On June 24, 2014, the House of Representatives passed H.R. 4413, the "Customer Protection and End User Relief Act," which is a bill to reauthorize the Commodity Futures Trading Commission through September 2018. In addition to continuing the CFTC’s authorization, the House bill would also make the following amendments to the Commodity Exchange Act:
- Specify congressional expectations for the protection of customer assets by codifying recent regulatory enhancements, including daily confirmations of segregated balances.
- Clarify that anticipatory hedging is considered bona-fide hedging for the purpose of speculative position limits.
- Clarify when futures commission merchants are required to deposit residual interest to satisfy the margin deficits of their customers.
- Modify the reporting structure for CFTC division directors, and require them to report to the full commission rather than only the CFTC chairman.
- Revise the manner in which cost-benefit analysis is performed for future CFTC rulemakings.
- Mandate joint cross-border swap/security-based swap rulemaking by the CFTC and the SEC.
- Exempt trading advisers to “registered investment companies” currently registered with the SEC from an obligation to register with the CFTC.
- Address certain issues involving swaps and end-users, including:
- Exempting non-financial entity end users from margin requirements for swaps not subject to mandatory clearing; and
- Excluding from the definition of swaps any forward contract that results in the physical delivery of commodities.
The House bill now goes to the Senate. It is expected that the Senate Agriculture Committee will hold additional hearings before proposing its own CFTC reauthorization bill. The hearing process is likely to continue over the coming months, but development of the ultimate Senate bill is expected to extend into Fall.