OPENING STATEMENT FOR

SENATOR TOM HARKIN

February 11, 1997

Thank you Mr. Chairman. I am pleased to be here to continue the Committee's work to modernize the Commodity Exchange Act.

The past 25 years have seen tremendous expansion of the derivative markets. And, it is essential that this Committee periodically look at what changes are needed to help maintain its world class futures industry.

These markets are critical because they allow farmers, ranchers and other businesses to manage risk and maximize their investment opportunities.

At the same time, the Committee has an obligation to protect the public trust through effective enforcement and regulatory measures that prevent and punish fraud and other abuses that may and have occurred in the international financial markets - including the futures market.

The legislation that Chairman Lugar, Senator Leahy, and I have jointly introduced -- seeks to strike a careful balance -- taking into account the need for adequate regulation and the realities of today's global markets. It is designed to maintain safeguards that prevent abuses, protect investors and ensure the integrity and honesty of our nation's critically important futures market.

Through specific changes to the CEA, we hope to further assist the Commodity Futures Trading Commission, the primary regulator of the futures industry, to continue its on-going effort to focus scarce resources where they are most effective -- in enforcement -- preventing consumer fraud and manipulation of market prices.

The CEA Amendment Act of 1997 endeavors to allow industry to focus on product innovation and marketing so that the end users -- farmers, ranchers and other businesses -- have available to them, free of fraud and at a competitive price -- the most state-of-the-art financial products.

The bill also provides the CFTC with additional authority to require U.S. delivery points for overseas futures markets to provide information similar to that currently demanded of American market participants.

I am pleased that the bill addresses the uncertainty that exists in the so-called "Treasury amendment", a 1974 provision of the Commodity Exchange Act that excludes certain financial products from its regulatory coverage.

This provision has long been controversial and our proposal suggests one solution.

Our bill also contains two important provisions to assist private enterprises to manage business risk. First, it provides greater legal certainty for the over-the-counter financial tools such as swaps and hybrids, and second, it allows for the creation of an on-exchange professional market.

I am very pleased to have joined my colleagues on this initiative. Chairman Lugar, Senator Leahy and I have worked together on futures issues for many years.

By introducing this bill early, we now have ample time to continue last year's public discussion and debate over what changes are appropriate and necessary to maintain a viable U.S. futures market.

It is my experience that such a dialogue helps develop solid bipartisan legislation. As with most issues, there are many interests that must be balanced, and this bill strives to find that balance.

It represents what in our best judgement, is one way that the Act can prudently be changed. Our minds remain open to further input and alternative approaches.

I look forward to hearing the views of the CFTC, the Treasury Department as well as industry participants and users of these products at today's and Thursday's hearings.