[Senate Hearing 108-648]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-648
 
     REVIEW COMMODITY FUTURES TRADING COMMISSION REGULATORY ISSUES
=======================================================================


                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,

                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION


                               __________

                              MAY 13, 2004

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry







  Available via the World Wide Web: http://www.agriculture.senate.gov

                                ______


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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                  THAD COCHRAN, Mississippi, Chairman

RICHARD G. LUGAR, Indiana            TOM HARKIN, Iowa
MITCH McCONNELL, Kentucky            PATRICK J. LEAHY, Vermont
PAT ROBERTS, Kansas                  KENT CONRAD, North Dakota
PETER G. FITZGERALD, Illinois        THOMAS A. DASCHLE, South Dakota
SAXBY CHAMBLISS, Georgia             MAX BAUCUS, Montana
NORM COLEMAN, Minnesota              BLANCHE L. LINCOLN, Arkansas
MICHEAL D. CRAPO, Idaho              ZELL MILLER, Georgia
JAMES M. TALENT, Missouri            DEBBIE A. STABENOW, Michigan
ELIZABETH DOLE, North Carolina       E. BENJAMIN NELSON, Nebraska
CHARLES E. GRASSLEY, Iowa            MARK DAYTON, Minnesota

                 Hunt Shipman, Majority Staff Director
                David L. Johnson, Majority Chief Counsel
               Lance Kotschwar, Majority General Counsel
                      Robert E. Sturm, Chief Clerk
                Mark Halverson, Minority Staff Director

                                  (ii)












                            C O N T E N T S

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                                                                   Page

Hearing(s):

Review Commodity Futures Trading Commission Regulatory Issues....    01

                              ----------                              

                         Thursday, May 13, 2004
                    STATEMENTS PRESENTED BY SENATORS

Cochran, Hon. Thad, a U.S. Senator from Mississippi, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............    01

                               WITNESSES

Newsome, James E., Chairman, Commodity Futures Trading 
  Commission, Washington, DC.....................................    02
                              ----------                              

                                APPENDIX

Prepared Statements:
    Newsome, James E.............................................    22
Questions and Answers Submitted for the Record:
    Questions raised during the Hearing requiring additional 
      information................................................    32
Questions from Senator Cochran...................................    34
Questions from Senator Conrad....................................    35
Questions from Senator Harkin....................................    37

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    REVIEWING COMMODITY FUTURES TRADING COMMISSION REGULATORY ISSUES

                              ----------                              


                         THURSDAY, MAY 13, 2004

                                       U.S. Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The committee met, pursuant to notice, at 10:05 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Thad Cochran 
[Chairman of the Committee] presiding.
    Present or submitting a statement: Senators Cochran, 
Fitzgerald, Chambliss, Crapo, Harkin, and Conrad.

      STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM 
MISSISSIPPI, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND 
                            FORESTRY

    The Chairman. Good morning. Welcome to the Committee's 
meeting to review regulatory issues that are under the 
jurisdiction of the Commodity Futures Trading Commission. This 
commission regulates commodities futures markets including 
futures and options on agricultural, energy, and metal 
commodities, as well as on financial instruments such as 
interest rates and foreign currencies. The volume and value of 
exchange-traded futures and options and off-exchange or over-
the-counter derivatives have grown tremendously in recent 
years. These markets play an important price discovery role and 
risk management role by helping market participants manage 
financial risk across a wide array of products and services.
    In recent years, the Federal Government has modified its 
regulatory approach in response to the growth and development 
of these markets. Largely following recommendations of the 
President's working group on financial markets published in 
November 1999, the Commodities Futures Modernization Act of 
2000 moved away from a one-size-fits-all regulatory approach to 
a more flexible approach that is based on broad core 
principles. With the experience of nearly three-and-a-half 
years since its enactment this is a good time for the Committee 
to review the impact it is having on the current regulatory 
environment and the integrity of the commodities futures 
markets.
    To help us with that review I am pleased to welcome James 
E. Newsome, who is chairman of the commission, as our witness 
today. Jim Newsome is widely respected for his thoughtful and 
common sense leadership at the Commodity Futures Trading 
Commission.
    A native of Plant City, Florida, Jim received his B.S. 
degree in food and resource economics from the University of 
Florida and his M.S. and Ph.D. degrees in animal science and 
agricultural economics from Mississippi State University. Dr. 
Newsome served as executive vice president of the Mississippi 
Cattlemen's Association before joining the CFTC. He began 
serving as a commissioner on August 10, 1998 and was nominated 
by President Bush and confirmed by the Senate to serve as 
chairman of the CFTC on December 20, 2001.
    We appreciate very much your distinguished service and your 
presence before our Committee for this hearing today. You may 
proceed.

  STATEMENT OF JAMES E. NEWSOME, CHAIRMAN, COMMODITY FUTURES 
               TRADING COMMISSION, WASHINGTON, DC

    Mr. Newsome. Thank you very much, Chairman Cochran. I 
appreciate the opportunity to testify before you today on 
behalf of the Commodity Futures Trading Commission. I have 
submitted a more detailed statement for the hearing record 
which I will summarize for you this morning.
    Before I get started I would like to acknowledge my 
colleagues that are here today, Commissioners Walt Lukken and 
Sharon Brown-Hruska, and thank them for their continued 
support, leadership and hard work at the commission, as well as 
I would like to recognize Barbara Holum, who retired from the 
CFTC at the end of 2003 after serving 10 dedicated years as a 
commissioner.
    Mr. Chairman, you instructed that the purpose of this 
hearing is to update the Committee on the regulatory issues 
before the commission. To put things into context, I would like 
to begin by providing you with an overview of our progress in 
implementing the Commodity Futures Modernization Act of 2000, 
or the CFMA, which significantly amended the Commodity Exchange 
Act, and describe how the markets have evolved in response to 
that very important legislation.
    In recognition of several aspects, including the growing 
importance of the futures and options markets to the domestic 
and global economies, the need to lift restraints on the 
ability of exchanges to keep pace with rapidly developing 
technological advances, and to respond quickly to demands for 
new products, in the year 2000 under the leadership of this 
Committee Congress rejected the one-size-fits-all approach to 
regulation by passing the CFMA. The CFMA amended the Commodity 
Exchange Act to establish a structure which markets can choose 
to operate under varying levels of commission oversight, 
depending on the products traded, the type of system in which 
they are traded, and the sophistication of market participants. 
Under this regulatory framework, exchanges are subject to broad 
core principles governing operational integrity rather than 
prescriptive rules.
    Over the three-and-a-half years since the CFMA was signed 
into law, the commission has concentrated its efforts on 
redesigning its regulatory programs to achieve the objectives 
of the statute. Our first task was to modernize the rules 
regarding trading facilities, both traditional and the new 
exempt markets permitted by the CFMA, and to establish guidance 
for new applicants in existing exchanges on how to comply with 
the core principles. We also studied through hearings, 
roundtables and the solicitation of public comment our 
regulations related to futures commission merchants, or FCMs, 
commodity pool operators, and other futures market 
intermediaries, to identify areas where improvements could be 
made and were matters could be delegated to the National 
Futures Association.
    We devoted much of last year implementing a number of 
modernizations in this area ranging from registration relief 
for operators of certain pooled investment vehicles that 
restrict participation to sufficiently well-sophisticated 
persons, to affording FCMs greater operational flexibility so 
that they can provide their customers with more efficient trade 
executions. In both of those endeavors the Commission's goal 
was to streamline and eliminate regulations where appropriate 
while keeping important market integrity and customer 
protections in place. It was hoped that these reforms would, 
among other things, encourage innovation by existing exchanges 
and market participants and lower the regulatory costs for new 
entry into the market, which in turn would result in a 
heightened level of competition that would benefit the 
marketplace as a whole. The indications thus far have been very 
positive.
    Some numbers will illustrate my point. In the short period 
since passage of the CFMA, the commission has approved eight 
new exchanges as designated contract markets, has accepted the 
registrations of seven derivatives clearing organizations, some 
of which were existing clearinghouses serving other financial 
market sectors, and several that were entirely new 
organizations not previously affiliated with any particular 
trading facility.
    In addition, the commission has received notices from 13 
new ventures of their intent to operate exempt markets, three 
as exempt boards of trade and 10 as exempt commercial markets. 
Domestic futures and options volume has almost doubled over the 
last several years and reached over one billion contracts 
traded in 2003. New contract filings have increased more than 
500 percent during this time period, and the regulatory delay 
in listing the products after filing has dropped from an 
average of almost 70 days in 1998 to 1 day for 99 percent of 
the new contract listed last year due to the certification 
procedures now available to the exchanges through the CFMA.
    Relationships between exchanges and clearinghouses have 
shifted, leading to market-driven clearing alliances. Certain 
over-the-counter business is also now cleared, adding an 
important element of safety and soundness to this important 
sector of the economy. New and traditional exchanges alike have 
embraced technology and electronic trading has soared from less 
than 10 percent of the total volume in 1998 to almost 50 
percent of the total last year, with expectations that this 
upward trend will continue.
    This modernized regulatory environment provided by the CFMA 
coupled with market demand has yielded more platforms, more 
choices and more competition than ever before, which has 
fostered capital efficiencies through new strategic alliances 
and has resulted in enhanced customer service and lower 
transactional fees.
    Another benefit to the markets and to the public that has 
resulted from the CFMA was the clarification of the 
Commission's jurisdiction with respect to retail foreign 
currency, or forex transactions. Following this important 
clarification in the law, the Commission launched an intensive 
and aggressive enforcement initiative to root out and prosecute 
unscrupulous operators of fraudulent forex bucket shops. The 
Commission also approved rules adopted by the National Futures 
Association last year that require their forex dealer members 
to take responsibility for the activities of unregulated 
solicitors that they may deal with. The Commission continues to 
work with the NFA and other market participants to identify 
ways in which our supervision of forex activity may be 
improved.
    Since the passage of the CFMA, the Commission has filed 61 
enforcement actions in the forex area and has been awarded 
civil monetary penalties totaling over $100 million as well as 
restitutions and disgorgement judgments totaling more than $62 
million. Many of these cases have resulted in additional 
criminal charges through the cooperative efforts of our 
division of enforcement and State and Federal criminal 
authorities.
    The Commission has also aggressively pursued those who 
manipulated or attempted to manipulate the energy futures 
market. Since 2002, the Commission has opened dozens of 
investigations in this area which has resulted in 17 actions 
filed against 20 major energy companies and two individuals, 
and almost $200 million in civil monetary penalties collected 
to date. Mr. Chairman, I am happy to report that 97 percent of 
the energy investigations we opened in 2002 have been resolved.
    By moving frontline accountability for how markets operate 
and what they trade to the marketplace, the Commodity Exchange 
Act as amended by the CFMA, permits regulatory resources to be 
refocused on strong oversight, risk-based inspection, and swift 
and sure enforcement. It has been an exciting time to be at the 
Commission and the futures industry as it has evolved and grown 
over the last several years. In my opinion, the new regulatory 
framework brought about by the enactment of the CFMA has 
provided the intended results and has been a success. I would 
hope, therefore, that as reauthorization approaches any 
legislative amendments that may be considered be approached 
cautiously and pursued only after a full debate by all 
interested parties. The Commission looks forward to working 
with the Committee on that upcoming project.
    I like to close, Mr. Chairman, by expressing how proud I am 
of the dedicated men and women that work at the Commission who 
have worked tirelessly over the last three-and-a-half years to 
modernize our regulatory framework to achieve the goals 
expressed by this committee and by the Congress, and to timely 
process the many new exchange and clearinghouse applications we 
have received. We worked very hard to try and get things right.
    Mr. Chairman, I thank you for the opportunity to testify 
before this committee and certainly am happy to answer any 
questions.
    The Chairman. Thank you very much, Mr. Chairman, for your 
presence here and your continued diligent leadership at the 
Commodity Futures Trading Commission.
    Let me ask you the first question and then I am pleased to 
yield to other Senators who have joined our hearing. You 
mentioned changes that have been made under the Commodity 
Futures Modernization Act. It seems that this has been a 
success in terms of the growth of the markets, the strength of 
the markets. Is that an accurate impression? Do you think that 
the modernization act has contributed to the growth of the 
markets?
    Mr. Newsome. It has contributed greatly to the growth and 
expansion that we have seen in the marketplace over the last 
several years. Of course there are a number of factors that can 
be attributed to this growth, but certainly the flexibility 
that can be attributed to the Act to allow the marketplace to 
adapt to technology, to make business decisions on a quicker 
basis as compared to the CEA before the Commodity Futures 
Modernization Act is a big cause of the success and growth that 
we have seen in these markets.
    The Chairman. Let me ask you a follow up. Do you think the 
CFTC needs any additional authority, legal authority under the 
statute or resources to fulfill your regulatory 
responsibilities?
    Mr. Newsome. As we look at the two parts of that question I 
will address the authority to start with. One of the things 
that was so positive about the new Act was that it gave the 
Commission tremendous flexibility. This committee and the 
Congress realized that these markets were changing rapidly and 
growing, that the exchanges and market participants had the 
need to adapt to new technology that was ever-changing. The 
flexibility that was provided to market participants was also 
provided to the CFTC so that we could adapt to changes in the 
marketplace. The flexible authority that was provided to us 
through the CFMA was very useful to us.
    In terms of looking at new rules, at this point I do not 
see that there is any new authority that is needed by the 
Commission. In terms of looking at our enforcement authority, 
the Commission enjoys very broad authority as it relates to the 
protection of customers through anti-fraud and anti-
manipulation provisions. They are always things that we are 
looking for to help strengthen that enforcement authority which 
we use as the primary preventive measure to wrongdoing in the 
marketplace. As we get into reauthorization I would love to sit 
down and look at what it may be some minor things.
    In answer to your question, we feel that we have very ample 
authority from both the rule and enforcement standpoint.
    As we look at resources, the marketplace has grown very 
rapidly. The CFTC has been an excellent place to work. We have 
very dedicated employees and staff at the CFTC. Ideally we look 
at a number of around 550 or the mid-500's in terms of FTEs, is 
probably an ideal number for us. We are a bit below that right 
now, but that is because of choices that we made internally. We 
were very fortunate from Congress last year in that we were one 
of the few non-defense agencies that got an increase in our 
budget. We chose to use that increase to fund pay parity of 
which this committee and Congress also provided for us. I would 
say that pay parity has achieved its goal. We have stemmed the 
tide of people leaving the Commission to go to sister agencies 
so that has worked very, very nicely.
    The Chairman. Thank you very much. I am pleased to yield to 
my friend and distinguished colleague from North Dakota, 
Senator Conrad.
    Senator Conrad. Thank you very much, Mr. Chairman. Thank 
you for holding this hearing, and thank you for the role you 
played in getting Mr. Newsome as the chairman at CFTC. By all 
accounts, Mr. Newsome, you are doing an exceptionally good job 
there. Sometimes people come up here and we give them a going 
over, which sometimes is richly deserved. Not so often we say, 
job well done. From all reports you are a steady hand at the 
helm of the CFTC and we ought to commend you publicly for what 
you have done to help turn that agency around. It was in 
considerable turmoil, all of us know, and we appreciate what 
you have done to provide a steadying hand there.
    Mr. Newsome. Thank you, sir.
    Senator Conrad. A couple questions. By the way, I noticed 
this article in Stocks Futures in the Options magazine about 
you. You were their honoree in 2003, and the headline on the 
article was, Speak Softly and Carry a Big Stick. That is the 
tradition of Teddy Roosevelt who, as you know, had a ranch in 
my home State of North Dakota, who we are going to be honoring 
tomorrow in North Dakota announcing a coin that will be struck 
in his honor. He was known for speaking softly and carrying a 
big stick, so I am glad to see you are in that tradition, Mr. 
Chairman.
    A couple of quick questions if I could, Mr. Chairman. On 
the mad cow case from December that involved the cow from 
Canada, I understand that there were reports that the CFTC was 
investigating whether there were some that traded on inside 
information prior to USDA's public announcement. I heard that 
when I held a hearing in North Dakota from ranching interests 
in my State in a hearing that was held in January. I would be 
interested if you have conducted such an investigation, and if 
so, is it complete and what are the findings?
    Mr. Newsome. Anything that happens in our futures market 
that is wrongdoing is very serious to us, but as a cattleman I 
pay particularly close attention to the cattle markets. Anytime 
there is the potential or alleged wrongdoing within the live 
cattle markets it is something that not only the Commission 
looks at closely but something that I take a personal interest 
in.
    We take very seriously allegations of leaked information or 
people trading upon the information. That is something that we 
are looking at. In fact we are cooperating with the U.S. 
Attorney's Office for the District of Columbia on this 
investigation. The investigation is ongoing so I am very 
limited in terms of what I can say there. We do hope to finish 
that investigation up this summer.
    Senator Conrad. I appreciate that. I would say this to you, 
Mr. Chairman. Ranchers in my State brought to the hearing, 
reports of unusual price movement before the USDA announcement. 
I must say it raised concern in my eyes of what happened. They 
had very carefully charted price movements before the official 
announcement, and those price movements were clearly in one 
direction and they were clearly unusual.
    I hope very much that in fact this investigation is able to 
report to us what happened. Was there a leaked report or were 
people simply anticipating? Did they have wind some way that 
USDA was going to make a determination? Because that really 
cannot be tolerated. That is the kind of thing that throws the 
credibility of the markets in question.
    A second quick question if I could, Mr. Chairman, is on the 
question of international regulation. Your prepared statement 
describes how futures markets have become truly global in 
nature. We all see that. We see the movement very rapidly 
through electronic means of the flow of funds. I am interested 
in whether or not the CFTC has attempted to assess whether 
other nations have appropriate regulatory structures in place. 
More to the point, whether some kind of market meltdown 
overseas could affect our markets here.
    Mr. Newsome. The international arena and rules and 
regulations in foreign jurisdictions are something that we 
spend a lot of time assessing and working with. We are members 
of the International Organization of Security Regulators as is 
the U.S. SEC, and we meet regularly with the goal of looking at 
rules and regulations, enforcement authorities in jurisdictions 
all around the globe in coming up with core principles that 
each jurisdiction can abide by, recognizing that differences in 
laws and differences in backgrounds lead to more specific rules 
and regulations within any jurisdiction. Through IOSCO we work 
very hard to establish certain core principles that every 
financial jurisdiction around the globe can live by.
    We are participants in numerous memorandums of 
understanding with foreign jurisdictions for the need to share 
information, particularly with regard to enforcement. If there 
is wrongdoing within other jurisdictions that have had a 
negative impact on U.S. customers, we want to have the ability 
to get the information that we need and to work with our sister 
jurisdictions to bring charges if they are warranted. In most 
financial jurisdictions around the world we have very good 
working relationships. Those relationships are formalized 
through these MOUs and we are very comfortable that we can 
receive information and work with these other jurisdictions to 
bring enforcement actions if necessary, and we have used those 
MOUs to do just that in the past.
    With regard to a meltdown in other jurisdictions, that is 
something that we continually work on as well. As we look at 
this globalized market, I would use the example of the London 
clearinghouse which we recently designated as a designated 
clearing organization in the U.S. As a DCO registered by us, 
they are subject to the exact same rules and regulations of any 
clearinghouse that is housed here locally. U.S. customers have 
the same protection if their money is at the London 
clearinghouse as they would if it is at the Chicago Mercantile 
exchange clearinghouse.
    Again, we take very seriously the protection of U.S. 
customers and their funds, and those are things that as we are 
going through the designation process looking at new market 
participants we want to make sure that we can protect them to 
the same extent that we can protect them if their money was 
here in the U.S.
    Senator Conrad. Let me be very specific, and this will be 
my final--I know, Mr. Chairman, you want to move on.
    I have heard increasingly concerns about the standards in 
Caribbean banking centers and whether or not there is 
increasing vulnerability of the entire global system because of 
a lack of regulation in those Caribbean banking centers, and 
that there is a concern, a growing concern I am hearing from 
people in the financial world about derivatives that have very 
large potential liabilities and the flow of funds through 
Caribbean banking centers with regard to those kinds of issues. 
Can you tell us if you have had an opportunity to take a 
special look at these Caribbean banking centers and whether or 
not we can be confident that they are being appropriately 
watched?
    Mr. Newsome. There is absolutely no question that there are 
jurisdictions that fail to meet the standards of IOSCO or the 
standards that we hold in the U.S. We continually look at 
jurisdictions all around the world, the Caribbean ones 
included. The pointed thing I could say at this point is that 
we have good news recently that jurisdictions in the Caribbean 
are becoming very sensitive about being pointed out as weak and 
they are asking to come to the table with the major 
jurisdictions around the world to try and strengthen their 
financial regulation so that they are not pointed out.
    One of the things that we have done through IOSCO is to 
create blacklists of jurisdictions that fail to meet 
appropriate standards. Countries who are on that blacklist are 
uncomfortable in being there.
    Senator Conrad. Could you provide the Committee with that 
list?
    Mr. Newsome. Yes, absolutely. I do not have it with me 
today.
    Senator Conrad. I understand that, but if you could provide 
us with that. I would just say in conclusion, Mr. Chairman, I 
would hope that you would take an especially hard look once 
again at those Caribbean banking centers, because I am told by 
people who are knowledgeable that there are very grave 
questions about how closely they are being regulated, how 
closely they are being watched, and that there are 
irregularities there that ought to cause concern.
    Mr. Newsome. We are more than happy to do so.
    Senator Conrad. I also want to recognize Mr. Sobba who is 
with you, who is a friend of longstanding, formerly with the 
cattlemen, formally with baseball, and a very good friend. I am 
glad to see that he is on your staff as well.
    Mr. Newsome. I am very fortunate to have him as a member of 
our team.
    Senator Conrad. Thank you.
    The Chairman. Thank you, Senator.
    Senator Chambliss.
    Senator Chambliss. Thank you, Mr. Chairman. I know Mr. 
Sobba too, Senator Conrad. You do have a terrific staff, 
chairman Newsome. Let me just take a minute to commend you 
also, just like Senator Conrad. You stepped into a tough 
situation, but nobody could have done a better job. You have 
been very available to members on both sides of the Capitol and 
have been willing to work with us on a number of tough issues 
that you have been facing and I commend you for that.
    It is also nice to have somebody out there testifying for 
whom I do not need an interpreter, so I am pleased from that 
standpoint too, from the standpoint of where you come from.
    I just have one question and that is, one issue that we 
worked very long and hard with you on, took us several years to 
complete it, was the pay parity issue. I would like to hear 
some comments from you for the record about how that pay parity 
is working relative to your ability to hire and have folks 
continue to work with you at CFTC.
    Mr. Newsome. Senator, as you know because we worked very 
closely with you, very closely with Chairman Cochran on that 
issue a couple years ago, and from an internal standpoint there 
was no bigger issue to us because we were almost double the 
Government average in terms of our turnover of very experienced 
staff at the Commission leaving and going to sister agencies 
who were not bound by the standard Government pay. As you know, 
they are always people in the Government leaving to go to the 
private sector and that is understandable. When the vast 
majority of them are leaving to go to sister agencies, that is 
difficult for us to deal with, particularly when the markets 
that we oversee are very complex and technical and it is 
difficult to hire and train people within our area, so that 
loss was becoming devastating to us.
    Since the implementation of pay parity we have now moved 
below the Government average in terms of turnover, so it has 
been a big success to us. We have not been able to use it so 
much from a hiring standpoint yet because of tight resources. 
In fact we are in the middle of a hiring freeze right now, but 
my expectation is that when we have the ability to start hiring 
again that our pay standards will be a huge benefit to us as 
they have been with retaining key staff.
    Senator Chambliss. I am glad to hear that have attempted 
for the greater appeared during thank you.
    Senator Crapo. Good. I am glad to hear that and again, 
thanks for the great job you are doing.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Crapo.
    Senator Crapo. Thank you very much, Mr. Chairman, and 
chairman Newsome, I appreciate your attendance here. I also 
want to extend my thanks to you for the tremendous work that 
you are doing. I have appreciated working with you on a number 
of issues over the years and have found you to be not only very 
responsive but very capable in helping us to address the 
critical issues we deal with.
    As you know, derivatives is on of the critical issues that 
I have been very involved in with you, and although we do not 
have a legislative issue dealing with it immediately before us 
right now, it is one that is constantly on the radar screen.
    I just would like you once again, if you would, to share 
with me your thoughts about whether you believe that the way 
that we manage derivatives and the utilization of derivatives 
in our economy is something that is beneficial to our financial 
system and something that helps make our economy more 
resilient.
    Mr. Newsome. Senator, I am more than happy to. First of 
all, The importance of derivatives to this economy grows every 
day. The ability to manage risk becomes more and more 
important. Obviously we have had that capability in the 
business sector for a number of years, but finally more and 
more in the business community are learning not only the 
benefits of the use of derivatives but how to use those 
derivatives as a hedge against real risk. Chairman Greenspan 
has pointed out on numerous occasions the tremendous benefits 
of derivatives and risk management to the economy and the 
business sector and that will continue, and it will continue to 
grow, both on exchange and over-the-counter.
    The over-the-counter business has grown very rapidly over 
the last 10 years, but over the last several years the 
exchange-traded growth has been outstanding. I mentioned 
earlier that over roughly a 4-year period we have seen volume 
in on-exchange futures and options business double to the point 
that over a billion contracts were traded last year. There is 
no question that these products and these contracts are a 
tremendous benefit.
    The regulatory structure in the United States through the 
passage of Commodity Futures Modernization Act reaches an 
appropriate balance, a balance between giving businesses, 
exchanges and firms the flexibility to be creative and somewhat 
unencumbered by the Government as they develop business plans 
that are best for them and their customers versus the very 
strong enforcement approach that we have taken as the deterrent 
to wrongdoing versus lots of prescriptive rules. It is an 
exciting time to be in this business. The Commodity Futures 
Modernization Act was the right legislation at the right time. 
This committee and the Congress should be commended for your 
foresight in allowing that shift in the regulatory landscape 
because it has played a big role in the growth within the 
futures and derivatives business.
    Senator Crapo. Thank you. I share your feelings about that 
and appreciate your work with us as we have dealt with these 
issues over the last little while.
    Just other question at that is, the legal certainty 
provisions in the Commodity Futures Modernization Act were 
intended by Congress both to reduce the systemic risk and to 
promote financial innovation. That overall we have achieved 
both of those objectives through the Act. The one issue, which 
I am sure you are aware that we are still working on is the 
passage of the financial contracts netting provisions in the 
pending bankruptcy bill. Now these provisions clarify the 
enforceability of early termination and netting of financial 
contracts that were proposed by the President's Working Group 
on which you are serving.
    Would you please comment on the importance of the netting 
legislation? Specifically, do you think that it is advisable to 
separate the netting provision from the broader bankruptcy 
legislation and pass it separately in the Senate and the House 
to get to the President as soon as possible?
    Mr. Newsome. Senator, I am very supportive of that netting 
provision. In fact I have written to the Congress on three 
different occasions now, twice as a member of the President's 
working group and one, along with Pat Wood chairman of the 
FERC, to support the netting provision. There is no question in 
my mind that everything we can do to achieve legal certainty is 
beneficial and positive.
    I understand that as a portion of broader legislation, the 
netting provision has been non-controversial and has been 
supported by a wide range of Members of Congress on both sides 
of the aisle. In my estimation, whether it remains a part of a 
broader package or whether it is pulled out and passed on its 
own, it is important to do so and I would be supportive of 
that.
    Senator Crapo. Thank you very much.
    The Chairman. Thank you, Senator.
    Senator Fitzgerald.
    Senator Fitzgerald. Mr. Chairman, thank you and thank you 
for holding this hearing.
    Chairman Newsome, thank you for being here and I will add 
my applause to the long list that has been given for the job 
you have been doing at the commission. We really appreciate 
your help and hard work.
    I wanted to follow-up on what Senator Crapo asked you 
about. Maybe I am in a minority on this committee with respect 
to one issue as to whether or not the CFTC should have 
jurisdiction in the next CFMA that we do. I guess it will be 
coming up after I leave the Senate next year.
    It is interesting that the current law provides that 
derivative contracts are regulated if they deal with tangible 
goods that have a finite limit to them. We do not to regulate 
interest rate derivative contracts, for example, that banks 
trade amongst themselves, or that Fannie Mae or Freddie Mac may 
hedge its interest rate risk by buying interest rate swaps with 
Citibank or other large financial institutions. For 
agricultural commodities, for commodities with a finite 
quantity we do provide CFTC jurisdiction, with one exception, 
energy and metals contracts that are traded online. That 
appeared to me to be a special carve-out for Enron Online.
    The assets Enron Online have been bought by USB Warburg I 
believe, and there is also a company, the Intercontinental 
Exchange that trades energy and metal contracts online. I have 
always been curious, what is the public policy rationale for 
carving out energy and metal contracts that are traded online 
and saying they cannot be regulated by the CFTC? I do think we 
saw a lot of wash trades, did we not, on that Enron Online that 
you ultimately have been able to impose a fine on Enron Online.
    Who paid that fine, by the way? Or who is liable for that 
since Enron has gone bankrupt and they have sold Enron Online?
    Mr. Newsome. That is in bankruptcy court as we speak.
    Senator Fitzgerald. You did try to assess the fine on 
Enron?
    Mr. Newsome. They have agreed to a settlement of $35 
million and that settlement itself is in front of the 
bankruptcy court now.
    Senator Fitzgerald. Did they challenge your ability to 
assess that fine?
    Mr. Newsome. No, the bankruptcy judge has not ruled yet 
with regard to that settlement with Enron.
    Senator Fitzgerald. We do not know, it is not yet shown 
whether you even have the authority to impose that fine in that 
case where they were clearly just engaging in a lot of wash 
trades, sometimes amongst themselves, Enron trading with its 
own subsidies to set an artificial price or to artificially 
boost their own revenues. They were claiming all the revenues 
as revenues of their company even though they were all washed 
out with an equivalent sale. Enron claimed to be the seventh 
largest company in America. Really a lot of it was just wash 
trades through Enron Online.
    Mr. Newsome. Enron has agreed to the settlement and it is 
my understanding that the settlement is in front of the 
bankruptcy court not to decide whether it is a legitimate 
settlement but to determine where it is in the line with what 
will be paid and what will not be paid. Enron has agreed with 
our authority in this area and agreed to that $35 million. 
Whether or not any of that money will ever flow to the U.S. 
Treasury or not is the question.
    Senator Fitzgerald. Now in the President's Working Group, 
in their policy paper they put out before we drafted the last 
CFMA they said that tangible commodities with a finite quantity 
should be subject to the CFTC's jurisdiction. They did not 
mention a special carve-out for energy and metal contracts 
traded on an online exchange. Do you believe the President's 
Working Group will this year put out a new policy paper calling 
for this special carve-out for energy and metal contracts 
online? If so, what would be the public policy rationale for 
separating energy and metal and saying that they do not have to 
be regulated if they are traded online, but if we trade 
anything else that is a tangible commodity with a finite 
quantity online we have to have some degree of regulation?
    Mr. Newsome. In terms of the President's Working Group and 
any kind of a policy statement, that has not been on the agenda 
in quite some time. At least at this point, to my knowledge, 
there is nothing being done to change or adopt a new policy 
statement on behalf of the PWG.
    A couple of years ago after the collapse of Enron, we had a 
hearing in front of this committee and there were two 
fundamental questions that were laid on the table. One was, 
should the over-the-counter marketplace be regulated more 
similarly to the exchange-traded marketplace? I told this 
committee at that time that I did not think that it should and, 
Senator, I feel the same way today.
    When we look at the anti-fraud, and anti-manipulation 
provisions of the act that are provided to the CFTC to deal the 
wrongdoing in that area, that was the second part of the 
discussion we had that day was whether or not the CFTC actually 
has the authority to go after wrongdoing in this area. I hope 
with the number of cases that we brought and the settlements 
over the last couple of years that we have settled that 
question, because at least that it is clear that we do have the 
ample authority to go after wrongdoing in that marketplace.
    In terms of the oversight regulation, while there have been 
attempts by the Congress to address that, in my opinion the 
marketplaces are so very different in terms of the 
participants, the technology, the sophistication that it would 
be extremely difficult to try and take the type of regulatory 
oversight that we provide in an exchange-traded market and lay 
that over the electronic market that you mentioned, for a 
couple of fundamental reasons. The largest of which, the 
contracts traded on exchange, as you well know, are very 
standardized. The pricing information that we get from those 
contracts that are transparent is very meaningful because 
everyone understands what the overlying terms and conditions of 
the contracts are, and the contracts are set up as such so that 
the only thing you have to worry about when you are trading is 
the price. You know all the underlying terms and conditions.
    In the over-the-counter market that is not necessarily the 
case. My fear has been that if you tried to take the large 
trader reports that we use so successfully in the on-exchange 
market and get daily pricing information and position 
information from the over-the-counter marketplace, because the 
underlying terms and conditions of the contracts are different, 
that that pricing information, without knowing all the 
underlying terms, can actually have a negative impact upon the 
very markets we rely upon for price discovery.
    What we are doing, and again from the enforcement 
standpoint we maintain that we have appropriate anti-fraud, 
anti-manipulation authority. The one area that is of concern 
and has been a concern to this committee and it is a concern to 
us is when a market, if an over-the-counter market gets to a 
point in terms of size, in terms of standardization that it has 
contracts that begin to serve a price discovery role, then 
certainly it is in the public good for that information to 
become more transparent. We are finalizing rules now that would 
allow for that transparency if the Commission makes a 
determination that a market has become a price discovery 
market, or its contracts are used in a price discovery role. 
That would include making the prices, daily volume, contracts, 
all transparent to the public as well as any other information 
that the commission determines we think would be useful.
    Senator Fitzgerald. I know my other colleagues have 
questions. One final question, Mr. Chairman.
    I understand that you are conducting a review of the self-
regulatory framework that we have, and I know that you have not 
released your report yet. Would you have any preliminary 
observations or thoughts on the results of the study you are 
undertaking and the effectiveness of our system of self-
regulation both on the exchanges and with outside associations 
that have been set up to offer their services as a regulator, 
self-regulator?
    Mr. Newsome. Yes, sir, I would be more than happy to. I 
would initially say that I announced our review of the self-
regulatory structure prior to information being made public on 
the security side that created quite the uproar there. We did 
not start our review based upon anything negative happening or 
as a response to a crisis. I simply felt that for 20 years our 
SRO structure in the futures business has worked very well. It 
had been 20 years since we had looked at it, and a lot of 
changes have taken place in the business with new market 
participants, new technology, and I felt that it was 
appropriate for us to conduct a review to make sure that the 
SRO structure continued to work as effectively today as it did 
when it was implemented.
    I am happy to say that we continue to believe that our SRO 
structure works very, very well and provides the kind of 
protections to the marketplace and the customers that we all 
expect that it should. We are continually that review. We hope 
to finish it within a matter of a couple of months. My 
expectation is that we are not going to need to make very broad 
changes to the SRO structure because for the most part it 
continues to work extremely well.
    There are some areas that we can make some recommendations 
in to strengthen the SRO structure but it continues to work 
fine.
    Senator Fitzgerald. Thank you. That is very helpful. Will 
you release a report on that? Will it be published?
    Mr. Newsome. Yes, sir.
    Senator Fitzgerald. We will look forward to that.
    Mr. Chairman, again thank you for doing this hearing. 
Chairman Newsome, thank you for being with us.
    The Chairman. Thank you, Senator Fitzgerald.
    Senator Harkin.
    Senator Harkin. Thank you very much, Mr. Chairman. Again I 
apologize to you and the others for arriving late and I 
appreciate the opportunity to just make a short statement and 
ask chairman Newsome a couple of questions.
    First I would just like to commend Mr. Newsome on his work 
as chairman of CFTC implementing the Commodity Futures 
Modernization Act and pursuing enforcement actions against 
people who violate it. I have also appreciated the 
responsiveness of the CFTC to concerns raised by members of 
this committee.
    I continue to be concerned about whether the CFTC has 
really adequate authority to oversee energy markets. I know a 
lot has been discussed here about that. Energy swaps and 
derivatives have a far more direct linkage to consumer 
pocketbooks than other exempt commodities such as metals. I 
believe the 16 energy enforcement cases settled by the CFTC so 
far for over $200 million in fines demonstrates that the CFTC 
has the authority to punish wrongdoing and the commission is 
using that authority.
    However, we need to make sure that the Federal agencies 
have the tools needed to detect and prevent the abuses from 
occurring in the first place, and I will have a question about 
that, especially given the fallout that it has for consumers. I 
also believe the Committee needs to take a look at the impact 
that increased global clearing links may have on the CFTC's 
ability to regulate the U.S. derivatives markets. I know that 
Eurex has applied for approval of such a link. I have had 
people in talking to me about that. I guess the CFTC is 
currently considering that application.
    Increased global clearing could portend a significant 
change in the structure of our U.S. derivatives markets. I do 
not know that we fully understand what the ramifications of 
that might be but we ought to be thinking about what the 
ramifications of that would be.
    Mr. Newsome, I just have three questions. First, do you 
believe being short two commissioners is hampering the ability 
of the CFTC operate effectively?
    Mr. Newsome. No, sir, I do not. I would quickly say that 
the commission operates best when all the seats are full and we 
are able to share the ideas and thoughts of a full commission. 
From an operational standpoint having two empty seats has not 
impeded our ability to operate and do business.
    Senator Harkin. Mr. Chairman, it seems to me to me if that 
is the answer of Mr. Newsome, then I see no reason why we have 
to continue with five. We ought to legislatively reduce the 
number of commissioners to three. We ought to save the 
taxpayers some money. If the Commission can operate with 
three--and that is what you just said--and it does not hamper 
your ability, I will be introducing legislation, and I hope 
this committee will consider this year reducing it down to 
three, two of one party and one of another. Obviously, if we do 
not need five, why have them? I guess that is it.
    Now I must say that we have two names down at the White 
House now. They have been sitting on them for over a year. The 
basic paperwork to move them has stalled; has not even begun. I 
always thought this was unfortunate for the Commission. If the 
commission can operate with three we ought to do it with three. 
We will save the taxpayers some money.
    Thank you, Mr. Newsome, we will just see if we can reduce 
that down to three then. This is one commissioner up this year. 
Obviously, we will not approve that commissioner to be 
extended. That will be the end of it right there. I can tell 
you, this is one Senator that will make sure that this person 
is not extended and we will get two of one party and one of 
another, regardless of who is President of the United States.
    I understand the CFTC and FERC have brought several 
enforcement cases regarding illegal activities in the energy 
markets. Again, pertaining to what I said earlier, I want to 
know how can we do a better job of preventing the abuses in the 
energy derivatives markets, not just going after them once it 
has happened. How do we prevent it? It seems that surveillance 
and continuous oversight are the hallmarks of successful 
programs that detect and address abuses early. How can the CFTC 
do this for exempt commodities like energy, for example, 
derivative products? How can we promote more transparency and 
openness in the energy markets?
    It is one thing to be able to go after them after it has 
happened, but it seems to me if we really want to protect 
consumers we have to have some way of preventing these in the 
first place. Any thoughts on that?
    Mr. Newsome. Yes, sir, and I appreciate you bringing that 
point up, because there are several areas that deserve 
discussion. When the Enron collapse happened, the Commodity 
Futures Modernization Act was almost brand new so a lot of the 
Act we had not had an opportunity to utilize. A very important 
part of the Act was that strong, swift enforcement was hoped 
that it would serve as a deterrent to wrongdoing in the 
marketplace. We have tried to use that enforcement authority as 
aggressively as we know how to use it, Senator, to bring 
charges against wrongdoers within this marketplace.
    The activity is just one of the prongs in the wheel. We 
have cooperated and worked very closely with the Federal Energy 
Regulatory Commission that has primary responsibility in the 
cash markets. We worked very closely with the SEC. We worked 
very closely with the Justice Department, all as a part of the 
corporate fraud task force to cooperate together, to share 
information where we could, to bring the charges that all the 
agencies have brought over the last 2 years. It is my hope that 
since the Act was new, we had not had an opportunity to use it, 
the fact that we have used our enforcement authority as 
aggressively as we can will serve as a deterrent to wrongdoing 
in the future.
    I know that we have spent quite a bit of time with FERC, 
and not only their staff but their commissioners have been to 
our office to look at our surveillance of the futures markets 
and the type of information that we provide and look at on a 
weekly basis. They are in the process of implementing a 
surveillance system themselves in the cash marketplace so that 
they hope that the information that is provided to them in the 
cash markets, as the information that is provided to us in 
futures markets, can serve as a deterrent to wrongdoing in the 
future as well.
    Senator Harkin. Do you think that would be adequate?
    Mr. Newsome. Yes, sir, I do.
    Senator Harkin. I am not so certain I agree with you on 
that. It might be a step in the right direction. It might help, 
but I am not sure that that alone would be adequate, but we 
might discuss that later on.
    The last thing I want to just--and I do not mean to prolong 
the hearing, Mr. Chairman, but what I said about Eurex's 
application in my statement, that Eurex has applied before 
approval of a link, a global clearing link. If that has been 
discussed earlier I do not want to go over it again, but just 
tell us how you are thinking about approaching this? What does 
that portend for our derivatives markets here, how that is 
going to change things if that is approved?
    Mr. Newsome. That is a timely question because the 
Commission is reviewing that process and information today, 
particularly with regard to the Eurex application, so there are 
probably still more questions and answers at this point. We 
take very seriously our charge to protect customers and their 
funds. It has been our stance that if there is to be a clearing 
link in which U.S. customer's funds could be placed in another 
jurisdictional clearinghouse, that we want to make sure that 
they are offered the same types of protections that they have 
here in the U.S. The way to do so is to require that if these 
types of clearing links are set up in which there is equal flow 
of customer funds back and forth that in most circumstances 
they are required to register as a designated clearing 
organization with the CFTC.
    We do have some history with regard to these types of 
clearing links. The Chicago Mercantile Exchange has a formal 
plan with Singapore that is somewhat shy of being a clearing 
link in the context of what you asked about with Eurex. We just 
designated the London clearinghouse as a derivatives clearing 
organization. One of the things that comes about by that 
designation is that U.S. customer funds are protected just as 
much as if they are in the London clearinghouse as they are if 
they are at the clearing corporation in Chicago. They are 
offered the same rules and protections in either instance.
    It is our expectation now, based upon the business plan 
that Eurex has offered, that most likely they will be required 
to register as a designated clearing organization as well. If 
that is the case, then customers are just as protected as if 
their funds were in a clearinghouse here.
    Senator Harkin. That is nice to know.
    One last thing. I was asked this question this morning. 
Some in the farm community feel there was an announcement or a 
leak by the Bunge Corporation during the trading day. This has 
to do with soybean, soybean futures.
    It is lawful or appropriate for a company to make an 
announcement or put information out while the market is open? 
It is lawful to trade or take a market position and then 
release information that would move the market? Could the 
managed release of information constitute market manipulation? 
These are all things were asked about what Bunge did. They are 
so big and they made this announcement during the trading day 
and there is a lot of concern. Is it lawful for them to do that 
during the trading day?
    Mr. Newsome. Yes, sir. The futures markets operate on 
information and, obviously, fundamental information about the 
marketplace can move the markets. I am aware of the major move 
in soybeans yesterday. Our surveillance economists are 
currently looking at the information that was available in the 
marketplace yesterday to make a determination of whether or not 
the market moved based upon fundamentals or whether there was 
something else involved. We have just started looking at that 
so I have very few details that I could provide this morning.
    Senator Harkin. Would you please keep this committee 
advised and informed as you find this information out?
    Mr. Newsome. Yes, sir.
    Senator Harkin. I also again want to know--the other 
question I want answered is, it is lawful for a company of the 
size of Bunge to take a market position and then release 
information that they know will move the market, because they 
are so big? You see what I am saying?
    Mr. Newsome. Yes, sir.
    Senator Harkin. They take a market position, then they 
release the information which moves the market.
    Mr. Newsome. It is lawful for them to do so. Obviously, as 
a big grain company they know their business plans and what 
kind of risk that they have to manage, so we would be logical 
within the marketplace for them to take a position to try and 
manage that risk.
    Typically in the market, even without them announcing it, 
as people see them starting to move in a particular direction 
or starting to take particular positions, the others in the pit 
figure out quite quickly that something is going on and they 
react to that. That would be relatively normal within the 
trading pits.
    Senator Harkin. Thank you. Thank you very much, Mr. 
Newsome.
    Thank you, Mr. Chairman.
    Again, I just want to repeat for emphasis sake that it 
looks like we are on the road to having three commissioners, 
which if that works, that is fine; we save the taxpayers some 
money. I just want to make it clear that if that is the case 
then whoever is up--I guess there is a vacancy this year--I 
will use my position to make sure that that person is not 
reappointed and that we have a balance reinstituted with two 
and one.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator, for your participation in 
the hearing.
    Mr. Chairman, let me ask you about the enforcement record 
of the Commission with respect to the energy area. Several 
senators have brought that up this morning and it is important 
for us to include in the record, if you can help us in this 
respect, a list or a summary of the enforcement actions that 
have been taken by the commission on energy trading and that 
general area that has been the subject of some questions this 
morning. I hope it will show us clearly whether or not the 
commission has been able to use its authority under the law to 
punish, through fines or other sanctions, wrongdoing in this 
area by energy traders.
    Is that possible for you to be able to provide that for the 
record, or do you have a written summary of that that can be 
provided to the Committee this morning?
    Mr. Newsome. I do not have a summary in front of me, Mr. 
Chairman, but I can very easily provide you with a list of all 
the companies and the sanctions and the fines within the energy 
sector that we have brought thus far and would be more than 
happy to do so.
    The Chairman. It is probably human nature to assume that in 
the lawmaking process that we have the power to prevent 
lawbreaking by passing a law. What we can do is punish those 
who break the laws, but it is very difficult to legislate no 
wrongdoing in a certain area, by an industry or by individuals. 
It is an interesting challenge that we face. Just by giving a 
Federal agency or a Commission such as the CFTC power to 
regulate an industry or an activity, does not mean that we 
endow you with a power to prevent wrongdoing. You agree with 
that as a general approach to the power of lawmakers and 
regulators?
    Mr. Newsome. I agree completely with that. It was clear to 
me that under the CFMA that the strong and broad enforcement 
authority that is provided to the commission was to be used as 
a deterrent to wrongdoing in these markets. We have taken that 
charge seriously and we have used our enforcement authority as 
aggressively as we can to try and prevent wrongdoing in the 
future.
    The Chairman. How would you assess the effectiveness of the 
actions by the commission in acting as a deterrent or having 
your actions act as a deterrent? Do you have, on the basis of 
your observations during your term as chairman of the 
Commission, any opinions about whether that has been an 
effective deterrent?
    Mr. Newsome. To this point it has, but time will be the 
great determiner of whether or not it has had a real deterrent. 
I do know that our aggressive activity in the enforcement area 
has created lots of changes within the energy OTC business. 
Those that are still involved in this business have made great 
changes to their business plans, the way that they trade, the 
way that they conduct themselves. We have even seen a number of 
the companies get out completely of the energy trading 
business. That was somewhat hurtful to the business for a while 
because credit availability was slim, liquidity dried up in 
many areas.
    That leads me to another point in the Act in terms of 
clearing over-the-counter contracts. The Act envisioned that. 
The Commission has allowed it, and now we have quite active 
clearing of over-the-counter energy markets.
    Anyway, back to the original point, a lot of changes have 
taken place. A lot of the major banks have stepped in to fill 
the void that energy companies that exited the market created 
and now we are seeing trading volume and liquidity in the 
energy area increase with different players and with different 
business plans. The changes that were made internally by energy 
companies have been positive.
    The Chairman. Do you think the integrity of the trading 
business in the energy area has improved over the last year?
    Mr. Newsome. Yes, sir, I sure do.
    The Chairman. As a direct consequence of the action of this 
commission?
    Mr. Newsome. Yes, sir.
    The Chairman. In looking forward next year when we come to 
the reauthorization process, do you have any early suggestions 
to make as to areas where we should start our work now thinking 
about how to improve or make the Act even more effective than 
it has been in the past?
    Mr. Newsome. I do not at this point. This is an area that 
we have just started really thinking about at the Commission 
and I would simply say that I look forward to working with this 
committee as we move forward. As we identify or come up with 
any areas we certainly will be quick to share them with this 
committee. The CFMA, as you well know, Mr. Chairman, was 
developed over a 2-year period with very intensive work by this 
committee and the House Agriculture Committee, continues to 
serve as well today as it did when it was passed.
    The fact that so much time was put on the CFMA and that it 
is such outstanding legislation, negates the need for very 
broad-reaching legislation this time around. There may be some 
areas or some tweaks that can be changed to benefit the act, 
but I simply look forward to working with this committee as we 
move forward on it.
    The Chairman. Your advice and counsel is very important for 
us and your performance has shown that you have brought to the 
Commission a seriousness of purpose and a calm, thoughtful 
approach to the responsibilities that have paid off, not only 
in terms of the effectiveness of the work of the Commission but 
the restoration of integrity in our markets. I congratulate you 
for a job well done. We appreciate your service.
    Mr. Newsome. Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Newsome can be found in the 
appendix on page 22.]
    The Chairman. With that, our hearing is adjourned.
    [Whereupon, at 11:13 a.m., the Committee was adjourned.]
      
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