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104th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 104-104
COMMODITY FUTURES TRADING COMMISSION REAUTHORIZATION ACT OF 1995
April 6, 1995.--Ordered to be printed
Mr. Roberts, from the Committee on Agriculture, submitted the following
R E P O R T
[To accompany H.R. 618]
[Including cost estimate of the Congressional Budget Office]
The Committee on Agriculture, to whom was referred the bill
(H.R. 618) to extend the authorization for appropriations for
the Commodity Futures Trading Commission through fiscal year
2000, having considered the same, report favorably thereon
without amendment and recommend that the bill do pass.
H.R. 618, the Commodity Futures Trading Commission Act of
1995, authorizes appropriations for the Commodity Futures
Trading Commission is such sums as are necessary for each of
the fiscal years 1995 through 2000. The bill contains no other
amendments to the Commodity Exchange Act.
Purpose and Need
The nation's commodity futures markets are a valuable
resource to U.S. commerce and industry, providing efficient
risk management instruments that also are the main price
discovery mechanism for the nation's agricultural economy,
which is a significant contributor to the wealth of the United
States and the mainstay of rural America.
The industry continues to grow at a phenomenal rate. In
calendar year 1994, total trading of futures and options exceed
650 million contracts, more than 26 percent greater than in the
previous year. Interest rate futures dominate these markets.
Nearly 50 percent of the total volume in 1994 was in interest
rate products, and they accounted for almost 70 percent of the
total growth last year. During fiscal year 1990 in comparison,
the total volume of futures and option activity was 334 million
contracts. There are currently 10 exchanges actively trading
futures and option contracts in the U.S.; however, the
Commission, in addition to its exchange oversight, also
oversees the regulation of 255 commodity brokerage firms, more
than 49,000 salesmen, 9,000 floor brokers, 1,164 floor traders,
more than 1,200 pool operators, about 2,500 commodity trading
advisors and hundreds of introducing brokers.
The Commission's responsibilities also include over-the-
counter (OTC) derivative instruments, which continue to develop
under the exemptive authorities Congress granted the Commission
in its last reauthorization enacted as a part of the Futures
Trading Practices Act of 1992 (1992 FTPA) (P.L. 102-546). In
conjunction with these new authorities, the Commission released
in fiscal year 1994 a comprehensive report, ``OTC Derivative
Markets and Their Regulation,'' which concluded that no
fundamental changes in the regulatory structure appeared to be
needed, although greater coordination among federal financial
regulators would help assure that oversight remains adequate
for these constantly changing markets.
Other reports mandated by the 1992 FTPA were delivered in a
timely manner and included, in addition to the OTC study, a
study of global competitiveness of U.S. futures markets, an
analysis of penalties imposed by the Commission and industry
self-regulatory organizations, an assessment of exchange audit
trail and trade recordation systems and an assessment of the
regulatory benefits of computerized trading systems.
Although the Commission's responsibilities in regulating
financial instruments have evolved with market developments,
the Commission still places a primary emphasis on the
exchanges' agricultural markets. Farmers, ranchers and
agribusinesses understand the importance of these markets to
their business success and actively use them for hedging. In
addition, agricultural commodity prices discovered in U.S.
futures markets reflect the worldwide attention and use of
In addition, the U.S. Department of Agriculture has
expanded its agricultural options pilot program authorized by
the 1990 Food, Agriculture, Conservation and Trade Act, and
farmers continue to show an interest is using options in their
As the Committee noted in its 1992 reauthorization, the
Commission is a permanent agency. The Commission has achieved
parity with other federal regulators, and the Committee intends
to pursue actively its legislative and oversight
responsibilities to shape the size and the role of the
Commission so that it may continue to meet future challenges
and innovations in the nation's futures and over-the-counter
Section 1--Short title
Section 1 provides that the bill may be cited as the
Commodity Futures Trading Commission Reauthorization Act of
Section 2--Authorization of Appropriations
Section 2 amends Section 12(d) of the Act to provide
authorization for appropriations in such sums as are necessary
for each of the fiscal years 1995 through 2000.
The Subcommittee on Risk Management and Specialty Crops
held public hearing on February 28, 1995, on H.R. 618.
Witnesses included Mary L. Schapiro, Chairman of the Commodity
Futures Trading Commission; Patrick H. Arbor, Chairman of the
Chicago Board of Trade; John F. Sandner, Chairman of the
Chicago Mercantile Exchange; Bennett J. Corn, President of the
Coffee, Sugar and Cocoa Exchange; Daniel Rappaport, Chairman of
the New York Mercantile Exchange; Peter F. Karpen, Chairman of
the Futures Industry Association; John G. Gaine, General
Counsel of the Managed Futures Association; and Robert K.
Wilmouth, Chairman, National Futures Association.
The Subcommittee also received written statements for the
record from the National Grain and Feed Association, the Kansas
City Board of Trade, the American Cotton Shippers Association,
and the National Cattlemen's Association.
Four important issues were addressed by witnesses during
the Subcommittee hearing: enhanced audit trail and trade
recordation systems, transaction taxes, the treatment of swap
transactions under Part 35 of the Commission's rules and the
merger of the CFTC and SEC.
CFTC Chairman Schapiro specifically addressed the audit
trail issue in her prepared testimony. She testified that,
``The Commission believes that the exchanges can make
significant improvements to their current audit trail systems
through non-electronic enhancements and that such improvements
can demonstrate a good faith attempt to meet the 1995 standards
of independence, unalterability and sequencing.''
In response to a question from Subcommittee Chairman Ewing,
Ms. Schapiro reiterated that `` * * * we believe that with
substantial enhancements, electronic and non-electronic, to
existing audit trail systems, that the exchanges can ultimately
meet the requirements of the '92 statue.''
In the case of the Clinton Administration's proposed
transaction taxes, Mr. Ewing asked Ms. Schapiro about the
effects of transaction taxes on U.S. futures markets'
competitiveness in global markets. Ms. Schapiro acknowledged
that adding costs to futures transactions may discourage some
market participants from using U.S. markets and that she was
sensitive to the impact transaction taxes might have. However,
she indicated she could not quantify what that impact might be.
In response to concerns about the Commission's treatment of
swap transactions expressed in a letter to Subcommittee
Chairman Ewing from Mr. Baker, a Member of the Committee, and a
written question submitted by Mr. Doolittle, a Member of the
Subcommittee, Ms. Shapiro indicated that the Commission's views
on swap contracts had not changed since the Commission
published a ``Policy Statement Concerning Swap Transactions''
in the Federal Register on July 21, 1989.
The Commission's response, delivered via Subcommittee
Chairman Ewing on April 4, 1995, to Mr. Doolittle specifically
noted the Congress made clear in the 1992 FTPA that legal
certainty was needed in this area; that as long as swap
transactions continued to meet certain specifications, the
Commission would adhere to the 1989 policy statement; and that
Congress did not require the Commission to determine whether or
not swap transactions are futures and, indeed, the Commission
did not make that determination in its Part 35 rules.
Finally, the Chicago Board of Trade, the Chicago Mercantile
Exchange and the Coffee, Sugar and Coacoa Exchange testified in
opposition to a merger of the Commodity Futures Trading
Commission and the Securities and Exchange Commission, citing
lack of additional benefit in cost savings or a reduction in
II. Subcommittee Consideration
The Subcommittee on Risk Management and Specialty Crops met
pursuant to notice on February 28, 1995, to consider H.R. 618,
the Commodity Futures Trading Commission Act of 1995.
Chairman Ewing called the meeting to order for the purpose
of considering H.R. 618 and the Committee Clerk established
that a quorum was present. The Committee Counsel explained H.R.
618 and indicated to the Subcommittee that a substantially
identical bill, S. 178, had passed the Senate February 10,
1995, had been received in the House and was being held at the
Speaker's desk. On motion of Mr. Rose, the Subcommittee ordered
the bill, H.R. 618, favorably reported to the full Committee by
voice vote and in the presence of a quorum.
III. Full Committee Consideration
The Committee on Agriculture met, pursuant to notice, on
April 4, 1995. Chairman Roberts called the meeting to order in
the presence of a quorum for the consideration of H.R. 618, the
Commodity Futures Trading Commission Reauthorization Act of
1995. Mr. de la Garza submitted an opening statement for the
Mr. Ewing was recognized to deliver an opening statement
and to explain the bill.
Mr. Ewing moved that the Committee adopt the bill. By a
voice vote, and in the presence of a quorum, the Committee
ordered the bill to be reported to the House with the
recommendation that the bill do pass and then adjourned.
Reporting the Bill--Roll Call Votes
No amendments were offered to the bill in Committee. In
compliance with clause 2(l)(2) of rule XI of the House of
Representatives, the bill was reported with a quorum actually
present. There was no motion or request for a recorded vote.
Budget Act Compliance (Section 308 and Section 403)
The provisions of clause 2(l)(3)(B) of Rule XI of the Rules
of the House of Representatives and section 308(a) of the
Congressional Budget Act of 1974 (relating to estimates of new
budget authority, new spending authority, or new credit
authority, or increased or decreased revenues or tax
expenditures) are not considered applicable. The estimate and
comparison required to be prepared by the Director of the
Congressional Budget Office under clause 2(l)(C)(3) of Rule XI
of the Rules of the House of Representatives and section 403 of
the Congressional Budget Act of 1974 submitted to the Committee
prior to the filing of this report are as follows:
Congressional Budget Office,
Washington, DC, April 5, 1995.
Hon. Pat Roberts,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 618, the
Commodities Futures Trading Commission Reauthorization Act of
Enactment of H.R. 618 would not affect direct spending or
receipts. Therefore, pay-as-you-go procedures would not apply
to the bill.
If you wish further details on this estimate, we will be
pleased to provide them.
James L. Blum,
(For June E. O'Neill).
congressional budget office cost estimate
1. Bill number: H.R. 618.
2. Bill title: Commodities Futures Trading Commission
Reauthorization Act of 1995.
3. Bill status: As ordered reported by the House Committee
on Agriculture on April 4, 1995.
4. Bill purpose: H.R. 618 would authorize the appropriation
of such sums as are necessary for the Commodities Futures
Trading Commission (CFTC) for the fiscal years 1995-2000.
5. Estimated cost to the Federal Government: Funds for CFTC
have been appropriated for 1995, and the estimate assumes that
no additional appropriation will be necessary for this fiscal
year. Because the bill does not provide a specific
authorization, the table shows two alternative authorization
levels for fiscal years 1996-2000--the 1995 appropriation for
CFTC without adjustment for anticipated inflation and the 1995
appropriation with adjustment for inflation. Outlay estimates
are based on historical spending rates for this program and
assume that appropriations will be provided before the start of
each fiscal year.
1995 1996 1997 1998 1999 2000
Level........ 0 49 49 49 49 49
Outlays...... 0 42 49 49 49 49
Level........ 0 51 53 56 58 60
Outlays...... 0 44 53 55 57 60
The costs of this bill fall within budget function 370.
6. Comparison with spending under current law: The fiscal
year 1995 appropriation for CFTC activities is $49 million. If
appropriations were to remain at the 1995 level, projected
spending would not exceed the amount under current law. If
appropriations were to increase each year to reflect
anticipated inflation, budget authority and outlays would
exceed the levels under current law by amounts growing to $11
million in 2000.
7. Pay-as-you-go considerations: None.
8. Estimated cost to State and local governments: None.
9. Estimate comparison: None.
10. Previous CBO estimate: On February 1, 1995, CBO
provided a cost estimate for S. 178, the CFTC Reauthorization
Act of 1995, as ordered reported by the Senate Committee on
Agriculture, Nutrition, and Forestry on February 1, 1995.
Because the two bills are identical, the cost estimates are the
11. Estimate prepared by: John Webb.
12. Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.
Inflationary Impact Statement
Pursuant to clause 2(l)(4) of Rule XI of the Rules of the
House of Representatives, the Committee estimates that
enactment of H.R. 618, will have no inflationary impact on the
No summary of oversight findings and recommendations made
by the Committee on Government Reform and Oversight under
clause 2(l)(3)(D) of Rule XI of the Rules of the House of
Representatives was available to the Committee with reference
to the subject matter specifically addressed by H.R. 618.
No specific oversight activities other than the hearings
detailed in this report were conducted by the Committee within
the definition of clause 2(b)(1) of Rule X of the Rules of the
House of Representatives.
Changes in Existing Law
In compliance with clause 3 of Rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new matter is printed in
italic, and existing law in which no change is proposed is
shown in roman):
Commodity Exchange Act
Sec. 1(a) * * *
* * * * * * *
Sec. 12(a) * * *
* * * * * * *
[(d) There are authorized to be appropriated to carry out
(1) $53,000,000 for fiscal year 1993; and
(2) $60,000,000 for fiscal year 1994.]
(d) There are authorized to be appropriated such sums as
are necessary for each of the fiscal years 1995 through 2000.