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[House Report 106-711]
[From the U.S. Government Publishing Office]

106th Congress                                            Rept. 106-711
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 4

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    COMMODITY FUTURES MODERNIZATION AND FINANCIAL CONTRACT NETTING 
                        IMPROVEMENT ACT OF 2000

                                _______
                                

                October 19, 2000.--Ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                        [To accompany H.R. 4541]

    This supplemental report shows the report of the 
Congressional Budget Office on the private sector effects with 
respect to the bill (H.R. 4541), as reported by the Committee 
on Banking and Financial Services and the vote of the committee 
on an amendment to the bill, which were not included in part 2 
of the report submitted by the Committee on Banking and 
Financial Services on September 6, 2000, (H. Rept. 106-711, pt. 
2).
    This supplemental report is submitted in accordance with 
clause 3(a)(2) of rule XIII of the Rules of the House of 
Representatives.

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 3, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate of private-sector effects of 
H.R. 4541, the Commodity Futures Modernization and Financial 
Contract Netting Improvement Act of 2000. CBO completed a 
federal cost estimate and an assessment of the bill's effects 
on state, local, and tribal governments on September 6.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Judy Ruud 
and Tim VandenBerg.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

    CONGRESSIONAL BUDGET OFFICE ESTIMATE OF COSTS OF PRIVATE-SECTOR 
                                MANDATES

H.R. 4541--Commodity Futures Modernization and Financial Contract 
        Netting Improvement Act of 2000

    Summary: H.R. 4541 would impose three new private-sector 
mandates as defined by the Unfunded Mandates Reform Act (UMRA) 
on insured depository institutions, registered futures 
associations, and retail swap market participants. CBO 
estimates that the direct costs of those mandates would be 
below the annual threshold established by UMRA for private-
sector mandates ($109 million in 2000, adjusted for inflation).
    Private-sector mandates contained in the bill: H.R. 4541 
would impose three new private-sector mandates as defined by 
UMRA. First, the bill would require insured depository 
institutions to keep more detailed records for certain 
financial contracts. Section 209 would authorize the Federal 
Deposit Insurance Corporation (FDIC) to prescribe additional 
recordkeeping requirements for certain qualified financial 
contracts held by depository institutions. Under the Federal 
Deposit Insurance Act, qualified financial contracts are 
defined for five types of financial contracts: securities 
contracts, commodity contracts, forward contracts, repurchase 
agreements, and swap agreements. The FDIC anticipates that 
under the new requirements, institutions would essentially have 
to ensure that certain data that they already collect (and 
record) on such contracts are organized in a manner that would 
be accessible to the FDIC. Consequently, CBO experts that the 
direct costs of this mandate would not be large.
    Second, H.R. 4541 would require a registered futures 
association to adopt ``suitability rules'' for its members, 
regarding advising customers on the purchase or sale of newly 
authorized futures on single stocks and futures on narrow stock 
indexes. Such rules would require that a future commission 
merchant, a commodity trading advisor, or an introducing broker 
that recommends such a purchase or sale to ascertain the 
suitability of that recommendation for their customers. 
According to industry representatives, such suitability rules 
would be similar to the ``know your customer requirements'' 
that the National Futures Association adopted in 1985. Thus, 
CBO expects that the direct costs of issuing suitability rules 
would be negligible.
    Third, the bill would authorize the Federal Reserve and the 
Secretary of the Treasury, in consultation with the Securities 
and Exchange Commission and the Commodity Futures Trading 
Commission, to jointly prescribe customer protection 
regulations that apply to sales practices relating to retail 
swap transactions. According to regulatory and industry 
representatives, the retain market for swaps may develop in the 
future, but such transactions are currently limited, if any. 
Thus, this mandate would have no immediate cost.
    Estimate prepared by: Judy Ruud and Tim VandenBerg.
    Estimate approved by: Roger Hitchner, Assistant Director 
for Microeconomics and Financial Studies Division.

                                 ERRATA

    On page 58 of Report 106-711 Part 2 under COMMITTEE 
CONSIDERATION AND VOTES add the following:
    The Committee considered an amendment by Mrs. Maloney of 
New York to delete the provision providing a partial exclusion 
from the CEA for exempt commodities entered into solely between 
eligible contract participants and executed on an electronic 
trading facility. The amendment was defeated 12-20.
        YEAS                          NAYS
Mr. King                            Mr. Leach
Mr. LaFalce                         Mrs. Roukema
Ms. Waters                          Mr. Bereuter
Mrs. Maloney, (NY)                  Mr. Baker
Mr. Gutierrez                       Mr. Campbell
Mr. Watt                            Mr. Royce
Mr. Maloney, (CT)                   Mr. Lucas
Ms. Hooley                          Mr. Metcalf
Mr. Sherman                         Mrs. Kelly
Ms. Lee                             Dr. Weldon
Mr. Inslee                          Mr. Ryun, (KS)
Ms. Schakowsky                      Mr. Cook
                                    Mr. Riley
                                    Mr. Hill, (MT)
                                    Mr. Ryan, (WI)
                                    Mrs. Biggert
                                    Mr. Terry
                                    Mr. Green, (WI)
                                    Mr. Toomey
                                    Mr. Bentsen

                                
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