WASHINGTON, July 16, 2014 – Senators Pat Roberts, R-Kan., and Heidi Heitkamp, D-N.D., introduced S. 2601 today, a bill that would strike down a Commodity Futures Trading Commission (CFTC) regulation they say is overly burdensome on farmers and ranchers who rely on the futures market to hedge their risks.
The bill – dubbed the Risk Hedging Protection Act of 2014 – would give futures customers an additional day to provide payments to brokers to meet their margin call. This fixes an issue that Roberts and Heitkamp – both members of the Senate Ag Committee - say is limiting available agricultural funds.
Under current law, the residual interest rule from the CFTC will eventually require futures customers to fully cover the margin of their contracts by the morning of the day following a trade. In order to comply with the rule, brokers would be more likely to demand drastically increased initial payments, which the senators say could drive some farmers out of the futures markets or restrict available funds that could otherwise be used to hire new employees or make capital improvements.
Roberts said the current CFTC regulations were put in place in reaction to the collapses of MF Global and Peregrine Financial Group, but ended up hurting farmers and ranchers. He said one of his biggest priorities is “protecting end users like farmers, ranchers and grain elevators from over-burdensome or unrealistic regulations.”
“This legislation ensures that the CFTC rules work in the countryside as well as on paper,” Roberts said. A spokeswoman for Roberts said the senator hopes to add this bill’s language to the Senate Ag Committee’s reauthorization efforts for the Commodity Exchange Act, which regulates all futures trading.
Heitkamp said the CFTC is “right to make changes that help identify bad practices, but the rules need to be workable, so farmers can continue to make investments . . . in the futures markets, and get their high-quality products to customers.”
Roberts and Heitkamp said the bill is similar to provisions in H.R. 4413, a bill reauthorizing the CFTC, which was by passed by the House on June 24. At the time, Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., said she could see some agreement between House and Senate policies, but that there was still a lot of work to do.
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