The House Ag Committee passed the “Derivatives Markets Transparency and Accountability Act of 2009,” which increases the transparency and strengthens oversight of futures, options and over-the-counter (OTC) markets.
Rep. Collin Peterson (D-MN), chairman of the House Ag Committee said, “The urgency to fix the problems in regulated and unregulated futures markets is magnified by the credit crisis and the collapse of some of America’s largest financial institutions: i.e. entities that were heavily involved in the trading of off-exchange credit derivatives like swaps contracts. Their failures have put the American taxpayer on the hook, so just sitting back and doing nothing is not an option.”
Provisions included in the Derivatives Markets Transparency and Accountability Act would:
- Require all prospective OTC transactions to be settled and cleared through a Commodity Futures Trading Commission (CFTC)-regulated designated clearing organization, unless exempted by CFTC in accordance with specified criteria. In some cases, the clearing requirement can be met through a Securities and Exchange Commission (SEC)-regulated clearing agency or a properly regulated foreign clearinghouse.
- Give CFTC the authority, with the President’s consent, to suspend naked credit default swap trading whenever a SEC short-selling suspension order is in effect.
- Close the so-called “London Loophole” by requiring foreign boards of trade to share trading data and adopt speculative position limits on contracts that trade U.S. commodities similar to U.S.-regulated exchanges.
- Require CFTC to set trading limits for physically deliverable commodities, in order to prevent excessive speculation.
- Empower the CFTC to criminally prosecute people who violate commodities legislation.
- Limit eligibility for hedge exemptions to bona-fide hedgers.
- Improve transparency by requiring CFTC disaggregate and separately report the trading activity of index funds and swap dealers in agriculture and energy markets.
- Call for new, full-time CFTC employees to enforce manipulation and prevent fraud.