia on how to ensure safe and efficient 
cross-border market supervision, to working on critical 
enforcement efforts intended to keep America's financial 
markets safe and secure.
    The 2008 financial crisis had devastating consequences for 
the economy and like many Americans, it impacted those I cared 
about in many ways. It would also underscore for me important 
lessons about interdependence and the global economy. For much 
of 2008, I was a fellow at the Securities and Exchange 
Commission's Office of International Affairs, on loan from 
Vanderbilt Law School in Nashville where I was teaching. There 
I helped push forward America's regulatory interests and 
priorities in the world and saw firsthand the need for skilled 
communication and coordination with global actors.
    My work since then has focused on cross-border oversight of 
derivatives and securities markets. I am a strong believer in 
promoting safe and economically vibrant financial markets 
through sensible and strong regulation at home and close 
coordination abroad. Smart international coordination helps 
level the playing field for U.S. firms competing abroad and to 
prevent arbitrage that can undermine our domestic policy 
priorities and market practices.
    I have seen in my experience assisting law enforcement 
that, unfortunately, threats to market integrity are very real 
and must be addressed swiftly. Farmers, ranchers, and 
commercial end users must be able to trust that markets both 
function properly and allow market participants to hedge their 
commercial risks effectively. They also have to trust that the 
markets in which they participate are healthy, liquid and free 
of fraud and manipulation.
    To accomplish this, government oversight should be prudent 
and efficient and rules should be carefully and faithfully 
enforced. The CFTC should not be afraid to embrace new 
technologies that promote efficient markets, but where 
innovations pose risks, whether to market integrity, 
cybersecurity or financial stability generally, end users and 
U.S. taxpayers must be protected.
    Finally, I believe the CFTC's mission going forward is as 
much about faithfully concluding the agency's Dodd-Frank 
rulemaking as it is about looking forward to new threats and 
opportunities facing the derivatives markets and those who 
depend on them. I recognize that to do this job well requires 
listening and keeping an open door to people who rely on those 
markets, and I promise to do just that.
    Again, I am honored to be here today, and I look forward to 
your questions.
    [The prepared statement of Mr. Brummer can be found on page 
26 in the appendix.]
    Chairman Roberts. Thank you very much, Dr. Brummer, for an 
excellent statement, and for being on time. I make a note of 
that. Ranking Member will have to give him a star for that. Mr. 
Quintenz.
    Mr. Quintenz. I will make a note of that too, Mr. Chairman.

 TESTIMONY OF BRIAN D. QUINTENZ, NOMINEE TO BE COMMISSIONER OF 
            THE COMMODITY FUTURES TRADING COMMISSION

    Mr. Quintenz. Thank you, Chairman Roberts, Ranking Member 
Stabenow, and members of the Senate Agriculture Committee. It 
is an honor to be with you this morning. I would also like to 
thank Majority Leader McConnell for recommending me for this 
position and President Obama for my nomination. If confirmed, I 
would fill the seat vacated by Scott O'Malia, who set a high 
standard in his service as commissioner.
    I am deeply grateful for the love and support of my 
parents, Kenneth and Susan Quintenz; my brother, Darren 
Quintenz; and my two children, Connor and Vivienne, all of whom 
are in attendance today. I am proud to have them here.
    Mr. Chairman, I am a Midwesterner, a first generation 
Ohioan whose mother and father grew up in Wisconsin, the home 
of my extended family. While I am a resident of Washington, DC, 
I still consider myself a Midwesterner, and I believe firmly in 
the Midwest values of hard work, honesty, and community.
    I come from a family of entrepreneurs and small business 
owners. My grandfather on my mother's side, after serving in 
World War II, returned home to Northwestern Wisconsin and 
bought a Ford car dealership. His wife, my maternal 
grandmother, was raised on a family dairy farm in Chetak, 
Wisconsin. My paternal grandmother owned and operated a 
restaurant on the east side of Milwaukee, putting her three 
sons through college. My father started his own business, my 
brother started his own business, and I am the founder of my 
own business, Saeculum Capital Management.
    Saeculum is an investment firm currently registered with 
the CFTC as a commodity pool operator. As the sole proprietor 
of this firm, it is my responsibility to effectively and 
meticulously manage risk as well as compliance. I am, 
therefore, very familiar with the CFTC's investor protection 
rules, disclosure requirements, and recordkeeping obligations. 
Additionally, as a registered Associated Person of this firm, I 
hold a Series 3 National Commodity Futures Exam license, a 
credential valuable in interpreting the impact of regulations 
on futures markets.
    I began my career in finance in 2008, during the financial 
crisis, working directly under the CEO at an investment firm 
focused on the banking sector. I performed detailed valuations 
on financial institutions of all sizes and complexities. I 
became an expert at reading banks' balance sheets and income 
statements, understanding their accounting rules and financial 
disclosures, and forecasting their capital levels and quarterly 
earnings.
    In this position, I depended on the accuracy and 
accessibility of publicly available information and became a 
firm believer in data and transparency. Transparency increases 
market efficiency and can provide an important check on risky 
behavior. The Commission's focus on data and transparency is 
encouraging, but more progress is needed. If confirmed, I will 
draw from my professional experience to advance that important 
work.
    But my professional career did not begin in finance; it 
began in public policy. After graduating from Duke with a 
degree in public policy studies, I joined the office of 
Congresswoman Deborah Pryce, who represented Ohio's 15th 
District, an area that included my hometown of Columbus. 
Ultimately, I became her Senior Policy Advisor with an issue 
portfolio that included agriculture. In meeting agricultural 
constituents and personally visiting some of the over 1,000 
family farmers in our Ohio district, I developed a strong 
appreciation for the work ethic and sophistication of America's 
farmers and ranchers, as well as for the pressures, costs, and 
risks that they face in their business. Should I be confirmed, 
I pledge to ensure the market concerns of the agricultural 
sector are recognized and continue developing a firsthand 
knowledge of the agricultural community.
    The financial crisis scarred every sector of our economy, 
hurt individuals, families and communities, and exposed deep 
flaws in our markets. It deserved a legislative and a 
regulatory response. As that response is calibrated, 
regulations meant to address those flaws should not spill over 
to harm the normal activity of ordinary businesses. When costs 
are added without targeting risk, poor outcomes ensue. I will 
work to ensure that regulations and their burdens are tied to 
the risks being mitigated.
    I would be honored to bring my public policy background, my 
expertise in finance, my knowledge of derivatives and their 
uses, my familiarity with risk management, as well as my 
respect for the agricultural community and end users of these 
markets, to the CFTC. This is a crucial time for our financial 
markets and for the people that depend on them. It would be a 
privilege to be of service in safeguarding and improving the 
country's marketplaces.
    I will be very pleased to answer your questions.
    [The prepared statement of Mr. Quintenz can be found on 
page 28 in the appendix.]
    Chairman Roberts. Thank you, sir. We now turn to 
questioning of the witnesses, and I am going to ask this 
question, and we will ask Brian to start off.
    Looking at the CFTC through the lens of an agricultural end 
user, do you think the CFTC has done an adequate job of 
balancing risk versus costs in rules they have issued as 
required by Dodd-Frank?
    Mr. Quintenz. Thank you for the question, Mr. Chairman. I 
think it is crucial that the agency, in all aspects of their 
rulemakings, do a thorough job in understanding, estimating, 
and disclosing the costs associated with their rule writings 
and to ensure that, as they seek to apply those costs through 
the definitions they create that target entities and 
activities, that those definitions correspond to the risks 
being mitigated. Otherwise, I fear costs are applied broadly, 
burdens are borne inappropriately, and the Commission gets into 
the dangerous area of potentially regulating generic activity.
    I guess I would point to, as an example, something we saw a 
number of years ago with the agency revising the Part 135 
requirements that would require farmers and ranchers to keep 
very detailed records that were searchable and sortable, 
including text messages and instant messages, of any 
communication that could possibly lead to a transaction. I know 
this was a great burden on the farming and ranching community. 
I am pleased that the CFTC recognized the burden of that and 
worked to fix it, although, unfortunately, I think it took a 
number of years to happen. But I would point to that, as well 
as maybe some other things coming down the pike, where they 
need to focus on this.
    Chairman Roberts. Dr. Brummer.
    Mr. Brummer. It is absolutely critical that the CFTC both 
remember its roots and the importance of agricultural end users 
to the U.S. economy. If these derivatives markets do not 
function well, it jeopardizes the ability of end users to not 
only hedge their risk, but also to contribute productively to 
the U.S. economy.
    You have my commitment that I will work to ensure that the 
rules that are in place work effectively for these end users, 
for the folks back home in my community and similar 
communities. It is important work, and frankly it has to be 
something to keep in mind in the ongoing rulemaking.
    Chairman Roberts. So you have your cost benefit yard stick 
right in your pocket?
    Mr. Brummer. Well, the CFTC statutorily is required to 
consider costs. It is critical that the work being done is data 
driven, that the Commission grounds its rule writing in facts. 
Part of the costs to be considered involve avoiding dead weight 
costs to society, while at the same time making sure that we 
keep in mind the greater costs at times, and certainly in the 
financial crisis, that we saw that can peril the U.S. economy. 
So the data-driven analysis has to be one where you kick the 
tires and you lift the hood, and also you keep in mind the 
stakes of getting it right and the stakes involved in getting 
it wrong.
    Chairman Roberts. You both have touched on this, but I want 
to really emphasize that I have stated many times before that 
we need more options and lower costs for our on-the-ground 
folks who are trying to hedge their agriculture or their 
commercial risks so they can get down to the business of what 
they do the best for America. As the CFTC is currently 
considering rules and regulations that could negatively affect 
our farmers, ranchers, and end users, can you please speak to 
how you would address those rules and regs as a commissioner, 
specifically the de minimis level and position limits.
    We will start with you, Mr. Quintenz.
    Mr. Quintenz. Thank you, Mr. Chairman. Yes, these are very 
important rulemakings that could affect a lot of activity that 
falls outside, I think, the risks that are being targeted. I 
think it is important in position limits to make sure that the 
end users maintain their ability to bona fide hedge their 
risks. The proposal, I think, contains a number of limitations 
of very tried and true hedging practices that would be subject 
to Commission approval and create an approval regime. In terms 
of the de minimis threshold, I fear that if we get that wrong, 
we end up driving providers of these swaps out of the market 
and consolidating risk.
    Chairman Roberts. Dr. Brummer.
    Mr. Brummer. Given the data that I have seen from the CFTC, 
I would have some concerns about the risk of transactions in 
the non-financial commodity swaps markets flying under the 
radar. I hear today, like you, that the Chairman has announced 
a year-long delay in order to get more data in order to not 
only do that, but also get their capital rules right. I 
certainly cannot disagree with the proposition that you want to 
get these rules in particular right.
    But I think that any delay really should be a purposeful 
one. It is essential for regulators to understand cost. But if 
you have significant players in the market, the law mandates 
that there needs to be in place standards like business 
conduct, reporting, record keeping, and risk mitigation, in 
order to help assure a high quality transactional environment.
    So if confirmed, I would certainly work to ensure that the 
time is used wisely.
    Chairman Roberts. Dr. Brummer, let me ask you a question. 
In a 2000 ``Georgetown Law Journal'' article you wrote the 
following, quote, ``Policymakers in agencies such as the SEC 
and Federal Reserve are not generally elected by the public and 
once appointed, are not often easily removed by even 
democratically-elected officials. Policymaking is to some 
degree unaccountable to the public, and therefore, some 
believe, illegitimate.''
    Now, considering this, why do you want to become such a 
policymaker, and how will you ensure the legitimacy of your 
work at the CFTC? Pardon us for going into your background.
    Mr. Brummer. Oh, no, no. It is an honor to have my 
scholarship certainly discussed by such an esteemed body. In 
that article and in other articles I also add that in order to 
get rulemaking right, you have to have on the one hand, 
technical expertise, people who are willing to get into the 
details and to make sure that very fact-specific and often 
complex market ecosystems work well. But it is essential that 
when doing this, that there is sound, strong congressional 
oversight.
    I think that if I have the honor of being a commissioner, a 
certain modesty has to be involved in everything that you do, 
to know that I am not or would not be an elected 
representative, and that ultimately I have to understand that 
although I have a responsibility to safeguard the public 
interest, that at the same time that work has to be done in a 
collaborative spirit with elected rule makers. It is the only 
way to get it right, to get all the information that you need 
about your constituents and others, and I think it ultimately 
enhances the quality of agency rulemaking.
    Chairman Roberts. I appreciate that. I have two other 
questions, one involving the cost benefit balance and the 
consideration when voting on proposed final rules and regs, the 
other on CFTC in regards to the Dodd-Frank rule writing 
process. You have both touched on those in your answers.
    I turn now to Senator Stabenow.
    Senator Stabenow. Well, thank you, Mr. Chairman, and thank 
you again to both of you. I wanted to specifically ask you a 
little bit about cybersecurity, which obviously, when we look 
at every realm of our lives now, there is the whole question 
that is very serious. Last week the CFTC adopted amendments to 
its system safeguard rules in an effort to enhance and clarify 
existing cybersecurity requirements.
    I am pleased that the Commission did that in a timely way, 
because it goes without saying that this threat of cyberattack 
is one of the biggest challenges we face both in the public and 
the private sector. However, looking closely at last week's 
amendments, I am curious whether each of you believes that a 
best practices approach is enough or whether we need to be 
looking at more specific cybersecurity regimes which closely 
integrate the public sector's work with the private sector. 
What is the best that we should be doing here as it relates to 
addressing cyber threats to our financial markets?
    I will first, Mr. Quintenz, ask you and then Dr. Brummer.
    Mr. Quintenz. Thank you, Senator. That is a very important 
and a very difficult question. There is no more important 
issue, I believe, to regulators and to the marketplaces than 
cybersecurity. I view cyberspace as the battlefield of the 21st 
Century for those that wish not only to commit fraud and theft, 
but for those that wish to do our country harm and potentially 
create a panic that could lead to a breakdown in social 
services. This is something that I believe the Commission has 
taken very seriously. I was encouraged by the bipartisan and 
unanimous adoption of that rule.
    Specifically, to your question, I think we need to allow 
for innovation in this space. We need to allow for the 
flexibility of firms that have very large budgets that can 
target cybersecurity, to spend those funds and spend that 
thought in a flexible way, while ensuring that they are meeting 
best practices, a high standard of best practices, to save our 
markets.
    Senator Stabenow. Thank you. Dr. Brummer.
    Mr. Brummer. Cybersecurity is critically important. It is 
critically important to our markets. It is critically important 
to the health and security of the U.S. economy. It is not only 
complex, but it is fast moving. Cyber threats can quite 
literally move in milliseconds, and it is critical that the 
agency, that the CFTC, remains ahead of the technological 
curve.
    Certainly best practices are a start. You want to, I would 
imagine, make sure--and certainly I would want to make sure, if 
I had the honor of being confirmed, that best practices and 
benchmarks are indeed being met and that there is a high 
quality to those best practices. It is important, frankly, for 
CFTC Commissioners and staff to get out into the field and make 
sure that they have both the resources and the wherewithal in 
order to predict trends to cybersecurity. But is it of critical 
importance, and you would have my commitment that I would be 
paying this very, very close attention.
    Senator Stabenow. Thank you. Let us talk about cross-border 
harmonization. I know, Dr. Brummer, you have done a lot of 
important work in that area, but recent decisions by some 
international regulators to delay the September 1 
implementation of margin requirements for un-cleared swaps has 
raised many important policy questions regarding global 
harmonization of financial markets and relates to the risks of 
rewarding bad behavior by broadly delaying deadlines. This is a 
dilemma because we have moved ahead, others have not.
    So given the global nature of the swaps market, what is 
your view of the U.S. role among international regulators, and 
how would each of you balance the need to move forward on 
financial reform while recognizing real challenges that 
individual regulators may face and the communities being 
regulated face in all of this? Dr. Brummer.
    Mr. Brummer. International coordination is deceptively 
hard. It is difficult. You have countries with different 
traditions, different economies, different political and 
economic cycles, and getting everybody on the same page takes 
commitment and it takes work. Overall, I think it is hard, 
however, to lead if you do not lead by example. I think if you 
want to have an environment, a cross-border regulatory 
environment that is of high quality, then the United States 
should commit to the highest standards and find those who are 
like-minded.
    There have been some delays. My sense is that by standing 
firm, the United States, and particularly the CFTC, has been 
able to encourage other countries to accelerate some of their 
own reforms in order to provide a more stable cross-border 
regulatory environment, but it certainly takes a lot of 
dedication, work and listening to other regulators and a firm 
understanding of what exactly they are doing in other parts of 
the world.
    Senator Stabenow. Thank you. Mr. Quintenz.
    Mr. Quintenz. Thank you, Senator. I would agree with my 
fellow nominee. I think this comes down ultimately to 
relationships and trust and keeping an open line of 
communication across our borders to make sure that these 
efforts are coordinated. I think someone does have to go first, 
but I do not believe that is the full analysis. I believe that 
the full analysis is: after you go first, how long will it be 
until all the jurisdictions move, what is the size of the 
regulatory arbitrage you are creating, and once other 
jurisdictions move, will there be regulatory arbitrage going 
forward?
    I believe that requires a great level of coordination on 
which I would be thrilled to work should I have the honor of 
being confirmed.
    Senator Stabenow. Thank you very much. One other question 
that I would like to ask each of you in that regards to the 
clearing house risk. The risk and leverage associated with 
unregulated swaps markets played, as we know, a significant 
role in a financial crisis. Recognizing this, Congress required 
essential clearing of certain standardized swaps. Since the 
transition, many concerns and questions have been raised 
regarding the new risk profile of clearing houses.
    What actions do each of you believe the CFTC should take to 
ensure registered clearing houses manage risk appropriately so 
that the requirement for clearing does not become a vehicle for 
unmanageable systemic risk? Dr. Brummer.
    Mr. Brummer. The reforms, the clearing reforms, are very 
important and constitute a core aspect of recent reforms, but 
there are risks certainly whenever you concentrate transactions 
within one entity, and as a result, the CFTC has to play a 
vigilant role in making sure that clearing houses operate well, 
that they function properly, and that the members are 
fulfilling their own obligations to the clearing house.
    This involves close supervision of clearing houses. It 
involves an analysis of what contributions the members are 
making to the clearing house in order for it to function 
properly, what risk protocols are not only being implemented 
now, but on an ongoing basis, and making sure that there are 
inspections of those clearing houses to make sure that they are 
adequately capitalized and to make sure again, that U.S. 
taxpayers are never again on the hook for shortcomings in our 
own financial market infrastructure.
    Senator Stabenow. Thank you. Mr. Quintenz.
    Mr. Quintenz. Yes, thank you for the question. I think it 
is crucial to make sure that the clearing houses are keeping 
their obligations. I do not believe that, before rule writing 
in this area, there was any method to potentially resolve a 
clearing house failure. So I believe that is crucially 
important, that it be on the record and in the books, and that 
process be known to the markets so it does not create a panic.
    However, I am also aware clearing houses need to protect 
themselves against their largest two customers and members 
failing, in which case there would probably be some significant 
other problems that we would be having to deal with. But I 
think it is crucial that we verify that they are keeping those 
obligations to prevent anything outside of that from happening.
    Senator Stabenow. Thank you, Mr. Chairman.
    Chairman Roberts. I thank my colleague. Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman, and Dr. Brummer, 
we are glad that your family saw the light and moved you from 
Virginia to Northwest Arkansas.
    Mr. Brummer. Yes, sir.
    Senator Boozman. Certainly we are very, very proud of you. 
I would like to follow up on the Chairman's question about the 
relationship of the importance of the CFTC understanding the 
American farmer and understanding agriculture. If confirmed--
and this is a question for both of you. If confirmed, how do 
you plan to engage with agricultural groups as well as with 
other end users? What would be your method of getting out and 
ensuring that you have a good understanding?
    Mr. Quintenz. Thank you, Senator. When I spent time on the 
Hill, one of my favorite things to do was to go back to our 
district and actually visit with people. I do not think you get 
a better sense of their businesses and their pressures and 
their costs than you do by actually going there and being on 
the ground with them.
    I would, should I have the honor of being confirmed, commit 
to, on a very regular basis, meeting with the agricultural 
community and farmers and ranchers around the country to make 
sure that I am hearing their concerns. I would also very much 
like to keep an open line of communication to you and your 
colleagues to make sure I am hearing the concerns of your 
constituents.
    Senator Boozman. Dr. Brummer.
    Mr. Brummer. Absolutely. It is an honor, a privilege to 
talk to our great farmers. I too can commit to getting out, 
talking to farmers and ranchers and other end users about their 
needs. I enjoy getting back home and talking to folks in my 
community and other similarly-situated communities and will 
continue to do so.
    Senator Boozman. Very good. In your testimonies, I think 
both of you noted the importance of ensuring that U.S. firms 
are operating on a level playing field as compared to our 
international competitors, and certainly, I completely agree 
with that point. But one area that has been a challenge is in 
harmonizing the rules, and again, our Ranking Member brought 
this up with the regulations with the rest of the world.
    How would you approach the decisions like the CFTC's recent 
comparability determination regarding Japan? How would you 
ensure that U.S. firms are able to compete with their 
international counterparts without competitive advantage?
    Mr. Quintenz. Thank you for the question, Senator. I think 
that this does come down to relationships. It does come down to 
keeping open lines of communication. I believe that in the 
example of Japan, ``comparability'' is an important word. The 
word is not ``equality''; it is ``comparability''. I think that 
we need to be open to understanding other jurisdictions have 
their own authority and, if their goals are similar to ours and 
we feel that we are comfortable with the ring fencing they can 
do around that risk, I think that those determinations should 
be pretty easy.
    But I think that it is crucial that we understand how our 
rules are either advantaging our markets or potentially 
disadvantaging our markets in a situation where there is 
disharmony in the regulatory process.
    Mr. Brummer. I think that harmonization is important. Rules 
will never be 100 percent the same across jurisdictions, and it 
is important to make sure that regulators are on the same page, 
both from the standpoint of financial risk, but also to make 
sure that there is a level playing field for our companies 
operating abroad, and I think you have to leverage existing 
international organizations and forums, having sound 
relationships, and leading by example.
    As I said, I think it is hard to lead if you do not lead by 
example, but also understand that there are different 
regulatory ecosystems and countries have different ways of 
getting things done.
    Senator Boozman. I really do not have a question about 
cybersecurity except just to comment in the sense I am on a 
Subcommittee that has jurisdiction over OPM and the IRS and 
Appropriations, and this is just a huge problem for our 
country, and we are seeing this with all the stuff that is 
coming out. But that is certainly something that I would really 
encourage both of you to really just make that a priority. It 
is just something that we have to attack as a nation. The 
Federal Government just does not do a very good job. So if you 
want to comment on that.
    Mr. Quintenz. I just agree with you. It requires an immense 
amount of coordination and effort.
    Senator Boozman. Yeah.
    Mr. Brummer. Absolutely, sir.
    Senator Boozman. Thank you. Thank you, Mr. Chairman. As 
noted, I have also stayed within my time line.
    Chairman Roberts. Much appreciated. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. Mr. Quintenz, 
welcome fellow Ohioan. I see your family is there with you. I 
know it is a big day for you and for them, and congratulations. 
I had the honor of serving with your very distinguished former 
employer in the House, with Congresswoman Pryce. So thanks for 
joining us.
    Let me start with you, and then I want to follow up with 
Dr. Brummer from what Mr. Boozman asked about and what Ranking 
Member Stabenow talked about too. The Advisory Committee, the 
CFTC Advisory Committee, as you know, these committees serve an 
important function, but earlier this year, the Energy and 
Environmental Markets Advisory Committee presented a one-sided 
report that was withdrawn.
    How do you support balancing the membership of the 
Committee to make sure a variety of viewpoints are considered 
and represented? Because in that report we had some 
conversations and the Commission did not really seem all that 
interested in more balance. How do we get there on those kinds 
of advisory committee reports?
    Mr. Quintenz. I think it is crucial that advisory 
committees are open and transparent. I think transparency is 
the bedrock of trust in governments and in markets. I believe 
in hearing all sides of an issue. As a former staffer and as an 
analyst in the markets, I know there are always two sides of a 
story. So I would encourage a robust conversation on any 
advisory committee would I have the honor of leading. I believe 
that the two advisory committees open are Global Markets and 
Technology. I am not sure exactly how robust those viewpoints 
would be, but I would agree with you that an open process is a 
good process.
    Senator Brown. Thank you. That is important. You want to 
comment on that, Dr. Brummer?
    Mr. Brummer. I certainly know that--frankly, I do not have 
a monopoly on all good ideas in the world, and it is so 
important that you have folks from different vantage points who 
are directly informing our regulatory decision-making. It is 
the only way in which you can get the information. People talk 
about data-driven analysis. It is the only way in which you can 
get the information to make sure that you get decisions right.
    So you would have my commitment, to the extent that I am 
both confirmed and have the power over any particular advisory 
committee to do so, to make sure that there is a broad set of 
personalities and interests that are involved in forming the 
decision-making.
    Senator Brown. Thank you. Let me follow up on the 
conversation again that Senator Boozman and Senator Stabenow 
had with you on the whole issue of international regulators. I 
stepped out of the Committee because I was speaking with 
Governor Dan Tarullo of the Federal Reserve, who does not have 
the title, but really is the supervisory--does the supervisory 
work for the Fed. What we were--the subject of the conversation 
in large part was what is happening with international 
regulators on capital standards, and partly the different speed 
at which--whether it is Basel III, whether it is the EU, 
whether it is individual countries--is they move on capital 
standards and on regulation, both the speed and the pressure 
they are under from their banking communities and their 
legislators.
    There are always efforts of one country playing off against 
another, one set of companies playing off one country against 
another to try to weaken rules. That being said, understanding 
you need to coordinate with international regulators, we have 
seen, like I said, rulemaking not always moving at the same 
speed. Are there risks or unintended consequences of CFTC 
repeatedly delaying its implementation based in part either at 
the weaker rules or the delaying--the slower moving rules of 
another country?
    Mr. Brummer. Again, where I am from, leadership is often--
leadership by example--and it is important if you want to push 
certain high quality standards--that an agency shows that it is 
willing to abide by those standards. You have to, obviously, 
try to understand that other countries work differently. 
Literally how they make rules can be different.
    But at the same time, the strategy should be to find other 
like-minded countries who have the same commitment, not only in 
the rules but in the supervision with same commitment to our 
rules that we have, and then to work collaboratively to create 
a large enough of a market and regulatory ecosystem that other 
countries are either inspired or required to opt into our 
standards and market and regulatory preferences. It is a 
critical aspect of our diplomacy, and getting it right means 
strong rules at home and leadership abroad.
    Senator Brown. One more point. I apologize for going over a 
bit, and thank you for that. For both of you, if you would, I 
know earlier you both discussed the importance of protecting 
markets from the threats of cyberattacks. In your opinion, is 
CFTC's funding keeping pace with this threat? Is it adequate? 
Do you want to start, and then Mr. Quintenz?
    Mr. Brummer. You know, I come from a part of the country 
where people want to know that their tax dollars are being 
invested wisely, and I think that the CFTC----
    Senator Brown. That may, actually, be all parts of the 
country, but fair enough.
    Mr. Brummer. I know. well, certainly----
    Senator Brown. Even in Bexley we think that.
    Mr. Brummer. I think the CFTC's case is an exceptionally 
strong one, and cybersecurity is one aspect of that case. The 
responsibilities of the agency have expanded dramatically and 
the threats from cyber have expanded dramatically as well. So 
you need to have both the human capital, the technological 
capability, the surveillance mechanisms, and other tools in 
place to help, again, promote sound decision-making, regulatory 
certainty from market participants and end users, also 
protecting the U.S. economy from folks who may want to 
undermine that stability.
    Senator Brown. So is the funding adequate? Do you know 
this? Can you figure this out yet?
    Mr. Brummer. Certainly I will have a better--the funding 
has certainly not kept up with the dramatic increase in the 
agency's responsibilities, and I have concerns, serious 
concerns about whether or not they are sufficient.
    Senator Brown. Mr. Quintenz.
    Mr. Quintenz. Thank you, Senator. I think I would have to 
get there to be able to answer that question concretely. From 
the rule writings that have been issued, they have been focused 
on enforcing very high standards of best practices for the 
industry. There are companies that spend hundreds of millions 
of dollars on this for themselves. It would be hard to answer 
that question in terms of the resources until I get there, 
should I have the honor of being confirmed.
    Senator Brown. As long as you are obviously aware of the 
acute need and that we do not always keep up with things like 
that as well as we should. Also, thank you for the meetings you 
have each had with my staff so far and I look forward to 
sitting with each of you. Thank you.
    Mr. Quintenz. Thank you.
    Chairman Roberts. Senator Tillis.
    Senator Tillis. Thank you, Mr. Chairman. I thank you both 
for being here today, and thank you for being generous with 
your time meeting with me in the office. I enjoyed that 
discussion. I just have a couple of questions.
    In the office, I appreciate some of the forward-looking 
discussions we had. I have a couple of questions here. One I 
may just submit for the record because it has to do with 
modernizing and becoming more focused on digital alternatives 
to the analog world that we live in today.
    But I want to get to two specific policy questions. One of 
them is about the regulation of automated trading. Are you 
familiar with the rule the Commission is trying to implement to 
remove the subpoena requirement? In my opinion, I cannot find 
any evidence of where the subpoena requirement is broken, so I 
do not know why they are trying to fix it. But I would be kind 
of curious about your position on this issue and the position 
you would take if confirmed.
    Mr. Quintenz, we will start with you.
    Mr. Quintenz. Sure Senator, thank you. I believe that the 
source code, trading mechanisms and algorithms that firms 
develop do not just represent historical trading files. I 
believe that they are a result of an immense amount of time and 
energy and thought and research, and represent future as well 
as current business strategy.
    Senator Tillis. It is critical intellectual property.
    Mr. Quintenz. I would agree with that, and I believe it 
deserves those protections. I do not see anything that is wrong 
or risky or inconvenient about maintaining the subpoena process 
as the appropriate legal and judicial standard to compel a firm 
to disclose its intellectual property. There are plenty of 
steps that the agency can take before it gets to that level to 
work with the firm.
    Senator Tillis. Thank you. Mr. Brummer.
    Mr. Brummer. As a law professor----
    Senator Tillis. Dr. Brummer.
    Mr. Brummer. No, no. I certainly understand the importance 
of due process. It is an essential part of the rule of law 
since, frankly, Roman times. The CFTC has rules, or must have 
rules in place to make sure that information is protected and 
that market participants can trust regulators.
    Now, I am not entirely sure about how enforcement is 
practiced in the building, and I have heard that there are some 
surveillance concerns and as a result, you would want to talk 
to the folks charged with financial stability and the 
enforcement folks to make sure that they have the tools that 
they need in order to do their job well. But I give you my word 
that I will do my very best to make sure that whatever the CFTC 
comes out with, due process and the confidentiality of 
information will be assured. I think this does require close 
attention.
    Senator Tillis. In my opinion, again, if we could point to 
a litany of examples where something bad could have been 
averted as a result of bypassing the subpoena process, I would 
see the argument. In my personal opinion, it looks like a power 
grab that I am not particularly supportive of.
    The other one that I had has to do with the implementation 
for the margin for un-cleared swaps. You know, we had several 
nations and economies that were going to be involved in that. 
Most, except for the United States and Japan, have delayed 
their implementation. The result is putting the U.S.--I will 
not speak for Japan--at a disadvantage in the period of time 
where some financial markets are not subject to the new rules 
that we are subject to.
    So I am kind of curious about why you would think it is 
either wise or unwise for the United States to move forward 
when some of our top global competitors have decided to delay 
it. Quite honestly, if they start measuring the benefit of 
having this market advantage for some period of time, I cannot 
imagine why they would not think, well, maybe we need a little 
bit more time than the initial delay to get a market advantage.
    So I would be curious, and this time, we will start with 
you, Dr. Brummer.
    Mr. Brummer. I too believe that it is important that 
countries work in concert with one another to the extent 
possible on regulatory positions and you do not want to do 
anything to burden our market participants in a global 
environment----
    Senator Tillis. So would you----
    Mr. Brummer. --needlessly.
    Senator Tillis. --in the interest of time then----
    Mr. Brummer. Sure.
    Senator Tillis. --would you suggest that it would make 
sense then for us to key our implementation dates with our 
major global competitors?
    Mr. Brummer. Here it is tough, because I would not want to, 
frankly, reward bad behavior. I think that if the United States 
wants to promote its rules, it has to do so by leading by 
example, and I think that it appears that the CFTC's----
    Senator Tillis. Yeah.
    Mr. Brummer. --pace has accelerated parts----
    Senator Tillis. Although I would say--and I am only 
interrupting you because of the time.
    Mr. Brummer. Sure. I am sorry.
    Senator Tillis. I would like to have your opinion. But it 
is almost like we are being penalized for good behavior. We are 
on time; some of the other key players are not. Our banking 
industry is suffering as we move forward with regulations that 
make us globally uncompetitive.
    So to me it is something that we should take a look at. We 
should never move forward with regulations that knowingly will 
put us at a disadvantage, and we have to make these things get 
in synch, otherwise, it provides our competitors with a 
disincentive to move quickly even after the delay.
    Mr. Quintenz, I will have you summarize.
    Mr. Quintenz. Yes. Thank you, Senator. I could not agree 
with you more. I think regulatory arbitrage always hurts 
someone. To the extent that it is created by us moving first or 
someone else delaying their rules, we need to be aware of how 
that affects our markets, how that imposes costs, how that 
disadvantages our economy. So I would urge a teamwork approach 
to this, being on time but moving forward with it together.
    Senator Tillis. Thank you both. I look forward to 
supporting your confirmation.
    Chairman Roberts. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman, and thank you, 
Dr. Brummer, Mr. Quintenz. I come from a farm state, Indiana, 
and I think it is really important for the CFTC commissioner, 
as my colleague Senator Boozman was saying, to make your 
decisions based on more than just being in Washington, and to 
not just occasionally fly out, have an airport meeting and fly 
back, but to actually be out and see what happens in our 
chairman's farms in Kansas and mine in Indiana.
    I think it is really important for you to spend the day 
there, to see what is going on, to see the effect of your 
decisions on how the balance sheet turns out for them, how that 
determines whether or not they are going to be able to cover 
their bills that year. I just want to follow up with Senator 
Boozman's comments that we would like a commitment that you 
will hit the road, that you will spend time out there, that you 
will talk to our farmers, not just at the airport lounge, but 
actually at their actual farms with a lot of the ag leaders in 
the community. Dr. Brummer.
    Mr. Brummer. I could not agree with you more. You have my 
commitment. Some of the smartest things I ever heard came from 
my own grandfolks who were farmers. You learn not only about 
markets, you learn not only about what they do, but you learn a 
little bit of common sense too, and it is important for folks 
to get out of Washington generally.
    But you have my commitment that I will do my very best to 
keep in touch and to make sure that the rules work as well as 
possible for our farmers, ranchers.
    Senator Donnelly. Mr. Quintenz, the Indiana line is only 
about 90 miles away from Columbus.
    Mr. Quintenz. I cannot wait. I cannot wait to come and 
visit my--my grandmother grew up on a dairy farm in Northern 
Wisconsin. She still lives very close to it. I remember her 
ridiculing me one time for bringing margarine home from the 
grocery story instead of butter, and that will never happen 
again.
    Senator Donnelly. She is a wise woman.
    Mr. Quintenz. I would very much like to take you up on your 
invitation.
    Senator Donnelly. Following up on that, one of the things 
that affects our farmers and their livelihood are how the 
commodities are obviously treated once they are on the market, 
and I have consistently argued that position limits should be a 
tool in the CFTC's toolbox. That helps the Commission fulfill 
its mission to promote transparent, open markets and to protect 
the public from fraud and manipulation. If confirmed, I want to 
know if you are going to work to help finalize the strong 
positions limit rule in a timely manner. Dr. Brummer.
    Mr. Brummer. Absolutely. You put it best. It is one of a 
number of tools that the Commission has historically relied on 
and will rely on to police market abuse and large systemic 
concerns of large positions, any one position. To get it right, 
you have to make sure that you do not end up excluding the 
folks who depend on them, a smart bona fide hedging rule.
    At the same time, you cannot create loopholes for the sake 
of creating loopholes. You have to focus on making sure it is 
as cost efficient and value enhancing for the market and for 
the global and U.S. economics as possible.
    Senator Donnelly. Mr. Quintenz.
    Mr. Quintenz. Yes, thank you, Senator. This issue has been 
out there for a long time. We have had four proposed rules. The 
one final rule was vacated by a federal court. We have had 
thousands of comment letters. It seems to me that the problems 
in finalizing something may not be a result of effort as 
opposed to perspective. I believe that the perspective needs to 
require the concerns of end users being met here, making sure 
that they can hedge in a bona fide way. Yes, I give a 
commitment to working on that.
    Senator Donnelly. Because it is important, obviously, that 
they be able to lay off risk and know that they are secure, but 
at the same time, we do not want to see these markets abused as 
well.
    Mr. Brummer. Absolutely.
    Senator Donnelly. I would also like to talk to you a little 
bit about the funding for the CFTC. You know, we have great 
hopes. We have great challenges. It is critically important to 
our rural communities and actually to the entire economy of the 
United States. But it is like a car, if there is no gas, you 
cannot start the car and it will not go down the highway.
    So one of the things we want to do is make sure that there 
is enough funding. I am interested in learning more about the 
possibility of creating some self-funding mechanisms for the 
Commission that provides you with the sufficient resources you 
need without restricting access for market participants.
    I am not asking you for an answer today, but would each of 
you commit to getting back to me about that concept of some 
methods of self-funding so you are not reliant on us having our 
budget act together and other things that make it very 
difficult. Mr. Quintenz, I will have you answer first.
    Mr. Quintenz. Yes, I would be thrilled to engage with you 
on that issue and respond to that issue.
    Senator Donnelly. Dr. Brummer.
    Mr. Brummer. Absolutely. I would be delighted to.
    Senator Donnelly. Great. Well, look, I will tell you that 
we had some folks from the EPA out to Indiana in February in an 
unheated barn. It was about 10 degrees. Everybody had a good 
time, I think, except maybe some of the folks who were not from 
Indiana. So we will try to make it either a heated barn or 
during the summer, if that works better for you. Thank you very 
much.
    Mr. Quintenz. Thank you.
    Chairman Roberts. Thank you, Senator Donnelly. We have 
never had any EPA folks out to Dodge City. I am not sure they'd 
get back. That memo that you are going to get from the two 
nominees with regards to the possibility of user fees, my word, 
not yours. Send me the same information.
    We have now Senator Gillibrand.
    Senator Gillibrand. Thank you, Mr. Chairman. I would like 
the memo too. I wanted to know specifically what budgetary 
challenges you think you are going to encounter. Because you 
have such a limited appropriations considering that the 
derivatives market is worth $300 trillion and $34 trillion 
worth of futures and options and $270 trillion worth of swaps. 
I mean, that is a huge responsibility. You have 750 people, but 
your budget is $250 million. So that is really much farther 
below other prudential regulators with the same regulatory 
responsibilities.
    So I would really like you to be as far reaching in your 
analysis of budgetary concerns and funding streams and what you 
think your ideal budget would be, and specifically, if you 
think capital infusions are needed for live time reporting or 
retaining qualified staff, also whether any mandatory funding 
stream should or would be necessary, whether you suggest fees 
or other mechanisms. Because I do think you need a more 
reliable and standard funding source for the CFTC.
    So I am very interested in your thoughts. If there is any 
you want to share now, you can, but otherwise, we can wait for 
your memo. Dr. Brummer.
    Mr. Brummer. Certainly fulfilling this mandate is not easy. 
The responsibilities have expanded dramatically and I look 
forward to providing it.
    Senator Gillibrand. Mr. Quintenz.
    Mr. Quintenz. Thank you. That was a very detailed question, 
and I think it would be very difficult to answer that question 
without being at the agency and understanding exactly how they 
are spending their money and their resources. I do know that 
the Technology Advisory Committee is currently un-sponsored, 
and should I have the honor of being confirmed and have the 
honor of sponsoring that advisory committee, it would give me a 
deep dive look into the technology needs of the agency to be 
able to assess resources.
    Senator Gillibrand. I think it is really important, and it 
obviously is relevant to the questions that we have already had 
on cybersecurity. I just think there is enormous vulnerability 
there, and while our markets are resilient, the systemic risks 
and bad actors throughout the world create more risks for us. I 
think part of those concerns directly relate to your budgeting 
and your vast area of responsibility.
    Recently the CFTC agreed that Japan's uncleaned swaps 
collateral would--excuse me--un-cleared swaps collateral was 
strong enough to suffice the CFTC margin requirements. A member 
of the Commission voiced concern that Japan's rule would quote, 
``introduce greater risk into the derivatives markets,'' 
specifically highlighting their concern that what would happen 
in the event of bankruptcy.
    As the Commission continues to move toward regulatory 
consistency in the market, what do you see as additional risks 
with the non-U.S. counterparties, and specifically with risks 
arriving from un-cleared swaps?
    Mr. Brummer. So clearing is an essential aspect of the 
CFTC's rulemaking because it allows a better opportunity to 
both standardize risk and to assess those risks. It is 
important when one looks and thinks about cross-border risk and 
the mandate of the agency and the agency resources and where 
risk may be coming in the future.
    There are parts of the world that are not only behind, but 
may not necessarily have any incentives to opt into the global 
reforms that were articulated by large international bodies 
like the G-20, and I think this is a key question. It is an 
important question. The margin rules are, as well, critical 
components of financial security and safety, and it is 
important that we get the rest of the world--and they are 
coming along. I think that there has been an enormous amount of 
progress made, but there is still some way to go to make sure 
that this is done right.
    Senator Gillibrand. Mr. Quintenz.
    Mr. Quintenz. Thank you, Senator. I think this is a very 
important area. Un-cleared swaps can provide very essential 
risk-mitigating features for companies in terms of hedge 
accounting and their exposures. But I think it is crucial that 
we also make sure that large exposures do not come back to our 
markets and harm us from a jurisdiction that may not have as 
similar rules to ours as we would like.
    So I think that is an important thing to consider, and I 
believe Chairman Massad had some responses to the concerns 
raised by the other commissioner.
    Senator Gillibrand. Do you see any other regulatory 
inconsistencies in non-U.S. jurisdictions that CFTC should seek 
to address through partial or full substitute compliance?
    Mr. Quintenz. I think that the swap execution facility 
rules, we need to keep working on those. There is potential 
evidence that it is fracturing a very important market and that 
it is shrinking liquidity to our participants, and if that is 
the case, I think we need to be open to revisiting that.
    Senator Gillibrand. Okay. Since I have no more time, I am 
going to submit my specific cyber question for the record, so 
you guys can just answer it once you get in place. You will 
have more information to be able to answer it more fully given 
the answers already. Thank you.
    Mr. Brummer. Thank you.
    Senator Gillibrand. Thank you.
    Chairman Roberts. I thank the distinguished Senator from 
New York for setting a wonderful example with regards to her 
time.
    Senator Klobuchar. Did you do that because I am up next?
    Chairman Roberts. Precisely. Senator Klobuchar.
    Senator Klobuchar. All right. Thank you very much, Mr. 
Chairman. I would like to start by thanking you for holding 
this hearing on the important nominations of Dr. Brummer and 
Mr. Quintenz, to be Commissioners. Thank you so much for that.
    I would like to focus some of my questions, given how 
people in my state have been harmed by speculation and by 
issues that have come before the Commodity Futures Trading 
Commission, and we also have a lot of businesses who hedge 
their risk legitimately. I always see a difference between some 
of the people that do it as part of their businesses and the 
effect that other types of speculation has had on our farming 
community.
    Each of you has a strong background with the financial 
markets. Dr. Brummer, you have a strong academic background. 
Mr. Quintenz, you are a participant in the financial markets as 
a part of your business. Could you talk to me about how you 
would evaluate the differences and the similarities between 
regulations for the financial markets and then for agricultural 
end users.
    Mr. Brummer. Frankly, one of the first observations is that 
farmers and ranchers did not cause the crisis, and I think that 
has to be acknowledged. At the same time, derivatives markets 
exist for a reason. It is for people to be able to hedge the 
risk in a way that is responsible and allows them to ultimately 
contribute to the U.S. economy. Certainly the origins and the 
roots are in the agricultural sector, but there are hardworking 
Americans, and commercial end users, who need the derivatives 
markets for similar things.
    It is key at the same time just to make sure that when 
examining the different risks, the different kinds of 
positions, the size of the positions, the liquidity of the 
different kinds of markets in which they are operating, to take 
into account the public interest across the board and to make 
sure that U.S. taxpayers are safe. But this has to be done in a 
responsible, efficient way.
    But again, understanding that is not just a question of the 
differences of the market participants, but also of the 
different contracts.
    Senator Klobuchar. So are you willing then to work with 
those who trade physical commodities to ensure that the 
exemptions to the position limit rule allow for normal 
practices of the businesses?
    Mr. Brummer. Absolutely.
    Senator Klobuchar. Thank you. Mr. Quintenz.
    Mr. Quintenz. Yes. Thank you, Senator. I think commodity 
markets need to work for the people that are exposed to 
commodity risk. Ultimately, markets need to work for the people 
that use them, and these markets are different than other 
markets in that regard. But with regard to your second 
question, yes, I am very concerned about making sure that any 
position limits rule allows for long-standing and tried and 
true hedging practices in the energy markets to make sure that 
people can, and firms can, hedge that risk the same way that 
they have been.
    Senator Klobuchar. Well, I know the CFTC has studied 
speculation extensively. Can you talk a little bit about how 
the trades that commercial end users enter into are different 
than the types that financial institutions have entered into 
and just your views on speculation? Mr. Brummer.
    Mr. Brummer. Well, certainly speculators have a role in 
derivatives markets and they are supposed to be there to make 
sure that trades are completed where perhaps end users are not 
there and to be ready. They help to make the markets work. The 
CFTC's regulation, and particularly its statutory authority, 
involves excessive speculation, and to make sure that excessive 
speculation does not distort the price discovery operations of 
these markets.
    Senator Klobuchar. Do you think the rules that we have in 
place now are adequate to do that, to go after abusive or 
excessive speculation?
    Mr. Brummer. I think we have made a strong start. I think 
it is important for the agency to continually reevaluate where 
it stands as it gets more information and data, particularly 
pertaining to your question on market abuse and market 
manipulation, because the markets themselves are always 
changing. You would have my commitment to do just that and to 
keep an eye open and talk to you and others about where the 
market stands on this.
    Senator Klobuchar. Mr. Quintenz, what steps do you believe 
the CFTC should take to reduce the risk of market manipulation 
from large market participants using one market to influence a 
price for similar contracts in another market?
    Mr. Quintenz. Thank you, Senator. That is a very good and 
interesting question. I think they need to be focused on all 
aspects that could affect artificially the price in any market. 
I think that position size has long been recognized, in the 
investment community, as something that can impact prices and 
create large price moves. As such, there has been a very robust 
regulatory architecture that has developed over the last 70 
years to identify, closely monitor, and in some cases, disallow 
large positions.
    Position limits have been a part of the CFTC's enforcement 
for 80 years now, I believe, and large trader reporting 
requirements for almost 90 years. So that is well established.
    Senator Klobuchar. Thank you very much. I appreciate it. 
Forty-four seconds over, Mr. Chairman.
    Chairman Roberts. That goes into your bank. That is 
certainly within the boundaries of the distinguished Senator. 
This is going to conclude our hearing this morning. I want to 
thank each of our witnesses very much for sharing your 
background and testimony. As the Committee considers your 
nomination, it has been most valuable to hear your perspectives 
first hand.
    I have a little admonition here to both of you, and for 
that matter, anybody else who is listening. There has been a 
lot of discussion about funding here today. I remember well 
when former Chairman Gensler came into my office to talk about 
funding. He was a little disturbed, alarmed, upset with regards 
to what the House of Representatives had done to his budget. We 
will not get into numbers, but it was significantly lower than 
what he requested. I informed him that some might be a little 
bit more understanding of his request, but what would he need 
all of that money for. He indicated it would be for several 
hundred more lawyers to implement Dodd-Frank.
    I asked if there would be parking places available for the 
attorneys and informed him we lived in a brave new world, where 
I think at that particular time the debt was about what, $17 
trillion, $16 trillion. It is now 20.
    I would say that the best perspective is that of our 
farmers who are going through a very difficult time. They are 
facing terribly tough times right now and, quite frankly, they 
just have to do more with less. There is a lot of talk about 
that, a lot of press about that. It is hard. It really is hard, 
and it requires that you really prioritize. But they know they 
have to do it.
    I remember sitting at the Pentagon with the commandant of 
the Marine Corps going over their mission in the Pacific, which 
is considerable, if anybody would ever use them. But having 
said that, I asked the commandant, how is he going to do this? 
He said, we are going to do what we always do, we are going to 
have to do more with less.
    I think that is the situation that we face, unfortunately. 
We should all do the same, and so we are going to talk about 
things like user fees and additional funding. It is good that 
we do that, but now is not the time. It is not going to happen.
    So with that wonderful news, to my fellow members, I would 
ask that any additional questions that they may have for the 
record, they be submitted to the Committee clerk by 5 p.m. 
Friday. I thank you both.
    Mr. Quintenz, that young man that looks remarkably like you 
can now go to whatever experience he wants to go that will be a 
lot more interesting than it has been so far for him today.
    The Committee stands adjourned.
    [Whereupon, at 11:18 a.m., the Committee was adjourned.]

      
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