"foster open, transparent, competitive, and financially sound markets, to avoid systemic risk, and to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act."
Several existing regulatory protections that apply to firms involved in futures markets would be made into law. The following consumer protection regulations would be made into law by this bill:
A requirement for regulators to electronically confirm customer account balances rather than using paper documents that can lead to forgeries;
Firms that move more than a specified percentage of customer funds between accounts must comply with permission and reporting requirements;
Undercapitalized firms (i.e. businesses that don't have the money they need to operate) have to notify regulators of their financial situation so that customer funds can be protected. Those firms also have to file an annual report with regulators;
Farmers, ranchers, and other futures customers would have a full business day to send their margin payments (a deposit of assets to cover some of the credit risk the other party is taking) to a futures commission merchant (FCM), reducing the cost of over-funding accounts.
The CFTC’s administration would be shaken up by making its division directors answerable to the entire Commission. A new Office of the Chief Economist would be established to report economic data and analysis to the entire Commission. “No-Action” letters that the CFTC issues would be subject to additional scrutiny, as they had been outside of the traditional oversight process. Proposed new rules would also be subject to a cost-benefit analysis before their implementation.
This legislation seeks to provide relief to end-users -- such as agricultural producers, manufacturers, electric and gas utilities, and pension plans -- by reducing barriers that have inhibited their participation in the futures markets.
Commercial end-users would no longer be treated like banks in terms of their reporting requirements, and all non-financial end-users would not be disadvantaged through public-reporting if they trade infrequently. There would also be additional time between the completion of a transaction and its reporting to protect these traders’ positions.
Farmers, grain elevators, agricultural entities, and commercial market participants would no longer be subject to record-keeping requirements that had mandated that they preserve all communications that may lead to a trade. Now, they would only have to record the final economic terms of their transactions.