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93–562 PDF 2004

S. HRG. 108–648

REVIEW COMMODITY FUTURES TRADING

COMMISSION REGULATORY ISSUES

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 13, 2004

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

THAD COCHRAN, Mississippi, Chairman 

RICHARD G. LUGAR, Indiana 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

PETER G. FITZGERALD, Illinois 

SAXBY CHAMBLISS, Georgia 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JAMES M. TALENT, Missouri 

ELIZABETH DOLE, North Carolina 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

THOMAS A. DASCHLE, South Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

ZELL MILLER, Georgia 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota

HUNT SHIPMAN, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

LANCE KOTSCHWAR, Majority General Counsel 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Review Commodity Futures Trading Commission Regulatory Issues ................ 01

Thursday, May 13, 2004

STATEMENTS PRESENTED BY SENATORS 

Cochran, Hon. Thad, a U.S. Senator from Mississippi, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 01

WITNESSES 

Newsome, James E., Chairman, Commodity Futures Trading Commission, 

Washington, DC ................................................................................................... 02

APPENDIX 

PREPARED STATEMENTS: 

Newsome, James E. .......................................................................................... 22

Questions and Answers Submitted for the Record: 

Questions raised during the Hearing requiring additional information ...... 32

Questions from Senator Cochran ........................................................................... 34

Questions from Senator Conrad ............................................................................. 35

Questions from Senator Harkin ............................................................................. 37

(1)

REVIEWING COMMODITY FUTURES TRADING 

COMMISSION REGULATORY ISSUES 

THURSDAY, MAY 13, 2004

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, 

Washington, DC 

The committee met, pursuant to notice, at 10:05 a.m., in room 

SD–106, Dirksen Senate Office Building, Hon. Thad Cochran 

[Chairman of the Committee] presiding. 

Present or submitting a statement: Senators Cochran, Fitzgerald, 

Chambliss, Crapo, Harkin, and Conrad. 

STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM 

MISSISSIPPI, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. Good morning. Welcome to the Committee’s 

meeting to review regulatory issues that are under the jurisdiction 

of the Commodity Futures Trading Commission. This commission 

regulates commodities futures markets including futures and options on agricultural, energy, and metal commodities, as well as on 

financial instruments such as interest rates and foreign currencies. 

The volume and value of exchange-traded futures and options and 

off-exchange or over-the-counter derivatives have grown tremendously in recent years. These markets play an important price discovery role and risk management role by helping market participants manage financial risk across a wide array of products and 

services. 

In recent years, the Federal Government has modified its regulatory approach in response to the growth and development of 

these markets. Largely following recommendations of the President’s working group on financial markets published in November 

1999, the Commodities Futures Modernization Act of 2000 moved 

away from a one-size-fits-all regulatory approach to a more flexible 

approach that is based on broad core principles. With the experience of nearly three-and-a-half years since its enactment this is a 

good time for the Committee to review the impact it is having on 

the current regulatory environment and the integrity of the commodities futures markets. 

To help us with that review I am pleased to welcome James E. 

Newsome, who is chairman of the commission, as our witness 

today. Jim Newsome is widely respected for his thoughtful and 

common sense leadership at the Commodity Futures Trading Commission. 

2

A native of Plant City, Florida, Jim received his B.S. degree in 

food and resource economics from the University of Florida and his 

M.S. and Ph.D. degrees in animal science and agricultural economics from Mississippi State University. Dr. Newsome served as executive vice president of the Mississippi Cattlemen’s Association before joining the CFTC. He began serving as a commissioner on August 10, 1998 and was nominated by President Bush and confirmed 

by the Senate to serve as chairman of the CFTC on December 20, 

2001. 

We appreciate very much your distinguished service and your 

presence before our Committee for this hearing today. You may 

proceed. 

STATEMENT OF JAMES E. NEWSOME, CHAIRMAN, COMMODITY 

FUTURES TRADING COMMISSION, WASHINGTON, DC 

Mr. NEWSOME. Thank you very much, Chairman Cochran. I appreciate the opportunity to testify before you today on behalf of the 

Commodity Futures Trading Commission. I have submitted a more 

detailed statement for the hearing record which I will summarize 

for you this morning. 

Before I get started I would like to acknowledge my colleagues 

that are here today, Commissioners Walt Lukken and Sharon 

Brown-Hruska, and thank them for their continued support, leadership and hard work at the commission, as well as I would like 

to recognize Barbara Holum, who retired from the CFTC at the end 

of 2003 after serving 10 dedicated years as a commissioner. 

Mr. Chairman, you instructed that the purpose of this hearing is 

to update the Committee on the regulatory issues before the commission. To put things into context, I would like to begin by providing you with an overview of our progress in implementing the 

Commodity Futures Modernization Act of 2000, or the CFMA, 

which significantly amended the Commodity Exchange Act, and describe how the markets have evolved in response to that very important legislation. 

In recognition of several aspects, including the growing importance of the futures and options markets to the domestic and global 

economies, the need to lift restraints on the ability of exchanges to 

keep pace with rapidly developing technological advances, and to 

respond quickly to demands for new products, in the year 2000 

under the leadership of this Committee Congress rejected the onesize-fits-all approach to regulation by passing the CFMA. The 

CFMA amended the Commodity Exchange Act to establish a structure which markets can choose to operate under varying levels of 

commission oversight, depending on the products traded, the type 

of system in which they are traded, and the sophistication of market participants. Under this regulatory framework, exchanges are 

subject to broad core principles governing operational integrity 

rather than prescriptive rules. 

Over the three-and-a-half years since the CFMA was signed into 

law, the commission has concentrated its efforts on redesigning its 

regulatory programs to achieve the objectives of the statute. Our 

first task was to modernize the rules regarding trading facilities, 

both traditional and the new exempt markets permitted by the 

CFMA, and to establish guidance for new applicants in existing exVerDate 0ct 09 2002 12:20 Oct 21, 2004 Jkt 093562 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\93562.TXT TOSHD PsN: TOSH
3

changes on how to comply with the core principles. We also studied 

through hearings, roundtables and the solicitation of public comment our regulations related to futures commission merchants, or 

FCMs, commodity pool operators, and other futures market intermediaries, to identify areas where improvements could be made 

and were matters could be delegated to the National Futures Association. 

We devoted much of last year implementing a number of modernizations in this area ranging from registration relief for operators of certain pooled investment vehicles that restrict participation 

to sufficiently well-sophisticated persons, to affording FCMs greater 

operational flexibility so that they can provide their customers with 

more efficient trade executions. In both of those endeavors the 

Commission’s goal was to streamline and eliminate regulations 

where appropriate while keeping important market integrity and 

customer protections in place. It was hoped that these reforms 

would, among other things, encourage innovation by existing exchanges and market participants and lower the regulatory costs for 

new entry into the market, which in turn would result in a heightened level of competition that would benefit the marketplace as a 

whole. The indications thus far have been very positive. 

Some numbers will illustrate my point. In the short period since 

passage of the CFMA, the commission has approved eight new exchanges as designated contract markets, has accepted the registrations of seven derivatives clearing organizations, some of which 

were existing clearinghouses serving other financial market sectors, and several that were entirely new organizations not previously affiliated with any particular trading facility. 

In addition, the commission has received notices from 13 new 

ventures of their intent to operate exempt markets, three as exempt boards of trade and 10 as exempt commercial markets. Domestic futures and options volume has almost doubled over the last 

several years and reached over one billion contracts traded in 2003. 

New contract filings have increased more than 500 percent during 

this time period, and the regulatory delay in listing the products 

after filing has dropped from an average of almost 70 days in 1998 

to 1 day for 99 percent of the new contract listed last year due to 

the certification procedures now available to the exchanges through 

the CFMA. 

Relationships between exchanges and clearinghouses have shifted, leading to market-driven clearing alliances. Certain over-thecounter business is also now cleared, adding an important element 

of safety and soundness to this important sector of the economy. 

New and traditional exchanges alike have embraced technology 

and electronic trading has soared from less than 10 percent of the 

total volume in 1998 to almost 50 percent of the total last year, 

with expectations that this upward trend will continue. 

This modernized regulatory environment provided by the CFMA 

coupled with market demand has yielded more platforms, more 

choices and more competition than ever before, which has fostered 

capital efficiencies through new strategic alliances and has resulted 

in enhanced customer service and lower transactional fees. 

Another benefit to the markets and to the public that has resulted from the CFMA was the clarification of the Commission’s juVerDate 0ct 09 2002 12:20 Oct 21, 2004 Jkt 093562 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\93562.TXT TOSHD PsN: TOSH
4

risdiction with respect to retail foreign currency, or forex transactions. Following this important clarification in the law, the Commission launched an intensive and aggressive enforcement initiative to root out and prosecute unscrupulous operators of fraudulent 

forex bucket shops. The Commission also approved rules adopted 

by the National Futures Association last year that require their 

forex dealer members to take responsibility for the activities of unregulated solicitors that they may deal with. The Commission continues to work with the NFA and other market participants to 

identify ways in which our supervision of forex activity may be improved. 

Since the passage of the CFMA, the Commission has filed 61 enforcement actions in the forex area and has been awarded civil 

monetary penalties totaling over $100 million as well as restitutions and disgorgement judgments totaling more than $62 million. 

Many of these cases have resulted in additional criminal charges 

through the cooperative efforts of our division of enforcement and 

State and Federal criminal authorities. 

The Commission has also aggressively pursued those who manipulated or attempted to manipulate the energy futures market. 

Since 2002, the Commission has opened dozens of investigations in 

this area which has resulted in 17 actions filed against 20 major 

energy companies and two individuals, and almost $200 million in 

civil monetary penalties collected to date. Mr. Chairman, I am 

happy to report that 97 percent of the energy investigations we 

opened in 2002 have been resolved. 

By moving frontline accountability for how markets operate and 

what they trade to the marketplace, the Commodity Exchange Act 

as amended by the CFMA, permits regulatory resources to be refocused on strong oversight, risk-based inspection, and swift and 

sure enforcement. It has been an exciting time to be at the Commission and the futures industry as it has evolved and grown over 

the last several years. In my opinion, the new regulatory framework brought about by the enactment of the CFMA has provided 

the intended results and has been a success. I would hope, therefore, that as reauthorization approaches any legislative amendments that may be considered be approached cautiously and pursued only after a full debate by all interested parties. The Commission looks forward to working with the Committee on that upcoming project. 

I like to close, Mr. Chairman, by expressing how proud I am of 

the dedicated men and women that work at the Commission who 

have worked tirelessly over the last three-and-a-half years to modernize our regulatory framework to achieve the goals expressed by 

this committee and by the Congress, and to timely process the 

many new exchange and clearinghouse applications we have received. We worked very hard to try and get things right. 

Mr. Chairman, I thank you for the opportunity to testify before 

this committee and certainly am happy to answer any questions. 

The CHAIRMAN. Thank you very much, Mr. Chairman, for your 

presence here and your continued diligent leadership at the Commodity Futures Trading Commission. 

Let me ask you the first question and then I am pleased to yield 

to other Senators who have joined our hearing. You mentioned 

5

changes that have been made under the Commodity Futures Modernization Act. It seems that this has been a success in terms of 

the growth of the markets, the strength of the markets. Is that an 

accurate impression? Do you think that the modernization act has 

contributed to the growth of the markets? 

Mr. NEWSOME. It has contributed greatly to the growth and expansion that we have seen in the marketplace over the last several 

years. Of course there are a number of factors that can be attributed to this growth, but certainly the flexibility that can be attributed to the Act to allow the marketplace to adapt to technology, to 

make business decisions on a quicker basis as compared to the 

CEA before the Commodity Futures Modernization Act is a big 

cause of the success and growth that we have seen in these markets. 

The CHAIRMAN. Let me ask you a follow up. Do you think the 

CFTC needs any additional authority, legal authority under the 

statute or resources to fulfill your regulatory responsibilities? 

Mr. NEWSOME. As we look at the two parts of that question I will 

address the authority to start with. One of the things that was so 

positive about the new Act was that it gave the Commission tremendous flexibility. This committee and the Congress realized that 

these markets were changing rapidly and growing, that the exchanges and market participants had the need to adapt to new 

technology that was ever-changing. The flexibility that was provided to market participants was also provided to the CFTC so that 

we could adapt to changes in the marketplace. The flexible authority that was provided to us through the CFMA was very useful to 

us. 

In terms of looking at new rules, at this point I do not see that 

there is any new authority that is needed by the Commission. In 

terms of looking at our enforcement authority, the Commission enjoys very broad authority as it relates to the protection of customers through anti-fraud and anti-manipulation provisions. They 

are always things that we are looking for to help strengthen that 

enforcement authority which we use as the primary preventive 

measure to wrongdoing in the marketplace. As we get into reauthorization I would love to sit down and look at what it may be 

some minor things. 

In answer to your question, we feel that we have very ample authority from both the rule and enforcement standpoint. 

As we look at resources, the marketplace has grown very rapidly. 

The CFTC has been an excellent place to work. We have very dedicated employees and staff at the CFTC. Ideally we look at a number of around 550 or the mid-500’s in terms of FTEs, is probably 

an ideal number for us. We are a bit below that right now, but that 

is because of choices that we made internally. We were very fortunate from Congress last year in that we were one of the few nondefense agencies that got an increase in our budget. We chose to 

use that increase to fund pay parity of which this committee and 

Congress also provided for us. I would say that pay parity has 

achieved its goal. We have stemmed the tide of people leaving the 

Commission to go to sister agencies so that has worked very, very 

nicely. 

6

The CHAIRMAN. Thank you very much. I am pleased to yield to 

my friend and distinguished colleague from North Dakota, Senator 

Conrad. 

Senator CONRAD. Thank you very much, Mr. Chairman. Thank 

you for holding this hearing, and thank you for the role you played 

in getting Mr. Newsome as the chairman at CFTC. By all accounts, 

Mr. Newsome, you are doing an exceptionally good job there. Sometimes people come up here and we give them a going over, which 

sometimes is richly deserved. Not so often we say, job well done. 

From all reports you are a steady hand at the helm of the CFTC 

and we ought to commend you publicly for what you have done to 

help turn that agency around. It was in considerable turmoil, all 

of us know, and we appreciate what you have done to provide a 

steadying hand there. 

Mr. NEWSOME. Thank you, sir. 

Senator CONRAD. A couple questions. By the way, I noticed this 

article in Stocks Futures in the Options magazine about you. You 

were their honoree in 2003, and the headline on the article was, 

Speak Softly and Carry a Big Stick. That is the tradition of Teddy 

Roosevelt who, as you know, had a ranch in my home State of 

North Dakota, who we are going to be honoring tomorrow in North 

Dakota announcing a coin that will be struck in his honor. He was 

known for speaking softly and carrying a big stick, so I am glad 

to see you are in that tradition, Mr. Chairman. 

A couple of quick questions if I could, Mr. Chairman. On the mad 

cow case from December that involved the cow from Canada, I understand that there were reports that the CFTC was investigating 

whether there were some that traded on inside information prior 

to USDA’s public announcement. I heard that when I held a hearing in North Dakota from ranching interests in my State in a hearing that was held in January. I would be interested if you have 

conducted such an investigation, and if so, is it complete and what 

are the findings? 

Mr. NEWSOME. Anything that happens in our futures market 

that is wrongdoing is very serious to us, but as a cattleman I pay 

particularly close attention to the cattle markets. Anytime there is 

the potential or alleged wrongdoing within the live cattle markets 

it is something that not only the Commission looks at closely but 

something that I take a personal interest in. 

We take very seriously allegations of leaked information or people trading upon the information. That is something that we are 

looking at. In fact we are cooperating with the U.S. Attorney’s Office for the District of Columbia on this investigation. The investigation is ongoing so I am very limited in terms of what I can say 

there. We do hope to finish that investigation up this summer. 

Senator CONRAD. I appreciate that. I would say this to you, Mr. 

Chairman. Ranchers in my State brought to the hearing, reports of 

unusual price movement before the USDA announcement. I must 

say it raised concern in my eyes of what happened. They had very 

carefully charted price movements before the official announcement, and those price movements were clearly in one direction and 

they were clearly unusual. 

I hope very much that in fact this investigation is able to report 

to us what happened. Was there a leaked report or were people 

7

simply anticipating? Did they have wind some way that USDA was 

going to make a determination? Because that really cannot be tolerated. That is the kind of thing that throws the credibility of the 

markets in question. 

A second quick question if I could, Mr. Chairman, is on the question of international regulation. Your prepared statement describes 

how futures markets have become truly global in nature. We all 

see that. We see the movement very rapidly through electronic 

means of the flow of funds. I am interested in whether or not the 

CFTC has attempted to assess whether other nations have appropriate regulatory structures in place. More to the point, whether 

some kind of market meltdown overseas could affect our markets 

here. 

Mr. NEWSOME. The international arena and rules and regulations in foreign jurisdictions are something that we spend a lot of 

time assessing and working with. We are members of the International Organization of Security Regulators as is the U.S. SEC, 

and we meet regularly with the goal of looking at rules and regulations, enforcement authorities in jurisdictions all around the globe 

in coming up with core principles that each jurisdiction can abide 

by, recognizing that differences in laws and differences in backgrounds lead to more specific rules and regulations within any jurisdiction. Through IOSCO we work very hard to establish certain 

core principles that every financial jurisdiction around the globe 

can live by. 

We are participants in numerous memorandums of understanding with foreign jurisdictions for the need to share information, particularly with regard to enforcement. If there is wrongdoing within other jurisdictions that have had a negative impact on 

U.S. customers, we want to have the ability to get the information 

that we need and to work with our sister jurisdictions to bring 

charges if they are warranted. In most financial jurisdictions 

around the world we have very good working relationships. Those 

relationships are formalized through these MOUs and we are very 

comfortable that we can receive information and work with these 

other jurisdictions to bring enforcement actions if necessary, and 

we have used those MOUs to do just that in the past. 

With regard to a meltdown in other jurisdictions, that is something that we continually work on as well. As we look at this 

globalized market, I would use the example of the London clearinghouse which we recently designated as a designated clearing organization in the U.S. As a DCO registered by us, they are subject 

to the exact same rules and regulations of any clearinghouse that 

is housed here locally. U.S. customers have the same protection if 

their money is at the London clearinghouse as they would if it is 

at the Chicago Mercantile exchange clearinghouse. 

Again, we take very seriously the protection of U.S. customers 

and their funds, and those are things that as we are going through 

the designation process looking at new market participants we 

want to make sure that we can protect them to the same extent 

that we can protect them if their money was here in the U.S. 

Senator CONRAD. Let me be very specific, and this will be my 

final—I know, Mr. Chairman, you want to move on. 

8

I have heard increasingly concerns about the standards in Caribbean banking centers and whether or not there is increasing vulnerability of the entire global system because of a lack of regulation in those Caribbean banking centers, and that there is a concern, a growing concern I am hearing from people in the financial 

world about derivatives that have very large potential liabilities 

and the flow of funds through Caribbean banking centers with regard to those kinds of issues. Can you tell us if you have had an 

opportunity to take a special look at these Caribbean banking centers and whether or not we can be confident that they are being 

appropriately watched? 

Mr. NEWSOME. There is absolutely no question that there are jurisdictions that fail to meet the standards of IOSCO or the standards that we hold in the U.S. We continually look at jurisdictions 

all around the world, the Caribbean ones included. The pointed 

thing I could say at this point is that we have good news recently 

that jurisdictions in the Caribbean are becoming very sensitive 

about being pointed out as weak and they are asking to come to 

the table with the major jurisdictions around the world to try and 

strengthen their financial regulation so that they are not pointed 

out. 

One of the things that we have done through IOSCO is to create 

blacklists of jurisdictions that fail to meet appropriate standards. 

Countries who are on that blacklist are uncomfortable in being 

there. 

Senator CONRAD. Could you provide the Committee with that 

list? 

Mr. NEWSOME. Yes, absolutely. I do not have it with me today. 

Senator CONRAD. I understand that, but if you could provide us 

with that. I would just say in conclusion, Mr. Chairman, I would 

hope that you would take an especially hard look once again at 

those Caribbean banking centers, because I am told by people who 

are knowledgeable that there are very grave questions about how 

closely they are being regulated, how closely they are being 

watched, and that there are irregularities there that ought to cause 

concern. 

Mr. NEWSOME. We are more than happy to do so. 

Senator CONRAD. I also want to recognize Mr. Sobba who is with 

you, who is a friend of longstanding, formerly with the cattlemen, 

formally with baseball, and a very good friend. I am glad to see 

that he is on your staff as well. 

Mr. NEWSOME. I am very fortunate to have him as a member of 

our team. 

Senator CONRAD. Thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Chambliss. 

Senator CHAMBLISS. Thank you, Mr. Chairman. I know Mr. 

Sobba too, Senator Conrad. You do have a terrific staff, chairman 

Newsome. Let me just take a minute to commend you also, just 

like Senator Conrad. You stepped into a tough situation, but nobody could have done a better job. You have been very available 

to members on both sides of the Capitol and have been willing to 

work with us on a number of tough issues that you have been facing and I commend you for that. 

9

It is also nice to have somebody out there testifying for whom I 

do not need an interpreter, so I am pleased from that standpoint 

too, from the standpoint of where you come from. 

I just have one question and that is, one issue that we worked 

very long and hard with you on, took us several years to complete 

it, was the pay parity issue. I would like to hear some comments 

from you for the record about how that pay parity is working relative to your ability to hire and have folks continue to work with 

you at CFTC. 

Mr. NEWSOME. Senator, as you know because we worked very 

closely with you, very closely with Chairman Cochran on that issue 

a couple years ago, and from an internal standpoint there was no 

bigger issue to us because we were almost double the Government 

average in terms of our turnover of very experienced staff at the 

Commission leaving and going to sister agencies who were not 

bound by the standard Government pay. As you know, they are always people in the Government leaving to go to the private sector 

and that is understandable. When the vast majority of them are 

leaving to go to sister agencies, that is difficult for us to deal with, 

particularly when the markets that we oversee are very complex 

and technical and it is difficult to hire and train people within our 

area, so that loss was becoming devastating to us. 

Since the implementation of pay parity we have now moved 

below the Government average in terms of turnover, so it has been 

a big success to us. We have not been able to use it so much from 

a hiring standpoint yet because of tight resources. In fact we are 

in the middle of a hiring freeze right now, but my expectation is 

that when we have the ability to start hiring again that our pay 

standards will be a huge benefit to us as they have been with retaining key staff. 

Senator CHAMBLISS. I am glad to hear that have attempted for 

the greater appeared during thank you. 

Senator CRAPO. Good. I am glad to hear that and again, thanks 

for the great job you are doing. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Crapo. 

Senator CRAPO. Thank you very much, Mr. Chairman, and chairman Newsome, I appreciate your attendance here. I also want to 

extend my thanks to you for the tremendous work that you are 

doing. I have appreciated working with you on a number of issues 

over the years and have found you to be not only very responsive 

but very capable in helping us to address the critical issues we deal 

with. 

As you know, derivatives is on of the critical issues that I have 

been very involved in with you, and although we do not have a legislative issue dealing with it immediately before us right now, it is 

one that is constantly on the radar screen. 

I just would like you once again, if you would, to share with me 

your thoughts about whether you believe that the way that we 

manage derivatives and the utilization of derivatives in our economy is something that is beneficial to our financial system and 

something that helps make our economy more resilient. 

10

Mr. NEWSOME. Senator, I am more than happy to. First of all, 

The importance of derivatives to this economy grows every day. 

The ability to manage risk becomes more and more important. Obviously we have had that capability in the business sector for a 

number of years, but finally more and more in the business community are learning not only the benefits of the use of derivatives 

but how to use those derivatives as a hedge against real risk. 

Chairman Greenspan has pointed out on numerous occasions the 

tremendous benefits of derivatives and risk management to the 

economy and the business sector and that will continue, and it will 

continue to grow, both on exchange and over-the-counter. 

The over-the-counter business has grown very rapidly over the 

last 10 years, but over the last several years the exchange-traded 

growth has been outstanding. I mentioned earlier that over roughly 

a 4-year period we have seen volume in on-exchange futures and 

options business double to the point that over a billion contracts 

were traded last year. There is no question that these products and 

these contracts are a tremendous benefit. 

The regulatory structure in the United States through the passage of Commodity Futures Modernization Act reaches an appropriate balance, a balance between giving businesses, exchanges and 

firms the flexibility to be creative and somewhat unencumbered by 

the Government as they develop business plans that are best for 

them and their customers versus the very strong enforcement approach that we have taken as the deterrent to wrongdoing versus 

lots of prescriptive rules. It is an exciting time to be in this business. The Commodity Futures Modernization Act was the right legislation at the right time. This committee and the Congress should 

be commended for your foresight in allowing that shift in the regulatory landscape because it has played a big role in the growth 

within the futures and derivatives business. 

Senator CRAPO. Thank you. I share your feelings about that and 

appreciate your work with us as we have dealt with these issues 

over the last little while. 

Just other question at that is, the legal certainty provisions in 

the Commodity Futures Modernization Act were intended by Congress both to reduce the systemic risk and to promote financial innovation. That overall we have achieved both of those objectives 

through the Act. The one issue, which I am sure you are aware 

that we are still working on is the passage of the financial contracts netting provisions in the pending bankruptcy bill. Now these 

provisions clarify the enforceability of early termination and netting of financial contracts that were proposed by the President’s 

Working Group on which you are serving. 

Would you please comment on the importance of the netting legislation? Specifically, do you think that it is advisable to separate 

the netting provision from the broader bankruptcy legislation and 

pass it separately in the Senate and the House to get to the President as soon as possible? 

Mr. NEWSOME. Senator, I am very supportive of that netting provision. In fact I have written to the Congress on three different occasions now, twice as a member of the President’s working group 

and one, along with Pat Wood chairman of the FERC, to support 

11

the netting provision. There is no question in my mind that everything we can do to achieve legal certainty is beneficial and positive. 

I understand that as a portion of broader legislation, the netting 

provision has been non-controversial and has been supported by a 

wide range of Members of Congress on both sides of the aisle. In 

my estimation, whether it remains a part of a broader package or 

whether it is pulled out and passed on its own, it is important to 

do so and I would be supportive of that. 

Senator CRAPO. Thank you very much. 

The CHAIRMAN. Thank you, Senator. 

Senator Fitzgerald. 

Senator FITZGERALD. Mr. Chairman, thank you and thank you 

for holding this hearing. 

Chairman Newsome, thank you for being here and I will add my 

applause to the long list that has been given for the job you have 

been doing at the commission. We really appreciate your help and 

hard work. 

I wanted to follow-up on what Senator Crapo asked you about. 

Maybe I am in a minority on this committee with respect to one 

issue as to whether or not the CFTC should have jurisdiction in the 

next CFMA that we do. I guess it will be coming up after I leave 

the Senate next year. 

It is interesting that the current law provides that derivative 

contracts are regulated if they deal with tangible goods that have 

a finite limit to them. We do not to regulate interest rate derivative 

contracts, for example, that banks trade amongst themselves, or 

that Fannie Mae or Freddie Mac may hedge its interest rate risk 

by buying interest rate swaps with Citibank or other large financial institutions. For agricultural commodities, for commodities 

with a finite quantity we do provide CFTC jurisdiction, with one 

exception, energy and metals contracts that are traded online. That 

appeared to me to be a special carve-out for Enron Online. 

The assets Enron Online have been bought by USB Warburg I 

believe, and there is also a company, the Intercontinental Exchange that trades energy and metal contracts online. I have always been curious, what is the public policy rationale for carving 

out energy and metal contracts that are traded online and saying 

they cannot be regulated by the CFTC? I do think we saw a lot of 

wash trades, did we not, on that Enron Online that you ultimately 

have been able to impose a fine on Enron Online. 

Who paid that fine, by the way? Or who is liable for that since 

Enron has gone bankrupt and they have sold Enron Online? 

Mr. NEWSOME. That is in bankruptcy court as we speak. 

Senator FITZGERALD. You did try to assess the fine on Enron? 

Mr. NEWSOME. They have agreed to a settlement of $35 million 

and that settlement itself is in front of the bankruptcy court now. 

Senator FITZGERALD. Did they challenge your ability to assess 

that fine? 

Mr. NEWSOME. No, the bankruptcy judge has not ruled yet with 

regard to that settlement with Enron. 

Senator FITZGERALD. We do not know, it is not yet shown whether you even have the authority to impose that fine in that case 

where they were clearly just engaging in a lot of wash trades, 

sometimes amongst themselves, Enron trading with its own subVerDate 0ct 09 2002 12:20 Oct 21, 2004 Jkt 093562 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\93562.TXT TOSHD PsN: TOSH
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sidies to set an artificial price or to artificially boost their own revenues. They were claiming all the revenues as revenues of their 

company even though they were all washed out with an equivalent 

sale. Enron claimed to be the seventh largest company in America. 

Really a lot of it was just wash trades through Enron Online. 

Mr. NEWSOME. Enron has agreed to the settlement and it is my 

understanding that the settlement is in front of the bankruptcy 

court not to decide whether it is a legitimate settlement but to determine where it is in the line with what will be paid and what 

will not be paid. Enron has agreed with our authority in this area 

and agreed to that $35 million. Whether or not any of that money 

will ever flow to the U.S. Treasury or not is the question. 

Senator FITZGERALD. Now in the President’s Working Group, in 

their policy paper they put out before we drafted the last CFMA 

they said that tangible commodities with a finite quantity should 

be subject to the CFTC’s jurisdiction. They did not mention a special carve-out for energy and metal contracts traded on an online 

exchange. Do you believe the President’s Working Group will this 

year put out a new policy paper calling for this special carve-out 

for energy and metal contracts online? If so, what would be the 

public policy rationale for separating energy and metal and saying 

that they do not have to be regulated if they are traded online, but 

if we trade anything else that is a tangible commodity with a finite 

quantity online we have to have some degree of regulation? 

Mr. NEWSOME. In terms of the President’s Working Group and 

any kind of a policy statement, that has not been on the agenda 

in quite some time. At least at this point, to my knowledge, there 

is nothing being done to change or adopt a new policy statement 

on behalf of the PWG. 

A couple of years ago after the collapse of Enron, we had a hearing in front of this committee and there were two fundamental 

questions that were laid on the table. One was, should the overthe-counter marketplace be regulated more similarly to the exchange-traded marketplace? I told this committee at that time that 

I did not think that it should and, Senator, I feel the same way 

today. 

When we look at the anti-fraud, and anti-manipulation provisions of the act that are provided to the CFTC to deal the wrongdoing in that area, that was the second part of the discussion we 

had that day was whether or not the CFTC actually has the authority to go after wrongdoing in this area. I hope with the number 

of cases that we brought and the settlements over the last couple 

of years that we have settled that question, because at least that 

it is clear that we do have the ample authority to go after wrongdoing in that marketplace. 

In terms of the oversight regulation, while there have been attempts by the Congress to address that, in my opinion the marketplaces are so very different in terms of the participants, the technology, the sophistication that it would be extremely difficult to try 

and take the type of regulatory oversight that we provide in an exchange-traded market and lay that over the electronic market that 

you mentioned, for a couple of fundamental reasons. The largest of 

which, the contracts traded on exchange, as you well know, are 

very standardized. The pricing information that we get from those 

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contracts that are transparent is very meaningful because everyone 

understands what the overlying terms and conditions of the contracts are, and the contracts are set up as such so that the only 

thing you have to worry about when you are trading is the price. 

You know all the underlying terms and conditions. 

In the over-the-counter market that is not necessarily the case. 

My fear has been that if you tried to take the large trader reports 

that we use so successfully in the on-exchange market and get 

daily pricing information and position information from the overthe-counter marketplace, because the underlying terms and conditions of the contracts are different, that that pricing information, 

without knowing all the underlying terms, can actually have a negative impact upon the very markets we rely upon for price discovery. 

What we are doing, and again from the enforcement standpoint 

we maintain that we have appropriate anti-fraud, anti-manipulation authority. The one area that is of concern and has been a concern to this committee and it is a concern to us is when a market, 

if an over-the-counter market gets to a point in terms of size, in 

terms of standardization that it has contracts that begin to serve 

a price discovery role, then certainly it is in the public good for that 

information to become more transparent. We are finalizing rules 

now that would allow for that transparency if the Commission 

makes a determination that a market has become a price discovery 

market, or its contracts are used in a price discovery role. That 

would include making the prices, daily volume, contracts, all transparent to the public as well as any other information that the commission determines we think would be useful. 

Senator FITZGERALD. I know my other colleagues have questions. 

One final question, Mr. Chairman. 

I understand that you are conducting a review of the self-regulatory framework that we have, and I know that you have not released your report yet. Would you have any preliminary observations or thoughts on the results of the study you are undertaking 

and the effectiveness of our system of self-regulation both on the 

exchanges and with outside associations that have been set up to 

offer their services as a regulator, self-regulator? 

Mr. NEWSOME. Yes, sir, I would be more than happy to. I would 

initially say that I announced our review of the self-regulatory 

structure prior to information being made public on the security 

side that created quite the uproar there. We did not start our review based upon anything negative happening or as a response to 

a crisis. I simply felt that for 20 years our SRO structure in the 

futures business has worked very well. It had been 20 years since 

we had looked at it, and a lot of changes have taken place in the 

business with new market participants, new technology, and I felt 

that it was appropriate for us to conduct a review to make sure 

that the SRO structure continued to work as effectively today as 

it did when it was implemented. 

I am happy to say that we continue to believe that our SRO 

structure works very, very well and provides the kind of protections 

to the marketplace and the customers that we all expect that it 

should. We are continually that review. We hope to finish it within 

a matter of a couple of months. My expectation is that we are not 

14

going to need to make very broad changes to the SRO structure because for the most part it continues to work extremely well. 

There are some areas that we can make some recommendations 

in to strengthen the SRO structure but it continues to work fine. 

Senator FITZGERALD. Thank you. That is very helpful. Will you 

release a report on that? Will it be published? 

Mr. NEWSOME. Yes, sir. 

Senator FITZGERALD. We will look forward to that. 

Mr. Chairman, again thank you for doing this hearing. Chairman 

Newsome, thank you for being with us. 

The CHAIRMAN. Thank you, Senator Fitzgerald. 

Senator Harkin. 

Senator HARKIN. Thank you very much, Mr. Chairman. Again I 

apologize to you and the others for arriving late and I appreciate 

the opportunity to just make a short statement and ask chairman 

Newsome a couple of questions. 

First I would just like to commend Mr. Newsome on his work as 

chairman of CFTC implementing the Commodity Futures Modernization Act and pursuing enforcement actions against people 

who violate it. I have also appreciated the responsiveness of the 

CFTC to concerns raised by members of this committee. 

I continue to be concerned about whether the CFTC has really 

adequate authority to oversee energy markets. I know a lot has 

been discussed here about that. Energy swaps and derivatives have 

a far more direct linkage to consumer pocketbooks than other exempt commodities such as metals. I believe the 16 energy enforcement cases settled by the CFTC so far for over $200 million in fines 

demonstrates that the CFTC has the authority to punish wrongdoing and the commission is using that authority. 

However, we need to make sure that the Federal agencies have 

the tools needed to detect and prevent the abuses from occurring 

in the first place, and I will have a question about that, especially 

given the fallout that it has for consumers. I also believe the Committee needs to take a look at the impact that increased global 

clearing links may have on the CFTC’s ability to regulate the U.S. 

derivatives markets. I know that Eurex has applied for approval of 

such a link. I have had people in talking to me about that. I guess 

the CFTC is currently considering that application. 

Increased global clearing could portend a significant change in 

the structure of our U.S. derivatives markets. I do not know that 

we fully understand what the ramifications of that might be but we 

ought to be thinking about what the ramifications of that would be. 

Mr. Newsome, I just have three questions. First, do you believe 

being short two commissioners is hampering the ability of the 

CFTC operate effectively? 

Mr. NEWSOME. No, sir, I do not. I would quickly say that the 

commission operates best when all the seats are full and we are 

able to share the ideas and thoughts of a full commission. From an 

operational standpoint having two empty seats has not impeded 

our ability to operate and do business. 

Senator HARKIN. Mr. Chairman, it seems to me to me if that is 

the answer of Mr. Newsome, then I see no reason why we have to 

continue with five. We ought to legislatively reduce the number of 

commissioners to three. We ought to save the taxpayers some 

15

money. If the Commission can operate with three—and that is 

what you just said—and it does not hamper your ability, I will be 

introducing legislation, and I hope this committee will consider this 

year reducing it down to three, two of one party and one of another. Obviously, if we do not need five, why have them? I guess 

that is it. 

Now I must say that we have two names down at the White 

House now. They have been sitting on them for over a year. The 

basic paperwork to move them has stalled; has not even begun. I 

always thought this was unfortunate for the Commission. If the 

commission can operate with three we ought to do it with three. 

We will save the taxpayers some money. 

Thank you, Mr. Newsome, we will just see if we can reduce that 

down to three then. This is one commissioner up this year. Obviously, we will not approve that commissioner to be extended. That 

will be the end of it right there. I can tell you, this is one Senator 

that will make sure that this person is not extended and we will 

get two of one party and one of another, regardless of who is President of the United States. 

I understand the CFTC and FERC have brought several enforcement cases regarding illegal activities in the energy markets. 

Again, pertaining to what I said earlier, I want to know how can 

we do a better job of preventing the abuses in the energy derivatives markets, not just going after them once it has happened. How 

do we prevent it? It seems that surveillance and continuous oversight are the hallmarks of successful programs that detect and address abuses early. How can the CFTC do this for exempt commodities like energy, for example, derivative products? How can we promote more transparency and openness in the energy markets? 

It is one thing to be able to go after them after it has happened, 

but it seems to me if we really want to protect consumers we have 

to have some way of preventing these in the first place. Any 

thoughts on that? 

Mr. NEWSOME. Yes, sir, and I appreciate you bringing that point 

up, because there are several areas that deserve discussion. When 

the Enron collapse happened, the Commodity Futures Modernization Act was almost brand new so a lot of the Act we had not had 

an opportunity to utilize. A very important part of the Act was that 

strong, swift enforcement was hoped that it would serve as a deterrent to wrongdoing in the marketplace. We have tried to use that 

enforcement authority as aggressively as we know how to use it, 

Senator, to bring charges against wrongdoers within this marketplace. 

The activity is just one of the prongs in the wheel. We have cooperated and worked very closely with the Federal Energy Regulatory Commission that has primary responsibility in the cash markets. We worked very closely with the SEC. We worked very closely 

with the Justice Department, all as a part of the corporate fraud 

task force to cooperate together, to share information where we 

could, to bring the charges that all the agencies have brought over 

the last 2 years. It is my hope that since the Act was new, we had 

not had an opportunity to use it, the fact that we have used our 

enforcement authority as aggressively as we can will serve as a deterrent to wrongdoing in the future. 

16

I know that we have spent quite a bit of time with FERC, and 

not only their staff but their commissioners have been to our office 

to look at our surveillance of the futures markets and the type of 

information that we provide and look at on a weekly basis. They 

are in the process of implementing a surveillance system themselves in the cash marketplace so that they hope that the information that is provided to them in the cash markets, as the information that is provided to us in futures markets, can serve as a deterrent to wrongdoing in the future as well. 

Senator HARKIN. Do you think that would be adequate? 

Mr. NEWSOME. Yes, sir, I do. 

Senator HARKIN. I am not so certain I agree with you on that. 

It might be a step in the right direction. It might help, but I am 

not sure that that alone would be adequate, but we might discuss 

that later on. 

The last thing I want to just—and I do not mean to prolong the 

hearing, Mr. Chairman, but what I said about Eurex’s application 

in my statement, that Eurex has applied before approval of a link, 

a global clearing link. If that has been discussed earlier I do not 

want to go over it again, but just tell us how you are thinking 

about approaching this? What does that portend for our derivatives 

markets here, how that is going to change things if that is approved? 

Mr. NEWSOME. That is a timely question because the Commission 

is reviewing that process and information today, particularly with 

regard to the Eurex application, so there are probably still more 

questions and answers at this point. We take very seriously our 

charge to protect customers and their funds. It has been our stance 

that if there is to be a clearing link in which U.S. customer’s funds 

could be placed in another jurisdictional clearinghouse, that we 

want to make sure that they are offered the same types of protections that they have here in the U.S. The way to do so is to require 

that if these types of clearing links are set up in which there is 

equal flow of customer funds back and forth that in most circumstances they are required to register as a designated clearing 

organization with the CFTC. 

We do have some history with regard to these types of clearing 

links. The Chicago Mercantile Exchange has a formal plan with 

Singapore that is somewhat shy of being a clearing link in the context of what you asked about with Eurex. We just designated the 

London clearinghouse as a derivatives clearing organization. One of 

the things that comes about by that designation is that U.S. customer funds are protected just as much as if they are in the London clearinghouse as they are if they are at the clearing corporation in Chicago. They are offered the same rules and protections in 

either instance. 

It is our expectation now, based upon the business plan that 

Eurex has offered, that most likely they will be required to register 

as a designated clearing organization as well. If that is the case, 

then customers are just as protected as if their funds were in a 

clearinghouse here. 

Senator HARKIN. That is nice to know. 

One last thing. I was asked this question this morning. Some in 

the farm community feel there was an announcement or a leak by 

17

the Bunge Corporation during the trading day. This has to do with 

soybean, soybean futures. 

It is lawful or appropriate for a company to make an announcement or put information out while the market is open? It is lawful 

to trade or take a market position and then release information 

that would move the market? Could the managed release of information constitute market manipulation? These are all things were 

asked about what Bunge did. They are so big and they made this 

announcement during the trading day and there is a lot of concern. 

Is it lawful for them to do that during the trading day? 

Mr. NEWSOME. Yes, sir. The futures markets operate on information and, obviously, fundamental information about the marketplace can move the markets. I am aware of the major move in soybeans yesterday. Our surveillance economists are currently looking 

at the information that was available in the marketplace yesterday 

to make a determination of whether or not the market moved 

based upon fundamentals or whether there was something else involved. We have just started looking at that so I have very few details that I could provide this morning. 

Senator HARKIN. Would you please keep this committee advised 

and informed as you find this information out? 

Mr. NEWSOME. Yes, sir. 

Senator HARKIN. I also again want to know—the other question 

I want answered is, it is lawful for a company of the size of Bunge 

to take a market position and then release information that they 

know will move the market, because they are so big? You see what 

I am saying? 

Mr. NEWSOME. Yes, sir. 

Senator HARKIN. They take a market position, then they release 

the information which moves the market. 

Mr. NEWSOME. It is lawful for them to do so. Obviously, as a big 

grain company they know their business plans and what kind of 

risk that they have to manage, so we would be logical within the 

marketplace for them to take a position to try and manage that 

risk. 

Typically in the market, even without them announcing it, as 

people see them starting to move in a particular direction or starting to take particular positions, the others in the pit figure out 

quite quickly that something is going on and they react to that. 

That would be relatively normal within the trading pits. 

Senator HARKIN. Thank you. Thank you very much, Mr. 

Newsome. 

Thank you, Mr. Chairman. 

Again, I just want to repeat for emphasis sake that it looks like 

we are on the road to having three commissioners, which if that 

works, that is fine; we save the taxpayers some money. I just want 

to make it clear that if that is the case then whoever is up—I guess 

there is a vacancy this year—I will use my position to make sure 

that that person is not reappointed and that we have a balance reinstituted with two and one. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator, for your participation in the 

hearing. 

18

Mr. Chairman, let me ask you about the enforcement record of 

the Commission with respect to the energy area. Several senators 

have brought that up this morning and it is important for us to include in the record, if you can help us in this respect, a list or a 

summary of the enforcement actions that have been taken by the 

commission on energy trading and that general area that has been 

the subject of some questions this morning. I hope it will show us 

clearly whether or not the commission has been able to use its authority under the law to punish, through fines or other sanctions, 

wrongdoing in this area by energy traders. 

Is that possible for you to be able to provide that for the record, 

or do you have a written summary of that that can be provided to 

the Committee this morning? 

Mr. NEWSOME. I do not have a summary in front of me, Mr. 

Chairman, but I can very easily provide you with a list of all the 

companies and the sanctions and the fines within the energy sector 

that we have brought thus far and would be more than happy to 

do so. 

The CHAIRMAN. It is probably human nature to assume that in 

the lawmaking process that we have the power to prevent 

lawbreaking by passing a law. What we can do is punish those who 

break the laws, but it is very difficult to legislate no wrongdoing 

in a certain area, by an industry or by individuals. It is an interesting challenge that we face. Just by giving a Federal agency or 

a Commission such as the CFTC power to regulate an industry or 

an activity, does not mean that we endow you with a power to prevent wrongdoing. You agree with that as a general approach to the 

power of lawmakers and regulators? 

Mr. NEWSOME. I agree completely with that. It was clear to me 

that under the CFMA that the strong and broad enforcement authority that is provided to the commission was to be used as a deterrent to wrongdoing in these markets. We have taken that charge 

seriously and we have used our enforcement authority as aggressively as we can to try and prevent wrongdoing in the future. 

The CHAIRMAN. How would you assess the effectiveness of the actions by the commission in acting as a deterrent or having your actions act as a deterrent? Do you have, on the basis of your observations during your term as chairman of the Commission, any opinions about whether that has been an effective deterrent? 

Mr. NEWSOME. To this point it has, but time will be the great 

determiner of whether or not it has had a real deterrent. I do know 

that our aggressive activity in the enforcement area has created 

lots of changes within the energy OTC business. Those that are 

still involved in this business have made great changes to their 

business plans, the way that they trade, the way that they conduct 

themselves. We have even seen a number of the companies get out 

completely of the energy trading business. That was somewhat 

hurtful to the business for a while because credit availability was 

slim, liquidity dried up in many areas. 

That leads me to another point in the Act in terms of clearing 

over-the-counter contracts. The Act envisioned that. The Commission has allowed it, and now we have quite active clearing of overthe-counter energy markets. 

19

Anyway, back to the original point, a lot of changes have taken 

place. A lot of the major banks have stepped in to fill the void that 

energy companies that exited the market created and now we are 

seeing trading volume and liquidity in the energy area increase 

with different players and with different business plans. The 

changes that were made internally by energy companies have been 

positive. 

The CHAIRMAN. Do you think the integrity of the trading business in the energy area has improved over the last year? 

Mr. NEWSOME. Yes, sir, I sure do. 

The CHAIRMAN. As a direct consequence of the action of this commission? 

Mr. NEWSOME. Yes, sir. 

The CHAIRMAN. In looking forward next year when we come to 

the reauthorization process, do you have any early suggestions to 

make as to areas where we should start our work now thinking 

about how to improve or make the Act even more effective than it 

has been in the past? 

Mr. NEWSOME. I do not at this point. This is an area that we 

have just started really thinking about at the Commission and I 

would simply say that I look forward to working with this committee as we move forward. As we identify or come up with any 

areas we certainly will be quick to share them with this committee. 

The CFMA, as you well know, Mr. Chairman, was developed over 

a 2-year period with very intensive work by this committee and the 

House Agriculture Committee, continues to serve as well today as 

it did when it was passed. 

The fact that so much time was put on the CFMA and that it 

is such outstanding legislation, negates the need for very broadreaching legislation this time around. There may be some areas or 

some tweaks that can be changed to benefit the act, but I simply 

look forward to working with this committee as we move forward 

on it. 

The CHAIRMAN. Your advice and counsel is very important for us 

and your performance has shown that you have brought to the 

Commission a seriousness of purpose and a calm, thoughtful approach to the responsibilities that have paid off, not only in terms 

of the effectiveness of the work of the Commission but the restoration of integrity in our markets. I congratulate you for a job well 

done. We appreciate your service. 

Mr. NEWSOME. Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Newsome can be found in the appendix on page 22.] 

The CHAIRMAN. With that, our hearing is adjourned. 

[Whereupon, at 11:13 a.m., the Committee was adjourned.] 

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