(Adds detail from bill)
By Douwe Miedema
WASHINGTON, April 7 (Reuters) - U.S. lawmakers on Monday launched a bill to rewrite the rules of of the Commodity Futures Trading Commission (CFTC), giving more leeway to smaller players in the derivative markets it oversees.
The agency became one of the most prolific reformers of Wall Street after the financial crisis under its previous chairman, Gary Gensler, who was frequently criticised by some in the financial industry for his hard-nosed style and sometimes-hasty adoption of new rules.
In a so-called reauthorization bill to fine-tune the CFTC's mandate, the chairman and the highest-ranking Democrat on the House Agriculture Committee drew up a list of changes to many of the tough rules the agency has written.
"The CFTC's rulemaking process has been less than ideal. The rulemaking process has proven confusing," the four lawmakers launching the bill said in a statement.
The bill also directed the CFTC to finish a study into high-frequency trading if it were adopted.
The CFTC was a little-watched overseer of agriculture and other futures before the crisis, but the 2010 Dodd-Frank law put it in charge of the $690 trillion swaps market, dominated by large investment banks such as JP Morgan Chase & Co, Citibank and Bank of America.
That has earned the agency a strong reputation among critics of big banks, but has drawn the ire of financial industry associations as well as from users of derivatives who fear the new rules may ramp up their costs.
Frank Lucas, the Republican from Oklahoma who chairs the Committee, and Collin Peterson, the ranking Democrat from Minnesota, urged the other members of the committee to adopt the bill at a hearing on Wednesday.
Separately, the Senate Agriculture Committee on Tuesday will vote on the candidacy on a new CFTC chairman, and two new commissioners.
The CFTC needs to be reauthorized every five years, though it has in the past gone for several years without that stamp of approval. The launch of the bill is the first step of what will likely be a drawn-out process to get it through Congress.
President Barack Obama's administration is opposed to making any changes to Dodd-Frank before it is fully implemented, and previous attempts to tweak it have stalled.
THREE TITLES IN BILL
The bill has three titles: one to better protect customers in futures markets, a second to reform the CFTC, and the third to fine-tune changes in the swaps market for those clients who use it to hedge risk, and not to speculate.
Client protection issues were at the heart of two major collapses of futures brokers overseen by the CFTC, MF Global and Peregrine Financial, and the agency has since tightened its rules for the long-regulated industry.