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Opinion

Gary Gensler: How to be in two places at once

To the London School of Economics, where Commodity Futures Trading Commission chairman Gary Gensler was speaking last month on reform of the global derivatives markets. The CFTC is a small agency with a few hundred staff that is attempting to regulate the $600 trillion OTC market, so Gensler is a busy man. How does he find time for such lectures?

Gensler opened his remarks by explaining that his twin brother, Rob, attended the LSE 34 years before. The seed of suspicion was sown – could his brother (with whom he is 99.9% identical) be standing in while Gary gets on with the business of protecting the taxpayer from the markets? His response to questions posed by LSE alumnus Tim Frost of Cairn Capital, and Markit’s co-founder, Lance Uggla, suggested it was indeed the real Gary. Frost’s point that some regulation might have the unintended consequence of getting everyone to behave in the same way was batted away with the statement that these things are a trade-off. Uggla maintained that derivatives markets serve an important purpose and over-regulation will scare players out of the markets. Gensler insisted that this is needed to prevent taxpayers being put at risk. So far, so predictable.

But then another questioner raised the point that clearing houses can and have failed. This has happened three times: the Caisse de Liquidation failed in Paris in 1974; Kuala Lumpur Commodities Clearing House failed in 1983; and the Hong Kong Futures Exchange failed in 1987. Gensler, however, pronounced ignorance of the Malaysian incident, musing "there is really so much more for me to read up on". Had his twin let his guard down for a second? If he had, he was anxious to re-establish his credentials with the next questioner, who identified himself as Professor Michael Dempster, founder of the Centre for Financial Research at the University of Cambridge. Gensler’s face lit up. "I have heard of that!" he beamed.

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