I
105TH CONGRESS
1ST SESSION
H. R. 645
To amend the Commodity Exchange Act to require the Commodity Futures
Trading Commission to regulate certain cash markets, such as the Na-
tional Cheese Exchange, until the Commission determines that the mar-
ket does not establish reference points for other transactions.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 6, 1997
Mr. OBEY (for himself, Mr. KIND, Mr. JOHNSON of Wisconsin, and Mr.
BARRETT of Wisconsin) introduced the following bill; which was referred
to the Committee on Agriculture
A BILL
To amend the Commodity Exchange Act to require the Com-
modity Futures Trading Commission to regulate certain
cash markets, such as the National Cheese Exchange,
until the Commission determines that the market does
not establish reference points for other transactions.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘National Cheese Ex-
change Oversight and Improvement Act of 1997’’.
SEC. 2. FINDINGS.
The Congress finds that the operation of the National
Cheese Exchange and other cash markets is of national
concern and in need of Federal oversight because of the
following:
(1) The National Cheese Exchange, located in
Green Bay, Wisconsin, is the dominant cash market
for bulk cheese in the United States.
(2) While less than 1 percent of the cheese pro-
duced in the United States is sold on the National
Cheese Exchange, the price determined by the Na-
tional Cheese Exchange acts as a reference price for
as much as 95 percent of the commercial cheese
transactions conducted in the United States.
(3) A three-year federally funded investigation
into the activities of the National Cheese Exchange
determined that the National Cheese Exchange is
very thinly traded, highly concentrated, completely
unregulated, and subject to manipulation.
(4) The Coffee, Sugar, and Cocoa Exchange in
New York, an exchange regulated by the Commodity
Futures Trading Commission, trades futures con-
tracts for cheese.
(5) The low volume in trading of cheese futures
contracts on the Coffee, Sugar, and Cocoa Exchange
is partially related to concerns about the lack of via-
bility, and potential for manipulation, in the domi-
nant cash market for cheese, the National Cheese
Exchange.
(6) The National Cheese Exchange is com-
pletely unregulated by any Federal or State agency.
(7) The Commodity Futures Trading Commis-
sion claims a lack of authority to regulate or oversee
the National Cheese Exchange and similar cash
markets.
SEC. 3. COMMODITY FUTURES TRADING COMMISSION REG-
ULATION OF NATIONAL CHEESE EXCHANGE
AND SIMILAR CASH MARKETS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.)
is amended by inserting after section 20 (7 U.S.C. 24)
the following new section:
‘‘SEC. 21. COMMISSION REGULATION OF NATIONAL CHEESE
EXCHANGE AND SIMILAR CASH MARKETS.
‘‘(a) DEFINITION OF CONCENTRATED CASH MAR-
KET.—In this section, the term ‘concentrated cash mar-
ket’ means—
‘‘(1) the National Cheese Exchange located in
Green Bay, Wisconsin; and
‘‘(2) a cash market for a commodity if the
Commission determines that—
‘‘(A) the cash market is geographically
centralized in the form of a market or ex-
change;
‘‘(B) the cash market is very thinly traded
or highly illiquid;
‘‘(C) the price established by the cash mar-
ket functions as a reference price for a majority
of commercial transactions off the cash market
for the commodity being traded;
‘‘(D) trading in the cash market is con-
centrated among relatively few buyers and sell-
ers;
‘‘(E) the cash market is substantially un-
regulated by any other regulatory structure (in-
cluding State regulation or self-regulation);
‘‘(F) a futures market regulated under this
Act also exists for the commodity that is being
traded on the cash market; and
‘‘(G) the instability, illiquidity, or potential
for manipulation on the cash market could be
a deterrent to the use of the futures market for
that commodity.
‘‘(b) REGULATION OF CONCENTRATED CASH MAR-
KETS.—In consultation with the Secretary of Agriculture,
the Commission shall regulate a concentrated cash market
under this Act until such time as the Commission deter-
mines that the concentrated cash market is not function-
ing as a reference price for a majority of commercial
transactions off the cash market for the commodity being
traded on the concentrated cash market.
‘‘(c) SUBMISSION
AND
REVIEW
OF
OPERATING
RULES.—
‘‘(1) SUBMISSION REQUIRED.—The Commission
shall require a concentrated cash market subject to
regulation under subsection (b) to submit to the
Commission for approval a set of rules governing the
operation of the concentrated cash market.
‘‘(2) TIME FOR SUBMISSION.—In the case of
the National Cheese Exchange, the operating rules
required under this subsection shall be submitted
not later than 90 days after the date of the enact-
ment of this section. In the case of other con-
centrated cash markets, the operating rules shall be
submitted not later than 90 days after the date on
which the Commission notifies the concentrated cash
market that it is subject to regulation under this
section.
‘‘(3) NOTIFICATION OF COMMISSION ACTION.—
The Commission shall promptly review operating
rules submitted by a concentrated cash market
under this subsection to determine whether the rules
are sufficient to govern the operation of the con-
centrated cash market. Not later than 60 days after
receiving the rules from a concentrated cash market,
the Commission shall notify the concentrated cash
market of the results of the review, including wheth-
er the rules are approved or disapproved. If dis-
approved, the Commission shall provide such rec-
ommendations regarding changes to the rules as the
Commission considers necessary to secure approval
and provide a schedule for resubmission of the rules.
‘‘(4) SUBSEQUENT
RULE
CHANGES.—A con-
centrated cash market may not change approved op-
erating rules unless the proposed change is also sub-
mitted to the Commission for review and the Com-
mission approves the change in the manner provided
in paragraph (3).
‘‘(d) EFFECT OF FAILURE TO SUBMIT OR RECEIVE
APPROVAL OF RULES.—Beginning one year after the date
of the enactment of this section, the National Cheese Ex-
change may operate only in accordance with rules ap-
proved by the Commission under subsection (c). In the
case of other concentrated cash markets, beginning one
year after the date on which the concentrated cash market
is notified that it is subject to regulation under this sec-
tion, the concentrated cash market may operate only in
accordance with rules approved by the Commission under
subsection (c).’’.
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