Rep. Austin Scott Introduces Bipartisan Bill to Modernize the Commodity Futures Trading Commission
WASHINGTON, DC – Congressman Austin Scott (GA-08), Chairman of the House Agriculture Committee Subcommittee on Commodity Exchanges, Energy and Credit, today released the following statement upon introducing last night the Commodity Futures Trading Commission Research and Development Modernization Act (H.R.6121). H.R.6121 would improve the research and development capabilities of the U.S. Commodity Futures Trading Commission (CFTC), which is the U.S. Futures and Derivatives regulator. CFTC is charged with ensuring competitiveness, efficiency and financial integrity in commodity trading markets.
“I am very glad to introduce this legislation to better equip the CFTC with the tools it needs to maintain fairness and transparency in our commodity trading markets in the 21st century,” said Rep. Scott. “It’s no secret that the private sector leads the charge with innovation and that our markets are rapidly evolving with new and emerging technologies. This bipartisan legislation will improve the relationships between the CFTC and financial technology companies to increase the Commission’s understanding of emerging technologies and its use of new tools to more effectively regulate derivatives markets.”
Financial markets are changing rapidly with the emergence of new technologies such as distributed ledger technology, machine learning, and predictive analytics. These technologies bring new opportunities and challenges to regulated derivatives markets. New technologies hold the potential to improve trade execution and settlement, simplify reporting compliance, and provide regulators with new tools for regulatory oversight.
The legislation refocuses the CFTC’s research goals on understanding these innovations and developing new tools to better regulate U.S. derivatives markets. It will allow the Commission to work more closely with technology companies to understand the software they are developing, how their applications fit into the Commission’s current rules, and what new tools might be leveraged by the Commission to improve its own regulatory purposes.
Specifically, H.R.6121 would grant the CFTC two new authorities to facilitate interactions with financial technology companies. The first would authorize the CFTC to engage in non-standard procurement transactions, and enable the CFTC to collaborate on projects with financial technology (FinTech) developers. The second would authorize the CFTC to receive gifts solely for research, development and demonstration purposes, and would allow the agency to receive and use software to advance its understanding of developing financial technology. Lastly, this legislation requires an annual report detailing the use of this authority and the gift authority would be subject to a five year sunset clause.