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Trump Administration Proposes Fees for Futures Industry

The White House proposed levying fees on derivatives users to bolster the Commodity Futures Trading Commission’s 2019 budget, an idea that may be dead on arrival because of industry opposition.


By

Gabriel T. Rubin

WASHINGTON—The White House on Monday proposed levying fees on derivatives users to bolster the Commodity Futures Trading Commission’s 2019 budget, an idea that may be dead on arrival because of industry opposition.

Moreover, leaders at the CFTC also are opposed to the funding idea.

The Trump administration’s fiscal year 2019 budget calls for keeping the CFTC’s budget appropriations flat at $250 million, but would add an additional $31.5 million in funding from a fee on some firms that participate in derivatives markets. The CFTC currently lacks the authority to collect such fees—unlike its larger market regulator counterpart, the Securities and Exchange Commission—and would require Congress to act to change its funding rules.

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The budget proposal is a compromise with CFTC Chairman J. Christopher Giancarlo, a Trump-appointed Republican, who has been lobbying for additional funding but has publicly opposed fees on derivatives transactions. At a House Appropriations Committee hearing last year, he argued that market participants must already pay transaction fees to self-regulatory organizations and that additional costs could have a negative impact on liquidity.

“As the chairman has long maintained, a budget of $281.5 million will allow the Commission to effectively accomplish its mission, by providing increased resources for economic analysis, examinations of clearinghouses, cybersecurity, fintech, and enforcement,” said CFTC spokeswoman Erica Richardson.

The fees would be assessed on derivatives users for activities such as product registration and reimbursing regulators for examinations and supervision.

CFTC discussions with the White House kept new fees out of the administration’s 2018 budget request, according to people familiar with the matter. But disagreements over the proper level of funding for the agency led the CFTC to submit its own budget request to Congress, alongside the White House’s request to keep the agency stuck at $250 million for the fourth straight year. Congressional Republicans largely vowed to ignore the CFTC’s request, which Mr. Giancarlo said was necessary to fund a new technology initiative and hire more economists, among other priorities.

Industry giants such as CME Group Inc. have long opposed CFTC user fees. As the dominant futures exchange, CME has raised its own internal user fees several times in recent years, but has pushed back on proposals to fund the CFTC with similar levies.

Relying on user fees to fund the CFTC is “not a smart thing to do,” said Terry Duffy, CME’s chairman and CEO, at a 2014 Senate hearing. At the time, Congress was considering a proposal to fund the CFTC in the same fashion as the SEC, where congressional appropriations are fully offset by fees.

CME declined to comment Monday.

The 700-employee CFTC has repeatedly pressed for more funding, citing its expanded responsibilities from the 2010 Dodd-Frank Act.

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

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