[Congressional Record Volume 141, Number 12 (Friday, January 20, 1995)]
[Extensions of Remarks]
[Page E142]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


         REAUTHORIZING THE COMMODITY FUTURES TRADING COMMISSION

                                 ______


                            HON. PAT ROBERTS

                               of kansas

                    in the house of representatives

                        Friday, January 20, 1995
  Mr. ROBERTS. Mr. Speaker, today I am introducing by request 
legislation that reauthorizes the Commodity Futures Trading Commission 
through the year 2000 at unspecified annual appropriations. I am joined 
by Messrs. de la Garza, Ewing, and Rose.
  The CFTC is the independent agency charged with regulating the 
Nation's 10 active commodity futures exchanges, the professional 
brokerage community of futures commission merchants and introducing 
brokers, commodity trading advisers and pool operators. Futures 
exchanges for years have met the vital economic needs of price 
discovery and risk management to U.S. agriculture. And, during the last 
20 years, we have seen an explosion of trading in exchange derivative 
products on industrial and precious metals and energy commodities as 
well as financial instruments. Interest rate and stock index contracts 
continue to show phenomenal growth trends as more and more commercial 
and industrial enterprises understand the benefits of hedging economic 
risks in the futures and options markets.
  Within the past decade, useful off-exchange markets have developed in 
individually negotiated instruments with characteristics of traditional 
futures and option contracts.
  The CFTC is there to make sure the designated exchanges continue to 
promote fair and orderly trading, to police legitimate over-the-counter 
markets and to prosecute with State law enforcement authorities illegal 
boiler room activities that have operated for years in the gray areas 
of the Commodity Exchange Act.
  My colleagues and I believe a simple, 5-year authorization is 
appropriate at this time, since the Commission's regulatory activities 
were thoroughly debated during the last reauthorization, which was 
concluded in October, 1992. The Commission operated without 
authorization during fiscal years 1990 through 1992 while the Congress 
debated several issues of crucial importance to our financial markets. 
The CFTC has been without an authorization so far in this current 
fiscal year, and this committee must assume its legislative 
responsibilities. There still are outstanding issues and questions 
about competitiveness and regulatory intrusions, but I would hope that 
we could deal with them, if necessary, in separate legislation.
  In that regard, the Futures Trading Practices Act of 1992 required 
the precise, independent and unalterable recordation of all trade 
executions to be an industry standard by October 1995. The Congress 
rightly understood the technological problems involved in attaining 
this mark and provided some flexibility. I might add here that the 
House committee report making appropriations for fiscal year 1995 
concluded that the exchanges had made good faith efforts to meet the 
audit trail requirements. The Appropriations Committee said it expected 
the Commission to grant an extension to the exchanges beyond the 1995 
deadline. Although I, as one Member, have not concluded whether or not 
the Commission should grant the extension, it is up to the Committee on 
Agriculture to deal with this matter.
  Finally, Mr. Speaker, off-exchange derivatives trading has been 
making headlines recently. Procter & Gamble, Gibson Greeting Cards, and 
other private companies as well as several public funds, including the 
now famous fund controlled by Orange County, CA, have lost large sums 
of money through derivatives investments. Many of these transactions 
may have been made without adequate understanding of the risks involved 
in highly leveraged instruments. There may have been breaches of 
fiduciary responsibilities in some of these cases. At any rate, so far 
the regulators have held their fire in requesting new authorities. I 
understand the SEC is asking for some voluntary restrictions of certain 
unregulated subsidiaries of SEC registrants, but, beyond that and other 
administrative actions taken recently by banking regulators, I would 
hope the Congress moves cautiously in this area of financial 
regulation.
  Derivatives are not new even though a casual reading of the business 
press would lead you to a different conclusion. There is little the 
Congress can do to legislate against poor judgement. In those instances 
where fraud is found, then there are appropriate laws to deal with the 
problem. To restrict the legitimate uses of derivatives--and few doubt 
their legitimacy whether they are exchange-traded futures and options 
or over-the-counter hedging and investment instruments--would be a 
profound error.


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