Legislation Would Curtail CFTC Powers

Bipartisan bill would limit agency's ability to impose rules on overseas derivatives trades and on corporate end users, and require disclosure of costs of Dodd-Frank regulations.

The U.S. Commodity Futures Trading Commission (CFTC) would face limits on its ability to impose rules on derivatives traded overseas and on manufacturers that use swaps to hedge business risks under bipartisan congressional legislation setting the scope of the agency’s powers.

Republicans and Democrats on the House Agriculture Committee, which has jurisdiction over the CFTC, introduced a 48-page bill that would also force the agency to assess the costs of its Dodd-Frank Act regulations and conduct a new study of high-speed trading. The legislation is typically approved once every five years.

Representative Frank D. Lucas, the Republican chairman of the committee, said in a statement that the legislation “improves the efficiency and accountability of the CFTC, ensures regulations are implemented in a sensible manner, maintains the integrity of the marketplace, and guarantees our global competitiveness.”

The committee scheduled a meeting in Washington on April 9 to consider the legislation. The bill is co-sponsored by Democratic Representatives Collin Peterson of Minnesota and David Scott of Georgia, and Republican Representative K. Michael Conaway of Texas.

The legislation is the first step in a broad congressional effort to review commodity laws since the CFTC implemented more than 60 regulations to increase oversight of swaps traded by firms including Goldman Sachs Group Inc., JPMorgan Chase & Co. and BP Plc.

 

Reduce Risk

The 2010 Dodd-Frank Act financial-overhaul law gave the agency the task of designing regulations to reduce risk and increase transparency in the swaps market following the 2008 credit crisis.

The measure would require the CFTC to release formal rules setting the reach of its regulations on derivatives traded overseas. The agency wouldn’t be allowed to set policy through guidance documents as it did in July and November 2013.

Wall Street’s largest lobbying groups—representing Goldman Sachs, JPMorgan, Deutsche Bank AG, and others—sued the CFTC in December to curtail its scope abroad. The associations said the agency illegally set policy through guidance documents and staff advisories instead of formal commission-approved rules.

The case is SIFMA v. U.S. CFTC, 13-cv-1916, U.S. District Court, District of Columbia (Washington).

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