Wednesday, the House Agriculture Committee approved legislation bringing accountability to derivatives markets, bringing federal oversight to unregulated over-the-counter products, such as swaps. By voice vote, the House Agriculture Committee approved an amended version of legislation that will increase transparency in and strengthen the oversight of both regulated exchanges and OTC derivatives markets.
"This legislation reflects more than two years of public hearings and a lot of bipartisan work," said Chairman Collin Peterson, D-Minn. "The clearing and exchange trading requirements, along with strong position limits provisions, will increase transparency in the marketplace, will benefit end users by not submitting them to onerous cash collateral requirements, and will hold swap dealers and major swap participants to new standards for capital, margin, business conduct and other requirements to reduce their ability to again place our financial system in such dire straits."
Ranking Member Frank Lucas, R-Okla., said this was another step on the road to creating a pragmatic regulatory structure to the derivatives market. Although he also said there is still a long way to go before it reaches the House floor.
Provisions included in the bill would:
- Institute a clearing requirement for swaps and security-based swaps, with derivatives clearing organizations determining which swaps must be cleared.
- Provide for exceptions from the clearing requirement for commercial end users who are not swap dealers or major swap participants.
- Hold swaps dealers and major swap participants accountable through margin, capital, business, and other conduct requirements.
- Require cleared, listed swaps to be traded on regulated exchanges.
- Require reporting and public disclosure of swap transactions.
- Allow CFTC to impose position limits on swaps and SEC to impose position limits on security-based swaps.
- Provide for exclusive jurisdiction of swaps products under the Commodities Futures Trading Commission, with security-based swaps products under the exclusive jurisdiction of the Securities and Exchange Commission
- Call for CFTC and SEC consultation in rulemaking regarding swap and security-based swap provisions
- Require CFTC to set trading limits for physically-deliverable commodities, in order to prevent excessive speculation.
During today's business meeting the Committee considered and adopted several amendments to the underlying legislation. All adopted amendments along with a description of the text can be viewed on the Committee's website at http://agriculture.house.gov.