Congress probably does not need to enact new laws for the futures industry, with the possible exception of retail foreign currency transactions, Futures Industry Association (FIA) President John Damgard said in two separate appearances before Congress in April.

Testifying during hearings on the reauthorization of the Commodity Futures Trading Commission (CFTC), Damgard praised the growth of competition among futures exchanges, and said policymakers should consider whether the CFTC has sufficient authority for its evolving role as a “referee” of competitive disputes in trading and clearing. In particular, he said the FIA wants to work with Congress, the CFTC, and the exchanges “to build a better process for making sure the self certification
authority does not become a haven for unfair competitive tactics.”

Regarding the governance of self-regulatory organizations (SROs), Damgard said public confidence “must increase” in the integrity and objectivity of SROs through the removal of real and perceived conflicts of interest and anti-competitive conduct. Referring to a previous FIA position paper on this matter, he suggested several changes that would help improve SRO governance.

Damgard recommended several changes to improve the transparency of the SRO rule-making process and assure broader participation, and suggested that in some cases CFTC review would be beneficial.

Damgard also challenged the exchanges to include more independent directors on their boards and questioned how the exchanges determine independence.

“At a minimum, [the] FIA believes that true independent directors should not be currently active in the industry or too recently associated with an SRO member,” he said.

Regarding security futures products such as single stock futures, Damgard said the FIA fully supports the recommendations put forward by U.S. futures exchanges for expanding this market, and in particular a “careful examination” to see if the dual regulatory structure is “unnecessarily inhibiting the growth of these products.”

He also strongly urged the CFTC and the Securities and Exchange Commission to permit U.S. customers to trade futures based on individual stocks or narrow indices listed for trading on non-U.S. exchanges, as Congress mandated in the Commodity Futures Modernization Act of 2000.

Damgard says in the release that the FIA is committed to helping the CFTC draft legislation to prevent retail fraud in currency transactions, but cautioned the legislation must be “carefully tailored” to address this specific problem, and reminded Congress the CFTC isn’t intended to become a “national strike force” against consumer fraud.