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Lucas pleased with CFTC rule

House Agriculture Committee Chairman Frank Lucas, R-Okla., signaled today that he was pleased with the Commodity Futures Trading Commission’s rule on swap dealers released today.

“From what I can tell today, there were improvements made to the final rule that will reduce the negative impact on end-users out in the countryside,” Lucas said in a statement. “As we wait for the details of the rule, I would like to commend the commissioners for working diligently and in a bipartisan manner to protect end-users from unnecessary harm.”

He added, “Comprehensive regulation of swap dealers is central to derivatives reform, and I support those efforts. Sweeping end-users into regulations designed for the largest global banks, however, simply doesn’t make sense and it unwisely diverts the CFTC’s resources and attention.”

The CFTC pulled back from a plan announced in December to count firms as swap dealers if they traded more than $100 million in swaps over a 12-month period, bumping the threshold up to $8 billion for most asset classes as an initial phase-in and later to $3 billion, unless regulators decide a different threshold is appropriate, Reuters reported.

It also added a more explicit exemption for swaps that are used to hedge market risks, such as reducing exposure to interest-rate fluctuations or oil price moves, Reuters said. Farm co-ops and other interests have said they feared being included as swap dealers because inclusion would increase their capital and margin requirements.

The National Grain and Feed Association said it “cautiously supports” the CFTC rule and believes it is intended to exclude from swap-dealer regulation those commercial end-users – including grain elevators, feed and feed ingredient manufacturers, grain processors and exporters – that offer risk-management tools to hedge physical commodities.

“While we will await publication of the actual text of the regulations before rendering a final judgment, we are encouraged that the CFTC acted to increase significantly the de minimis level of swap activity – to $8 billion annually – that would be necessary before an entity is classified as a swap dealer compared to what initially was proposed,” said Todd Kemp, National Grain and Feed’s vice president of marketing and corporate treasurer.

“We look forward to publication of the CFTC’s rules and will analyze them carefully,” Kemp said. “And we will continue to work with the agency to help ensure that critically important risk-management tools are not precluded from being used by agribusiness firms and U.S. agricultural producers.”

But Better Markets, a financial services reform group started by Michael Masters, a commodities trader and financial manager who testified before Congress several times in the wake of the 2008-2009 financial crisis, called the rule issued by the CFTC and the Securities and Exchange Commission “ a sellout to industry.”

The Dodd-Frank financial services reform law required the agencies to issue a rule regulating swap dealers.