Four House Agriculture Committee leaders filed a bill to reauthorize the Commodity Futures Trading Commission. A mark up is scheduled for Wednesday at 10 a.m. ET. The meeting will be Webcast. “We will advance our bill in the committee this week and then prepare for full House consideration,” said committee chairman Frank Lucas, one of the four sponsors, in a statement.
From the early days of the Dodd-Frank financial reform law, Lucas and the other sponsors – Republican Michael Conaway and Democrats Collin Peterson and David Scott – have said end users, companies such as manufacturers, food processors and utilities that use derivatives to lock in price and supply of materials needed for their operations, should be exempt from regulations aimed at speculators. Instead, CFTC “has narrowly interpreted the law, which has burdened businesses,” says the Agriculture Committee. The collapse of MF Global and Peregrine Financial highlighted flaws in safeguards for customers’ funds held by trading houses.
The Consumer Protection and End-User Relief Act, HR 4413, would brokers to report to regulators when they move large amounts of money from one account to another and require companies that become under-capitalized to notify regulators so they can decide if action is needed to protect customers’ funds.
It also would require CFTC to complete a study on high-frequency trading.
“End users should not be treated as financial entities,” says a summary of the section on “end-user relief.” The bill would reduce the recordkeeping requirements for transactions, reduce the required amount of capital to be held by non-bank swap dealers, and “allows for end users to hedge against anticipated business risks by providing a more workable definition of bona fide hedging related to position limits.”
The bill also revamps the CFTC rulemaking process, requires a cost-benefit analysis of each proposed rule and creates a chief economist’s office to provide economic data and analysis.