[Congressional Record Volume 160, Number 98 (Monday, June 23, 2014)]
[House]
[Pages H5612-H5638]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CUSTOMER PROTECTION AND END USER RELIEF ACT
The SPEAKER pro tempore. Pursuant to House Resolution 629 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 4413.
The Chair appoints the gentleman from Utah (Mr. Bishop) to preside
over the Committee of the Whole.
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In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 4413) to reauthorize the Commodity Futures Trading Commission, to
better protect futures customers, to provide end users with market
certainty, to make basic reforms to ensure transparency and
accountability at the Commission, to help farmers, ranchers, and end
users manage risks to help keep consumer costs low, and for other
purposes, with Mr. Bishop of Utah in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
The gentleman from Oklahoma (Mr. Lucas) and the gentleman from
Minnesota (Mr. Peterson) each will control 30 minutes.
The Chair recognizes the gentleman from Oklahoma.
Mr. LUCAS. Mr. Chairman, I yield myself as much time as I might
consume.
Mr. Chairman, I rise today in strong support of H.R. 4413, the
Customer Protection and End User Relief Act.
This is a bipartisan bill to reauthorize the Commodity Futures
Trading Commission that I introduced along with my colleagues, Ranking
Member Collin Peterson and chairman and ranking member of the
Subcommittee on General Farm Commodities and Risk Management, Mike
Conaway and David Scott.
[[Page H5613]]
This bill is years in the making, and I want to thank my colleagues
on both sides of the aisle for all of the hard work that they have put
in to get us to this point.
Throughout this process, the committee, as well as the Subcommittee
on General Farm Commodities and Risk Management, held numerous
hearings, heard from a variety of stakeholders with a wide variety of
perspectives.
We heard from end users representing farmers, ranchers,
manufacturers, energy firms, and utilities. We heard testimony from
every CFTC Commissioner and even foreign regulators. We also heard from
exchanges, futures customers, and numerous other market participants.
Ultimately, we developed legislation to reauthorize and reform the
CFTC in a way that would not only improve operations at the agency, but
also protect customers from another market failure, as we saw with MF
Global or PFGBEST.
Our efforts will also increase certainty in the marketplace and
provide a more balanced approach to regulations impacting job creators.
I am proud to say this overwhelmingly bipartisan bill passed
unanimously out of the Agriculture Committee by a voice vote.
First of all, H.R. 4413 will better protect farmers and ranchers who
use the futures markets to manage their risk by cementing several new
and existing protections into law.
These protections are designed to restore confidence in the
marketplace following the failure of MF Global and PFGBEST, where
customers, who thought their money was safely segregated, suffered
severe financial loss due to the illegal use of their funds.
Such protections include requiring firms to calculate and report
customer account balances electronically to regulators, requiring firms
who become undercapitalized to immediately notify regulators, and
imposing strict reporting and permission requirements before the
movement of a customer's funds from one account to another.
Now, as for the reforms of the Commission, H.R. 4413 reauthorizes the
appropriations to the agency through 2018. Furthermore, the bill
strives to enhance the efficiency of the Commission operations and
ensure all Commissioners' voices are heard in the regular order of a
well-reasoned rulemaking process.
For example, H.R. 4413 closely follows an executive order issued by
President Obama to improve the quality of cost-benefit analysis
performed by the Commission prior to promulgating rules; requires
division directors to serve at the pleasure of the entire Commission,
rather than solely at the whim of the chairman; and clarifies the
judicial review process of agency rules.
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The Commission reform title also calls for the development of a much-
needed strategic technology plan to enhance market surveillance and the
interpretation of collected data.
Importantly, H.R. 4413 also provides much-needed relief to end users.
Those are the market participants who account for only 10 percent of
the swaps market and had nothing to do with the 2008 financial crisis,
yet represent 94 percent of U.S. job creators, including farmers,
ranchers, manufacturers, energy firms, and utilities.
Due to the consideration of the Dodd-Frank Act, Congress clearly
intended to exempt end users from some of the most costly new
regulations. However, the CFTC has narrowly interpreted the law,
resulting in burdensome and often arbitrary compliance requirements
which have negatively impacted end users by making it more difficult
and costly to manage the risks associated with their businesses.
To address these concerns, H.R. 4413 includes provisions which
relieve business owners from arbitrary and costly record-keeping
requirements, allow businesses to continue successful fuel-hedging
strategies, and prevent the physical delivery of commodities from being
unnecessarily regulated as swaps.
H.R. 4413 provides help to America's job creators by including five
carefully crafted measures designed to enhance market certainty, which
have previously passed the House of Representatives Agriculture
Committee and the United States House of Representatives, with
overwhelming bipartisan support, three of which received over 400 votes
in favor.
In closing, the Customer Protection and End User Relief Act is a
wide-ranging, bipartisan CFTC reauthorization bill that provides a
blueprint for the newly elected Chairman and Commissioners to use in
making numerous improvements at the Commission, better protects futures
customers, and reduces burdens on America's job creators. I urge each
of my colleagues to join me in supporting this bipartisan legislation.
I reserve the balance of my time.
House of Representatives,
Committee on Agriculture,
Washington, DC, May 21, 2014.
Hon. Bob Goodlatte,
Chairman, Committee on the Judiciary, House of
Representatives, Rayburn House Office Building,
Washington, DC.
Dear Mr. Chairman: Thank you for your letter regarding H.R.
4413, the Customer Protection and End User Relief Act. As you
noted, there are provisions of the bill that fall within the
Rule X jurisdiction of the Committee on the Judiciary.
I appreciate your willingness to forgo action on H.R. 4413,
and I agree that your decision should not prejudice the
Committee on the Judiciary with respect to the appointment of
conferees or its jurisdictional prerogatives on this or
similar legislation.
I will also include a copy of our exchange of letters in
the Congressional Record during floor debate.
Thank you for your courtesy in this matter and I look
forward to continued cooperation between our respective
committees.
Sincerely,
Frank D. Lucas,
Chairman.
____
House of Representatives,
Committee on the Judiciary,
Washington, DC, May 22, 2014.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture, Longworth House Office
Building, Washington, DC.
Dear Chairman Lucas, I am writing with respect to H.R.
4413, the ``Customer Protection and End User Relief Act,''
which the Committee on Agriculture ordered reported favorably
on April 9, 2014. As a result of your having consulted with
us on provisions in H.R. 4413 that fall within the Rule X
jurisdiction of the Committee on the Judiciary, I agree to
forego consideration of this bill so that it may proceed
expeditiously to the House floor for consideration.
The Judiciary Committee takes this action with our mutual
understanding that by foregoing consideration of H.R. 4413 at
this time, we do not waive any jurisdiction over subject
matter contained in this or similar legislation, and that our
Committee will be appropriately consulted and involved as
this bill or similar legislation moves forward so that we may
address any remaining issues in our jurisdiction. Our
Committee also reserves the right to seek appointment of an
appropriate number of conferees to any House-Senate
conference involving this or similar legislation, and asks
that you support any such request.
I would appreciate a response to this letter confirming
this understanding with respect to H.R. 4413, and would ask
that a copy of our exchange of letters on this matter be
included in the Congressional Record during Floor
consideration of H.R. 4413.
Sincerely,
Bob Goodlatte,
Chairman.
Mr. PETERSON. Mr. Chairman, I yield myself such time as I might
consume.
The bill before us today is bipartisan, reasonable legislation to
reauthorize the CFTC. I believe this bill strikes the necessary balance
to actually become law.
The Dodd-Frank Act tasked the CFTC with implementing a variety of new
regulations to better protect the derivative market participants, and
while the Commission has made great progress, recent cases have
demonstrated there is more work that needs to be done.
H.R. 4413 better protects farmers and ranchers who use the futures
markets by cementing into law several new regulatory provisions that
arose out of the MF Global bankruptcy and the fraud that occurred at
Peregrine Financial. The bill requires electronic confirmation of
customer fund account balances held at depository institutions and
prohibits firms from moving customer funds from one account to another
without regulators' knowledge. The bill also examines two issues that
have recently gained notoriety: high-frequency trading and funding for
the CFTC.
Michael Lewis' book ``Flash Boys'' has made high-frequency trading a
hot topic. But what many people don't realize is that high-frequency
trading in securities markets is very different from high-frequency
trading in futures and other derivatives markets. This is why the bill
directs the CFTC to thoroughly examine this practice and report back to
Congress their findings.
[[Page H5614]]
And once we have a better understanding of high-frequency trading in
the markets regulated by the CFTC, we can then determine if further
legislative action is necessary.
The bill also directs GAO to examine CFTC's funding needs. There has
been a lot of debate in the House about the agency's funding level and
how the fund should be used. And I am not sure anybody really knows. So
having an independent third party, like the GAO, look at this question
will better inform the debate going forward.
As the chairman said, H.R. 4413 also provides some much-needed
clarity to end users, agriculture and energy producers, and others who
actually use the derivatives market to hedge against risk and did not
cause the financial collapse. Congress never intended for these end
users to be regulated in the same manner as financial entities, and
H.R. 4413 makes that clear. The bill also incorporates legislation
already passed by the House, with strong bipartisan support, including
end user margin exemptions, indemnification requirements, and relief
for municipal utilities.
I know Members have raised concerns about two particular provisions
in this bill, the cost-benefit section and the cross-border section.
The cost-benefit language mirrors President Obama's Executive Order
13563, which imposed cost-benefit assessment standards on all
government departments. I didn't hear any complaints about increased
workload when the executive order was issued. But there are some
complaints about what is in this bill.
I guess because the executive order exempted cost-benefit standards
from legal challenges, some have suggested that the financial industry
will use this bill's new standards to challenge CFTC rulemaking. But,
frankly, I think the financial industry will continue to sue the CFTC
regardless of whether we change the cost-benefit standards or not. It
is the industry's nature to fight regulation. We will also be
considering some amendments to address these concerns, and I look
forward to this debate tonight.
Finally, I have heard some fears that this bill gives some foreign
interests an automatic exemption from U.S. swap rules. So let's be
clear. The CFTC has adopted these cross-border provisions. The SEC has
not. And what it says in this bill is, if they don't agree, then the
current regulations stay in place. So the CFTC's cross-border guidance
is going to continue to be effective and remain in place, and whatever
cross-border rule the SEC finalizes next week will also be effective.
And what it says in this bill is that if they can ever reconcile those
two things, then there could be some changes in how the cross-border
rule is administered.
But given the history of these two agencies, the chances of them
actually coming together on this are probably slim to none. We have
been waiting 14 years for joint rules regarding portfolio margining for
products under their respective jurisdictions. So their record of
cooperation is not good. And as I said, right now, the CFTC has rules.
They say that if somebody is doing business in the U.S., they are going
to have to come under U.S. law, and that is the way it is going to
stay.
So, Mr. Chairman, this bill is not perfect. But if we waited for
perfection, we would be waiting forever, and we wouldn't be able to
vote for anything. This bill deserves our support so we can move the
process along to the Senate and hopefully see a bill signed into law
before the CFTC reauthorization expires in September.
I urge my colleagues to support H.R. 4413, and I reserve the balance
of my time.
Mr. LUCAS. Mr. Chairman, I yield 4 minutes to the gentleman from the
great State of Texas (Mr. Hensarling), the chairman of the Financial
Services Committee.
Mr. HENSARLING. I thank the gentleman for yielding and for his
leadership on this bill.
Mr. Chairman, regrettably, our Nation is still faced with the
weakest, slowest, nonrecovery recovery since the Great Depression. Tens
of millions of our fellow countrymen remain unemployed and
underemployed. And if you speak to practically any business--large,
small, medium--they will tell you that the sheer weight in volume and
complexity of regulation--especially Federal regulation--is perhaps the
primary reason that they can't expand their business and that they
can't create more jobs for those who need them.
As one small businessman in my district put it: ``The complexity of
all the different rules and regulations that the government imposes is
just incomprehensible confusion.''
Mr. Chairman, that is not the way we create jobs in America. Yet
Washington continues to drown our small businesses and our job creators
in so many regulations and red tape. We have got to change that.
The legislation before us, H.R. 4413, contains a number of measures
that originated in the Financial Services Committee and have already
passed the House with bipartisan support. For example, section 395 of
the bill was originally introduced as H.R. 1256, bipartisan legislation
sponsored by Mr. Garrett of New Jersey and Mr. Carney of Delaware. It
will simplify and rationalize the regulation of derivatives activity
that occurs across U.S. and foreign markets today.
American companies obviously use derivatives to manage risk and to
provide products and services to consumers at competitive prices, yet
today they face the troubling prospect of having to comply with
conflicting cross-border requirements from two Washington regulators,
the CFTC and the SEC.
On the one hand, the Securities and Exchange Commission has issued a
proposed rule that recognizes equivalent derivatives requirements in
foreign countries as valid substitutes for U.S. regulation. On the
other hand, the CFTC staff outside the formal rulemaking process has
issued guidance that treats countries with well-established regulatory
systems, including Canada, the U.K., Germany, and Japan, as rogue
nations. The CFTC decided all on its own to inappropriately extend U.S.
derivatives rules into foreign markets. It is no wonder that the CFTC's
irresponsible guidance has been challenged in Federal court and
routinely criticized by a number of our U.S. and European regulators.
This unapproved guidance will harm U.S. markets. It will harm
consumers. It will harm job-seekers. It will harm our economy. It will
result in higher costs on everything, from a John Deere tractor for a
farmer in east Texas who wants to buy one to a cold six-pack for a
worker in a mesquite factory who wants to finally rest after the day's
end. It will even impact the price of an airline ticket for a
grandmother in Garland as she tries to afford a trip to go visit the
grandkids.
Mr. Chairman, farmers, workers, grandmothers, and, indeed, all
Americans are already paying more for food, for gas, and for
everything. Let's not let the CFTC add to their burden. The bill before
us today, H.R. 4413, would help solve this case of government overreach
by requiring U.S. regulators to issue one--one--clear rule to govern
cross-border derivatives activities.
Let's bring some common sense back. Let's protect our consumers.
Let's get America back to work. I urge my colleagues to support H.R.
4413.
Mr. PETERSON. Mr. Chairman, I am now pleased to yield 5 minutes to
the gentlewoman from California (Ms. Waters), the ranking member of the
Financial Services Committee.
Ms. WATERS. I thank the gentleman from Minnesota for yielding.
Mr. Chairman, I rise in opposition to our H.R. 4413 legislation that
would reauthorize the Commodity Futures Trading Commission. This
measure addresses an important goal for this Congress: reauthorization
of the CFTC, our regulator whose mission it is to ensure fair rules of
the road for the majority of derivatives traded by U.S. firms.
I know that Representative Peterson and Representative Scott, the
ranking members of the committee and subcommittee respectively, have
worked in good faith to improve this legislation and that they care
deeply about making the CFTC work for farmers, manufacturers, and other
businesses that use futures and derivatives. I thank them for their
efforts.
However, I am concerned about provisions in the bill unrelated to the
reauthorization of the Commission that I believe would undermine the
CFTC's authority and hamstring its ability to
[[Page H5615]]
regulate a complex and important marketplace. Mr. Chairman, this
legislation imposes heavy administrative burdens that will prevent,
delay, or weaken CFTC's efforts to implement important reforms called
for by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
H.R. 4413 would also make it much more difficult for the CFTC and the
SEC to regulate derivatives transactions involving foreign operations
of U.S. banks. It does so by establishing hard-to-overturn exemptions
that allow their operations to substitute Dodd-Frank rules in favor of
more lenient foreign rules in foreign markets, despite the fact that
the risks may come back to the United States.
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These types of derivatives transactions contributed to the massive
taxpayer bailout of AIG in 2008, created enormous losses to JPMorgan in
the London Whale episode in 2012, and brought down the hedge fund Long-
Term Capital Management in the 1990s. This bill makes the job of the
CFTC and the SEC to police derivatives operations of large U.S. banks
and their foreign affiliates much more difficult.
In addition, under the guise of cost-benefit analysis, the bill
imposes heavy administrative hurdles and new litigation risk on the
CFTC, significantly impairing the Commission's ability to do its job of
regulating our derivatives markets.
Like other agencies, the CFTC already considers the costs and
benefits pursuant to numerous existing laws, and unlike any other
regulator, the CFTC goes even further, considering the protection of
market participants and the public, the effect on futures markets,
price discovery, sound risk management practices, and other public
interest matters.
Even the courts have weighed in, finding that the CFTC has fulfilled
its duty to consider the cost and benefits.
H.R. 4413 not only burdens an agency already facing limited funding
with additional administrative burdens, but it also opens up new
avenues for special interests to endlessly challenge the CFTC in court.
Former CFTC Chairman Gensler noted that, if this provision in H.R.
4413 is enacted, ``It may well be hard to get any rule out of the
building.''
Together, these changes undermine the CFTC's ability to guard against
some of the most complex and risky activities in our financial system,
and it is all just part of a multifaceted Republican effort to undercut
laws and regulations that protect consumers, investors, and the
economy.
It also comes just a week after House Republicans proposed an
appropriations measure that dangerously underfunds the CFTC at 22
percent below the President's request, a level which will lead to
either agencywide closures or employee layoffs.
Mr. Chairman, we cannot continue to undercut and underfund Wall
Street's top derivatives cop with the authority to ensure compliance
with the law. This bill is widely opposed by the Obama administration,
the AFL/CIO, broad coalition groups like Americans for Financial Reform
and the Consumer Federation of America, as well as derivatives end
users like the Petroleum Marketers Association of America.
So I would urge my colleagues to oppose this legislation. I insert in
the Record the opposition, including the White House opposition to this
legislation.
Public Citizen,
June 16, 2014.
Dear Representative: Public Citizen opposes H.R. 4413,
``The Customer Protection and End User Relief Act.'' Several
provisions will severely undermine financial reform. These
include:
Adding unworkable cost-benefit analysis requirements that
will only empower industry interests to bring litigation that
will delay or negate important rules and do nothing to
improve Commodity Futures Trading Commission (CFTC)
regulations.
Prohibiting the CFTC from supervising US swap operations
overseas, which will invite riskier activity and raise the
potential for more bailouts;
Eliminating the ability of the CFTC to require certain
safety rules for swaps.
New Cost-Benefit Requirements Don't Pass The Cost-Benefit Test
Wall Street has exploited the courts to delay, dilute and
even overturn needed reform laws intended to return the
financial industry to safer practices. Instead of making the
CFTC more effective and efficient by bolstering their
authority and improving their standing vis a vis the courts,
H.R. 4413 actually makes the CFTC even more vulnerable to
Wall Street lawsuits. The net effect will be weaker rules
that will take the CFTC longer to finalize and will be more
prone to reversal in court. In sum, this legislation will
significantly damage, not improve, the CFTC's ability to
adopt strong financial reforms that protect consumers and the
public.
H.R. 4413 patently ignores the fact that the CFTC takes
their cost-benefit requirements very seriously. In September
2010, the CFTC's General Counsel and Acting Chief Economist
directed staff to produce cost-benefit analyses in proposed
rulemakings and conceptual cost-benefit analyses in adopting
releases. This is above and beyond existing CFTC
requirements. In a follow-up memo, rule-making teams were
directed to ``incorporate the principles of Executive Order
13563'' when writing rules. This order applied cost-benefit
analysis requirements for departments overseen by the
President. In May 2012, the CFTC, in an unprecedented move,
entered into a memorandum of understanding with the Office of
Information and Regulatory Affairs (OIRA) where OIRA provides
``technical assistance'' to CFTC staff during implementation
of the Dodd-Frank Act, ``particularly with respect'' to cost-
benefit analysis.
Thus, the litany of additional cost-benefit analyses
imposed by H.R. 4413 in no way improves the existing and
extensive cost-benefit analysis practices at the CFTC. Rather
the direct effect will be to convert the cost-benefit
analyses the CFTC already conducts as a matter of best
practice into numerous new legal grounds for Wall Street to
challenge CFTC rules in court. Thus, the beneficiaries of
these changes will be big Wall Street banks and their high-
priced lawyers while the public pays the price of a far
slower CFTC that must jump through even more hoops before
putting common-sense Wall Street reforms in place.
Evading US Supervision
Some of the most dangerous financial practices by US firms
leading to the financial crisis of 2008 were conducted
overseas. AIG sold a form of bond insurance called credit
default swaps from its London office, out of view of American
supervisors. When AIG could not pay massive claims from bond
defaults, taxpayers bailed out AIG's clients with $160
billion. More recently, JP Morgan's ``Whale'' transactions
used US deposits for speculative derivatives trading in
London, leading to a loss of more than $6 billion.
Section 359 nullifies the CFTC's rubric for overseeing
American firms with foreign-based swaps business. Instead, it
permits US firms to establish foreign-incorporated affiliates
that would escape US supervision altogether. Already, certain
US firms have begun to exploit a loophole in the CFTC's
current rules to escape US supervision. This involves
removing the guarantee of the US parent for the foreign-
originated swap.
Permitting foreign supervision is misguided because foreign
supervisors won't have the same motivation as US supervisors
to enforce prudential rules since a failure would fall on US
taxpayers. In fact, foreign governments would be incentivized
to relax oversight so as to attract more traders and the
associated income tax revenue they would generate. The
financial sector provides more than 11 percent of total tax
revenue for the United Kingdom. Not only does this
legislation increase the chance for another US taxpayer
bailout, it would sacrifice US tax revenue by incentivizing
American firms to relocate their derivatives business abroad.
Safety margins prohibited
Unregulated swaps were at the heart of the financial crash,
as derivatives dealers who failed to back up their swaps with
adequate collateral spread financial contagion. This
legislation removes some of the tools that the CFTC could use
to promote safety. For example, H.R. 4413 prohibits the CFTC
from requiring that end-users post margin collateral. The
CFTC has declared that it would not require such margin, but
it is important for the agency to retain this power if the
market becomes unsafe in the future.
This is just one example of the flaws of this bill. There
are many other sections that limit the ability of the CFTC to
accomplish its mission of protecting investors and the public
from misconduct in the $700 trillion swaps market. We believe
Congress should be exploring ways to strengthen the agency,
such as with self-funding and a larger budget, rather than
working to undermine it.
We urge the House to reject H.R. 4413.
For more information, please contact Public Citizen's
Congress Watch Advocates: Amit Narang, Regulatory Policy
Advocate at [email protected];, or Bartlett Naylor,
Financial Policy Advocate, at [email protected].
Sincerely,
Amit Narang.
Bartlett Naylor.
____
Consumer Federation of America,
June 17, 2014.
Re Oppose H.R. 4413.
Dear Representative: We are writing on behalf of the
Consumer Federation of America (CFA) to ask you to oppose
``The Customer Protection and End User Relief Act'' (H.R.
4413), which the House is expected to vote on this month.
This legislation would hamstring the Commodity Futures
Trading
[[Page H5616]]
Commission (CFTC) from effectively overseeing and regulating
commodities and derivatives markets, leaving consumers
exposed to fraud, manipulation, abusive practices and putting
the safety and stability of the U.S. financial system at
risk. This bill includes harmful provisions that are
strikingly similar to other bills that have been brought to
the House floor, which were clearly aimed at undermining the
Dodd-Frank Act, and which the Obama Administration opposed.
Please stand firm against these continuing attacks on
financial reform by voting no on H.R. 4413.
First, this bill would impose an assortment of new, onerous
cost-benefit analysis requirements on the CFTC which are
likely to delay and obstruct agency action. Under the
Commodity Exchange Act, the CFTC already has a statutory
mandate to evaluate the costs and benefits of its actions in
light of numerous considerations, including the protection of
market participants and the public, efficiency,
competitiveness, financial integrity, price discovery, and
sound risk management practices. This bill would add six new
considerations that the CFTC would have to evaluate, and
require that a new Office of the Chief Economist provide
qualitative and quantitative analysis to justify the agency's
actions. Included in the new economic analysis regime is a
requirement to evaluate the costs of complying with the
proposed regulation, provide a methodology for quantifying
the costs, assess available alternatives to direct
regulation, and, determine whether, in choosing among
alternative regulatory approaches, those alternatives
maximize the net benefits, which likely will mean adopting an
approach that best benefits industry. Essentially, the CFTC
will be required to undertake an in-depth, burdensome
economic analysis for each regulation it proposes and compare
its proposal to every conceivable alternative. Such a
framework likely will create insurmountable barriers that
cripple the agency from putting forth rule proposals and
finalizing them in a timely manner so as to effectively
protect market participants and the overall economy.
The new cost-benefit analysis requirements also are likely
to result in increasing opportunities to thwart CFTC
regulations through legal challenges. The practical effect of
the new heightened requirements will be that any time an
industry participant objects to new rules, it will have
several new bases for a lawsuit, and it will seek to defeat
those rules by claiming that the agency did not undertake a
proper economic analysis by considering, and then disposing
of, all the possible theoretical alternatives. It is
reasonable to believe that armed with such strong ammunition,
industry-supported lawsuits seeking to dismantle any new
regulations will be successful, a problem made worse by the
agency's lack of funding to effectively defend against such
suits.
The provisions in this bill that would apply to the CFTC
reflect the same approach that the House took last year
against the Securities and Exchange Commission (SEC) in H.R.
1062, the ``SEC Regulatory Accountability Act,'' for which
the White House issued a Statement of Administration Policy
(SAP). That bill also imposed numerous unnecessary cost-
benefit analysis requirements to rulemakings by the SEC, in
addition to the cost-benefit requirements that the SEC
already has to undertake. Similar to H.R. 4413, H.R. 1062
required the SEC to separately analyze the costs and benefits
of the entire set of ``available regulatory alternatives''
and make a determination whether a regulation imposed the
``least burden possible'' among all possible regulatory
options. We urge you to oppose this renewed attempt to impose
onerous, unnecessary cost-benefit analysis bills aimed at
undermining financial regulators' ability to implement the
Dodd-Frank Act.
This legislation also subverts the CFTC's authority to
regulate foreign derivatives activities that have a direct
and significant effect on U.S. commerce. As our nation has
learned painfully and repeatedly from the collapses of Long
Term Capital Management, AIG, and Lehman Bros., and from the
recent JPMorgan London Whale trading debacle, even when
derivatives contracts are booked through a foreign subsidiary
of a U.S. financial institution, the risks of those
derivatives often flow back to the U.S., threatening the U.S.
economy and potentially putting U.S. taxpayers on the hook
for any resulting losses. That is why Dodd-Frank gave the
CFTC broad authority to regulate overseas derivatives when
they put our national economic interests in peril. Pursuant
to that cross-border framework, the CFTC allows a foreign
host country's regulations to substitute for U.S. regulations
only after the CFTC has made a finding that the foreign host
country's regulations are comparable to U.S. rules. However,
this bill would create a presumption that a foreign host
country's regulations should apply unless the CFTC determines
that those regulations are not ``broadly equivalent'' to U.S.
regulations, and in each instance, requires the CFTC to
submit a written report to Congress articulating the basis
for the agency's determination. Switching the presumption
will subjugate the CFTC's authority, with the default
position allowing a foreign country's rules to apply, and
then requiring the CFTC to prove why they should not apply.
Combining the reversed presumption, required Congressional
report, and overwhelming cost-benefit analysis requirements,
the CFTC will be forced to overcome daunting and possibly
insurmountable hurdles if this legislation is adopted. As a
result of this legislation, the agency's ability to protect
the U.S. economy from the dangers resulting from foreign
derivatives transactions will be impaired.
The cross-border provisions in this bill are almost
identical to the provisions of a bill that the House voted on
last year, H.R. 1256, ``Swap Jurisdiction Certainty Act,''
for which the White House issued another SAP. We urge you to
oppose this renewed attempt on the CFTC's ability to regulate
cross-border derivatives.
Derivatives markets affect the U.S. economy in profound
ways, and the risks that derivatives pose to the U.S. economy
are well-known. The Dodd-Frank Act brought meaningful reforms
to increase transparency and accountability in the
derivatives markets and provided the CFTC the necessary
authority to properly oversee and regulate the market.
However, this legislation would put those reforms at risk and
hamper the CFTC's ability to adequately protect consumers,
market participants, and the U.S. economy. We cannot afford
to suffer the grave consequences of another derivatives-laced
financial crisis, but this legislation makes it more likely
that we will. Accordingly, we urge you to oppose H.R. 4413.
Sincerely,
Micah Hauptman,
Financial Services Counsel.
Barbara Roper,
Director of Investor Protection.
____
Better Markets,
Washington, DC, June 19, 2014.
House CFTC Reauthorization Bill Protects Wall Street Banks by
Handcuffing the CFTC Derivatives Cops on the Wall Street Beat and
Dismantling Financial Reform
Measure Defies Public Opinion and Fails to Learn a Lesson from Eric
Cantor's Loss
Dennis Kelleher, President and CEO of Better Markets, an
independent nonprofit organization that promotes the public
interest in the financial markets, made the following
statement about the upcoming vote on H.R. 4413, the CFTC
Reauthorization bill in the House of Representatives:
``Wall Street's political allies in the House of
Representatives have filled the CFTC Reauthorization bill
with Wall Street's wish list of deregulation provisions that
put Americans at risk of another devastating financial crash.
Reckless, high risk derivatives gambling by Wall Street's
biggest banks was at the core of causing the 2008 financial
crash, which is going to cost the U.S. more than $13
trillion. The CFTC are the derivatives cops on the Wall
Street beat trying to prevent Wall Street from doing that
again. This bill will handcuff those cops, kill essential
derivatives reforms, roll back protections vital to every
American, and make future financial crises and bailouts more
likely.''
``For example, the bill will prohibit the CFTC from
stopping Wall Street firms shifting their U.S. derivatives
business overseas to avoid essential financial reform rules.
As a result, when Wall Street's future overseas derivatives
deals blow up, like AIG did in 2008, it will send the bill
back to the American taxpayer. The Reauthorization bill will
also impose numerous crippling burdens on the CFTC. While
innocently named `cost-benefit analysis,' these onerous,
time-consuming provisions are really `industry cost-only
analysis,' which will require the CFTC to overweight
industry's inflated cost claims and to discount the costs to
the public of another derivatives-fueled financial crash and
economic catastrophe. This legislation also has numerous
other indefensible provisions that will prevent CFTC staff
from doing their job to protect the American people from Wall
Street's excesses.''
``Elected officials who support these provisions are
ignoring the American people who do not want their
representatives protecting Wall Street at their expense.
Recently defeated Majority Leader Eric Cantor just learned
that lesson the hard way. This was confirmed by a new
national poll showing voters' disgust with Wall Street and
its Washington enablers. Indeed, 89% of voters view
government efforts to reign in Wall Street as `poor' or `only
fair' and many think that's because Wall Street and
Washington are in cahoots. The pro-Wall Street, anti-Main
Street provisions in this Reauthorization bill are why voters
believe this. Elected officials must stop protecting Wall
Street banks and bankers' bonuses and get back to protecting
the voters who elected them.''
____
Statement of Administration Policy
H.R. 4413--Customer Protection and End User Relief Act
(Rep. Lucas, R-Oklahoma, June 19, 2014)
The Administration is firmly committed to strengthening the
Nation's financial system through the implementation of key
reforms to safeguard derivatives markets and ensure a
stronger and fairer financial system for investors and
consumers. The full benefit to the Nation's citizens and the
economy cannot be realized unless the entities charged with
establishing and enforcing the rules of the road have the
resources to do so.
[[Page H5617]]
The Administration strongly opposes the passage of H.R.
4413 because it undermines the efficient functioning of the
Commodity Futures Trading Commission (CFTC) by imposing a
number of organizational and procedural changes and offers no
solution to address the persistent inadequacy of the agency's
funding. The CFTC is one of only two Federal financial
regulators funded through annual discretionary
appropriations, and the funding the Congress has provided for
it over the past four years has failed to keep pace with the
increasing complexity of the Nation's financial markets. The
enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act resulted in significant expansion of the
CFTC's responsibilities. The proposed changes would hinder
the CFTC's progress in successfully implementing these
critical responsibilities and would unnecessarily disrupt the
effective management and operation of the agency, without
providing the more robust and reliable funding that the
agency needs.
____
The Petroleum Marketers
Association of America,
June 19, 2014.
Re The Customer Protection and End User Relief Act of 2014
(H.R. 4413).
House of Representatives,
The Capitol Building,
Washington, DC.
Dear Representative: Tomorrow, the House will consider the
``Customer Protection and End User Relief Act'' (H.R. 4413),
also known as the Commodity Futures Trading Commission (CFTC)
Reauthorization Act. The bill would reauthorize the CFTC for
five years and modify certain reforms included in the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010.
Some of these changes would jeopardize rules designed to
increase market transparency and stability and to prevent
fraud, manipulation and excessive speculation in the
commodity markets. Please vote ``no'' on H.R. 4413 unless
amendments are passed to remove harmful provisions.
The Petroleum Marketers Association of America (PMAA) is a
national federation of 48 state and regional trade
associations representing over 8,000 independent petroleum
marketers. These companies own 60,000 convenience store/
gasoline stations and supply motor fuels such as gasoline and
diesel fuel to an additional 40,000 stores. The New England
Fuel Institute (NEFI) is the nation's largest independent
home heating oil trade association, representing more than
1,000 home heating oil, kerosene and propane dealers and
related services companies. Together, NEFI and PMAA members
provide nearly all the gasoline, diesel fuel and heating oil
sold in the U.S.
For decades, PMAA and NEFI members have used derivatives
(i.e., futures, options and swaps) to protect their
businesses and consumers from risk associated with the price
of gasoline, diesel fuel, home heating oil and propane. They
rely on these markets to communicate prices for these
commodities that are reflective of supply and demand. For
this reason, we have been supportive of the vigorous
implementation and enforcement of derivative reforms included
in Title VII of the Dodd-Frank Act. This law expands the
authority of the CFTC to conduct oversight of previously
unregulated over-the-counter and off-shore markets and
strengthens rules designed to increase market transparency
and prevent fraud, manipulation and excessive speculation.
We are pleased that H.R. 4413 includes reforms to address
the MF Global crisis (Sections 102-106). Several of our
members were affected by the collapse of the commodity
brokerage firm in October of 2011 and we commend the Congress
for acting on this issue. We also are pleased with the
inclusion of studies on the impact of high frequency trading
or HFT (Section 107) and the adequacy of CFTC resources
(Section 213). We support the DeFazio Amendment (#16) to
expand the HFT study to include the effect of such trading on
market volatility.
Unfortunately, several provisions in this bill would
jeopardize progress on vital new commodity trading rules.
This includes Section 203, which would double the number of
hurdles the CFTC must jump when considering the costs and
benefits of any rule, regulation or order. This would stymie
the rulemaking process and make it easier for opponents of
reform to challenge these rules in court. We also oppose
Section 212, which would shift responsibility for judicial
review of CFTC rules and regulations from the U.S. District
Court of the District of Columbia to the U.S. Court of
Appeals. The Court of Appeals has a history of ruling in
favor of large banks and other financial institutions.
Therefore, we support respective amendments to remove these
provisions from the bill and preserve existing law, Moore
(#2) and Jackson Lee (#13).
Again, while we support consumer and end-user protections
included in H.R. 4413, we cannot support this legislation
unless Congress strikes provisions that would compromise
progress on key reforms designed to protect market
participants and the American public from fraud, manipulation
and the reckless financial speculation that has straddled
businesses and consumers with volatile energy prices and
unhinged the market from real-world market fundamentals.
Thank you in advance for your consideration.
Sincerely,
Dan Gilligan,
President, PMAA.
Michael C. Trunzo,
President & CEO, NEFI.
Mr. LUCAS. Mr. Chairman, I wish to yield 2 minutes to the gentleman
from North Carolina, Congressman Hudson, who has crafted a key
component of this major reform bill.
Mr. HUDSON. Mr. Chairman, I rise today to urge my colleagues to
support H.R. 4413, which includes language from my bill, H.R. 3814, the
Risk Management Certainty Act.
This bill would require CFTC Commissioners to partake in a formal
rulemaking process before placing undue burdens on job creators.
Without this critical piece of legislation, a misguided CFTC rule will
automatically lump costly new regulations on public utilities, energy
companies, and other end users that played no part in the financial
crisis.
As the regulations currently stand, if a company does more than $8
billion worth of swap business per year, it must register with the CFTC
as a swap dealer. Despite rules requiring a study to determine if the
threshold is appropriately set, the CFTC is set to arbitrarily lower
that level to $3 billion without a vote.
In today's world, where the cost of living continues to rise for
millions of American families, we cannot afford for our Nation's job
creators and energy providers to bear the brunt of yet another
regulatory burden without a full and fair debate and a vote. This bill
solves that problem and gives the public the ability to weigh in before
a decision is made.
I remain committed to protecting consumers and reducing regulatory
burdens on our job creators, and I urge my colleagues to join me in
support of this legislation.
Mr. PETERSON. Mr. Chairman, I am now pleased to yield 6 minutes to
the gentleman from Georgia (Mr. David Scott), the ranking member of the
relevant subcommittee.
Mr. DAVID SCOTT of Georgia. Mr. Chairman, we have before us perhaps
the most important piece of legislation to add fluidity to a very
complex, complicated financial arena in which we are in; and that is in
the area of derivatives, swaps dealing, and dealing on the
international stage as the world's number one economy--very complex,
very complicated.
History has shown that the United States is a leader in the world,
particularly in economic affairs. We are here today to deal with
reauthorization of the CFTC at a time when we have just come out of a
very serious economic downturn.
Now, I agree with my distinguished ranking member. We have worked
very closely on this, and quite honestly, there is nobody in Congress
that has the knowledge of financial services as does our ranking
member. The ranking member and I have worked diligently to try to bring
a serious bit of compromise to this area. She raises a good point.
Let me take a couple of her concerns, so I can share with you how we
have addressed those. The first one is the cross border. The claim that
we are opening up and doing business with foreign governments and
foreign jurisdictions that have no regulations there and we acquire
risk--here is what we are doing, and I want to make sure we are clear.
I serve on the Agriculture Committee as the ranking member on the
Derivatives Subcommittee, and I serve on the Financial Services
Committee. The very cross border that we are talking about has been
debated, has been argued, and has been passed by this House in the form
of H.R. 1256.
Now, here is what needs to be understood: we have minimized totally
any risk of importation of damage to our economy with the exemption of
the top nine--not all the foreign governments and not the foreign
jurisdictions--we are exempting the top nine largest swap dealers who
deal in derivatives of foreign jurisdictions, and it will be the CFTC,
in conjunction and jointly through joint rulemaking with the SEC.
As Chairman Peterson pointed out, they are at loggerheads now. The
first order of business is to get them to agree on a rule, and 270 days
after that, that rule would go into effect, and immediately, the top
five of those foreign jurisdictions that have rules and regulations
that are equitable to ours--
[[Page H5618]]
which, again, will be determined jointly by the SEC and the CFTC--will
go into effect.
One year after that, the remaining four will go into effect, so what
we have here is a check and balance right there. They will determine
that criteria. We put something else in there, as well, to address Ms.
Waters' very legitimate concern.
We said that: look, once the CFTC has done this jointly with the SEC,
then what we will do is any one of those foreign jurisdictions who do
not measure up to having the equal amount of robust regime on their
regulations, they will disavow them, and within 30 days, they must send
to the Congress of the United States--specifically to the House
Financial Services Committee, the Senate Banking Committee, the House
Agriculture Committee, and the Senate Agriculture Committee--the reason
why. Stop right there. That back door is closed tight. There will be no
seepage.
If these nine foreign countries that we work with--and, Mr. Chairman,
you must realize that, historically, we are the leader, we have to show
the way here, and we are not going to put in practice any way where
there is any leakage that will come back to us that will be damaging to
our system, it will be in the hands of where it needs to be, the
regulators.
They will determine if their rules and regulations meet ours, and if
they don't, they will let Congress know, and then they will not be
allowed.
The other point, Mr. Chairman, is we have end users. This bill isn't
just about banking. This bill is about farmers. This bill is about
people who make things. We are the world's leading economy.
We don't do business just in the United States; we do them all around
the world. If we don't put this in--this cross border in--we will be
putting our business community on the international stage in a very
disadvantaged competitive position. So I submit to my friend, Ms.
Waters, that we have certainly dealt with that.
Now, the cost-benefit analysis--first of all, Ms. Waters should take
credit for this because she really, on H.R. 1062, which was a mandate
that we do, we changed that, thanks to you, and this is clearly an
adjustment.
The CHAIR. The time of the gentleman has expired.
Mr. PETERSON. I yield the gentleman an additional 1 minute.
Mr. DAVID SCOTT of Georgia. We had a bill, H.R. 1062. Ms. Waters was
absolutely right because that bill mandated the benefit and the cost,
and it was beneficial, in a way, to certain industries. I voted against
that bill with Ms. Waters.
I took Ms. Waters' suggestion, and we went back, and we said that we
can't mandate this. So what did we do with this bill? We simply said:
let's consider how we can protect the market. Let's consider, let's
assess how we can do that and not mandate it.
Again, as Mr. Peterson has pointed out, we modeled this directly
after what President Obama's executive order mandated, that you take a
risk management assessment before you make the decisions.
Mr. LUCAS. Mr. Chairman, I wish to yield 2 minutes to the gentleman
from Georgia (Mr. Austin Scott), an outstanding Member who also has
worked a key portion of this bill, and his legislation reflects it.
Mr. AUSTIN SCOTT of Georgia. Mr. Chairman, I also rise today in
support of H.R. 4413, the Customer Protection and End User Relief Act.
This legislation clarifies congressional intent concerning end users
under the Dodd-Frank law by providing a clear exemption for
nonfinancial end users who qualify for the clearing exception under
title 7 of the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
Across the country, consumers and businesses alike are confronted
with financial risks associated with their day-to-day operations. To
manage these risks, they use over-the-counter derivatives to provide
price certainty. Consumers, in turn, benefit from these risk management
practices through greater stability in the day-to-day prices of the
goods that we purchase.
By passing this legislation, Congress provides an exemption from
clearing and margin requirements and, therefore, reduces the costs for
businesses and individuals who are not financial institutions.
With this exemption, less than 10 percent of the capital involved in
the derivatives market is relieved of burdensome regulations. This
balance protects the consumer while providing a pro-growth environment
for businesses, and we passed very similar legislation in the 112th
Congress 370-24.
For this reason, I ask my colleagues to support H.R. 4413, so that we
can provide businesses and individuals the tools necessary to manage
day-to-day operational risk, while providing much-needed certainty to
the American people.
Mr. PETERSON. Mr. Chairman, I am now pleased to yield 2 minutes to
the gentlewoman from Connecticut (Ms. DeLauro).
{time} 1945
Ms. DeLAURO. Mr. Chairman, I will include for the Record a document
from the Institute for Agriculture and Trade Policy, and I rise in
strong opposition to this bill. To cater to special interests, it
deliberately weakens the essential regulatory and oversight functions
of the Commodity Futures Trading Commission, and it fails to address
the CFTC's biggest challenge--its flawed funding mechanism.
Simply put, this bill is a recipe for another disaster on Wall
Street, like the one that caused the Great Recession. Americans want to
see more accountability from big banks and oil speculators and fewer
reckless transactions, market failures, and bailouts. That is what the
CFTC's job is, to rein in gambling with risky derivatives on Wall
Street and prevent undue speculation on oil.
Unfortunately, this bill goes in the wrong direction. It includes
provisions that will make it harder for the CFTC to regulate
derivatives transactions between the United States and foreign banks.
It goes out of its way to impose new hurdles and litigation risks to
prevent the Commission from doing its job. It fails to address the
CFTC's flawed funding mechanism, hamstringing its ability to create
fair and transparent derivatives and futures markets.
The CFTC is the only financial regulator that is completely dependent
upon the general fund to provide for its operations. Every other
financial regulator--SEC, FDIC, FHFA, the list goes on--collects user
fees.
Fixing this structural flaw has been proposed by every President
since Ronald Reagan. It is all the more important since Congress
greatly expanded the CFTC's responsibilities 4 years ago in response to
the bad behavior that precipitated a devastating financial crisis.
According to Acting Chairman Wetjen:
The unfortunate reality is that, at current funding levels,
the Commission is unable to adequately fulfill the mission
given to it by Congress.
I submitted an amendment that would have addressed this flaw, yet the
House majority refused to allow it to be heard.
We should not undermine the CFTC's ability to oversee risky market
behaviors, protect consumers, and enforce the law. I urge a ``no''
vote.
Institute for Agriculture
and Trade Policy,
June 16, 2014.
Representative,
House of Representatives, Washington, DC.
Dear Representative, I write on behalf of the Institute for
Agriculture and Trade Policy (IATP) a non-profit, non-
governmental organization based in Minneapolis, MN to urge
you to vote against H.R. 4413, ``Customer Protection and End
User Relief Act.'' A vote for H.R. 4413 annuls or amends
major portions of Title VII of the Dodd Frank Act Wall Street
Reform and Consumer Protection Act (DFA) and per Title 1V's
retro-active application to July 2010, makes regulations and
guidance issued under the DFA authorities vulnerable to legal
challenge by the regulated entities.
Furthermore, if enacted, H.R. 4413 would impede DFA Title
VI implementation by, among other measures:
1) preventing the cross-border application of DFA
authorized rules unless the Commodity Futures Trading
Commission and the Securities Exchange Commission jointly
determine that foreign jurisdiction rules are not ``broadly
equivalent'' to DFA rules (Section 359);
2) micro-managing the CFTC Division Directors, Chief
Economist and staff (Sections 204, 205 and 206);
3) micro-managing and possibly impeding CFTC enforcement
activities (Section 209);
4) imposing cost-benefit analysis of each CFTC rule prior
to implementation, and as
[[Page H5619]]
required of no other independent agency, under terms that
would paralyze CFTC rulemaking that did not conform to
industry demands (Section 203); and
5) by requiring that CFTC voluntary guidance to industry be
subject to the same Administrative Procedures Act (APA)
requirements as for legally binding rulemakings (Section
212).
IATP began to work on commodity derivatives issues in June
2008, when grain elevators stopped forward contracting with
farmers and rural banks stopped loaning to elevators, due to
extreme price volatility and price levels in commodity
derivatives markets, which resulted from excessive
speculation by financial institution. IATP has participated
in the Commodity Markets Oversight Coalition (CMOC) since
2009, and the Derivatives Task Force of Americans for
Financial Reform (AFR) since 2010. 1ATP has contributed to
and signed on to numerous CMOC and AFR letters in support of
Title VII of the DFA. IATP has submitted several comments on
CFTC rulemaking, and on consultation papers of the
International Organization of Securities Commissions, the
Financial Stability Board, the European Securities and
Markets Authority, and the European Commission's Directorate
General for Internal Markets.
H.R. 4413 offers terrible trade-offs that no member of
Congress should be forced to vote for. As H.R. 4413 is
constructed, you can only vote for the widely agreed customer
protections in Title 1, if, e.g. you also vote to require the
CFTC Commissioners to vote on the length of a subpoena, the
renewal of the subpoena and whether the Division of
Enforcement has a ``legitimate purpose'' for each
investigation it undertakes (Section 209). Title 1 could and
should be proposed as a separate bill, for which you should
be able to get sponsors from Republicans, as well as
Democrats.
IATP also requests that you propose and vote for deletion
or amendment of certain sections of the bill, because its
passage is very likely. It is crucial that there be recorded
votes on all amendments to or deletions of H.R. 4413. Here
are IATP's top five priorities for deletions, since
amendments may not be possible, given the short amount of
time before the amendment deadline of Tuesday at 3 p.m. ET.
1. Section 359: This section (paragraph a) first requires
the CFTC to issue rules jointly with the Securities Exchange
Commission on the cross-border application of DFA rules. The
CFTC has authority over about 96.5% of the gross notional
value of the U.S. derivatives market, whereas the SEC has
authority over 3.5% of this market. The SEC has authority
over just one asset class of derivatives, equity-based
derivatives. The House would give equal rulemaking authority
with the CFTC to an agency that has historic competence and
legal authority for only a small sliver of the derivatives
market. This section further seeks to impede the CFTC's
ability to apply DFA authorized rules to foreign affiliate
swaps of U.S. swaps dealers that have a ``direct and
significant'' impact on the U.S. economy (Sect. 722, DFA). It
does so first by requiring that the CFTC's international
memoranda of understanding (MoUs) with foreign market
regulators comply with APA requirements for binding
rulemaking (paragraph c). MoUs are not binding rules, but
diplomatic agreements whose implementation and enforcement
does not depend entirely on U.S. law or regulations. Here,
again, H.R. 4413 seeks to micro-manage the CFTC's work, this
time in negotiations with foreign governments.
Most perniciously, Section 359 grants a blanket exemption
from compliance with DFA authorized derivatives rules for
``Countries or Administrative Regions Having Nine Largest
Markets,'' [sic] unless the CFTC and SEC ``jointly determine
that the regulatory requirements'' of these countries and
regions are not ``broadly equivalent'' to U.S. regulatory
requirements (paragraph d). Given the aforementioned huge
disparity in the ``market share'' of the CFTC's and SEC's
authority over the swaps market, this co-determination
requirement is grotesque. Furthermore, taking into account
the markets in the 28 member states of the European Union,
plus the next eight largest market jurisdictions, Section 359
exempts more than 90 percent of the foreign swaps market from
compliance with the cross-border application of the DFA. The
seven largest U.S. bank holding companies have 4939 foreign
subsidiaries and thousands of more affiliates. Trading losses
by these subsidiaries and affiliates resulted in default
cascades by their U.S. parent companies, saved from
bankruptcy only by at least $19 trillion in emergency loans
from the Federal Reserve Bank, plus $10 trillion to foreign
central banks to bail out their banks with U.S.
affiliates from 2007-2010. The regulatory regimes of the
foreign jurisdictions to which the Fed loaned at ultra-low
interest rates had been judged to be ``broadly
equivalent'' during the Bush Administration.
2. Section 203: Cost Benefit Analysis. The CFTC, unlike
other independent regulatory agencies, is required to do a
cost-benefit analysis prior to each regulation it issues.
This section does not operate consistently with Executive
Order 13563, as House supporters claim, since 13563 applies
only to non-independent agencies.Paragraph H requires the
CFTC to tabulate the costs of compliance by ``all regulated
entities,'' in effect requiring the CFTC to accept as fact
the compliance costs claimed by the regulated entities. These
claimed compliance costs often have been shown to be wildly
overstated. Paragraph J requires that the CFTC demonstrate
prior to implementation that each of the agency's regulatory
approaches ``maximize net benefits.'' These two paragraphs
alone should ensure that DFA authorized rules are not
implemented unless they satisfy the cost-benefit demands of
the regulated entities. Ex-ante cost-benefit analyses
traditionally are done on the basis of econometric modeling,
and not by the peculiar dependence on regulated entity claims
featured in this section.
3. Section 209: Subpoena duration and renewal. This section
authorizes the Commissioners to determine the length of a
subpoena that the Division of Enforcement shall use to compel
testimony and production of documents relative to an
investigation. It will require the Commission to vote on
whether the Division of Enforcement has a ``legitimate
purpose'' for requesting the subpoena, what the duration of
the subpoena will be and whether to renew the subpoena. Well-
funded subjects of an investigation will be advised by their
lawyers to delay complying with any subpoena in the event
that a majority of Commissioners decides to override the
Division of Enforcement and not renew a subpoena. It is one
thing to disagree with an investigation. It is quite another
for the House to vote for a section that would impede
enforcement of the law.
4. Section 204: Division Directors. This section requires
that each Division Director report to and be reviewed
(``serve at the pleasure of'') by each Commissioner. In the
event that the Commissioners disagree about any activity of a
Division, the Division Director could be taking contradictory
instructions from the Commissioners. Disagreements among
Commissioners must be resolved among the Commissioners and
not transmitted to Division Directors in the form of
contradictory orders. This section offers a high degree of
opportunity for one Commissioner to paralyze the work of the
Commission. At best, the section ensures delay of DFA
implementation through Commission micro-management of
Division Directors and the staff (see also our Comments on
Section 205 and 206).
5. Section 353: While the title of this section indicates
that it would give ``relief'' from record-keeping to farmers
and grain elevator participants in the derivatives market,
the application in the exemption from record-keeping could
and almost certainly will be applied to much larger
participants in the derivatives markets. By requiring only a
written record of the final agreement of swaps for
participants in unregistered designated contract markets or
swaps execution facilities, this section precludes the CFTC
from seeking interim documentation of swaps transactions,
including cell phone records if needed. This section makes
constructing audit trails in investigations more difficult
and otherwise limits enforcement activities.
Other sections that IATP believes you should consider for
deletion from HR 4413 include:
Section 205: The Office of the Chief Economist. This
section requires that the Chief Economist report to and be
reviewed by each Commissioner. Our concerns are the same as
those of Section 204.
Section 206: This proposal to require a seven day advance
notice to review each and every staff letter and to allow the
Commission to delay, review and revise staff letters, puts
the Commission in charge of micro-managing the staff. Many of
the staff no action letters that are the subject of the
complaint in the House agricultural committee report on HR
4413 are the result of the need to reply to industry
questions and complaints, and to postpone compliance by
foreign affiliates of U.S. swaps dealers, as foreign
jurisdiction rulemaking is delayed by industry opposition. A
staff whose budget, personnel and computer infrastructure has
been severely constrained by the House has operated as
efficiently and effectively as their meager resources allow.
This section is not an attempt to improve CFTC transparency
and openness but another tactic to micro-manage the staff.
Section 211: Requires that CFTC voluntary guidance to
industry be subject to the same Administrative Procedures Act
(APA) requirements as legally binding rulemakings. This
section represents the plaintiff's position in a court case
involving the CFTC's guidance on the cross border application
of DFA rules and would pre-empt the result of that case. If
the House wishes to require that APA procedures for issuing
guidance are the same as for rulemaking, it should amend the
APA, rather than single out one agency for this peculiar pre-
emption of a court ruling and unique application of the APA
to one agency.
Section 212: This section allows plaintiffs to file a
lawsuit in the District of Columbia or ``in the circuit where
the party resides or has the principal place of business''
(paragraph a). If the CFTC were a self-financed regulatory
agency or had a budget corresponding to its greatly expanded
duties under the DFA, the extra costs of litigating outside
the District of Columbia might not be a financial burden for
agency. Given the House's budgetary expression of hostility
to the CFTC, this section represents another tactic to
increase the burden on the agency to defend the DFA in court.
Section 362: One of the advantages of trading Over the
Counter is the delay in reporting, relative to the near real
time reporting required of exchanges for futures and options
[[Page H5620]]
contracts. OTC traders take advantage of price, volatility
and other information provided by the public and regulated
markets while providing no information of their own, a huge
competitive advantage. This section would allow traders of
uncleared and ``illiquid swaps'' to delay reporting up to 30
days after a trade's execution, an eternity in financial
markets, to protect the identity of individual traders.
Because swaps can be structured to be illiquid, this section
does not consider that the exemption from reporting in near
real time could be part of a regulatory evasion strategy. If
the industry wishes to petition the CFTC for a reporting
exemption on illiquid swaps, let it do so. Legislators should
not be involved in designing reporting exemptions.
Section 355: The asset class indiscriminate de minimis of
$8 billion of swaps dealing before a swaps dealer is required
to register with the CFTC and be subject to CFTC rules may be
lowered only with a vote of the Commission. It is dangerous
to remove the CFTC's regulatory discretion in determining the
justification for a de minimis. Whereas $8 billion of
interest swaps is a low de minimis relative to the more than
$150 trillion annual gross notional value of interest rate
swaps, an $8 billion de minimis is a very, very high de
minimis for commodity swaps. Again, here is another section
where the House is acting to micro-manage the CFTC's
rulemaking discretion and authority.
In sum, notwithstanding Title I on customer protections and
some sections of Title II and III, HR 4413 is a bill that
reauthorizes the CFTC, only to impede it from carrying out
its statutory duties. IATP urges you to vote against this
bill and to vote to delete the aforementioned sections. I
would be pleased to work with your staff on any amendments or
deletions that you may wish to offer. Thank you for your
consideration of our views on HR 4413.
Respectfully,
Steve Suppan, Ph.D.,
Senior Policy Analyst.
Mr. LUCAS. Mr. Chairman, I yield 4 minutes to the gentleman from
Texas (Mr. Conaway), who not only has a key component of this bill, but
in his role as chairman of the Subcommittee on General Farm Commodities
and Risk Management carried the lion's share of the subcommittee
hearing work and the day-to-day efforts that came to be known as H.R.
4413.
Mr. CONAWAY. Mr. Chairman, I would like to start by thanking the
chairman of the committee, Frank Lucas, and our ranking member, Collin
Peterson, for the bipartisan tone that they have set on all of the work
that we do in the Agriculture Committee. Under their leadership, we
work together to examine the issues under our jurisdiction, and we work
together to develop legislative solution to the problems we discover.
Their leadership is reflected in the bill we have before us today.
Over the past 2 years, the General Farm Commodities and Risk
Management Subcommittee has heard from two Commissioners, the exchanges
and SROs, market participants, end users, and foreign regulators on a
broad cross section of issues facing the CFTC. The testimony and
questions that we heard formed the foundation of what has become the
Customer Protection and End User Relief Act.
True to its name, the Customer Protection and End User Relief Act
makes important progress in protecting Main Street. We strengthen
safeguards against another MF Global or PFGBest and significantly
reduce damage a failed FCM can inflict on its customers.
We also protect end users from being roped into registration,
reporting, or regulatory requirements that are inappropriate for the
level of risk they can impose on financial markets. It is clear that
end users did not cause the financial crisis. They do not pose a
systemic risk to the financial markets, and they should not be treated
like financial entities.
As we drafted this reauthorization, we also examined the internal
organization and processes of the Commission. Over the past 5 years, it
has become clear that Dodd-Frank has fundamentally changed the role of
the CFTC. The law has moved the Commission from a conferring,
principles-based regulator to a more adversarial, rules-based
regulator. As the Commission changes, so must the rules that Congress
sets for its operation.
Today's legislation addresses these changes by making the CFTC more
responsive and accountable to each Commissioner, and by ensuring that
each Commissioner, not just the Chairman, is given a greater voice on
Commission and staff activities. It also creates and defines the Office
of Chief Economist to provide every Commissioner with objective
economic data and analysis.
Finally, one of the most important changes this bill makes is to
require a meaningful quantification of the costs and benefits of a rule
when it is first proposed. This analysis, done by the chief economist,
will strengthen the rulemaking process and will result in better
regulations and safer markets. This small mandate on the economists at
the CFTC will ensure that regulatory burdens are justified in the real
world, not just in the pages of the Federal Register. Rules that
reflect the impact of a proper cost-benefit analysis will be better
accepted by those being regulated and may result in less acrimony
during the rules-making process.
As I close, I would also like to thank my ranking member, David
Scott. Over the past year and a half, we have examined these CFTC
issues together and collaborated on legislation and hearings. I am
pleased with the fruits of our labor, and I couldn't ask for a better
partner on our subcommittee.
The Customer Protection and End User Relief Act is a commonsense,
bipartisan reform package. In it we protect customers and end users
from overreach and make meaningful changes to the operation of the
commission. I urge my colleagues to support passage of the bill.
Mr. PETERSON. Mr. Chairman, I am pleased to yield 2 minutes to the
gentlewoman from New York (Mrs. Carolyn B. Maloney).
Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I thank the
gentleman for yielding and for his leadership in so many ways in this
body.
I rise in opposition to H.R. 4413. This bill would impose unnecessary
burdens on the CFTC and would restrict our financial regulators'
ability to regulate cross-border derivatives.
Dodd-Frank brought the previously unregulated derivatives market out
of the shadows and created a robust regulatory regime for derivatives.
One of the core principles of this regulatory regime was that if the
United States is ultimately bearing the risk on a derivative, then you
have to comply with the Dodd-Frank rules.
One of the reasons that the U.S. markets are so strong is because
investors have confidence in our markets and in our market
participants. I am concerned that this bill, particularly in the cross-
border area, could undermine that confidence.
For foreign derivatives entered into by a U.S. bank, the bank can
only avoid complying with Dodd-Frank rules if they are already
complying with regulations that are at least equivalent or stronger
than Dodd-Frank rules. This bill, unfortunately, establishes a
presumption that the derivatives rules in London and the EU are
equivalent to Dodd-Frank, even though we know that is not true. The
truth is London and the EU are well behind the United States on
financial reform, and it may take many years for them to become
equivalent to our rules. This is in my view a very real concern and
presents an undue risk to the United States financial system and to our
investors and to our taxpayers. This is why I cannot support this bill.
Mr. Chairman, I include for the Record two letters, one from
Americans for Financial Reform and one from the Center For Progressive
Reform.
Americans for Financial Reform,
Washington, DC, June 16, 2014.
Dear Representative, on behalf of Americans for Financial
Reform, we are writing to express our opposition to HR 4413,
``The Customer Protection and End User Relief Act''. This
legislation would have a severe negative impact on the
Commodity Futures Trading Commission (CFTC) and its ability
to police commodities and derivatives markets crucial to our
economy. The new restrictions it places on CFTC rulemaking
would require additional years of bureaucratic and legal red
tape prior to agency action, even in areas where Congress has
clearly directed the CFTC to act and where action is badly
needed to protect the public interest.
This legislation also includes no provisions that address
the CFTC's most fundamental problem--the lack of resources to
accomplish its mission. Due to both the agency's new
responsibilities under the Dodd-Frank Act for hundreds of
trillions of dollars in previously unregulated derivatives
markets, and the growth of the commodities markets the agency
has traditionally regulated, the size of CFTC-regulated
markets has increased roughly 15-fold over the last decade.
But funding for the agency lags enormously behind. As CFTC
commissioner Mark Wetjen recently stated, ``The unfortunate
reality is
[[Page H5621]]
that, at current funding levels, the agency is unable to
adequately fulfill the mission given to it by Congress: to
prevent disruptions to market integrity, to protect customer
assets, monitor and reduce the build-up of systemic risk, and
ensure to the greatest degree possible that derivatives
markets are free of fraud and manipulation''. The agency
authorization process could and should be an opportunity to
supplement appropriations with some form of agency self-
funding. Self-funding mechanisms are used by all other
financial regulatory agencies and have been endorsed by the
Obama Administration.
Instead of addressing the pressing problem of funding, HR
4413 would instead load down the CFTC with additional
mandates that would drain resources and act as a roadblock to
necessary oversight and enforcement. HR 4413 would more than
double the number of cost benefit analyses the agency must
perform prior to taking any action. Since any of these
analyses could serve as grounds for a lawsuit, this measure
would greatly expand Wall Street's ability to dispute any
agency action in court, tilting the regulatory playing field
still further in their favor. The legislation would also
create an initial presumption that CFTC rules did not apply
to so-called `cross-border' transactions, which include a
vast number of transactions involving foreign subsidiaries of
U.S. banks. The agency would have to perform a
`determination' (jointly with the Securities and Exchange
Commission) each time it wanted to regulate such
transactions. HR 4413 also includes additional internal
process requirements for the CFTC that would also act as
barriers to action. These additional requirements would
affect everything from the supervision of key employees to
the ability to respond to public requests for information.
In combination, these changes would greatly reduce the
CFTC's capacity to effectively police Wall Street. HR 4413
also includes many additional changes. Some of them, such as
amendments to indemnification requirements for swaps data
repositories, are reasonable. Other changes--including (but
not limited to) provisions that expand the definition of
`commercial end user' to include financial entities (Sections
321 and 352), exemptions for entities with billions of
dollars in swaps business from `swap dealer' oversight
(Section 355), provisions that would permit marketing of
complex institutional commodity pools to retail investors
(Section 357), and provisions that weaken limits on commodity
market speculation (Section 358)--raise serious questions of
their own.
But even before considering these issues, the major new
restrictions on the agency created by the cost-benefit and
cross-border provisions of this bill mean that supporting
needed derivatives regulation requires opposing this
legislation.
Provisions Related to Cost Benefit Analysis and Judicial Review
The CFTC already has a statutory requirement to consider
the costs and benefits of its actions, and to evaluate these
costs and benefits as applied to a long list of
considerations, including market efficiency, price discovery,
and protection of the public. Section 203 of HR 4413 would
massively expand this requirement. The section would more
than double than number of different factors the CFTC must
evaluate in any rulemaking, order, or guidance, and change
the standard of evaluation from consideration of costs and
benefits to a more extensive and burdensome `reasoned
determination' of costs and benefits. The section also
includes a particularly sweeping mandate that would require
the agency to determine whether an action 'maximizes net
benefits' compared to all possible regulatory alternatives.
This requirement alone, which seems to require comparison of
any actual regulation to a potentially vast number of
theoretical alternatives, could be read to require dozens of
additional agency analyses.
Some of this cost-benefit language does replicate cost-
benefit instructions from the Office of Management and Budget
that already applies to agencies within the executive branch,
although not to independent financial regulatory agencies
like the CFTC. In addition to this extension of reach, a
crucial difference is that since HR 4413 would add this
language in statute, each and every additional instruction
regarding cost-benefit analysis could become grounds for a
Wall Street lawsuit against a CFTC rule. The extensive new
cost-benefit requirements in Section 203 amount to a roadmap
for industry interests to tie up regulations in endless
litigation, delays, and red tape. With critical rulemakings
to implement new requirements like position limits to control
commodity price manipulation still incomplete almost four
years after they became law, the addition of new barriers to
action would be dramatic movement in the wrong direction.
Heightening the effect of the new cost-benefit provisions
are new internal process requirements in Section 204 of the
legislation. Section 204 would apparently change the CFTC's
internal structure so that the entire five-member Commission
directly supervised the activities of all key division
directors. These key employees would `serve at the pleasure'
of the entire Commission, `report directly' to the entire
Commission, and perform duties as prescribed by the entire
Commission. Currently, as in other Federal agencies
supervised by a multi-member Commission, the Chair of the
CFTC supervises the employees of the Commission. Giving
direct control of all employee activities to an entire five-
member Commission is a recipe for endless delay and
bureaucratic red tape. Currently, individual Commissioners
are able to hire their own personal staff and express their
views on Commission activities through the voting process.
Should this legislation pass, any individual Commissioner,
even if their views were in the minority, could interfere
directly with the activities of Commission staff in
implementing the law.
Provisions Relating to International Derivatives Markets
Section 359 of the bill contains sweeping new restrictions
on the ability of the CFTC to properly oversee derivatives
transactions conducted through foreign subsidiaries of U.S.
banks, even when such transactions have a direct and
significant connection to the U.S. economy. We need only look
at the example of J.P Morgan's `London Whale' transactions,
or the London derivatives transactions of AIG Financial
Products which resulted in the largest bailout in U.S.
history, to see that derivatives transactions conducted
through nominally overseas entities can have a profound
impact on the U.S. economy. Over half of Wall Street
derivatives transactions are currently booked in nominally
foreign subsidiaries, and it is very likely that more could
easily be transacted in this way if there was an incentive to
do so to avoid regulation.
Section 359 of the bill, mirroring the `Swaps Jurisdiction
Certainty Act', controversial legislation which recently
passed the House on a 301 to 124 vote, would create a
presumption that U.S. rules would not govern transactions
booked in major foreign jurisdictions. The legislation would
force U.S. regulators to accept foreign rules for derivatives
transactions booked by U.S. banks in any of the nine largest
global financial markets. The CFTC could overturn this
presumption that foreign rules would apply, but only through
a complex procedure involving a joint determination with the
Securities and Exchange Commission that foreign rules were
not `broadly equivalent' to U.S. rules, supported by an
official report to Congress. Furthermore, any rules governing
these cross-border derivatives would have to be identical
between the SEC and the CFTC, despite the fact that these
agencies regulate very different parts of the derivatives
markets and have differing jurisdictional authority under the
Dodd-Frank Act.
The drastic new limitations placed on CFTC jurisdiction
over cross-border derivatives would have a profound impact on
the ability of U.S. regulators to properly oversee
derivatives transactions. It would effectively overturn a key
provision in Section 722 of the Dodd Frank Act that gives the
CFTC jurisdiction over all swaps transactions that have a
`direct and significant' effect on the U.S. economy. This
provision of Dodd-Frank was put in place precisely to ensure
that the trillions of dollars in swaps booked in offshore
subsidiaries would be properly regulated and would not
endanger the U.S. economy.
As mentioned above, this legislation also includes numerous
other provisions targeted at various areas of CFTC
regulation. Some of these provisions would take positive
steps, while others could roll back financial protection in
troubling ways. But even before considering these and other
provisions positive or negative, the major new burdens the
cost-benefit and international derivatives provisions of this
bill place on the basic ability of the CFTC to do its job
create overwhelming reasons to reject this legislation as
currently written.
We urge you to vote against HR 4413 and preserve the CFTC's
capacity to properly regulate crucial futures and derivatives
markets. Thank you for your consideration. For more
information please contact AFR's Policy Director, Marcus
Stanley.
Sincerely,
Americans for Finincial Reform.
____
Center for Progressive Reform,
Washington, DC, June 23, 2014.
Dear Representative, We, the undersigned, are Member
Scholars with the Center for Progressive Reform (CPR), a
research and education organization working to protect
health, safety, and the environment. Collectively, we have
several decades of experience in studying, writing about, and
teaching administrative law in law schools across the United
States. Based on this experience, we are submitting these
comments with regard to Amendment 17 for H.R. 4413, the
Consumer Protection and End-User Relief Act. This Amendment
would change the standard of judicial review that courts
would conduct for the cost-benefit analyses that the
Commodity Futures Trading Commission (CFTC) would have to
undertake for their rules under the bill from the ``arbitrary
and capricious'' standard to the ``abuse of discretion''
standard.
This amendment appears to be based on a misunderstanding
that the ``abuse of discretion'' standard is more lenient
than the ``arbitrary and capricious'' standard. For all
practical purposes, though, the two standards of review are
identical in how they have been applied by reviewing courts.
The real problem with this aspect of H.R. 4413 is that it
permits judicial review of the CFTC's cost-benefit analyses
at all. In reality, judicial review of these analyses is
highly unusual and would therefore invite unnecessary
unpredictability into the rulemaking process, which is
probably why the authors of the judicial review provision in
the Unfunded Mandates Reform Act, 2 U.S.C. 1571, chose to
preclude judicial review of the cost-benefit analysis itself
and instead required that it be
[[Page H5622]]
made part of the entire rulemaking record considered by the
court in any judicial review of a rule.
We thank you for taking these views under consideration.
Sincerely,
William Funk,
Robert E. Jones Professor of Advocacy and Ethics, Lewis &
Clark Law School.
Richard Murphy,
AT&T Professor of Law, Texas Tech University.
Thomas O. McGarity,
Joe R. and Teresa Lozano Long, Endowed Chair in
Administrative Law, University of Texas School of Law.
Following are the partners of Americans for Financial Reform
All the organizations support the overall principles of AFR
and are working for an accountable, fair and secure financial
system. Not all of these organizations work on all of the
issues covered by the coalition or have signed on to every
statement.
AARP, A New Way Forward, AFL-CIO, AFSCME, Alliance For
Justice, American Income Life Insurance, American Sustainable
Business Council, Americans for Democratic Action, Inc.,
Americans United for Change, Campaign for America's Future,
Campaign Money.
Center for Digital Democracy, Center for Economic and
Policy Research, Center for Economic Progress, Center for
Media and Democracy, Center for Responsible Lending, Center
for Justice and Democracy, Center of Concern.
Center for Effective Government, Change to Win, Clean Yield
Asset Management, Coastal Enterprises Inc., Color of Change,
Common Cause, Communications Workers of America, Community
Development Transportation Lending Services, Consumer Action,
Consumer Association Council.
Consumers for Auto Safety and Reliability, Consumer
Federation of America, Consumer Watchdog, Consumers Union,
Corporation for Enterprise Development, CREDO Mobile, CTW
Investment Group, Demos, Economic Policy Institute, Essential
Action, Green America.
Greenlining Institute, Good Business International, HNMA
Funding Company, Home Actions, Housing Counseling Services,
Home Defender's League, Information Press, Institute for
Agriculture and Trade Policy, Institute for Global
Communications, Institute for Policy Studies: Global Economy
Project, International Brotherhood of Teamsters, Institute of
Women's Policy Research, Krull & Company.
Laborers' International Union of North America, Lawyers'
Committee for Civil Rights Under Law, Main Street Alliance,
Move On, NAACP, NASCAT, National Association of Consumer
Advocates, National Association of Neighborhoods, National
Community Reinvestment Coalition, National Consumer Law
Center (on behalf of its low-income clients), National
Consumers League, National Council of La Raza.
National Council of Women's Organizations, National Fair
Housing Alliance, National Federation of Community
Development Credit Unions, National Housing Resource Center,
National Housing Trust, National Housing Trust Community
Development Fund, National NeighborWorks Association,
National Nurses United, National People's Action, National
Urban League, Next Step, OpenTheGovernment.org.
Opportunity Finance Network, Partners for the Common Good,
PICO National Network, Progress Now Action, Progressive
States Network, Poverty and Race Research Action Council,
Public Citizen, Sargent Shriver Center on Poverty Law, SEIU,
State Voices, Taxpayer's for Common Sense.
The Association for Housing and Neighborhood Development,
The Fuel Savers Club, The Leadership Conference on Civil and
Human Rights, The Seminal, TICAS, U.S. Public Interest
Research Group, UNITE HERE, United Food and Commercial
Workers, United States Student Association.
USAction, Veris Wealth Partners, Western States Center, We
the People Now, Woodstock Institute, World Privacy Forum,
UNET, Union Plus, Unitarian Universalist for a Just Economic
Community.
List of State and Local Partners
Alaska PIRG, Arizona PIRG, Arizona Advocacy Network,
Arizonans For Responsible Lending, Association for
Neighborhood and Housing Development NY, Audubon Partnership
for Economic Development LDC, New York NY, BAC Funding
Consortium Inc., Miami FL, Beech Capital Venture Corporation,
Philadelphia PA, California PIRG, California Reinvestment
Coalition, Century Housing Corporation, Culver City CA,
CHANGER NY.
Chautauqua Home Rehabilitation and Improvement Corporation
(NY), Chicago Community Loan Fund, Chicago IL, Chicago
Community Ventures, Chicago IL, Chicago Consumer Coalition,
Citizen Potawatomi CDC, Shawnee OK, Colorado PIRG, Coalition
on Homeless Housing in Ohio, Community Capital Fund,
Bridgeport CT, Community Capital of Maryland, Baltimore MD,
Community Development Financial Institution of the Tohono
O'odham Nation, Sells AZ, Community Redevelopment Loan and
Investment Fund, Atlanta GA, Community Reinvestment
Association of North Carolina.
Community Resource Group, Fayetteville A, Connecticut PIRG,
Consumer Assistance Council, Cooper Square Committee (NYC),
Cooperative Fund of New England, Wilmington NC, Corporacion
de Desarrollo Economico de Ceiba, Ceiba PR, Delta Foundation,
Inc., Greenville MS, Economic Opportunity Fund (EOF),
Philadelphia PA, Empire Justice Center NY, Empowering and
Strengthening Ohio's People (ESOP), Cleveland OH,
Enterprises, Inc., Berea KY, Fair Housing Contact Service OH,
Federation of Appalachian Housing.
Fitness and Praise Youth Development, Inc., Baton Rouge LA,
Florida Consumer Action Network, Florida PIRG, Funding
Partners for Housing Solutions, Ft. Collins CO, Georgia PIRG,
Grow Iowa Foundation, Greenfield IA, Homewise, Inc., Santa Fe
NM, Idaho Nevada CDFI, Pocatello ID, Idaho Chapter, National
Association of Social Workers, Illinois PIRG, Impact Capital,
Seattle WA, Indiana PIRG, Iowa PIRG.
Iowa Citizens for Community Improvement, JobStart
Chautauqua, Inc., Mayville NY, La Casa Federal Credit Union,
Newark NJ, Low Income Investment Fund, San Francisco CA, Long
Island Housing Services NY, MaineStream Finance, Bangor ME,
Maryland PIRG, Massachusetts Consumers Coalition, MASSPIRG,
Massachusetts Fair Housing Center, Michigan PIRG, Midland
Community Development Corporation, Midland TX.
Midwest Minnesota Community Development Corporation,
Detroit Lakes MN, Mile High Community Loan Fund, Denver CO,
Missouri PIRG, Mortgage Recovery Service Center of L.A.,
Montana Community Development Corporation, Missoula MT,
Montana PIRG, New Economy Project, New Hampshire PIRG, New
Jersey Community Capital, Trenton NJ, New Jersey Citizen
Action, New Jersey PIRG, New Mexico PIRG, New York PIRG.
New York City Aids Housing Network, New Yorkers for
Responsible Lending, NOAH Community Development Fund, Inc.,
Boston MA, Nonprofit Finance Fund, New York NY, Nonprofits
Assistance Fund, Minneapolis MN, North Carolina PIRG,
Northside Community Development Fund, Pittsburgh PA, Ohio
Capital Corporation for Housing, Columbus OH, Ohio PIRG,
OligarchyUSA, Oregon State PIRG, Our Oregon.
PennPIRG, Piedmont Housing Alliance, Charlottesville VA,
Michigan PIRG, Rocky Mountain Peace and Justice Center, CO,
Rhode Island PIRG, Rural Community Assistance Corporation,
West Sacramento CA, Rural Organizing Project OR, San
Francisco Municipal Transportation Authority, Seattle
Economic Development Fund, Community Capital Development,
TexPIRG, The Fair Housing Council of Central New York.
The Loan Fund, Albuquerque NM, Third Reconstruction
Institute NC, Vermont PIRG, Village Capital Corporation,
Cleveland OH, Virginia Citizens Consumer Council, Virginia
Poverty Law Center, War on Poverty--Florida, WashPIRG,
Westchester Residential Opportunities Inc., Wigamig Owners
Loan Fund, Inc., Lac du Flambeau WI, WISPIRG.
Small Businesses
Blu, Bowden-Gill Environmental, Community MedPAC,
Diversified Environmental Planning, Hayden & Craig, PLLC, Mid
City Animal Hospital, Phoenix AZ, UNET.
Mr. LUCAS. Mr. Chairman, I yield 3 minutes to the gentleman from
California (Mr. LaMalfa) whose good work as a freestanding bill passed
unanimously in this body.
Mr. LaMALFA. Mr. Chairman, I thank the chairman of the committee, Mr.
Lucas, for his help and support, as well as the big picture bill, H.R.
4413, which is a necessary and reasonable approach to the modest
reforms that are needed to the overall legislation.
This measure includes badly needed reforms and policy changes that
are necessary for the CFTC to run more efficiently, stabilize the
commodities industry, and ensure continued growth in our agricultural
sector.
The U.S. needs regulatory relief for end users and certainty for our
markets. That is why I am pleased to report that my legislation, H.R.
1038, which the chairman mentioned, which passed the House on June 12,
2013, with unanimous support, is included in this bill.
H.R. 1038, the Public Power Risk Management Act, is a targeted reform
that protects over 47 million Americans from unnecessary electricity
and natural gas rate increases. These 47 million Americans are
ratepayers of over 2,000 publicly owned utilities who use swaps and
energy futures to manage their risks and stabilize costs.
Unfortunately, the Dodd-Frank Act, which was intended to make reforms
to our Nation's financial industry, has inadvertently restricted public
utilities' access to natural gas, electricity, and other energy
futures.
For example, in my own district, the city of Redding's municipal
utility believes that limitations to hedging options in the future will
increase the
[[Page H5623]]
costs to their customers. This unintended consequence of Dodd-Frank is
negatively impacting utilities in many congressional districts across
the U.S. The impact of this limitation means fewer sources of energy
for publicly owned utilities, which translates into higher costs for
millions of American ratepayers.
H.R. 4413 will bring relief to commodity end users, utility
ratepayers, and the greater agriculture community, a vital asset to our
Nation. Let's keep this country and our ag community growing and doing
business by passing this commonsense piece of legislation.
Mr. PETERSON. Mr. Chairman, I yield 30 seconds to the gentleman from
Georgia (Mr. David Scott).
Mr. DAVID SCOTT of Georgia. Mr. Chairman, I just wanted to clarify
one point made by the gentlelady from New York, and I just pointed out
to her, she was clear in her statement, and I am reading from the
actual bill here where it says that:
Or other foreign jurisdiction as jointly determined by the
Commission, shall be exempt from the United States swaps
requirements in accordance with the schedule unless the
Commission jointly determines that the regulatory
requirements of the country or administrative region or other
foreign jurisdiction are not broadly equivalent to the United
States.
I just wanted to clear that up.
Mr. LUCAS. Mr. Chairman, I yield 2 minutes to the gentleman from
Illinois (Mr. Rodney Davis), who has a major component in this overall
legislation.
Mr. RODNEY DAVIS of Illinois. Mr. Chairman, I rise today in support
of H.R. 4413, and I would like to thank my colleagues, especially
Chairman Lucas, for his leadership on this very important issue;
Ranking Member Peterson for his leadership; and also the subcommittee
chairman, Mr. Conaway.
I am supportive of this bill because it provides relief to consumers,
especially to our farmers and manufacturers. This bill also includes
language that I developed that addresses regulations that could
directly increase prices for consumers back home in Illinois and
throughout this great country.
In crafting rules to implement Dodd-Frank, the CFTC imposed a real-
time reporting requirement on all swaps markets. This has had a
negative and unintended consequence on end users. This real-time
reporting requirement has made it easier for market participants in
certain sparsely traded markets to be exposed. And when these
participants are exposed, it allows for others to take advantage of
their positions and increase their costs of doing business for future
trades.
These rarely traded swaps are used by only a handful of companies
with excellent credit ratings to provide long-term protection against
price fluctuations for commodities such as oil and jet fuel. The CFTC
has long recognized the danger of disclosing counterparty identities in
thinly traded markets. This bipartisan, commonsense language is needed
to help reinforce that long-standing policy.
As a member of the Agriculture Committee, I am pleased that we are
reauthorizing this bill because it will provide relief to end users
like farmers and manufacturers, and keep costs low for anyone wanting
to travel by air, and all consumers. I support this legislation.
Mr. PETERSON. Mr. Chairman, I am pleased to yield 2 minutes to the
gentleman from Maryland (Mr. Sarbanes).
Mr. SARBANES. Mr. Chairman, I thank the ranking member for yielding.
Mr. Chairman, I wanted to come down and rise in opposition to this
bill, and I wanted to get on the Record because I predict that there
will come a time when there will be another financial crisis, and
people will look back and they will say: Where were you when the CFTC
reauthorization came up?
Six years ago, our economy and the lives of millions of Americans was
thrown into a tailspin by a devastating financial crisis, spurred in
large part by reckless behavior on Wall Street and a lack of
transparency of and oversight over the global financial systems'
derivatives market.
So we acted. Congress acted. We took steps. We passed Dodd-Frank. We
strengthen the rules of the road. We brought derivatives markets out of
the shadows, allowing regulators to better assess and reduce systemic
risk, all working towards the goal of decreasing the chances of another
financial crisis.
The problem is the opponents of reform did not give up. Over the past
several years, the fight for meaningful financial reform has in large
part now migrated to the regulatory agencies overseeing the
implementation of Dodd-Frank, and now we return to the legislative
arena with H.R. 4413, which represents in my view a dangerous attack on
the authority and efficacy of the Commodity Futures Trading Commission.
{time} 2000
It erects an assortment of redundant hoops for regulators to jump
through, empowers courts to unilaterally undercut the CFTC oversight,
and dramatically reduces CFTC's ability to regulate overseas
derivatives.
The forces opposing strong oversight of our financial markets have
the luxury of existing in a political system that too often gives
voices to the wealthy at the expense of the rest of America.
The only way we would pass this legislation is if we were suffering
from collective amnesia, if we had completely forgotten what happened
in 2008 and 2009 and were sleepwalking through our oversight
responsibilities. We need to wake up and protect the American people
from another financial crisis. I urge opposition to the bill.
I yield back the balance of my time.
Mr. LUCAS. Mr. Chairman, might I inquire how much time remains for
both sides?
The CHAIR. The gentleman from Oklahoma (Mr. Lucas) has 11 minutes
remaining. The gentleman from Minnesota (Mr. Peterson) has 5 minutes
remaining.
Mr. LUCAS. Mr. Chairman, I would note to my colleague, I have no
additional speakers and would reserve the balance of my time to close.
Mr. PETERSON. Mr. Chairman, we have no other speakers on our side
either.
In closing, I want to thank the chairman, Mr. Lucas, and Congressman
Conaway and Congressman Scott for their work on this bill, along with
Members on both sides of the aisle for their work and their support.
I also want to thank the Agriculture Committee staff, especially
Clark Ogilvie, who did all our work on Dodd-Frank and did the work on
this bill. He has been working on these issues for a long time and I
think is seen as one of the most knowledgeable--if not the most
knowledgeable--staffers around. I want everybody to give him a round of
applause and also announce that tomorrow he is leaving to become the
chief of staff at the CFTC, so it is pretty good timing. We would like
to thank Mr. Ogilvie for his work.
With that, I urge support of H.R. 4413 and yield back the balance of
my time.
Mr. LUCAS. Mr. Chairman, I yield myself what time I might consume.
Mr. Chairman, I would like to remind all of my colleagues that once
again the House Agriculture Committee, in the tradition of the House
Agriculture Committee, has worked very diligently to address issues
that are of great impact on rural America and on our national economy.
In that tradition of bipartisanship--call it nonpartisanship if you
want--Mr. Peterson and I, Mr. Conaway, Mr. Scott have worked in full
committee and subcommittee together to craft what is a reasonable,
logical set of proposals to address some real issues out there.
Any of you who have observed this process know that the committee is
not timid in trying to do the right thing; and we have a track record
of however long it takes, however hard it is, to do the right thing.
Now, some will say this piece of legislation may or may not have an
impact on the decisionmaking process in some other body. I would just
note to you, we have identified, through all of the hearings and all
the testimony and all the input from within government and without
government, that there are some things that need to be done. With this
piece of legislation, we will encourage progress on those issues.
I urge all of my colleagues, vote for H.R. 4413. Move the process
along; help us get ultimately to a product that will address these
problems. This is a rather substantial impact on the national economy.
If we don't do the things that we are proposing in the Agriculture
Committee that we do, harm will be done, job creation will be impacted,
[[Page H5624]]
every consumer and every working person will feel the effects
negatively. So pass the bill. Pass the bill.
With that, Mr. Chairman, I yield back the balance of my time.
The CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule.
It shall be in order to consider as an original bill for the purpose
of amendment under the 5-minute rule an amendment in the nature of a
substitute consisting of the text of Rules Committee Print 113-47. That
amendment in the nature of a substitute shall be considered as read.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 4413
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Customer Protection and End-
User Relief Act''.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I--CUSTOMER PROTECTIONS
Sec. 101. Short title.
Sec. 102. Enhanced protections for futures customers.
Sec. 103. Electronic confirmation of customer funds.
Sec. 104. Notice and certifications providing additional customer
protections.
Sec. 105. Futures commission merchant compliance.
Sec. 106. Certainty for futures customers and market participants.
Sec. 107. Study on high-frequency trading.
TITLE II--COMMODITY FUTURES TRADING COMMISSION REFORMS
Sec. 201. Short title.
Sec. 202. Extension of operations.
Sec. 203. Consideration by the Commodity Futures Trading Commission of
the costs and benefits of its regulations and orders.
Sec. 204. Division directors.
Sec. 205. Office of the Chief Economist.
Sec. 206. Procedures governing actions taken without a commission vote.
Sec. 207. Strategic technology plan.
Sec. 208. Internal risk controls.
Sec. 209. Subpoena duration and renewal.
Sec. 210. Implementation plan for Commission rulemakings.
Sec. 211. Applicability of notice and comment requirements of the
Administrative Procedure Act to guidance voted on by the
Commission.
Sec. 212. Judicial review of Commission rules.
Sec. 213. GAO study on adequacy of CFTC resources.
Sec. 214. Disclosure of required data of other registered entities.
TITLE III--END-USER RELIEF
Sec. 301. Short title.
Subtitle A--End-User Exemption From Margin Requirements
Sec. 311. End-user margin requirements.
Sec. 312. Implementation.
Subtitle B--Inter-Affiliate Swaps
Sec. 321. Treatment of affiliate transactions.
Subtitle C--Indemnification Requirements Related to Swap Data
Repositories
Sec. 331. Indemnification requirements.
Subtitle D--Relief for Municipal Utilities
Sec. 341. Transactions with utility special entities.
Sec. 342. Utility special entity defined.
Sec. 343. Utility operations-related swap.
Subtitle E--End-User Regulatory Relief
Sec. 351. End-users not treated as financial entities.
Sec. 352. Reporting of illiquid swaps so as to not disadvantage certain
non-financial end-users.
Sec. 353. Relief for grain elevator operators, farmers, agricultural
counterparties, and commercial market participants.
Sec. 354. Relief for end-users who use physical contracts with
volumetric optionality.
Sec. 355. Commission vote required before automatic change of swap
dealer de minimis level.
Sec. 356. Capital requirements for non-bank swap dealers.
Sec. 357. Harmonization with the Jumpstart Our Business Startups Act.
Sec. 358. Bona fide hedge defined to protect end-user risk management
needs.
Sec. 359. Cross-border regulation of derivatives transactions.
Sec. 360. Report on foreign boards of trade.
Subtitle F--Effective Date
Sec. 371. Effective date.
TITLE I--CUSTOMER PROTECTIONS
SEC. 101. SHORT TITLE.
This title may be cited as the ``Futures Customer
Protection Act''.
SEC. 102. ENHANCED PROTECTIONS FOR FUTURES CUSTOMERS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is
amended by adding at the end the following:
``(s) A registered futures association shall--
``(1) require each member of the association that is a
futures commission merchant to maintain written policies and
procedures regarding the maintenance of--
``(A) the residual interest of the member, as described in
section 1.23 of title 17, Code of Federal Regulations, in any
customer segregated funds account of the member, as
identified in section 1.20 of such title, and in any foreign
futures and foreign options customer secured amount funds
account of the member, as identified in section 30.7 of such
title; and
``(B) the residual interest of the member, as described in
section 22.2(e)(4) of such title, in any cleared swaps
customer collateral account of the member, as identified in
section 22.2 of such title; and
``(2) establish rules to govern the withdrawal, transfer or
disbursement by any member of the association, that is a
futures commission merchant, of the member's residual
interest in customer segregated funds as provided in such
section 1.20, in foreign futures and foreign options customer
secured amount funds, identified as provided in such section
30.7, and from a cleared swaps customer collateral,
identified as provided in such section 22.2.''.
SEC. 103. ELECTRONIC CONFIRMATION OF CUSTOMER FUNDS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as
amended by section 102 of this Act, is amended by adding at
the end the following:
``(t) A registered futures association shall require any
member of the association that is a futures commission
merchant to--
``(1) use an electronic system or systems to report
financial and operational information to the association,
including information related to customer segregated funds,
foreign futures and foreign options customer secured amount
funds accounts, and cleared swaps customer collateral, in
accordance with such terms, conditions, documentation
standards, and regular time intervals as are established by
the association;
``(2) instruct each depository, including any bank, trust
company, derivatives clearing organization, or futures
commission merchant, holding customer segregated funds under
section 1.20 of title 17, Code of Federal Regulations,
foreign futures and foreign options customer secured amount
funds under section 30.7 of such title, or cleared swap
customer funds under section 22.2 of such title, to report
balances in the futures commission merchant's section 1.20
customer segregated funds, section 30.7 foreign futures and
foreign options customer secured amount funds, and section
22.2 cleared swap customer funds, to the registered futures
association or another party designated by the registered
futures association, in the form, manner, and interval
prescribed by the registered futures association; and
``(3) hold section 1.20 customer segregated funds, section
30.7 foreign futures and foreign options customer secured
amount funds and section 22.2 cleared swaps customer funds in
a depository that reports the balances in these accounts of
the futures commission merchant held at the depository to the
registered futures association or another party designated by
the registered futures association in the form, manner, and
interval prescribed by the registered futures association.''.
SEC. 104. NOTICE AND CERTIFICATIONS PROVIDING ADDITIONAL
CUSTOMER PROTECTIONS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as
amended by sections 102 and 103 of this Act, is amended by
adding at the end the following:
``(u) A futures commission merchant that has adjusted net
capital in an amount less than the amount required by
regulations established by the Commission or a self-
regulatory organization of which the futures commission
merchant is a member shall immediately notify the Commission
and the self-regulatory organization of this occurrence.
``(v) A futures commission merchant that does not hold a
sufficient amount of funds in segregated accounts for futures
customers under section 1.20 of title 17, Code of Federal
Regulations, in foreign futures and foreign options secured
amount accounts for foreign futures and foreign options
secured amount customers under section 30.7 of such title, or
in segregated accounts for cleared swap customers under
section 22.2 of such title, as required by regulations
established by the Commission or a self-regulatory
organization of which the futures commission merchant is a
member, shall immediately notify the Commission and the self-
regulatory organization of this occurrence.
``(w) Within such time period established by the Commission
after the end of each fiscal year, a futures commission
merchant shall file with the Commission a report from the
chief compliance officer of the futures commission merchant
containing an assessment of the internal compliance programs
of the futures commission merchant.''.
SEC. 105. FUTURES COMMISSION MERCHANT COMPLIANCE.
(a) In General.--Section 4d(a) of the Commodity Exchange
Act (7 U.S.C. 6d(a)) is amended--
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B);
(2) by inserting ``(1)'' before ``It shall be unlawful'';
and
(3) by adding at the end the following new paragraph:
``(2) Any rules or regulations requiring a futures
commission merchant to maintain a residual interest in
accounts held for the benefit of customers in amounts at
least sufficient to exceed the sum of all uncollected margin
deficits of such customers shall provide that a futures
commission merchant shall meet its residual interest
requirement as of the end of each business day calculated as
of the close of business on the previous business day.''.
[[Page H5625]]
(b) Conforming Amendment.--Section 4d(h) of the Commodity
Exchange Act (7 U.S.C. 6d(h)) is amended by striking
``Notwithstanding subsection (a)(2)'' and inserting
``Notwithstanding subsection (a)(1)(B)''.
SEC. 106. CERTAINTY FOR FUTURES CUSTOMERS AND MARKET
PARTICIPANTS.
Section 20(a) of the Commodity Exchange Act (7 U.S.C.
24(a)) is amended--
(1) by striking ``and'' at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) that cash, securities, or other property of the
estate of a commodity broker, including the trading or
operating accounts of the commodity broker and commodities
held in inventory by the commodity broker, shall be included
in customer property, subject to any otherwise unavoidable
security interest, or otherwise unavoidable contractual
offset or netting rights of creditors (including rights set
forth in a rule or bylaw of a derivatives clearing
organization or a clearing agency) in respect of such
property, but only to the extent that the property that is
otherwise customer property is insufficient to satisfy the
net equity claims of public customers (as such term may be
defined by the Commission by rule or regulation) of the
commodity broker.''.
SEC. 107. STUDY ON HIGH-FREQUENCY TRADING.
(a) In General.--Not later than one year after the date of
the enactment of this Act, the Commodity Futures Trading
Commission shall submit to the Committee on Agriculture of
the House of Representatives and the Committee on
Agriculture, Nutrition, and Forestry of the Senate a report
examining the effect of the practice commonly referred to as
high-frequency trading on markets under its jurisdiction.
(b) Specific Areas Examined in Report.--In preparing the
report submitted under subsection (a), the Commission shall
particularly examine each of the following areas:
(1) The technology, personnel, or other resources the
Commission may require for purposes of monitoring the effect
of high-frequency trading.
(2) The role such trading plays in providing market
liquidity.
(3) Whether the technology creates discrepancies in the
marketplace between market participants.
(4) Whether the existing authority of the Commission with
respect to such trading is sufficient to meet the
Commission's mission to--
(A) protect market participants and the public from fraud,
manipulation, abusive practices, and systemic risk related to
derivatives; and
(B) foster transparent, open, competitive, and financially
sound markets.
TITLE II--COMMODITY FUTURES TRADING COMMISSION REFORMS
SEC. 201. SHORT TITLE.
This title may be cited as the ``Commodity Futures Trading
Commission Reform Act''.
SEC. 202. EXTENSION OF OPERATIONS.
Section 12(d) of the Commodity Exchange Act (7 U.S.C.
16(d)) is amended by striking ``2013'' and inserting
``2018''.
SEC. 203. CONSIDERATION BY THE COMMODITY FUTURES TRADING
COMMISSION OF THE COSTS AND BENEFITS OF ITS
REGULATIONS AND ORDERS.
Section 15(a) of the Commodity Exchange Act (7 U.S.C.
19(a)) is amended by striking paragraphs (1) and (2) and
inserting the following:
``(1) In general.--Before promulgating a regulation under
this Act or issuing an order (except as provided in paragraph
(3)), the Commission, through the Office of the Chief
Economist, shall assess and publish in the regulation or
order the costs and benefits, both qualitative and
quantitative, of the proposed regulation or order, and the
proposed regulation or order shall state its statutory
justification.
``(2) Considerations.--In making a reasoned determination
of the costs and the benefits, the Commission shall
evaluate--
``(A) considerations of protection of market participants
and the public;
``(B) considerations of the efficiency, competitiveness,
and financial integrity of futures and swaps markets;
``(C) considerations of the impact on market liquidity in
the futures and swaps markets;
``(D) considerations of price discovery;
``(E) considerations of sound risk management practices;
``(F) available alternatives to direct regulation;
``(G) the degree and nature of the risks posed by various
activities within the scope of its jurisdiction;
``(H) the costs of complying with the proposed regulation
or order by all regulated entities, including a methodology
for quantifying the costs (recognizing that some costs are
difficult to quantify);
``(I) whether the proposed regulation or order is
inconsistent, incompatible, or duplicative of other Federal
regulations or orders;
``(J) whether, in choosing among alternative regulatory
approaches, those approaches maximize net benefits (including
potential economic and other benefits, distributive impacts,
and equity); and
``(K) other public interest considerations.''.
SEC. 204. DIVISION DIRECTORS.
Section 2(a)(6)(C) of the Commodity Exchange Act (7 U.S.C.
2(a)(6)(C)) is amended by inserting ``, and the heads of the
units shall serve at the pleasure of the Commission, report
directly to the Commission, and perform such functions and
duties as the Commission may prescribe'' before the period.
SEC. 205. OFFICE OF THE CHIEF ECONOMIST.
(a) In General.--Section 2(a) of the Commodity Exchange Act
(7 U.S.C. 2(a)) is amended by adding at the end the
following:
``(17) Office of the chief economist.--
``(A) Establishment.--There is established in the
Commission the Office of the Chief Economist.
``(B) Head.--The Office of the Chief Economist shall be
headed by the Chief Economist, who shall be appointed by the
Commission and serve at the pleasure of the Commission.
``(C) Functions.--The Chief Economist shall report directly
to the Commission and perform such functions and duties as
the Commission may prescribe.
``(D) Professional staff.--The Commission shall appoint
such other economists as may be necessary to assist the Chief
Economist in performing such economic analysis, regulatory
cost-benefit analysis, or research as the Commission may
direct.''.
(b) Conforming Amendment.--Section 2(a)(6)(A) of such Act
(7 U.S.C. 2(a)(6)(A)) is amended by striking ``(4) and (5)''
and inserting ``(4), (5), and (17)''.
SEC. 206. PROCEDURES GOVERNING ACTIONS TAKEN WITHOUT A
COMMISSION VOTE.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)) is amended--
(1) by striking ``(12) The'' and inserting the following:
``(12) Rules and regulations.--
``(A) In general.--Subject to the other provisions of this
paragraph, the''; and
(2) by adding after and below the end the following new
subparagraph:
``(B) Notice to commission.--The Commission shall develop
and publish internal procedures governing the issuance by any
division or office of the Commission of any response to a
formal, written request or petition from any member of the
public for an exemptive, a no-action, or an interpretive
letter and such procedures shall provide that the Commission
be provided with the final version of the matter to be issued
with sufficient notice to thoroughly review the matter prior
to its issuance.''.
SEC. 207. STRATEGIC TECHNOLOGY PLAN.
Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)),
as amended by section 204(a) of this Act, is amended by
adding at the end the following:
``(18) Strategic technology plan.--
``(A) In general.--Every 5 years, the Commission shall
develop and submit to the Committee on Agriculture of the
House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a detailed plan focused
on the acquisition and use of technology by the Commission.
``(B) Contents.--The plan shall--
``(i) include for each related division or office a
detailed technology strategy focused on market surveillance
and risk detection, market data collection, aggregation,
interpretation, standardization, harmonization,
normalization, validation, streamlining or other data
analytic processes, and internal management and protection of
data collected by the Commission, including a detailed
accounting of how the funds provided for technology will be
used and the priorities that will apply in the use of the
funds; and
``(ii) set forth annual goals to be accomplished and annual
budgets needed to accomplish the goals.''.
SEC. 208. INTERNAL RISK CONTROLS.
(a) In General.--Section 2(a)(12) of the Commodity Exchange
Act (7 U.S.C. 2(a)(12)), as amended by section 206 of this
Act, is amended by adding at the end the following:
``(C) Internal risk controls.--The Commission, in
consultation with the Chief Economist, shall develop
comprehensive internal risk control mechanisms to safeguard
and govern the storage of all market data by the Commission,
all market data sharing agreements of the Commission, and all
academic research performed at the Commission using market
data.''.
(b) Reports to the Congress.--
(1) Content.--The Commission shall submit to the Committee
on Agriculture of the House of Representatives and the
Committee on Agriculture, Nutrition, and Forestry of the
Senate 2 reports on the progress made in implementing the
internal risk controls provided for in section 2(a)(12)(C) of
the Commodity Exchange Act.
(2) Timing.--The Commission shall submit the 1st report
required by paragraph (1) within 60 days after the date of
the enactment of this Act, and the 2nd such report within 120
days after such date of enactment.
SEC. 209. SUBPOENA DURATION AND RENEWAL.
Section 6(c)(5) of the Commodity Exchange Act (7 U.S.C.
9(5)) is amended--
(1) by striking ``(5) Subpoena.--For'' and inserting the
following:
``(5) Subpoena.--
``(A) In general.--For''; and
(2) by adding after and below the end the following:
``(B) Content of order.--An order of the Commission
authorizing the issuance of a subpoena in an investigation
shall state in good faith--
``(i) the legitimate purpose of the investigation; and
``(ii) the information sought by any subpoena order that
will be reasonably relevant to that purpose.
``(C) Duration and renewal.--An order issued under this
paragraph shall not be for an indefinite duration and may be
renewed only by Commission action.''.
SEC. 210. IMPLEMENTATION PLAN FOR COMMISSION RULEMAKINGS.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)), as amended by sections 206 and 208(a) of this Act,
is amended by adding at the end the following:
``(D) Requirement to publish implementation plan for
commission rules.--The Commission shall direct its staff to
develop and publish in any proposed rule a plan for--
``(i) when and for how long the proposed rule will be
subject to public comment; and
``(ii) by when compliance with the final rule will be
required.''.
[[Page H5626]]
SEC. 211. APPLICABILITY OF NOTICE AND COMMENT REQUIREMENTS OF
THE ADMINISTRATIVE PROCEDURE ACT TO GUIDANCE
VOTED ON BY THE COMMISSION.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)), as amended by sections 206, 208(a), and 210 of
this Act, is amended by adding at the end the following:
``(E) Applicability of notice and comment rules to guidance
voted on by the commission.--The notice and comment
requirements of chapter 5 of title 5, United States Code,
shall also apply with respect to any guidance issued by the
Commission.''.
SEC. 212. JUDICIAL REVIEW OF COMMISSION RULES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended
by adding at the end the following:
``SEC. 24. JUDICIAL REVIEW OF COMMISSION RULES.
``(a) A person adversely affected by a rule of the
Commission promulgated under this Act may obtain review of
the rule in the United States Court of Appeals for the
District of Columbia Circuit or the United States Court of
Appeals for the circuit where the party resides or has the
principal place of business, by filing in the court, within
60 days after publication in the Federal Register of the
entry of the rule, a written petition requesting that the
rule be set aside.
``(b) A copy of the petition shall be transmitted forthwith
by the clerk of the court to an officer designated by the
Commission for that purpose. Thereupon the Commission shall
file in the court the record on which the rule complained of
is entered, as provided in section 2112 of title 28, United
States Code, and the Federal Rules of Appellate Procedure.
``(c) On the filing of the petition, the court has
jurisdiction, which becomes exclusive on the filing of the
record, to affirm and enforce or to set aside the rule.
``(d) The court shall affirm and enforce the rule unless
the Commission's action in promulgating the rule is found to
be arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; contrary to
constitutional right, power, privilege, or immunity; in
excess of statutory jurisdiction, authority, or limitations,
or short of statutory right; or without observance of
procedure required by law.''.
SEC. 213. GAO STUDY ON ADEQUACY OF CFTC RESOURCES.
(a) Study.--The Comptroller General of the United States
shall conduct a study of the resources of the Commodity
Futures Trading Commission that--
(1) assesses whether the resources of the Commission are
sufficient to enable the Commission to effectively carry out
the duties of the Commission; and
(2) examines the prior expenditures of the Commission on
hardware, software, and analytical processes designed to
protect customers in the areas of--
(A) market surveillance and risk detection; and
(B) market data collection, aggregation, interpretation,
standardization, harmonization, normalization, validation,
and streamlining or other data analytic processes.
(b) Report.--Not later than 180 days after the date of the
enactment of this Act, the Comptroller General of the United
States shall submit to the Committee on Agriculture of the
House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report that contains
the results of the study.
SEC. 214. DISCLOSURE OF REQUIRED DATA OF OTHER REGISTERED
ENTITIES.
Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is
amended by adding at the end the following:
``(j) Disclosure of Required Data of Other Registered
Entities.--
``(1) Except as provided in this subsection, the Commission
may not be compelled to disclose any proprietary information
provided to the Commission, except that nothing in this
subsection--
``(A) authorizes the Commission to withhold information
from Congress, upon an agreement of confidentiality; or
``(B) prevents the Commission from--
``(i) complying with a request for information from any
other Federal department or agency, any State or political
subdivision thereof, or any foreign government or any
department, agency, or political subdivision thereof
requesting the report or information for purposes within the
scope of its jurisdiction, upon an agreement of
confidentiality to protect the information in a manner
consistent with this paragraph and subsection (e); or
``(ii) a disclosure made pursuant to a court order in
connection with an administrative or judicial proceeding
brought under this Act, in any receivership proceeding
involving a receiver appointed in a judicial proceeding
brought under this Act, or in any bankruptcy proceeding in
which the Commission has intervened or in which the
Commission has the right to appear and be heard under title
11 of the United States Code.
``(2) Any proprietary information of a commodity trading
advisor or commodity pool operator ascertained by the
Commission in connection with Form CPO-PQR, Form CTA-PR, and
any successor forms thereto, shall be subject to the same
limitations on public disclosure, as any facts ascertained
during an investigation, as provided by subsection (a);
provided, however, that the Commission shall not be precluded
from publishing aggregate information compiled from such
forms, to the extent such aggregate information does not
identify any individual person or firm, or such person's
proprietary information.
``(3) For purposes of section 552 of title 5, United States
Code, this subsection, and the information contemplated
herein, shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
``(4) For purposes of the definition of proprietary
information in paragraph (5), the records and reports of any
client account or commodity pool to which a commodity trading
advisor or commodity pool operator registered under this
title provides services that are filed with the Commission on
Form CPO-PQR, CTA-PR, and any successor forms thereto, shall
be deemed to be the records and reports of the commodity
trading advisor or commodity pool operator, respectively.
``(5) For purposes of this section, proprietary information
of a commodity trading advisor or commodity pool operator
includes sensitive, non-public information regarding--
``(A) the commodity trading advisor, commodity pool
operator or the trading strategies of the commodity trading
advisor or commodity pool operator;
``(B) analytical or research methodologies of a commodity
trading advisor or commodity pool operator;
``(C) trading data of a commodity trading advisor or
commodity pool operator; and
``(D) computer hardware or software containing intellectual
property of a commodity trading advisor or commodity pool
operator;''.
TITLE III--END-USER RELIEF
SEC. 301. SHORT TITLE.
This title may be cited as the ``End-User Relief and Market
Certainty Act''.
Subtitle A--End-User Exemption From Margin Requirements
SEC. 311. END-USER MARGIN REQUIREMENTS.
(a) Commodity Exchange Act Amendment.--Section 4s(e) of the
Commodity Exchange Act (7 U.S.C. 6s(e)) is amended by adding
at the end the following new paragraph:
``(4) Applicability with respect to counterparties.--The
requirements of paragraphs (2)(A)(ii) and (2)(B)(ii),
including the initial and variation margin requirements
imposed by rules adopted pursuant to paragraphs (2)(A)(ii)
and (2)(B)(ii), shall not apply to a swap in which a
counterparty qualifies for an exception under section
2(h)(7)(A), or an exemption issued under section 4(c)(1) from
the requirements of section 2(h)(1)(A) for cooperative
entities as defined in such exemption, or satisfies the
criteria in section 2(h)(7)(D).''.
(b) Securities Exchange Act of 1934 Amendment.--Section
15F(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
10(e)) is amended by adding at the end the following new
paragraph:
``(4) Applicability with respect to counterparties.--The
requirements of paragraphs (2)(A)(ii) and (2)(B)(ii) shall
not apply to a security-based swap in which a counterparty
qualifies for an exception under section 3C(g)(1) or
satisfies the criteria in section 3C(g)(4).''.
SEC. 312. IMPLEMENTATION.
The amendment made to the Commodity Exchange Act by this
subtitle shall be implemented--
(1) without regard to--
(A) chapter 35 of title 44, United States Code; and
(B) the notice and comment provisions of section 553 of
title 5, United States Code;
(2) through the promulgation of an interim final rule,
pursuant to which public comment will be sought before a
final rule is issued; and
(3) such that paragraph (1) shall apply solely to changes
to rules and regulations, or proposed rules and regulations,
that are limited to and directly a consequence of the
amendment.
Subtitle B--Inter-Affiliate Swaps
SEC. 321. TREATMENT OF AFFILIATE TRANSACTIONS.
(a) In General.--
(1) Commodity exchange act amendment.--Section
2(h)(7)(D)(i) of the Commodity Exchange Act (7 U.S.C.
2(h)(7)(D)(i)) is amended to read as follows:
``(i) In general.--An affiliate of a person that qualifies
for an exception under subparagraph (A) (including affiliate
entities predominantly engaged in providing financing for the
purchase of the merchandise or manufactured goods of the
person) may qualify for the exception only if the affiliate
enters into the swap to hedge or mitigate the commercial risk
of the person or other affiliate of the person that is not a
financial entity, provided that if the transfer of commercial
risk is addressed by entering into a swap with a swap dealer
or major swap participant, an appropriate credit support
measure or other mechanism is utilized.''.
(2) Securities exchange act of 1934 amendment.--Section
3C(g)(4)(A) of the Securities Exchange Act of 1934 (15 U.S.C.
78c-3(g)(4)(A)) is amended to read as follows:
``(A) In general.--An affiliate of a person that qualifies
for an exception under paragraph (1) (including affiliate
entities predominantly engaged in providing financing for the
purchase of the merchandise or manufactured goods of the
person) may qualify for the exception only if the affiliate
enters into the security-based swap to hedge or mitigate the
commercial risk of the person or other affiliate of the
person that is not a financial entity, provided that if the
transfer of commercial risk is addressed by entering into a
security-based swap with a security-based swap dealer or
major security-based swap participant, an appropriate credit
support measure or other mechanism is utilized.''.
(b) Applicability of Credit Support Measure Requirement.--
Notwithstanding section 371 of this Act, the requirements in
section 2(h)(7)(D)(i) of the Commodity Exchange Act and
section 3C(g)(4)(A) of the Securities Exchange Act of 1934,
as amended by subsection (a), requiring that a credit support
measure or other mechanism be utilized if the transfer of
commercial risk referred to in such sections is
[[Page H5627]]
addressed by entering into a swap with a swap dealer or major
swap participant or a security-based swap with a security-
based swap dealer or major security-based swap participant,
as appropriate, shall not apply with respect to swaps or
security-based swaps, as appropriate, entered into before the
date of the enactment of this Act.
Subtitle C--Indemnification Requirements Related to Swap Data
Repositories
SEC. 331. INDEMNIFICATION REQUIREMENTS.
(a) Derivatives Clearing Organizations.--Section 5b(k)(5)
of the Commodity Exchange Act (7 U.S.C. 7a-1(k)(5)) is
amended to read as follows:
``(5) Confidentiality agreement.--Before the Commission may
share information with any entity described in paragraph (4),
the Commission shall receive a written agreement from each
entity stating that the entity shall abide by the
confidentiality requirements described in section 8 relating
to the information on swap transactions that is provided.''.
(b) Swap Data Repositories.--Section 21(d) of such Act (7
U.S.C. 24a(d)) is amended to read as follows:
``(d) Confidentiality Agreement.--Before the swap data
repository may share information with any entity described in
subsection (c)(7), the swap data repository shall receive a
written agreement from each entity stating that the entity
shall abide by the confidentiality requirements described in
section 8 relating to the information on swap transactions
that is provided.''.
(c) Security-Based Swap Data Repositories.--Section
13(n)(5)(H) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(n)(5)(H)) is amended to read as follows:
``(H) Confidentiality agreement.--Before the security-based
swap data repository may share information with any entity
described in subparagraph (G), the security-based swap data
repository shall receive a written agreement from each entity
stating that the entity shall abide by the confidentiality
requirements described in section 24 relating to the
information on security-based swap transactions that is
provided.''.
Subtitle D--Relief for Municipal Utilities
SEC. 341. TRANSACTIONS WITH UTILITY SPECIAL ENTITIES.
Section 1a(49) of the Commodity Exchange Act (7 U.S.C.
1a(49)) is amended by adding at the end the following:
``(E) Certain transactions with a utility special entity.--
``(i) Transactions in utility operations-related swaps
shall be reported pursuant to section 4r.
``(ii) In making a determination to exempt pursuant to
subparagraph (D), the Commission shall treat a utility
operations-related swap entered into with a utility special
entity, as defined in section 4s(h)(2)(D), as if it were
entered into with an entity that is not a special entity, as
defined in section 4s(h)(2)(C).''.
SEC. 342. UTILITY SPECIAL ENTITY DEFINED.
Section 4s(h)(2) of the Commodity Exchange Act (7 U.S.C.
6s(h)(2)) is amended by adding at the end the following:
``(D) Utility special entity.--For purposes of this Act,
the term `utility special entity' means a special entity, or
any instrumentality, department, or corporation of or
established by a State or political subdivision of a State,
that--
``(i) owns or operates an electric or natural gas facility
or an electric or natural gas operation;
``(ii) supplies natural gas and or electric energy to
another utility special entity;
``(iii) has public service obligations under Federal,
State, or local law or regulation to deliver electric energy
or natural gas service to customers; or
``(iv) is a Federal power marketing agency, as defined in
section 3 of the Federal Power Act.''.
SEC. 343. UTILITY OPERATIONS-RELATED SWAP.
(a) Swap Further Defined.--Section 1a(47)(A)(iii) of the
Commodity Exchange Act (7 U.S.C. 1a(47)(A)(iii)) is amended--
(1) by striking ``and'' at the end of subclause (XXI);
(2) by adding ``and'' at the end of subclause (XXII); and
(3) by adding at the end the following:
``(XXIII) a utility operations-related swap;''.
(b) Utility Operations-related Swap Defined.--Section 1a of
such Act (7 U.S.C. 1a) is amended by adding at the end the
following:
``(52) Utility operations-related swap.--The term `utility
operations-related swap' means a swap that--
``(A) is entered into to hedge or mitigate a commercial
risk;
``(B) is not a contract, agreement, or transaction based
on, derived on, or referencing--
``(i) an interest rate, credit, equity, or currency asset
class; or
``(ii) a metal, agricultural commodity, or crude oil or
gasoline commodity of any grade, except as used as fuel for
electric energy generation; and
``(C) is associated with--
``(i) the generation, production, purchase, or sale of
natural gas or electric energy, the supply of natural gas or
electric energy to a utility, or the delivery of natural gas
or electric energy service to utility customers;
``(ii) all fuel supply for the facilities or operations of
a utility;
``(iii) compliance with an electric system reliability
obligation;
``(iv) compliance with an energy, energy efficiency,
conservation, or renewable energy or environmental statute,
regulation, or government order applicable to a utility; or
``(v) any other electric energy or natural gas swap to
which a utility is a party.''.
Subtitle E--End-User Regulatory Relief
SEC. 351. END-USERS NOT TREATED AS FINANCIAL ENTITIES.
(a) In General.--Section 2(h)(7)(C)(iii) of the Commodity
Exchange Act (7 U.S.C. 2(h)(7)(C)(iii)) is amended to read as
follows:
``(iii) Limitation.--Such definition shall not include an
entity--
``(I) whose primary business is providing financing, and
who uses derivatives for the purpose of hedging underlying
commercial risks related to interest rate and foreign
currency exposures, 90 percent or more of which arise from
financing that facilitates the purchase or lease of products,
90 percent or more of which are manufactured by the parent
company or another subsidiary of the parent company; or
``(II) who is not supervised by a prudential regulator, and
is not described in any of subclauses (I) through (VII) of
clause (i), and--
``(aa) is a commercial market participant and is considered
a financial entity under clause (i)(VIII) because the entity
predominantly engages in physical delivery contracts; or
``(bb) enters into swaps, contracts for future delivery,
and other derivatives on behalf of, or to hedge or mitigate
the commercial risk of, whether directly or in the aggregate,
affiliates that are not so supervised or described.''.
(b) Commercial Market Participant Defined.--
(1) In general.--Section 1a of such Act (7 U.S.C. 1a), as
amended by section 343(b) of this Act, is amended by
redesignating paragraphs (8) through (52) as paragraphs (9)
through (53), respectively, and by inserting after paragraph
(6) the following:
``(7) Commercial market participant.--The term `commercial
market participant' means any producer, processor, merchant,
or commercial user of an exempt or agricultural commodity, or
the products or byproducts of such a commodity.''.
(2) Conforming amendments.--
(A) Section 1a of such Act (7 U.S.C. 1a) is amended--
(i) in subparagraph (A) of paragraph (18) (as so
redesignated by paragraph (1) of this subsection), in the
matter preceding clause (i), by striking ``(18)(A)'' and
inserting ``(19)(A)''; and
(ii) in subparagraph (A)(vii) of paragraph (19) (as so
redesignated by paragraph (1) of this subsection), in the
matter following subclause (III), by striking ``(17)(A)'' and
inserting ``(18)(A)''.
(B) Section 4(c)(1)(A)(i)(I) of such Act (7 U.S.C.
6(c)(1)(A)(i)(I)) is amended by striking ``(7), paragraph
(18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38),
(39), (41), (42), (46), (47), (48), and (49)'' and inserting
``(8), paragraph (19)(A)(vii)(III), paragraphs (24), (25),
(32), (33), (39), (40), (42), (43), (47), (48), (49), and
(50)''.
(C) Section 4q(a)(1) of such Act (7 U.S.C. 6o-1(a)(1)) is
amended by striking ``1a(9)'' and inserting ``1a(10)''.
(D) Section 4s(f)(1)(D) of such Act (7 U.S.C. 6s(f)(1)(D))
is amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(E) Section 4s(h)(5)(A)(i) of such Act (7 U.S.C.
6s(h)(5)(A)(i)) is amended by striking ``1a(18)'' and
inserting ``1a(19)''.
(F) Section 4t(b)(1)(C) of such Act (7 U.S.C. 6t(b)(1)(C))
is amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(G) Section 5(d)(23) of such Act (7 U.S.C. 7(d)(23)) is
amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(H) Section 5(e)(1) of such Act (7 U.S.C. 7(e)(1)) is
amended by striking ``1a(9)'' and inserting ``1a(10)''.
(I) Section 5b(k)(3)(A) of such Act (7 U.S.C. 7a-
1(k)(3)(A)) is amended by striking ``1a(47)(A)(v)'' and
inserting ``1a(48)(A)(v)''.
(J) Section 5c(c)(4)(B) of such Act (7 U.S.C. 7a-
2(c)(4)(B)) is amended by striking ``1a(10)'' and inserting
``1a(11)''.
(K) Section 5h(f)(10)(A)(iii) of such Act (7 U.S.C. 7b-
3(f)(10)(A)(iii)) is amended by striking ``1a(47)(A)(v)'' and
inserting ``1a(48)(A)(v)''.
(L) Section 21(f)(4)(C) of such Act (7 U.S.C. 24a(f)(4)(C))
is amended by striking ``1a(48)'' and inserting ``1a(49)''.
SEC. 352. REPORTING OF ILLIQUID SWAPS SO AS TO NOT
DISADVANTAGE CERTAIN NON-FINANCIAL END-USERS.
Section 2(a)(13) of the Commodity Exchange Act (7 U.S.C.
2(a)(13)) is amended--
(1) in subparagraph (C), by striking ``The Commission'' and
inserting ``Except as provided in subparagraph (D), the
Commission''; and
(2) by redesignating subparagraphs (D) through (G) as
subparagraphs (E) through (H), respectively, and inserting
after subparagraph (C) the following:
``(D) Requirements for swap transactions in illiquid
markets.--Notwithstanding subparagraph (C):
``(i) The Commission shall provide by rule for the public
reporting of swap transactions, including price and volume
data, in illiquid markets that are not cleared and entered
into by a non-financial entity that is hedging or mitigating
commercial risk in accordance with subsection (h)(7)(A).
``(ii) The Commission shall ensure that the swap
transaction information referred to in clause (i) of this
subparagraph is available to the public no sooner than 30
days after the swap transaction has been executed or at such
later date as the Commission determines appropriate to
protect the identity of participants and positions in
illiquid markets and to prevent the elimination or reduction
of market liquidity.
``(iii) In this subparagraph, the term `illiquid markets'
means any market in which the volume and frequency of trading
in swaps is at such a level as to allow identification of
individual market participants.''.
SEC. 353. RELIEF FOR GRAIN ELEVATOR OPERATORS, FARMERS,
AGRICULTURAL COUNTERPARTIES, AND COMMERCIAL
MARKET PARTICIPANTS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended
by inserting after section 4t the following:
[[Page H5628]]
``SEC. 4U. RECORDKEEPING REQUIREMENTS APPLICABLE TO NON-
REGISTERED MEMBERS OF CERTAIN REGISTERED
ENTITIES.
``Except as provided in section 4(a)(3), a member of a
designated contract market or a swap execution facility that
is not registered with the Commission and not required to be
registered with the Commission in any capacity shall satisfy
the recordkeeping requirements of this Act and any
recordkeeping rule, order, or regulation under this Act by
maintaining a written record of each transaction in a
contract for future delivery, option on a future, swap,
swaption, trade option, or related cash or forward
transaction. The written record shall be sufficient if it
includes the final agreement between the parties and the
material economic terms of the transaction and is
identifiable and searchable by transaction.''.
SEC. 354. RELIEF FOR END-USERS WHO USE PHYSICAL CONTRACTS
WITH VOLUMETRIC OPTIONALITY.
Section 1a(47)(B)(ii) of the Commodity Exchange Act (7
U.S.C. 1a(47)(B)(ii)) is amended to read as follows:
``(ii) any purchase or sale of a nonfinancial commodity or
security for deferred shipment or delivery, so long as the
transaction is intended to be physically settled, including
any stand-alone or embedded option--
``(I) for which exercise results in a physical delivery
obligation;
``(II) that cannot be severed or marketed separately from
the overall transaction for the purpose of financial
settlement; and
``(III) for which both parties are commercial market
participants;''.
SEC. 355. COMMISSION VOTE REQUIRED BEFORE AUTOMATIC CHANGE OF
SWAP DEALER DE MINIMIS LEVEL.
Section 1a(49)(D) of the Commodity Exchange Act (7 U.S.C.
1a(49)(D)) is amended--
(1) by striking all that precedes ``shall exempt'' and
inserting the following:
``(D) De minimis exception.--
``(i) In general.--The Commission''; and
(2) by adding after and below the end the following new
clause:
``(ii) Special rule.--The de minimis quantity of swap
dealing as described in clause (i) that is currently set at a
quantity of $8,000,000,000 shall only be amended or reduced
through a new affirmative action of the Commission undertaken
by rule or regulation.''.
SEC. 356. CAPITAL REQUIREMENTS FOR NON-BANK SWAP DEALERS.
(a) Commodity Exchange Act.--Section 4s(e) of the Commodity
Exchange Act (7 U.S.C. 6s(e)) is amended--
(1) in paragraph (2)(B), by striking ``shall'' and
inserting the following: ``and the Securities and Exchange
Commission, in consultation with the prudential regulators,
shall jointly''; and
(2) in paragraph (3)(D)--
(A) in clause (ii), by striking ``shall, to the maximum
extent practicable,'' and inserting ``shall''; and
(B) by adding at the end the following:
``(iii) Financial models.--To the extent that swap dealers
and major swap participants that are banks are permitted to
use financial models approved by the prudential regulators or
the Securities and Exchange Commission to calculate minimum
capital requirements and minimum initial and variation margin
requirements, including the use of non-cash collateral, the
Commission shall, in consultation with the prudential
regulators and the Securities and Exchange Commission, permit
the use of comparable financial models by swap dealers and
major swap participants that are not banks.''.
(b) Securities Exchange Act of 1934.--Section 15F(e) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-10(e)) is
amended--
(1) in paragraph (2)(B), by striking ``shall'' and
inserting the following: ``and the Commodity Futures Trading
Commission, in consultation with the prudential regulators,
shall jointly''; and
(2) in paragraph (3)(D)--
(A) in clause (ii), by striking ``shall, to the maximum
extent practicable,'' and inserting ``shall''; and
(B) by adding at the end the following:
``(iii) Financial models.--To the extent that security-
based swap dealers and major security-based swap participants
that are banks are permitted to use financial models approved
by the prudential regulators or the Commodity Futures Trading
Commission to calculate minimum capital requirements and
minimum initial and variation margin requirements, including
the use of non-cash collateral, the Commission shall, in
consultation with the Commodity Futures Trading Commission,
permit the use of comparable financial models by security-
based swap dealers and major security-based swap participants
that are not banks.''.
SEC. 357. HARMONIZATION WITH THE JUMPSTART OUR BUSINESS
STARTUPS ACT.
Within 90 days after the date of the enactment of this Act,
the Commodity Futures Trading Commission shall--
(1) revise section 4.7(b) of title 17, Code of Federal
Regulations, in the matter preceding paragraph (1), to read
as follows:
``(b) Relief available to commodity pool operators. Upon
filing the notice required by paragraph (d) of this section,
and subject to compliance with the conditions specified in
paragraph (d) of this section, any registered commodity pool
operator who sells participations in a pool solely to
qualified eligible persons in an offering which qualifies for
exemption from the registration requirements of the
Securities Act pursuant to section 4(2) of that Act or
pursuant to Regulation S, 17 CFR 230.901 et seq., and any
bank registered as a commodity pool operator in connection
with a pool that is a collective trust fund whose securities
are exempt from registration under the Securities Act
pursuant to section 3(a)(2) of that Act and are sold solely
to qualified eligible persons, may claim any or all of the
following relief with respect to such pool:''; and
(2) revise section 4.13(a)(3)(i) of such title to read as
follows:
``(i) Interests in the pool are exempt from registration
under the Securities Act of 1933, and such interests are
offered and sold pursuant to section 4 of the Securities Act
of 1933 and the regulations thereunder;''.
SEC. 358. BONA FIDE HEDGE DEFINED TO PROTECT END-USER RISK
MANAGEMENT NEEDS.
Section 4a(c) of the Commodity Exchange Act (7 U.S.C.
6a(c)) is amended--
(1) in paragraph (1)--
(A) by striking ``may'' and inserting ``shall''; and
(B) by striking ``future for which'' and inserting
``future, to be determined by the Commission, for which
either an appropriate swap is available or'';
(2) in paragraph (2)--
(A) in the matter preceding subparagraph (A), by striking
``subsection (a)(2)'' and all that follows through ``position
as'' and inserting ``paragraphs (2) and (5) of subsection (a)
for swaps, contracts of sale for future delivery, or options
on the contracts or commodities, a bona fide hedging
transaction or position is''; and
(B) in subparagraph (A)(ii), by striking ``of risks'' and
inserting ``or management of current or anticipated risks'';
and
(3) by adding at the end the following:
``(3) The Commission may further define, by rule or
regulation, what constitutes a bona fide hedging transaction,
provided that the rule or regulation is consistent with the
requirements of subparagraphs (A) and (B) of paragraph
(2).''.
SEC. 359. CROSS-BORDER REGULATION OF DERIVATIVES
TRANSACTIONS.
(a) Joint Rulemaking Required.--
(1) In general.--Not later than 270 days after the date of
enactment of this Act, the Securities and Exchange Commission
and the Commodity Futures Trading Commission shall jointly
issue rules setting forth the application of United States
swaps requirements of the Securities Exchange Act of 1934 and
the Commodity Exchange Act relating to cross-border swaps and
security-based swaps transactions involving U.S. persons or
non-U.S. persons.
(2) Construction.--The rules required under paragraph (1)
shall be identical, notwithstanding any difference in the
authorities granted the Commissions in section 30(c) of the
Securities Exchange Act of 1934 (15 U.S.C. 78dd(c)) and
section 2(i) of the Commodity Exchange Act (7 U.S.C. 2(i)),
respectively, except to the extent necessary to accommodate
differences in other underlying statutory requirements under
such Acts, and the rules thereunder.
(b) Considerations.--The Commissions shall jointly issue
rules that address--
(1) the nature of the connections to the United States that
require a non-U.S. person to register as a swap dealer, major
swap participant, security-based swap dealer, or major
security-based swap participant under each Commission's
respective Acts and the regulations issued under such Acts;
(2) which of the United States swaps requirements shall
apply to the swap and security-based swap activities of non-
U.S. persons, U.S. persons, and their branches, agencies,
subsidiaries, and affiliates outside of the United States and
the extent to which such requirements shall apply; and
(3) the circumstances under which a non-U.S. person in
compliance with the regulatory requirements of a foreign
jurisdiction shall be exempt from United States swaps
requirements.
(c) Rule in Accordance With APA Required.--No guidance,
memorandum of understanding, or any such other agreement may
satisfy the requirement to issue a joint rule from the
Commissions in accordance with section 553 of title 5, United
States Code.
(d) General Application to Countries or Administrative
Regions Having Nine Largest Markets.--
(1) General application.--In issuing rules under this
section, the Commissions shall provide that a non-U.S. person
in compliance with the swaps regulatory requirements of a
country or administrative region that has one of the nine
largest combined swap and security-based swap markets by
notional amount in the calendar year preceding issuance of
such rules, or other foreign jurisdiction as jointly
determined by the Commissions, shall be exempt from United
States swaps requirements in accordance with the schedule set
forth in paragraph (2), unless the Commissions jointly
determine that the regulatory requirements of such country or
administrative region or other foreign jurisdiction are not
broadly equivalent to United States swaps requirements.
(2) Effective date schedule.--The exemption described in
paragraph (1) and set forth under the rules required by this
section shall apply to persons or transactions relating to or
involving--
(A) countries or administrative regions described in such
paragraph, or any other foreign jurisdiction as jointly
determined by the Commissions, accounting for the five
largest combined swap and security-based swap markets by
notional amount in the calendar year preceding issuance of
such rules, on the date on which final rules are issued under
this section; and
(B) the remaining countries or administrative regions
described in such paragraph, and any other foreign
jurisdiction as jointly determined by the Commissions, 1 year
after the date on which such rules are issued.
(3) Criteria.--In such rules, the Commissions shall jointly
establish criteria for determining that one or more
categories of regulatory requirements of a country or
administrative region
[[Page H5629]]
described in paragraph (1) or other foreign jurisdiction is
not broadly equivalent to United States swaps requirements
and shall jointly determine the appropriate application of
certain United States swap requirements to persons or
transactions relating to or involving such country or
administrative region or other foreign jurisdiction. Such
criteria shall include the scope and objectives of the
regulatory requirements of a country or administrative region
described in paragraph (1) or other foreign jurisdiction as
well as the effectiveness of the supervisory compliance
program administered, and the enforcement authority
exercised, by such country or administrative region or other
foreign jurisdiction, and such other factors as the
Commissions, by rule, jointly determine to be necessary or
appropriate in the public interest.
(4) Required assessment.--Beginning on the date on which
final rules are issued under this section, the Commissions
shall begin to jointly assess the regulatory requirements of
countries or administrative regions described in paragraph
(1), as the Commissions jointly determine appropriate, in
accordance with the criteria established pursuant to this
subsection, to determine if one or more categories of
regulatory requirements of such a country or administrative
region or other foreign jurisdiction is not broadly
equivalent to United States swaps requirements.
(e) Report to Congress.--If the Commissions make the joint
determination described in subsection (d)(1) that the
regulatory requirements of a country or administrative region
described in such subsection or other foreign jurisdiction
are not broadly equivalent to United States swaps
requirements, the Commissions shall articulate the basis for
such a determination in a written report transmitted to the
Committee on Financial Services and the Committee on
Agriculture of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs and the Committee on
Agriculture, Nutrition, and Forestry of the Senate within 30
days of the determination. The determination shall not be
effective until the transmission of such report.
(f) Definitions.--As used in this Act and for purposes of
the rules issued pursuant to this Act, the following
definitions apply:
(1) The term ``U.S. person''--
(A) means--
(i) any natural person resident in the United States;
(ii) any partnership, corporation, trust, or other legal
person organized or incorporated under the laws of the United
States or having its principal place of business in the
United States;
(iii) any account (whether discretionary or non-
discretionary) of a U.S. person; and
(iv) any other person as the Commissions may further
jointly define to more effectively carry out the purposes of
this Act; and
(B) does not include the International Monetary Fund, the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, their
agencies and pension plans, and any other similar
international organizations and their agencies and pension
plans.
(2) The term ``United States swaps requirements'' means
the provisions relating to swaps and security-based swaps
contained in the Commodity Exchange Act (7 U.S.C. 1a et seq.)
and the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) that were added by title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (15 U.S.C. 8301 et
seq.) and any rules or regulations prescribed by the
Securities and Exchange Commission and the Commodity Futures
Trading Commission pursuant to such provisions.
(g) Conforming Amendments.--
(1) Securities exchange act of 1934.--Section 36(c) of the
Securities Exchange Act of 1934 (15 U.S.C. 78mm(c)) is
amended by inserting ``or except as necessary to effectuate
the purposes of the Customer Protection and End-User Relief
Act,'' after ``to grant exemptions,''.
(2) Commodity exchange act.--Section 4(c)(1)(A) of the
Commodity Exchange Act (7 U.S.C. 6(c)(1)(A)) is amended by
inserting ``or except as necessary to effectuate the purposes
of the Customer Protection and End-User Relief Act,'' after
``to grant exemptions,''.
SEC. 360. REPORT ON FOREIGN BOARDS OF TRADE.
Within 1 year after the date of the enactment of this Act,
the Commodity Futures Trading Commission shall prepare and
submit to the Committee on Agriculture of the House of
Representatives and the Committee on Agriculture, Nutrition,
and Forestry of the Senate a written report reviewing the
standards and rules of foreign boards of trade related to the
physical delivery of base metals, including warehousing
facilities, as compared to the standards and rules for
domestic designated contract markets and related warehouses
for base metals.
Subtitle F--Effective Date
SEC. 371. EFFECTIVE DATE.
Except as otherwise provided in this title, the amendments
made by this title shall take effect as if enacted on July
21, 2010.
The CHAIR. No amendment to that amendment in the nature of a
substitute shall be in order except those printed in House Report 113-
476. Each such amendment may be offered only in the order printed in
the report, by a Member designated in the report, shall be considered
read, shall be debatable for the time specified in the report equally
divided and controlled by the proponent and an opponent, shall not be
subject to amendment, and shall not be subject to a demand for division
of the question.
Amendment No. 1 Offered by Mr. DeFazio
The CHAIR. It is now in order to consider amendment No. 1 printed in
House Report 113-476.
Mr. DeFAZIO. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 10, after line 12, insert the following:
(5) Whether such trading increases market volatility,
including short term market swings.
The CHAIR. Pursuant to House Resolution 629, the gentleman from
Oregon (Mr. DeFazio) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from Oregon.
Mr. DeFAZIO. Mr. Chair, the ranking member mentioned earlier that
there is a section in the bill of merit which would require four
studies: whether the technology and personnel needed to monitor the
effect of high-frequency trading are accurate; the role it plays in
providing liquidity; whether it creates discrepancies between market
participants--I would recommend people read ``Flash Boys'' if they want
the answer to that question--and whether the CFTC's existing authority
is sufficient with regard to high-frequency trading.
Those all have great merit. We should have the answers, but I have
one additional request, which would be to examine whether high-
frequency trading increases market volatility. CFTC already did one
study. They found that there were 27,000 contracts traded during a 14-
second period during the flash crash, but they came to no conclusion
regarding how or what role they may have played in the flash crash. I
think that we should further investigate this.
With that, I yield back the balance of my time.
Mr. LUCAS. Mr. Chairman, I claim the time in opposition to the
gentleman's amendment.
The CHAIR. The gentleman from Oklahoma is recognized for 5 minutes.
Mr. LUCAS. Mr. Chairman, I yield myself such time as I might consume.
Although it is my understanding that the substance of the gentleman
from Oregon's amendment would be broadly addressed within the existing
language of section 107, I certainly see no problem with ensuring that
his concerns are addressed more specifically. Therefore, I will suggest
to my colleague from Oregon, let's accept your amendment.
With that, Mr. Chairman, I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the gentleman
from Oregon (Mr. DeFazio).
The amendment was agreed to.
Amendment No. 2 Offered by Ms. Jackson Lee
The CHAIR. It is now in order to consider amendment No. 2 printed in
House Report 113-476.
Ms. JACKSON LEE. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 10, after line 12, insert the following:
SEC. ___. REPORT ON ENTITIES REGULATED BY THE CFTC.
Not later than 2 years after the date of the enactment of
this Act, the Commodity Futures Trading Commission shall
submit to the Committees on Agriculture, Financial Services,
and the Judiciary of the House of Representatives and the
Committees on Agriculture, Nutrition, and Forestry, Banking,
Housing, and Urban Affairs, and the Judiciary of the Senate a
report examining the number of entities regulated by the
Commodity Futures Trading Commission, and with respect to
those entities, their size, practice models, and assets under
management, and those rendered defunct via bankruptcy or
obsolescence.
The CHAIR. Pursuant to House Resolution 629, the gentlewoman from
Texas (Ms. Jackson Lee) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Texas.
Ms. JACKSON LEE. Mr. Chair, I thank the chairman very much. I thank
the chairman and the ranking member of the committee and knowing how
hard they have worked. I hope that this discussion today will emphasize
a commitment to transparency and a commitment to consumers and a
commitment to making the legislation responsive to consumers. So I
thank you for the opportunity.
[[Page H5630]]
This legislation is to reauthorize and improve the operations of the
Commodity Futures Trading Commission as well as address concerns from
customers from another failure such as the MF Global and Peregrine
Financial. It is a product of a multiyear process that included
hearings and perspectives from market participants, end users, futures
customers, and the CFTC.
The Jackson Lee amendment only seeks to improve this bill. If passed,
it would require a study that will provide very basic information about
firms regulated by the Commodity Futures Trading Commission. The
amendment simply requires the CFTC to do a report examining the number
of entities regulated by them, the entity's size, practice models, and
assets under management.
We must be quick to acknowledge that the dramatic failures of not
just MF Global but several other venerated firms, such Bear Stearns,
speak loudly to requiring more information for the consumer.
This amendment would also provide more insight as to how the industry
works. My amendment gives 2 years for the agency to complete the first
study. That is a very long time. Again, the report provides more
information for the very consumers that we are trying to protect. That
is more than enough time for the staff of the CFTC to comply with the
amendment.
In that span of 2 years, a lot of things can change, but the gist of
the amendment is to provide more transparency for the investors, as
many on this floor have already spoken of. It is critical that
investors know what is going on, particularly small investors who are
not privy to the information that many of the larger entities are made
aware.
My amendment, again, basic information via an agency study, much of
which the Commission already has, and I am merely seeking to have it.
Let me just share just one aspect of this and then conclude. More
importantly, in my conclusion, many of the residents of the 18th
Congressional District have invested in homes, stocks, and education,
to see it all flittered away because someone on Wall Street--France or
Houston, even--pushed the wrong button generating a contra-trade when
they meant to bid in the other direction. This is not what Americans
want to see. This is a regulated entity. Transparency is viable.
Let me show you a letter that was sent from the trustee of MF Global
to some poor person who, after 5 years, got their few dollars after
this major bankruptcy.
Enclosed with this mailing is a check from the trustee in
payment of your allowed customer claim.
They got it 5 years later.
With this check the full net equity value, as established
in the Bankruptcy Court, of your segregated property, the
amount related to your trading on domestic exchanges or
``4(d) Property,'' will have been distributed to you. Your
former account number at MF Global appears on the check.
Please cash this check as soon as possible.
That is another frightening thing. You better hurry up and get the
$25 or $40 that came.
To ensure proper and prompt processing.
I will include the letter for the Record here.
Epiq Bankruptcy Solutions, LLC
FDR Station, New York, NY, April 28, 2014.
Re In re MF Global Inc., Case No. (MG) SIPA.
Dear Claimant: Enclosed with this mailing is a check from
James W. Giddens, Trustee for the SIPA liquidation of MF
Global Inc., in payment of your allowed customer claim in the
SIPA proceeding. With this check the full net equity value,
as established in the Bankruptcy Court, of your segregated
property (i.e., the amount related to your trading on
domestic exchanges or ``4d Property''), will have been
distributed to you. Your former account number at MF Global
Inc. appears on the check.
Please cash this check as promptly as possible. To ensure
proper and prompt processing, please be sure to properly
endorse the check by signing your name and/or account number
in the appropriate location on the reverse side of the check.
If you have any questions, please feel free to contact one of
my representatives at 1-888-236-0808 (inside the United
States) or 1-503-597-5173 (outside the United States).
Very truly yours,
James W. Giddens,
Trustee for the SIPA
Liquidation of MF Global Inc.
Ms. JACKSON LEE. Mr. Chairman, and to my colleagues I believe that
this is an important asset or aspect of helping to have more
information for our consumers.
I reserve the balance of my time.
Mr. Chair, I thank you for this opportunity to briefly explain my
amendment. It is simple and makes a significant improvement to the
bill.
This bipartisan legislation to reauthorize and improve the operations
of the Commodity Futures Trading Commission (CFTC), as well as address
concerns relating to protecting customers from another failure such as
MF Global and Peregrine Financial.
It is the product of a multi-year process that included hearing
perspectives from market participants, end-users, futures customers,
and the CFTC.
The Jackson Lee amendment only seeks to improve this bill. If passed
it would require a study that will provide very basic information about
firms regulated by the Commodity Futures Trading Commission.
The amendment simply requires the CFTC to do a report examining the
number of entities regulated by them, the entity's size, practice
models, and assets under management.
We must be quick to acknowledge the dramatic failures of not just MF
Global and Peregrine but several other venerated firms such as Bear
Stearns.
This amendment would also provide more insight as to how industry
works.
The language of the Jackson Lee amendment gives two years for the
agency to complete the first one.
That is more than enough time for the staff at the CFTC to comply
with this amendment.
In that span of two years a lot of things could change but the gist
of the amendment is to provide more transparency for investors.
It also asks that those firms rendered defunct like MF Global be
included in the report.
It is critical that investors know what is going on--particularly
smaller investors who are not privy to the information that many of the
larger entities are made aware.
The MF Global bankruptcy hurt investors and potential investors. It
is critical that firms increase their transparency and disclose
information which consumers may use to make informed investment
decisions.
The Jackson Lee amendment asks very basic information of these firms
via an agency study--much of which the Commission may already keep
account of--and I am merely seeking to have it in a report.
Again, the amendment simply requires the CFTC to do a report
examining the number of entities regulated by them, the entity's size,
practice models, and assets under management. It also asks that those
firms rendered defunct like MF Global be included in the report.
And more importantly, many of the residents of the 18th District of
Texas have invested in homes, stocks, and education--and to see it all
flittered away because someone on Wall Street, France, or Houston even,
pushed the wrong button, generating a contra-trade when they meant to
bet in the other direction--is not what Americans want to see.
I urge my colleagues to vote for transparency, fairness and openness
by supporting the Jackson Lee Amendment.
Mr. LUCAS. Mr. Chair, I claim the time in opposition to the
amendment.
The CHAIR. The gentleman from Oklahoma is recognized for 5 minutes.
Mr. LUCAS. Mr. Chair, in a time of economic uncertainty, tight fiscal
budgets, I advise against the use of valuable Commission time and
resources on a study with some ambiguous terms and no clear practical
use.
H.R. 4413 already includes carefully crafted requirements for studies
on the pertinent issues of agency funding and on the effects of high-
frequency trading. So I respectfully urge my colleagues to join me in
opposing this amendment.
With that, I reserve the balance of my time.
Ms. JACKSON LEE. Mr. Chairman, I thank the gentleman, and I certainly
thank the chairman for his comments.
Right now the Veterans' Affairs Committee is meeting to find out more
information on the dastardly knowledge of so many veterans who may have
died on a secret list. I would imagine that they would have wanted,
some years back, to have investigated, studied, and gotten more
information about how veterans are treated in the veterans hospital.
I respectfully disagree with my friend and colleague. I do not think
that this is a waste of the energy of this agency and I don't think we
have enough information. Anytime I can stand on this floor and err on
the side of the customer, the consumer, and stand up here and show a
letter that is the ultimate result of a bankruptcy because the
consumers didn't have all the information that they needed--and all we
[[Page H5631]]
are asking is over a 2-year period give us the number of entities, the
size, practice models, and the assets under the management--I don't
believe that that is too much.
Investigating precise issues is not giving the consumer a portfolio
of knowledge. I disagree with my good friend, and I ask my colleagues
to support the Jackson Lee amendment.
The CHAIR. The time of the gentlewoman has expired.
Mr. LUCAS. Mr. Chairman, I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Texas (Ms. Jackson Lee).
The question was taken; and the Chair announced that the noes
appeared to have it.
Ms. JACKSON LEE. Mr. Chair, I demand a recorded vote.
The CHAIR. Pursuant to clause 6 of rule XVIII, further proceedings on
the amendment offered by the gentlewoman from Texas will be postponed.
Amendment No. 3 Offered by Ms. DelBene
The CHAIR. It is now in order to consider amendment No. 3 printed in
House Report 113-476.
Ms. DelBENE. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 11, strike lines 5 through 7 and insert the following:
Section 15(a) of the Commodity Exchange Act (7 U.S.C.
19(a)) is amended--
(1) by striking paragraphs (1) and (2) and inserting the
following:
Page 12, line 22, strike the last period and insert ``;
and''.
Page 12, after line 22, insert the following:
(2) by adding at the end the following:
``(4) Judicial review.--Notwithstanding section 24(d), a
court shall affirm a Commission assessment of costs and
benefits under this subsection, unless the court finds the
assessment to be an abuse of discretion.''.
The CHAIR. Pursuant to House Resolution 629, the gentlewoman from
Washington (Ms. DelBene) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Washington.
{time} 2015
Ms. DelBENE. Mr. Chair, I would like to thank Chairman Lucas and
Ranking Member Peterson, as well as Subcommittee Chairman Conaway and
Ranking Member Scott, for their work on this very important bill.
I would also like to thank Congressmen Gibson and Vargas for
cosponsoring this amendment. This amendment is the only bipartisan
amendment we are considering today. It is straightforward and will
provide needed clarity.
This amendment simply states that a court shall affirm the CFTC's
assessment of the costs and benefits of a rule. This would have the
practical impact of limiting the ability of individuals and firms to
challenge the CFTC in court, in an attempt to stop a rule from being
implemented based on the cost-benefit analysis.
The amendment also provides for an exception in the case of an abuse
of discretion by the Commission. If no such abuse occurs, a court must
uphold the CFTC's assessment.
At a time when the CFTC is still implementing a litany of rules,
including a number of crucial rules required by the passage of Dodd-
Frank, we should not be inhibiting the CFTC's progress and adding to
their workload, especially when the agency is already struggling with
insufficient resources for the task at hand.
To be clear, the CFTC is already required to consider the costs and
benefits of its actions and regulations. It just does not provide a
formal analysis of the costs and benefits.
If we are going to mandate that the CFTC provide a formal cost-
benefit analysis when developing regulations, which can be time
consuming, we should trust their analysis and not let the rules get
tied up in costly and time-consuming litigation.
Why go through such a rigorous process, like a cost-benefit analysis,
and expend all of the time and energy that goes with it, if the end
result can be easily derailed by a lawsuit filed at the eleventh hour.
I firmly believe that this amendment improves this bill to
reauthorize a critical Federal regulator, and I urge my colleagues to
support this bipartisan amendment.
I reserve the balance of my time.
Mr. LUCAS. Mr. Chairman, I rise in opposition to the amendment.
The CHAIR. The gentleman from Oklahoma is recognized for 5 minutes.
Mr. LUCAS. Mr. Chairman, this amendment sponsored by the gentlewoman
from Washington and her cosponsors, the gentlemen from New York and
California--all valued Members of the House Agriculture Committee--
builds on the enhancements of the cost-benefit analysis required in
this bill by preserving the court's ability to review the Commission
rules or orders.
I congratulate the sponsors of this amendment. Once again, the House
Ag Committee proves that working in a bipartisan manner is possible and
productive. This is the type of cooperation I think our friends back
home would want to see and demand.
With that, I urge its adoption, and I yield back the balance of my
time.
Ms. DelBENE. Mr. Chair, I yield as much time as he may consume to the
gentleman from Georgia (Mr. David Scott), the subcommittee ranking
member.
Mr. DAVID SCOTT of Georgia. Mr. Chair, I thank Ms. DelBene.
Ms. DelBene, Mr. Gibson, and Mr. Vargas are all hardworking members,
Democrats and Republicans, on the Ag Committee. I think this shows you
how wonderful the legislative process can be. I certainly want to
recognize our ranking member who brought this concern in her opening
remarks.
This helps to tighten and, I think, make a better bill. What it will
do is that it will address the concerns that Ms. Waters raised, and
that would be that improved cost-benefits provision would lead to
unnecessary litigation.
What Ms. DelBene, Mr. Vargas, and Mr. Gibson have done with their
language is it definitely narrows the potential avenues for litigation
on the CFTC's cost-benefit analysis, but still allows the consideration
of the points of analysis to take place.
I want to commend Ms. DelBene, Mr. Gibson, and Mr. Vargas for a very
good amendment.
Ms. DelBENE. I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Washington (Ms. DelBene).
The amendment was agreed to.
Amendment No. 4 Offered by Ms. Waters
The CHAIR. It is now in order to consider amendment No. 4 printed in
House Report 113-476.
Ms. WATERS. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 11, strike lines 5 through 7 and insert the following:
Section 15(a) of the Commodity Exchange Act (7 U.S.C.
19(a)) is amended--
(1) by striking paragraphs (1) and (2) and inserting the
following:
Page 12, line 22, strike the last period and insert ``;
and''.
Page 12, after line 22, insert the following:
(2) by adding at the end the following:
``(4) Judicial review.--This subsection is intended only to
improve the internal management of the Commission and any
estimate, analysis, statement, description or report prepared
under this subsection, and any compliance or noncompliance
with the provisions of this subsection, and any determination
concerning the applicability of the provisions of this
subsection shall not be subject to judicial review. No
provision of this subsection shall be construed to create any
right or benefit, substantive or procedural, enforceable at
law by a party against the United States, its agencies, its
officers, or any person.''.
The CHAIR. Pursuant to House Resolution 629, the gentlewoman from
California (Ms. Waters) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from California.
Ms. WATERS. Mr. Chairman, I urge support for this amendment to ensure
that the Commodities Futures Trading Commission can adequately regulate
our financial markets and address some of the very practices that so
seriously harmed our economy just a few years ago.
This amendment modestly improves the onerous cost-benefit
considerations included in this bill, a provision that would open the
Commission up to expensive legal challenges.
It does so by adding in language from the President's executive order
on cost-
[[Page H5632]]
benefit analysis that prohibits judicial review. The bill's sponsors
cite this order as the model of good analysis and incorporate many
provisions of that order in this legislation.
However, the measure before us today inconsistently omits the order's
prohibition on judicial review, thereby subjecting the CFTC's most
cost-benefit considerations to increase litigation risk--risk that no
other agency complying with the executive order has faced.
My amendment would correct this oversight and prevent special
interest groups from using the cost-benefit provision as a club to
delay, weaken, or kill financial reform.
My colleagues--Representative DelBene, Representative Gibson, and
Representative Vargas--share my concerns and have proposed an amendment
that would establish a heightened standard of judicial review.
While I support this amendment, it does not go far enough, in my
view, to fix the problem. I believe that judicial review with regard to
the heightened cost-benefit provisions in the underlying bill should be
prohibited entirely.
Make no mistake, even if the amendment offered previously by my
colleagues on judicial review--or, for that matter, my amendment--is
adopted, the bill would still impose heavy administrative hurdles on
the CFTC.
The Commission is already required to consider the costs and benefits
when promulgating rules and issuing orders pursuant to the Paperwork
Reduction Act, the Congressional Review Act, and the Regulatory
Flexibility Act, as other agencies do.
Unlike any other financial regulator, the CFTC is also already bound
by the Commodity Exchange Act to consider the impact of their rules on
the full range of market stakeholders.
The courts have weighed in as well, finding that the CFTC has
fulfilled its duty to consider the costs and benefits, as in the rule
related to commodity pool operators.
The CFTC will still have to expand resources to comply with this
provision that Republicans are unwilling to provide. Instead, the CFTC
will have to take funds from examinations and enforcement to pay for
redundant economic analysis.
Mr. Chairman, this is a commonsense amendment that will simply
prevent our Nation's top directives cop from spending excessive time
and resources fighting off superfluous legal challenges and would make
the underlying bill consistent with the President's executive order.
I urge my colleagues to support this amendment, and I reserve the
balance of my time.
Mr. CONAWAY. Mr. Chairman, I rise in opposition to the amendment.
The CHAIR. The gentleman from Texas is recognized for 5 minutes.
Mr. CONAWAY. Mr. Chairman, I think it is very dangerous to require
the regulated community to follow rules or regulations that have not
been properly considered.
A cost-benefit analysis is an essential requirement for any rule or
order. Only after a regulator considers the costs of imposing a rule
and then compares that cost to the anticipated benefits can a rule be
properly analyzed.
Far too often, regulators at the CFTC ignore cost or important cost
factors, so that their regulatory agenda can be implemented unimpeded.
The ability of the regulated committee to ask a court to review the
cost-benefit analysis of a rule or order is an essential deterrent to
such a practice.
The threat of litigation forces regulators to make sure they properly
consider costs and attest that the regulation achieves the goal set out
in the law passed by Congress in the most cost-efficient manner.
Striking the ability of a court to review the cost-benefit analysis
of a CFTC regulation would vitiate the carefully negotiated bipartisan
compromise just offered by Ms. DelBene.
It seems odd on the logic that you would support the DelBene
amendment, which improves judicial review and narrows its scope, and
then categorically oppose judicial review.
I think her amendment, allowing courts to determine if a cost-benefit
analysis of a CFTC-promulgated rule or regulation is an abuse of the
Commission's discretion, is a measured approach that will lead to a
sound and effective policy.
We have also got an indication from the IG, the inspector general,
that throughout the entire Dodd-Frank regulatory process, which the
CFTC put in place some 60 rules, that generally speaking--according to
the IG, generally speaking, it appears that CFTC employees did not
consider quantifying costs when conducting cost-benefit analysis for
the definitions as indicated. It took a very cavalier approach to the
process.
We think that, based on the testimony we have heard from many of the
regulated, the CFTC did a very poor job on the front end of estimating
the cost of what all of these rules that they were putting in place
with respect to Dodd-Frank would be and, therefore, did not consider
them properly, and the benefits were far less than the cost imposed.
With that, I respectfully urge my colleagues to defeat this
amendment, and I reserve the balance of my time.
Ms. WATERS. May I inquire as to how much time I have remaining on
this amendment?
The CHAIR. The gentlewoman from California has 1\1/2\ minutes
remaining.
Ms. WATERS. Thank you very much, Mr. Chairman.
I just want to make clear my opposition to anything other than
preventing judicial review on cost-benefit analysis.
Again, I am very appreciative to my colleagues who also share my
concerns and, again, have proposed an amendment that would establish a
heightened standard of judicial review, and I support that amendment.
I do not want anyone to be confused that I believe that that
amendment would solve the problem. I still think that, if that
amendment is adopted, the bill would still impose heavy administrative
hurdles on the CFTC.
This is not about simply reauthorization at any cost with anything in
the bill. This is about having a CFTC that really works, that is not
burdened with the kind of cost-benefit analysis that we have seen
burdening other of our agencies that have tried to do their job,
including the SEC.
I would ask my friends who are listening to differentiate between
that amendment of my colleagues, who are addressing this concern in
their way, and my amendment that would prevent judicial review
altogether.
I yield back the balance of my time.
Mr. CONAWAY. Mr. Chair, I, too, agree with the gentlewoman that we
all want a very effective CFTC.
Reauthorizing the agency ought to be a part of looking at its
operations. Given the work that it did and didn't do during the Dodd-
Frank regulatory scheme that put in place 60 new rules, we don't
believe that the cost-benefit rules that were in place under section
15(a) were properly used and did not generate the benefits that the
impact of a properly vetted cost-benefit analysis would have on each
and every rule.
With that, I urge my colleagues to vote against the amendment, and I
yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from California (Ms. Waters).
The question was taken; and the Chair announced that the noes
appeared to have it.
Ms. WATERS. Mr. Chair, I demand a recorded vote.
The CHAIR. Pursuant to clause 6 of rule XVIII, further proceedings on
the amendment offered by the gentlewoman from California will be
postponed.
Amendment No. 5 Offered by Ms. Moore
The CHAIR. It is now in order to consider amendment No. 5 printed in
House Report 113-476.
Ms. MOORE. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 11, strike line 1 and all that follows through page
12, line 22, and insert the following:
SEC. ___. SENSE OF THE CONGRESS.
It is the sense of the Congress that the Commodity Futures
Trading Commission is required by law to consider the costs
and benefits when promulgating rules and issuing orders, and
is held accountable to this requirement by our courts.
Current law requires the Commission to conduct economic
analyses pursuant to the Paperwork Reduction Act, the
Congressional Review Act, and the Regulatory Flexibility Act,
as
[[Page H5633]]
other agencies do. Unlike any other financial regulator, the
Commission is also bound by the Commodity Exchange Act to
consider the protection of market participants and the
public; the efficiency, competitiveness, and financial
integrity of futures markets; price discovery; sound risk
management practices; and other public interest
considerations. Notably, the Federal courts hold the
Commission accountable and vacate rulemaking that does not
meet statutory requirements, as demonstrated by the ruling by
a United States district court on the Commission's rule on
commodity position limits.
The CHAIR. Pursuant to House Resolution 629, the gentlewoman from
Wisconsin (Ms. Moore) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentlewoman from Wisconsin.
Ms. MOORE. Mr. Chair, my amendment is really rather straightforward.
It preserves the ability of the Commodities Futures Trading Commission
to regulate derivatives markets, while maintaining the reasonable cost-
benefit provisions that are already in the law.
Just to give you a little history, Mr. Chair, as we know, unregulated
derivatives transactions precipitated the 2008 financial crisis, which
this country is still struggling to recover.
Section 203 is not something, as I have heard earlier in this debate,
that will just make it more facile for manufacturers or for end users
or farmers.
It is a Trojan horse designed to deregulate derivatives markets by
providing Wall Street favorable terms and means to sue to overturn laws
and regulations, not on substance, not even on congressional intent,
but by challenging economic studies in court.
{time} 2030
Regulatory gaps in derivatives regulation will put taxpayers back on
the hook for Wall Street excesses.
Mr. Chairman, I will enter into the Record an analysis that I did. It
was posted in The Huffington Post: ``GOP `Cost-Benefit' Bill Benefits
Wall Street and Costs Americans.''
[From the Huffpost Politics, May 17, 2013]
GOP `Cost-Benefit' Bill Benefits Wall Street and Costs Americans
(By Rep. Gwen Moore)
Republicans again have it all wrong on the substance and
politics as they bring to the House floor the SEC Regulatory
Accountability Act, or the so-called SEC ``cost-benefit''
bill. Despite the innocuous name of the bill, Americans
should not be fooled. The bill seeks to not only undo Dodd-
Frank, but all financial market regulation past, present, and
future. It is a bad bill for American taxpayers and for free
market capitalism.
By requiring an overly stringent and arbitrary accounting
of ``costs'' to industry, the bill makes it impossible to
properly regulate markets. It seeks to eviscerate the mission
of the Securities and Exchange Commission (SEC) to protect
investors and would functionally subordinate all government
oversight and regulation, including by the elected Congress,
to industry interests. The bill functions as a one-way
ratchet to make deregulation an irresistible gravity, while
making regulation of even the worst industry practices a
nearly impossible hurdle.
The circumstances of the financial crisis have utterly
discredited the Ayn Rand-inspired deregulatory zeal that the
proponents of this bill insist on advancing. It is a model
that does not work and that led to economic calamity and
pain. Instead, the supporters of this bill are hoping that
rhetoric can mask reality.
Securities law already directs the SEC ``to consider'' the
cost-benefit of rulemakings. President Obama also directs the
SEC to conduct cost-benefit analysis of rulemakings. I
support the cost-benefit analysis mandates already contained
in federal securities law and President Obama's executive
order. So what does the SEC Regulatory Accountability Act
add? As former SEC Chairman Arthur Levitt explains in the New
York Times, the bill subjects the SEC to an impossibly
subjective review of all regulations. This bill was
transparently designed to allow each regulation to be
challenged in court by industry, but not by consumer
advocates.
The primary mission of the SEC is investor protection. The
bill undermines that mission by permitting industry to sue
the government in order to overturn regulations. Even when
Congress passes laws to protect investors, like Dodd-Frank,
the SEC would be constrained in issuing rules under this bill
by the mandate to prioritize even tertiary costs to industry
over investor protection, or any other priority Congress
sets, such as constraints on systemic risks. In other words,
it creates a government for industry over the People.
The bill is clearly bad for consumer protection and
taxpayers as it ushers in a new world where Wall Street
functionally decides the rules, and it is caveat emptor for
financial services end-users. However, it is not even good
for industry in the broader sense. It would mean that
rulemakings would take even longer, as the SEC struggled to
meet the impossibly subjective economic cost-benefit standard
to stave off the coming court battle over competing economic
impact projections. The ink would not be dry on a SEC rule
before the race to the courthouse door to challenge the
regulations would begin. Presumably, the most powerful
industry participants would challenge the rules in the way
that achieves their narrow interest, which may be to the
detriment of investors or other less-affluent market
participants. In this way, the most powerful industry
interests would be able to not only use the courts to undo
consumer protections, but to also seek competitive advantage
over competitors.
In Congress, I hear a lot from the financial industry about
``uncertainty.'' There would never be certainty in securities
markets if this bill were to ever become law. However, my
primary concern is not for industry. It is for the People.
The bill would eventually degrade consumer protection in
financial markets until no investor could have faith in U.S.
financial markets. The bill would allow firms and markets to
operate unchecked. The industry with the best lawyers would
reign, regardless of business model, practices, or any other
market consideration. Congress would be powerless to help.
This legislation rejects the lessons of the financial crisis
and statutorily mandates the mistakes that led to it, with
the taxpayers on the hook.
____
Page 19, beginning on line 15, strike ``United States Court
of Appeals for the District of Columbia Circuit or the United
States Court of Appeals for the circuit'' and insert ``United
States District Court for the District of Columbia or the
United States District Court for the district''.
Ms. MOORE. I can tell you that among the requirements of this new
section 203 is a mandate for regulators to consider ``available
alternatives to direct regulation.''
Alternatives to regulation? What are we talking about here?
As a Member of Congress--and all of us who are accountable to
voters--we should not be comfortable passing laws only to have
regulators not implement them because Wall Street hedge funds or swap
dealers object to a cost study issued with the regulation.
The Wolf of Wall Street should not get a veto over regulations
because he can produce a self-serving study that a regulation may
burden him in some way.
Mr. Chairman, how much time do I have remaining?
The CHAIR. The gentlewoman from Wisconsin has 2\1/2\ minutes
remaining.
Ms. MOORE. Mr. Chairman, I reserve the balance of my time.
Mr. CONAWAY. Mr. Chairman, I rise in opposition to the amendment.
The CHAIR. The gentleman from Texas is recognized for 5 minutes.
Mr. CONAWAY. Mr. Chairman, we have already talked at length about the
benefits of cost-benefit analysis, and section 203 would bring the
discipline necessary to the agency for them to consider the costs and
benefits when prescribing a new rule or regulation.
The gentlelady's remarks would be much more in line if she were
strictly asking to strike the section, but she is asking for a sense of
Congress. Why would we need a sense of Congress based on her arguments
that CFTC doesn't need this issue at all? I would understand her
arguments a lot better if she would have simply asked for a strike.
I am going to oppose the gentlewoman's amendment because her
amendment is a stalking horse, because it would simply replace the
bipartisan, well-crafted consideration for the new cost-benefit
analysis for the CFTC with a sense of Congress. That, in my view, would
gut and negate the value of having the agency actually go through, as
they propose a rule, to determine what will be the cost and what will
be the benefits.
We are always going to have regulations. God started us off with 10.
We are going to have regulations, but they ought to make sense, they
ought to regulate the minimum amount needed to regulate, and when the
usefulness goes away, they should expire as well.
So as an agency conducts that process, taking into consideration the
cost and benefits is an appropriate step as they put together
regulations. It doesn't mean that the cost-benefit analysis will
control in every instance, but it does allow for a better sense that
those who are being regulated here have their voices heard during the
process. And then if the agency has done a proper cost-benefit
analysis, those who are regulated will stand a better chance of
voluntarily complying with those new rules, we will have less
[[Page H5634]]
acrimony during the process, and perhaps even less litigation if the
agency would use a proper cost-benefit analysis and reflect the impact
of that analysis in the rules.
With that, I will oppose the amendment, and I reserve the balance of
my time.
Ms. MOORE. Mr. Chairman, those bipartisan groups who do not learn
from history are doomed to repeat it. We, on a bipartisan basis, didn't
regulate these derivatives, and we will, unfortunately, learn our
lesson.
I yield such time as she may consume to the gentlewoman from
California (Ms. Waters), ranking member of the Financial Services
Committee.
Ms. WATERS. Thank you very much for yielding additional time to me to
talk about cost-benefit analysis.
I think the gentlelady has made a real case for what we are dealing
with here.
First of all, we know--and I guess we all agree--that prior to the
meltdown that we had that caused the recession in this country, we did
not have the kind of oversight that we needed on derivatives.
We worked very hard to bring about transparency. We worked very hard
to get a handle on the role that derivatives played in this meltdown we
had that caused us almost to go into a depression. And here we are
trying to implement the reforms, trying very hard to protect the
American public and those ends users that have been talked about so
much today.
Cost-benefit analysis is just another way that has been injected into
this whole attempt to regulate that would place unreasonable burdens on
the CFTC and basically prohibit them from doing their job.
In offering this amendment, the gentlelady has made it very clear,
and she has added additional support to what we have been talking about
today relative to cost-benefit analysis. And so I hope that not only
the information we have presented, but the information that she has
presented is enough to have people understand what we need to do in
order to protect the CFTC's ability to do its job and to carry out its
mission.
Ms. MOORE. Section 203 takes us back to the day before AIG melted
down. We are moving backwards in time and not forward with
strengthening our economy.
With that, I yield back the balance of my time.
Mr. CONAWAY. Mr. Chairman, throughout the debate on this bill--in
committee, in subcommittee--we have made the point over and over that
this is simply a prospective change to the rules for the Commission. It
has absolutely nothing to do with the rules that are already in place.
The 60-some odd rules that are in place to protect under Dodd-Frank are
unaffected by this change to the CFTC's rules and cost-benefit
analysis.
In the future, if Congress decides on a massive law change, as they
did with Dodd-Frank--one side of the House decided that--and the CFTC
has to go through this, at that point in time these rules come into
effect. But title VII to Dodd-Frank and all the changes that were made
at the CFTC are in place.
So this is not going backwards. It is not looking backwards. This is
simply a prospective change to the way the CFTC should operate going
forward. They should have been operating under this rule anyway, but
they weren't. The rules were antiquated. There were not enough teeth in
them. So Chairman Gensler and others took advantage of it.
This will close that loophole and future chairmen will have to abide
by a rational cost-benefit analysis program that will improve the
regulations.
With that, Mr. Chairman, I urge my colleagues to oppose the
amendment, and I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Wisconsin (Ms. Moore).
The question was taken; and the Chair announced that the noes
appeared to have it.
Ms. MOORE. Mr. Chairman, I demand a recorded vote.
The CHAIR. Pursuant to clause 6 of rule XVIII, further proceedings on
the amendment offered by the gentlewoman from Wisconsin will be
postponed.
Amendment No. 6 Offered by Ms. Jackson Lee
The CHAIR. It is now in order to consider amendment No. 6 printed in
House Report 113-476.
Ms. JACKSON LEE. Mr. Chairman, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 19, beginning on line 15, strike ``United States Court
of Appeals for the District of Columbia Circuit or the United
States Court of Appeals for the circuit'' and insert ``United
States District Court for the District of Columbia or the
United States District Court for the district''.
The CHAIR. Pursuant to House Resolution 629, the gentlewoman from
Texas (Ms. Jackson Lee) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Texas.
Ms. JACKSON LEE. Mr. Chairman, again, I thank the chairman and
ranking member of the Financial Services Committee.
My amendment is simple. It would preserve existing law where a legal
challenge to a CFTC regulation is reviewed first by the district court.
And then, following an opinion by a district court judge, an appeal, if
any, is taken to the court of appeals.
Let me, first of all, refer my colleagues to the joint report by the
Agriculture Committee where specifically it says that the general
review provisions of the APA would apply, requiring parties seeking to
challenge CFTC rules to file a claim before a U.S. district court.
And it goes on to give those particular details. Then it goes on to
indicate that to follow the review provisions of the APA--this going
into a district court--the CFTC's general counsel indicated that he
would not object to a change.
I would make the argument that it is not the general counsel but it
is the individual consumer who should have the opportunity in a
district court--either in their district or in the District of
Columbia--to be able to make a record and to ensure that all of the
facts of the issue dealing with the rule are fully vetted. And that
will happen if you have the opportunity to go first to the district
court.
Preserving existing law where a legal challenge to a CFTC regulation
is reviewed first by the district court and then followed by an opinion
by a district court judge gives the opportunity for a full briefing--a
robust record that can be developed along the legal issue and fact
issues, and also it reduces the ability of the industry to undermine
important Dodd-Frank derivatives.
In my earlier statement on the floor, I indicated that many of the
little guys are in the commodities. Dealing with that, they need the
opportunities to have, in essence, the double-check on rules that may
impact their business.
With respect to Dodd-Frank and this authorizing legislation, let us
not throw the baby out with the bath water.
We all remember the dark days of September and October of 2008. The
financial markets needed to be bailed out. I do not want to see that
repeated.
So, again, the amendment is simple. It goes back to existing law. I
cannot imagine that the general counsel would oppose existing law. The
statement says he didn't mind. But, again, didn't mind closing down
further opportunities for consumers to have a record made on something
that they may be opposing?
So I would ask my colleagues to support the Jackson Lee amendment,
and I reserve the balance of my time.
Mr. Chair, I wish to thank the Chair and Ranking Member for their
work on this bill. We all know that the Agriculture Committee is one of
the hardest working--and also has one of the most diverse missions in
Congress. I thank you for this opportunity to briefly explain my
amendment. It is simple and makes a significant improvement to the
bill.
My amendment modifies Section 212 on judicial review that on page 19,
lines 15 through 17 strikes ``United States Court of Appeals for the
District of Columbia Circuit or the United States Court of Appeals for
the circuit,'' and replaces with ``United States District Court for the
District of Columbia or the United States Court for the district.
Doing so would preserve existing law, where a legal challenge to a
CFTC regulation is reviewed first by the district court, and then
following an opinion by a district court judge, an appeal, if any, is
taken in the court of appeals.
[[Page H5635]]
This process provides for a more robust development of legal issues
and a broader record in any appeal, reducing the ease of industry to
undermine important Dodd-Frank derivatives rulemakings.
With respect to Dodd-Frank and this authorizing legislation, Mr.
Chairman, let us not throw out the baby with the bath water. We all
remember the dark days of September and October 2008 when the financial
markets needed to be bailed out. I do not want to repeat that.
And more importantly, many of the residents of the 18th District of
Texas have invested in homes, stocks, and education--and to see it all
flittered away because someone on Wall Street, France, or Houston even,
pushed the wrong button, generating a contra-trade when they meant to
bet in the other direction--is not what Americans want to see.
I urge my colleagues to vote for fairness and judicial economy, and
preserve existing law by supporting the Jackson Lee Amendment.
Mr. LUCAS. Mr. Chairman, I claim the time in opposition to the
amendment.
The CHAIR. The gentleman from Oklahoma is recognized for 5 minutes.
Mr. LUCAS. Mr. Chairman, I yield myself such time as I may consume.
In crafting the Consumer Protection and End User Relief Act, I worked
closely with Ranking Member Peterson to ensure that judicial review of
CFTC rules would be on the same footing as a review of security laws
from the SEC, the Securities and Exchange Commission.
The current disparity between security laws and the Commodity
Exchange Act has resulted in confusion in the past, as aggrieved
parties were unsure of where to go to seek review of CFTC rules.
Quite simply, I urge my colleagues to vote against what I fear is a
regressive amendment.
With that, I reserve the balance of my time.
Ms. JACKSON LEE. Mr. Chairman, how much time do I have remaining?
The CHAIR. The gentlewoman from Texas has 2 minutes remaining.
Ms. JACKSON LEE. I appreciate the chairman's commentary about the
SEC. I am well aware that the SEC has driven itself to utilizing the
Court of Appeals.
I would make the argument that there is a smaller investor that tends
to engage in commodities, and, therefore, transparency and the
opportunity to create a record is far more important in commodities.
I would also make the point that my amendment is supported by the
Commodity Markets Oversight Coalition, which is asking for us to
continue with existing law.
They, of course, include Airlines for America, American Baker's
Association, California Black Farmers, California Independent Oil
Marketers Association, Colorado Petroleum Marketers Association,
Florida Petroleum Market Marketers Association, Maine Energy Marketers
Association, the National Association of Oil and Energy Service
Professionals, National Family Farm Coalition, among others, which I
will include in the Record.
National Grange, New Jersey Citizen Action Oil Group, New Mexico
Petroleum Marketers Association, North Dakota Petroleum Marketers
Association, Oil Heat Council of New Hampshire, Petroleum Marketers and
Convenience Stores of Iowa, Public Citizen, Ranchers-Cattlemen Action
Legal Fund, Wyoming Petroleum Marketers Association, to name just a
few, who clearly just ask for a simple request: when there is a need to
challenge the rules, allow a full record to be made at the district
court level. Commodities is not in the same vain as the SEC.
I would argue that there is need for greater highlight in
information, and that the Jackson Lee amendment should be accepted for
that kind of transparency and treating small investors fairly and
giving them the opportunity to fully pursue their position when it
comes to a particular rule.
I would ask my colleagues to support the amendment, and I yield back
the balance of my time.
commodity marketer overnight coalition
Supporting organizations: Airlines for America; American
Baker's Association; American Feed Industry Association;
American Public Power Association; American Trucking
Associations; California Black Farmers & Agriculturalists
Association; California Independent Oil Marketers
Association; California Service Station and Automotive Repair
Association; Colorado Petroleum Marketers Association;
Connecticut Energy Marketers Association; Consumer Federation
of America; Florida Petroleum Marketers Association; Fuel
Merchants Association of New Jersey; Gasoline & Automotive
Service Dealers of America; Institute for Agriculture and
Trade Policy; Louisiana Oil Marketers & Convenience Store
Association; Maine Energy Marketers Association; Montana
Petroleum Marketers & Convenience Store Association; NAFA
Fleet Management Association; National Association of Oil &
Energy Service Professionals.
National Association of Shell Marketers; National Family
Farm Coalition; National Farmers Union; National Grange;
National Latino Farmers & Ranchers Trade Association; New
England Fuel Institute; New Jersey Citizen Action Oil Group;
New Mexico Petroleum Marketers Association; New York Oil
Heating Association; North Dakota Petroleum Marketers
Association; North Dakota Retail Association; Ohio Petroleum
Marketers & Convenience Store Association; Oil Heat Council
of New Hampshire.
Oil Heat Institute of Long Island; Oil Heat Institute of
Rhode Island; Organization for Competitive Markets; Petroleum
Marketers & Convenience Store Association Kansas; Petroleum
Marketers & Convenience Stores of Iowa; Petroleum Marketers
Association of America; Public Citizen; Ranchers-Cattlemen
Action Legal Fund (R-CALF) USA; Utah Petroleum Marketers and
Retailers Association; Vermont Fuel Dealers Association; West
Virginia Oil Marketers and Grocers Association; Wyoming
Petroleum Marketers Association.
{time} 2045
Mr. LUCAS. Mr. Chairman, I yield myself whatever time I might
consume.
Once again, I respectfully ask my colleagues to vote against what I
am concerned is a regressive amendment.
With that, I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Texas (Ms. Jackson Lee).
The question was taken; and the Chair announced that the noes
appeared to have it.
Ms. JACKSON LEE. Mr. Chairman, I demand a recorded vote.
The CHAIR. Pursuant to clause 6 of rule XVIII, further proceedings on
the amendment offered by the gentlewoman from Texas will be postponed.
Amendment No. 7 Offered by Mr. Fincher
The CHAIR. It is now in order to consider amendment No. 7 printed in
House Report 113-476.
Mr. FINCHER. Mr. Chairman, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 24, after line 21, insert the following:
SEC. ___. GAO STUDY ON COMMISSION LEASES.
(a) The Comptroller General of the United States shall, in
consultation with the Commodity Futures Trading Commission
Inspector General, conduct a study and publish a report
regarding achieving efficiencies in leasing and rental costs
at the Commodity Futures Trading Commission.
(b) The report shall be published within 90 days after the
date of the enactment of this Act regarding achieving
efficiencies in leasing and rental costs of buildings
occupied by the Commodity Futures Trading Commission, and
shall include recommendations to the Chairman of the
Commodity Futures Trading Commission and the congressional
committees of jurisdiction regarding the following:
(1) Average occupancy rates and leasing costs of buildings
across the Federal Government compared to those currently in
effect with respect to buildings and locations occupied by
the Commodity Futures Trading Commission;
(2) Changes to leasing authority that could achieve
efficiencies, including the revocation of independent leasing
authority and transfer of authority to the Administrator of
General Services;
(3) The recommendations and responses contained in the
report by the Commodity Futures Trading Commission Inspector
General, dated June 4, 2014.
(4) Other related recommendations that would achieve
efficiencies in leasing and rental costs of buildings
currently occupied by the Commodity Futures Trading
Commission.
(5) Is the Commodity Futures Trading Commission violating
any laws, including the Anti-Deficiency Act, by entering into
these leases, particularly those with more than 5-year terms,
and if so, how they can avoid violating Federal law in the
future.
(c) The Chairman of the Commodity Futures Trading
Commission shall report to the congressional committees of
jurisdiction within 60 days after receipt of the report as to
whether the Chairman accepts or rejects each of the
recommendations of the Comptroller General, and an
explanation for each decision.
The CHAIR. Pursuant to House Resolution 629, the gentleman from
Tennessee (Mr. Fincher) and a Member opposed each will control 5
minutes.
[[Page H5636]]
The Chair recognizes the gentleman from Tennessee.
Mr. FINCHER. Mr. Chairman, my amendment to H.R. 4413 simply requires
the Comptroller General of the United States to conduct a study of the
efficiencies in leasing and rental costs at the Commodity Futures
Trading Commission.
The study would determine if the CFTC is violating any laws,
including the Antideficiency Act, by entering into these leases,
particularly those with more than 5-year terms and, if so, how it can
avoid violating Federal law in the future.
In a recent report from the inspector general of the Commodity
Futures Trading Commission, we found that the CFTC is currently using
just one-third of its Kansas City regional office.
The CFTC is paying approximately $44,000 per month, meaning that,
over the 10-year life of the lease, the CFTC will pay $5.3 million,
with $3.6 million dedicated to vacant office space.
However, in this letter from the inspector general, we found that
this is not limited to just the Kansas City office. In fact, over the
life of the CFTC's current leases, more than $200 million will be spent
with approximately $64 million dedicated to vacant office spaces.
This is simply outrageous, and it is the latest example of government
waste of taxpayer money. In fact, the CFTC management, in its May 14
response to the inspector general, agreed that there is excess vacant
space.
However, the CFTC argued the lease of so many vacant offices was a
justifiable expense because future funding increases are within the
``realm of possibility.''
Mr. Chairman, Congress has appropriated approximately 66 percent of
the CFTC's budget request. Let's just look over the last few years. In
fiscal year 2012 and in fiscal year 2013, the CFTC requested $308
million and received $205 million. In fiscal year 2014, the CFTC
requested $315 million and received $215 million.
I agree with the inspector general that the realm of possibility is
not the standard taxpayers expect when the government deals with their
money.
Mr. Chairman, is it really too much to ask agencies that are spending
millions on rent to actually need and use this space?
The inspector general hit the nail on the head when he stated that:
The CFTC and the public are better served by the risk of a
temporary shortage of space than a 100 percent certainty of
spending substantial taxpayer dollars on the leases of vacant
spaces.
It is just common sense that, if you can't afford it, you don't buy
it. For these reasons, I urge my colleagues to vote for this amendment
and ensure that the CFTC stops relying on the realm of possibility as
justification for wasting taxpayer dollars on empty office spaces.
With that, I reserve the balance of my time.
Mr. PETERSON. Mr. Chairman, I claim the time in opposition.
The CHAIR. The gentleman from Minnesota is recognized for 5 minutes.
Mr. PETERSON. In opposition, I want to say that I have no opposition
to this amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. FINCHER. Mr. Chairman, I urge the support of the amendment, and I
yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the gentleman
from Tennessee (Mr. Fincher).
The amendment was agreed to.
Amendment No. 8 Offered by Mr. Garrett
The CHAIR. It is now in order to consider amendment No. 8 printed in
House Report 113-476.
Mr. GARRETT. Mr. Chairman, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 55, after line 2, insert the following:
SEC. ___. TREATMENT OF CERTAIN FUNDS.
(a) Amendment to the Definition of Commodity Pool
Operator.--Section 1a(11) of the Commodity Exchange Act (7
U.S.C. 1a(11)) is amended by adding at the end the following:
``(C)(i) The term `commodity pool operator' does not
include a person who serves as an investment adviser to an
investment company registered pursuant to section 8 of the
Investment Company Act of 1940 or a subsidiary of such a
company, if the investment company or subsidiary invests,
reinvests, owns, holds, or trades in commodity interests
limited to only financial commodity interests.
``(ii) For purposes of this subparagraph only, the term
`financial commodity interest' means a futures contract, an
option on a futures contract, or a swap, involving a
commodity that is not an exempt commodity or an agricultural
commodity, including any index of financial commodity
interests, whether cash settled or involving physical
delivery.
``(iii) For purposes of this subparagraph only, the term
`commodity' does not include a security issued by a real
estate investment trust, business development company, or
issuer of asset-backed securities, including any index of
such securities.''.
(b) Amendment to the Definition of Commodity Trading
Advisor.--Section 1a(12) of such Act (7 U.S.C. 1a(12)) is
amended by adding at the end the following:
``(E) The term `commodity trading advisor' does not include
a person who serves as an investment adviser to an investment
company registered pursuant to section 8 of the Investment
Company Act of 1940 or a subsidiary of such a company, if the
commodity trading advice relates only to a financial
commodity interest, as defined in paragraph (11)(C)(ii) of
this section. For purposes of this subparagraph only, the
term `commodity' does not include a security issued by a real
estate investment trust, business development company, or
issuer of asset-backed securities, including any index of
such securities.''.
The CHAIR. Pursuant to House Resolution 629, the gentleman from New
Jersey (Mr. Garrett) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from New Jersey.
Mr. GARRETT. Mr. Chairman, I rise today to offer an amendment to H.R.
4413, the Customer Protection and End User Relief Act.
This amendment seeks to address duplicative and overburdensome
regulatory and registration requirements being faced by pensioners,
savers, retirees, endowments, municipalities, and many other investors.
Registered investment companies, RICs, play a critical role in the
U.S. financial savings and retirement landscape. Millions of retirees,
pensioners, and other savers across the country seek access to RICs to
invest their hard-earned money and savings to invest for retirement,
college tuition, or a first home.
Currently, all RICs are registered with and are primarily regulated
by the SEC and have to comply with an extensive set of rules and
requirements, including the oversight of their derivatives holdings.
Back in 2012, the Commodity Futures Trading Commission, the CFTC,
acting on its own initiative and without any direction from Congress,
significantly narrowed a longstanding exclusion from the commodity pool
operator, CPO, registration for ``otherwise regulated entities,'' but
only for RICs, which are comprehensively regulated by SEC and typically
do not resemble traditional commodity pools.
Because all RICs are currently registered with and are regulated by
the SEC, the CFTC's rules change needlessly forces fund companies that
manage literally thousands of funds, representing literally millions of
U.S. pensioners, savers, and retirees to do what? To pay for costly and
duplicative registration requirements.
You see, even without registration, the CFTC still has enforcement
authority over all commodity contracts. This amendment would not, in
any way, change the extent to which all commodity transactions are
subject to the transaction level requirements of regulation, such as
reporting, such as clearing, such as trading, and even margin. This
amendment simply eliminates the duplicative regulatory and registration
costs faced by these funds.
Also, by more appropriately tailoring the CFTC's regulatory reach,
this amendment has the added benefit of ensuring that the CFTC has
actually even more funds and resources available to do what? To
implement Dodd-Frank and enforce the new swaps regulatory regime.
This will help the agency prioritize, even better, their current
workload and even reduce the need for a significant increase in the
agency's budget during these challenging fiscal times.
Mr. Chairman, at a time when millions of American households are
approaching retirement and their investment returns are significantly
reduced because of the Federal Reserve's low interest rate policies, it
is very important that government public policy
[[Page H5637]]
minimize the regulatory costs of investment for our retirees, for our
pensioners, and for our savers.
We must strike the right balance between ensuring investors have the
ability to earn adequate returns on their investments with the
appropriate regulatory oversight of our financial markets.
Please help restore this balance and protect investors by voting
``yes'' for the Garrett amendment to H.R. 4413.
I reserve the balance of my time.
Mr. PETERSON. Mr. Chairman, I claim the time in opposition.
The CHAIR. The gentleman from Minnesota is recognized for 5 minutes.
Mr. PETERSON. Mr. Chairman, as one great American said: now, we are
going to hear the rest of the story.
This is a situation where industry lost in court, and now, they are
coming to Congress to try to accomplish what they couldn't do through
the court system, so I rise in opposition.
From President Reagan's time to President Clinton's, the CFTC has--on
its own accord--exempted registered investment companies, RICs, from
having to register as commodity pool operators or as commodity trade
advisers with the CFTC, provided they meet two conditions: one, that
the commodity futures activity occurring in the funds they managed was
below a set threshold; and, two, that they did not market to retail
customers as a commodity pool or investment vehicle for commodity
futures or commodity options.
During the first term of the second Bush administration, the CFTC
eliminated both the threshold and the retail marketing restriction.
These steps allowed investment companies unlimited access to commodity
futures markets without any CFTC oversight and were opposed by the
National Futures Association, the frontline regulator for the CFTC.
In 2010, the National Futures Association petitioned the CFTC to
reconsider the broad exemption for registration given for RICs. From
that request and following the passage of the Dodd-Frank Act, giving
the Commission new jurisdiction over swaps, the CFTC reconsidered its
exemption for RICs and reinstituted the thresholds for trading activity
and retail marketing conditions that would trigger registration with
the CFTC.
Not surprisingly, the Investment Company Institute, which represents
these funds and the Chamber of Commerce, then sued the CFTC. The
Federal district court ruled in favor of the CFTC, and the court ruled
for the agency in summary judgment.
The funds appealed, and the U.S. Court of Appeals upheld the ruling
in favor of the CFTC. After the CFTC won its case, the Commission set
up a harmonization regime versus SEC rules for the registered trading
advisers who were involved in this. If the CFTC and SEC rules conflict,
the RIC can defer to the SEC rules.
Despite that accomodation by the Commission, its having lost both the
regulation and the litigation, the financial community is here now with
this legislation.
The Garrett amendment attempts to accomplish what the financial
industry could not achieve in the courts. The amendment would
permanently remove the CFTC's jurisdiction over RICs registered with
the SEC, regardless of how big they play in the futures or swaps market
and regardless of their reach to retail customers.
The amendment's supporters will say that this only applies to
investments in futures, options on futures, and swaps in financial
commodities, as opposed to agriculture or energy commodities; but I
would remind the Members that it was financial swaps, like credit
default swaps, that contributed to the financial collapse in 2008. It
wasn't energy or agriculture swaps.
The SEC failed in its oversight in 2008. I don't want to have to rely
on them to keep an eye on financial instruments, and I don't want to
have a repeat of the Bernie Madoff scandal, but, this time, in futures.
The CFTC has gone out of its way to accommodate industry concerns
over duplicative oversight through its substituted compliance regime.
Given their past bad behavior, I don't think we should rely on one
agency to keep an eye on these guys, so I urge you to defeat this
amendment.
Mr. GARRETT. Will the gentleman yield?
Mr. PETERSON. I yield to the gentleman from New Jersey.
Mr. GARRETT. Your last sentence was that you do not wish to rely on
just one entity--presumably the SEC--in the enforcement of these
contracts and so on and so forth.
Mr. PETERSON. It is only in certain circumstances.
Mr. GARRETT. Right, but we do nothing in this amendment to take away
from the CFTC their enforcement authority. They retain that.
All that has changed is the registration requirement. The CFTC and
the SEC retain both their mutual and harmonious, if you will,
enforcement authorities under all of the contracts that are respective
to these provisions. That is not taken away.
We just say: Why duplicate the effort as far as registration
requirements? I just wanted to clarify that point.
Mr. PETERSON. I think there is more to it than that.
Mr. GARRETT. No.
Mr. PETERSON. They wouldn't go through all of this to try to get the
CFTC to do what they wanted, then go through the courts, and then come
here with legislation, if this were just some minor registration issue,
no.
Mr. GARRETT. Actually, yes, they would.
The CHAIR. The gentleman from Minnesota controls the time, and his
time has expired.
The gentleman from New Jersey has 1\1/2\ minutes remaining.
Mr. GARRETT. Great. I would like to hear from our chairman.
Before that, Mr. Chairman, I yield 1 minute to the gentleman from
Georgia (Mr. David Scott).
Mr. DAVID SCOTT of Georgia. This is a very interesting debate in
listening to it, but I think the simple point here, Mr. Chairman, is
that, number one, this just deals with the registration. Prior to 2012,
the SEC handled all of the RICs.
{time} 2100
Now, we have caught up in the middle of this millions and millions of
pensioners, retirees, people who are getting into the golden years of
their lives.
My hope is that we can pass this amendment. It only deals with
registration. The ranking member has brought up some interesting
points. That is why we do have the courts to settle those.
I think here, tonight, we need to think of what this simple amendment
does is stop duplicative areas within registration and gives a better
hand for our retirees today.
Mr. GARRETT. I thank the gentleman from Georgia for his support for
this legislation and for the amendment.
I yield now the remainder of my time to the chairman of the
committee, and congratulate him for his great work on the underlying
legislation before us today.
Mr. LUCAS. Mr. Chairman, I thank the gentleman from New Jersey.
I would simply note: let's cut to the point here. The CFTC, when
finalizing the rules for registered investment companies, deferred
almost entirely to the SEC to regulate them, so this amendment is in
line with what the CFTC has already done.
I urge my colleagues to support the commonsense amendment. Let's just
do what is reflected here, and I thank the gentleman for his input.
Mr. GARRETT. Mr. Chairman, I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the gentleman
from New Jersey (Mr. Garrett).
The question was taken; and the Chair announced that the ayes
appeared to have it.
Mr. PETERSON. Mr. Chairman, I demand a recorded vote.
The CHAIR. Pursuant to clause 6 of rule XVIII, further proceedings on
the amendment offered by the gentleman from New Jersey will be
postponed.
Mr. LUCAS. Mr. Chairman, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Conaway) having assumed the chair, Mr. Bishop of Utah, Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 4413) to
reauthorize the Commodity Futures Trading Commission, to better protect
futures customers, to provide end users with market certainty, to make
basic reforms to
[[Page H5638]]
ensure transparency and accountability at the Commission, to help
farmers, ranchers, and end users manage risks to help keep consumer
costs low, and for other purposes, had come to no resolution thereon.
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