[Congressional Record Volume 146, Number 127 (Thursday, October 12, 2000)]
[House]
[Pages H9867-H9868]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       H.R. 4541, THE COMMODITY FUTURES MODERNIZATION ACT OF 2000

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Virginia (Mr. Bliley) is recognized for 5 minutes.
  Mr. BLILEY. Mr. Speaker, the estimate of private sector mandates 
prepared by the Congressional Budget Office for H.R. 4541, the 
Commodity Futures Modernization Act of 2000, was not available when the 
Committee on Commerce filed its report on the bill. Pursuant to section 
423(f)(1) of the Congressional Budget Act of 1974, as amended, I am 
submitting that statement for publication in the Congressional Record.

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, October 11, 2000.
     Hon. Tom Bliley,
     Chairman, Committee on Commerce, House of Representatives, 
         Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed estimate of private-sector effects of 
     H.R. 4541, the Commodity Futures Modernization Act of 2000. 
     CBO completed a federal cost estimate and an assessment of 
     the bill's effects on state, local, and tribal governments on 
     September 6.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Judy Ruud 
     and Tim VandenBerg.
           Sincerely,
                                                 Barry B. Anderson
                                   (For Dan L. Crippen, Director).

[[Page H9868]]

       Enclosure.


    congressional budget office estimate of costs of private-sector 
                                mandates

     H.R. 4541--Commodity Futures Modernization Act of 2000
       Summary
       H.R. 4541 would impose several new private-sector mandates 
     as defined by the Unfunded Mandates Reform Act (UMRA) on 
     persons or entities subject to the jurisdiction of the 
     Commodity Futures Trading Commission (CFTC), registered 
     futures associations, and electronic trading facilities. CBO 
     cannot determine whether the direct cost of those mandates 
     would exceed the threshold set by URMA for private-sector 
     mandates ($109 million in 2000, adjusted annually for 
     inflation).
       Private-sector mandates contained in the bill
       H.R. 4541 would impose three sets of private-sector 
     mandates. First, it would impose Title V of the Gramm-Leach-
     Bliley Act, the privacy provisions of that act, on all 
     persons or entities subject to the jurisdiction of the CFTC. 
     Second, under certain circumstances it would require 
     registered futures associations to also become registered 
     national securities associations, and hence subject them to 
     the Securities and Exchange Commission as well as the CFTC. 
     Third, it would authorize the CFTC to require certain 
     electronic trading facilities to disseminate trading data.
       Privacy Provisions
       H.R. 4541 would extend the privacy protection provisions 
     contained in Title V of the Gramm-Leach-Bliley Act to persons 
     or entities whose financial activities are subject to the 
     jurisdiction of the Commodity Futures Trading Commission. CBO 
     cannot estimate the costs of complying with the privacy 
     provisions primarily because of uncertainties about how 
     consumer privacy protections would apply to the broad 
     categories of entities subject to the jurisdiction of the 
     CFTC and because of the unavailability of information 
     about the privacy protection procedures that those 
     entities now have in place.
       In accordance with CFTC implementing regulations, the bill 
     would require affected entities to:
       Develop administrative, technical, and physical safeguards 
     of the nonpublic information they possess concerning their 
     customers;
       Disclose their policies and practices regarding the 
     disclosure of customers' nonpublic personal information to 
     nonaffiliated third parties when customer relationships are 
     initiated and annually thereafter, and give the consumer the 
     option to stop such disclosure to nonaffiliated third 
     parties.
       Safeguards. Providing adequate safeguards for customer 
     information could impose several costs on affected entities. 
     The largest of these, perhaps, is ensuring the technical 
     security of customer information. Establishing such 
     safeguards could be quite costly for some entities, 
     particularly the measures needed to protect computer 
     databases. However, the cost may be minimal to entities that 
     already have adequate safeguards in place and would face few 
     additional costs to comply with the requirements. Due to lack 
     of information regarding the existing level of consumer 
     information safeguards, the safeguards that might be required 
     under the legislation and the costs involved in upgrading 
     these safeguards, CBO cannot estimate the cost of those 
     requirements.
       Privacy Policy and Disclosure. Developing and disseminating 
     privacy policies, establishing procedures to notify customers 
     of possible information disclosures, and allowing customers 
     to disallow such disclosure would involve a variety of costs. 
     Developing privacy policies may require entities to incur 
     legal costs. After the privacy policy has been adopted, 
     relevant personnel may need training on new procedures. 
     Notifying existing and new customers of the firm's privacy 
     policy would entail printing and mailing costs. And the 
     requirement to notify customers of information disclosures 
     and allow them to opt out might require the development of 
     new databases to track customers' opt-out elections. 
     Furthermore, to the extent that the affected entities have 
     been profiting from the disclosure of consumers' nonpublic 
     personal information, entities may lose revenue if many of 
     their customers opt out of such disclosure.
       The total cost of complying with the bill's privacy policy 
     and disclosure requirements is uncertain. Several factors 
     could mitigate the costs of complying with the privacy policy 
     and disclosure requirements. For example, some of the 
     affected entities may only have institutional customers. 
     Entities with no consumer accounts may not incur the costs 
     associated with developing a privacy policy, notifying 
     customers of the privacy policy, and tracking customers' 
     responses allowing or disallowing disclosure of their 
     information. The cost of complying with the privacy 
     requirements would also be reduced to the extent that the 
     affected entities do not disclose personal information to 
     nonaffiliated third parties--in that case, the privacy policy 
     would be relatively simple, and they would not need to track 
     customers' responses to the policy. Moreover, if the CFTC or 
     industry associations furnish model privacy policies, the 
     cost of developing privacy policies might also be reduced. 
     CBO was unable to obtain data on the extent to which the 
     affected entities disclose customer information to 
     nonaffiliated third parties, or obtain data concerning the 
     possible cost of implementing systems to track delivery of 
     privacy notices and customer opt-out elections.
       Dual Registration of Registered Futures Associations
       H.R. 4541 would require futures associations registered 
     with the CFTC to register with the Securities and Exchange 
     Commission (SEC) as a national securities associated, if any 
     of its members effect trades in the newly authorized security 
     future products. This provision would mandate that the 
     National Futures Association, a self-regulatory organization 
     for the U.S. futures industry, be registered with, and fall 
     under the regulatory scrutiny of the SEC. The National 
     Futures Association and the SEC do not expect this 
     requirement to impose many additional costs since this new 
     regulatory oversight would largely parallel existing 
     supervision by the CFTC.
       Dissemination of Trading Data by Certain Electronic Trading 
           Facilities
       H.R. 4541 would authorize the CFTC to prescribe rules and 
     regulations to ensure timely dissemination of price, trading 
     volume, and other trading data by electronic trading 
     facilities dealing with transactions in exempt commodities or 
     swaps, should the CFTC determine that the electronic trading 
     facility performs a significant price discovery function for 
     transactions in the cash market for the commodity underlying 
     the contracts being traded on the electronic trading 
     facility. Based on information provided by the CFTC, it is 
     quite possible that the CFTC would not use this authority. 
     If, after a period of time, the CFTC did require such an 
     electronic trading facility to disseminate trading data, the 
     cost to the electronic trading facility would depend upon the 
     specific information to be released, and the type of 
     dissemination that the CFTC required. The costs of 
     disseminating trading data may be small if simply daily 
     dissemination to a public source were required, but would be 
     higher if continuous, real-time dissemination were required.
       Estimate prepared by: Judy Ruud and Tim VandenBerg (226-
     2940).
       Estimate approved by: Roger Hitchner, Assistant Director 
     for Microeconomics and Financial Studies Division.

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