The Senate Committee on Agriculture Wednesday heard from a panel of market stakeholders during a hearing to reauthorize the Commodity Futures Trading Commission.
Panelists were invited to share their opinions of proposed new rules governing the CFTC as well as recent brokerage failures that have caused futures customers to question the market structure.
One such failure of MF Global in October, 2011, has been the center of much discussion for farmers, legislators and traders alike, serving as a call for tougher standards on futures markets.
"This Committee has been closely monitoring the MF Global case, where customer funds –money that rightly belonged to farmers, businesses, and individuals all across the country – went missing," Stabenow said in opening comments.
She said since then, the Ag Committee has focused on three goals: getting customers their money back, holding anyone engaged in wrongdoing accountable, and ensuring that proper customer protections are in place so that another failure doesn't occur.
Because of the failure of not only MF Global and another group, Peregrine Financial, along with data security breaches, unexplained price volatility and technology challenges, Stabenow said customer confidence has decreased.
A few proposed changes intended to protect customers in the event of another collapse include decreasing the time in which customers' margin calls must arrive to their futures commission merchant from the current three days to one day and changing the timing of FCMs' calculation of residual interest.
Several industry groups offered testimony during the hearing on proposed changes, including the National Grain and Feed Association. NGFA representative John Heck, senior vice president of The Scoular Company in Omaha, Neb., said the proposed changes could "radically alter" the way business is done in the futures industry.
Heck said decreasing the margin calls time would result in customers being required to send more money to their FCM, "potentially putting a greater amount of segregated customer funds at risk in the event of another FCM insolvency."