Mary Schapiro (who Obama has named to chair the Securities and Exchange Commission [SEC]) has advocated for a merger of the SEC and Commodity Futures Trading Commission (CFTC). Such a notion has been kicked around in the past but with the great pressure to reform our financial regulatory institutions in the current crisis this idea is getting more traction.
I have seen some real anguish at the notion however. Unfortunately I am not really able to assess all the implications and make up my mind. Most of the arguments against it I have seen assume the CFTC would be subsumed into the larger and older SEC and that SEC regulatory culture would be imposed on the derivatives markets. However, derivatives are very different things than securities and regulation that makes sense in the securities markets would be very bad in the derivatives markets.
I tend to agree that the two cannot be treated the same. What I am not sure of is that the SEC (or new merged agency) would feel compelled to apply the same rules to both sides. Some say the very nature of being one agency would put great pressure to “harmonize” the rules when really they shouldn’t be. Generally such a thing would make sense when merging but then it assumes no one at the SEC (or new agency) is smart enough to realize they are dealing with apples and oranges and would blithely apply a one-size-fits-all approach.
Opinions?