What does it say about a regulatory oversight system when individuals from inside start to ‘blow the whistle?’

I think it speaks volumes that all is not well, and somebody better start to really pay attention and take some meaningful action.

A month or so ago we heard from retiring SEC attorney James Kidney voicing real concerns in describing the commission as little more than a “tollbooth on the banksters’ turnpike.” Now we hear CFTC (Commodities Futures Trading Commission) commissioner Scott O’ Malia also blowing the whistle. Let’s navigate as Pensions and Investments highlights O’ Malia’s siren call: 

“I do not believe that the (Commodity Futures Trading Commission’s) systems are adequate to oversee today’s fast and complex derivatives markets,” Scott O’Malia said Tuesday at a TABB Forum conference on derivatives in Chicago.

Mr. O’Malia said he was “tired of asking the commission” about proposals for a strategic technology plan, “so I am instead going to seek input from the exchanges, other self-regulatory organizations and high-frequency traders, who have invested millions of dollars in their own technology, for their thoughts on how the commission should design the 21st-century mouse trap to spot disruptive and manipulative trading practices — at any speed.”

Do you sense O’ Malia’s frustration? I do.

Do you think any traders may be ‘speeding’ given that the cops are not able to properly monitor the traffic?

Mr. O’Malia said the CFTC does not have an order message data collection and analysis system. Without one, he said, “How can the commission understand and make decisions about today’s automated trading strategies? … We still have work to do. We need to improve our data collection.”

How is it that this commission might be so ill-prepared to properly monitor this market that some estimate to be a quadrillion (a thousand trillion) in size? In my opinion, O’Malia’s whistle is a sign of real failure on behalf of those running the CFTC and those in Washington charged with funding it to make sure that this critically important regulator is properly equipped.

Is anybody in Washington listening to what O’ Malia is saying? Or are we still supposed to operate under the guidelines that it is better to be quiet and take real national risk — and yes, I do consider this a matter of national security — rather than draw attention to a regulatory system that runs the gamut from ill-equipped to incompetent to captured to corrupt?

Thank you Mr. O’ Malia.

Navigate accordingly.

Larry Doyle