[House Report 106-711]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-711
HOUSE OF REPRESENTATIVES
2d Session Part 4
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COMMODITY FUTURES MODERNIZATION AND FINANCIAL CONTRACT NETTING
IMPROVEMENT ACT OF 2000
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October 19, 2000.--Ordered to be printed
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Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
SUPPLEMENTAL REPORT
[To accompany H.R. 4541]
This supplemental report shows the report of the
Congressional Budget Office on the private sector effects with
respect to the bill (H.R. 4541), as reported by the Committee
on Banking and Financial Services and the vote of the committee
on an amendment to the bill, which were not included in part 2
of the report submitted by the Committee on Banking and
Financial Services on September 6, 2000, (H. Rept. 106-711, pt.
2).
This supplemental report is submitted in accordance with
clause 3(a)(2) of rule XIII of the Rules of the House of
Representatives.
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 3, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed estimate of private-sector effects of
H.R. 4541, the Commodity Futures Modernization and Financial
Contract Netting Improvement Act of 2000. CBO completed a
federal cost estimate and an assessment of the bill's effects
on state, local, and tribal governments on September 6.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Judy Ruud
and Tim VandenBerg.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
CONGRESSIONAL BUDGET OFFICE ESTIMATE OF COSTS OF PRIVATE-SECTOR
MANDATES
H.R. 4541--Commodity Futures Modernization and Financial Contract
Netting Improvement Act of 2000
Summary: H.R. 4541 would impose three new private-sector
mandates as defined by the Unfunded Mandates Reform Act (UMRA)
on insured depository institutions, registered futures
associations, and retail swap market participants. CBO
estimates that the direct costs of those mandates would be
below the annual threshold established by UMRA for private-
sector mandates ($109 million in 2000, adjusted for inflation).
Private-sector mandates contained in the bill: H.R. 4541
would impose three new private-sector mandates as defined by
UMRA. First, the bill would require insured depository
institutions to keep more detailed records for certain
financial contracts. Section 209 would authorize the Federal
Deposit Insurance Corporation (FDIC) to prescribe additional
recordkeeping requirements for certain qualified financial
contracts held by depository institutions. Under the Federal
Deposit Insurance Act, qualified financial contracts are
defined for five types of financial contracts: securities
contracts, commodity contracts, forward contracts, repurchase
agreements, and swap agreements. The FDIC anticipates that
under the new requirements, institutions would essentially have
to ensure that certain data that they already collect (and
record) on such contracts are organized in a manner that would
be accessible to the FDIC. Consequently, CBO experts that the
direct costs of this mandate would not be large.
Second, H.R. 4541 would require a registered futures
association to adopt ``suitability rules'' for its members,
regarding advising customers on the purchase or sale of newly
authorized futures on single stocks and futures on narrow stock
indexes. Such rules would require that a future commission
merchant, a commodity trading advisor, or an introducing broker
that recommends such a purchase or sale to ascertain the
suitability of that recommendation for their customers.
According to industry representatives, such suitability rules
would be similar to the ``know your customer requirements''
that the National Futures Association adopted in 1985. Thus,
CBO expects that the direct costs of issuing suitability rules
would be negligible.
Third, the bill would authorize the Federal Reserve and the
Secretary of the Treasury, in consultation with the Securities
and Exchange Commission and the Commodity Futures Trading
Commission, to jointly prescribe customer protection
regulations that apply to sales practices relating to retail
swap transactions. According to regulatory and industry
representatives, the retain market for swaps may develop in the
future, but such transactions are currently limited, if any.
Thus, this mandate would have no immediate cost.
Estimate prepared by: Judy Ruud and Tim VandenBerg.
Estimate approved by: Roger Hitchner, Assistant Director
for Microeconomics and Financial Studies Division.
ERRATA
On page 58 of Report 106-711 Part 2 under COMMITTEE
CONSIDERATION AND VOTES add the following:
The Committee considered an amendment by Mrs. Maloney of
New York to delete the provision providing a partial exclusion
from the CEA for exempt commodities entered into solely between
eligible contract participants and executed on an electronic
trading facility. The amendment was defeated 12-20.
YEAS NAYS
Mr. King Mr. Leach
Mr. LaFalce Mrs. Roukema
Ms. Waters Mr. Bereuter
Mrs. Maloney, (NY) Mr. Baker
Mr. Gutierrez Mr. Campbell
Mr. Watt Mr. Royce
Mr. Maloney, (CT) Mr. Lucas
Ms. Hooley Mr. Metcalf
Mr. Sherman Mrs. Kelly
Ms. Lee Dr. Weldon
Mr. Inslee Mr. Ryun, (KS)
Ms. Schakowsky Mr. Cook
Mr. Riley
Mr. Hill, (MT)
Mr. Ryan, (WI)
Mrs. Biggert
Mr. Terry
Mr. Green, (WI)
Mr. Toomey
Mr. Bentsen