Ralph naders campaign blog has posted an article by the candidate detailing the history of regulatory choices which created the current financial crisis. Commodity futures markets executive summary since the passage of the commodity futures modernization act of 2000, new institutional noncommercial investors have entered the commodities futures market. At its top level, it divides the world of legislation into fifty topicallyorganized titles, and each title is further subdivided into any number of logical subtopics. Chinn olivier coibion university of wisconsin, madison university of texas, austin and nber imf and nber this draft. Instead, trading activity in these contracts must follow general. It effectively banned regulators from sticking their noses into overthecounter derivatives like credit default swaps. Commodity futures modernization act credit default.
Commodity futures modernization act investor dictionary. The south african market has traditionally been the largest of the single stock futures marketplaces. Testimony of patrick parkinson deputy director, division of research and statistics commodity futures modernization act of 2000 before the committee on banking, housing, and urban affairs, u. Apr 19, 2020 the commodity futures modernization act was passed by congress and signed into law by president bill clinton in december 2000. The loophole was enacted in sections 2h and g of the commodity futures modernization act of 2000, signed by u. Commodity futures modernization act the financial crisis.
The commodity futures modernization act of 2000 cfma is united states federal legislation that ensured financial products known as overthecounter otc derivatives are unregulated, accelerating the collapses of major financial companies. The enron loophole exempts most overthecounter energy trades and trading on electronic energy commodity markets from government regulation. Commodity futures modernization act of 2000 wikipedia. House of representatives 540 h r 4541 on motion to suspend the rules and pass, as amended 23 yeaandnay passed 19oct2000 7.
The most popular food futures are for meat, wheat, and sugar. Commodity futures modernization amends the commodity exchange act to authorize appropriations for authorities and activities under such act. I have just modified 2 external links on commodity futures modernization act of 2000. Mar 02, 2009 the only two concrete examples i have seen are the gradual repeal of glasssteagall throughout the 1990s and the commodity futures modernization act in 2000. Ontario commodity futures act advisory committee interim. Commodity futures modernization act of 2000 us law. Testimony, parkinsoncommodity futures modernization. The predictive content of commodity futures menzie d. The three main areas of commodities are food, energy, and metals. As amended by the cfma, in order for a dcm to list. Media in category commodity futures modernization act of 2000 this category contains only the following file.
Commodity futures contracts financial definition of. The commodity futures modernization act, of 2000, signed by president bill clinton, allowed overthecounter otc derivatives to trade in commodities, outside the supervision of the u. The term security future does not include any agreement, contract, or transaction excluded from this act under section 2c, 2d, 2f, or 2g of this act as in effect on the date of the enactment of the commodity futures modernization act of 2000 or title iv of the commodity futures modernization act of 2000. Commodities futures are agreements to buy or sell a raw material at a specific date in the future at a particular price. Sep 08, 2005 testimony of patrick parkinson deputy director, division of research and statistics commodity futures modernization act of 2000 before the committee on banking, housing, and urban affairs, u. Ewing introduced his commodity futures modernization act. Jun 09, 2006 states which overhauled its commodity futures regime with the introduction of the commodity futures modernization act, 2000. There were other, unmet pet priorities of some lawmakers. What is the commodity futures modernization act cfma. What does commodity futures modernization act mean. Any person who for compensation of profit, engages in the business of advising others, either directly, or through publications, writings or electronic media as to the value of or the advisability of trading in any contract of sale of a commodity for future delivery made or to be made or subject to the rules of a contact market any commodity option authorized under section 4c of the act.
Jan 18, 2016 leading the charge in congress were sens. At that time, congress had enacted legislation to expand the scope of what was defined as a commodity. Commodity futures contract an agreement to buy and sell a commodity at a certain date at a certain price. Introduced in house 12142000 commodity futures modernization act of 2000 title i. Congress passes commodity futures modernization act, cftc.
This term refers to a group of institutional investors that own commodities futures. The cfma removed a longstanding ban2 on trading futures on single securities and narrowbased security indexes3 in the united states. Introduced in house 1214 2000 commodity futures modernization act of 2000 title i. Did deregulated derivatives cause the financial crisis. Urging support for the commodity futures modernization act. The committee was requested to prepare a report which addressed whether the cfa, in its current form, provides an. It was signed into law on december 21, 2000 by president bill clinton. Dec 31, 2008 if you had to pick a single government move that did more than any other to muck things up, it was probably this bill, passed by a republican congress and signed into law by lameduck president bill clinton in december 2000. In the judgment of the cme, the commodity futures modernization act of 2000, or the cfma, represents successful landmark legislation. The united states code is meant to be an organized, logical compilation of the laws. Anticipating that single stock futures will begin trading in the u. What is commodity futures modernization act of 2000. I n the waning days of the 106th congress and the clinton administration, congress met in a lameduck session to complete work on a variety of appropriations bills that were not passed prior to the 2000 election. This act may be cited as the commodity futures modernization act of 2000.
This act may be cited as the commodity futures act and referred to as chapter c152 of the continuing consolidation of the statutes of manitoba. States which overhauled its commodity futures regime with the introduction of the commodity futures modernization act, 2000. This act comes into force on a day fixed by proclamation. The commodity futures modernization act and single stock. The united states code is meant to be an organized, logical compilation of the laws passed by congress. December 15, 2000 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. The act removed the ban trading of futures contracts based on single stocks and narrowly based stock indices in the u. On october 23, 2001, new rules relating to intermediaries, including futures commission merchants fcms, introducing. It clarified the law so most otc derivative transactions between sophisticated. It was an attempt to solve a dispute between the securities exchange commission sec and the commodities futures trading commission cftc that arose in the early 1980s. The law allows sophisticated parties to trade the contracts without scrutiny under the commodity exchange act of 1936. The bills principal focus is on lifting the ban on single stock futures and the much needed modernization of our futures laws as well as the provision for legal. Before the committee on agriculture, nutrition, and forestry and committee on banking, housing, and urban affairs united states senate june 21, 2000. The legislation reauthorizes the commodity exchange act, repeals the ban on single stock futures, and provides legal.
Commodity futures modernization act of 2000 be it enacted by the senate and house of representatives of the united states of america in congress assembled, section 1. Commodity modernization act provides legal certainty. The commodity futures modernization act and single stock futures the financial information forum fif was founded in 1996 to address the issues of its component groups exchanges, brokerdealers, futures commission merchants fcm and vendors. S government that reaffirmed the authority of the commodity futures trading commission for five years as the regulatory. The loophole was drafted by enron lobbyists working with senator phil gramm 1 seeking a deregulated atmosphere for their new experiment. Sep 18, 2008 commodity futures modernization act of 2000 the cfma has received criticism for the socalled enron loophole, 7 u. To his credit, weisberg candidly admits that he cant point to a smoking gun. Commodity futures contract an agreement to buy a specific amount of a commodity at a specified price on a particular date in the future, allowing a producer to guarantee the price of a product or raw material used in production. Some otcs derivatives transactions were kept outside of the jurisdiction of the cftc. The only two concrete examples i have seen are the gradual repeal of glasssteagall throughout the 1990s and the commodity futures modernization act in 2000. Chairman lugar, chairman gramm, and members of the committees.
Commodity futures modernization act of 2000 the cfma has received criticism for the socalled enron loophole, 7 u. Commodity futures modernization act brought basic changes in the derivatives and commodities markets. Chairman and ranking member condit, thank you for bringing the committee together today to discuss h. Mar 20, 2009 2000 commodities act paved way for problems melissa block talks with michael hirsh, senior editor at newsweek talks about how the commodity futures modernization act of 2000 was passed to keep. On december 21, 2000, the commodity futures modernization act cfma became law and amended the commodity exchange act cea. This legislation would provide legal certainty that overthecounter otc derivatives transactions will continue to be enforceable in accordance with their terms. Commodities futures modernization act of 2000 some. Another major part of the act was that it prevented the new financial products called swaps from being regulated by the. May 28, 2018 commodity futures modernization act cfma. The commodity futures modernization act was passed by congress and signed into law by president bill clinton in december 2000. It was the second federal statute that attempted to regulate futures contracts after the short lived antigold futures. Our futures markets are stronger and more vibrant today as the direct result of congresss enactment of the cfma, and equally important, the cftcs judicious and deliberate implementation of those reforms.
In 2000, senator phil gramm played a central role in writing the commodity futures modernization act, a law that would open the door to unregulated trading of. Federal legislation enacted in 2000 that overhauled certain regulatory schemes and expelled the shadjohnson jurisdictional accord, which prevented singlestock futures in 1982. The commodity futures modernization act of 2000 cfma, pub. The act removed the ban trading of futures contracts based on single. To reauthorize and amend the commodity exchange act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and overthecounter derivatives, and for other purposes. This paper examines the predictive content of futures prices for energy, agricultural, precious and base metal commodities. If you had to pick a single government move that did more than any other to muck things up, it was probably this bill, passed by a republican congress and signed into law by lameduck president bill clinton in december 2000. However, ncoil continues to believe that cdswhich are most often defined as insurance against negative credit eventsshould be regulated as insurance. I am pleased to testify today on behalf of the securities and exchange commission sec or commission as you consider s. The commodity futures modernization act brought the united states into a global market of the single stock futures that included great britain, spain, south africa, india, and other countries.