CFTC Reauthorization Act of 2005

CFTC REAUTHORIZATION ACT OF 2005 -- (Extensions of Remarks - December 15, 2005)

SPEECH OF
HON. NYDIA M. VELÁZQUEZ
OF NEW YORK
IN THE HOUSE OF REPRESENTATIVES
WEDNESDAY, DECEMBER 14, 2005

Ms. VELÁZQUEZ. Mr. Speaker, I rise to express concerns with Title II of H.R. 4473, which reauthorizes the Commodity Exchange Act (CEA). When the CEA was previously reauthorized in 2000, changes were made that brought much needed legal clarity to over-the-counter derivatives and foreign currency markets. In the same legislation, the regulatory structure of U.S. futures exchanges was enhanced, providing a more flexible approach to the oversight of complex financial instruments. Together, these two developments provided a structure that has promoted the depth and breadth of U.S. capital markets throughout the world. Such vibrancy of U.S. capital markets is critical to creating new jobs, building wealth, and attracting investment.

While the reauthorization of the CEA is essential to the efficient functioning of our Nation's capital markets, I am concerned that title II of H.R. 4473--while well intentioned--may disrupt the balance created through the reauthorization of the CEA in 2000. Title II of H.R. 4473 provides the Commodity Futures Trading Commission (CFTC) with expansive new powers that may be interpreted as applying the CEA to over-the-counter natural gas contracts. Doing so may jeopardize the legal certainty of certain natural gas contracts, potentially undermining the efficiency and robustness of the very markets that proponents of Title II are seeking to promote. The Federal Reserve and the Department of Treasury have raised similar concerns about this legislation.

In addition, other concerns have been expressed about H.R. 4473. Section 201 provides the CFTC with new market surveillance powers, which require the CFTC to investigate any highly unusual price changes in futures contracts for natural gas. Such new powers may not be the most appropriate policy response to address widely fluctuating natural gas prices. The Federal Reserve has noted that wide swings in natural gas prices are not a result of weak regulation, but rather due to supply and demand imbalances related to insufficient infrastructure necessary to produce and transport the underlying commodity. Further, section 202 imposes new position reporting standards on holders of natural gas futures or options contracts, requiring that records of such contracts be maintained for five years and provided to the CFTC as their request. These new requirements are not without costs, which could be significant and may be passed on to homeowners and businesses. As a result, this provision could have the unintended affect of increasing costs on energy consumers.

By potentially expanding CFTC authority beyond that established in the 2000, serious questions have been raised about CEA's scope and construction and the potential impact these new changes may have on energy consumers, investors, and industry participants. As this legislation heads to conference, I urge my colleagues to thoroughly discuss and address these issues and concerns so that we can be confident that our Nation's capital markets remain strong and vibrant.

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