House Approves CFTC Measure

October 20, 2000

The House voted 377-4 Thursday to modernize futures industry regulations, establish legal certainty for the financial derivatives industry and reform outdated restrictions to allow U.S. futures exchanges to trade single stock futures instruments while retaining all current consumer protections. The measure was brought to the House floor by agriculture Risk Management Subcommittee Chairman Tom Ewing (R-IL)

London's futures exchange will take the unprecedented step of trading single stock futures on American companies – without competition – unless federal regulation of U.S. futures exchanges is modernized, proponents say.

"Our action balances the capital and investment needs of American businesses at the point they intersect with the need to manage economic risk in a global environment," said House Agriculture Committee Chairman Larry Combest (R-TX). "This bill modernizes the federal regulatory system to ensure that domestic financial service providers can compete in the global marketplace."

"Banking modernization was enacted last year. It is time for the financial industry to move on to CEA modernization," said Ewing (R-IL). "I made it clear that I was interested in a comprehensive bill, and I believe this bill displays a substantial cooperative effort among the House Agriculture, Banking and Financial Services, and Commerce Committees to substantively address the most important reforms for the U.S. financial industry. If the U.S. futures exchanges and OTC industry are to compete with new electronic exchanges and other foreign competition such as EUREX, we need to send a clear message that the United States will have a fair and competitive regulatory system."

The bill is "an important piece of legislation and has a number of components that will improve the business environment for the derivatives portion of our nation's financial services industry," said Charlie Stenholm (D-TX), the committee's Ranking Democrat.

Three main reforms are the centerpiece of H.R. 4541: It gives legal certainty to the vast, multi-trillion-dollar derivatives markets, but with certainty that only highly-sophisticated, deep-pocketed companies and individuals may participate in these markets. U.S. futures industry will be able to trade single stock futures, but only under the watchful eyes of federal securities and futures regulators. Finally, U.S. futures exchanges will be allowed to set their own course in operating their derivatives markets under CFTC oversight but without "the burdens of a regulatory regime designed for the last century," according to House supporters.