Committee Passes Commodity Futures Modernization Act of 2000
Washington, DC --Today, the House Committee on Agriculture, led by Chairman Larry Combest (R-TX), passed by voice vote, legislation (H.R. 4541) sponsored by Rep. Tom Ewing (R-IL), which reauthorizes the Commodity Exchange Act (CEA) and modernizes laws for futures, futures options, and other derivatives including swaps.
"While there are vast competing interests in this legislation, almost everyone agrees that there is a great need for a more directed, more flexible, and less obtrusive regulatory framework for our futures and derivatives markets if we intend to keep those markets in this country," Combest said. "Moreover, almost everyone realizes the need to provide legal certainty for derivative transactions which have become such important risk management tools in the modern financial world."
Before passing H.R. 4541, the Committee accepted by voice vote the Chairman's en bloc amendment. Among other provisions, the amendment:
1) allows agricultural and metal commodity futures to be traded on a derivatives transaction execution facility if the Commodity Futures Trading Commission (CFTC) creates rules for such trading.
2) requires a derivatives clearing organization to be registered by the CFTC unless it is already registered by the Securities Exchange Commission (SEC), a federal banking regulator, or a recognized foreign regulatory authority.
3) allows bilateral transactions of certain exempt commodities, including energy derivatives, by eligible participants. With the exception of metal commodities, these futures may also be traded on an electronic trading facility.
4) permits U.S. futures commission merchants to sell to U.S. citizens certain foreign stock and index futures transacted on foreign markets.
The Committee also accepted by voice vote an amendment offered by Ranking Member Charlie Stenholm which contains Congressional findings about the changing and global nature of derivatives markets. The amendment also includes a Sense of Congress resolution regarding the importance of the CFTC's role in coordinating with foreign regulatory authorities, participating in international regulatory organizations and forums, and providing technical assistance to foreign governmental authorities.
"While more work remains to be done, I support the bill and believe we have a tremendous opportunity to take a step forward in modernizing our futures trading laws this year," said Stenholm (D-TX). "If we have to wait another year, we deprive our industry of the opportunity to innovate and to compete in the international marketplace. The time to act is now."
Authorization for the Commodity Exchange Act expires on September 30, 2000. The Commodity Futures Modernization Act of 2000 reauthorizes the CEA for five years and would reform the Act in three primary ways:
1) incorporates the President's Working Group findings on legal certainty for over-the-counter (OTC) derivatives;
2) codifies the regulatory relief proposal of the Commodity Futures Trading Commission (CFTC);
3) reforms the Shad-Johnson jurisdictional accord regarding futures on securities.
"Inevitably, there are still contentious issues that have not been fully resolved. I want to assure everyone that we will continue to work to resolve these problems as the legislative process continues," Combest said. "A great deal of effort has gone into this bill and there is till much to do."