In this economic downturn, we can no longer just sit back and let the markets work. Instead, we need to take a hard look at the contributing factors of this sagging economy.

Over the years, the Commodity Futures Trading Commission (CFTC) and laws enacted by Congress have allowed instruments that are essentially futures contracts to be privately negotiated without the safeguards provided through exchange trading. Yet the total face value of swaps reached a high of some $531 trillion at the middle of last year, eight-and-a-half times the world GDP of $62 trillion, according to the latest figures available. Renowned investor Warren Buffett has called derivatives “financial weapons of mass destruction” if they are not properly understood and managed.

My legislation, The Derivatives Trading Integrity Act, will bring more transparency and accountability into the marketplace. Specifically, the bill amends the Commodity Exchange Act to eliminate the distinction between “excluded” and “exempt” commodities and transactions versus commodities and transactions traded or conducted on regulated exchanges. All commodities and transactions of the same nature would be treated the same.

In addition, the bill eliminates the statutory exclusion of swap transactions and ends the CFTC’s authority to exempt such transactions from the general requirement that a contract for the purchase or sale of a commodity for future delivery can only trade on a regulated board of trade. In effect, this means that all futures contracts must trade on a designated contract market or a derivatives transaction execution facility. Virtually all contracts now commonly referred to as swaps fall under the definition of futures contracts and function basically in the same manner as futures contracts.

In bringing all over-the-counter financial transactions, those currently traded without federal oversight, onto regulated exchanges, we establish stronger standards of openness, transparency and integrity in the trading of swaps and other over-the-counter financial derivatives. This is a critical step toward rebuilding and restoring confidence in the financial system.