Halt Index Trading of Energy Commodities (HITEC) Act - Amends the Commodity Exchange Act to declare unlawful for: (1) a commodity index fund to engage in an energy commodity transaction if any person investing in the fund is an excluded investor, (2) an energy commodity index fund to accept an investment from a person who is an excluded investor, or (3) a commodity index fund to hold an investment in an energy commodity if any person investing in the fund is an excluded investor.
Defines "excluded investor" as a person with respect to whom there is no position in an energy commodity which, if held by the person, would be considered a bona fide hedging position.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5186 Introduced in House (IH)]
112th CONGRESS
2d Session
H. R. 5186
To prevent excessive speculation in energy commodities, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 27, 2012
Mr. Markey (for himself, Mr. Frank of Massachusetts, Ms. DeLauro, Ms.
Edwards, Mr. Larson of Connecticut, Mr. Moran, Mr. Pascrell, and Mr.
Scott of Virginia) introduced the following bill; which was referred to
the Committee on Agriculture
_______________________________________________________________________
A BILL
To prevent excessive speculation in energy commodities, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Halt Index Trading of Energy
Commodities (HITEC) Act''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) Investment in our commodities markets has grown
dramatically in recent years. While the volume of futures
contracts traded in the United States was only 630,000,000 in
1998, that volume ballooned to over 3,200,000,000 in 2007.
(2) According to testimony provided to the Committee on
Natural Resources of the House of Representatives, this growth
in volume has been accompanied by a huge increase in the
percentage of commodity futures contracts owned by speculators.
While physical hedgers used to account for 70 percent of
futures contracts and speculators accounted for just 30
percent, those numbers have reversed, and speculators now
possess 70 percent of all open commodity futures contracts.
(3) Almost all of this increase in speculation has been
caused by a surge in trading of commodity index funds.
(4) Commodity index trading is investing in funds or other
financial products which are indexed to changes in value of
various commodities traded on commodity markets in the United
States. These funds can be tied to a basket of different
commodities or just to a single commodity.
(5) Investment in funds tied to these indexes has grown
enormously in the last 2 decades. According to the Commodity
Futures Trading Commission, a partial tally of net long
positions in United States markets in these indexes reached to
over $160,000,000,000 in February 2012, and net long positions
in West Texas Intermediate Crude Oil reached to over
$39,000,000,000. Many of the investors in these funds are
institutional clients, such as pension funds and universities.
(6) The vast majority of investors in commodity index funds
do not use the commodities involved. These investors are only
interested in profiting from a rise in value of the commodities
and must sell their interests in the commodities before the
futures contracts they own close. This practice, known as
rolling, causes hundreds of billions of dollars of additional
trading to flow through our commodities markets each month,
artificially increasing the volatility of our markets and
driving up prices for many of our commodities, including crude
oil.
(7) Because our commodities markets are tied to the actual
retail prices of our commodities, the artificial and excessive
levels of speculation have significantly increased the retail
prices our citizens pay for their commodities. In the case of
oil, excessive speculation may have added nearly $1.00 to the
per gallon price of gasoline.
(8) As sharp increases in energy costs reduce economic
growth, these commodity index funds are creating a weight on
the overall economy, threatening to delay our Nation's full
recovery from the 2008 financial crisis and recession.
(9) Thus, commodity index funds hurt economic growth and
consumer's wallets.
(10) In the Dodd-Frank Wall Street Reform Act, Congress
ordered the Commodity Futures Trading Commission to limit the
number of positions that a person or a class of persons may
hold in the commodities markets. Congress has taken initial
steps to set boundaries on commodity trading, but more must be
done to address the role of commodity index funds in the energy
commodity markets.
(11) Because oil prices have been at elevated levels for
much of the last year, Congress believes the situation is an
emergency and warrants immediate action to ban commodity index
trading in energy commodities.
SEC. 3. PREVENTION OF EXCESSIVE SPECULATION IN ENERGY COMMODITIES.
Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended
by adding at the end the following:
``(h)(1)(A) It shall be unlawful for a commodity index fund to
engage in a transaction involving an energy commodity if any person
investing in the fund is an excluded investor.
``(B) It shall be unlawful for an energy commodity index fund to
accept an investment from a person who is an excluded investor.
``(C) Beginning 2 years after the date of the enactment of this
subsection, it shall be unlawful for a commodity index fund to hold an
investment in an energy commodity if any person investing in the fund
is an excluded investor.
``(2) In this subsection:
``(A) The term `commodity index fund' means a fund that
consists principally of swaps involving, or contracts of sale
for future delivery of, more than 1 commodity, the value or
level of which is based, in whole or in part, on the value or
level of more than 1 commodity, and that transfers, as between
the parties to the transaction, in whole or in part, the
financial risk associated with a future change in any such
value or level.
``(B) The term `energy commodity index fund' means a
commodity index fund that consists principally of swaps
involving, or contracts of sale for future delivery of, more
than 1 energy commodity.
``(C) The term `energy commodity' means crude oil, natural
gas, or any other product (other than an agricultural
commodity) that is produced or refined, in whole or in part,
from crude oil or natural gas and that may be used as fuel for
a power source of any kind, but does not include electricity.
``(D) The term `excluded investor' means a person with
respect to whom there is no position in at least 1 energy
commodity which, if held by the person, would be considered a
bona fide hedging position (within the meaning of section
4a(c)(1)).
``(E) The term `swap' shall have the meaning the term would
have if the provisions of title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act defining, and
authorizing further definition of, the term were in effect.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Agriculture.
Referred to the Subcommittee on General Farm Commodities and Risk Management.
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