The U.S. Commodity Futures Trading Commission (CFTC) would face limits on its ability to impose rules on derivatives traded overseas and on manufacturers that use swaps to hedge business risks under proposed bipartisan congressional legislation setting the scope of the agency’s powers.

Republicans and Democrats on the House Agriculture Committee in the US, which has jurisdiction over the Commodity Futures Trading Commission (CFTC), have introduced a 48-page bill that would also force the agency to assess the costs of its Dodd-Frank Act regulations and conduct a new study of high-speed trading. The legislation is typically approved once every five years.

The legislation is intended to improve the efficiency and accountability of the CFTC, ensure regulations are implemented in a sensible manner, maintain the integrity of the marketplace, and guarantees US global competitiveness. The committee scheduled a meeting in Washington today to consider the legislation. It is the first step in a broad congressional effort to review commodity laws since the CFTC implemented more than 60 regulations to increase oversight of swaps traded .

CFTC future in regulating the derivatives market

The 2010 Dodd-Frank Act financial-overhaul law gave the agency the task of designing regulations to reduce risk and increase transparency in the swaps market following the 2008 credit crisis.

This new measure would require the CFTC to release formal commission approved rules setting the reach of its regulations on derivatives traded overseas. The agency wouldn’t be allowed to set policy through guidance documents as it did in July and November 2013. 

In addition, some experts believe that there are provisions in this bill that would effectively unwind a good deal of the work the CFTC has already done and make it much harder for them to regulate the derivatives markets.

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CTMfile take: Assessing the real cost of Dodd-Frank will take forever, nevertheless, the lessons for future regulations could be huge. However, what is the future now for the control of derivates markets globally? Probably a bigger mess than before. The regulatory authorities in the rest of the world are still trying to catch up with the US has done already, who are now going to change their regulations again.