U.S. ag committees get say on derivatives commission

Commodity Futures Trading Commission | American regulator’s authority must be renewed for another five-year term

American futures and derivatives markets will likely have an improved Commodity Futures Trading Commission to answer to, say U.S. agriculture congressional leaders.


However, it’s hard to tell how long that will take because both the House of Representatives’ and the Senate’s agriculture committees are developing their own legislation to “re-authorize” the crucial body.


The House committee’s proposed legislation was unveiled and put forward April 9, but it has yet to be determined when it will be debated. The Senate does not yet have a proposal.


“We want to look at consumer protections, end user protections, ways we could address issues of (crises with brokers like) MF Global and Peregrine (Financial Group), and so on,” Senate agriculture committee chair Debbie Stabenow said during an April 8 news conference with North American Agricultural Journalists.


Frank Lucas, the House agriculture committee chair, said he hoped having support of influential members of both political parties would help his committee’s CFTC re-authorization proposals pass through the House without too much trouble. However, he said the committee wants improved protection for market users and to “correct some of the most egregious mistakes in (the) Dodd-Frank (post-2008 financial crisis legislation).” 


The House and Senate can develop and pass bills on the same issues, but those pieces of legislation then have to be fit together before a final version is approved.


Lucas, an Oklahoma Republican, and Stabenow, a Michigan Democrat, acknowledged that it might be tough reauthorizing the CFTC this year because an election is looming.


“The farther we get into the year, an election year, we’ll have to see if we can do that,” said Stabenow.


The CFTC is the police officer of the U.S. derivatives world, tasked with protecting market participants from fraud and other abuses. Intense attention has focused on the CFTC since the 2008 financial meltdown because derivatives were generally viewed to be key elements of the calamity.


The commission approves commissioners for five-year terms and recently has been operating without three of five permanent positions, although the Senate is now moving forward three nominees in the approval process. 


The legislation enabling the commission’s operations is valid for five year terms, causing these re-authorization situations. 


However, it has been given extensions a number of times since its 1974 inception.


The CFTC answers to the agriculture committees because publicly regulated derivatives markets were once dominated by agricultural commodities. 


Other commodities and market factors such as interest rates now make up the vast bulk of derivatives market volume.


It gives agriculture-focused politicians a chance to push the interests of farmers higher in the sight of regulators than they would otherwise likely be.


The agriculture focus was also a factor in vetting the three nominees for CFTC commissioner, all of whom were pressed on their agricultural knowledge and commitment to understanding how farmers rely upon futures markets.


“We, I think, all expressed a real desire to make sure they understand agriculture and agricultural end users,” said Stabenow.

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