White House pushes for futures fees

The White House made a series of recommendations in a statement of administrative policy on the 2008 agriculture spending bill, which includes funding for the Commodities Futures Trading Commission (CFTC).

In the statement, the President’s office of management and budget recommended that the House approve the transaction fees as recommended recently in a report by the Senate homeland security and governmental affairs’ permanent subcommittee on investigations, which looked to increase the powers of the CFTC following the collapse of Amaranth Advisors, an energy hedge fund, in 2006.

“The CFTC is the only federal financial regulator that does not derive its funding from the specialised entities it regulates, and because its programmes provide clear benefits to participants in these markets, it is appropriate for those participants to contribute toward their cost,” the statement said.

It also encouraged the House to “join the Senate appropriations committee in matching the [Bush administration] requested $116 million for the CFTC, which will allow more effective monitoring of the markets the Commission oversees and strengthen enforcement in cases where market abuses may have occurred.” The House bill seeks only $102.5 million.

The notion of transaction fees has been rejected by participants in the futures industry who view the move as a tax on futures transactions that would raise the costs while discouraging institutions and individuals from using futures contracts for risk-management purposes.

The renewed recommendation follows the July request by the securities, insurance and investment subcommittee of the committee on banking, housing and urban affairs for a study on whether the US Securities and Exchange Commission (SEC) and the CFTC should merge some of their oversight functions.

Currently the CFTC regulates trading in commodity futures and options, while the SEC monitors key players in the securities world, including securities exchanges, securities brokers and dealers, investment advisers and mutual funds.

The CFTC will hold hearings next month to examine its oversight of trading on regulated futures exchanges and other commercial markets.