The inauguration of Donald Trump as President, together with the Republican majority Congress, will trigger changes at the SEC and CFTC in 2017. SEC Chair Mary Jo White is expected to step down in early 2017 and Michael Piwowar will likely become the acting Chair until the SEC elects a new permanent Chair. Kara Stein, a Democrat, is presently the third SEC Commissioner. The SEC currently has two vacant Commissioner seats. In 2015, Barack Obama nominated a Republican and a Democratic candidate for the vacant SEC seats, but the Senate did not confirm the candidates. The Trump administration will surely select new candidates in 2017 which will likely face a less contentious confirmation process before the Republican majority in the Senate. The turnover at the SEC may further delay security-based swap Dodd-Frank rulemaking.
The CFTC will undergo a similar transition. In January 2017, CFTC Chairman Timothy Massad will likely step down and be replaced by CFTC Commissioner Christopher Giancarlo. Currently, Chris Giancarlo is the only Republican CFTC Commissioner. Sharon Bowen, a Democrat, is presently the third CFTC Commissioner. Just like the SEC, the CFTC has two vacant Commissioner seats which the Obama administration was unable to fill. After January 20, 2017, the Republican Party will hold three out of the five CFTC Commissioner seats. With a majority of Republican CFTC Commissioners and a Republican controlled Congress, the potential impact on CFTC Dodd-Frank rulemaking, including perhaps on the implementation of swap margin requirements and adoption of the controversial Regulation Automated Trading, can’t be understated.
The changes at the SEC and CFTC may be magnified by leadership decisions for important committees in Congress. In the House of Representatives, Rep. Mike Conaway (R-Texas) may continue on as chairman of the House Agriculture Committee and Rep. Jeb Hensarling (R-Texas), author of the Financial CHOICE Act of 2016 (which would, among other things, roll-back parts of Dodd-Frank Act and repeal the Volcker Rule) will likely remain chairman of the powerful House Financial Services Committee. However, Rep. Scott Garrett (R-N.J.), current chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises was not re-elected. It’s unknown who may rise to lead the subcommittee. In a year that saw the Chicago Cubs win the World Series and a reality television star be elected President, the only certainties for derivatives traders, will be regime changes at the SEC and CFTC, and more regulatory uncertainty in 2017.