The Commodity Futures Trading Commission (CFTC) is the federal regulatory agency for the futures and options markets, and the Securities Exchange Commission (SEC) is the federal regulatory agency for the securities markets. The markets they regulate serve different economic purposes, and the agencies have different regulatory missions and philosophies, receive oversight from different Congressional committees, and in most other respects have very little in common. Nevertheless, periodically there is a proposal to merge these two agencies, usually as a way to achieve "synergies," "efficiencies" or various other promised benefits.
The Treasury Department highlighted the differences between these two agencies in its 2008 "Blueprint for a Modernized Financial Regulatory Structure." It recommended a CFTC-SEC merger, but only as an intermediate-term goal, and said that for such a merger to be successful the SEC should abandon its rules-based regulatory approach and adopt the CFTC's principles-based approach. Congress also considered combining the CFTC and SEC as part of the Dodd-Frank Wall Street Reform & Consumer Protection Act. However, the final version of Dodd-Frank stopped well short of merging these two agencies, and instead mandated joint rulemaking and formal consultation such as swaps where both the CFTC and SEC share jurisdiction.
The latest call for a CFTC-SEC merger came from the House Subcommittee on Oversight & Investigations, in a staff report on MF Global dated November 15, 2012. This report cites several occasions during the final days of MF Global where the CFTC and SEC failed to coordinate efforts and share certain information. While better coordination would not have prevented MF Global's collapse, the report hypothesizes that a closer working relationship "might have" better protected the company's customers and investors. Based on this possibility, the Subcommittee recommends that Congress explore whether customers and investors would be better served if the SEC and CFTC were combined into a single regulatory agency.
This was followed on November 21 by the Markets and Trading Reorganization Act, a bill introduced by Rep. Barney Frank of Dodd-Frank fame. This bill calls for the creation of a Securities and Derivatives Commission that it claims would "strengthen investor confidence in United States financial markets" and "ensure the efficiency and competitiveness of those markets." Much of the language in this bill deals with mundane details such as the number, qualifications and terms of the commissioners, the transfer of existing employees to this new agency, and other administrative matters.
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