House panel OKs CFTC reauthorization, but challenges loom

By Philip Brasher

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, May 14, 2015 - The House Agriculture Committee approved a CFTC reauthorization bill that would roll back some Dodd-Frank regulations and seeks to end a dispute with the European Union over U.S. rules, but the panel's top Democrat predicted the measure wouldn't become law.

The House bill, which also would require the Commodity Futures Trading Commission to analyze the costs and benefits of all new rules, mirrors much of what was in a bill that the House passed last year. The new bill (HR 2289) also includes noncontroversial new customer protections to prevent a repeat of the MF Global and Peregrine Financial scandals.

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House Agriculture Chairman Mike Conaway,  R-Texas, said the legislation would make “narrowly targeted changes … to provide the right relief to the right people.”

But Rep. Collin Peterson, the panel's ranking Democrat, who had supported last year's bill, said that many of the provisions were no longer necessary because of changes pushed through by CFTC Chairman Timothy Massad.

He also said that bill would undercut Massad's ongoing negotiations with the European Union over its approval of U.S. exchanges. The EU is insisting that the United States accept its regulations.

The committee rejected, by voice vote, a Peterson amendment that would have stripped the bill of almost everything except the customer protections, but he told reporters that his amendment is likely to be similar to what eventually becomes law.

“At the end of the day the final bill is going to look a lot more like mine than what came out of here,” he said. The Senate “can't get the votes to do a lot of this stuff, and frankly a lot of these things aren't necessary.”

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Senate Agriculture Chairman Pat Roberts, who held a hearing on the CFTC issues Thursday,  told Agri-Pulse he didn't know whether his bill would include the end-user and cross-border provisions that are in the House measure. 

In a letter to Conaway opposing his committee's legislation, Massad said that many of the provisions “are either unnecessary or impose requirements on the Commission that would make it harder to fulfill our mission. The bill limits the Commission's ability to respond quickly to both market events and market participants.”

The committee's Democrats, however, were divided over the bill. Georgia Rep. David Scott, the ranking Democrat on the Commodity Exchanges, Energy and Credit Subcommittee, defended the legislation, including the requirement for cost-benefit analyses.

“The bill simply directs the commission to consider the efficiency, competitiveness and financial integrity of futures and swaps markets,” Scott said. He also insisted that the bill's provisions would help Massad's negotiations with the EU.

Other provisions in the bill would:

--Exempt grain elevators and other agricultural interests that are managing their own money from having to maintain records of all forms of communications that lead to a trade;

--Limit capital requirements for non-bank swaps dealers;

--Require the commission to provide a comprehensive plan addressing cross-border regulatory requirements;

--Create a judicial review process similar to the one the Securities Exchange Commission has;

--Require the commission to follow a notice-and-comment process before issuing policy statements, guidance documents and interpretive rules that have the force of law. 

 

Some of the commission's new Dodd-Frank rules, including the record-keeping requirements, "present incredible challenges" to end users, said Conaway. "The bill fixes real problems for end users who rely on derivatives markets to manage their risks."

 


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