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8500 NW River Park Rd

Pillar 231 --A

Parkville, MO 64152

**[Testimony of Brent Weisenborn, CEO of Agora-X, LLC.]{.underline}**

Mr. Chairman and Members of the Committee,

My name is Brent Weisenborn of Parkville, Missouri. I am CEO of Agora-X,
LLC. Thank you for the opportunity to share my views on the important
questions of regulation of the OTC commodities markets that you are now
considering in the proposed bill (Draft Bill) to amend the Commodity
Exchange Act (CEA).

\(1\) **[Background]{.underline}**.

Agora-X, LLC is a development stage company that is dedicated to
bringing efficiency, liquidity and transparency to over-the-counter
(OTC) commodity markets by means of state of the art, regulatory
compliant, electronic platforms for OTC contract negotiation as well as
trading and transaction execution. Its initial focus is on cash-settled
OTC contracts related to physical commodities, such as energy and
agricultural commodities.

Agora-X, LLC was founded in 2007 by FCStone Group, Inc, which is a
commodities firm with deep roots in agricultural commodities markets.
FCStone originated as a regional cooperative in the Mid-West offering
traditional hedging services to cooperative grain elevators, and has
grown to offer commodity trading and price risk management services
throughout the nation and beyond. In addition to FCStone, Agora-X is now
also partly owned by The NASDAQ OMX Group, Inc.

I am tremendously excited about the opportunity that exists to improve
the functioning of the commodities markets by means of innovations such
as the electronic platforms offered by my company and by adjustments to
existing regulatory systems that you are now considering.

I feel qualified to comment on these points, not only because of my role
with Agora-X, but also because of years of experience in both the
securities and commodities markets.

I have been a member of both the Chicago Board of Trade (CBOT) and the
Kansas City Board of Trade (KCBT). I traded futures and was an option
market maker as a proprietary trader. I served on the Board of Directors
of the KCBT from 1996 to 1998.

I was a founder and served from 1987 until 2001 as President of Security
Investment Company of Kansas City, an institutional only Broker-Dealer
and NASDAQ Market Maker. Security Investment Company specialized in
proprietary trading and wholesale market making.

I was elected to the NASDR (renamed FINRA), District No. 4 District
Committee in 1998 and was elected Chairman in 1999. I served as chairman
until January of 2001 and as co-chairman of the District 4 & 8 (Chicago)
Regional Committee. The NASDR (FINRA) District No. 4 covers seven
states: Missouri, Kansas, Iowa, Nebraska, North Dakota, South Dakota and
Minnesota. At that time I was responsible for the regulatory oversight
of approximately 55,000 stockbrokers in 2,500 offices. I also served on
the NASDR National Advisory Council for the year 2000. In June of 2000,
I was elected to the NASDR National Small Firm Advisory Board.

As a result of my experience I have observed at close hand the evolution
of the electronic markets for securities, and I see strong parallels
with electronic markets for commodities that are just now emerging.

\(2\) **[Need for Regulatory Change]{.underline}**.

OTC markets play an important role of market innovation. They provide an
alternative venue of contract formation, price discovery and risk
mitigation outside the rigid and restrictive regulatory framework for
"designated contract markets" that applies to commodity exchanges. OTC
markets can provide substantial public benefit without creating systemic
risk of the kind that precipitated last September's financial crisis if
they are required to be transparent, reportable, clearable, and to
function within the bounds of electronic communication networks (ECNs)
or exempt commercial markets (ECMs).

Well organized OTC markets also dramatically improve efficiency of
commodity markets and by doing so OTC markets reduce the costs that
consumers ultimately pay for commodities. When the markets are
transparent, liquid and open, the spreads that swaps dealers can charge
shrink and as a result, transaction costs fall. Efficient markets also
inevitably attract liquidity and become broader. If these markets become
clearable, they will also bring increased liquidity to clearing houses
and registered commodity exchanges.

In addition, in open markets there is much less room for manipulation
and the possibility of committing fraud. Because of the transparency and
breadth of these markets, the likelihood of devastating speculative
bubbles is also significantly reduced. These markets will help bring
interests of traders and sound market fundamentals into balance. Thus,
well regulated and well managed OTC markets will contribute to the
integrity of US financial markets as a whole.

Of course, we must not ignore the problems that have emerged from the
current crisis, but we should be careful in identifying the sources of
these problems. In my view, the major problems have been in the misuse
of securities and commodities contracts, and have not been in the means
by which they are traded.

This brings me to the major point I wish to make. I urge the Committee
to preserve the OTC commodity markets, but to modify the existing law to
derive improvements in them.

The present financial crisis demonstrated that there are inefficiencies
in the regulation and functioning of the OTC commodities markets and
that these markets can be improved by means of electronic audit trail
and reporting, by clearing and by moving these markets to a transparent
ECN or ECM facilities, where possible.

In addition, an important issue for this Committee is the treatment of
OTC contracts on agricultural commodities. We believe that agricultural
derivatives, such as commodity swaps and options, deserve the same
treatment as the non-agricultural commodities under the Draft Bill.
Existing law and regulation discriminate against these commodities by
making it difficult or impossible to create OTC agricultural contracts
electronically or to clear them. Harmonization of regulation for OTC
contracts on agricultural commodities with other contracts will provide
the same public benefits to agricultural commodities as are available to
all other commodities. In addition it will eliminate existing regulatory
anomalies such as prohibitions of clearing and electronic trading that
arose in the evolution of the OTC markets and were discarded over time
for other commodities, but retained without critical analysis for
agricultural commodities.

An example may help illustrate the point. Last summer grain prices in
the United States reached very high levels, but many producers who
wanted to lock in those prices with cash forward contracts were unable
to do so because the country elevators who ordinarily offer such
contracts did not do so because of inability to finance the margin
required for offsetting futures positions. I think clearable, structured
OTC contracts could have emerged to bridge that gap if it were not for
restrictive regulations.

We currently face a time when agriculture desperately needs liquidity.
The agricultural OTC market is a significant existing market that is
developing entirely outside of registered commodity exchanges. Allowing
cleared, structured agricultural OTC contracts on ECNs can help
facilitate and accelerate liquidity, while adding transparency and
efficiency.

With the safeguards that this Committee will add to protect the OTC
markets it is time for agricultural commodity producers, processors and
users to have full access to such regulated markets.

\(3\) **[Conclusions and Recommendations]{.underline}**.

During the last few decades the securities markets have been truly
revolutionized by innovative electronic trading methods. Now, the
commodities markets are following the same path of innovation. Based on
my experience I think four things are essential to the OTC commodity
markets reform agenda:

\(A\) The OTC commodity markets should be retained, but improved;

\(B\) Unless exempted by the CFTC, all OTC commodity contracts,
agreements and transactions must be reportable to the CFTC;

\(C\) Unless exempted by the CFTC, all OTC commodity contracts,
agreements and transactions must be clearable; and

\(D\) Unless exempted by the CFTC, all OTC commodity contracts,
agreements and transactions must be negotiated on an electronic
communication network (ECN) via the request for quote process (RFQ) or
traded or executed algorithmically on an exempt commercial market (ECM)
or posted by means of give-ups to such electronic trade reporting
facilities.

Accordingly, I generally support the language of the Draft Bill, but
propose amending the Draft Bill as follows:

1\. ***Clearing of all OTC commodity contracts, agreements and
transactions***. Repeal existing laws and regulations which prohibit
electronic trading and clearing of OTC contracts on agricultural
commodities and provide that agricultural commodities should be given
equal regulatory treatment with non-agricultural commodities by amending
Section 2(g) of the CEA. The Draft Bill implies some of this, but it
should be further clarified to assure that agricultural commodities
fully benefit from the reforms enacted.

2\. ***Electronic Documentation***. Require that all OTC commodity
contracts, agreements and transactions be electronically documented,
whether or not cleared, to assure transparency and to facilitate the
reporting of these transactions.

3\. ***Negotiation, Trading and Execution on ECNs or ECMs***. Require
that unless certain limited CFTC-defined exemptions and exclusions
apply, all OTC commodity contracts, agreements and transactions be
negotiated, traded and executed on an ECN or ECM or posted by means of
the give-ups to such electronic facilities.

4\. ***Definition of ECN***. The definition of "Trading Facility" in the
CEA should be amended to explicitly not include the ECNs. A new
definition of the ECN should be drafted and added to the CEA.

Thank you for giving me the opportunity to share my views on the Draft
Bill. I look forward to offering any assistance with drafting this
proposed legislation as you may request.

# 

# Brent M. Weisenborn,

# CEO, Agora-X, LLC

8500 NW River Park Rd.

Pillar 231-A

Parkville, MO 64152

Cc: Richard A. Malm, Esq.

> Dickinson, Mackaman, Tyler & Hagen, P.C.
>
> 699 Walnut Street, Suite 1600
>
> Des Moines, Iowa 50309
>
> Tel: (515) 246-4516

Cc: Peter Y. Malyshev, Esq.

McDermott, Will & Emery, LLP

> 600 13^th^ Street
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> Washington, DC 20005
>
> Tel: (202) 756-8067