WASHINGTON, D.C. – U.S. Senators Pat Roberts, R-Kan., and Heidi Heitkamp, D-N.D., today introduced bipartisan legislation to ensure farmers and ranchers are protected from a reinterpretation of a Commodity Futures Trading Commission (CFTC) regulation that allows for sufficient time to send payments to their Futures Commission Merchant (FCM) and to repeal a requirement that impedes international data sharing.
“As the Senate Agriculture Committee works to reauthorize the CFTC, I am prioritizing the protection of end-users, like the folks at the local grain elevator, from over-burdensome or unrealistic regulations,” Roberts said. “This legislation ensures that the CFTC rules work as well in rural America as they do on paper.”
“For our farmers, elevators, and businesses to effectively do their jobs, they need to be able to hedge using futures markets,” Heitkamp said. “And they should know that any oversight of those efforts supports and protects them, rather than unnecessarily burdening them. Our bill would provide farmers and grain elevators with the time they need to meet their margins, while protecting customers and the markets from fraud or other reckless behavior by bad actors. The recently-enacted rule by the CFTC was an important step, and our bill would play an important role in providing permanent certainty for farmers, elevators, and businesses that they will be protected.”
At issue is the residual interest rule from the CFTC, which requires futures customers to fully cover the margin of their futures contracts by the end of the day following a trade. The CFTC correctly addressed the concerns of farmers and ranchers by removing the automatic termination of the phased-in period, which would have resulted in the time frame being at the end of the day of the trade.
This legislation ensures that the time frame stays at the end of the day following a trade and prevents a future rule reinterpretation by the CFTC.
This legislation also addresses problems with access to swaps data needed for regulators to monitor risk or detect market manipulation.
The Dodd-Frank mandated indemnity agreement prevents a swap data repository (SDR) and the CFTC from paying the expenses that arise from any litigation relating to the market data. Many countries do not recognize the concept of indemnification and will not accept an agreement with an SDR. Neither the SDR nor the CFTC can then share reported swap data with them, leading to an inability to collectively look at the swaps market to monitor and access risks.
This legislation repeals the Dodd-Frank provision to allow for information sharing among both jurisdictions and market participants.
“The lack of mutual data access and information will hinder regulators’ ability to respond to a financial crisis,” said Roberts. “Incorrect or insufficient responses to a crisis could potentially amplify the financial hardships for Kansans, as exhibited during the 2008 crisis.”
For text of the bill, click here.
The Committee plans to incorporate this legislation into CFTC reauthorization package this year.
Sen. Roberts serves as chairman of the Senate Committee on Agriculture, Nutrition and Forestry, which has jurisdiction over the CFTC. Sen. Heitkamp is a member of the Committee and has pushed to address the concerns of end-users related to the regulation of futures and swaps markets.