The House Agriculture Committee came together in a bipartisan fashion and approved H.R. 4895, a bill to reauthorize the Commodity Futures Trading Commission (CFTC). CFTC is an independent agency that regulates U.S. derivatives markets, including those that trade in agricultural commodities.
This marks the first full reauthorization of CFTC since 2008. Agricultural commodity trading significantly affects the price at which farmers can sell their products.
In an opening statement, House Agriculture Committee chairman Collin Peterson (D., Minn.) noted that “CFTC authorization expired in 2013, so it is overdue, and I’m glad we are on a bipartisan path to get it done. The newly confirmed chairman of the CFTC is also keen to have his agency formally reauthorized.”
CFTC chairman Heath Tarbert thanked the House for unanimously passing the legislation. “The sound regulation of our derivatives markets, which see more than $4 trillion in notional activity each day, is critical to the health of the U.S. economy and the pocketbook of every American," he said. "These markets help inform the price of everything from food and gasoline to home mortgage interest.”
Tarbert said the bipartisan action highlights the importance of the work done at CFTC and represents a significant first step in the legislative process. “I look forward to working with members of both parties in both chambers to see a bill through to completion,” Tarbert said.
House Agriculture Committee ranking member Michael Conaway (R., Texas) said the bill includes new protections for charitable organizations and church retirement plans so they will not be subjected to regulations designed for Wall Street as well as ensures the protection of customers’ hard-earned assets in the case of a commodity broker bankruptcy.
Currently, judges determine which assets are included in bankruptcy proceedings, but the case-by-case nature of these proceedings can leave agribusinesses uncertain about their financial futures. To protect customers and provide them with greater certainty in cases of broker bankruptcy, Rep. Abigail Spanberger (D., Va.) included a provision as part of the CFTC package that would allow futures customers to have a predetermined idea as to which commodity broker assets will be used to cover the costs of equity claims during bankruptcy proceedings.
This provision would amend CFTC’s authority to establish certainty for futures customers and market participants in cases of Chapter 7 bankruptcy proceedings. Specifically, the bill would require that a commodity broker’s cash, securities or other property be classified as customer property to help pay the net equity claims of a broker’s public customers following the broker’s bankruptcy.
Commodity exchanges, energy and credit subcommittee ranking member Rep. Austin Scott (R., Ga.) added that the bill contains provisions that will keep CFTC at the cutting edge of technological advancements. “I’m especially excited to see what the CFTC is able to accomplish with its new authorities to develop improved research and oversight tools, investigate innovative financial products and explore emerging technologies. I believe these and other modernizations in this bill will help the commission maintain fairness and transparency as they work to address the realities of commodity markets in the 21st century,” he said.
National Cattlemen’s Beef Assn. (NCBA) manager of legislative affairs and market regulatory policy Darryl Blakey applauded the House Agriculture Committee’s action on the CFTC reauthorization.
“The committee leadership has come together to move this legislation forward in a bipartisan fashion, and having this approach has allowed all parties to be honest in their negotiations to build a constructive and sound legislative product that can equip the commission for the markets our members face today,” Blakey said.
NCBA said it has been part of the discussion on the reauthorization process as a representative of commercial end users. “NCBA has naturally been a part of this reauthorization process from the very beginning by being one of the first organizations knocking on the doors of Congress in the form of meeting with key offices and sending up a thorough letter of support and ideas for a potential CFTC reauthorization package. This included providing tools for reducing systemic risk, ensuring market integrity for end users and delivering regulatory consistency while also considering the important role derivatives markets play in the ability of farmers, ranchers and agribusinesses to hedge their risks efficiently and effectively,” Blakely noted.
"Our members are pleased to see that some of our original ideas are in the product today in the form of continued protection for end users from regulatory burdens, enhancement of the agency’s regulatory tools and establishing coordination between the Office of the Chief Economist and the commission to consider a cost/benefit analysis before it’s rule-makings,” he added.