WASHINGTON, Feb. 12, 2015—House Agriculture Committee members questioned Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad today on the agency’s 2015 agenda, including new regulations in the swaps market, end-user protection and cyber security.

One of the jobs of CFTC is to oversee futures trading in corn, soybeans, wheat, cattle and other agricultural commodities. Chairman Michael Conaway, R-Texas, said “burdensome regulations” proposed and implemented through the 2010 Dodd-Frank Act passed have increased costs and created uncertainty for farmers, and ranchers.

Through the act, Congress mandated that CFTC extend the definition of position limits, which limit excessive speculation that can destabilize the market, but in a way that allows participants to engage in bona fide commercial hedging. “That does get complicated,” Massad said. “We’re taking our time to try to get this right.”

In December, the CFTC reopened the comment period on a proposed rule on position limits. Rep. Austin Scott, R-Ga., said the CFTC’s proposal put too narrow a definition on a bona fide hedge. Rep. Randy Neugebauer, R-Texas, said the definition affects cotton growers in his district and other growers that rely on derivatives markets to hedge against commodity risks.

The Commodity Markets Council, whose members include Cargill Inc. and Archer Daniels Midland Co., sent a letter to the CFTC in January asking the agency not to classify physical commodity markets’ hedging activities as speculation.

“Unquestionably, this narrow approach to the bona fide hedge exemption will harm end-users and pre-empt business risk management decision-making in favor of bureaucratic edict,” Scott said. “It is neither desirable nor practicable for the federal government to insert itself in the risk management decisions of American businesses and farmers.”

CFTC is still reviewing the definition. Massad said the agency received “substantial public input” on the position limits rule as well as input from participants at its Agriculture Advisory Committee meeting in December.

Massad said CFTC will continue to focus on completing Dodd-Frank rules, including those for clearing standardized swap transactions, increasing oversight of major market participants, and establishing regular reporting for increased market transparency. Another priority for the agency is harmonizing regulatory rules with similar rules in other countries.

Committee ranking member Collin Peterson, D-Minn., told Massad that one of the things his constituents are most upset about is the lack of jail-time given to executives of large firms that lost millions of customer funds in market scandals in recent years. For example, a federal court fined commodities brokerage firm MF Global $1.2 billion after placing risky bets in European markets, going bankrupt in 2011 and losing millions of its customers’ funds, but its supervisors have not been criminally charged.

Rep. David Scott, D-Ga., said putting “some of the crooks in jail” will be “the foremost way to gain the confidence of the American people.”

Massad said that “holding individuals accountable, putting people in jail, is one of the most important ways we can send a clear message,” but he added that handing out jail time required action by other agencies.

Massad also made the case for the White House’ proposed budget for CFTC in Fiscal Year 2016. He said the current budget “can’t keep up” with the extra demand the agency faces after passage of the Dodd-Frank Act.

However, House appropriators indicated Wednesday in a hearing that the agency would not receive the full budget request.

Massad said CFTC is conducting daily surveillance of clearinghouses, but they are increasingly vulnerable to cyberattacks. He said cyber security “is an area in which I really want to step up our efforts.”

The White House requested $322 million in spending for fiscal year 2016 for the CFTC, which would nearly triple the agency's size since 2008.


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