A bipartisan bill advanced by the House Agriculture Committee on Wednesday would give the Commodity Futures Trading Commission authority to keep pace with new technology as well as pursue market fraud and manipulation that takes place outside the United States.
The reauthorization bill, which was approved on a voice vote, also includes provisions aimed at deterring the European Union from trying to regulate U.S. futures markets.
The bill “helps strengthen our financial market infrastructure and makes it more resilient. It also combats fraud and promotes cooperation among regulators,” said House Agriculture Chairman Collin Peterson, D-Minn.
The CFTC’s old reauthorization law expired in 2013. Previous GOP attempts to pass reauthorization bills lacked sufficient Democratic support and died in the Senate.
Senate Agriculture Chairman Pat Roberts, R-Kan., told Agri-Pulse that that he expects his committee to take up the House bill once it gets to the Senate. He and Peterson discussed the legislation earlier this week.
Peterson said he expects the House to take up the bill under an accelerated procedure that is reserved for relatively non-controversial measures.
The senior Republican on the committee, Mike Conaway, expressed some concern that the authority to prosecute overseas fraud and market manipulation might be a problem for legitimate market activity but nevertheless endorsed the legislation.
He singled out for praise the section of the bill that would require the agency to establish research programs to study emerging technologies and technological advances.
“From artificial intelligence to data mining to blockchains, technology is changing the markets and institutions the CFTC regulates,” Conaway said. The bill would “provide the commission the tools it needs to be a 21st century regulator.”
According to an analysis of the bill by experts with the law firm Steptoe and Johnson, it’s not clear which specific overseas activity the CFTC and the Justice Department could prosecute.
Determining that "will require judicial interpretation as to what effect is ‘reasonably foreseeable’ and what is a 'substantial' effect. The standard, though, is similar to the terms of the extraterritorial reach of antifraud provisions of the Securities Exchange Act of 1934 for actions brought by the Securities and Exchange Commission,” the analysis says.
To discourage the EU from seeking to regulate U.S. clearinghouses, an amendment to the draft bill would authorize the CFTC “to review the appropriateness of the exemptions granted to foreign entities, including clearinghouses, under the jurisdiction of the foreign authority.”
The EU is “extending an effort to try to regulate our financial services industry. … We can’t stand for that,” said Rep. David Scott, D-Ga. “We cannot put our banks, our market participants, our clearinghouses at a disadvantage, to have them regulated by the European Union.”
Committee members also noted that the bill includes a dedicated new internship program for minority students.
The commission's GOP chairman, Heath Tarbert, welcomed the legislation. The "bipartisan action highlights the importance of the work done at the CFTC and represents a significant first step in the legislative process. I look forward to working with members of both parties in both chambers to see a bill through to completion," he said.
The new bill omits a number of controversial proposals that doomed previous Republican attempts to restrict the CFTC's rule making under the 2010 Dodd-Frank law.
When Conaway chaired the committee in 2014 and 2015, the panel approved GOP bills over Democratic opposition that among other things would have required CFTC to analyze the costs and benefits of all new rules. The legislation ultimately died in the Senate.
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