House Passes CFTC Reauthorization Bill: U.S. House of Representatives Passes the “Customer Protection and End-User Relief Act” That Would Amend Certain Provisions of the Commodity Exchange Act Implemented After Dodd-Frank

Sullivan & Cromwell LLP - July 1, 2014

On June 24, 2014, the House of Representatives voted 265 to 144 to pass H.R. 4413, entitled the “Customer Protection and End-User Relief Act” (the “Reauthorization Act”).  The Reauthorization Act reauthorizes the operations of the Commodity Futures Trading Commission (the “CFTC”) through the 2018 fiscal year.  In addition to reauthorizing the CFTC, the Reauthorization Act would, if enacted, amend the Commodity Exchange Act (the “CEA”), among other things, to:

  • require statutorily the CFTC and Securities and Exchange Commission (“SEC”) to issue joint rules regarding the application of U.S. swaps rules to transactions made between U.S. and foreign entities;
  • modify the requirements for the CFTC’s cost-benefit analyses for rules promulgated under the CEA;
  • enhance certain protections afforded to customers of futures commission merchants (“FCMs”);
  • require the CFTC to conduct a study on high-frequency trading no later than one year after the enactment of the bill;
  • amend the procedures for taking actions without a full vote of the CFTC commissioners; and
  • provide relief to end-users from certain requirements implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
The Reauthorization Act will now be considered by the Senate and will need to be passed by the Senate and signed by the President prior to enactment. The Senate is not expected to pass the Reauthorization Act in the form passed by the House and will likely offer a Senate version with substantial differences from the House’s Reauthorization Act. The bills must then be reconciled by Congress before they are presented to the President. Furthermore, the Reauthorization Act, as passed by the House, does not provide the CFTC with additional funding and imposes new requirements on its operation, to which the CFTC will likely object.  If the House and the Senate fail to reach an agreement on an act to reauthorize the CFTC, Congress will likely be forced to reauthorize the CFTC temporarily for an additional year based on its current statutory authorization.