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Chairman David Scott Opening Statement at Hearing “Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models”

WASHINGTON House Agriculture Chairman David Scott of Georgia delivered the following statement at today's hearing “Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models”

[As prepared for delivery]

Good morning to our witnesses and thank you for joining us today. The purpose of today’s hearing is to examine the FTX proposal currently before the CFTC for public comment and the potential of such changes to the traditional clearinghouse model and roles of various market participants.

I look forward to what I’m sure will be a robust and well-informed debate today on the merits and suitability of the clearing model proposed by FTX. 

As I have said many times before, I have a tremendous love and admiration for our great financial system.

And as Chairman of our House Agriculture Committee, as well as a senior Member of the House Financial Services Committee, I am particularly interested in new and novel developments involving the CFTC and our financial system.

Just as the CFTC has recognized the novelty of FTX’s proposal to trade margined products under a non-intermediated clearing model and the need for closer public examination, I have heard a number of concerns about the risks of their proposed model and I believe that we must take great caution to preserve and protect our financial system, the protections, and the international standing it affords our market participants. That is why I have brought people representing a variety of interests and perspectives here together today to ensure that we are giving this conversation the appropriate amount of attention and that all of the voices are being heard.

Earlier this year, Chairman Benham was invited to testify before this Committee on the State of the CFTC and I was heartened to hear that the Commission would offer the opportunity for robust public input on the FTX proposal. Any new and untested proposal that has widespread implications for the orderly clearing of derivatives trades must be given due and proper consideration.

Make no mistake - while the proposed clearing model by FTX is limited to a select few cryptocurrency contracts, we must consider the potential of this model to expand into other derivatives markets and adopted in some form by other clearinghouses.

Furthermore, I am gravely concerned about the potential of this proposal to upset international agreements that the CFTC and this Committee have worked so hard to preserve which have deemed our current clearing structure and regulations equivalent to EU and UK rules, affording US derivatives clearing organizations the ability to provide clearing services in their markets.   

By holding today’s hearing, we are giving yet another public platform to shine a light on these novel market structures and help to ensure that the potential implications – good or bad – of such proposals are thoroughly considered before any changes are made.

We have the greatest financial system in the world, and we must ensure that the CFTC’s regulatory safeguards governing derivatives markets help us maintain that position into the future.

As Chairman of our House Agriculture Committee, I believe it is the role of this Committee to ensure this remains the case and I look forward to hearing everyone’s perspectives here today.

I will now turn it over to the distinguished Ranking Member, the gentleman from Pennsylvania, Mr. Thompson, for any opening remarks he would like to give.

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