Statement of Administration Policy: H.R. 707 - Commodity Futures Improvements Act of 1991

(SENT 3/5/91)
(House)
(English (D) Oklahoma and three others)

The Administration supports House passage of H.R. 707 but will seek Senate amendments to ensure that the efficiency and competitiveness of U.S. futures markets are preserved. The principal amendments to be sought by the Administration would:

—   Substitute the Administration's proposal entitled the "Capital Markets Competition, Stability and Fairness Act of 1991" for section 215. This proposal would help prevent minor events from triggering major market disruptions.

—   Amend the prohibition of dual trading in section 101 to authorize the Commodity Futures Trading Commission (CFTC) to ban dual trading if it concludes that the benefits of such a ban would exceed its costs.

—   Authorize the CFTC to determine the threshold trading level at which the dual trading ban provided for in the bill becomes effective. (The provision contained in H.R. 707 may not provide the CFTC with adequate flexibility to consider market-specific factors in implementing the ban.)

—   Delete the provision in section 102 that would limit trading among members of broker associations to 25 percent of total trading. Further study on the role of broker associations is needed to determine whether such a restriction is warranted or adequate.

—   Delete section 214, which purports to limit the President's choice of persons who could be nominated for the CFTC and would conflict with the Appointments Clause of the constitution.

—   Delete as unnecessary section 216 regarding index arbitrage trading. The Market Reform Act of 1990 already provides the SEC with authority to prohibit or constrain certain trading practices during periods of extraordinary volatility.

—   Increase penalties for knowing violations of 7 U.S.C. section 6c, strengthen ethics reporting provisions, and clarify insider trading provisions.