(Archived Content)
Section 1. This section sets forth the findings of Congress that the markets for over-the-counter derivatives and hybrid instruments are large and important global markets that have continued to grow dramatically; that transactions in these markets have been entered into in reliance on written guidance and exemptions issued by the Commodity Futures Trading Commission (CFTC); that any changes in the regulatory environment for these transactions raise important public policy issues that should be dealt with by the entire financial regulatory community working with Congress; and that any such changes should be carried out after careful study and in a manner that enhances certainty as to the legal status of such transactions and the competitive position of the U.S. markets in the global economy.
Section 2. This section directs the President's Working Group on Financial Markets to conduct a study of over-the-counter derivatives, including swaps, as well as hybrid instruments; to develop such recommendations as may be appropriate for changes, if any, in statutes, regulations, and policies to improve operation of the markets for these products and to enhance legal certainty for swap agreements and hybrid instruments; and to submit a report to Congress describing the study and any recommendations. The report is required to be submitted not later than one year after the date of enactment.
Section 3. To maintain the status quo while the study is conducted and in order to provide time for the Congress, the regulatory community, and other interested parties to consider the important public policy issues involved, this section places a moratorium on action by the CFTC with respect to hybrid instruments and swap agreements. Specifically, the moratorium provides that the CFTC shall not promulgate any proposed or final rule, regulation or order, or issue any interpretative or policy statement, restricting or regulating activity in any hybrid instrument or swap agreement eligible for exemption under Part 34 or Part 35 of title 17, Code of Federal Regulations as in effect on January 1, 1998. This section is intended to prevent the CFTC from acting on the concept release printed at 63 Fed.Reg. 26114 (May 12, 1998) or otherwise taking any action to extend the CFTC's jurisdiction with respect to over-the-counter derivatives or hybrid instruments during the period of the moratorium. This section is not intended, however, to prevent the CFTC from confirming the availability of the exemptions under Part 34 or Part 35 to any proposed transaction or instrument, or expanding the scope of transactions or instruments eligible to rely on such exemptions. CFTC action covered by this section is prevented prior to the enactment of legislation authorizing appropriations for the CFTC for any year after fiscal year 2000 (CFTC reauthorization).
This section also provides that no hybrid instrument or swap agreement that satisfies the definitions and conditions for exemption under the CFTC exemptions cited above and that is or has been entered into prior to reauthorization shall be deemed to violate section 2(a)(1)(B)(v) of the Commodity Exchange Act.