Tuesday, March 19, 2013

House Legislation Would Require CFTC to do Cost-Benefit Analysis of Proposed Regulations

Rep. K. Michael Conaway (R-TX) has introduced a bipartisan bill that would require the Commodity Futures Trading Commission to quantify the costs and benefits of future regulations and orders. The bill, H.R. 1003, would also mandate that the CFTC quantify the impact of market liquidity, a marked change from the current policy of just considering costs. H.R. 1003 is co-sponsored by Rep. David Scott (D-GA). Other co-sponsors include Rep. Scott Garrett (R-NJ), Chair of the Capital Markets Subcommittee and rep. Patrick McHenry (R-NC), Chair of the Oversight Subcommittee of the House Financial Services Committee. 
Rep. Conaway, who is Chair of the House Agriculture Subcommittee on Commodities and Risk Management, also introduced this legislation in the 112th Congress, where it was reported out of the House Agriculture Committee by voice vote.

U.S. businesses and citizens deserve to know the implications of new regulations impacting the futures industry, noted Chairman Conaway.. Just as President Obama’s Executive Order directed government agencies to evaluate the cost of regulations on jobs and the economy, he continued, the legislation will ensure that the CFTC conducts a comprehensive qualitative and quantitative analysis of any future proposed regulations.

In addition to market liquidity, the bill lists a number of other factors that the CFTC must consider in doing the cost-benefit analysis, including price discovery, efficiency, competitiveness and available alternatives to regulation. The CFTC must also consider if the regulation is inconsistent or duplicative of other federal regulations.          

The legislation would also update the CFTC’s current requirements to require the examination of the impacts on the previously unregulated swaps markets, a necessary addition because of new authority given to the CFTC under Dodd-Frank. It also would require the CFTC’s chief economist be involved in the cost-benefit analysis, a recommendation made by the commission’s inspector general. Only future proposed rules would be affected; the legislation would not require retroactive analysis of pending proposals.