With the Senate now under Republican control, the odds of passing reauthorization of Commodity Futures Trading Commission (CFTC) targeting Dodd-Frank has increased considerably. The Chairman of the Commodity Futures Trading Commission (CFTC) Timothy Massad testified on Thursday, February 12 for the second time this week, before the US House Committee on Agriculture. Earlier this week Massad testified before the US House Agriculture Appropriations Subcommittee. To download a copy of Chairman Masssad’s testimony click on:
U.S. House Appropriations testimony.
US House Agriculture testimony.
The FY 2016 budget request from CFTC is $322 million, a 29% increase over the previous year’s level of $250 million. The Agriculture Appropriations Subcommittee has received budget requests from nearly every agency under its jurisdiction for an increase in its respective budget, but the Subcommittee’s allocation for FY 2016 is the same level as last year making it highly unlikely CFTC will receive a budget increase.
Chairman of the House Agriculture Committee K. Michael Conaway (R-TX) said his Committee plans to take up reauthorization of CFTC in the coming months, “to ensure the marketplace works for all participants.” Chairman Conaway outlined four areas of focus needing modifications to the Dodd-Frank Wall Street Reform & Consumer Protection Act (PL 111-203). Those modifications include:
- CFTC’s rule-making that impose new position limits on commodities markets;
- CFTC’s treatment of commercial businesses that use derivatives to hedge risk;
- CFTC’s rules governing cross-border derivatives trades; and
- CFTC’s data reporting requirements.
The passage of Dodd Frank requires CFTC to regulate the $700 trillion over-the-counter derivatives market. CFTC has begun writing new rules but much to the dismay of many Republican members of Congress and the financial industry.
Multiple financial industry groups have filed suit blocking CFTC from implementing cross-border rules and its position limits rule. To date, court decisions have upheld the CFTC’s cross-border trading regulation and dismissed CFTC’s position limits proposal. The CFTC is continuing to write the position-limits rule.
In June of last year the House of Representatives passed (265 to 144) HR 4413 the Customer Protection and End User Relief Act reauthorizing the operations of the CFTC through the 2018 fiscal year. In addition to reauthorizing the CFTC, the legislation would amend the Commodity Exchange Act (CEA”) to:
- require statutorily the CFTC and Securities and Exchange Commission (“SEC”) to issue joint rules regarding the application of U.S. swaps rules to transactions made between U.S. and foreign entities;
- modify the requirements for the CFTC’s cost-benefit analyses for rules promulgated under the CEA;
- enhance certain protections afforded to customers of futures commission merchants (“FCMs”);
- require the CFTC to conduct a study on high-frequency trading no later than one year after the enactment of the bill;
- amend the procedures for taking actions without a full vote of the CFTC commissioners; and
- provide relief to end-users from certain requirements implemented under the Dodd-Frank.
The House-passed legislation was not taken up in the U.S. Senate last year.
The White House issued a Statement of Administration Policy on H.R. 4413 in July of 2014 which maintains opposition to passage of the bill as it would hinder the CFTC from effectively managing its responsibilities which expanded with the passage of Dodd-Frank.
Yesterday, in a show of bipartisan support, Ranking Member Collin Peterson (D-MN) said “We passed a good, bipartisan bill last Congress…..and I hope that we can build on that legislation and actually get something signed into law this year.”
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