The House Agriculture Committee has approved an amended version of Chairman Collin Peterson’s Derivatives Markets Transparency and Accountability Act of 2009, H.R. 977. The bill, which would amend the Commodity Exchange Act (CEA), reflects several substantive changes from the draft bill, which was the subject of hearings before the Committee last week. Among the more significant changes, the revised bill would preclude the Federal Reserve Board from regulating over-the-counter derivatives transactions. In addition, rather than prohibiting “naked” credit default swaps (CDS) as originally proposed, the revised bill would grant the Commodity Futures Trading Commission the authority to suspend the trading of certain CDS, provided that (i) the President does not disapprove, (ii) the suspension applies only to CDS that are related to securities suspended by the Securities and Exchange Commission from short selling, and (iii) such CDS are purchased by persons who are not reducing an existing credit risk directly related to the CDS reference entity or its obligations. Further, the CFTC would be directed to establish speculative position limits only for physically deliverable commodities, rather than all commodities as originally proposed. Finally, the proposed legislation would authorize the CFTC to prosecute criminal violations of the CEA if the Attorney General had declined to do so, which would expand the CFTC’s current authorization to prosecute violations of the CEA and CFTC regulations in U.S. district court and in agency administrative proceedings. Congressman Barney Frank, Chairman of the Financial Services Committee, is expected to request that H.R. 977 next be referred to that committee for consideration.
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