Statement of Administration Policy: S. 207 - Futures Trading Practices Act of 1991

(Senate)
(Leahy (D) Vermont and 5 others)

Title III of S. 207, as proposed to be amended by Senator Leahy, represents a substantial step toward promoting intermarket stability by assigning broad authority for setting margin levels for stock index futures to the Federal Reserve Board, and the Administration strongly supports section 301 of Title III, as amended.

Although the amended Title III language on exclusivity issues, while containing modest improvements and clarification over the current situation, falls short of the broader competition in financial instruments that the Administration initially proposed, the Administration generally supports Title III as amended, in the spirit of the compromise reflected in the amendment.

The Administration supports enactment of S. 207 if it is further amended to:

—   Clarify that computerized trading should not be restricted to being an adjunct to the open out cry auction system. This could be accomplished by inserting the words "both as a separate system or" following "computerized trading" in section 267 and substitute "encouraged" where the word "directed" first appears. The CFTC should be directed to study the viability of computerized trading and report to Congress.

—   Eliminate the proposed exemption in section 102 for the CFTC from Federal pay caps and the regular compensation system. The Federal Employees Pay Comparability Act of 1990 provides numerous pay flexibilities to permit the CFTC to recruit and retain highly qualified personnel.

—   Conform the provision on the CFTC's undercover authority in section 262 with the provision contained in section 203 of H.R. 707 as passed by the House. The House language would offer greater consistency with current practice.

—   Amend subtitle F to protect from compelled disclosure certain information provided by foreign regulators. This provision is necessary to ensure that foreign governments are willing to share with the CFTC sensitive financial information.

—   Delete the provision in section 263 that would authorize the General Accounting Office to have direct access to information maintained by futures markets and related organizations. This information can already be obtained from the CFTC.

—   Delete the requirement in section 268 that the CFTC "take into consideration, and endeavor to serve" the producers of agricultural commodities. This requirement would severely compromise the CFTC's role as a neutral regulator.

—   Delete the requirement in section 267 that the CFTC cooperate in efforts to remove trade barriers related to electronic trading systems. Trade issues should receive careful consideration in separate legislation.

—   Increase penalties for certain prohibited commodity transactions, strengthen ethics reporting provisions, enhance audit trail requirements, and clarify insider trading provisions.

—   Authorize the CFTC to ban dual trading if it concludes that the benefits of such a ban would exceed its costs.

The Administration would oppose any amendment to remove or limit the increase in CFTC fee collections and any amendment similar to section 214 of last year's House-passed version of H.R. 2869. That section purported to limit the President's choice of persons who could be nominated for the CFTC and would conflict with the Appointments Clause of the Constitution.

Scoring for the Purpose of Pay-As-You-Go and the Caps

S. 207 would increase federal revenues as a result of the service fees established in the bill. Because no pay-as-you-go spending is mandated in the bill, these revenues would be counted as an offset to the end of the year pay-as-you-go requirement, which must be met to avoid a sequester. The bill also would authorize the appropriation of amounts that are substantially higher than those included in the current services baseline for the CFTC. The authorization is not subject to pay-as-you-go requirements.

OMB's preliminary scoring estimates are presented in the table below. Final scoring of this legislation may deviate from these estimates. If S. 207 were enacted, final OMB scoring estimates would be published five days after enactment, as required by the Omnibus Budget Reconciliation Act (OBRA). The cumulative effect of all enacted legislation on the pay-as-you-go requirement will be issued in monthly reports transmitted to Congress.

Estimates for Pay-As-You-Go
(increased receipts in millions of $)