CFTC Reauthorization

Book excerpt: Authorization for the Commodity Futures Trading Commission (CFTC), a "sunset" agency established in 1974, expired on September 30, 2005. In the past, Congress has used the reauthorization process to consider amendments to the Commodity Exchange Act (CEA), which provides the basis for federal regulation of commodity futures trading. The last reauthorization resulted in the enactment of the Commodity Futures Modernization Act of 2000 (CFMA), the most significant amendments to the CEA since the CFTC was created in 1974. Both chambers considered reauthorization bills in the 109th Congress, but none was enacted. The Senate Agriculture Committee approved S. 1566, a CFTC reauthorization bill offered by Chairman Chambliss, on July 21, 2005. The House passed H.R. 4473 by voice vote on December 14, 2005. The 110th Congress is expected to take up reauthorization. This report provides summaries of current reauthorization issues, including (1) regulation of energy derivatives markets, where some blame excessive price volatility on a lack of effective regulation, (2) the legality of futures-like contracts based on foreign currency prices offered to retail investors, and (3) the market in security futures, or futures contracts based on single stocks, which were authorized by the CFMA, but trade in much lower volumes than their proponents expected. This report will be updated as developments warrant.