[Senate Hearing 115-591]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 115-591

                             NOMINATION OF
                       J. CHRISTOPHER GIANCARLO,
                     OF NEW JERSEY, TO BE CHAIRMAN,
                  COMMODITY FUTURES TRADING COMMISSION

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION


                               __________

                             JUNE 22, 2017

                               __________

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

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           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
JONI ERNST, Iowa                     MICHAEL BENNET, Colorado
CHARLES GRASSLEY, Iowa               KIRSTEN GILLIBRAND, New York
JOHN THUNE, South Dakota             JOE DONNELLY, Indiana
STEVE DAINES, Montana                HEIDI HEITKAMP, North Dakota
DAVID PERDUE, Georgia                ROBERT P. CASEY, Jr., Pennsylvania
LUTHER STRANGE, Alabama              CHRIS VAN HOLLEN, Maryland

             James A. Glueck, Jr., Majority Staff Director

                    Jessica L. Williams, Chief Clerk

               Joseph A. Shultz, Minority Staff Director

               Mary Beth Schultz, Minority Chief Counsel

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Nomination of J. Christopher Giancarlo, of New Jersey, to be 
  Chairman, Commodity Futures Trading Commission.................     1

                              ----------                              

                        Thursday, June 22, 2017
                    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...     3

                                Witness

Giancarlo, J. Christopher, Nominee to be Chairman, Commodity 
  Futures Trading Commission.....................................     4
                              
                              ----------                              

                                APPENDIX

Prepared Statements:
    Giancarlo, J. Christopher....................................    16
Document(s) Submitted for the Record:
Roberts, Hon. Pat:
    Various organizations letter of support for J. Christopher 
      Giancarlo to be Chairman of the Commodity Futures Trading 
      Commission (CFTC)..........................................    24
Giancarlo, J. Christopher:
    5-day letter, Committee questionnaire and Office of 
      Government Ethics Executive Branch Personnel Public 
      Financial Disclosure Report filed by J. Christopher 
      Giancarlo.................................................. 26-63
Question and Answer:
Giancarlo, J. Christopher:
    Written response to questions from Hon. Pat Roberts..........    66
    Written response to questions from Hon. Debbie Stabenow......    70
    Written response to questions from Hon. John Boozman.........    81
    Written response to questions from Hon. John Hoeven..........    83
    Written response to questions from Hon. John Thune...........    85
    Written response to questions from Hon. Steve Daines.........    88
    Written response to questions from Hon. Luther Strange.......    91
    Written response to questions from Hon. Sherrod Brown........    94
    Written response to questions from Hon. Amy Klobuchar........   100
    Written response to questions from Hon. Joe Donnelly.........   103


 
                             NOMINATION OF
                       J. CHRISTOPHER GIANCARLO,
                     OF NEW JERSEY, TO BE CHAIRMAN,
                  COMMODITY FUTURES TRADING COMMISSION

                              ----------                              


                        Thursday, June 22, 2017

                              United States Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:46 a.m. in room 
328, Russell Senate Office Building, Hon. Pat Roberts, Chairman 
of the Committee, presiding.
    Present or submitting a statement: Senators Roberts, 
Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Casey, and Van 
Hollen.

 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 as we consider the nomination of 
Mr. J. Christopher Giancarlo to serve as Chairman of the U.S. 
Commodity Futures Trading Commission.
    Mr. Giancarlo, it was a pleasure to see you in Montana a 
few weeks ago. It reminds me of a Merle Haggard song, but we 
will not go there.
    [Laughter.]
    Chairman Roberts. I thank you for being with us here today. 
I note that you have your wife, children, and other close 
family and friends in the audience today. Allow me to welcome 
the family and you all to the Ag Committee. Thank you for 
coming.
    As noted in the CFTC's mission statement, this agency is 
charged with fostering open, transparent, competitive, and 
financially sound markets, while working to prevent systemic 
risk.
    Further, the Commission is tasked with protecting market 
users and their funds and consumers and the public from fraud, 
any manipulation, abusive practices related to derivatives and 
other products that are subject to the Commodity Exchange Act.
    The services provided by the CFTC allow farmers, ranchers, 
commercial companies, municipalities, pension funds, and others 
who rely on derivatives to hedge commercial risk and focus on 
what they do best--innovating and creating jobs and producing 
food, goods, and services for the economy. I might add that is 
a pretty big deal.
    It is essential the CFTC have individuals in charge who 
truly take its mission statement and responsibilities to heart. 
Mr. Giancarlo, you have demonstrated your understanding of that 
mission during your time at the CFTC. In fact--and I want to 
underscore this--in fact, in 2014, this Committee voted 
unanimously to advance your nomination, and the Senate 
confirmed you by a voice vote.
    Happy birthday Let us not forget, it was not the farmer, 
rancher, rural cooperative, electric utility, nor other end 
users who contributed to the financial crisis of 2008. Many 
members raised concern during consideration of Dodd-Frank 
effort and insisted the legislation provide flexibility to 
those who rely on these markets but did not contribute to 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, limited flexibility was provided from 
the heavy hand of government overreach.
    Therefore, moving forward, I think it is imperative that 
both Congress and our Federal financial regulators work to 
provide necessary and appropriate relief to our nation's 
providers of food and energy and to those who export U.S. 
goods.
    To do this, we need a functioning CFTC which handles 
regulations practically and looks to reduce Federal overreach. 
In fact, I believe the recent announcement of your initiative 
to apply current rules and regulations in a less burdensome 
manner is a perfect example of getting our Federal agencies 
back to how they were intended to function--governing, not 
ruling--and to be a true partner to our nation's market 
participants.
    Further, I am encouraged by the CFTC's launch of LabCFTC, 
which is intended to foster financial technological innovation, 
something that is happening at light speed today whether we 
like it or not. I am glad you intend to stay out ahead of the 
curve and engage with the modern derivatives marketplace.
    Mr. Giancarlo, it is imperative all Commissioners 
understand the historic nature of a portion of the markets the 
CFTC regulates, which is to provide risk management tools for 
producers of agriculture commodities. It is often lost on many 
in Washington that these financial markets create and allow for 
stability, stability that we all appreciate when we go to the 
grocery store on any given day and buy food at affordable 
prices.
    Functioning markets benefit every hardworking family in 
America. Those families would feel the effects if our 
agricultural producers lacked the market's affordable and 
effective risk management tools to help lock in fair and 
reasonable prices. This is especially true today as the farm 
economy is struggling, as we have talked about.
    I am grateful you understand and are committed to fostering 
a functional marketplace for all participants, and I especially 
appreciate your commitment to our rural stakeholders.
    Again, I thank the nominee for being here today. I look 
forward to your testimony.
    I now turn to my distinguished colleague and our Ranking 
Member, former Chairperson, 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, 
and welcome again and congratulations, Mr. Giancarlo, on your 
nomination. I too want to welcome your family back again. Your 
secret weapon, your mom, is with you today, so we welcome her 
as well.
    Mr. Giancarlo, you testified last time before us in 2014 as 
a nominee for CFTC Commissioner. Back then, you shared the 
witness table with Commissioner Bowen and former Chairman 
Massad. I think it is fair to say the three of you worked hard 
to find consensus where possible in order to support the core 
mission of the CFTC to maintain transparency and competitive 
derivative markets.
    The CFTC Chairman has a wide range of responsibilities, as 
you know, that have a tremendous effect on farmers and 
families. If confirmed as Chairman, the decisions you make day 
to day will have a much larger impact on financial markets and 
consumers both here and abroad.
    As a Commissioner, I appreciate that you showed a 
willingness to work on a bipartisan basis to find consensus.
    I would like to also personally thank you for visiting 
Michigan last summer to listen to both farmers and 
manufacturers about their concerns and to discuss the 
importance of the CFTC.
    Having played a pivotal role at the Commission over the 
past 3 years, you understand as well as anyone what work lies 
ahead for the CFTC.
    While Wall Street reform has brought much needed 
transparency to the previously unregulated swaps market, there 
is much more work to be done at the Commission.
    The 2008 financial crisis exposed gaping weaknesses in our 
regulatory system, left the economy in ruins, and put millions 
and millions of Americans out of work.
    Nearly nine years since the crisis, parts of our economy 
have shown great resiliency and progress. However, we should 
not be complacent with the improvements we have seen. We need 
to keep moving forward, not backward.
    This Committee and the CFTC must not forget some of the 
Commission's crucial roles in overseeing the derivatives 
market: holding bad actors accountable, surveilling market 
participants, and monitoring systemic risk. From speculative 
position limits to capital requirements, the CFTC has 
unfinished business.
    It is critical that the Commission take action quickly on 
these issues to finish the rulemakings required under Dodd-
Frank. The Commission should continue to build on the progress 
we have made and the progress we have seen in recent years.
    Mr. Giancarlo, I look forward to learning more about your 
plans for finishing this critical work. We cannot afford to 
delay any longer.
    Of equal importance is the CFTC's insufficient budget. Less 
than 2 months ago, the White House issued a budget proposal, 
which fell woefully short of what the CFTC needs to fulfill its 
mission. It is something you and I talked about. I appreciate 
that you courageously broke from the administration to issue 
your own proposal, recognizing the CFTC must be better funded 
in order to be a world-class regulator.
    I commend you for this, and I think it is very important 
that we work together to get the resources that are truly 
needed for this Commission to be able to do its work. I am 
committing my support to work with you on that.
    Simply put, the Commission cannot meet its responsibilities 
at the current funding level. The risks to our economy, which 
directly affect thousands and potentially millions of jobs, is 
too great to ignore any longer.
    I also note that on Tuesday, Commissioner Bowen announced 
she will be leaving the Commission in the coming months. With 
this announcement, Mr. Chairman, we need to confirm nominees 
for the four open Commissioner seats as soon as we can. We need 
to move quickly to ensure we have a full leadership team in 
place so the CFTC can do its important work. I look forward to 
working with you in that effort.
    Today, I look forward to learning more about your vision, 
Mr. Giancarlo, for the CFTC and how we can continue to build on 
the progress of reform to create more certainty for our 
agricultural producers, commercial businesses, and consumers.
    Whether we realize it or not, derivatives markets play an 
integral role in the everyday life of Americans. We must ensure 
regulators and market participants are fulfilling their 
responsibilities to promote safe and transparent markets.
    Thank you.
    Chairman Roberts. Mr. Giancarlo, as is the tradition and 
custom of the Committee, before we nominate witnesses, to 
provide testimony, I need to administer the oath. Please stand 
and raise your right hand. First, 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. Giancarlo. I do.
    Chairman Roberts. Second, do you agree that, if confirmed, 
you will appear before any duly constituted committee of 
Congress if asked to appear?
    Mr. Giancarlo. I will.
    Chairman Roberts. Thank you. Please proceed with your 
testimony.

TESTIMONY OF J. CHRISTOPHER GIANCARLO, NOMINEE TO BE CHAIRMAN, 
              COMMODITY FUTURES TRADING COMMISSION

    Mr. Giancarlo. Thank you. Thank you, Chairman Roberts, 
Ranking Member Stabenow, and members of the Committee.
    I am honored to testify before you. With your permission, I 
would like to introduce members of my family: my wife and my 
joy for 28 years, Regina; my dear brother, Dr. Tim Giancarlo; 
and my son, Henry Giancarlo. My older son, Luke, and my 
wonderful daughter, Emma, could not be with us this morning due 
to other responsibilities. But I would also like to introduce 
my wonderful mother, Mrs. Ella Jane Keegan.
    Mom?
    Chairman Roberts. You can stand.
    [Applause.]
    Chairman Roberts. Thank you, mom.
    Mr. Giancarlo. Mom taught my brothers and me three simple 
lessons, and that was arrive early to work, leave your 
workplace better than you found it, and give thanks every night 
for God's grace. I am blessed to have her as a mother and 
blessed by my wonderful family. Thank you.
    I thank many of you on the Committee for meeting with me 
before this meeting and over the past several years. You have 
all taught me a lot about the issues facing American 
agriculture.
    I last appeared before this Committee in 2014 upon my 
nomination by President Obama. At that hearing, I presented my 
professional credentials, and I also admitted my personal 
shortcomings of not having been raised on a farm. Nevertheless, 
I promised you that I would learn about American agriculture.
    In the 3 years since, I have met with farmers, ranchers, 
energy producers, and small and large manufacturers who use our 
markets to hedge production and price risk.
    I have been to Kansas, Michigan, Indiana, Illinois, South 
Dakota, North Dakota, Iowa, Minnesota, New York, New Jersey, 
Missouri, Kentucky, Ohio, Louisiana, Florida, California, 
Texas, and just a few weeks ago, Montana. I am not done 
traveling.
    I have milked dairy cows with family farmers in Minnesota, 
and I visited with grain and livestock growers in Iowa. I have 
walked factory floors in Illinois, oil refineries in Texas, 
grain elevators in Indiana, and power plants in Ohio. I have 
been 900 feet underground in a Kentucky coal mine and 90 feet 
above ground on a North Dakota natural oil rig.
    In Kansas, I met with Mary and Pat Ross at their feed lot 
in Lawrence, called on corn farmer Ken McCauley in White Cloud, 
and harvested soybeans with Pat O'Trimble in Perry. In 
Michigan, I toured the Fort Rouge automobile plant, visited the 
Star of the West flour mill, and talked to grain growers at 
Crop Production Services warehouse in Henderson.
    Now, while these visits have been delightful in their own 
right, they have made me a much better regulator of our ag 
commodity markets, and I thank members of this Committee for 
encouraging me to make these visits.
    As you know, for over a hundred years, American farmers and 
ranchers have used futures to hedge volatile commodity prices. 
They are the reason why consumers enjoy stable prices in the 
grocery story, whatever the conditions out on the farm.
    But derivatives also stabilize the cost of heating our 
homes, powering our factories, supporting residential 
mortgages, and generating returns on retirement savings. In 
short, derivatives help moderate price, supply, and other 
commercial risk, and thereby free up capital for economic 
growth, job creation, and prosperity.
    When I last testified, I said that my best qualification to 
serve was my expertise in over-the-counter swaps and that I was 
a supporter of the reforms in Title VII of the Dodd-Frank Act. 
In fact, I may well be the most longstanding supporter of 
market reform from either political party to serve at the CFTC.
    When Congress began drafting the bills that would become 
Title VII of the law, I had already championed its three key 
reforms: central clearing of swaps, swaps data reporting, and 
regulated swaps trading. My support is not based on academic 
theory or political ideology; it is based on my practical 
experience of 14 years in the markets.
    If confirmed, I have three priorities; first, to foster 
open, transparent, competitive, and durable derivative markets, 
free from fraud and manipulation. The day after the White House 
stated its intention to nominate me, I told a large gathering 
of industry executives that there would be no pause, no let-up, 
no reduction in our duty to enforce the law and punish 
wrongdoing, and I make that commitment again to you today.
    Second, we will conduct the agency's regulatory mission in 
support of broad-based economic growth. That means completing 
swaps market reforms that underpin healthy, durable, and 
vibrant markets, and it also means getting from where we are 
today to where we need to be, and that is a 21st century 
regulator for 21st century digital markets.
    Finally, we will carry out our regulatory mission in a way 
that respects the American taxpayer. We will get back to 
regular order in our operations, carefully manage appropriated 
resources, and apply our existing rules in ways that are 
simpler and less burdensome to the economy.
    Chairman and Ranking Member, this Committee has a strong 
tradition of bipartisanship, and I believe that practice--I 
have followed that practice at the CFTC by working 
constructively with my fellow Commissioners. I have voted with 
the majority in over 95 percent of the matters before the 
Commission over the past 3 years, and if confirmed, I will 
continue to act without partisanship. I will work with each of 
you with candor and promptness in our common purpose of serving 
the American people and the agricultural producers on which we 
all rely.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Giancarlo can be found on 
page 16 in the appendix.]
    Chairman Roberts. Thank you, sir.
    Not long ago, you announced the launch of an agency 
initiative to review CFTC rules, regulations, and practices 
furthering the President's executive order to reduce excessive 
regulatory burdens. I understand your initiative is meant to 
identify existing rules and apply them in a less burdensome 
manner.
    In addition to this initiative, how do you plan to address 
regulatory reform, and what limitations might you encounter?
    Mr. Giancarlo. Thank you very much, Chairman.
    The CFTC has been in operation for almost--over 40 years 
now, and over the course of time, it is no surprise that 
regulations that have built up over time in some cases conflict 
with one another and other cases are out of date and in some 
cases just need a revisit and a refresh.
    I will give you an example. We recently revised a rule that 
at the time it was adopted years ago, it was considered to be 
very forward-looking in its technology application; that is, it 
required filing of information by fax. Here we are in 2017, and 
few people have fax machines anymore.
    So, over time, technology changes, market conditions 
change, and if rules are not occasionally and from time to time 
brought up to date and relooked at, they become stale and they 
become burdensome on the market as a whole.
    So what we have done with our Project KISS is to look at 
our existing rules, not the policies behind them, but the rules 
themselves, the practical application of the rules, and see 
whether they can be applied in ways that are simpler, less 
costly, and more straightforward and still achieve our policy 
objectives.
    Chairman Roberts. Thank you for that.
    Senator Stabenow.
    Senator Stabenow. Thank you very much, Mr. Chairman, and 
welcome again, Mr. Giancarlo.
    As you and I have talked about, the Commission at this 
point has had multiple efforts to complete the position limits 
rule that was mandated by Congress as part of Wall Street 
reform to protect families from spikes in food and energy costs 
that are caused by speculation. Will you commit to completing 
this critical rule as CFTC Chairman without further delay?
    Mr. Giancarlo. Yes. If I could add----
    Senator Stabenow. Yes.
    Mr. Giancarlo. --I think it is very important. I think the 
opportunity is at hand. As you know, I voted for the most 
recent iteration of this rule, the most recent proposal. The 
comment period is now closed. We are going through those 
comments, and I believe we can get a position limits rule done.
    Senator Stabenow. Thank you.
    As I said in my opening comments, you recently stepped 
forward with a different budget proposal than what was proposed 
by the White House. The question that I have is even though 
your proposal was better in my judgement, there are still 
additional resources beyond that that are needed. What market 
oversight and personnel risk will the Commission face if its 
budget is not increased?
    Mr. Giancarlo. You know, before going into government, I 
spent 30 years in the private sector and most recently 14 years 
as an executive of a public company. I will work with whatever 
budget the appropriators give us, and I will make sure the 
mission is done. However, we have put forward a budget that 
does have some new elements in it, some elements as the markets 
have evolved, elements that I believe are necessary for us to 
keep pace with the market.
    So I will be making my case next week in front of Senate 
appropriators for our budget, which as you know is more than 
last year, and I am hoping they will see their way to the 
money. But whatever appropriators give us, we will do our 
mission with it.
    Senator Stabenow. I understand. I mean, that is what the 
CFTC has been doing and the Chairman has been doing for years 
which is, unfortunately, in my mind, limping along and not 
having the resources to fully do what is needed to really 
enforce the laws of to gain the confidence of those who count 
on the Commission to be able to do its job.
    So you will be advocating for the number that you have 
proposed, then----
    Mr. Giancarlo. Yes.
    Senator Stabenow. --as opposed to what the White House has 
proposed?
    Mr. Giancarlo. We have put forward the number of $281.5 
million, which is an increase of $31.5 million over the prior 
year's appropriation.
    I believe the number we are asking for is the right number 
for the CFTC with the mission it has before it today.
    Senator Stabenow. Thank you.
    The Chairman talked about and you have talked about what 
you call Project KISS----
    Mr. Giancarlo. Yes.
    Senator Stabenow. Keep It Simple Stupid. We all appreciate 
that, reducing the regulatory burdens.
    But at the same time, we have the White House signing an 
executive order aimed at rolling back the Wall Street reforms.
    Mr. Giancarlo. Yes.
    Senator Stabenow. So how do both of those proposals relate 
to each other? Please speak about whether the intention overall 
is to roll back critical reforms to Title VII and to the 
derivatives.
    Mr. Giancarlo. So let me----
    Senator Stabenow. --markets.
    Mr. Giancarlo. Let me--thank you. Let me be very clear. 
Project KISS is not about rolling back Dodd-Frank or Wall 
Street reforms in any shape or fashion. I am a supporter of 
Title VII, of Dodd-Frank, which has amended the Commodities 
Exchange Act with regard to the swaps that we oversee. I 
support those reforms, and so we are not looking to use Project 
KISS in any way to address that.
    Project KISS is a complete approach to our--the way that 
our agency applies reforms to see if we can do that in a 
simpler, more straightforward fashion.
    Senator Stabenow. Thank you.
    Then, finally, as Chairman, knowing what we know now about 
the enormous risk of cyberattacks----
    Mr. Giancarlo. Yes.
    Senator Stabenow. --in terms of national security, what are 
your intentions to address this growing challenge. Do you 
believe that our Committee needs to provide additional 
authority to the CFTC to better protect the financial markets 
it oversees?
    Mr. Giancarlo. Thank you very much.
    I have said before and I share with former Chairman Massad 
the view that cyber risk is the number one threat to the 
markets that we oversee, and therefore, it has to be a priority 
in everything we do.
    Since I have stepped in as Acting Chairman, our head of 
cyber security now meets with me monthly and reviews not only 
all the attacks we have seen in the markets as a whole but 
every attack that we receive at the agency itself.
    I believe that the approach to cyber needs to be both a 
public and private approach, and that is because the nature of 
the threats we face are both from private actors and from state 
actors. So I think there is a very vigorous role for us at the 
agency. We work with U.S. law enforcement agencies. We work 
with regulatory agencies abroad as well as self-regulatory 
organizations as well as all of our major market participants.
    Cyber is a critical priority and will remain so.
    Senator Stabenow. I agree.
    Thank you, Mr. Chairman.
    Senator Stabenow. Senator Klobuchar.
    Senator Klobuchar. Thank you very much.
    Mr. Giancarlo, congratulations. Congratulations to your mom 
and your family.
    I think we talked before about this, and I know you talked 
about it at your last hearing. The commodity markets you have 
oversight of involve essentially two kinds of participants, the 
commercial end users who base their trades on actual physical 
products and then financial institutions, like hedge funds and 
investors who base their derivatives trades, of course, on 
fluctuations in prices or the index. So that is a particular 
concern of mine, just because we have a lot of products and 
grouping of people who fall into the first category.
    I know you visited Mackinson Dairy Farm, Blue Diamond 
Dairy.
    Mr. Giancarlo. Yes.
    Senator Klobuchar. I am very impressed you milked a cow. 
Your mom raised you well.
    [Laughter.]
    Senator Klobuchar. But what did you learn about the 
importance of the CFTC to these economic sectors, and what is 
going on with these sectors? How do you think that the CFTC 
could be responsive?
    Mr. Giancarlo. Thank you for that. I mean, you are 
absolutely right. I mean, my experience with that family dairy 
near Melrose in your state was formative. I often think about 
the Frericks family when I think about really the most basic 
element of our market participants, and that is some of our 
America's small-family farms. That even if they do not use 
these hedging instruments, they rely on the price signals that 
come from these futures markets to determine whether they are 
getting a fair price from their distributor. So that family, 
when they sell their milk, they are relying on price signals 
that come from our markets to know whether they are based on 
market fundamentals and not distorted by algorithms or 
speculators in the market.
    So that brought that very much home to me, and so our role 
as an agency is to make sure that the give-and-take of all the 
different market participants in our markets results in a fair 
price.
    Senator Klobuchar. Exactly.
    Mr. Giancarlo. It is a challenge in a world today that is 
increasingly dominated by these algorithmic traders.
    Senator Klobuchar. Exactly.
    You mentioned that issue of speculation, and we have spoken 
about that before. I know in high-frequency trading, the CFTC 
has been working on this regulation, automated trading, and I 
think those best practices are a good first step. What other 
steps do you think the CFTC can take to ensure that the pricing 
is accurate and it is not influenced by things it should not be 
influenced by?
    Mr. Giancarlo. Thank you.
    You know, when I talk to farmers and ranchers and they ask 
me questions about what is the role of high-frequency trading 
in the markets, I hear a lot of anecdotal concerns, but what we 
do not yet have is the--we are getting the data, but we do not 
have the analytical tools to really know whether the role in 
the market of these traders is harmful or benign or what 
mixture of the two.
    They do provide important liquidity in the markets. You 
could not have a market of just naturals. You would not have a 
market. So what I have asked for in our budget request is 12 
additional economists, because what we really need to do is go 
beyond anecdotal concern and get to--and to take our data and 
bring it down to really hard analysis so that will drive our 
policy decisions. If we need to make policy decisions that 
might restrict some participation in the market, it needs to be 
based on hard data, and so I am looking to really beef up our 
analytical capability.
    Senator Klobuchar. Back to some of the product issues, in 
your testimony you note that the derivatives markets are not 
just useful for ag producers but impact many consumer issues 
like home heating fuels and propane. What steps are you 
currently taking to prevent the type of price hikes that we 
have seen in the past in the Midwest when it comes to heating?
    Mr. Giancarlo. So we have got to get our position limits 
right.
    I will tell you a story about a visit I made to First 
Energy in Akron, Ohio, and they told me that--it does not 
happen often. They have a small trading desk. I actually met 
with the person who does their energy trading. They only do 
about six or seven trades a day. They never speculate. If they 
are buying forward, it is to protect a position.
    They say a couple of winters, when you have got a polar 
vortex, if one of their generators goes down, they need to go 
into the market and they need to buy forward. They may have to 
break a position limit, and they need to know that they can do 
that. Otherwise, they are going to turn off the lights in some 
homes and turn off some heat. So we have got to make sure we 
have the flexibility built into our limits, yet at the same 
time, we are all concerned about the role of excessive 
speculations. So getting that balance right is vitally 
important.
    Senator Klobuchar. Very good.
    On the speculation front, what do you think needs to be 
done there? Then I will end.
    Mr. Giancarlo. Well, Congress has said that we should use 
position limits as appropriate to address the issue of 
excessive speculation, and as I said in response to the Ranking 
Member, I think we can get this done, provided that we address 
the concerns that have been raised by our energy providers and 
by our agriculture producers.
    Senator Klobuchar. Thank you very much.
    Mr. Giancarlo. Thank you.
    Chairman Roberts. Senator Gillibrand.
    Senator Gillibrand. Well, thank you so much for being here, 
and thank you for your dedication to serving others. Thank you 
for visiting my state. I am very grateful that you were able to 
spend some time in New York.
    In March of this year, you gave a speech where you remarked 
on your intention to comply with President Trump's executive 
order. This was your Keep It Simple Stupid deregulation view, 
and you mentioned that this is not an exercise in repeal or 
rewriting rules but rather streamlining. Has President Trump or 
anyone in his administration identified CFTC regulations they 
would like to eliminate or rewrite under the executive order or 
under your program?
    Mr. Giancarlo. No.
    Senator Gillibrand. One of the strengths of the CFTC's 
regulation is the U.S. person rule or cross-border jurisdiction 
rule, which provides the CFTC the power to guard against 
financial risk around the world.
    It is clear from the 2008 financial collapse that pooled 
risk anywhere in the world can cause significant problems at 
home. How often have you heard from market participants on 
reforming or curtailing the current U.S. person rule 
specifically for U.S.-based entities?
    Mr. Giancarlo. Well, I support it, the rule on capital for 
swap dealers, and I think Chairman Massad and I came to the 
right place on that rule. So I was proud to support him on 
that.
    I do not recall specific concerns raised on that in 
particular that has come to my attention.
    Senator Gillibrand. Do you foresee any changes to the U.S. 
person rules for the European or UK markets, especially as 
Brexit continues and you negotiate directly with the UK?
    Mr. Giancarlo. So this is an area where I actually agree 
with Chairman Gensler in that when it comes to our rules that 
concern our swaps rules, that concern a systemic risk, we do 
need to take the view that risk that builds up anywhere in the 
globe can come back to the United States.
    When it comes to issues of mechanics, then I am in favor of 
a more territorial approach and not exporting our mechanical 
approach to, say, swaps execution abroad. But on systemic risk 
concerns, then I think we have to take a global approach.
    Senator Gillibrand. Do you believe that you will rewrite 
these rules, or do you anticipate any actions to dilute the 
CFTC's jurisdiction?
    Mr. Giancarlo. No, no actions to dilute the CFTC's 
jurisdictions.
    I did propose in 2015--in fact, I wrote an 89-page white 
paper saying where I think the CFTC mis-implemented its swaps 
execution rules, and I said I think we got it wrong primarily 
because we did not follow Congress' stated prescription in the 
law itself that swaps executions should be done through any 
means of interstate commerce. That is the area where I have 
been very clear that I think the rule is in need of a rewrite. 
I think the law is correct.
    As I said before, Congress got it right. I think the CFTC 
got the swaps execution rules wrong. When it comes to swaps 
clearing, I have said we have got it right, and swaps 
transparency in terms of swaps reporting to swap data 
repositories, I believe we have got that right as well. The 
disappointment is we still have not realized it, 9 years after 
the crisis.
    Senator Gillibrand. One of the things President Trump 
campaigned on and members of his economic team actually 
endorsed, the idea of separating commercial banking from 
riskier financial activities. Has President Trump or anyone in 
the White House, including his economic team or the National 
Economic Council, spoken to you or anyone at the CFTC about 
reinstating an updated version of Glass-Steagall or any action 
that would divide commercial banking from riskier financial 
activities?
    Mr. Giancarlo. No.
    Senator Gillibrand. Have you examined how the CFTC may be 
employed through regulation and enforcement to separate 
derivatives dealing from commercial banking under that kind of 
framework?
    Mr. Giancarlo. I am not aware of any.
    Senator Gillibrand. Okay. The U.S. derivatives market is 
approximately worth $300 trillion. That includes $34 trillion 
worth of futures and options and $270 trillion in swaps. There 
are approximately 750 people that work at the CFTC. Currently, 
the budget, as the Ranking Member mentioned--currently, the 
CFTC budget is $250 million, far below other prudential 
regulators with similar regulatory responsibilities.
    Previous budgetary requests asked for a 30 percent 
increase, while your request is closer to 13 percent, and the 
President's budget has flat funding. Don't you think that 
Congress should look at how other prudential regulators like 
the SEC use mandatory funding mechanisms to provide a more 
reliable and standard funding source for the CFTC?
    Mr. Giancarlo. So I know this is a conversation that has 
been going on for a long time, and I know that senior people, 
including presidents of both parties, have called for a funding 
mechanism. Yet, at the same time, we have self-funding in our 
markets and through our self-regulatory organization, NFA, 
which charges fees.
    I have been concerned and have been raising concerns for 
the last 3 years about the changing nature of liquidity in our 
markets.
    Last week, I had breakfast with some of America's most 
prominent corporations, their corporate treasurers, including 
from Hershey's chocolates to General Motors, and they raised 
with me their decreasing ability to access liquidity in the 
market. So I do not advocate transaction fees for the reason of 
trading liquidity in the markets. I am concerned about that 
impact, but ultimately, this is a decision for our 
appropriators and our authorizers, and if they were to see fit 
to provide this mechanism, then we clearly would work within 
it.
    Senator Gillibrand. Thank you, Mr. Chairman.
    Chairman Roberts. I thank the Senator.
    I wish to thank Senator Gillibrand, Senator Klobuchar for 
appearing in person. This is--I think this is the latest 
women's movement here that we have on the Committee. I do not 
know what happened. Well, never mind. We are not going to go 
down that----
    Senator Stabenow. You should be worried, Mr. Chairman.
    Senator Klobuchar. Very, very worried.
    [Laughter.]
    Chairman Roberts. It is no problem.
    That will conclude our hearing today.
    In closing, I would like to bring attention to a letter 
from a coalition of nearly 20 agriculture groups in support of 
Mr. Giancarlo's nomination, and that list includes some of the 
largest councils and cooperatives and associations in the ag 
sector. I am grateful to them for voicing their support.
    Without objection, the letter will be entered into the 
record at this point.
    [The letter can be found on page 24 in the appendix.]
    Chairman Roberts. Thank you, Mr. Giancarlo, for taking time 
to address this Committee and to answer the Committee's 
questions. It is clear that you are abundantly qualified to 
lead the CFTC and motivated to tackle the challenges that lay 
ahead.
    To my fellow members, I would ask that any additional 
questions you may have for the record be submitted to the 
Committee Clerk by 5:00 p.m. tomorrow, June 23. We look forward 
to receiving your responses, Mr. Giancarlo, and to further 
considering your nomination.
    The Committee is adjourned.
    Mr. Giancarlo. Thank you.
    [Whereupon, at 10:23 a.m., the Committee was adjourned.]

      
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                            A P P E N D I X

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                   DOCUMENTS SUBMITTED FOR THE RECORD

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                         QUESTIONS AND ANSWERS

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