U.S. House Panel Approves CFTC Reauthorization Bill

The House Agriculture Committee recently approved a bill to reauthorize the Commodity Futures Trading Commission (CFTC) and scale back regulations for end-users of futures and swaps. In a bipartisan voice vote, the panel passed the Customer Protection and End-User Relief Act (H.R. 4413).

The bill includes several important provisions that are positive for the industry and that NGFA had reviewed and earlier helped draft with committee staff.  Four of the most important are provisions related to the agency’s customer-protection rulemakings that: 

1. Reiterate congressional intent that anticipatory hedging is to be considered as bona fide hedging;
2. Set the time of futures commission merchants’ residual interest calculation at the close of business on the day following the trade;
3. Strongly reaffirm congressional intent that end-users utilizing swaps are not required to post margins; and
4. Clarify that members of designated contract markets who are not required to register with the CFTC under Dodd-Frank can satisfy CFTC’s recordkeeping requirements by maintaining written records.

The House Ag Committee-passed bill also requires the CFTC to conduct a study on high-frequency trading that includes: 1) an examination of whether the agency has sufficient technology for monitoring such activity; 2) analyzing liquidity benefits of such trading and whether high-frequency trading creates discrepancies between market participants; 3) and whether the CFTC has sufficient authority to adequately oversee high-frequency trading activities.  Another provision in the bill would strengthen and clarify the CFTC’s obligation to conduct serious cost-benefit studies before publishing rules and regulations.  And the bill would provide for including the personal property of commodity futures brokers as customer property in the event of an insolvency in which there is a shortfall of funds to satisfy customer claims. 

Timing of House floor action on the bill, as well as Senate Agriculture Committee consideration of a similar measure, is uncertain.  But Senate Ag Committee Chairwoman Debbie Stabenow made positive comments about the House committee’s action and stated her support for many of its provisions.