As the global capital markets become ever-more entwined, there have been increasing calls in the U.S. for a move toward principles-based regulation such as that employed by the U.K.’s Financial Services Authority (FSA). But Walter Lukken, acting chairman of the Commodity Futures Trading Commission (CFTC) pointed out in a speech on Nov. 26 that the U.S. already has a regulator that utilizes such an approach—his agency. Speaking at the Futures Industry Association’s Futures and Options Expo in Chicago, Lukken pointed out that the “futures industry has been thriving under principles since the passage of the Commodity Futures Modernization Act in 2000.” Lukken called a principles-based system “a hybrid of desired public outcomes complemented by specific rules aimed at achieving those ends,” adding that good regulators “play where the markets are going, not where the markets have been.”
Much of the job of regulating is reacting to ... situations as they arise. This is inevitable given the nature of the financial markets and its broad array of participants. But regulators should not be content to just play defense—we must be ready to anticipate trends as our industry and markets evolve. ...
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