2 in House Fault Futures Trading Panel On Over-the-Counter Derivatives

WASHINGTON - Two House committee chairmen have taken the Commodity Futures Trading Commission to task for meddling in the over-the-counter derivatives market.

In a Dec. 15 letter, Commerce Committee Chairman Thomas J. Bliley Jr. and Agriculture Committee Chairman Pat Roberts told the commission to clear up by the end of this week confusion surrounding a July enforcement order hinting that some privately negotiated swaps contracts might be invalid.

Rep. Bliley, R-Va., and Rep. Roberts, R-Kan., said they had no complaint with the futures commission's decision to fine the German conglomerate Metallgesellschaft AG $2.25 million for selling illegal futures contracts. But they argued that a definition of futures included in the order could be interpreted to cover many swaps as well - meaning that swaps contracts might fall under the commission's jurisdiction and might not be binding unless registered with the commission.

Swaps make up a big chunk of the over-the-counter derivatives market, which is dominated by U.S. money-center banks.

"We would be dismayed if the legal certainty for privately negotiated derivatives which we sought to achieve in the enactment of the Futures Trading Practices Act of 1992 was undermined by commission actions even unintentionally," the congressmen said.