CFTC Reauthorization Act of 2005

CFTC REAUTHORIZATION ACT OF 2005 -- (House of Representatives - December 14, 2005)

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Mr. LUCAS. Mr. Speaker, I rise today to urge my colleagues to support H.R. 4473. It has been 5 years since this body last passed legislation aimed at reauthorizing the CFTC, which has jurisdiction over futures and options markets.

The Ag Committee has jurisdiction over futures and options because the derivatives were first developed on agricultural products, or commodities as they are commonly called. These innovative products are now predominantly traded on other financial products, such as interest rates and foreign currencies.

The CFTC implemented the Commodity Futures Modernization Act of 2000 in a very straightforward and responsible manner. Yes, there have been a few bumps in the road, but overall CFMA has been very successful.

What issues brought us to the point in 2000 that a major rewrite of the futures laws and passage of CFMA was required? The U.S. futures markets were quickly losing ground to foreign exchanges in the late 1990s due to heavy-handed regulation and antiquated business models. The over-the-counter markets were coming to grips with the fact that they did not have a high enough degree of legal certainty to ensure that their swap products would not be challenged in court as illegal off-exchange futures. And, finally, some foreign exchanges were beginning to seriously encourage the development of single stock futures products.

The futures markets, and other agricultural commodities, were deregulated to allow them to compete with foreign exchanges in both open outcry and electronically traded arenas. The OTC markets were given legal certainty, and the single stock futures guidelines were set in place.

Fast forward to 2005, what has happened? The domestic futures and options exchanges have been reinvigorated. The OTC market is thriving, and a few issues have come to light. The President's working group, consisting of the Federal Reserve, Treasury, the SEC and the CFTC, have weighed in on the Zelener case which found that the CFTC did not have adequate authority to stop certain fraudulent activities regarding retail currency transactions. H.R. 4473 will authorize the CFTC to stop those unscrupulous actors.

The natural gas markets have become an arena of intense scrutiny over the last few years. There is unprecedented demand for natural gas and still a fairly captive supply in the U.S., and indeed the world. It will take time for the energy bill that we recently passed to increase supply, and we are most likely in a period of relatively high natural gas prices. The CFTC does have fairly broad authority under the CFMA to investigate the natural gas markets. It is a very fine line for Congress and the CFTC to decide how much to regulate a market without creating excessive regulatory burden or causing it to become inefficient or allowing another country to become the leader of trading in that commodity.

As a member of both the Agriculture and Financial Services Committees, I know how seriously the two chairmen take their responsibilities. I also know that fair and appropriately applied regulation is necessary. I encourage my colleagues to vote ``yes'' on H.R. 4473.

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