Former acting CFTC chairman resigns from commodities oversight agency

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, June 16 -- Walter L. Lukken, who was the US Commodity Futures Trading Commission’s acting chairman from June 2007 to January 2009, resigned from CFTC on June 16.

Lukken, whose resignation will be effective on July 10, drew heavy fire from congressional critics for not moving more aggressively to close the so-called “Enron loophole,” a provision in the 2000 Commodity Futures Modernization Act which created commodity classes that were excluded or exempt from regulation.

US Sens. Byron L. Dorgan (D-ND), Maria Cantwell E. Cantwell (D-Wash.), and Thomas R. Harkin (D-Iowa), and Reps. Bart Stupak (D-Mich.) and John B. Larson (D-Conn.) all said the provision created opportunities for speculators to manipulate commodity prices, leading to last year’s crude oil price spike, by taking bigger positions on unregulated overseas exchanges than would have been allowed on domestic trading platforms.

Lukken convened a conference on rising crude oil prices and commodities’ possible role in October 2007 and began to investigate ways in which CFTC could examine the allegations more closely. Existing law kept the commission from issuing subpoenas in several key instances, and CFTC had to ask traders to provide information voluntarily.

It nevertheless was able to determine that in some instances, index funds and swaps apparently performed a price discovery function even though they were not regulated. Congress gave CFTC authority in late 2008 to require that documents and records be provided, and the commission used it for the first time on June 9 as it opened an investigation of a financial instrument trading on the Intercontinental Exchange.

Lukken, who became a CFTC commissioner in August 2002, also pushed for closer working relationships with the US Federal Energy Regulatory Commission, the US Securities and Exchange Commission, and the US Federal Reserve as it became increasingly apparent that the nation’s financial regulation had not kept pace with markets. He also promoted CFTC’s sharing information with its counterparts in other countries.

He has accepted a position as senior vice-president of global market structure in NYSE Euronext’s office of general counsel.

Contact Nick Snow at [email protected].