Financial Market Regulation:

Benefits and Risks of Merging SEC and CFTC

T-GGD-95-153: Published: May 3, 1995. Publicly Released: May 3, 1995.

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GAO discussed the proposed Markets and Trading Reorganization and Reform Act, focusing on: (1) the merger of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC); and (2) whether the potential benefits of the merger outweigh the potential risks. GAO noted that: (1) the benefits of merging SEC and CFTC include reduced regulatory uncertainty, which would enhance market efficiency and innovation, increased regulatory effectiveness and efficiency, and greater ease in conducting international regulatory negotiations; (2) the securities and futures markets have become increasingly linked, which makes market disruptions more widespread and rapid; (3) the merger will likely yield inconsequential budgetary cost savings, since it would not significantly reduce personnel; (4) the merger's risks include potential over-regulation, decreased market innovation, the potential dominance of one market, and disrupted operations during the transition; and (5) other issues related to the proposed legislation include updating and harmonizing existing securities and commodities laws, clarifying the mission of the proposed interagency Federal Financial Markets Coordinating Council, reassessing the executive branch's authority over the new regulatory agency, and specifying the new agency's funding.

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