House Ag Markup of Commodity End -User Relief Act
House Agriculture Committee
“Mark-up of H.R. 2289 – Commodity End-User Relief Act,
a bill to reauthorize the CFTC”
Thursday, May 14, 2015
Key Topics & Takeaways
- Approved by Voice Vote: The House Agriculture Committee approved H.R. 2289, the Commodity End-User Relief Act, by voice vote.
- CFTC Reforms: Chairman Conaway said the legislation contains reforms of the CFTC in three different areas: 1) protecting customer margin funds; 2) reforming the operations of the Commission; and 3) fixing “real problems for end-users.”
- Ranking Member Opposition: Ranking Member Peterson said that while he supported reauthorization legislation last year, he would not be supporting H.R. 2289 because the “facts on the ground at the Commission have changed.”
- Cross-Border Concerns: Rep. David Scott said Congress “must clear up” the CFTC’s cross-border guidance and harmonization efforts, and that CFTC rules must include cost-benefit analysis.
Approved Amendments (all by voice vote):
- Lucas Amendment (Data Security)
- DelBene Amendment (Court Cost-Benefit Affirmation)
- Goodlatte Amendment (Aluminum Warehousing)
- Davis Amendment (Registered Investment Companies)
- Kuster Amendment (Special Entities)
- Emmer Amendment (Small Bank and Saving Holding Companies)
- Austin Scott Amendment (SEFs)
- Lucas Amendment (FHLB)
- Bost Amendment (International Recognition)
Opening Statements
Chairman K. Michael Conaway (R-Texas), in his opening statement, said that H.R. 2289, the Commodity End-User Relief Act, represents “the bipartisan work of dozens of members of this Committee over the past three years to address the challenges and uncertainties that end-users are facing in derivatives markets.”
He said the legislation contains reforms of the Commodity Futures Trading Commission (CFTC) in three different areas: 1) protecting customer margin funds; 2) reforming the operations of the Commission to improve the “deliberative process” at the agency and require a “robust system of cost-benefit analysis; and 3) fixing “real problems for end-users.”
Ranking Member Colin Peterson (D-Minn.) said that while he supported reauthorization legislation last year, he would not be supporting H.R. 2289 because the “facts on the ground at the Commission have changed.” He then expressed concern that Title II of the bill would slow down the CFTC’s process of providing regulatory relief to end-users and that provisions on cross-border treatment of swaps “presents the very real danger of cutting the [CFTC] chairman off at the knees” in negotiations with foreign regulators. He concluded that the derivatives markets are safer now and that the bill and some of the amendments to be offered “move us in the wrong direction.”
Rep. Austin Scott (R-Ga.) said the bill clarifies Congressional intent to ensure end-users are able to access the markets effectively and use derivatives products to hedge risk and manage their businesses.
Rep. David Scott (D-Ga.) said Congress must make sure the U.S. has the strongest and fairest regulatory framework for commodity trading and that after two years of uncertainty it is time for the Committee to re-authorize the CFTC. He added that Congress “must clear up” the CFTC’s cross-border guidance and harmonization efforts, and that CFTC rules must include cost-benefit analysis.
David Scott highlighted that concerns have been raised about litigation related to cost-benefit analysis, but explained that the bill does not mandate this analysis, but rather only requires the CFTC to consider and assess the costs and benefits of a rule. He added that the bill must provide that the eight largest swaps markets are comparable to U.S. unless the CFTC determines otherwise.
Consideration and Votes on Amendments
PetersonAmendment (Clean Reauthorization) – Not Adopted by Voice Vote
Peterson offered an amendment that he said would do away with “unnecessary and extraneous items in the underlying bill” and provides a “clean re-authorization.” He said there is no reason to change the operations of the Commission and that provisions in the bill would make it “more problematic” for the CFTC to resolve issues.
Conaway opposed the amendment, saying the cost-benefit section is generally the same that was contained in last year’s bill and that the Committee took out some provisions from the previous bill that were “driven by the previous Chairman.”
David Scott said he would support the amendment because Peterson “has some very legitimate concerns,” but noted that “nowhere in the bill does it mandate that benefits must outweigh costs.”
Peterson responded that if the Committee’s “only change had been to cross-border” he would have supported the bill, stressing that his issue was with provisions that would “muck up things” at the Commission.
LucasAmendment (Data Security) – Adopted by Voice Vote
Rep. Frank Lucas (R-Okla.) offered an amendment co-sponsored by Reps. Randy Neugebauer (R-Texas) and David Rouzer (R-N.C.) that would establish safeguards on sensitive information submitted to the CFTC and harmonize the CFTC data processes with those in place at other regulatory agencies, including the SEC. He added that the amendment would not restrict congressional oversight and would ensure that the Agriculture Committee also has a confidentiality process in place for information it receives.
Rep. Sean Patrick Maloney (D-N.Y.) supported the amendment and said “the Commission can agree with us on this point.”
DelBene Amendment (Court Cost-Benefit Affirmation) – Adopted by Voice Vote
Rep. Suzan DelBene (D-Wash.) offered an amendment to require a court to affirm the CFTC’s assessment of cost-benefit analysis. She highlighted that this legislation was approved in the previous Congress. DelBene said that if the CFTC is required to conduct formal cost-benefit analysis than its results should be trusted to prevent rules from being “tied up in litigation.”
David Scott supported the amendment, saying it would address unnecessary lawsuits.
Goodlatte Amendment (Aluminum Warehousing) – Adopted by Voice Vote
Rep. Bob Goodlatte (R-Va.) offered an amendment to ensure the market for aluminum operates “in an orderly manner.” He said long queues for aluminum delivery are affecting prices and impacting consumers and commended the CFTC on its recent oversight actions. He noted that his amendment would require the CFTC to issue a report in 90 days on the application status of foreign boards of trade for metal exchanges.
Rep. Dan Newhouse (R-Wash.) supported the amendment, saying that delivery times lasting months or years have driven up prices and lead to market distortions.
Rep. Jackie Walorski (R-Ind.) voiced opposition to the amendment, saying the Committee must ensure fairness and transparency in the review process.
DavisAmendment (Registered Investment Companies) – Adopted by Voice Vote
Rep. Rodney Davis (R-Ill.) offered an amendment he said would reduce the regulatory burden on savers and investors by addressing requirements of registered investment companies. He noted that these companies are already highly-regulated and registered with the Securities and Exchange Commission (SEC) and that his amendment would address the CFTC’s action to broaden its oversight of registered funds.
Kuster Amendment (Special Entities)– Adopted by Voice Vote
Rep. Ann Kuster (D-N.H.) offered an amendment co-sponsored by Reps. Dan Benishek (R-Mich.), Brad Ashford (D-Neb.) and John Moolenaar (R-Mich.) that would exempt churches, schools, and civic organizations from requirements to register as commodity pool operators. She noted that these organizations use swaps to hedge risk in their endowment funds, but that a distinction must be drawn between commercial business and these organizations. She said registration would divert CFTC efforts and impose unnecessary costs on churches and schools.
Emmer Amendment (Small Bank and Saving Holding Companies) – Adopted by Voice Vote
Rep. Tom Emmer (R-Minn.) offered an amendment to apply the small bank and saving company exemption to their respective holding companies. He explained that they are currently not exempt because it was assumed that holding companies are the same as depository institutions, but that this is “not the case.”
AustinScott Amendment (SEFs) – Adopted by Voice Vote
Austin Scott offered an amendment to change requirements of swap execution facilities (SEFs) to limit their monitoring requirements to only the activity within their own facilities, have operating coverage funding for just one year with the requirement that the SEF hold funds for an orderly wind-down of operations, and modify the duties of SEF chief compliance offers and procedures of SEF annual reports to the CFTC.
LucasAmendment (FHLB) – Adopted by Voice Vote
Lucas offered another amendment to clarify that advances made to financial institutions by the Federal Home Loan Bank System are “banking products” regulated by the Federal Housing Finance Agency, rather than being treated as derivatives subject to CFTC regulation. He said this amendment would codify the way these products are currently viewed.
Peterson said he did not oppose the goal and purpose of the amendment but had concerns with the practical implications in the way it was drafted, saying it could be overly-broad. Lucas agreed to work with Peterson to correct these drafting issues.
BostAmendment (International Recognition) – Adopted by Voice Vote
Rep. Mike Bost (R-Ill.) offered an amendment that would allow the CFTC to suspend a determination that a foreign jurisdiction is comparable to or as comprehensive as the U.S. rules if that jurisdiction has not provided substituted compliance or equivalency recognition to U.S. entities. He said it would put U.S. clearinghouses on an equal footing with foreign clearinghouses.
David Scott supported the amendment, stressing the importance of having equivalency determinations before the June 15 deadline when additional capital charges would be imposed on U.S. clearinghouses.
Maloney also supported the amendment, saying it is “outrageous” that the U.S. has not been afforded equivalency by European regulators.
H.R. 2289
David Scott moved to report H.R. 2289 favorably to the House for consideration. This motion was approved by voice vote.
For more information on this meeting, please click here.
For the House Agriculture Committee summary of H.R. 2289, please click here.
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House Agriculture Committee
“Mark-up of H.R. 2289 – Commodity End-User Relief Act,
a bill to reauthorize the CFTC”
Thursday, May 14, 2015
Key Topics & Takeaways
- Approved by Voice Vote: The House Agriculture Committee approved H.R. 2289, the Commodity End-User Relief Act, by voice vote.
- CFTC Reforms: Chairman Conaway said the legislation contains reforms of the CFTC in three different areas: 1) protecting customer margin funds; 2) reforming the operations of the Commission; and 3) fixing “real problems for end-users.”
- Ranking Member Opposition: Ranking Member Peterson said that while he supported reauthorization legislation last year, he would not be supporting H.R. 2289 because the “facts on the ground at the Commission have changed.”
- Cross-Border Concerns: Rep. David Scott said Congress “must clear up” the CFTC’s cross-border guidance and harmonization efforts, and that CFTC rules must include cost-benefit analysis.
Approved Amendments (all by voice vote):
- Lucas Amendment (Data Security)
- DelBene Amendment (Court Cost-Benefit Affirmation)
- Goodlatte Amendment (Aluminum Warehousing)
- Davis Amendment (Registered Investment Companies)
- Kuster Amendment (Special Entities)
- Emmer Amendment (Small Bank and Saving Holding Companies)
- Austin Scott Amendment (SEFs)
- Lucas Amendment (FHLB)
- Bost Amendment (International Recognition)
Opening Statements
Chairman K. Michael Conaway (R-Texas), in his opening statement, said that H.R. 2289, the Commodity End-User Relief Act, represents “the bipartisan work of dozens of members of this Committee over the past three years to address the challenges and uncertainties that end-users are facing in derivatives markets.”
He said the legislation contains reforms of the Commodity Futures Trading Commission (CFTC) in three different areas: 1) protecting customer margin funds; 2) reforming the operations of the Commission to improve the “deliberative process” at the agency and require a “robust system of cost-benefit analysis; and 3) fixing “real problems for end-users.”
Ranking Member Colin Peterson (D-Minn.) said that while he supported reauthorization legislation last year, he would not be supporting H.R. 2289 because the “facts on the ground at the Commission have changed.” He then expressed concern that Title II of the bill would slow down the CFTC’s process of providing regulatory relief to end-users and that provisions on cross-border treatment of swaps “presents the very real danger of cutting the [CFTC] chairman off at the knees” in negotiations with foreign regulators. He concluded that the derivatives markets are safer now and that the bill and some of the amendments to be offered “move us in the wrong direction.”
Rep. Austin Scott (R-Ga.) said the bill clarifies Congressional intent to ensure end-users are able to access the markets effectively and use derivatives products to hedge risk and manage their businesses.
Rep. David Scott (D-Ga.) said Congress must make sure the U.S. has the strongest and fairest regulatory framework for commodity trading and that after two years of uncertainty it is time for the Committee to re-authorize the CFTC. He added that Congress “must clear up” the CFTC’s cross-border guidance and harmonization efforts, and that CFTC rules must include cost-benefit analysis.
David Scott highlighted that concerns have been raised about litigation related to cost-benefit analysis, but explained that the bill does not mandate this analysis, but rather only requires the CFTC to consider and assess the costs and benefits of a rule. He added that the bill must provide that the eight largest swaps markets are comparable to U.S. unless the CFTC determines otherwise.
Consideration and Votes on Amendments
PetersonAmendment (Clean Reauthorization) – Not Adopted by Voice Vote
Peterson offered an amendment that he said would do away with “unnecessary and extraneous items in the underlying bill” and provides a “clean re-authorization.” He said there is no reason to change the operations of the Commission and that provisions in the bill would make it “more problematic” for the CFTC to resolve issues.
Conaway opposed the amendment, saying the cost-benefit section is generally the same that was contained in last year’s bill and that the Committee took out some provisions from the previous bill that were “driven by the previous Chairman.”
David Scott said he would support the amendment because Peterson “has some very legitimate concerns,” but noted that “nowhere in the bill does it mandate that benefits must outweigh costs.”
Peterson responded that if the Committee’s “only change had been to cross-border” he would have supported the bill, stressing that his issue was with provisions that would “muck up things” at the Commission.
LucasAmendment (Data Security) – Adopted by Voice Vote
Rep. Frank Lucas (R-Okla.) offered an amendment co-sponsored by Reps. Randy Neugebauer (R-Texas) and David Rouzer (R-N.C.) that would establish safeguards on sensitive information submitted to the CFTC and harmonize the CFTC data processes with those in place at other regulatory agencies, including the SEC. He added that the amendment would not restrict congressional oversight and would ensure that the Agriculture Committee also has a confidentiality process in place for information it receives.
Rep. Sean Patrick Maloney (D-N.Y.) supported the amendment and said “the Commission can agree with us on this point.”
DelBene Amendment (Court Cost-Benefit Affirmation) – Adopted by Voice Vote
Rep. Suzan DelBene (D-Wash.) offered an amendment to require a court to affirm the CFTC’s assessment of cost-benefit analysis. She highlighted that this legislation was approved in the previous Congress. DelBene said that if the CFTC is required to conduct formal cost-benefit analysis than its results should be trusted to prevent rules from being “tied up in litigation.”
David Scott supported the amendment, saying it would address unnecessary lawsuits.
Goodlatte Amendment (Aluminum Warehousing) – Adopted by Voice Vote
Rep. Bob Goodlatte (R-Va.) offered an amendment to ensure the market for aluminum operates “in an orderly manner.” He said long queues for aluminum delivery are affecting prices and impacting consumers and commended the CFTC on its recent oversight actions. He noted that his amendment would require the CFTC to issue a report in 90 days on the application status of foreign boards of trade for metal exchanges.
Rep. Dan Newhouse (R-Wash.) supported the amendment, saying that delivery times lasting months or years have driven up prices and lead to market distortions.
Rep. Jackie Walorski (R-Ind.) voiced opposition to the amendment, saying the Committee must ensure fairness and transparency in the review process.
DavisAmendment (Registered Investment Companies) – Adopted by Voice Vote
Rep. Rodney Davis (R-Ill.) offered an amendment he said would reduce the regulatory burden on savers and investors by addressing requirements of registered investment companies. He noted that these companies are already highly-regulated and registered with the Securities and Exchange Commission (SEC) and that his amendment would address the CFTC’s action to broaden its oversight of registered funds.
Kuster Amendment (Special Entities)– Adopted by Voice Vote
Rep. Ann Kuster (D-N.H.) offered an amendment co-sponsored by Reps. Dan Benishek (R-Mich.), Brad Ashford (D-Neb.) and John Moolenaar (R-Mich.) that would exempt churches, schools, and civic organizations from requirements to register as commodity pool operators. She noted that these organizations use swaps to hedge risk in their endowment funds, but that a distinction must be drawn between commercial business and these organizations. She said registration would divert CFTC efforts and impose unnecessary costs on churches and schools.
Emmer Amendment (Small Bank and Saving Holding Companies) – Adopted by Voice Vote
Rep. Tom Emmer (R-Minn.) offered an amendment to apply the small bank and saving company exemption to their respective holding companies. He explained that they are currently not exempt because it was assumed that holding companies are the same as depository institutions, but that this is “not the case.”
AustinScott Amendment (SEFs) – Adopted by Voice Vote
Austin Scott offered an amendment to change requirements of swap execution facilities (SEFs) to limit their monitoring requirements to only the activity within their own facilities, have operating coverage funding for just one year with the requirement that the SEF hold funds for an orderly wind-down of operations, and modify the duties of SEF chief compliance offers and procedures of SEF annual reports to the CFTC.
LucasAmendment (FHLB) – Adopted by Voice Vote
Lucas offered another amendment to clarify that advances made to financial institutions by the Federal Home Loan Bank System are “banking products” regulated by the Federal Housing Finance Agency, rather than being treated as derivatives subject to CFTC regulation. He said this amendment would codify the way these products are currently viewed.
Peterson said he did not oppose the goal and purpose of the amendment but had concerns with the practical implications in the way it was drafted, saying it could be overly-broad. Lucas agreed to work with Peterson to correct these drafting issues.
BostAmendment (International Recognition) – Adopted by Voice Vote
Rep. Mike Bost (R-Ill.) offered an amendment that would allow the CFTC to suspend a determination that a foreign jurisdiction is comparable to or as comprehensive as the U.S. rules if that jurisdiction has not provided substituted compliance or equivalency recognition to U.S. entities. He said it would put U.S. clearinghouses on an equal footing with foreign clearinghouses.
David Scott supported the amendment, stressing the importance of having equivalency determinations before the June 15 deadline when additional capital charges would be imposed on U.S. clearinghouses.
Maloney also supported the amendment, saying it is “outrageous” that the U.S. has not been afforded equivalency by European regulators.
H.R. 2289
David Scott moved to report H.R. 2289 favorably to the House for consideration. This motion was approved by voice vote.
For more information on this meeting, please click here.
For the House Agriculture Committee summary of H.R. 2289, please click here.