[Congressional Record Volume 142, Number 138 (Monday, September 30, 1996)]
[Extensions of Remarks]
[Page E1828]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     INTRODUCTION OF THE COMMODITY EXCHANGE ACT AMENDMENTS OF 1996

                                 ______
                                 

                          HON. THOMAS W. EWING

                              of illinois

                    in the house of representatives

                      Saturday, September 28, 1996

  Mr. EWING. Mr. Speaker, as a point of departure as the 104th Congress 
passes into the historical record, today I am introducing legislation 
to reform the Commodity Exchange Act [CEAct], the law governing the 
regulation of futures and options on our Nation's commodity exchanges 
and other risk management financial instruments that are traded in 
over-the-counter markets.
  Although this legislation is not massive in size, it is sizable in 
scope. This area of Federal regulation--the importance of our futures 
and options markets--demands new treatment. Although the Commodity 
Futures Trading Commission [CFTC] was just reauthorized through the 
year 2000 last April, the Congress took more than three years to agree 
on the Futures Trading Practices Act of 1992 [1992 FTPA]. Needless to 
say, that law was a contentious debate; this bill may be similarly 
contentious. For that reason, it should be viewed as a discussion 
document. We will have several months to think about it and discuss it 
prior to the introduction of a new bill in the 105th Congress.
  The purpose of the bill is to establish the concept of self-
regulation with CFTC oversight. The commodity exchanges are self-
regulatory organizations; they regulate their members and the trade and 
financial practices of their members. The National Futures Association 
[NFA], at this time the sole registered futures association, regulates 
the professional futures community, setting industry-wide standards of 
sales and trade practice conduct.
  The aim is to keep the U.S. futures industry competitive as it enters 
the next century. The price discovery and hedging functions of our 
futures markets still are paramount. The law, however, must recognize 
that technology is constantly changing and that our commodity exchanges 
serve a sophisticated, mostly institutional clientele these days, not 
small, retail traders.
  With that in mind, let me briefly outline the contents of the bill I 
am introducing.
  Section 2(a)(1)(A)(ii), is known commonly as the Treasury amendment 
and was enacted as a part of the Commodity Futures Trading Commission 
Act of 1974. Unfortunately, this language has created numerous legal 
problems the courts have dealt with inconsistently.
  Title II of the bill offers a solution to these problems. It is one 
solution. Obviously, there are others. Attempting to deal with a 
controversy of this magnitude is not easy. The solution in the 
legislation will be disputed and argued. I welcome all interested 
groups, including members of the other body, to help to solve this 
matter in the next Congress.
  Section 3 of the CEAct describes the reasons for federal regulation 
of futures and option markets and a great deal of this section is 
simply outdated and does not fit today's regulatory requirements or 
needs. The bill substantially restates the purposes of federal 
regulation.
  Section 4 is amended to include specifically an exemption for certain 
professional markets whose participants are recognized under current 
law. These ``appropriate persons'' are described in Sec. 4(c)(3) of the 
CEAct and include futures commission merchants, floor brokers and floor 
traders. In light of the exemptions afforded other professional traders 
by the 1992 FTPA, I believe this language is consistent with 
congressional intent in this area.
  Sections 103 and 104 of the bill enhance the self-regulation of 
exchange institutions by providing simplified and streamlined contract 
market designation and rule submission procedures. These are necessary 
in my view to maintain the competitiveness of our commodity exchanges 
in a world that has come to understand the importance of risk 
management on exchanges with sound, but limited, regulatory programs.
  These amendments presume a commodity exchange develops sound 
contracts with economic purposes that are widely recognized and will be 
used by commercial and speculative interests for price discovery and 
risk-shifting that have long been viewed in this country and by the 
Congress as beneficial to our Nation's economy.
  Section 105 of the bill seeks to improve commodity exchange audit 
trails without impairing the functions of the markets. Audit trail 
issues date from the establishment of the CFTC but have been actively 
debated in the CFTC's regulatory programs since 1986, when the CFTC 
proposed a one-minute, verifiable standard.
  Understanding that each commodity exchange has different trade 
customs and systems unique to each institution means there are numerous 
ways to obtain adequate, verifiable audit trails. These trade 
recordation systems have changed dramatically over the years, and U.S. 
commodity exchanges constantly are improving and upgrading their audit 
trail systems. The amendment seeks to develop standards that are 
objective and reasonable.
  Section 106 of the legislation provides benefit-cost analysis to the 
CFTC's regulatory program. Regulation under Republican administrations 
and new law under this Republican Congress has moved us further in that 
direction. There is no reason we cannot bring similar sound, 
reasonable, and fair regulation to our commodity exchanges and preserve 
the public interest.
  Finally, section 107 is a house-keeping matter of interest to the 
Committee on Agriculture. An objective of the Committee during the 
reform of U.S. Agriculture embodied in the Federal Agriculture 
Improvement and Reform Act of 1996 [FAIR Act] was to use fewer words. 
The FAIR Act is literally one-half the volume of the 1990 farm bill. 
With that in mind--and there may be further improvements later--section 
107 repeals Sec. 8e dealing with CFTC oversight and deficiency orders. 
It is my understanding that after the nearly four years this section 
has been law it has never been used. that makes it unnecessary in my 
view.
  I look forward to comments on the legislation and working with 
interested parties as we proceed with this necessary reform in the 
105th Congress.

                          ____________________