ISDA®
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION

NEWS RELEASE

For Immediate Release Wednesday March 9, 2005

For More Information, Please Contact:

Louise Marshall, ISDA New York, (212) 901-6000; lmarshall@isda.org

ISDA Testifies before U.S. HOUSE AGRICULTURE SUBCOMMITTEE:

NO NEED TO CHANGE COMMODITY FUTURES MODERNIZATION ACT

WASHINGTON, D.C., Wednesday, March 9, 2005 – In testimony before the U.S. House Agriculture Subcommittee on General Farm Commodities and Risk Management today, the International Swaps and Derivatives Association (ISDA) emphasizes its position that there is no fundamental need to make substantive changes to portions of the CFMA governing privately negotiated derivatives.

The Committee’s hearing, scheduled for 10am EST today, will review legislation to reauthorize the Commodity Futures Trading Commission (CFTC). The CFTC administers the Commodity Exchange Act (CEA), which Congress substantially amended in the Commodity Futures Modernization Act of 2000 (CFMA).

ISDA’s principal interests in the CFMA are those provisions of the legislation intended to provide legal certainty for OTC derivatives. In his testimony, Robert Pickel, Chief Executive Officer and Executive Director of ISDA, draws attention to this aspect of the CFMA framework, which is based on a long-standing consensus among Congress, the CFTC and others that privately negotiated derivatives transactions are not appropriately regulated as futures contracts under the CEA.

Mr. Pickel asserts that the legal certainty provisions of the CFMA were intended by Congress both to reduce systemic risk and promote financial innovation. ISDA’s experience over the past several years indicates that both of these objectives have been achieved. Mr. Pickel also states that the related provisions of the Bankruptcy Code (adopted by Congress in 1990) may have enhanced the ability of market participants to deal effectively with events such as the collapse of Enron.

Moreover, ISDA reports that the use of OTC derivatives to hedge interest rate, foreign currency and credit risk increased substantially in the last four years, evidencing the importance of OTC derivatives as a tool to manage risk in periods of economic downturn and uncertainty.

For these reasons, ISDA shares the view expressed by CFTC Chairman Sharon Brown-Hruska that the CFMA “functions exceptionally well.” In his testimony, Mr. Pickel commends the CFTC for the evenhanded manner in which it has interpreted and administered the CFMA in accordance with Congressional intent, as well as for its vigorous program of enforcement following the collapse of Enron and the California energy situation.

ISDA notes that the legal certainty agenda remains incomplete, despite the historic advances embodied in the CFMA, and urges Congress to focus on completing action on the financial contract netting provisions contained in the pending bankruptcy reform legislation.

The U.S. Senate Agriculture Committee is also hearing testimony on the reauthorization of the CFTC. Mr. Pickel will provide ISDA’s testimony before that committee tomorrow, March 10^t, at 10am EST.

The complete text of ISDA’s testimony is available at www.isda.org.

ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 625 member institutions from 47 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org

^®ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.

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