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CONGRESS PASSES COMMODITY FUTURES MODERNIZATION ACT

CFTC Reauthorized for Five Years

  � The Commodity Futures Modernization Act, as adopted, is a significant step forward for U.S. financial markets. This important new law creates a flexible structure for regulation of futures trading, codifies an agreement between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission to repeal the 18-year old ban on trading single stock futures and provides legal certainty for the over-the-counter derivatives markets. The law, which reauthorizes the CFTC for five years, also clarifies the Treasury Amendment exclusion and specifically grants the CFTC authority over retail foreign exchange trading.

  � Congress, in passing this law, has effectively implemented the recommendations set forth in the President’s Working Group on Financial Markets’ Report on Over-the-Counter Derivatives Markets and the Commodity Exchange Act. The CFTC worked closely with Congress and the futures industry to help design a regulatory structure that is tailored to the specific products and participants of a given market, specifically taking into account the manipulability of the products and eligibility of the participants. This approach will provide U.S. financial markets the flexibility needed to maintain a leadership role in the global market arena. The CFTC will proceed promptly to conform its rules as necessary to the provisions contained in the new law.