CFTC Chair Caroline Pham Talks Markets
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Bloomberg Audio Studios. Podcasts, radio, news. Well, the Commodity Futures Trading Commission is asking for public comment on allowing round-the-clock trading in derivatives markets. This is according to a statement put out earlier this week. The CFTC also wants input on offering perpetual futures. It's a type of contract that's popular outside the United States and gaining some traction in digital asset trading. So,

We want to talk about that. We want to talk about the overall massive derivatives market. Delighted to have with us

in our Bloomberg News DC Bureau, is acting chair of the CFTC, Caroline Pham. Chair Pham, so nice to have you with Tim and myself. Let's talk a little bit about the market volatility that we have seen over the last month or so. What have you seen in the derivatives market amid that volatility, trends, flows, oversized bets? What can you tell us?

Sure, of course. So one of the things that is really important to remember about the recent market volatility and all-time highs as far as volume goes is that the markets operated in a functional and liquid manner. So we were really pleased. Of course, all regulators were concerned about the market conditions. You had the very

sharp spikes with the volatility. You had the record all-time flows of volume, but the markets were resilient. There were adequate margin levels. A lot of people have thought about what happened in March 2020 with the dash for cash, and we wanted to make sure that that wouldn't happen again. So you saw the global regulatory community come together with some margin reform and

We're pleased to see that that all worked as planned and there were no significant operational issues. So I think relieved to see that the markets performed well throughout that volatility. No significant operational issues. That's certainly great news. Was anything close? Were there any issues of concern for you? No, we were in close contact with all market infrastructures and market participants throughout the market stress and market conditions. And we had no significant issues, no issues of concern whatsoever.

Is there anything you are seeing or hearing? You know, this is certainly your world. I guess we're trying to gauge whether or not foreign investors are pulling back on U.S. assets and dollar based assets. And I'm just curious in any of the trend flows or again, this is your world. And as you talk to officials here in the United States when it comes to trading and investing, are you hearing or seeing any of that?

Look, I think it's very tempting to chase the charts and to be very focused on sort of the, you know, minute to minute, day to day spikes. But that's just all part of market functioning. And I think what you're going to see, as it has been for decades, that the U.S. is the world's reserve currency, that U.S. treasuries are a safe haven. And in fact, the global financial system runs on U.S. treasuries. So I'm confident that that will continue to be the case.

Are you not concerned that the U.S. is losing its status as a safe haven? Look what we saw with treasuries. Look what we've seen with the dollar in recent weeks. Is that something that's concerning to you?

Again, I think it's important not to chase the charts and be focused on the minute-to-minute or the day-to-day. But if you look overall, U.S. markets have never been safer, sounder, or healthier. All right. So one of the things we want to talk about, and we certainly set it up in our introduction to you, is about this 24-7 trading and the CFTC putting out a request for comment on potential uses and risks to allow for 24-7 trading in the derivatives market. I know you just made the outreach.

But any comments, what are you hearing and kind of what is top of mind when you think about uses as well as risks?

So I'm pleased to talk about this issue because it's something that we've been seeing in our markets for the past several years. But until recently, we did not have an administration and a policy that was pro-innovation and pro-growth, both in new products as well as in new markets. So again, the debate around 24-7 trading and extended trading hours or continuous trading hours has been very active for the past several years. But now we're finally moving from talk

to action. We've had a number of exchanges in our markets show their interest and announce that they are looking at moving to 24/7 trading or 24/6 trading or 24/5 trading. And while that presents a lot of opportunities and there's a lot of benefits, particularly when you have an asset class that is liquid enough to support

continuous trading or extended trading hours, we also have to make sure that we are prepared, again, from an operational perspective because, you know, as we discussed with the recent market volatility, it's absolutely incumbent upon us as regulators to make sure that the markets are functioning well. So that's what this request for comment is. It's a thoughtful set of questions that seeks to understand the uses, benefits, and also risks of

of extended trading hours or continuous trading hours. I'm really looking forward to the comments. Again, this is an area that's been very well debated for several years. I don't think we're going to see any surprises. And the CFTC has always been at the forefront of market innovation. You know, we saw this with the creation of financial commodities and derivatives based on interest rates, indices, and then again with all of the new and interesting asset classes, including crypto. Do you think it's a good idea? Do you think 24/7 trading of these products is a good idea?

I think 24-7 trading is appropriate, but only when there is enough liquidity. So look at the FX market. The FX market is already trading on a continuous basis. There's no closing hours for the FX market. What we've seen in some of these announcements is that people are focused on the crypto asset class right now. That's also one that trades continuously today. So it doesn't change anything about the current market structure.

just only that it's now happening in a regulated way with our futures products. So I think that's going to be very key. But again, we want to make sure we are thinking through all the possible issues, and we want to make sure we're doing so in an open and transparent way with lots of public engagement and public comment. How do you ensure, Chair Pham, that what could be a lack of liquidity during the off-

hours potentially if it's 24/7 trading that leads to maybe some severe disconnects in the derivatives market. So I'm just curious, how do you make sure that doesn't happen?

That's exactly the key point because that's why it's so important to make sure there is sufficient liquidity. When you have something that already trades continuously like FX or like crypto, it's less of a concern, but we are looking at everything from a very product-specific perspective. We're looking at each individual product, what asset class it's based on. But obviously you would have concerns when you're looking at something that doesn't trade continuously today, something like ag futures, for example. That is something that we would be extremely cautious about before we move to anything like

this type of innovation. So it wouldn't be like across the board, there's very possible that there are carve-outs, right, depending on the market?

So this is, again, on a product by product basis. So we've had some exchanges that have self-certified or have shown an interest to trade certain products. And these are all at this point in time based on the crypto asset class on a 24-7 basis or 24-6 or 24-5. Some of this is future plans. So it's not actually live before the commission. But again, it's something where we're looking at very specifically on that product basis. It's not going to be where, you know, all of a sudden it's a free for all in the market. Yeah.

You mentioned crypto, so let's go there. How is the CFTC going to work with the SEC? Of course, Paul Atkins was sworn in as chair this week. When it comes to cryptocurrency, what's the plan? I think what is great about this current administration is the clear vision that was expressed in the president's executive order on digital assets, the creation of the president's working group on digital asset markets, and the open and continuous communication we have with all of the relevant stakeholders, including all the regulators.

I've known Chairman Atkins for a long time. I'm really looking forward to working with the SEC under his leadership. And this really resets the CFTC and the SEC back to how it's always traditionally been between the two of us, where we work together on any issues of jurisdictional issues.

And that's something that's gone all the way back to at least the 80s. And it's something that I look forward to continuing as we move forward through creating more regulatory clarity in the United States for crypto. Hey, one thing we got to ask you, Doge, it's gone to the SEC. Has it gone to the FTC? Yeah.

There is no doge at the CFTC at this time, but that doesn't mean that we haven't been doing our own efforts to make sure that we're being the most return for the American taxpayer and that they're getting value out of their dollars. So my efficiency initiatives at the CFTC have already resulted in $18 million in savings. That's about 5% of our appropriated budget.

about 12% of our non-payroll budget. And I'm pleased to say that this year it looks like on an annualized basis we'll be on track to save $50 million, and our budget is only $365 million. What are you cutting?

We have some contracts that are excessive. We have had contracts where I think, you know, just applying basic cost management principles, people didn't stop to think, do we really need five of the exact same contract for the exact same IT service? So it is really just common sense, reviewing our contracts, making sure that we are only paying for what we actually use and what we actually need. Is sometime like a redundancy in a contract because to make sure that there's a backup program or that's not, that wasn't the case?

No, that's not the case. Let me give you an example. $1.4 million on a focus group for consumer fraud. We all know that consumer fraud is bad. That is money that could be better put towards upgrading our technology, for example.

Hey, before we let you go, I just wanted to ask another crypto question. We learned yesterday that the president is set to have dinner with the top 220 holders of the Trump meme coin. The issuers of the cryptocurrency announced yesterday. We saw this on social. I'm curious, just as a regulator, how you look at the relationship that the president has with this digital asset and as a person who is in charge of essentially creating policy on this stuff.

Our job is to make sure that we have markets that are safe and that are sound and that we preserve market integrity and that we make sure that most of all in looking at market integrity that the markets are well functioning and that there is an actual connection to the fundamentals that are underlying the market. So for us that is of course across the entire market. There's no distinction for anything else. Does it make your job more difficult?

My job is difficult every day. It doesn't make any difference. All right. We're going to leave it there. Listen, thank you so much. Really appreciate your time. We've been talking with Caroline Pham. She's the acting chair of the Commodity Futures Trading Commission.

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