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Swap Jurisdiction Certainty Act

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. CONAWAY. Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, I rise today to urge my colleagues to pass H.R. 1256, the Swap Jurisdiction Certainty Act. Swaps are important tools that our farmers, ranchers, and businesses rely on to hedge the risks of competing in a global marketplace. Yet later this month, guidance the CFTC issued could fundamentally disrupt these markets here at home and around the world unless Congress acts today.

Last summer, the CFTC issued its proposed crossborder guidance to the marketplace for review and comment, explaining how it would regulate swaps entered into by foreign companies. What was produced was startling in its reach--the guidance declares that almost any swap entered into by anyone with any interest related to the United States falls under the jurisdiction of the CFTC and the Dodd-Frank Act.

As chairman of the General Farm Commodities and Risk Management Subcommittee, I held a hearing on this issue last December with Commissioners Sommers and Chilton from the CFTC and regulators from the European Union and Japan. Each witness agreed that it was imperative that we get the crossborder application of Dodd-Frank correct and that the U.S. not try to police swap markets around the world.

Respect for equivalent, but not necessarily identical, regulatory standards has been a cornerstone of international banking regulations for decades. The CFTC as rewritten the principles of international cooperation with this guidance, insisting that it alone can and should manage the global swaps markets. Predictably, this was met with universal outcry from foreign governments and international regulators.

But today's bill is about far more than just the pride of international regulators. If the CFTC's guidance stands and equivalence is no longer recognized, the global derivatives market can become regionalized as institutions and customers transact a majority of their business within their home jurisdictions. Such an outcome would concentrate specific risks in various economies and sectors of the world.

Here at home, American end users who use swaps to manage everyday business risks may have fewer counterparties to work with. Fewer counterparties means that there will be less competition and liquidity in the market, leading to higher costs for end users and a concentration of higher risk in the United States.

Not only has the CFTC failed to cooperate with international regulators, it's failed to do so at home, as well, leading the SEC to propose a separate rule governing the small slice of swaps markets that it regulates. Today, there are two different sets of rules for when market participants are subject to U.S. law, depending on what instrument is being traded.

The Swap Jurisdiction Certainty Act will end this mess. It first requires that the CFTC and the SEC cooperate on a single, joint rule for the extraterritorial application of Dodd-Frank regulations. Second, it requires the CFTC and the SEC to recognize the competence of certain sophisticated foreign regulators, unless they can both agree that the regulators have failed to produce equivalent requirements.

For all the back and forth today, this is a simple, straightforward bill. In a nutshell, it requires the CFTC and the SEC to cooperate, both with each other and with the rest of the world--exactly what they should have been doing all along.

I'd like to thank my counterpart on the Financial Services Committee, Mr. Garrett, for his work on bringing this legislation to the floor today. I would, as well, like to thank Ranking Member David Scott, who continues to be a thoughtful and productive partner on issues in the Agriculture Committee. And, finally, I'd like to thank Chairman Frank Lucas who never lets us forget that our constituents depend on these markets to manage their businesses and protect themselves in an uncertain world.

With that, I urge swift passage of the legislation and reserve the balance of my time.

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