Speculators Seek to Clean Up Speculation

Don't be mistaken, I am a "free marketer" who spent a noteworthy portion of my career as a proprietary trader, a.k.a. "speculator." Because of that, I believe that speculators, more than anyone else, should be battling for a level playing field, because that is where they earn their living.

Despite the recent headlines and hoopla, the first phase of the CFTC's new initiative occurred a month ago in front of the Senate Agriculture Committee in a hearing titled "Regulatory Reform and the Derivatives Markets." The first panelist was CFTC Chairman Gensler. Did we mention that he is a 20-year Goldman Sachs (GS Quote) veteran (a former "speculator"), and was at Treasury during the Rubin-Summers era when the massive deregulatory Commodity Futures Modernization Act of 2000 was signed into law by President Clinton?

It is highly unlikely that Gensler shares Henry Ford's view either. If anything, Gensler has the potential to be a modern-day equivalent to Joe Kennedy becoming the first head of the SEC.

Financial historian John Steele Gordon eloquently described Kennedy's time at the SEC by noting that, "He regarded his job not only to restore the confidence of the country in Wall Street, but, equally important, to restore the confidence of Wall Street in the American economy and government."

In his testimony, Gensler discussed regulating derivatives dealers (such as AIG (AIG Quote)), improving capital and margin requirements, regulating derivatives markets, central clearing, exchange trading, position limits and improving transparency. Most of these actions sound very similar to the structure of the U.S. equity market.

Interestingly, some of the second panel group of panelists, JPMorgan executive Mark Lenczowski and Cargill executive David Dines, made the case for limiting the new regulation, whereas hedge fund manager Michael Masters and author/hedge fund executive/former Wall Street executive Dr. Richard Bookstaber, who are both "speculators," advocated new regulation.