An interesting statement by J. Christopher Giancarlo, one of the CFTC Commissioners, voices a concern that raising regulatory standards for CCPs and clearing members may have the unintended consequence of concentrating risk and shutting end-users out of the market. To quote some key sentences:
… many small to medium-sized FCMs [Futures Commission Merchants – effectively derivatives brokers] providing specialized services to everyday businesses are charging higher fees or leaving the industry because they cannot afford the additional infrastructure, technology and compliance costs imposed by the swelling regulations. Still, others have stopped clearing swaps for customers, which has the perverse effect of concentrating risk in fewer and fewer firms, a dangerous proposition in light of Dodd-Frank’s clearing mandate.
…If we are not careful, America’s rural producers will soon be left with few places to protect against business risk. The Midwest farmer who plants 1,000 acres of corn may have no choice but to go unhedged against market volatility.
These are concerns that have been growing for some time and it is interesting to hear them presented so articulately by a CFTC Commissioner.