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House passes commodities market transparency bill

The House of Representatives voted Thursday to approve a bill to increase the transparency, oversight, and anti-manipulation authority over commodity futures and options markets. The House overwhelmingly passed H.R. 6604, the Commodity Markets Transparency and Accountability Act of 2008, a bill sponsored by House Agriculture Committee Chairman Collin C. Peterson of Minnesota, by a vote of 283-133.

According to a House news release, the bill would strengthen trader position limits on oil and other futures markets as a way to prevent potential price distortions caused by excessive speculative trading. It directs the CFTC to get a clearer picture of the over-the-counter (OTC) markets, and it calls for new full-time CFTC staff to improve enforcement, prevent manipulation, and prosecute fraud.

“Commodities markets have seen significant changes in recent years,” Peterson said. Trading volume is at record levels, tradable products are more complex, and an unexplained lack of convergence between futures and cash prices in some contracts has called into question the effectiveness of these markets as a source of price discovery and risk management.

“I am proud that we could work across party lines today to pass this bill which will bring much-needed transparency to commodities and futures markets for the benefit of producers, processors and consumers.”

Provisions included in the bill would:

• Require foreign boards of trade to share trading data and adopt speculative position limits on contracts that trade U.S. commodities similar to U.S.-regulated exchanges.

• Require the CFTC to set trading limits for all agricultural and energy commodities, in order to prevent excessive speculation.

• Limit eligibility for hedge exemptions to bona-fide hedgers.

• Codify CFTC recommendations to improve transparency by disaggregating index fund and other data in energy and agricultural markets as well as requiring detailed reporting from index traders and swap dealers.

• Call for a minimum of 100 full-time CFTC employees to enforce manipulation and prevent fraud. Despite record trading volume in the futures and options markets, CFTC staffing is at its lowest level since the agency was created in 1974.

• Authorize CFTC to take action if it finds disruption in over-the-counter markets for energy and gas.

• Require the CFTC to study the effectiveness of establishing position limits in over-the-counter markets.

Congressional oversight of commodity futures trading is under the jurisdiction of the House Agriculture Committee, chaired by Peterson. The committee approved H.R. 6604 by voice vote on July 24. It was brought to the House floor on July 30 under suspension of House rules, but it did not receive the two-thirds majority needed to pass.

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