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Bart Chilton: A Career of Regulating Commodities, Futures and Cheetahs

May 7, 2019

Bart Chilton, a senior adviser at DLA Piper who was from 2007 to 2014 a Commissioner of the Commodity Futures Trading Commission, passed away April 27.

Chilton had a colorful reputation in the largely grey-hued world of commodities regulation. President George W. Bush appointed Chilton to the CFTC at a time when technological advances now seen as routine were still considered game-changing in the commodities world, and there was a good deal of anxiety about the disruption they would entail. While he was there (in 2010) the US Congress passed the Dodd-Frank Act, giving the commission new responsibilities and authority. He was an integral part of the three-year effort to write the rules mandated by the Act.

Price Manipulation and Cheetahs

Chilton was always concerned about price manipulation, especially in the derivatives of the precious metals. In October 2010 he stated bluntly at CFTC hearing that there had been fraudulent violations of the Commodity Exchange Act, and that he believed that “any such violation of the law in this regard should be prosecuted.”

Chilton was also known as a critic of algorithmic high-frequency trading after a “flash crash” in May 2010 roiled the world of securities regulators. The DJIA started a steep plunge at 2:32 PM, eastern time, May 6, and that plunge continued for 36 minutes. The index lost 600 points in that period. Although it recovered most of the ground lost in the remainder of the trading day, such volatility is never without consequences.

Chilton was among many who believed that high-frequency trades were the problem behind the flash crash.

In a hearing in June of 2012, the CFTC considered its Technology Advisory Committee’s recommendations about HFTs. Chilton, in his opening statement, bestowed upon the practitioners in this field the nickname “cheetahs,” which on one level was a reference to the notorious speed of those jungle cats but, on the other, can sound like a derogatory pun.

The Swaps Trade … and More on Cheetahs

Another cause with which Chilton’s name is connected: global regulation of the swaps trade. The notion of global regulation may seem to be far-fetched, since they believe that it requires unanimity among the regulators of all the nation-states on the globe, and that there will always be hold-out nations. But Chilton, who enjoyed referencing pop culture, used a movie reference to explain his rejection of that attitude. As the disembodied voice says in the Kevin Costner movie Field of Dreams, “If you build it, he will come.” Chilton said that if the United States and the European Union together could build a harmonized system of swaps regulation, “the rest of the world will come.”

Such harmony, he said in July 2013, is “good for markets, it’s good for the economy and I think it’s good for consumers ultimately.”

After Chilton left the CFTC, he went to work for the cheetahs. In August 2014, the Modern Markets Initiative (an HFT lobbying firm) announced that Chilton and DLA Piper would be working with the MMI on “regulatory and public policy matters.”

Chilton, explaining the move, said that he had never contended that HFT as a whole “should go away.” He was, in his work on the Commission, concerned about the misuse of the technology for manipulative purposes. As a private attorney, he was working with the MMI because they “are the white hats among the HFTs.”

A Final Tweet

Just this past March, Chilton made his presence felt in another cutting-edge issue for today’s markets. He made a presentation (by broadcast) at Hong Kong Blockchain Week, with a presentation on “Blockchain Dreamers and the Properties of Bamboo,” extolling the virtues both the fintech innovation and the plant named in that title.

On April 29, the chairman of the CFTC, J. Christopher Giancarlo, issued a statement, expressing the agency’s deep sadness as Chilton’s death and adding: “In the aftermath of the financial crisis, Bart used his signature style of humor to draw attention to pressing issues for the agency and the markets at large, with the intent of protecting retail investors.”