[House Report 112-391]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-391
======================================================================
PROTECTING MAIN STREET END-USERS FROM EXCESSIVE REGULATION
_______
February 8, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Lucas, from the Committee on Agriculture, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 3527]
[Including cost estimate of the Congressional Budget Office]
The Committee on Agriculture, to whom was referred the bill
(H.R. 3527) to amend the Commodity Exchange Act to clarify the
definition of swap dealer, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Main Street End-Users From
Excessive Regulation''.
SEC. 2. CLARIFICATION OF THE DEFINITION OF SWAP DEALER.
Section 1a(49) of the Commodity Exchange Act (7 U.S.C. 1a(49)) is
amended to read as follows:
``(49) Swap dealer.--
``(A) In general.--The term `swap dealer' means any
person who--
``(i) holds itself out as a dealer in swaps;
``(ii) makes a market in swaps;
``(iii) regularly enters into swaps with
counterparties as an ordinary course of
business for its own account; or
``(iv) engages in any activity causing the
person to be commonly known as a dealer or
market maker in swaps,
provided however, in no event shall an insured
depository institution be considered to be a swap
dealer to the extent it offers to enter into a swap
with a customer in connection with originating a loan
to the customer.
``(B) Inclusion.--A person may be designated as a
swap dealer for a single type or single class or
category of swap or activities and considered not to be
a swap dealer for other types, classes, or categories
of swaps or activities.
``(C) Exceptions.--
``(i) The term `swap dealer' does not include
a person that enters into swaps for such
person's own account, either individually or in
a fiduciary capacity, but not as part of
regular business activities as described in
subparagraph (A).
``(ii) In determining whether a person is a
`swap dealer' within the meaning of
subparagraph (A), any transaction entered into
for a person's own account for the purpose of
hedging or mitigating commercial risk shall not
be considered as part of that determination.
``(iii) The Commission shall by rule adopt
standards distinguishing the activities
described in subparagraph (A) and entering into
swaps for a person's own account for the
purpose of achieving one's own trading
objectives as determined by the Commission.
``(D) De minimis exception.--The Commission shall
exempt from designation as a swap dealer an entity that
enters into swap dealing transactions with or on behalf
of the person's customers if the aggregate gross
notional amount of the outstanding swap dealing
transactions entered into over the course of the
preceding calendar year does not exceed $3,000,000,000
(or such greater amount as the Commission may establish
as market conditions warrant), multiplied by the sum of
1 and the percentage (if any) by which the Consumer
Price Index for all Urban Customers published by the
Bureau of Labor Statistics of the Department of Labor
changed for the 12-month period ending the preceding
April 30.''.
SEC. 3. IMPLEMENTATION.
The amendments made by this Act 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; and
(2) through the promulgation of an interim final rule.
Brief Explanation
H.R. 3527 amends Section 1a(49)(C) of the Commodity
Exchange Act (CEA) to include 2 new exceptions to the
definition of ``swap dealer'': an exception for transactions
entered into to hedge or mitigate an entity's commercial risk,
and a directive for the Commodity Futures Trading Commission
(CFTC) to establish, by rule, a standard for distinguishing
between swap dealing activities and trading for one's own
account for one's own trading objectives.
In addition, H.R. 3527 requires the CFTC to exempt from
designation as a ``swap dealer'' entities that, over the
preceding calendar year, entered into less than $3 billion in
aggregate gross notional swap dealing transactions with or on
behalf of customers.
Purpose and Need
A central element of Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (P.L. 111-203) (the
Dodd-Frank Act) is the registration and regulation of ``swap
dealers.'' Registration as a swap dealer brings the most
comprehensive new regulatory regime in Title VII: swap dealers
are subject to clearing and execution requirements when they
trade with counterparties other than non-financial end-users,
reporting and recordkeeping requirements, new capital and
margin requirements, the Section 716 ``push-out'' rule, and
significant new business conduct standards to govern their
sales practices and interaction with counterparties.
Most of the derivatives activity in the U.S. is
concentrated among several large, complex and global financial
institutions. In fact, five banks alone collectively hold 86%
of the credit exposure and 96% of the total notional value of
all derivatives within the U.S. banking system. As such,
Congress targeted the swap dealer definition to those entities
that hold themselves out as dealers, make markets or are
commonly known in the market as ``dealers.'' In fact, the
Chairman of the CFTC, Gary Gensler, described the intent of
dealer regulation:
``I also think we need regulation of the
institutions, that Congress would actually have a
statutory regime for derivative dealers, somewhat like
we have for banks, where you have capital rules which
address the excess leverage, have business conduct
rules to make sure there is not fraud and manipulation
in the sales practices. And then, of course, lastly and
very importantly, reporting rules. These dealers--there
is about 15 or 20 around the globe that make up 99
percent of the market for over-the-counter
derivatives.''
The statutory definition of ``swap dealer'' requires the
CFTC to further define the term, which they did jointly with
the SEC in the proposal ``Further Definition of ``Swap
Dealer'', ``Security-based Swap Dealer'', ``Major Swap
Participant,'' ``Major Security-based Swap Participant,'' and
``Eligible Contract Participant'' (http://www.cftc.gov/ucm/
groups/public/@lrfederalregister/documents/file/2010-
31130a.pdf). It is important to note that the statutory
definition of ``swap dealer'' was derived from the securities
laws and the definition of a ``dealer'' in securities.
Distinguishing dealers from other market participants for the
purpose of securities regulation based upon that definition has
occurred for decades in the application and interpretation of
the Securities Exchange Act of 1934.
Many end-users, particularly from the energy and
agriculture sectors, testified in the Committee's hearings that
the CFTC's proposed definition of ``swap dealer'' is overly
broad and vague, and that it could result in them having to
register as swap dealers and subsequently be subject to the
most significant and costly regulations in Title VII--
regulations that were generally designed for large financial
institutions. For example, the proposed criteria used to
identify swap dealing activity could describe the activities of
many market participants that are not engaged in dealing
activity, such as ``dealers are generally available to enter
into swaps to facilitate other parties' interest in entering
into those instruments,'' and ``dealers tend to accommodate
demand for swaps.'' At the same time, registration as a swap
dealer is a self-selecting process; in other words, entities
will need to identify themselves as dealers based upon the
regulation and not upon an indication from the CFTC. This
increases the need for a clear, unambiguous rule to ensure
entities do not go unregistered.
Compounded by the breadth of the definition, the CFTC
proposed a ``de minimis'' exception that is too low (less than
$100 million notional amount annually, less than 20 swaps per
year, and less than 15 counterparties) to achieve Congress'
intent in providing for the exception. Congress expressly
granted the CFTC the authority to establish an exception for
entities that engage in only a small amount of swap dealing.
However, the proposed threshold would result in few, if any,
entities that would be eligible.
H.R. 3527 clarifies the definition of swap dealer to avoid
entities that are not swap dealers from having to register as
such. First, it clarifies that the Commission should not
consider swaps entered into for the purpose of hedging
commercial risk as ``dealing.'' Second, the bill directs the
CFTC to develop rules establishing standards by which to
distinguish entities that are acting as dealers, and those that
are trading for their own account to achieve their own trading
objectives. The SEC, in applying and interpreting the
securities ``dealer'' definition has long upheld a ``Dealer/
Trader'' distinction to permit entities that are trading for
their own investment objectives from having to register as
dealers. The SEC also proposes to uphold this distinction in
the definition of ``Security-based Swap Dealer,'' but the CFTC
does not. The second provision in H.R. 3527 directs the CFTC to
adopt a similar standard to be applied within the ``swap
dealer'' definition.
These important clarifications to the swap dealer
definition are critical to ensuring that end-users, the very
entities Congress intended to exempt from many of the new
regulations in Title VII, are not subject to the most
burdensome and costly new regulatory regime in Title VII. For
example, a recent study by the National Economic Research
Associates estimates that for non-financial commercial energy
firms, designation as a swap dealer would impose incremental
costs of $388 million.
Lastly, the bill increases the ``de minimis'' threshold to
$3 billion average aggregate gross notional to ensure entities
that are engaged in only a small amount of swap dealing will
not be regulated as such. As a reference, this is less than 5/
10,000 of 1% of the notional value of the entire U.S. swaps
market.
On February 10, 2011, Edward Gallagher of Dairy Farmers of
America, testified to the breadth of the definition and the
impact it would have on farmer cooperatives, summarizing well
the need to clarify the definition:
``We believe that by applying the ``interpretive
approach for identifying whether a person is a swap
dealer,'' as outlined in the proposed rule, CFTC would
likely capture a number of entities that were never
intended to be regulated as swap dealers, including
farmer cooperatives. This is because cooperatives
engage in activities that look very similar to those of
a dealer when they enter into swaps with farmers, local
elevators, and customers as they provide risk
mitigation services and products throughout the
agriculture and energy sector. If farmer cooperatives
were to be regulated as dealers, increased requirements
for posting capital and margin, complying with
reporting, record keeping and other regulatory
requirements intended for large systemically important
institutions could make providing those services
uneconomical to our members. Such action would result
in the unintended consequence of increasing the very
risk the law intends to mitigation.''
Section-by-Section
Section 1 is the short title, ``Protecting Main Street End-
Users from Excessive Regulation''.
Section 2 amends the Commodity Exchange Act to modify the
definition of swap dealer in the Dodd-Frank Act to prohibit the
CFTC from considering an entity's transactions entered into for
the purpose of hedging or mitigating commercial risk. It also
directs the commission by rule to adopt standards
distinguishing swap dealing activities from trading of swaps.
The amendment in section 2 (amendment to 1a(49)(D))
requires the CFTC to exempt from the designation of a swap
dealer anyone who enters into swap dealing transactions with or
on behalf of customers if the total amount of outstanding swap
dealing transactions is less than $3 billion, indexed to
inflation, over the last calendar year.
Section 3 excludes the amendments made by this bill from
the requirements of the Paperwork Reduction Act and from notice
and comment requirements of the Administrative Procedure Act.
Committee Consideration
I. HEARINGS
In the 112th Congress, the Committee has held seven
hearings, four Full Committee and two General Farm Commodities
and Risk Management Subcommittee hearings to examine the
implementation of Title VII of the Dodd-Frank Act and one Full
Committee hearing to examine legislative proposals related
thereto, including a discussion draft of H.R. 3527. The
Committee took testimony from witnesses that represented a
broad spectrum of participants in the derivatives markets.
In the following hearings, witnesses testified to the
CFTC's overly broad definition of ``swap dealer'' and the
importance of ensuring that end-users are not unnecessarily
miscategorized as swap dealers:
Public hearing to review implementation of title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act: February 10,
2011
Defining the Market: Entity and Product Classifications Under Title VII
of the Dodd-Frank Wall Street Reform and Consumer Protection
Act: March 31, 2011
Derivatives Reform: The View from Main Street: July 21, 2011
To review legislative proposals amending Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act: October 12,
2011
For example, on July 21, 2011 the Honorable Glenn English,
CEO of the National Rural Electric Cooperative Association
testified:
``The regulators have suggested they might interpret
this definition broadly enough to sweep in our not-for-
profit members. If so, such an interpretation has the
potential to be one of the more damaging unintended
consequences of the Dodd-Frank Act. If our members were
considered ``swap dealers,'' those cooperatives would
be subject to a slew of new capital-draining
requirements, business practices, and financial markets
regulations that Congress intended to impose on Wall
Street derivatives dealers. To put it bluntly--it would
be an incredible regulatory overreach for the CFTC to
apply the definition of ``swap dealer'' to rural
electric cooperatives--who are obviously not in the
business of derivatives dealing, but instead are not-
for-profit end-users of nonfinancial energy derivatives
to hedge commercial risk and protect consumers from
price volatility in wholesale power markets. The rural
electric cooperatives' core mission is keeping the
lights on for farmers, families and small businesses in
rural America, not dealing in the global swaps markets.
There are no ``Wall Street derivatives dealers'' in our
membership.''
Also on July 21, 2011, Mr. Randy Howard testified on behalf
of the City of Los Angeles, Department of Water and Power and
the Large Public Power Council stating:
``In particular, we are concerned that individual
LPPC members could be considered a ``swap dealer'' due
to certain transactions we use to hedge our costs.
LADWP and the members of LPPC do not belong within this
definition, as we hedge strictly to minimize commercial
risk and do not contribute to systemic risk of the
market. If our utility systems were regulated as swap
dealers, our ratepayers--the residents and businesses
which we are obligated to serve--would be swept into
the same regulatory regime meant to target financial
speculation.''
On October 12, Mr. Scott Cordes, President of Country
Hedging testified on behalf of the National Council of Farmer
Cooperatives:
``The uncertainty created by the ``definitions''
rules is NCFC's greatest concern as implementation
continues. As the rule was proposed, some activities of
cooperatives such as those previously mentioned would
appear to push cooperatives into the ``swap dealer''
category. Regulating farmer cooperatives as dealers
would increase requirements for posting capital and
margin on swaps it uses with other dealers to offset
the risk of providing risk management products and
services to its members and customers. This
requirement, combined with the cost of complying with
other regulatory requirements intended for large
financial institutions, could make providing those
services to a cooperative's member-owners uneconomical.
Such action would result in the unintended consequence
of increasing risk in the agricultural sector.''
II. FULL COMMITTEE
The Committee on Agriculture met, pursuant to notice, with
a quorum present, on January 25, 2012, to consider H.R. 3527,
to amend the Commodity Exchange Act to clarify the definition
of swap dealer, and other pending business. Chairman Lucas
offered an opening statement, as did Ranking Member Peterson
and Hultgren.
The bill, H.R. 3527 was placed before the Committee for
consideration and without objection a first reading of the bill
was waived and it was opened for amendment at any point. The
Chairman offered an Amendment in the Nature of a Substitute to
the bill, and counsel provided a brief explanation of the
amendment.
Mr. Costa was recognized to offer and explain an amendment
that would clarify that actions undertaken to comply with state
or local laws or regulations are specifically excluded in
determining whether an entity is a swap dealer. Discussion
occurred and without objection the amendment was withdrawn.
Mr. Walz as then recognized to offer and explain an
amendment that clarifies that clarifies that none of the
exceptions in section (c) of the ``Protecting Main Street End-
Users from Excessive Regulation Act'' should apply to financial
institutions. Discussion occurred and without objection the
amendment was withdrawn.
Mr. Peterson was recognized to offer and explain an
amendment to expedite implementation by excluding the
amendments made by the bill from the requirements of the
Paperwork Reduction Act and from notice and comment
requirements of the Administrative Procedure Act. By a voice
vote the Peterson amendment was adopted.
There being no further amendments, the Peterson motion to
approve the Amendment in the Nature of a Substitute to H.R.
3527, as amended was adopted by a voice vote.
By a voice vote, the Peterson motion to report the bill
favorably to the House with the recommendation that it do pass
was adopted.
The Committee then moved onto other pending business, where
at the conclusion of the meeting, Chairman Lucas advised
Members that pursuant to the rules of the House of
Representatives that Members have 2 calendar days to file such
views with the Committee.
Without objection, staff was given permission to make any
necessary clerical, technical or conforming changes to reflect
the intent of the Committee.
Chairman Lucas thanked all the Members and adjourned the
meeting.
Reporting the Bill--Roll Call Votes
In compliance with clause 3(b) of rule XIII of the House of
Representatives, H.R. 3527 was reported by voice vote with a
majority quorum present. There was no request for a recorded
vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee on Agriculture's
oversight findings and recommendations are reflected in the
body of this report.
Budget Act Compliance (Sections 308, 402, and 423)
The provisions of clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives and section 308(a)(1) of the
Congressional Budget Act of 1974 (relating to estimates of new
budget authority, new spending authority, new credit authority,
or increased or decreased revenues or tax expenditures) are not
considered applicable. The estimate and comparison required to
be prepared by the Director of the Congressional Budget Office
under clause 3(c)(3) of rule XIII of the Rules of the House of
Representatives and sections 402 and 423 of the Congressional
Budget Act of 1974 submitted to the Committee prior to the
filing of this report are as follows:
February 6, 2012.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3527, Protecting
Main Street End-Users from Excessive Regulation.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 3527--Protecting Main Street End-Users from Excessive Regulation
H.R. 3527 would prevent the Commodity Futures Trading
Commission (CFTC) from considering certain transactions
undertaken by an entity when determining whether the entity
should be considered a swap dealer. Current law defines a swap
dealer as a person who, among other things, buys and sells
swaps in the regular course of business to earn a profit on the
transactions. (A swap is a contract that calls for an exchange
of cash between two participants based on an underlying rate or
index, or on the performance of an asset.) Under H.R. 3527, the
CFTC would be directed to exclude swap transactions undertaken
to mitigate business-related risk (for instance, an airline
entering into a swap transaction to hedge the risk of rising
fuel prices) when determining whether a person or entity would
meet the definition of a swap dealer.
The CFTC is developing regulations relating to swap dealers
as the result of the enactment of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Public Law 111-203),
however, the agency has not finalized such regulations. Based
on information from the agency, CBO expects that incorporating
the provisions of H.R. 3527 at this point in the regulatory
process would not require a significant increase in the
agency's workload. Therefore, CBO estimates that any change in
discretionary spending to implement the legislation, which
would be subject to the availability of appropriated funds,
would not be significant. Enacting H.R. 3527 would not affect
direct spending or revenues; therefore, pay-as-you-go
procedures do not apply.
H.R. 3527 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Performance Goals and Objectives
With respect to the requirement of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to
amend the Commodity Exchange Act to clarify the definition of
swap dealer.
Constitutional Authority Statement
The Committee finds the Constitutional authority for this
legislation in Article I, section 8, clause 18, that grants
Congress the power to make all laws necessary and proper for
carrying out the powers vested in Congress by the Constitution
of the United States or in any department or officer thereof.
Committee Cost Estimate
Pursuant to clause 3(d)(2) of rule XIII of the Rules of the
House of Representatives, the Committee report incorporates the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to sections 402 and 423 of the
Congressional Budget Act of 1974.
Advisory Committee Statement
No advisory committee within the meaning of section 5(b) of
the Federal Advisory Committee Act was created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act (Public Law
104-1).
Federal Mandates Statement
The Committee adopted as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act (Public Law 104-4).
Earmark Statement Required by Clause 9 of Rule XXI of the Rules of the
House of Representatives
H.R. 3527 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(e), 9(f), or 9(g) of rule XXI of the Rules of the
House Representatives.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
COMMODITY EXCHANGE ACT
* * * * * * *
SEC. 1A. DEFINITIONS.
As used in this Act:
(1) * * *
* * * * * * *
[(49) Swap dealer.--
[(A) In general.--The term ``swap dealer''
means any person who--
[(i) holds itself out as a dealer in
swaps;
[(ii) makes a market in swaps;
[(iii) regularly enters into swaps
with counterparties as an ordinary
course of business for its own account;
or
[(iv) engages in any activity causing
the person to be commonly known in the
trade as a dealer or market maker in
swaps,
provided however, in no event shall an insured
depository institution be considered to be a
swap dealer to the extent it offers to enter
into a swap with a customer in connection with
originating a loan with that customer.
[(B) Inclusion.--A person may be designated
as a swap dealer for a single type or single
class or category of swap or activities and
considered not to be a swap dealer for other
types, classes, or categories of swaps or
activities.
[(C) Exception.--The term ``swap dealer''
does not include a person that enters into
swaps for such person's own account, either
individually or in a fiduciary capacity, but
not as a part of a regular business.
[(D) De minimis exception.--The Commission
shall exempt from designation as a swap dealer
an entity that engages in a de minimis quantity
of swap dealing in connection with transactions
with or on behalf of its customers. The
Commission shall promulgate regulations to
establish factors with respect to the making of
this determination to exempt.]
(49) Swap dealer.--
(A) In general.--The term ``swap dealer''
means any person who--
(i) holds itself out as a dealer in
swaps;
(ii) makes a market in swaps;
(iii) regularly enters into swaps
with counterparties as an ordinary
course of business for its own account;
or
(iv) engages in any activity causing
the person to be commonly known as a
dealer or market maker in swaps,
provided however, in no event shall an insured
depository institution be considered to be a
swap dealer to the extent it offers to enter
into a swap with a customer in connection with
originating a loan to the customer.
(B) Inclusion.--A person may be designated as
a swap dealer for a single type or single class
or category of swap or activities and
considered not to be a swap dealer for other
types, classes, or categories of swaps or
activities.
(C) Exceptions.--
(i) The term ``swap dealer'' does not
include a person that enters into swaps
for such person's own account, either
individually or in a fiduciary
capacity, but not as part of regular
business activities as described in
subparagraph (A).
(ii) In determining whether a person
is a ``swap dealer'' within the meaning
of subparagraph (A), any transaction
entered into for a person's own account
for the purpose of hedging or
mitigating commercial risk shall not be
considered as part of that
determination.
(iii) The Commission shall by rule
adopt standards distinguishing the
activities described in subparagraph
(A) and entering into swaps for a
person's own account for the purpose of
achieving one's own trading objectives
as determined by the Commission.
(D) De minimis exception.--The Commission
shall exempt from designation as a swap dealer
an entity that enters into swap dealing
transactions with or on behalf of the person's
customers if the aggregate gross notional
amount of the outstanding swap dealing
transactions entered into over the course of
the preceding calendar year does not exceed
$3,000,000,000 (or such greater amount as the
Commission may establish as market conditions
warrant), multiplied by the sum of 1 and the
percentage (if any) by which the Consumer Price
Index for all Urban Customers published by the
Bureau of Labor Statistics of the Department of
Labor changed for the 12-month period ending
the preceding April 30.
* * * * * * *
ADDITIONAL VIEWS
For the past year, our Committee has held several hearings
and listened to a host of stakeholders who are concerned about
how the Dodd-Frank Act is being implemented with regard to
improving oversight and accountability in derivative markets.
Looking at the Dodd-Frank rules that have already been
finalized by the CFTC, it is safe to say that, so far, the CFTC
has done a pretty good job.
Of all the bills considered during the mark-up on January
25, 2012, H.R. 3527 is the one that would benefit the most from
a delay. The CFTC is very close to finalizing the rule defining
a swap dealer. Given their past record, it is probable that the
CFTC will satisfactorily address the concerns represented by
this legislation when the Commission approves this definition.
The final rule defining swap dealer is particularly
important considering the scope of regulation that would apply
to such an entity. By acting too precipitously on H.R. 3527,
Congress may unintentionally do more harm than good. While the
final definition could raise concerns and issues for some
market participants, it may provide a good outcome for others,
resolving concerns to their satisfaction.
If the CFTC does get something wrong in the final rule, we
should work to correct it. But we should tailor our efforts
narrowly just toward that correction. We must not jeopardize
the certainty and security of those market participants who
finally know they will not be considered swap dealers under the
final rule. In a similar vein, what happens if new and unique
issues arise out of the final rule? Moving H.R. 3527 to the
House floor too quickly may limit the ability of the House to
address such new issues without resorting to brand new
legislation.
The bill as amended and approved by the Committee is a
reasonable compromise; neither the Majority nor Minority got
exactly what they originally wanted. It is a good faith effort
and allows us to move forward in a bipartisan manner.
Still, there are lingering concerns regarding the
legislation's use of the phrase, ``for the purpose of achieving
one's own trading objectives.'' Companies and firms have made
clear their concerns about the CFTC's proposed rule and how it
distinguishes dealing from trading. As we crafted the Dodd-
Frank derivative title, we strove to distinguish the dealing
activities of the larger banks with the trading practices of
other market participants who may be trying to speculate or
take a view of the market in a manner that does not create
legal loopholes where ``dealing activity'' can squeeze into
``trading objective'' activity. Misinterpretation of this
language could lead to the creation of such loopholes.
In a colloquy, the Chairman and Ranking Member agreed to
work together to improve the bill and ensure that end users are
not unnecessarily burdened by regulations without creating
loopholes. That effort should and will continue.
Finally, the Committee approved the Peterson amendment,
which includes language that should look very familiar to Farm
Bill veterans. It is the exact same provisions that we
incorporate in each Farm Bill for implementation of the Title I
commodity programs. In that context, it exempts USDA from
provisions of the Paperwork Reduction Act and notice and
comment provisions of the Administrative Procedures Act.
With this change, comments can still be sent to the CFTC.
Anyone would still be able to meet with CFTC officials to share
their thoughts on how these bills should be implemented. Farm
groups certainly did not have any trouble sharing their views
on Farm Bill implementation. Given the openness the CFTC has
already demonstrated, this provision will not hurt anyone's
ability to provide input to the CFTC.
Collin C. Peterson.
Joe Courtney.
James P. McGovern.
Chellie Pingree.
Timothy J. Walz.