About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 (January 3, 2006)

handle is hein.crs/crsuntaacev0001 and id is 1 raw text is: Order Code RS22028 Updated January 3, 2006 CRS Report for Congress Received through the CRS Web CFTC Reauthorization in the 109th Congress Mark Jickling Specialist in Public Finance Government and Finance Division Summary 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 House and Senate Agriculture Committees held reauthorization hearings in March 2005. The Senate Banking Committee held a hearing on September 8, 2005. 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. This report provides brief summaries of the issues in the 2005 reauthorization process, including (1) 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 had hoped, (2) regulation of energy derivatives markets, where some see excessive price volatility and a lack of effective regulation, and (3) the legality of futures-like contracts based on foreign currency prices offered to retail investors. This report will be updated as developments warrant. Futures contracts -like other financial derivatives such as options or swaps - gain or lose value as the price of some underlying commodity rises or falls. They allow traders to invest in corn, gold, or T-bills without actually owning the underlying commodities themselves. Futures can be used to avoid, or hedge, price risk. That is, farmers, utilities, airlines, banks, and many other businesses can use derivatives to protect themselves against unfavorable changes in commodity prices, interest rates, or other variables. Most futures trading, however, is done by speculators who profit if their forecasts of price trends are correct. (The futures exchanges are associations of professional speculators.) There are two public benefits to speculation: speculators provide liquidity - they are willing to assume the risks that hedgers wish to avoid. Speculative trading also provides a very efficient price discovery mechanism: futures Congressional Research Service + The Library of Congress

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most