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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Senate Committee on Agriculture, Nutrition, and Forestry
  • The house Passed January 12th, 2017
    Roll Call Vote 239 Yea / 182 Nay
      house Committees
      House Committee on Financial Services
      House Committee on Agriculture
    IntroducedJanuary 4th, 2017

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What is it?

This bill would reauthorize the Commodity Futures Trading Commission (CFTC) through 2021, after its last authorization expired in September 2013. For those of you who don't dabble much in futures trading, the CFTC's big goals are to: 
"foster open, transparent, competitive, and financially sound markets, to avoid systemic risk, and to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act."

The CFTC regulates derivative contracts used by business owners to hedge risks and protect their companies, customers, and shareholders from unexpected economic changes. Derivatives are things like commodity futuresoptions, and swaps. Stock options are perhaps the most well known of these financial instruments, and they allow people purchasing the option to buy or sell stock at a specified price within a certain timeframe. This is beneficial for the individual, who might purchase shares of stock in a company but will protect themselves by hedging against a drop in the stock’s price by also purchasing options.

Several existing regulatory protections that apply to firms involved in futures markets would be made into law. The following consumer protection regulations would be made into law by this bill:

  • A requirement for regulators to electronically confirm customer account balances rather than using paper documents that can lead to forgeries;

  • Firms that move more than a specified percentage of customer funds between accounts must comply with permission and reporting requirements;

  • Undercapitalized firms (i.e. businesses that don't have the money they need to operate) have to notify regulators of their financial situation so that customer funds can be protected. Those firms also have to file an annual report with regulators;

  • Farmers, ranchers, and other futures customers would have a full business day to send their margin payments (a deposit of assets to cover some of the credit risk the other party is taking) to a futures commission merchant (FCM), reducing the cost of over-funding accounts.

The CFTC’s administration would be shaken up by making its division directors answerable to the entire Commission. A new Office of the Chief Economist would be established to report economic data and analysis to the entire Commission. “No-Action” letters that the CFTC issues would be subject to additional scrutiny, as they had been outside of the traditional oversight process. Proposed new rules would also be subject to a cost-benefit analysis before their implementation.

This legislation seeks to provide relief to end-users -- such as agricultural producers, manufacturers, electric and gas utilities, and pension plans -- by reducing barriers that have inhibited their participation in the futures markets.

Commercial end-users would no longer be treated like banks in terms of their reporting requirements, and all non-financial end-users would not be disadvantaged through public-reporting if they trade infrequently. There would also be additional time between the completion of a transaction and its reporting to protect these traders’ positions.

Farmers, grain elevators, agricultural entities, and commercial market participants would no longer be subject to record-keeping requirements that had mandated that they preserve all communications that may lead to a trade. Now, they would only have to record the final economic terms of their transactions.

Cost

$1.10 Billion
The CBO estimated during the 114th Congress that implementing this legislation would cost $1.1 billion over the 2016-2020 period, or about $220 million per year.

More Information

Of Note: Believe it or not, the underlying plot of the 1980’s film Trading Places starring Eddie Murphy and Dan Aykroyd was focused on the commodities portion of the derivatives market (warning: mild spoilers ahead). In it, two of the film’s characters (the Duke brothers) try to corner the derivatives market for frozen concentrated orange juice, which leads to the Dukes ensnaring Murphy’s and Aykroyd’s characters in their nefarious plot.


In-Depth: This bill passed the House Agriculture Committee by voice vote, and the Committee’s Chairman Rep. K. Michael Conaway (R-TX) praised the bipartisan legislation, saying: 

“It codifies new practices instituted by the CFTC and other market regulators to protect customer margin, it includes a strong cost-benefit analysis measure to produce better rules, and it provides relief for end-users from burdensome requirements currently in place.”

During the last Congress, the Obama administration responded to this bill’s passage through committee by blasting it for failing to increase the CFTC’s funding, and issuing a veto threat. Further, the Administration — through the Office of Management and Budget (OMB) — said it would “undercut efforts taken by the CFTC over the last year to address end-user concerns,” which could threaten financial stability by encouraging “risky, irresponsible behavior.”


Media:

Summary by Eric Revell
(Photo Credit: consumerist.com)

AKA

Commodity End-User Relief Act

Official Title

To reauthorize the Commodity Futures Trading Commission, to better protect futures customers, to provide end-users with market certainty, to make basic reforms to ensure transparency and accountability at the Commission, to help farmers, ranchers, and end-users manage risks, to help keep consumer costs low, and for other purposes.

    Wall Street has not protected our economy in the past & it is foolish to think they ever will. Some oversight is necessary if only to justify the billions of dollars of taxpayer money that were used to bail out Wall Street. (The CFTC should welcome the reauthorization as it falls in line with this agency's whole stated purpose.)
    Like (63)
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    Away with the bureaucracy. Part of the CFTC's purpose is "to avoid systemic risk, and to protect the market users and their funds." Well that's an impossible battle you've got on your hands. "Avoid systemic risk"? No such thing. Literally any steps the government can and does try to take to avoid systemic risk just make bigger market distortions. That's simply clear, obvious, historically-evident economic fact. And "protect market users and their funds"? Again, no such thing. You're just tasked with creating further market distortions that produce bigger bubbles and nastier crashes. Bubbles and crashes are a normal thing. People get excited about some area of the economy and it appreciates, then they take a step back and realize things aren't actually worth quite that much and the market corrects. That's a natural thing. What's unnatural is the bubble crashing the entire economy when it bursts rather than corrections in individual sectors. What's unnatural is not being able to bounce back quickly. These unnatural things are what you get when you try to artificially engineer markets and remove risk for people. There's no such thing as a risk-free investment. Anything you try to centrally plan to that effect just distorts the market and makes the long-run consequences worse. Agencies like this are fighting a losing battle, in fact an impossible one, and throwing more money at them is not the answer.
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    These kind of protections are essential for protecting middle class and lower class Americans from the billionaires. Personally, all the agriculture benefits are a home run for me as a midwesterner, even though I'm not involved in agriculture. Even as a democrat I can support this bill. Great bill!
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    Yes and more YES!! It has been proven time and time again when Wall Street is left unchecked it threatens the global economy.
    Like (23)
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    Let's just eliminate the CFTC. Let the buyer beware. By the way, is the CFTC broken?
    Like (7)
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    We have seen what happens when stock, bond, and commodity trading goes unregulated. Do we seriously trust these guys to regulate themselves? I don't want another financial collapse like the last one they created.
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    These "reforms" boil down to regulated entities no longer needing to preserve communications leading to commodity trades. In essence, this completely removes a fundamental component of the regulatory process, which, I'm sure, is the whole point.
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    This bill is necessary to support and protect the middle class from the greed and piracy of Wall Street
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    Please note: the Obama admin was against this bill. It underfunds the CFTC - the lack of regulators as underfunding contributed a great deal to the Great Recession. The CFTC, and really one major voice in it, was THE ONLY person and agency to call out the systemic risk and problems leading up the Great Recession. The USA is a system based on money and money only. Leaders DO NOT have values or morals. The system will AlWAYS veer to the easiest money, made the fastest. If we want to avoid future crashes and poverty for the 99%, we MUST have as much strong oversight as possible. This is a BAD bill that robs us, the people, of that. It should NOT pass.
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    This bill reduces record keeping requirements in order to grow demand for the gambling-like derivatives market beyond financial institutions. Are we trying to force every company in our nation to play the market just to flood more profit into an unstable investment vehicle? This is how we develop national economic crises.
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    I would hope this passes metely for the fact that the companies still use paper for everything. Which can be tampered with. These companies should invest in encrypted software for most things yo not on stave off potential fraud but also to help the environment.
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    Government trying to be more open is like a wolf being vegetarian.
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    A select few are making millions fleecing the retirement accounts of the masses. It should be regulated, especially if they get government bailouts
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    This is the best way to "drain the swamp."
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    Wall Street must not be allowed to run our economy aground again, pulling millions of average Americans down with them. It feels eerily like 2008 again and I fear we are headed toward rough waters if Wall Street reforms are rolled back or weaken in the coming years.
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    Wall Street has proven it needs to be regulated. End of story.
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    If you blindly trust people makimg large sums of money to do the right things in the pursuit of those large sums of money all the time your naive.
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    Less government is always better!
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    An economic crisis brought by those working in the financial sector cannot be allowed to happen again. They need to be accountable for their dealings and not expected to be saved by taxpayers, the very victims of their shenanigans.
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    I support this bill. The 99% needs all the protection it can get from the 1%.
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