“Thank you M__ Speaker. I yield myself as much time as I may 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 derivative market participants. While the Commission has made great progress, recent cases have demonstrated that there is more work 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. Once we have a better understanding of high-frequency trading in the markets regulated by the CFTC, we can 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 that funding should be used. I’m not sure anyone really knows. Having an independent third-party, like GAO, look at the question will better inform the debate.
“H.R. 4413 also provides some much-needed clarity to end-users, agriculture and energy producers 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.
“Because the Executive Order exempted cost-benefit standards from legal challenge, some have suggested that the financial industry will use the bill’s new standards to challenge CFTC rulemaking. 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 in the industry’s nature to fight regulation.
“We will be considering some amendments to address these concerns, and I look forward to that debate.
“Finally, I’ve heard some fears that this bill gives some foreign interests an automatic exemption from U.S. swap rules. Let me be clear, if the CFTC and SEC cannot reach an agreement on a joint rule for cross-border application of U.S. regulation, then current law standards will remain in effect. The CFTC’s cross-border guidance will still be effective and whatever cross-border rule the SEC finalizes will also be effective.
“Given the history of these two agencies, the chances of them actually coming together on this are probably slim to none. We’ve been waiting 14 years for joint rules regarding portfolio margining for products under their respective jurisdictions. Their record of cooperation is not good.
“M__ Speaker, this is not a perfect bill; but if you wait for perfection, you’ll be waiting forever and won’t be able to vote for anything. This bill deserves our support so we can move this process along to the Senate and hopefully see a bill signed into law.
“I urge my colleagues to support H.R. 4413 and reserve the balance of my time."
Source: House Committee on Agriculture
