[House Report 116-313]
[From the U.S. Government Publishing Office]
116th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 116-313
======================================================================
CFTC REAUTHORIZATION ACT OF 2019
_______
November 26, 2019.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Peterson, from the Committee on Agriculture, submitted the
following
R E P O R T
[To accompany H.R. 4895]
[Including cost estimate of the Congressional Budget Office]
The Committee on Agriculture, to whom was referred the bill
(H.R. 4895) to reauthorize the Commodity Futures Trading
Commission, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``CFTC Reauthorization Act of 2019''.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I--POLICY AMENDMENTS
Sec. 101. Foreign futures authority.
Sec. 102. Honors program.
Sec. 103. Advisory committee changes.
Sec. 104. Enhancement of Office of Minority and Women Inclusion at the
Commission; internship program.
Sec. 105. Detailing and resource-sharing.
Sec. 106. Office of the Chief Economist.
Sec. 107. Equal consideration for holding companies.
Sec. 108. Exemption of qualified charitable organizations from
regulation as commodity pool operators.
Sec. 109. Digital commodity.
Sec. 110. System safeguards.
Sec. 111. Administration of swap execution facilities.
Sec. 112. Applicability of prohibitions on fraud and manipulation to
activities outside the United States.
Sec. 113. Privilege retention.
Sec. 114. Proprietary information.
Sec. 115. Authority to provide food and incidental assistance to
foreign officials hosted by the Commission.
Sec. 116. Extension of operations.
Sec. 117. Aiding and abetting.
Sec. 118. Modernization of authority of the Commission to conduct
research, development, demonstration, and information programs.
Sec. 119. Protecting customer property during commodity broker
bankruptcy.
Sec. 120. Elimination of the double-sided confirmation requirement for
swap data repositories.
Sec. 121. Whistleblower protections for internal disclosures.
Sec. 122. Updating standards for natural persons to meet requirements
for qualified eligible persons.
Sec. 123. Government Accountability Office study on aluminum markets.
Sec. 124. Response to foreign regulatory authority.
Sec. 125. Affiliate conditions.
TITLE II--TECHNICAL CORRECTIONS
Sec. 201. Correction of references.
Sec. 202. Elimination of obsolete references to dealer options.
Sec. 203. Updated trade data publication requirement.
Sec. 204. Flexibility for all registered entities.
Sec. 205. Elimination of obsolete references to electronic trading
facilities.
Sec. 206. Elimination of obsolete reference to alternative swap
execution facilities.
Sec. 207. Clarification of Commission authority over swaps trading.
Sec. 208. Elimination of obsolete reference to the Commodity Exchange
Commission.
Sec. 209. Elimination of obsolete references to derivative transaction
execution facilities.
Sec. 210. Elimination of obsolete references to exempt boards of trade.
Sec. 211. Elimination of completed reports.
Sec. 212. Miscellaneous corrections.
Sec. 213. Technical amendments to section 14(e).
Sec. 214. Technical clarifications for retail foreign currency.
Sec. 215. Miscellaneous swap technical corrections.
TITLE I--POLICY AMENDMENTS
SEC. 101. FOREIGN FUTURES AUTHORITY.
(a) In General.--Section 1a(26) of the Commodity Exchange Act (7
U.S.C. 1a(26)) is amended to read as follows:
``(26) Foreign futures authority.--The term `foreign futures
authority' means any foreign government, or any law enforcement
authority, department, central bank, ministry, agency,
governmental body, or regulatory organization empowered by a
foreign government to administer, enforce, or prosecute a law,
rule, or regulation relating to matters involving futures,
options, swaps, or commodities, or any such authority,
department, or agency of a political subdivision of a foreign
government empowered to administer, enforce, or prosecute a
law, rule, or regulation as it relates to such matters.''.
(b) Conforming Amendment.--Section 12(f) of such Act (7 U.S.C. 16(f))
is amended--
(1) in paragraph (1)--
(A) by striking ``futures or options'' and inserting
``futures, options, swaps, or commodities''; and
(B) by striking ``administers or enforces'' and
inserting ``administers, enforces, or prosecutes''; and
(2) in paragraph (2)(A), by striking ``in futures and
options'' and inserting ``in futures, options, swaps, or
commodities''.
SEC. 102. HONORS PROGRAM.
(a) In General.--Section 2(a)(7) of the Commodity Exchange Act (7
U.S.C. 2(a)(7)) is amended by adding at the end the following:
``(D) Honors program.--The Commission may establish
the Honors Program under its appointment and
compensation authorities.''.
(b) Conforming Amendment.--Section 12(b)(1) of such Act (7 U.S.C.
16(b)(1)) is amended by adding at the end the following: ``To clarify
the Commission's authority to establish the Honors Program under
section 2(a)(7)(D), the Commission may coordinate with the Office of
Personnel Management, as needed.''.
SEC. 103. ADVISORY COMMITTEE CHANGES.
(a) In General.--Section 2(a)(15) of the Commodity Exchange Act (7
U.S.C. 2(a)(15)) is amended to read as follows:
``(15) Advisory committees.--
``(A) Establishment.--
``(i) In general.--The Commission shall
establish advisory committees to serve as
vehicles for discussion and communication on
matters related to the regulatory activities of
the Commission.
``(ii) Membership.--The Commission shall
appoint to an advisory committee such members
as the Commission finds appropriate to promote
robust discussion of the subject mater before
the advisory committee. In appointing members
to an advisory committee, the Commission shall
seek to include a wide diversity of opinion and
represent a broad cross-section of interests,
as applicable to the subject matter.
``(B) Activities.--The activities of an advisory
committee shall include the following:
``(i) to hold meetings at such intervals as
necessary to carry out the functions of the
advisory committee;
``(ii) to submit to the Commission such
reports and recommendations to the Commission
(including minority views, if any) as the
advisory committee deems appropriate; and
``(iii) such activities as the Commission
determines is appropriate.
``(C) Applicability of the federal advisory committee
act.--An advisory committee established under this
paragraph shall be subject to the Federal Advisory
Committee Act.''.
(b) Existing Advisory Committees.--Notwithstanding section 2(a)(15)
of the Commodity Exchange Act, the Commodity Futures Trading Commission
may permit an advisory committee that, as of the date of the enactment
of this Act, had a charter established by the Commission, or that was
established under such section as in effect before such date of
enactment, to continue to operate in accordance with the charter or in
accordance with such predecessor section until the sponsor of the
advisory committee is changed. After which such advisory committee will
become subject to section 2(a)(15) of the Commodity Exchange Act.
SEC. 104. ENHANCEMENT OF OFFICE OF MINORITY AND WOMEN INCLUSION AT THE
COMMISSION; INTERNSHIP PROGRAM.
(a) In General.--Section 2(a) of the Commodity Exchange Act (7 U.S.C.
2(a)) is amended by adding at the end the following:
``(16) Office of minority and women inclusion.--Within 1 year
after the date of the enactment of this paragraph, the
Commission shall comply with section 342 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
``(17) Annual internship program.--
``(A) In general.--The Executive Director shall
establish a program to place an appropriate number of
students attending qualified institutions in a
semester-length internship within the Commission's
divisions and offices.
``(B) Funding.--The Commission shall set aside an
appropriate percentage of the funds allocated to the
office of the Chairman to enable the selected interns
identified in subparagraph (A) to afford living
expenses, including rent and a per-diem, in the
metropolitan areas where the Director identifies
internship opportunities.
``(C) Qualified institution defined.--In this
paragraph, the term `qualified institution' means--
``(i) an 1890 Institution (as defined in
section 2 of the Agricultural Research,
Extension, and Education Reform Act of 1998 (7
U.S.C. 7601));
``(ii) a 1994 Institution (as defined in
section 532 of the Equity in Educational Land-
Grant Status Act of 1994 (Public Law 103-382; 7
U.S.C. 301 note));
``(iii) an eligible institution (as defined
in section 1489 of the National Agricultural
Research, Extension, and Teaching Policy Act of
1977 (7 U.S.C. 3361)); or
``(iv) a Hispanic-serving institution (as
defined in section 1404 of the Food and
Agriculture Act of 1977 (7 U.S.C. 3103)).''.
(b) Joint Standards.--In carrying out section 2(a)(16) of the
Commodity Exchange Act, the Commodity Futures Trading Commission shall
adopt the joint standards established in the Interagency Policy
Statement published in the Federal Register on June 10, 2015 (80 Fed.
Reg. 33016), or any successor Policy Statement.
SEC. 105. DETAILING AND RESOURCE-SHARING.
Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)), as
amended by section 104 of this Act, is amended by adding at the end the
following:
``(18) Assistance from federal agencies.--
``(A) In general.--The Commission may accept any
assistance, including services, funds, facilities, and
other support services as determined by the Commission,
to effectuate the purposes and provisions of this Act,
from any department or agency of the United States that
is authorized under other law to provide the
assistance.
``(B) Detail flexibility.--When an employee from
another department or agency is detailed to the
Commission, the employee may be detailed on either a
reimbursable or non-reimbursable basis, and such detail
shall be without interruption or loss of civil service
status or privilege.
``(19) Assistance from foreign governmental entities.--
``(A) In general.--The Commission may--
``(i) accept details of officers or employees
of a foreign futures authority or any
department or agency of a foreign government,
including a central bank or ministry, on a
temporary basis as employees of the Commission
pursuant to section 12(b) of this Act, or
section 3101 or 3109 of title 5, United States
Code; and
``(ii) detail officers or employees of the
Commission to work on a temporary basis for an
entity described in clause (i).
``(B) Reciprocity and reimbursement.--
``(i) Reciprocity not required.--Assistance
described in subparagraph (A) need not be
provided on a reciprocal basis.
``(ii) Reimbursement.--
``(I) In general.--The Commission may
provide and accept assistance described
in subparagraph (A) on a reimbursable
or non-reimbursable basis, only in
accordance with a written agreement
between the Commission and the
respective foreign governmental entity.
``(II) Form.--A reimbursement to or
from the Commission may be made in cash
or in kind. The Commission shall credit
a reimbursement received from a foreign
governmental entity to the appropriate
Commission appropriation, fund, or
account.
``(C) Standards of conduct.--An officer or employee
detailed under subparagraph (A)(i) shall be subject to
the provisions of law relating to ethics, conflicts of
interest, or corruption, and to any other statute
governing the standards of conduct for Commission
employees that are applicable to the type of
appointment.
``(D) Limitation.--An officer or employee detailed
under subparagraph (A)(i) may not hold any management
position at the Commission.''.
SEC. 106. OFFICE OF THE CHIEF ECONOMIST.
(a) In General.--Section 2(a) of the Commodity Exchange Act, as
amended by sections 104 and 105 of this Act, is amended by adding at
the end the following:
``(20) Office of the chief economist.--
``(A) Establishment.--There is established in the
Commission the Office of the Chief Economist.
``(B) Head.--The Office of the Chief Economist shall
be headed by the Chief Economist.
``(C) Functions.--The Chief Economist shall serve as
economic advisor to the Commission and perform
functions such as economic analysis, regulatory cost-
benefit analysis, and research.
``(D) Professional staff.--
``(i) In general.--The Commission shall
appoint such other economists and any related
positions as may be necessary for the Office of
the Chief Economist--
``(I) in accordance with the
statutes, rules, and regulations
governing appointments in the excepted
service; and
``(II) notwithstanding any statutes,
rules, and regulations governing
appointments in the competitive
service.
``(ii) Rule of construction.--The appointment
of a candidate to a position under authority of
this subsection shall not be considered to
cause such position to be converted from the
competitive service to the excepted service.''.
(b) Conforming Amendment.--Section 15(a) of such Act (7 U.S.C. 19(a))
is amended--
(1) in paragraph (1), by inserting ``, after coordinating
with the Office of the Chief Economist,'' before ``shall'';
(2) in paragraph (2)(B), by striking ``futures markets'' and
inserting ``markets under the jurisdiction of the Commission'';
(3) in paragraph (2), by redesignating subparagraphs (D) and
(E) as subparagraphs (E) and (F); and
(4) in paragraph (2), by inserting after subparagraph (C) the
following:
``(D) considerations of market liquidity;''.
SEC. 107. EQUAL CONSIDERATION FOR HOLDING COMPANIES.
Section 2(h)(7)(C)(ii) of the Commodity Exchange Act (7 U.S.C.
2(h)(7)(C)(ii)) is amended--
(1) in the matter before subclause (I), by striking ``unions,
including--'' and inserting ``unions, bank holding companies,
and savings and loan holding companies, including--'';
(2) in subclause (II), by striking ``or'' at the end;
(3) in subclause (III), by striking the period at the end and
inserting a semicolon; and
(4) by adding at the end the following:
``(IV) bank holding companies (as
defined in section 2 of the Bank
Holding Company Act of 1956) that have
aggregated assets, including the assets
of their subsidiaries, of
$10,000,000,000 or less; and
``(V) savings and loan holding
companies (as defined in section 10 of
the Home Owners' Loan Act of 1933) that
have aggregated assets, including the
assets of their subsidiaries, of
$10,000,000,000 or less.''.
SEC. 108. EXEMPTION OF QUALIFIED CHARITABLE ORGANIZATIONS FROM
REGULATION AS COMMODITY POOL OPERATORS.
Section 4m of the Commodity Exchange Act (7 U.S.C. 6m) is amended to
read as follows:
``SEC. 4M. USE OF MAILS OR OTHER MEANS OR INSTRUMENTALITIES OF
INTERSTATE COMMERCE BY COMMODITY TRADING ADVISORS
AND COMMODITY POOL OPERATORS.
``(a) Prohibition.--It shall be unlawful for any commodity trading
advisor or commodity pool operator, unless registered under this Act,
to make use of the mails or any means or instrumentality of interstate
commerce in connection with business as the commodity trading advisor
or commodity pool operator.
``(b) Exceptions.--
``(1) In general.--Subsection (a) shall not apply to a
commodity trading advisor whose commodity trading advice is
solely incidental to the conduct of that person's business, and
who is a--
``(A) dealer, processor, broker, or seller in cash
market transactions of any commodity specifically set
forth in section 2(a) of this Act before the enactment
of the Commodity Futures Trading Commission Act of 1974
(or products thereof); or
``(B) nonprofit, voluntary membership, general farm
organization, that provides advice on the sale or
purchase of any commodity specifically set forth in
section 2(a) of this Act before the enactment of the
Commodity Futures Trading Commission Act of 1974.
``(2) Charitable organization.--Subsection (a) shall not
apply to any commodity trading advisor or commodity pool
operator that is--
``(A) a charitable organization, as defined in
section 3(c)(10)(D) of the Investment Company Act of
1940 (15 U.S.C. 80a-3(c)(10)(D)), or a trustee,
director, officer, employee, or volunteer of such a
charitable organization acting within the scope of the
employment or duties of the person with the
organization, whose advisory or pool activities are
conducted only on behalf of, or with respect to, 1 or
more of--
``(i) any such charitable organization; or
``(ii) an investment trust, syndicate, or
similar form of enterprise excluded from the
definition of `investment company' pursuant to
section 3(c)(10) of the Investment Company Act
of 1940 (15 U.S.C. 80a-3(c)(10)), or the
trustees, administrators, settlors (or
potential settlors), or beneficiaries of the
foregoing; or
``(B) any plan, company, or account described in
section 3(c)(14) of the Investment Company Act of 1940
(15 U.S.C. 80a-3(c)(14)), any person or entity who
establishes or maintains such a plan, company, or
account, or any trustee, director, officer, employee,
or volunteer for any of the foregoing plans, persons,
or entities acting within the scope of the employment
or duties of the person with the organization, whose
advisory or pool activities are conducted only on
behalf of, or with respect to, any investment trust,
syndicate, or similar form of enterprise excluded from
the definition of `investment company' pursuant to
section 3(c)(14) of the Investment Company Act of 1940
(15 U.S.C. 80a-3(c)(14)).
``(3) Small commodity trading advisors.--Subsection (a) shall
not apply to any commodity trading advisor who, during the
course of the preceding 12 months, has not furnished commodity
trading advice to more than 15 persons and who does not hold
themselves out generally to the public as a commodity trading
advisor.
``(4) SEC-registered.--
``(A) In general.--Subsection (a) shall not apply to
any commodity trading advisor that is registered with
the Securities and Exchange Commission as an investment
adviser whose business does not consist primarily of
acting as a commodity trading advisor and that does not
act as a commodity trading advisor to any commodity
pool that is primarily engaged in trading commodity
interests.
``(B) Engaged primarily.--For purposes of this
paragraph, a commodity trading advisor or a commodity
pool shall be considered to be `engaged primarily' in
the business of being a commodity trading advisor or
commodity pool if it is or holds itself out to the
public as being engaged primarily, or proposes to
engage primarily, in the business of advising on
commodity interests or investing, reinvesting, owning,
holding, or trading in commodity interests,
respectively.
``(C) Commodity interests.--For purposes of this
paragraph, commodity interests shall include contracts
of sale of a commodity for future delivery, options on
such contracts, security futures, swaps, leverage
contracts, foreign exchange, spot and forward contracts
on physical commodities, and any monies held in an
account used for trading commodity interests.
``(5) Subject to proceedings.--A person described in
paragraphs (1) and (2) shall be subject to proceedings under
section 14.
``(c) Relationship to Other Law.--Nothing in this Act shall relieve
any person of any obligation or duty, or affect the availability of any
right or remedy available to the Securities and Exchange Commission or
any private party arising under the Securities Act of 1933 (15 U.S.C.
77a et seq.) or the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.) governing the issuance, offer, purchase, or sale of securities of
a commodity pool, or of persons engaged in transactions with respect to
the securities, or reporting by a commodity pool.
``(d) Disclosure Concerning Exempted Charitable Organizations.--A
commodity trading advisor or commodity pool operator that is an
organization or person described in subsection (b)(2)(A) of this
section to or of any investment trust, syndicate, or similar form of
enterprise excluded from the definition of `investment company'
pursuant to section 3(c)(10)(B) of the Investment Company Act of 1940
(15 U.S.C. 80a-3(c)(10)(B)) shall provide disclosure in accordance with
section 7(e) of that Act (15 U.S.C. 80a-7(e)).''.
SEC. 109. DIGITAL COMMODITY.
(a) Requirements Applicable to Boards of Trade.--Section 5(d)(4) of
such Act (7 U.S.C. 7(d)(4)) is amended--
(1) by striking all that precedes ``board of trade'' and
inserting the following:
``(4) Prevention of market disruption.--
``(A) In general.--The'';
(2) by redesignating each of subparagraphs (A) and (B) as
clauses (i) and (ii), respectively, and moving each of such
provisions 2 ems to the right; and
(3) by adding after and below the end the following:
``(B) Digital commodity.--With regard to a contract
on the contract market that references a digital
commodity available on a cash market, the Commission
shall adopt rules detailing the content and
availability of trade and trader data and other
information the board of trade must be able to access
from the referenced cash markets and data sources in
order to comply with this paragraph.''.
(b) Requirements Applicable to Swap Execution Facilities.--Section
5h(f)(4) of such Act (7 U.S.C. 7b-3(f)(4)) is amended--
(1) by striking all that precedes ``swap execution facility
shall'' and inserting the following:
``(4) Monitoring of trading and trade processing.--
``(A) In general.--The'';
(2) by redesignating each of clauses (i) and (ii) of
subparagraph (A) as subclauses (I) and (II), respectively, and
moving each of such provisions 2 ems to the right;
(3) by redesignating subparagraphs (A) and (B) as clauses (i)
and (ii), respectively, and moving each of such provisions 2
ems to the right; and
(4) by adding after and below the end the following:
``(B) Digital commodity.--With regard to a swap on
the swap execution facility that references a digital
commodity available on a cash market, the Commission
shall adopt rules detailing the content and
availability of trade and trader data and other
information the swap execution facility must be able to
access from the referenced cash markets and data
sources in order to comply with this paragraph.''.
SEC. 110. SYSTEM SAFEGUARDS.
(a) Contract Markets.--Section 5(d)(20) of the Commodity Exchange Act
(7 U.S.C. 7(d)(20)) is amended--
(1) in subparagraph (A), by striking ``through'' and all that
follows and inserting ``through--
``(i) the implementation of appropriate
controls and procedures; and
``(ii) the development and operation of
automated systems that--
``(I) are reliable, secure, and
resilient;
``(II) have adequate scalable
capacity; and
``(III) maintain the confidentiality,
integrity, and availability of the data
they contain;''; and
(2) in subparagraph (C), by striking ``tests to'' and all
that follows and inserting ``tests to--
``(i) verify the reliability, security,
resilience, and capacity of the board of
trade's automated systems;
``(ii) verify the confidentiality, integrity,
and availability of the data contained in those
systems; and
``(iii) verify that backup resources are
sufficient to ensure continued order processing
and trade matching, price reporting, market
surveillance, and maintenance of a
comprehensive and accurate audit trail.''.
(b) Clearinghouses.--Section 5b(c)(2)(I) of such Act (7 U.S.C. 7a-
1(c)(2)(I)) is amended--
(1) in clause (i), by striking ``through the'' and all that
follows and inserting ``through the--
``(I) implementation of appropriate
controls and procedures; and
``(II) development and operation of
automated systems that--
``(aa) are reliable, secure,
and resilient;
``(bb) have adequate scalable
capacity; and
``(cc) maintain the
confidentiality, integrity, and
availability of the data that
they contain;'';
(2) in clause (ii), by striking ``allows'' and inserting
``allow''; and
(3) in clause (iii), by striking ``tests to'' and all that
follows and inserting ``tests to--
``(I) verify the reliability,
security, resilience, and capacity of
the derivatives clearing organization's
automated systems;
``(II) verify the confidentiality,
integrity, and availability of the data
contained in those systems; and
``(III) verify that the backup
resources of the derivatives clearing
organization are sufficient to ensure
daily processing, clearing, and
settlement.''.
(c) Swap Execution Facilities.--Section 5h(f)(14) of such Act (7
U.S.C. 7b-3(f)(14)) is amended--
(1) in subparagraph (A), by striking ``through'' and all that
follows and inserting ``through--
``(i) the implementation of appropriate
controls and procedures; and
``(ii) the development and operation of
automated systems that--
``(I) are reliable, secure, and
resilient;
``(II) have adequate scalable
capacity; and
``(III) maintain the confidentiality,
integrity, and availability of the data
they contain;''; and
(2) in subparagraph (C), by striking ``tests to'' and all
that follows and inserting ``tests to--
``(i) verify the reliability, security,
resilience, and capacity of the swap execution
facility's automated systems;
``(ii) verify the confidentiality, integrity,
and availability of the data contained in those
systems; and
``(iii) verify that backup resources are
sufficient to ensure continued order processing
and trade matching, price reporting, market
surveillance, and maintenance of a
comprehensive and accurate audit trail.''.
(d) Swap Data Repositories.--Section 21(f) of such Act (7 U.S.C.
24a(f)) is amended by redesignating paragraph (4) as paragraph (5) and
inserting after paragraph (3) the following:
``(4) System safeguards.--Each swap data repository shall--
``(A) establish and maintain a program of risk
analysis and oversight to identify and minimize sources
of operational risk, through--
``(i) the implementation of appropriate
controls and procedures; and
``(ii) the development and operation of
automated systems that--
``(I) are reliable, secure, and
resilient;
``(II) have adequate scalable
capacity; and
``(III) maintain the confidentiality,
integrity, and availability of the data
they contain;
``(B) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery
that allow for--
``(i) the timely recovery and resumption of
operations; and
``(ii) the fulfillment of the
responsibilities and obligations of the swap
data repository; and
``(C) periodically conduct tests to--
``(i) verify the reliability, security,
resilience, and capacity of the automated
systems of the swap data repository;
``(ii) verify the confidentiality, integrity,
and availability of the data contained in those
systems; and
``(iii) verify that backup resources are
sufficient to ensure continued fulfillment of
all duties and obligations of the swap data
repository established by this Act or the
regulations of the Commission.''.
SEC. 111. ADMINISTRATION OF SWAP EXECUTION FACILITIES.
Section 5h of the Commodity Exchange Act (7 U.S.C. 7b-3) is amended--
(1) in subsection (f)(8), by striking all that follows
``cooperation with the Commission'' and inserting ``and other
registered entities, as is necessary and appropriate, to
facilitate the liquidation or transfer of open positions in any
swap, or to suspend or curtail trading in a swap.''; and
(2) in subsection (f)(15)--
(A) in subparagraph (A), by adding at the end the
following: ``The individual may also perform other
responsibilities for the swap execution facility, if--
``(i) there are no conflicts of interest
between the other responsibilities and the
duties and obligations of the chief compliance
officer under this Act and the regulations
thereto; and
``(ii) the other responsibilities do not
limit the ability of the chief compliance
officer to carry out the responsibilities of
the chief compliance officer.'';
(B) in subparagraph (B)--
(i) by striking clauses (iii) through (v) and
inserting the following:
``(iii) establish and administer--
``(I) policies and procedures, in
consultation with the board of the
facility, a body performing a function
similar to that of a board, or the
senior officer of the facility, that
are reasonably designed, as determined
by the Commission, to resolve any
conflicts of interest that may arise;
``(II) the policies and procedures
required to be established pursuant to
this section; and
``(III) policies and procedures that
reasonably ensure, as determined by the
Commission, compliance with this Act
and the rules and regulations issued
under this Act, including rules
prescribed by the Commission pursuant
to this section; and''; and
(ii) by redesignating clause (vi) as clause
(iv);
(C) in subparagraph (C), by striking ``(B)(vi)'' and
inserting ``(B)(iv)''; and
(D) in subparagraph (D)--
(i) in clause (i), by striking ``and sign'';
and
(ii) in clause (ii)--
(I) in the matter preceding subclause
(I), by inserting ``or senior officer''
after ``officer''; and
(II) in subclause (II), by inserting
``materially'' before ``accurate''.
SEC. 112. APPLICABILITY OF PROHIBITIONS ON FRAUD AND MANIPULATION TO
ACTIVITIES OUTSIDE THE UNITED STATES.
Section 6 of the Commodity Exchange Act (7 U.S.C. 8) is amended by
adding at the end the following:
``(h) Applicability to Activities Outside the United States.--
``(1) Applicability.--The provisions of this Act prohibiting
fraud, manipulation, attempted fraud, and attempted
manipulation, and providing for enforcement by the Commission
or the United States of such prohibitions (including sections
4b, 4c(a)(1)-(4), 4c(a)(7), 4c(b), 4o, 4s(h)(1), 4s(h)(4),
6(c), 6(e)(1)-(3), 6c, 9(a), 9(c), 9(d), and 9(e), including
any rule or regulation promulgated thereunder), shall apply to
activities outside the United States where such activities,
independently or in conjunction with activities in the United
States, have or would have a reasonably foreseeable substantial
effect within the United States.
``(2) Effect on other authority.--Nothing in this subsection
affects the application or interpretation of, or liability
under, any other provision of this Act, including section
22.''.
SEC. 113. PRIVILEGE RETENTION.
Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is amended--
(1) by striking subsection (e) and inserting the following:
``(e) Disclosure Authorities.--
``(1) In general.--
``(A) Previously disclosed.--The Commission may
disclose and make public, where such information has
previously been disclosed publicly in accordance with
the provisions of this section, the names and addresses
of all traders on the boards of trade on the commodity
markets with respect to whom the Commission has
information, and any other information in the
possession of the Commission relating to the amount of
commodities purchased or sold by each such trader.
``(B) Congressional access.--Upon the request of any
committee of either House of Congress, acting within
the scope of its jurisdiction, the Commission shall
furnish to the committee the names and addresses of all
traders on the boards of trade with respect to whom the
Commission has information, and any other information
in the possession of the Commission relating to the
amount of any commodity purchased or sold by each such
trader.
``(2) Domestic agencies.--
``(A) In general.--Upon the request of any department
or agency of the Government of the United States,
acting within the scope of its jurisdiction, the
Commission may furnish to the department or agency any
information in the possession of the Commission
obtained in connection with the administration of this
Act.
``(B) Conditions.--Any information furnished under
this paragraph to any Federal department or agency
shall not be disclosed by the department or agency
except in any action or proceeding under the laws of
the United States to which the department or agency,
the Commission, or the United States is a party.
``(C) Federal reserve banks.--In this paragraph, the
term `agency' includes the Federal Reserve Banks.
``(3) State agencies.--
``(A) In general.--Upon the request of any department
or agency of any State or any political subdivision
thereof, acting within the scope of its jurisdiction,
the Commission may furnish to the department, agency,
or political subdivision any information in the
possession of the Commission obtained in connection
with the administration of this Act.
``(B) Conditions.--Any information furnished to any
department or agency of any State or political
subdivision thereof shall not be disclosed by the
department or agency except in connection with an
adjudicatory action or proceeding under this Act or the
laws of the State or political subdivision to which the
State, political subdivision, department, or agency is
a party.
``(4) Foreign agencies.--
``(A) In general.--Upon the request of any foreign
futures authority, or any department, central bank,
ministry, or agency of any foreign government or any
political subdivision thereof, acting within the scope
of its jurisdiction, the Commission may furnish to the
foreign futures authority, department, central bank,
ministry, agency of any foreign government, or any
political subdivision thereof, any information in the
possession of the Commission obtained in connection
with the administration of this Act.
``(B) Conditions.--The Commission shall not furnish
any information to a foreign futures authority or to a
department, central bank, ministry, or agency of a
foreign government or political subdivision thereof,
unless the Commission is satisfied that the information
will not be disclosed by the foreign futures authority,
department, central bank, ministry, or agency of any
foreign government or any political subdivision
thereof, except in connection with an adjudicatory
action or proceeding under the laws of the foreign
government or political subdivision to which the
foreign government, political subdivision, department,
agency, central bank, ministry, or foreign futures
authority is a party.'';
(2) by redesignating subsections (h) and (i) as subsections
(i) and (j), respectively; and
(3) by inserting after subsection (g) the following:
``(h) Sharing Privileged Information With Other Authorities.--
``(1) Privilege definition.--The term `privilege' includes
any applicable work-product privilege, attorney-client
privilege, governmental privilege, or other privilege
recognized under Federal, State, or foreign law.
``(2) Privileged information provided by the commission.--The
Commission shall not be considered to have waived any privilege
by transferring information to or permitting that information
to be used in accordance with section 8a(6) or paragraphs (2),
(3), and (4) of subsection (e) of this section.
``(3) Nondisclosure of privileged information provided to the
commission.--The Commission shall not be compelled to disclose
privileged information obtained from any foreign futures
authority if the authority has in good faith determined and
represented to the Commission that the information is
privileged, except as provided for in subsection (a)(1).
``(4) Nonwaiver of privileged information provided to the
commission.--
``(A) In general.--The entities listed in paragraphs
(2), (3), and (4) of subsection (e) and section 8(a)(6)
shall not be considered to have waived any privilege by
transferring information to or permitting information
to be used by the Commission.
``(B) Exception.--Subparagraph (A) shall not apply to
an entity listed in section 8a(6) with respect to
information obtained by the Commission in an
investigation relating to or in any action against the
entity.
``(5) Rule of construction.--Nothing in this subsection shall
authorize the Commission to withhold information from the
Congress or prevent the Commission from complying with an order
of a court of the United States in an action commenced by the
United States or the Commission.''.
SEC. 114. PROPRIETARY INFORMATION.
Section 8 of the Commodity Exchange Act (7 U.S.C. 12), as amended by
section 113 of this Act, is amended by adding at the end the following:
``(k) Proprietary Information.--
``(1) In general.--For any proprietary information provided
to the Commission, the Commission may, in its discretion, after
notice and comment, adopt rules and regulations to apply any of
the provisions of this section to such information it obtains
or receives, as it deems necessary, to the extent such
information is not already covered by the provisions of this
section.
``(2) Policies.--With regard to proprietary information it
obtains or receives, the Commission shall adopt policies, as
determined by the Commission, after notice and comment, to--
``(A) address circumstances when the Commission
requests proprietary information;
``(B) safeguard the information, taking into
consideration the level of sensitivity of the
information;
``(C) limit access to the information to appropriate
staff, as determined by the Commission; and
``(D) protect the information from unlawful use or
disclosure.
``(3) Sharing.--To the extent the Commission adopts rules or
regulations, pursuant to paragraph (1), regarding the sharing
of such proprietary information with other governmental
entities, the Commission shall receive assurances that such
other governmental entity shall maintain sufficient safeguards
consistent with--
``(A) policies that achieve the objectives of
subparagraphs (B), (C), and (D) of paragraph (2) of
this subsection; and
``(B) the limitations set forth in paragraphs (2),
(3), and (4) of subsection (e) concerning the
confidentiality of any such information received.''.
SEC. 115. AUTHORITY TO PROVIDE FOOD AND INCIDENTAL ASSISTANCE TO
FOREIGN OFFICIALS HOSTED BY THE COMMISSION.
Section 12(b) of the Commodity Exchange Act (7 U.S.C. 16(b)) is
amended by adding at the end the following:
``(5) The Commission may incur expenses for consultations and
meetings hosted by the Commission with foreign governmental and
other regulatory officials to exchange views concerning
derivatives matters, such expenses to include necessary
logistic and administrative expenses, including--
``(A) meals;
``(B) local travel and transportation; and
``(C) related incidental expenses.''.
SEC. 116. EXTENSION OF OPERATIONS.
Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is
amended by striking ``2008 through 2013'' and inserting ``2020 through
2025''.
SEC. 117. AIDING AND ABETTING.
Section 13(a) of the Commodity Exchange Act (7 U.S.C. 13c(a)) is
amended--
(1) by inserting ``or recklessly provides substantial
assistance to,'' after ``commission of,''; and
(2) by inserting ``, or who by recklessly providing
substantial assistance to another,'' before ``causes an act''.
SEC. 118. MODERNIZATION OF AUTHORITY OF THE COMMISSION TO CONDUCT
RESEARCH, DEVELOPMENT, DEMONSTRATION, AND
INFORMATION PROGRAMS.
Section 18 of the Commodity Exchange Act (7 U.S.C. 22) is amended to
read as follows:
``SEC. 18. RESEARCH AND DEVELOPMENT PROGRAMS.
``(a) Programs.--The Commission, as part of its ongoing operations,
shall establish and maintain research, development, demonstration, and
information programs that further the purposes of this Act, including
programs that--
``(1) facilitate the understanding by the Commission of
emerging technologies, technological advances, and innovations
and their potential application to and effect on the
transactions and markets under the jurisdiction of the
Commission, and associated implications for cybersecurity, data
security, and systemic risk;
``(2) provide an environment where emerging technologies,
technological advances, and innovations may be explored by the
Commission with developers and potential users to evaluate
potential effects on the Commission and the markets under the
jurisdiction of the Commission;
``(3) identify areas where the Commission should adapt its
administration of this Act in light of emerging technologies,
technological advances, and innovations to benefit the markets
under the jurisdiction of the Commission; and
``(4) develop educational and other informational materials
for dissemination and use among producers, market-users, and
the general public regarding--
``(A) derivatives;
``(B) emerging technologies, technological advances,
and innovations in markets under the jurisdiction of
the Commission; and
``(C) applicable requirements of this Act and the
regulations prescribed under this Act with regard to
the subjects described in subparagraphs (A) and (B).
``(b) Research and Development Plan.--
``(1) In general.--The Commission may, after notice and
comment, adopt a research and development plan for a program
established under subsection (a).
``(2) Conditions.--A research and development plan adopted
pursuant to paragraph (1) shall identify--
``(A) specific areas of interest to the Commission;
``(B) potential activities the Commission will
undertake to investigate an area of interest; and
``(C) how the authority described in subsection (c)
will be utilized in the program.
``(c) Other Transaction Authority.--
``(1) In general.--Notwithstanding the Office of Federal
Procurement Policy Act of 1974 and the Competition in
Contracting Act, the Commission may enter into and perform a
transaction (other than a standard contract) for the purpose of
aiding or facilitating the programs and activities under
subsection (a).
``(2) Conditions.--The Commission may enter into a
transaction under this subsection only if--
``(A) the transaction is used only in furtherance of
a research and development plan established under
subsection (b);
``(B) the Commission endeavored to use a competitive
process, where appropriate, when determining the
parties to the transaction; and
``(C) using a standard contract to do so is either
not feasible or not appropriate.
``(3) Policies.--The Commission shall, after notice and
comment, establish and publish written policies setting forth
the manner and criteria for utilizing the authority provided by
this subsection.
``(d) Gift Acceptance Authority.--
``(1) In general.--The Commission may accept and use, on
behalf of the United States, any non-monetary gift of a
provision of access, use of facilities, personal property, or
services, that is related to--
``(A) sharing of research, data, or other
information;
``(B) public presentations; or
``(C) non-commercially available services or systems.
``(2) Conditions.--
``(A) In general.--A gift may be accepted pursuant to
this subsection only if it is in furtherance of a
research and development plan established under
subsection (b).
``(B) Limitations.--The Commission may not accept a
gift if--
``(i) conditions inconsistent with applicable
laws or regulations apply to the gift;
``(ii) the gift is conditioned on, or will
require, the expenditure of appropriated funds
not available to the Commission;
``(iii) using a standard contract or other
transaction authority under subsection (c) to
acquire the gift is either feasible or
appropriate; or
``(iv) acceptance of the gift would--
``(I) reflect unfavorably on the
ability of the Commission to carry out
its responsibilities or official duties
in a fair and objective manner, or
compromise the integrity or the
appearance of the integrity of its
programs or any official involved in
its programs, or
``(II) give the endorsement or the
appearance of the endorsement by the
Commission or Commission staff of the
products, services, activities, or
policies of the donor.
``(C) Solicitation prohibition.--
``(i) In general.--Except as provided in
clause (ii), no gift may be solicited by any
Commissioner, employee of, or contractor at the
Commission.
``(ii) Exception.--A Commissioner or employee
of the Commission may solicit only for a gift
described in paragraph (1)(B).
``(D) Duration.--To the extent applicable, the
Commission shall return any gift accepted pursuant to
this subsection within 90 days after accepting the
gift.
``(E) Rules.--The Commission shall, after notice and
comment, establish and publish written rules setting
forth the manner and criteria to be used in determining
whether a gift meets the conditions of this paragraph.
``(3) Disclosure.--Within 30 days after accepting a gift
pursuant to this subsection, the Commission shall publish in
the Federal Register a notice detailing--
``(A) the source of the gift;
``(B) the nature of the gift;
``(C) whether the gift was solicited pursuant to
paragraph (2)(C)(ii), and if so, by whom; and
``(D) how the gift meets the conditions set forth in
paragraph (2).
``(4) Sunset.--The authority provided in this subsection may
not be exercised on or after October 1, 2025.
``(e) Annual Report.--Not later than 60 days after the end of each
fiscal year, the Commission shall submit to the Committee on
Agriculture, Nutrition, and Forestry of the Senate and the Committee on
Agriculture of the House of Representatives a report on all
transactions entered into under subsection (c) and all gifts accepted
under subsection (d) in the fiscal year, which shall include the
following:
``(1) A brief description of the subject of each such
transaction or gift, with an explanation of--
``(A) its potential utility to the Commission or the
markets regulated by the Commission;
``(B) how it fulfills the goals and objectives of the
research and development plan established under
subsection (b); and
``(C) the status of all related projects.
``(2) The information required to be published pursuant to
subsection (d)(3).
``(3) A description of all sums expended by the Commission in
connection with a transaction entered into under subsection
(c), and, if readily ascertainable, the value of any gift
accepted under subsection (d).''.
SEC. 119. PROTECTING CUSTOMER PROPERTY DURING COMMODITY BROKER
BANKRUPTCY.
Section 20(a) of the Commodity Exchange Act (7 U.S.C. 24(a)) is
amended--
(1) by striking ``and'' at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) that cash, securities, or other property of the estate
of a commodity broker, including the trading or operating
accounts of the commodity broker and commodities held in
inventory by the commodity broker, shall, subject to any
otherwise unavoidable security interest, or otherwise
unavoidable contractual offset or netting rights of creditors
(including rights set forth in a rule or bylaw of a derivatives
clearing organization or a clearing agency) in respect of such
property, be included in customer property, but only to the
extent that the property that is otherwise customer property is
insufficient to satisfy the net equity claims of public
customers (as such term may be defined by the Commission by
rule or regulation) of the commodity broker.''.
SEC. 120. ELIMINATION OF THE DOUBLE-SIDED CONFIRMATION REQUIREMENT FOR
SWAP DATA REPOSITORIES.
Section 21(c)(2) of the Commodity Exchange Act (7 U.S.C. 24a(c)(2))
is amended to read as follows:
``(2) confirm with any counterparty to the swap, as
determined by the Commission, the accuracy of the data that was
submitted, and the counterparty shall comply with the rules or
procedures of a swap data repository to confirm the accuracy of
the data;''.
SEC. 121. WHISTLEBLOWER PROTECTIONS FOR INTERNAL DISCLOSURES.
(a) Internal Reporting.--Section 23 of the Commodity Exchange Act (7
U.S.C. 26) is amended--
(1) in subsection (a)(7)--
(A) by striking ``The term'' and inserting the
following:
``(A) In general.--The term''; and
(B) by adding at the end the following:
``(B) Special rule.--Solely for the purposes of
subsection (h)(1), the term `whistleblower' includes
any individual who takes, or 2 or more individuals
acting jointly who take, an action described in
subsection (h)(1)(A).''; and
(2) in subsection (h)(1)(A)--
(A) in clause (i), by striking ``or'' at the end;
(B) in clause (ii), by striking the period at the end
and inserting ``; or''; and
(C) by adding at the end the following:
``(iii) in providing information regarding
any conduct that the whistleblower reasonably
believes constitutes a violation of any law,
rule, or regulation subject to the jurisdiction
of the Commission to--
``(I) a person with supervisory
authority over the whistleblower at the
employer of the whistleblower, if that
employer is an entity registered with,
or required to be registered with, the
Commission, a self-regulatory
organization, or a State securities
commission or office performing like
functions; or
``(II) another individual working for
the employer described in subclause (I)
who the whistleblower reasonably
believes has the authority--
``(aa) to investigate,
discover, or terminate the
misconduct; or
``(bb) to take any other
action to address the
misconduct.''.
(b) Claims Processing.--
(1) In general.--Section 23(b) of the Commodity Exchange Act
(7 U.S.C. 26) is amended by adding at the end the following:
``(3) Timely processing of claims.--
``(A) Initial disposition.--
``(i) In general.--Except as provided in
subparagraph (B), and subject to clause (ii),
the Commission shall make an initial
disposition with respect to a claim submitted
by a whistleblower for an award under this
section (referred to in this paragraph as an
`award claim') not later than 1 year after the
deadline established by the Commission, by
rule, for the whistleblower to file the award
claim.
``(ii) Multiple actions.--If a covered
judicial or administrative action involves 1 or
more related actions, the requirement under
clause (i) shall apply with respect to the
latest deadline with respect to the actions.
``(B) Exceptions.--
``(i) Initial extension.--If the Director of
the Division of Enforcement of the Commission
(referred to in this paragraph as the
`Director'), or the designee of the Director,
determines that an award claim is sufficiently
complex or involves more than 1 whistleblower,
or if other good cause exists such that the
Commission cannot reasonably satisfy the
requirement under subparagraph (A), the
Director or the designee, as applicable, after
providing notice to the Chairman of the
Commission (referred to in this paragraph as
the `Chairman'), may extend the deadline with
respect to the satisfaction of that
subparagraph by not more than 180 days.
``(ii) Additional extensions.--If, after
providing an extension under clause (i), the
Director, or the designee of the Director,
determines that the Commission cannot
reasonably satisfy the requirement under
subparagraph (A) with respect to an award
claim, as extended under that clause, the
Director or the designee, as applicable, after
providing notice to the Chairman, may extend
the period in which the Commission may satisfy
subparagraph (A) by 1 additional 180-day
period.
``(iii) Notice to whistleblower required.--If
the Director, or the designee of the Director,
exercises authority under clause (i) or (ii),
the Director or the designee, as applicable,
shall submit to the whistleblower who filed the
award claim that is subject to that action by
the Director or the designee a written
notification of that action by the Director or
the designee.
``(C) Applicability.--This paragraph shall apply only
to an award claim that is timely submitted under a
deadline established by the Commission after the date
of enactment of this paragraph.''.
(2) Rules.--The Commodity Futures Trading Commission may
issue any rules that are necessary to carry out paragraph (3)
of section 23(b) of the Commodity Exchange Act (7 U.S.C. 26(b))
(as added by paragraph (1)).
(c) CFTC Whistleblower Program Education Initiatives.--Section
23(g)(2) of the Commodity Exchange Act (7 U.S.C. 26(g)(2)) is amended--
(1) in subparagraph (A), by striking ``and'' at the end;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(C) the funding of initiatives designed to educate
stakeholders regarding the incentives and protections
available under this section, including the benefits of
those incentives and protections.''.
(d) Deposits Into CFTC Customer Protection Fund.--Section 23(g)(3)(A)
of the Commodity Exchange Act (7 U.S.C. 26(g)(3)(A)) is amended by
striking ``$100,000,000'' and inserting ``$150,000,000''.
(e) Availability of Certain CFTC Information to Government
Agencies.--Section 23(h)(2)(C) of the Commodity Exchange Act (7 U.S.C.
26(h)(2)(C)) is amended--
(1) in clause (i)--
(A) in subclause (II), by striking ``jurisdiction;''
and inserting the following: ``jurisdiction,
including--
``(aa) the Federal Trade
Commission;
``(bb) the Internal Revenue
Service; and
``(cc) the Department of
State;''; and
(B) in subclause (VI), by inserting ``or other
foreign law enforcement authority'' before the period
at the end; and
(2) in clause (ii)--
(A) by striking ``Each'' and inserting the following:
``(I) In general.--Each'';
(B) in subclause (I) (as so designated), by inserting
``subclauses (I) through (V) of'' before ``clause
(i)''; and
(C) by adding at the end the following:
``(II) Foreign authorities.--An
entity described in subclause (VI) of
clause (i) shall maintain information
described in that clause in accordance
with such assurances of confidentiality
as the Commission determines
appropriate.''.
SEC. 122. UPDATING STANDARDS FOR NATURAL PERSONS TO MEET REQUIREMENTS
FOR QUALIFIED ELIGIBLE PERSONS.
(a) In General.--Within 1 year after the date of the enactment of
this section, the Commodity Futures Trading Commission shall adopt a
rule to update its regulations governing the requirements for natural
persons to be qualified eligible persons who must satisfy portfolio
requirements, for the purposes of providing relief to commodity trading
advisors and commodity pool operators in their dealings with qualified
eligible persons pursuant to section 4.7 of title 17, Code of Federal
Regulations, so that a natural person, to be a qualified eligible
person who must satisfy the portfolio requirement, must meet the
requirement of paragraph (1) and the requirement of paragraph (2):
(1) Means.--The requirement of this paragraph is that the
person must have--
(A) an individual net worth, or joint net worth with
the spouse, if any, of the person, at the time of the
opening of an exempt account or purchase of 1 or more
participation units in an exempt commodity pool, to
qualify the person as an accredited investor, as
defined in section 230.501(a)(5) of title 17, Code of
Federal Regulations, as if that regulation were amended
by striking ``$1,000,000'' and inserting
``$5,000,000''; or
(B) individual income, or joint income with the
spouse, if any, of the person, in excess of $500,000 in
each of the 2 most recent years, and have a reasonable
expectation of reaching the same income level in the
current year.
(2) Portfolio.--The requirement of this paragraph is that the
person must meet a portfolio requirement under section
4.7(a)(1)(v) of title 17, Code of Federal Regulations, as if
that regulation were amended--
(A) by striking ``$2,000,000'' and inserting
``$5,000,000'';
(B) by striking ``$200,000'' and inserting
``$500,000'';
(C) by striking ``$1,000,000'' and inserting
``2,500,000''; and
(D) by striking ``$100,000'' and inserting
``$250,000''.
(b) Inflation.--In adopting a rule pursuant to subsection (a), the
Commission shall--
(1) include provisions providing for adjusting the dollar
amounts referred to in subsection (a) for inflation every three
years to the nearest $1,000 to reflect the change in the
Consumer Price Index for All Urban Consumers published by the
Bureau of Labor Statistics; and
(2) allow any natural person who meets the requirements of a
qualified eligible person and is a participant in a commodity
pool or the customer of a commodity trading advisor provided
relief under section 4.7 of title 17, Code of Federal
Regulations, before the date of any adjustment in such
requirements established pursuant to this rule to remain a
qualified eligible person, notwithstanding such adjustments
established pursuant to this rule, if--
(A) the natural person continues to meet the
requirements of qualified eligible persons pursuant to
section 4.7 of title 17, Code of Federal Regulations,
as in effect before the date of any adjustment in such
requirements established pursuant to this rule; and
(B) the natural person does not--
(i) sell all shares of its participation in
such exempt commodity pool;
(ii) withdraw all assets from any account
managed by such exempt commodity trading
advisor;
(iii) purchase any new shares of
participation in such exempt commodity pool; or
(iv) contribute additional assets to any
account managed by such exempt commodity
trading advisor.
SEC. 123. GOVERNMENT ACCOUNTABILITY OFFICE STUDY ON ALUMINUM MARKETS.
(a) Study.--The Comptroller General of the United States shall
conduct a study of--
(1) the aluminum markets in the United States and globally,
in general;
(2) the effectiveness and efficiency of the markets for
purchasers of aluminum;
(3) what factors and policies influence the supply, demand,
and movement of aluminum around the world; and
(4) the effectiveness of government oversight over the
markets.
(b) Report.--Within 180 days after the date of the enactment of this
Act, the Comptroller General shall submit to the Committee on
Agriculture of the House of Representatives and the Committee on
Agriculture, Nutrition, and Forestry of the Senate a written report
that contains the results of the study required by subsection (a).
SEC. 124. RESPONSE TO FOREIGN REGULATORY AUTHORITY.
Where a foreign authority seeks to assert direct supervisory
authority over derivatives clearing organizations domiciled in the
United States, the Commodity Futures Trading Commission should review
the appropriateness of the exemptions granted to foreign entities,
including clearinghouses, under the jurisdiction of the foreign
authority.
SEC. 125. AFFILIATE CONDITIONS.
Section 2(h)(7)(D)(iv) of the Commodity Exchange Act (7 U.S.C.
2(h)(7)(D)(iv)) is amended--
(1) in subclause (I), by striking ``risk; and'' and inserting
``risk, unless the affiliate can demonstrate to the Commission,
as determined by the Commission, that--
``(aa) the affiliate has
utilized the exception in
clause (i) only to hedge or
mitigate commercial risk; and
``(bb) the affiliate
complies, as a financial
entity, with the obligations of
the affiliate with respect to
any swap for which the
exception in clause (i) is not
exercised; and''; and
(2) in subclause (II), by striking ``neither the affiliate
nor any person affiliated with the affiliate that is not a
financial entity'' and inserting ``neither the affiliate that
qualifies for the exception in clause (i) nor any person
affiliated with the affiliate, that is directly or indirectly
wholly- or majority-owned by the same ultimate parent, and that
enters into swaps with the affiliate''.
TITLE II--TECHNICAL CORRECTIONS
SEC. 201. CORRECTION OF REFERENCES.
(a) Section 2(h)(8)(A)(ii) of the Commodity Exchange Act (7 U.S.C.
2(h)(8)(A)(ii)) is amended by striking ``5h(f) of this Act'' and
inserting ``5h(g)''.
(b) Section 5c(c)(5)(C)(i) of such Act (7 U.S.C. 7a-2(c)(5)(C)(i)) is
amended by striking ``1a(2)(i))'' and inserting ``1a(19)(i))''.
(c) Section 23(f) of such Act (7 U.S.C. 26(f)) is amended by striking
``section 7064'' and inserting ``section 706''.
SEC. 202. ELIMINATION OF OBSOLETE REFERENCES TO DEALER OPTIONS.
(a) In General.--Section 4c of the Commodity Exchange Act (7 U.S.C.
6c) is amended by striking subsections (d) and (e) and redesignating
subsections (f) and (g) as subsections (d) and (e), respectively.
(b) Conforming Amendments.--
(1) Section 2(d) of such Act (7 U.S.C. 2(d)) is amended by
striking ``(g) of'' and inserting ``(e) of''.
(2) Section 4f(a)(4)(A)(i) of such Act (7 U.S.C.
6f(a)(4)(A)(i)) is amended by striking ``, (d), (e), and (g)''
and inserting ``and (e)''.
(3) Section 4k(5)(A) of such Act (7 U.S.C. 6k(5)(A)) is
amended by striking ``, (d), (e), and (g)'' and inserting ``and
(e)''.
(4) Section 5f(b)(1)(A) of such Act (7 U.S.C. 7b-1(b)(1)(A))
is amended by striking ``, (e), and (g)'' and inserting ``and
(e)''.
(5) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) is
amended by striking ``through (e) of subsection'' and inserting
``through (c) of section''.
SEC. 203. UPDATED TRADE DATA PUBLICATION REQUIREMENT.
Section 4g(e) of the Commodity Exchange Act (7 U.S.C. 6g(e)) is
amended by striking ``the exchange'' and inserting ``each designated
contract market and swap execution facility''.
SEC. 204. FLEXIBILITY FOR ALL REGISTERED ENTITIES.
(a) Section 5c(b) of the Commodity Exchange Act (7 U.S.C. 7a-2(b)) is
amended by striking ``contract market, derivatives transaction
execution facility, or electronic trading facility'' each place it
appears and inserting ``registered entity''.
(b) Section 5c(b)(1) of such Act (7 U.S.C. 7a-2(b)(1)) is amended--
(1) by striking ``(1) In general.--A'' and inserting the
following:
``(1) Delegation.--
``(A) In general.--A'';
(2) by striking ``with respect to a significant price
discovery contract''; and
(3) by adding after and below the end the following:
``(B) Swaps.--In addition to the authority described
in subparagraph (A), a registered entity may also
comply with any applicable core principle, as it
applies to swaps, through delegation of any relevant
function to a registered national securities
association.''.
SEC. 205. ELIMINATION OF OBSOLETE REFERENCES TO ELECTRONIC TRADING
FACILITIES.
(a) Section 1a(18)(A)(x) of the Commodity Exchange Act (7 U.S.C.
1a(18)(A)(x)) is amended by striking ``(other than an electronic
trading facility with respect to a significant price discovery
contract)''.
(b) Section 1a(40) of such Act (7 U.S.C. 1a(40)) is amended--
(1) by adding ``and'' at the end of subparagraph (D); and
(2) by striking all that follows ``section 21'' and inserting
a period.
(c) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended--
(1) in the first sentence--
(A) by striking ``or by any electronic trading
facility'';
(B) by striking ``or on an electronic trading
facility''; and
(C) by striking ``or electronic trading facility''
each place it appears; and
(2) in the second sentence, by striking ``or electronic
trading facility with respect to a significant price discovery
contract''.
(d) Section 4g(a) of such Act (7 U.S.C. 6g(a)) is amended by striking
``any significant price discovery contract traded or executed on an
electronic trading facility or''.
(e) Section 4i of such Act (7 U.S.C. 6i) is amended--
(1) by striking ``, or any significant price discovery
contract traded or executed on an electronic trading
facility''; and
(2) by striking ``or electronic trading facility''.
(f) Section 6(b) of such Act (7 U.S.C. 8(b)) is amended by striking
``or electronic trading facility'' each place it appears.
(g) Section 12(e)(2) of such Act (7 U.S.C. 16(e)(2)) is amended by
striking ``in the case of--'' and all that follows and inserting ``in
the case of an agreement, contract, or transaction that is excluded
from this Act under section 2(c) or 2(f) of this Act or title IV of the
Commodity Futures Modernization Act of 2000, or exempted under section
4(c) of this Act (regardless of whether any such agreement, contract,
or transaction is otherwise subject to this Act).''.
SEC. 206. ELIMINATION OF OBSOLETE REFERENCE TO ALTERNATIVE SWAP
EXECUTION FACILITIES.
Section 5h(h) of the Commodity Exchange Act (7 U.S.C. 7b-3(h)) is
amended by striking ``alternative'' before ``swap''.
SEC. 207. CLARIFICATION OF COMMISSION AUTHORITY OVER SWAPS TRADING.
Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended--
(1) in paragraph (7)--
(A) by inserting ``the protection of swaps traders
and to assure fair dealing in swaps, for'' after
``appropriate for'';
(B) in subparagraph (A), by inserting ``swaps or''
after ``conditions in''; and
(C) in subparagraph (B), by inserting ``or swaps''
after ``future delivery''; and
(2) in paragraph (9)--
(A) by inserting ``swap or'' after ``or liquidation
of any''; and
(B) by inserting ``swap or'' after ``margin levels on
any''.
SEC. 208. ELIMINATION OF OBSOLETE REFERENCE TO THE COMMODITY EXCHANGE
COMMISSION.
Section 13(c) of the Commodity Exchange Act (7 U.S.C. 13c(c)) is
amended by striking ``or the Commission''.
SEC. 209. ELIMINATION OF OBSOLETE REFERENCES TO DERIVATIVE TRANSACTION
EXECUTION FACILITIES.
(a) Section 1a(12)(B)(vi) of the Commodity Exchange Act (7 U.S.C.
1a(12)(B)(vi)) is amended by striking ``derivatives transaction
execution facility'' and inserting ``swap execution facility''.
(b) Section 1a(34) of such Act (7 U.S.C. 1a(34)) is amended--
(1) in the heading, by striking ``; member of a derivatives
transaction execution facility''; and
(2) by striking ``or derivatives transaction execution
facility'' each place it appears.
(c) Section 1a(35)(B)(iii)(I) of such Act (7 U.S.C.
1a(35)(B)(iii)(I)) is amended by striking ``or registered derivatives
transaction execution facility''.
(d) Section 2(a)(1)(C)(ii) of such Act (7 U.S.C. 2(a)(1)(C)(ii)) is
amended--
(1) by striking ``, or register a derivatives transaction
execution facility that trades or executes,'';
(2) by striking ``, and no derivatives transaction execution
facility shall trade or execute such contracts of sale (or
options on such contracts) for future delivery''; and
(3) by striking ``or the derivatives transaction execution
facility,''.
(e) Section 2(a)(1)(C)(v)(I) of such Act (7 U.S.C. 2(a)(1)(C)(v)(I))
is amended by striking ``, or any derivatives transaction execution
facility on which such contract or option is traded,''.
(f) Section 2(a)(1)(C)(v)(II) of such Act (7 U.S.C.
2(a)(1)(C)(v)(II)) is amended by striking ``or derivatives transaction
execution facility'' each place it appears.
(g) Section 2(a)(1)(C)(v)(V) of such Act (7 U.S.C. 2(a)(1)(C)(v)(V))
is amended by striking ``or registered derivatives transaction
execution facility''.
(h) Section 2(a)(1)(D)(i) of such Act (7 U.S.C. 2(a)(1)(D)(i)) is
amended in the matter preceding subclause (I)--
(1) by striking ``in, or register a derivatives transaction
execution facility''; and
(2) by striking ``, or registered as a derivatives
transaction execution facility for,''.
(i) Section 2(a)(1)(D)(i)(IV) of such Act (7 U.S.C.
2(a)(1)(D)(i)(IV)) is amended by striking ``registered derivatives
transaction execution facility,'' each place it appears.
(j) Section 2(a)(1)(D)(ii)(I) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(I)) is amended to read as follows:
``(I) the transaction is conducted on or subject to the rules
of a board of trade that has been designated by the Commission
as a contract market in such security futures product;''.
(k) Section 2(a)(1)(D)(ii)(II) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(II)) is amended by striking ``or registered derivatives
transaction execution facility''.
(l) Section 2(a)(1)(D)(ii)(III) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(III)) is amended by striking ``or registered derivatives
transaction execution facility member''.
(m) Section 2(a)(9)(B)(ii) of such Act (7 U.S.C. 2(a)(9)(B)(ii)) is
amended--
(1) by striking ``or registration'' each place it appears;
(2) by striking ``or derivatives transaction execution
facility'' each place it appears;
(3) by striking ``or register'';
(4) by striking ``, registering,''; and
(5) by striking ``registration,''.
(n) Section 2(c)(2) of such Act (7 U.S.C. 2(c)(2)) is amended by
striking ``or a derivatives transaction execution facility'' each place
it appears.
(o) Section 4(a) of such Act (7 U.S.C. 6(a)) is amended--
(1) by striking ``or derivatives transaction execution
facility'' each place it appears; and
(2) in paragraph (1), by striking ``or registered''.
(p) Section 4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is amended--
(1) by striking ``or registered''; and
(2) by striking ``or derivatives transaction execution
facility''.
(q) Section 4a(a)(1) of such Act (7 U.S.C. 6a(a)(1)) is amended--
(1) by striking ``or derivatives transaction execution
facilities''; and
(2) by striking ``or derivatives transaction execution
facility''.
(r) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended--
(1) by striking ``, derivatives transaction execution
facility,'' each place it appears; and
(2) by striking ``or derivatives transaction execution
facility''.
(s) Section 4c(e) of such Act (7 U.S.C. 6c(g)), as so redesignated by
section 202(a) of this Act, is amended by striking ``or derivatives
transaction execution facility'' each place it appears.
(t) Section 4d of such Act (7 U.S.C. 6d) is amended by striking ``or
derivatives transaction execution facility'' each place it appears.
(u) Section 4e of such Act (7 U.S.C. 6e) is amended by striking ``or
derivatives transaction execution facility''.
(v) Section 4f(a) of such Act (7 U.S.C. 6f(a)) is amended by striking
``or registered derivatives transaction execution facility''.
(w) Section 4f(b) of such Act (7 U.S.C. 6f(b)) is amended by striking
``or derivatives transaction execution facility'' each place it
appears.
(x) Section 4i of such Act (7 U.S.C. 6i) is amended by striking ``or
derivatives transaction execution facility''.
(y) Section 4j of such Act (7 U.S.C. 6j) is amended--
(1) in the heading by striking ``and registered derivatives
transaction execution facilities'';
(2) in subsection (a), by striking ``and registered
derivatives transaction execution facility'';
(3) in subsection (b), by striking ``or registered
derivatives transaction execution facility''; and
(4) in subsection (c), by striking ``or registered
derivatives transaction execution facility members''.
(z) Section 4k of such Act (7 U.S.C. 6k) is amended by striking ``or
registered derivatives transaction execution facility''.
(aa) Section 4l of such Act (7 U.S.C. 6l) is amended by striking ``or
derivatives transaction execution facilities'' each place it appears
(bb) Section 4p(a) of such Act (7 U.S.C. 6p(a)) is amended by
striking ``, or derivatives transaction execution facilities''.
(cc) Section 4p(b) of such Act (7 U.S.C. 6p(b)) is amended by
striking ``derivatives transaction execution facility,''.
(dd) Section 5(e) of such Act (7 U.S.C. 7(e)) is amended--
(1) by striking ``(e)'' and all that follows through ``a
contract for'' and inserting the following:
``(e) Current Agricultural Commodities.--A contract for''; and
(2) by striking paragraph (2).
(ee) Section 5c(b) of such Act (7 U.S.C. 7a-2(b)) is amended by
striking ``, derivatives transaction execution facility,'' each place
it appears.
(ff) Section 5c(f) of such Act (7 U.S.C. 7a-2(f)) is amended by
striking ``and registered derivatives transaction execution facility''.
(gg) Section 5c(f)(1) of such Act (7 U.S.C. 7a-2(f)(1)) is amended by
striking ``or registered derivatives transaction execution facility''.
(hh) Section 6 of such Act (7 U.S.C. 8) is amended--
(1) in subsection (a), by striking ``or registered'';
(2) by striking ``or derivatives transaction execution
facility'' each place it appears; and
(3) by striking ``or registration'' each place it appears.
(ii) Section 6a(a) of such Act (7 U.S.C. 10a(a)) is amended--
(1) by striking ``or registered'';
(2) by striking ``or a derivatives transaction execution
facility''; and
(3) by inserting ``shall'' before ``exclude'' the first place
it appears.
(jj) Section 6a(b) of such Act (7 U.S.C. 10a(b)) is amended--
(1) by striking ``or registered''; and
(2) by striking ``or a derivatives transaction execution
facility''.
(kk) Section 6d(1) of such Act (7 U.S.C. 13a-2(1)) is amended by
striking ``derivatives transaction execution facility,''.
SEC. 210. ELIMINATION OF OBSOLETE REFERENCES TO EXEMPT BOARDS OF TRADE.
(a) Section 1a(18)(A)(x) of the Commodity Exchange Act (7 U.S.C.
1a(18)(A)(x)) is amended by striking ``or an exempt board of trade''.
(b) Section 12(e)(1)(B)(i) of such Act (7 U.S.C. 16(e)(1)(B)(i)) is
amended by striking ``or exempt board of trade''.
SEC. 211. ELIMINATION OF COMPLETED REPORTS.
(a) Section 23(h)(2)(C) of the Commodity Exchange Act (7 U.S.C.
26(h)(2)(C)) is amended by striking clause (iii).
(b) Section 26 of the Futures Trading Act of 1978 (7 U.S.C. 16a) is
amended by striking subsection (b) and redesignating subsection (c) as
subsection (b).
SEC. 212. MISCELLANEOUS CORRECTIONS.
(a) Section 1a(12)(A)(i)(II) of the Commodity Exchange Act (7 U.S.C.
1a(12)(A)(i)(II)) is amended by adding at the end a semicolon.
(b) Section 2(a)(1)(C)(ii)(III) of such Act (7 U.S.C.
2(a)(1)(C)(ii)(III)) is amended by moving the provision 2 ems to the
right.
(c) Section 2(a)(1)(C)(iii) of such Act (7 U.S.C. 2(a)(1)(C)(iii)) is
amended by moving the provision 2 ems to the right.
(d) Section 2(a)(1)(C)(iv) of such Act (7 U.S.C. 2(a)(1)(C)(iv)) is
amended by striking ``under or'' and inserting ``under''.
(e) Section 2(a)(1)(C)(v) of such Act (7 U.S.C. 2(a)(1)(C)(v)) is
amended by moving the provision 2 ems to the right.
(f) Section 2(a)(1)(C)(v)(VI) of such Act (7 U.S.C.
2(a)(1)(C)(v)(VI)) is amended by striking ``III'' and inserting
``(III)''.
(g) Section 2(c)(1) of such Act (7 U.S.C. 2(c)(1)) is amended by
striking the second comma.
(h) Section 4(c)(3)(H) of such Act (7 U.S.C. 6(c)(3)(H)) is amended
by striking ``state'' and inserting ``State''.
(i) Section 4c(c) of such Act (7 U.S.C. 6c(c)) is amended to read as
follows:
``(c) The Commission shall issue regulations to continue to permit
the trading of options on contract markets under such terms and
conditions that the Commission from time to time may prescribe.''.
(j) Section 4d(b) of such Act (7 U.S.C. 6d(b)) is amended by striking
``paragraph (2) of this section'' and inserting ``subsection (a)(2)''.
(k) Section 4f(c)(3)(A) of such Act (7 U.S.C. 6f(c)(3)(A)) is amended
by striking the first comma.
(l) Section 4f(c)(4)(A) of such Act (7 U.S.C. 6f(c)(4)(A)) is amended
by striking ``in developing'' and inserting ``In developing''.
(m) Section 4f(c)(4)(B) of such Act (7 U.S.C. 6f(c)(4)(B)) is amended
by striking ``1817(a)'' and inserting ``1817(a))''.
(n) Section 5 of such Act (7 U.S.C. 7) is amended by redesignating
subsections (c) through (e) as subsections (b) through (d),
respectively.
(o) Section 5b of such Act (7 U.S.C. 7a-1) is amended by
redesignating subsection (k) as subsection (j).
(p) Section 5f(b)(1) of such Act (7 U.S.C. 7b-1(b)(1)) is amended by
striking ``section 5f'' and inserting ``this section''.
(q) Section 6(a) of such Act (7 U.S.C. 8(a)) is amended by striking
``the the'' and inserting ``the''.
(r) Section 8a of such Act (7 U.S.C. 12a) is amended in each of
paragraphs (2)(E) and (3)(B) by striking ``Investors'' and inserting
``Investor''.
(s) Section 12(b)(4) of such Act (7 U.S.C. 16(b)(4)) is amended by
moving the provision 2 ems to the left.
(t) Section 14(a)(2) of such Act (7 U.S.C. 18(a)(2)) is amended by
moving the margin of the provision 2 ems to the left.
(u) Section 17(b)(9)(D) of such Act (7 U.S.C. 21(b)(9)(D)) is amended
by striking the semicolon and inserting a period.
(v) Section 17(b)(10)(C)(ii) of such Act (7 U.S.C. 21(b)(10)(C)(ii))
is amended by striking ``and'' at the end.
(w) Section 17(b)(11) of such Act (7 U.S.C. 21(b)(11)) is amended by
striking the period and inserting a semicolon.
(x) Section 17(b)(12) of such Act (7 U.S.C. 21(b)(12)) is amended--
(1) by striking ``(A)''; and
(2) by striking the period and inserting ``; and''.
(y) Section 17(b)(13) of such Act (7 U.S.C. 21(b)(13)) is amended by
striking ``A'' and inserting ``a''.
(z) Section 17 of such Act (7 U.S.C. 21) is amended by redesignating
subsection (q), as added by section 233(5) of Public Law 97-444, and
subsection (r) as subsections (r) and (s), respectively.
(aa) Section 22(b)(3) of such Act (7 U.S.C. 25(b)(3)) is amended by
striking ``of registered'' and inserting ``of a registered''.
(bb) Section 22(b)(4) of such Act (7 U.S.C. 25(b)(4)) is amended by
inserting a comma after ``entity''.
SEC. 213. TECHNICAL AMENDMENTS TO SECTION 14(E).
Section 14(e) of the Commodity Exchange Act (7 U.S.C. 18(e)) is
amended--
(1) by inserting ``(1)'' after ``(e)'';
(2) in the 1st sentence--
(A) by inserting ``final'' after ``Any'';
(B) by striking ``hereunder'' and inserting ``under
this section''; and
(C) by striking ``the appellee'' and inserting ``an
appellee'';
(3) in the 2nd sentence--
(A) by striking ``Such appeal'' and inserting ``If
the order requires the petitioner to pay reparation, or
upholds a prior order requiring such a payment, the
petition for review'';
(B) by striking ``appellant'' each place it appears
and inserting ``petitioner'';
(C) by striking ``for the appellee, if the appellee
shall prevail'' and inserting ``as set forth below'';
(4) in the 4th sentence, by striking ``The'' and inserting
``An''; and
(5) in the 5th sentence--
(A) by inserting ``participates in the proceedings
before the Court of Appeals through counsel and''
before ``prevails''; and
(B) by striking ``his'' and inserting ``the
appellee's''; and
(6) by adding after and below the end the following:
``(2) In paragraph (1), the term `appellee' means a party to a
proceeding before the Commission under this section in whose favor the
Commission ruled in an order that is the subject of a petition for
review under paragraph (1) and whose interests are adverse to those of
the petitioner.''.
SEC. 214. TECHNICAL CLARIFICATIONS FOR RETAIL FOREIGN CURRENCY.
Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is
amended--
(1) in subparagraph (B)--
(A) in clause (i)(II), by redesignating item (ff) as
item (ee);
(B) by striking ``(gg)'' each place it appears and
inserting ``(ee)'';
(C) in clause (iii), by striking ``(ee), or (ff) of
clause (i)(II) of this subparagraph'' and inserting
``or (dd) of clause (i)(II)''; and
(D) in clause (iv)--
(i) in each of subclauses (I) and (II), by
striking ``(ee), or (ff)'' each place it
appears and inserting ``or (dd)'';
(ii) in subclause (I)(bb), by inserting ``,
or otherwise act as a commodity trading advisor
with respect to any agreement, contract, or
transaction described in clause (i)'' before
the semicolon; and
(iii) in subclause (IV)(aa), by striking
``(ff)'' and inserting ``(dd)'';
(2) in subparagraph (C)--
(A) by striking ``(ee), or (ff)'' each place it
appears and inserting ``or (dd)''; and
(B) in clause (iii)--
(i) in subclause (I)(bb), by inserting ``, or
otherwise act as a commodity trading advisor
with respect to any agreement, contract, or
transaction described in clause (i)'' before
the semicolon; and
(ii) in subclause (IV)(aa), by striking
``item (aa) through (ff)'' and inserting
``items (aa) through (dd)''; and
(3) in subparagraph (E)(ii)(I), by inserting ``or (C)(i)(I)''
after ``(B)(i)(I)''.
SEC. 215. MISCELLANEOUS SWAP TECHNICAL CORRECTIONS.
(a) Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is
amended by inserting ``or section 5h'' after ``sections 5 through 5c''.
(b) Section 8a of such Act (7 U.S.C. 12a) is amended--
(1) in paragraph (7)(A), by inserting ``or swap contracts''
after ``contracts of sale''; and
(2) in paragraph (9), by striking ``futures contract'' and
inserting ``contract of sale for future delivery or swap
contract'' each place it occurs.
(c) Section 15(b) of such Act (7 U.S.C. 19(b)) is amended by striking
``contract market'' and inserting ``registered entity''.
Brief Explanation
TITLE I--POLICY CHANGES
The CFTC Reauthorization Act of 2019, H.R. 4895, includes
many provisions designed to protect market participants, foster
greater cooperation among Federal financial agencies and
between the Commodity Futures Trading Commission (CFTC or
Commission) and its foreign counterparts, strengthen the
agency, provide relief and certainty to market participants,
and increase opportunities for a young and diverse workforce.
These include provisions to:
Clarify that definition of foreign futures
authority includes foreign law enforcement authorities.
Establish an Honors Program under its
appointment and compensation authority.
Replace the provisions which only govern the
Energy and Environmental Markets Advisory Committee
with a general authority for the CFTC to establish
advisory committees under one single set of rules.
Require the CFTC's Office of Minority and
Women Inclusion to comply with the requirements of
Section 342 of the Dodd-Frank Act.
Require the Commission to establish an
internship program for students from eligible minority
serving institutions.
Authorize the Commission to accept various
forms of assistance from other Federal agencies, as
otherwise authorized by law.
Formally establish an Office of the Chief
Economist (OCE) and require that the Commission
coordinate with the OCE before its consideration of
costs and benefits for its rulemakings.
Provide an exemption to the mandatory swaps
clearing requirement to bank holding companies and
savings and loan holding companies if they have
aggregated assets, including the assets of
subsidiaries, of $10 billion or less.
Establish that persons acting as commodity
pool operators or commodity trading advisors on behalf
of charitable organizations and/or church plans are not
required to register with the Commission.
Direct the CFTC to adopt rules detailing the
content and availability of trade and trader data and
other information that boards of trade and swap
execution facilities must be able to access from a cash
market in a digital commodity to meet their respective
obligations to prevent disruption of their market.
Amend existing system safeguard core
principles for market infrastructure to clarify that
systems safeguards, particularly automated systems,
should be resilient and protect the confidentiality,
integrity, and availability of data they contain.
Clarify that Swap Execution Facilities
emergency authority is to facilitate the liquidation or
transfer of open positions on swaps as opposed to
directly liquidating or transferring them.
Clarify that chief compliance officers
(CCOs) may perform other responsibilities for the SEF
provided there are no conflicts of interest between
such other responsibilities and the duties of the CCOs
or limitations on the CCOs from carrying out their own
responsibilities.
Confirm the Commission's authorities to
prosecute fraud and manipulation applies to activities
outside the United States.
Establish protections to retain privileges
for information shared by the CFTC with other Federal
and state authorities, foreign authorities, and self-
regulatory organizations as well as information shared
with the CFTC from such authorities and organizations.
Clarify the Commission's authority to apply
Section 8 disclosure protections, in its discretion, to
proprietary information obtained or received by the
Commission.
Require the Commission to adopt policies to
address issues concerning proprietary information.
Reauthorize the Commission for Fiscal Years
2020 through 2025.
Add a ``reckless'' standard to the
Commission's aiding and abetting provisions.
Authorize the Commission to establish
research, development, and information programs to
further the purposes of this Act.
Clarify that when there is a shortfall in
funds segregated for the benefit of customers, assets
from the debtor's bankruptcy estate can be available to
make up the shortfall.
Eliminate the double-sided confirmation
requirement for swap data repositories.
Expand whistleblower protections.
Update standards for natural persons to meet
requirements for qualified eligible persons.
Direct the Government Accountability Office
to conduct a study on aluminum markets.
Amend the conditions that must be met by
Treasury affiliates to non-financial entities who hope
to use the end-user clearing exception on behalf of
their non-financial affiliates.
TITLE II--TECHNICAL CORRECTIONS
Working with the CFTC and House Legislative Counsel, the
Committee has prepared a section of technical edits and changes
to the Commodity Exchange Act which corrects references,
removes obsolete terms, comports ambiguous text to existing
practices, fixes formatting errors, and removes studies long
since completed.
Purpose and Need
TITLE I--POLICY AMENDMENTS
Section 101--Foreign futures authority
This section is a revision to the definition of ``foreign
futures authority'' to clarify that the definition includes
foreign law enforcement authorities so as to more accurately
characterize the Commodity Futures Trading Commission's (CFTC
or Commission) international cooperative partners. Section 8 of
the Commodity Exchange Act (CEA) authorizes the Commission to
share information with a ``foreign futures authority''. This
change would clarify that the Commission's authority also
includes sharing information with foreign law enforcement
authorities. The Commission shares information with its foreign
cooperation partners under international agreements and the
amendment will make it easier to bring in foreign law
enforcement under those agreements. Finally, the revision to
Section 12(f) would clarify that the Commission is authorized
to provide assistance to both foreign futures and law
enforcement authorities with respect to all transactions within
the Commission's jurisdiction.
Section 102--Honors Program
This section authorizes the CFTC to establish an Honors
Program through its appointment and compensation authority as
well as the ability to coordinate with the Office of Personnel
Management, as needed, to create such a program. Currently, the
CFTC does not have many entry level openings and thus lacks the
opportunity to grow talent right out of college. Honors
programs exist for this purpose across other agencies of
government (e.g., Securities and Exchange Commission).
Establishing an Honors Program is an opportunity for the
Commission to do just that.
Section 103--Advisory committee changes
This section strikes the statutory language establishing
the Energy and Environmental Markets Advisory Committee (EEMAC)
and replaces it with general authority language for the
Commission to establish advisory committees. Finally, the
section provides for a transition period to ensure the current
vital work of the advisory committee is not disrupted.
The EEMAC was authorized in the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act). It is the
only statutorily created advisory committee at the CFTC and it
operates under different rules than the four other advisory
committees at the Commission.
Most notably, the membership of EEMAC is severely
constrained in statute. Advisory committees at the Commission
have historically been forums for the Commission to hear from a
wide variety of market participants, from large financial
institutions to small end-users, intermediaries, and consumer
organizations. The wide diversity of membership ensures that
the Commission receives a full picture of public opinion.
While the other advisory committees have dozens of members,
the EEMAC is statutorily limited to nine members, depriving the
Commission of critical viewpoints. To solve this problem, the
Commission, on its own, created ``associate members'' of EEMAC,
who are invited to participate in meetings, but are not
considered ``members'' when the advisory committee presents
opinions to the Commission.
Additionally, while advisory committees are generally
subject to the Federal Advisory Committee Act (FACA), which
imposes ``Sunshine Act-like'' obligations on advisory
committees across the Federal Government, EEMAC is exempted
from that law. With this section, the advisory committees will
be able to operate under the same set of rules and be subject
to FACA. The Committee fully expects EEMAC to be reconstituted
by the Commission under this new authority once the transition
period ends.
Section 104--Enhancement of Office of Minority and Women Inclusion at
the Commission; Internship Program
This section requires the Commission to comply with Section
342 of the Dodd-Frank Act, which created an Office of Minority
and Women Inclusion (OMWI) at most of the other Federal
financial regulators. The Commission previously acted on its
own initiative to rename its Office of Diversity Inclusion into
an OMWI office, which currently has some of the
responsibilities outlined in Dodd-Frank. This section brings
the Commission in line with the other Federal financial
regulators by statutorily establishing the CFTC's OMWI and
providing it with responsibility for all matters relating to
diversity in management, employment, and business activities at
the agency.
Under the statute, each OMWI shall--
be headed by a career position in the Senior
Executive Service or equivalent;
directly report to the head of the agency;
develop standards for equal employment
opportunity, including increasing participation of
minority- and women-owned businesses in programs and
contracts with the agency and assessing the diversity
policies of the agency; and
advise on the impact of policies and
regulations on minority- and women-owned businesses.
This section requires that the CFTC adopt the joint
standards of the Interagency Policy Statement, which was
published as required in Section 342 of Dodd-Frank.
Additionally, the language instructs the Executive Director
to establish a program to place an appropriate number of
students attending 1890s land-grants, 1994 land-grants from
among Tribal colleges and territorial colleges, and USDA
designated Hispanic serving institutions in a semester-length
internship within the Commission's divisions and offices.
Section 105--Detailing and resource-sharing
This section provides authority for reimbursable and non-
reimbursable details and for the Commission to accept
assistance from any Federal agency or department, as authorized
under law. Additionally, the proposed amendment provides
authority for the detailing of personnel between the CFTC and
foreign futures authorities on a temporary basis.
Section 106--Office of the Chief Economist
This section establishes by statute an Office of the Chief
Economist (OCE) at the CFTC to be headed by a Chief Economist.
In addition, this section provides the Commission with the
authority to appoint staff to the OCE through the excepted
service. This authority, already utilized by the Commission to
hire attorneys, will aid the Commission in its ability to bring
top economists and research analysts into the OCE.
Finally, this section makes several minor amendments to
Section 15(a) of the CEA which governs the Commission's
consideration of the costs and benefits of its rules,
regulations, and orders. First, it names the OCE as a
participant in the cost-benefit process. Second, it updates
Section 15(a) to apply to all markets under the Commission's
jurisdiction, as opposed to just ``futures markets'' and to
include considerations regarding market liquidity.
The Committee notes that the OCE is already an active
participant in the process to consider costs and benefits for
regulations with the Office of General Counsel, as well as, the
relevant divisions and offices responsible for crafting the
rule or order under consideration. The Committee further notes
that the Commission currently applies Section 15(a) to
regulations across all of its regulated markets and that its
considerations also include market liquidity.
To that end, it is the Committee's intent that inclusion of
the modifications to Section 15(a) of this language neither
establishes any new requirement nor obligation upon the
Commission that differs from current practice. Nor should this
language be interpreted as placing the OCE on equal basis with
the Commission or elevating the OCE over any other Division or
Office engaged in preparing the cost-benefit analysis for the
Commission. Rather, the purpose of this language is to codify
the existing practices at the Commission and prevent the OCE
from being removed from its current active participation.
The Committee recognizes the significant strides the
Commission has made in improving its consideration of costs and
benefits over the past five years. The Committee believes
robust consideration of costs and benefits is essential for a
data-focused regulatory agency. Such consideration should not
merely be an exercise in satisfying legal or procedural
requirements, but serve to meaningfully inform the rulemaking
and regulatory process.
Section 107--Equal consideration for holding companies
Under the Dodd-Frank Act, end-users that are not considered
a ``financial entity'' are exempt from the Act's swaps clearing
mandate. The Act directed the CFTC to determine whether to
exempt small banks and savings associations, Farm Credit System
banks, and credit unions with assets less than $10 billion from
the definition of ``financial entity,'' thereby making them
eligible for the end-user exemption from the swaps clearing
mandate. Small financial institutions often enter into interest
rate swaps to hedge interest rate risk that they incur as a
result of issuing debt securities or making loans. In July
2012, the CFTC issued a final rule exempting ``small financial
institutions'' with total assets of $10 billion or less from
classification as a ``financial entity.''
However, some small banks and savings associations are
structured under bank holding companies (BHC) or savings and
loan holding companies (SLHC). Under a holding company
structure, small financial institutions may choose to manage
the same swaps activity through their holding company in order
to aggregate the activity of multiple institutions or to gain
hedge accounting treatment. Yet, such activity is not
statutorily eligible for relief from the clearing mandate.
The CFTC extended relief from clearing to similarly
situated BHCs and SLHCs in a no-action letter in January 2016.
In that letter the Division of Clearing and Risk noted that the
Commission had previously found that the swaps books that these
institutions hold have a relatively small notional value and
fall into the scope of what Congress intended when directing
the CFTC to evaluate an exemption for small financial
institutions from the ``financial entity'' definition.
Section 107 gives the option for the CFTC to codify those
exemptions for holding companies. Allowing the CFTC to codify
this relief will provide confidence and security to these small
institutions to continue to use swaps to manage risk.
Section 108--Exemption of qualified charitable organizations from
regulation as commodity pool operators
As a result of the Dodd-Frank Act's addition of swaps to
the ``commodity pool'' definition, certain colleges and
universities currently face uncertainty as to whether the
practices of universities managing their endowment funds
together with funds of affiliated organizations (such as
university newspapers, clubs, charitable remainder trusts, and
other organizations within the university community) and
entering into swaps in the ordinary course of managing their
investment exposure and operational risk (e.g., interest rates
or energy prices) would cause university endowments to be
commodity pools and universities themselves to be commodity
pool operators (CPOs) or commodity trading advisors (CTAs),
subject to CFTC regulation.
Many colleges, universities and other charitable
organizations faced similar uncertainty with respect to the
Investment Advisors Act of 1940, and this uncertainty was
addressed by the Philanthropy Protection Act of 1995 (``PPA'').
Since that time, university endowments have relied on the
changes made by the PPA to provide an exemption from Securities
and Exchange Commission (SEC) registration in recognition of
the special status of these funds. The CFTC extended relief to
these qualified university endowments in a no-action letter in
September 2017.
Similarly, church benefits boards often use investment
managers or advisers that engage in commodities transactions.
Church benefits boards also have the ability to pool plan
assets with other funds for the benefit of the church (``church
plan-related accounts''), purely for investment management
purposes. While securities laws clearly exempt church plans and
church plan-related accounts from SEC registration
requirements, the CEA and CFTC rules are not so clear.
The CFTC extended relief to these qualified churches and
nonprofits in a no-action letter in February 2014.
Section 108 will harmonize the exemptions between
securities laws and the CEA and CFTC regulations. It will
prevent university endowments, church pension plans, and church
plan-related accounts from having to be registered as commodity
pools. Likewise, Section 108 will prevent the universities and
church benefits boards from having to register as CPOs or CTAs.
These exemptions would reduce the cost to churches,
universities, and charitable organizations, and would also
ensure they have the full benefit of commodities investments
that provide diversification, opportunities to hedge, and
returns to their respective beneficiaries.
Section 109--Digital commodity
Pursuant to the CEA, Designated Contract Markets (DCMs) and
Swap Execution Facilities (SEFs), as self-regulatory
organizations (SROs), are required as part of their core
principles to establish and maintain an effective oversight
program to ensure listed contracts are not susceptible to
manipulation, and to detect and prevent manipulation, price
distortion and disruptions to the delivery or cash-settlement
process. Visibility into the underlying spot markets referenced
by either a contract or a swap is an important component to
ensuring an exchange can effectively identify and address those
risks as they occur.
In December 2017, when the first derivative contracts on
Bitcoin were self-certified by various DCMs, the CFTC issued
guidance for a ``heightened review'' with those exchanges of
the terms and conditions for those contracts. At the heart of
the CFTC's heightened review is extensive visibility and
monitoring of markets for those virtual currency derivatives
and underlying settlement reference rates. Part of that
heightened review included guidance that DCMs should--
enter into direct or indirect information
sharing agreements with cash market platforms for the
virtual currency to allow access to trade and trader
data, and
monitor data from cash markets with respect
to price settlements and other Bitcoin prices more
broadly and identify anomalies and disproportionate
moves in the cash markets compare to the futures
markets.
The section would require the Commission to promulgate
rules detailing the content and availability of trade and
trader data and other information DCMs and SEFs must be able to
access from cash markets regarding their derivative contracts
that reference a digital commodity (e.g., Bitcoin). The
Committee believes that moving from guidance, which is
technically non-binding, to a more definitive list of what is
required by exchanges to ensure such listed contracts are not
susceptible to manipulation and exchanges are effectively
monitoring the markets, will not only strengthen the oversight
of these new markets in digital commodities, but also
consequently enhance the confidence in these markets by their
users.
In providing this new requirement, the Committee is mindful
of the longstanding obligations of DCMs and SEFs to protect the
integrity of all of their markets, and does not intend the
Commission to impose new rules that place excessive burdens on
digital commodity derivatives that are distinct from other
commodity derivatives. The Committee also recognizes the
emerging nature of these derivatives products, the digital
commodity asset class, and the spot trading venues which
provide the pricing data. It is the Committee's intention that
in implementing this section the Commission does not impose
requirements that would make producing or accessing spot market
data disruptive to market participants.
Section 110--System safeguards
This section amends the existing core principles for
designated contract markets, designated clearing organizations,
and swap execution facilities to clarify that system
safeguards, particularly for automated systems, should be
resilient (able to regain an ideal state or rapidly recover
after undergoing a challenge) and maintain the confidentiality,
integrity, and availability of data they contain. The section
also applies the amended system safeguard core principles to
swap data repositories. The changes to the core principles
reflect current best practices in evaluating system safeguards.
Section 111--Administration of swap execution facilities
This section amends provisions affecting SEFs to--
clarify that SEF emergency authority is to
facilitate the liquidation or transfer of open
positions on swaps as opposed to directly liquidating
or transferring them;
clarify that chief compliance officers
(CCOs) may perform other responsibilities for the SEF
provided there are no conflicts of interest between
such other responsibilities and the duties of CCOs or
limit the CCOs from carrying out its own
responsibilities;
clarify policies and procedures CCOs must
establish and administer;
remove a statutory requirement that CCOs
sign annual reports;
allow a senior officer to submit an annual
report prepared by CCOs; and
establish that such reports must be
materially accurate.
This section removes a statutory requirement that a chief
compliance officer for a SEF must sign the annual reports it
sends to the Commission. The Committee notes that designated
contract markets do not have a similar statutory requirement
and therefore is comfortable removing the statutory requirement
for SEFs.
Section 112--Applicability of prohibitions on fraud, and manipulation
to activities outside the United States
In Prime International Trading, Ltd. v. BP P.L.C., 937 F.3d
94 (2d Cir. Aug. 29, 2019), the U.S. Court of Appeals for the
Second Circuit held that the provisions in the CEA that
prohibit fraud and manipulation in connection with any swap,
contract for commodity in interstate commerce, or for future
delivery, i.e., Sections 6(c)(1) and 9(a)(2), lack ``a clear
statement of extraterritorial effect.'' The Court found there
was ``no allegation of manipulative conduct or statements made
in the United States,'' notwithstanding plaintiffs' allegations
that the defendants' conduct affected the price of contracts of
sale of commodities for future delivery traded on a U.S.
exchange, and therefore dismissed the plaintiffs' action. The
Court's ruling opens the possibility that would-be fraudsters
or manipulators of commodity markets within the United States
would seek safe havens from--and assert challenges to--the
CFTC's enforcement authority by conducting their manipulative
or fraudulent activities outside the territory of the United
States. This section clarifies the prohibitions on fraud, and
manipulation, and the CFTC's enforcement authority, apply to
activities outside the United States that have or would have
reasonably foreseeable effects within the United States.
The provisions of this section would not affect the
substantive elements of the prohibitions on fraud and
manipulation. The CFTC's burden in establishing a violation of
these prohibitions with respect to activities outside the
United States would be the same as for establishing a violation
for the conduct if it had occurred within the United States.
Rather, this provision would specify the nature of the
activities that would apply these prohibitions to activities
outside the United States. The extraterritorial provisions
applicable in this section would apply only with respect to the
prohibitions on fraud and manipulation.
Section 113--Privilege retention
This provision clarifies that the Commission shall not be
considered to have waived any privilege by transferring or
permitting use of information in accordance with the disclosure
authorities under the CEA. The bill also clarifies entities
that shared or permitted use of information by the Commission
shall not be considered to have waived any privilege. Such
protection would not apply in the case of self-regulatory
organizations (SROs) to information obtained as a result of
investigations or enforcement actions against the SRO. Further,
the Commission shall not be compelled to disclose privileged
information obtained from any foreign futures authority.
Privilege is defined as any applicable work-product
privilege, attorney-client privilege, governmental privilege,
or other privilege recognized under Federal, State or foreign
law.
Current law, under the CEA, allows the Commission to enter
into access or sharing agreements with other enforcement and
regulatory agencies. This creates a risk that the partner will
claim any associated privileges are waived upon sharing that
information. Because of the lack of established legal precedent
in this context, the SEC and banking regulators have
established statutory provisions clarifying privilege
retention. This proposal would provide similar clarity to the
CFTC's sharing of information and increase the scope and
effectiveness of cooperation between the CFTC and other
enforcement or regulatory agencies, domestic or abroad.
Section 114--Proprietary information
This section clarifies that the CFTC has the authority to
adopt rules and regulations to apply CEA Section 8 statutory
disclosure of information limitations on types of proprietary
information not already covered under Section 8. The provisions
of Section 8 govern how and when the Commission may share
information with other government entities (i.e., Federal,
State, foreign). This section also requires the CFTC to create
policies on the circumstances under which the CFTC will request
proprietary information, and how the CFTC will safeguard, limit
access, and protect proprietary information from unlawful use
and disclosure. Given the growing dependence and use of
proprietary information in derivatives trading, whether in the
form of new technologies or trading strategies, this section
provides market participants with a pathway to address concerns
they may have regarding how such information is handled,
shared, and protected at the agency.
Section 115--Authority to provide food and incidental assistance to
foreign officials hosted by the Commission
This section provides the authority to expend appropriated
funds for necessary logistic and administrative expenses
including incidental meals, travel, local transportation, and
related lodging and subsistence when there are meetings with
foreign governmental and other regulatory officials that are
hosted by the Commission. This is consistent with the SEC who
was granted similar authority in its 2019 appropriation (Public
Law No. 116-6).
Section 116--Extension of operations
Section 116 authorizes the CFTC from FY 2020 through FY
2025.
Section 117--Aiding and abetting
Section 117 harmonizes CFTC and SEC standards for liability
by expanding the CEA's aiding and abetting provisions to mirror
the securities laws' inclusion of the ``reckless'' standard.
Section 118--Modernization of authority of the Commission to conduct
research, development, demonstration, and information programs
Section 118 requires the Commission to create research and
development programs and authorizes other transaction and term-
limited gift acceptance authorities in order to advance the
Commission's understanding of emerging technologies.
Technologies like artificial intelligence and advanced data
analytics, distributed ledgers and blockchains, cryptography,
cloud computing, and more are disrupting markets and creating
new opportunities.
The Committee recognizes that emerging financial
technologies hold the promise to create new financial products,
like digital assets, and also to remake existing institutions
like clearinghouses, and provide greater insight to regulators
by helping to better analyze the troves of data the Commission
holds.
Given this growing use of technology, it is important for
the CFTC to understand how technology is changing and impacting
markets under its jurisdiction. The research and development
programs, along with the other transaction and gift acceptance
authorities--which have been authorized by Congress for other
agencies (e.g. Department of Defense, Office of Government
Ethics)--gives the agency the tools necessary to interact and
learn more about these technologies and be in a better position
to promote responsible innovation.
In providing these new authorities, the Committee reminds
the Commission of the importance of Federal contracting law and
reiterates that it does not intend these new authorities to be
utilized for the day-to-day procurement requirements of the
Commission. The section imposes significant restrictions on the
use of the other transaction and gift authorities, including
that any transaction entered into under either authority be
related to a research and development plan adopted by the
Commission. In addition, to promote transparency, this section
requires notice and comment periods for the proposed program
plan and the use of other transaction authority, the reporting
of gifts within 30 days, and an annual report to the House and
Senate Committees on Agriculture.
Section 119--Protecting customer property during commodity broker
bankruptcy
CFTC Regulation 190.08(a)(1)(ii)(J) (17 C.F.R. 190) defines
customer property as including cash, securities or other
property of the debtor's estate, including the debtor's trading
or operating accounts and commodities of the debtor held in
inventory, but only to the extent that the property enumerated
is insufficient to satisfy in full all claims of public
customers.'' The Committee's plain reading of this CFTC
regulation is that property of the debtor futures commission
merchant (FCM), even though not held as customer property,
becomes customer property to the extent necessary to satisfy
net equity claims of public customers,'' who are defined in
Regulation 190.01 as all customers other than certain control
persons, affiliates, and related parties (i.e., non-public
customers). In effect, in order to protect the funds of
customers held in segregation, Regulation 190.08 subordinates
the claims of non-public customers and non-customer creditors,
other than properly perfected liens on such property of the
debtor, to the claims of public customers with respect to the
property of the FCM that was not held (and not required to be
held) as customer property.
However, in 2000, doubts as to the validity of Regulation
190.08(a)(1)(ii)(J) arose after a Federal bankruptcy court (In
re Griffin Trading Co., 245 B.R. 291 (Bankr. N.D. Ill. 2000))
rejected an attempt by the trustee to use a bankrupt commodity
broker's estate to pay shortfalls in the customer accounts.
Among the issues in the case, which was later settled, and
resulted in no binding judicial precedent, was whether the
CFTC's broad definition of customer property'' in Regulation
190.08 would determine which assets could be used to repay
customers. The court found that the CFTC exceeded its statutory
authority in enacting Regulation 190.08 with a definition of
customer property more expansive than that used in the U.S.
Bankruptcy Code. Further, the court found that, any shortfall
in the customer property as defined in 11 U.S.C. 761 must be
treated as a general unsecured claim.'' This vacated court
decision has left uncertainty about whether, in the event that
customer assets are insufficient to cover all customer claims,
customers can have first priority to a FCM's general estate
assets until all customer claims are paid in full.
In order to provide clarity that the CFTC did not exceed
its authority to promulgate Regulation 190.08 under Section
20(a) of the CEA, the Committee intends for this section to
provide for the broad use of the assets of a commodity broker's
estate, other than secured property (such as property held at a
clearinghouse, including offset or netting rights of creditors
with respect to such type of property), to satisfy shortfalls
in customer property beyond what was held in customer
segregated accounts at the time of a firm's failure.
Section 120--Elimination of the double-sided confirmation requirement
for swap data repositories
Under Section 21 of the CEA, a defined duty of a swap data
repository (SDR) is to confirm with both counterparties to a
swap, the accuracy of submitted data. This has been interpreted
as requiring a SDR to confirm the accuracy of data with both
reporting and non-reporting counterparties. SDRs are able to
easily confirm the data submitted by a reporting counterparty;
however, they often do not have established means of
communication with non-reporting counterparties. Furthermore,
the section does not require counterparties to respond to the
SDR's request, making the SDR duty to confirm an overly
burdensome and often impossible task.
This language provides the SDR with flexibility to seek
confirmation from one or both counterparties, as determined by
the Commission. While the Committee expects most, but not all,
swap reporting can be confirmed effectively from one
counterparty, specifically the reporting counterparty,
flexibility has been preserved in case the Commission
determines that a new type or class of swap is so complex and
detailed that confirmation from both counterparties is
necessary for accuracy. The amendment also directs
counterparties to confirm with the SDR upon request.
Section 121--Whistleblower protections for internal disclosures
In February 2018, the U.S. Supreme Court decided Digital
Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018), holding
that the Dodd-Frank Act's anti-retaliation provision only
applies to individuals who directly report violations of
securities laws to the SEC. It is assumed that this precedent
would apply equally to both whistleblowers under the securities
laws and under the CEA, as the whistleblower provisions in both
bodies of law mirror one another. This section expands the CEA
definition of a whistleblower to clarify that individuals who
report wrongdoing to their employers will also be protected
from retaliation, independent of whether they report directly
to the CFTC.
The current CEA whistleblower definition is a person ``who
provides information relating to a violation of the CEA to the
CFTC.'' This section modifies the definition to also include a
person ``who provides information regarding any conduct that
the person reasonably believes violates any CFTC law, rule or
regulation to: (1) a supervisor, if the employer is a CFTC
registered entity, a self-regulatory organization, or a State
securities regulator, or (2) another person working for the
employer who the whistleblower reasonably believes has the
authority to address the misconduct (e.g., internal reporting
office or general counsel).''
In addition, this section expedites payments to
whistleblowers by requiring the CFTC to make an initial
disposition on a claim for an award within one year after the
deadline for filing the claim, while providing possible
extensions for the CFTC under certain circumstances. The
section also increases the deposits into the CFTC's Customer
Protection Fund by $50 million to a level of $150 million and
codifies an existing Government Accountability Office (GAO)
authorization for the fund to be used for initiatives to
educate stakeholders about whistleblower protections and
incentives. The language in this section mirrors some of the
proposed language in the Whistleblower Programs Improvement
Act, S. 2529 and H.R. 4816 (116th Congress), as well as the
Whistleblower Protection Reform Act, H.R. 2515 (116th
Congress).
Section 122--Updating standards for natural persons to meet
requirements for qualified eligible persons
Under regulations issued by the CFTC, CPOs and CTAs are
exempt from certain disclosure requirements when only dealing
with qualified eligible persons (QEPs). A natural person can
qualify as a QEP if they meet the following conditions:
have a new worth in excess of $1 million; or
have an annual income in excess of $100,000
singly or $250,000 for a married couple; and
owns securities with aggregate market value
of at least $2 million; or
has on deposit with a futures commission
merchant at least $200,000 in margin.
These income and investment figures were determined to be
sufficient to demonstrate that a person was likely
sophisticated enough to handle interactions with CPOs and CTAs
without the customary customer protection disclosures required
for retail customers. This rule was instituted in 1992 and
these figures have not been updated for more than 25 years.
This section would increase both the income and investment
figures for natural persons and subsequently require periodic
adjustments tied with inflation every three years.
The Committee recognizes that many Americans have made
investment decisions based on their ability to qualify as a QEP
and their eligibility to participate in certain exempt
commodity investment vehicles. Section 122 requires that the
Commission, in implementing its new regulations, continue to
permit investors to maintain or reduce, but not increase, their
investment in an existing exempt commodity pool or with an
existing exempt Commodity Trading Advisor, according to the QEP
thresholds that were in place at the time of their last
investment.
Section 123--Government Accountability Office study on aluminum markets
Section 123 requires a GAO study addressing the aluminum
markets in the U.S. and abroad, effectiveness and efficiency of
the market for all market participants, factors and policies
influencing aluminum supply, demand and movement globally, and
effectiveness of government oversight of aluminum markets. To
the extent that it is helpful, GAO should consult with the CFTC
for data and insight into aluminum derivatives markets. In
furtherance of this section, the Committee directs the
Commission to provide GAO with any reasonable assistance it
requests.
This report will give lawmakers an in-depth understanding
of the current aluminum markets. This report is due to the
House Agriculture Committee and the Senate Agriculture,
Nutrition, and Forestry Committee within 180 days of the
signing of this bill.
Section 124--Response to foreign regulatory authority
Section 124 provides that where a foreign authority, such
as a non-U.S. supervisor or regulator, seeks to assert direct
supervisory authority over U.S.-domiciled designated clearing
organizations (DCOs), the Commission should review the
appropriateness of exemptions granted to entities under the
foreign authority's jurisdiction. The Commission's grant of
exemptions and other relief to a foreign entity facilitates
cross-border derivatives transactions between the United States
and the foreign entity's home jurisdiction. Such relief is made
in the interest of international comity and premised on the
importance of robust, global capital markets to participants in
both jurisdictions.
The CFTC was one of the first regulators to take the lead
on a cross-border recognition and deference approach, starting
with foreign brokers in the 1980s and foreign exchanges in the
1990s. Such recognition and deference undoubtedly contributed
to the growth of foreign financial markets, as it provided a
clear path for Americans to participate in those markets. It
also provided American market participants with new
counterparties and better opportunities to manage their risks.
As deference and equivalence regimes have expanded to other
regulatory jurisdictions, similar benefits have accrued across
all participating jurisdictions.
While the Committee has long viewed international
cooperation as a positive development for capital markets, in
certain circumstances it views the costs imposed by a lack of
deference on specific issues as outweighing the benefits of
other instances of cooperation. Where a foreign jurisdiction's
rules call for actions that may not espouse international
comity, including disrupting effective cooperation with the
Commission in areas which present concerns of increased
systemic risk, it calls into question the appropriateness of
exemptions to entities in that jurisdiction.
In light of the systemic importance of clearinghouses,
derogations from international comity in the clearing space can
be particularly concerning. Congress has set out in the CEA
that the Commission is the principle, exclusive regulatory and
supervisory authority of U.S.-domiciled DCOs. This encompasses
administering any applicable regulatory and prudential
requirements, and in discharging this responsibility, the
Commission may consult and coordinate, as necessary, with other
relevant authorities. This supervisory cooperation can
facilitate effective risk management per the objectives of
various involved domestic and foreign supervisors.
To that end, Section 124 requires the Commission to review
its exemptions granted to entities in the foreign authority's
jurisdiction to determine whether the lack of comity would, in
the Commission's discretion, call for the corresponding
reversal of the exemptive relief. Specifically, the Committee
directs the Commission's focus to the impacts of EMIR 2.2 and
how regulations finalized under that law will alter the
implementation of the 2016 Common Approach for Transatlantic
CCPs (The Common Approach) agreed to by both the European
Commission (EC) and the Commission.
The Common Approach was signed in February 2016, after
three years of negotiations, by the then-European Commissioner
for Financial Stability, Financial Services and Capital Markets
Union, Jonathan Hill, and the then-CFTC Chairman, Timothy
Massad. In the agreement, the EC announced that it would adopt
an equivalence decision with respect to CFTC requirements for
U.S. CCPs which would allow the European Securities and Markets
Authority (ESMA) to recognize U.S. CCPs as equivalently
regulated to European Union (EU) CCPs. Once recognized by ESMA,
U.S. CCPs would continue to be able to provide services in the
EU while complying with CFTC requirements.
The Common Approach also provided that the Commission would
make a determination of comparability with respect to EU
requirements, which would permit EU CCPs to provide services to
U.S. clearing members and clients while complying with certain
corresponding EU requirements. The CFTC staff would also
propose to streamline the registration process for EU CCPs
wishing to register with them.
In March 2016, both the Commission and the EC fulfilled its
commitments to each other under the Common Approach. Yet,
subsequent events have called into question the EC's intention
to maintain its commitments under that the agreement.
On June 23, 2016, the United Kingdom voted to exit from the
EU. In response, the EC granted ESMA new supervisory
authorities (EMIR 2.2) to ensure ongoing oversight of the Euro
currency and financial markets denominated in Euros. While the
intention may have been to have greater oversight over British
markets that were leaving the EU regulatory structure, EMIR 2.2
has the consequence of capturing U.S. financial markets under
ESMA's supervision, despite their limited exposure to the Euro.
For all practical purposes, this proposed implementation of
EMIR 2.2 would scrap the Common Approach.
In 2019, the House Committee on Agriculture held two
hearings where testimony on EMIR 2.2 was given:
On May 1, 2019, at a Subcommittee on Commodity
Exchanges, Energy, and Credit hearing entitled ``The State of
the CFTC'' the following testimony was given pertaining to
actions by the European Union regarding EMIR 2.2:
``Recently, EU co-legislators reached a political
agreement on the new amendments to the European Market
Infrastructure Regulation (EMIR 2.2) pertaining to the
regulation and supervision of central counterparties
(CCPs). To mark this occasion, I issued two statements:
a joint statement with Valdis Dombrovskis
(Dombrovskis), the Vice President of the European
Commission (EC), and a separate statement as Chair of
the CFTC. The statements publicly affirm that the
CFTC's concerns regarding the potential adverse impact
EMIR 2.2 on U.S. CCPs and the broader U.S. financial
markets remain a significant issue for the U.S. and it
is our expectation, that EU authorities will address
our concerns during the EMIR 2.2 legislative process.
The joint statement with Dombrovskis asserted that the
CFTC will continue to engage with EU authorities on
EMIR 2.2 through the next phase of the legislative
process, the drafting of the implementation regulations
(the Level 2 process), and that the EC will consider
the CFTC's concerns during this Level 2 process. It
also states that it is the expectation of the EC and
the CFTC that the implementation of EMIR 2.2, along
with the CFTC's on-going review of its cross-border
regime, will result in a future transatlantic
relationship between the EU and the CFTC, which will be
based on greater deference than there is now.''
Hon. Christopher Giancarlo, then-Chairman of the
CFTC.
On June 26, 2019, at a Subcommittee on Commodity
Exchanges, Energy, and Credit hearing entitled ``Brexit and
Other International Developments Affecting U.S. Derivatives
Markets'' the following testimony was given pertaining to
recent actions by the European Union regarding EMIR 2.2:
``Recent revisions to the European Market
Infrastructure Regulation legislation (EMIR 2.2) on
clearinghouse supervision may require direct compliance
with substantial elements of EU law and supervision by
EU regulators for U.S. clearinghouses deemed systemic
unless EU regulators find U.S. supervision to be
equivalent.
If implemented without the proper recognition of home
country supervision, this could lead to contradictory
requirements, duplicative supervision and counter-
reactions by global regulatory authorities. These EU
consultations, which are currently out for public
comment, may impact access to global markets if not
properly clarified and implemented.''
Hon. Walt Lukken, President and Chief Executive
Officer, FIA.
``In effect, EMIR 2.2 and the ESMA Consultations
propose, in many cases, to supersede not only U.S. laws
but also CFTC regulations that were subject to a robust
notice and comment process. Instead of those
congressional and CFTC mandates, U.S. DCOs would be
subjected to recently developed E.U. laws and
regulations on risk management and governance which
were drafted with E.U. financial markets in mind. It is
notable that ESMA does not and will not under EMIR 2.2
or the ESMA Consultations, supervise any E.U. CCPs. In
fact, the E.U. policy-makers specifically considered
giving ESMA supervisory powers over E.U. CCPs as part
of the legislative process and decided to continue to
defer to the local regulators in the E.U. member
states.''
Hon. Terrance A. Duffy, Executive Chairman &
President, CME Group Inc. (CME).
In addition, on September 24, 2019, at the CFTC's
Global Markets Advisory Committee (GMAC) meeting, EMIR 2.2 was
a prominent part of the discussion:
``As currently envisioned, EMIR 2.2 could result in
one or more U.S. CCPs being designated systemically
important to the EU financial system. Such a `tier 2'
designation seemingly would, at a minimum, subject any
such U.S. CCPs to direct supervision by ESMA and, at
the extreme, require the relocation of any EU-derived
business to an EU-based entity. Direct supervision of
U.S. CCPs by European regulators has the potential to
introduce fragmentation into the U.S. financial markets
through inconsistent and contradictory risk management
requirements. It also has the potential to increase
systemic risk within the U.S. financial system.''
Hon. Heath Tarbert, Chairman of the CFTC.
At our hearings in 2019 and those in years past, this
Committee has long recognized the importance of seamless,
global risk management markets and been a constant advocate for
robust, effective international coordination. Such coordination
is best built around a comprehensive regime of deference to
jurisdictions which have regulations that lead to comparable
regulatory outcomes, as both U.S. and the European regulators
have already agreed to in the area of CCP regulations.
As it has made clear repeatedly, this Committee remains
deeply concerned about the path the EC is treading with EMIR
2.2. Should the EC continue to pursue regulations which would
abandon its commitments under the Common Approach and apply
direct supervisory authority over U.S. financial markets,
particularly CCPs, the Committee believes it is appropriate for
the Commission to review its past grants of recognition and
deference for European firms subject to the Commission's
jurisdiction.
Section 125--Affiliate conditions
This section contains two provisions meant to address
problems arising from the 2015 amendment to the CEA regarding
treasury affiliates. In Dodd-Frank, non-financial entities may
claim an exemption from the swap clearing mandate. The law also
allowed a financial entity affiliate (i.e., treasury affiliate)
of the non-financial entity to claim the exemption if it was
acting on behalf of, or as the agent for, the non-financial
entity. Many treasury affiliates found the exemption cumbersome
as they were taking upon themselves the risk of their end-
user's affiliates and not acting as an agent for the end-user.
In response, the CFTC provided no-action relief to such
treasury affiliates provided they and their end-user affiliates
met certain conditions. In 2015, Congress attached to the
Omnibus Appropriations Act of 2016, an amendment to codify this
no-action relief.
Unfortunately, the language did not match the conditions
entirely and had unintended consequences for those end-user
affiliates within the corporate group that did not have
commercial risk mitigated through a treasury affiliate. One
provision in this section addresses that problem by clarifying
that non-financial affiliates that do not engage in swaps
activity with its treasury affiliate may engage in swaps
trading with other affiliates under the same corporate group.
The other provision in this section provides more
flexibility on the conditions the 2015 amendment required upon
treasury affiliates seeking to utilize the swap clearing
exception. Treasury affiliates can not only continue utilizing
this exception for its hedging swaps for its end-user
affiliate, but they can also now engage in non-hedging swaps
for itself provided they meet certain conditions. First, they
must demonstrate to the CFTC that their end-user hedging
activity is in compliance with existing statutory requirements
limiting use of the exception for hedging or mitigating
commercial risk of the non-financial entities. Second, the
treasury affiliate must otherwise comply with existing swap
obligations for the non-hedging swap as a financial entity.
TITLE II--TECHNICAL CORRECTIONS
Committee staff, CFTC staff, and House Legislative Counsel
staff worked together to develop Title II and fix a number of
statutory oversights and drafting errors.
Section 201--Correction of references
Section 5h(f) refers to SEF core principles, whereas
section 5h(g) is the intended provision under which a SEF can
be exempt from registration due to being ``subject to
comparable, comprehensive supervision and regulation.''
Section 1a(2)(i) does not exist, and the provision is meant
to reference the definition of ``excluded commodity'' in
section 1a(19)(i).
This section corrects a typographical error in the cross-
reference to the Administrative Procedure Act.
Section 202--Elimination of obsolete references to dealer options
The provisions refer to activity that occurred prior to
1978. Dealer options are no longer traded, and the Commission
deleted the corresponding regulation (32.23) as part of its
commodity options rulemaking.
Section 203--Updated trade data publication requirement
The term ``exchange'' is not a defined term in the CEA, and
this updated language reflects the current trade data
publication requirements under the CEA.
Section 204--Flexibility for registered entities
This section allows all registered entities to delegate
functions under core principles to a third-party service
provider. For consistency in regulation, SEFs, DCOs and SDRs
should be allowed to delegate these functions as DCMs are
currently able to do.
Section 205--Elimination of obsolete references to electronic trading
facilities
The Commodity Futures Modernization Act (CFMA) added the
term electronic trading facility'' to support two forms of
trading that were abolished by the Dodd-Frank Act. There is no
longer a need for this term in the CEA.
Section 206--Elimination of obsolete reference to alternative swap
execution facilities
Initially, the Dodd-Frank Act referred to SEFs as
``alternative swap execution facilities''. ``Alternative'' was
dropped in later versions of the legislation, but not in this
place.
Section 207--Elimination of redundant references to types of registered
entities.
The reference to registered entities is sufficient. The
deleted language is unnecessary.
Section 208--Clarification of Commission authority over swaps trading
This section clarifies the Commission's authority under
Section 8a includes swaps trading.
Section 209--Elimination of obsolete reference to the Commodity
Exchange Commission
This strikes an obsolete reference to the Commodity
Exchange Commission.
Section 210--Elimination of obsolete references to derivative
transaction execution facilities
Derivatives Transaction Execution Facility (DTEF) was a
type of registered entity created by the CFMA in 2000: it was
abolished by the Dodd-Frank Act in 2010.
Section 211--Elimination of obsolete references to exempt boards of
trade
Exempt Boards of Trade (EBOTs) were abolished by the Dodd-
Frank Act in 2010.
Section 212--Elimination of completed reports
Section 16a of the CEA required the CFTC to submit a study
to the Congressional Agriculture Committees on the function of
the National Futures Association. Section 23(h)(2)(C)(iii) of
the CEA required the CFTC Inspector General to conduct a study
on FOIA reports. This section would eliminate these studies as
they are completed.
Section 213--Miscellaneous corrections
This section provides a collection of additional
miscellaneous statutory corrections that fix drafting errors
from prior legislation.
Section 214--Clarification of petitioner and petition
Section 14(e) of the CEA uses the terms appellant and
appeal which is inconsistent with judicial review regulations
similar to those referenced in this section. For consistency,
those terms are changed to petitioner and petition
respectively.
Section 215--Technical clarifications for retail foreign currency
This section corrects omission of item (ee) from current
section 2(c)(2)(B)(i)(II). It also updates cross-references to
the reordered items in subparagraphs (B) and (C). Further, this
section clarifies that the prohibition in current sections
2(c)(2)(B)(iv)(I)(bb) and 2(c)(2)(C)(iii)(I)(bb) broadly apply
to acting as a commodity trading advisor with respect to any
agreement, contract, or transaction described in clause (i).
Section 216--Miscellaneous swap technical corrections
This section updates references to the requirements of
registered entities in Section 6b to include Section 5h. It
updates Section 8a to specifically include swap contracts. This
section also broadens the types of matters in Section 12(f)
with which the CFTC may assist a foreign futures authority to
any investigation relating to violations of laws, rules, or
regulations enforced by the foreign futures authority. Last, it
clarifies that Section 15(b) applies to bylaws, rules, or
regulations of registered entities, as opposed to contract
markets.
Section-by-Section Analysis
Sec. 1. Short title
This section provides that the Act may be cited as the
``CFTC Reauthorization Act of 2019''.
Sec. 2. Table of contents
TITLE I--POLICY AMENDMENTS
Sec. 101. Foreign futures authority
This section clarifies that the definition of foreign
futures authority includes foreign law enforcement authorities,
which prosecute laws, rules, or regulations relating to
futures, options, swaps, or commodities.
Sec. 102. Honors Program
This section authorizes the Commodity Futures Trading
Commission (CFTC) to establish an Honors Program under its
appointment and compensation authority, and to coordinate with
the Office of Personnel Management, as needed, to establish
such a program.
Sec. 103. Advisory committee changes
This section replaces language that outlines unique rules,
which only govern the Energy and Environmental Markets Advisory
Committee with a general authority for the CFTC to establish
advisory committees under one single set of rules. It also
changes the statute so that all advisory committees must be
subject to the Federal Advisory Committee Act.
Sec. 104. Enhancement of Office of Minority and Women Inclusion at the
CFTC; internship program
This section requires the CFTC's Office of Minority and
Women Inclusion to comply with the requirements of Section 342
of the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010, including:
reporting directly to the head of the
agency;
adopting standards for equal employment
opportunity within the CFTC;
implementing policies to increase the
participation of minority- and women-owned businesses
in programs and contracts of agency;
implementing policies to assess the
diversity policies of agency registrants; and
advising the CFTC on the impacts of policies
and regulations on minority- and women-owned
businesses.
This section requires the CFTC to adopt the joint standards
established by the Interagency Policy Statement, or any
successor Policy Statement, published to comply with Section
342 of the Dodd-Frank Act.
It further requires the Executive Director to establish an
internship program for students attending qualified
institutions, including Hispanic-serving agricultural colleges/
universities, 1994 land-grants (Tribal colleges/universities),
1890 land-grants (historically black colleges/universities),
and colleges/universities in insular areas with teaching/
extension programs in food/agricultural sciences.
Sec. 105. Detailing and resource-sharing
This section authorizes the CFTC to accept assistance from
other Federal agencies, as otherwise authorized by law, to
accept details from other Federal agencies on a non-
reimbursable basis, and to accept and provide details of
employees with foreign futures authorities on a reimbursable or
non-reimbursable basis.
Sec. 106. Office of the Chief Economist
This section establishes an Office of the Chief Economist
(OCE) at the CFTC to serve as economic advisor to the CFTC.
Amends the cost-benefit provisions of the Act to require that
the CFTC coordinate with the OCE before its consideration of
costs and benefits for its rulemakings. Updates the cost-
benefit provisions to include swaps and options, and market
liquidity in its considerations.
Sec. 107. Equal consideration for holding companies
This section permits the CFTC to extend an existing
exemption from the clearing requirement provided to banks,
savings and loans, and credit unions with assets of under $10
billion to bank holding companies and savings and loan holding
companies if they have aggregated assets, including the assets
of any subsidiaries, of $10 billion or less.
Sec. 108. Exemption of qualified charitable organizations from
regulation as commodity pool operators
This section establishes that persons acting as commodity
pool operators or commodity trading advisors on behalf of
church plans or other charitable organizations are not required
to register with the CFTC.
Sec. 109. Digital commodities
This section directs the CFTC to adopt rules detailing the
content and availability of trade and trader data and other
information that boards of trade and swap execution facilities
must be able to access from cash markets of digital derivatives
which settle to a benchmark.
Sec. 110. System safeguards
This section amends existing core principles for designated
contract markets, designated clearing organizations, and swap
execution facilities to clarify that system safeguards,
particularly for automated systems, should be resilient and
maintain the confidentiality, integrity, and availability of
data they contain. Applies amended system safeguard core
principles to swap data repositories.
Sec. 111. Administration of swap execution facilities
This section amends provisions affecting swap execution
facilities (SEF) to--
clarify that SEF emergency authority is to
facilitate the liquidation or transfer of open
positions on swaps as opposed to directly liquidating
or transferring them;
clarify chief compliance officers (CCOs) may
perform other responsibilities for the SEF provided
there are no conflicts of interest between the new
responsibilities and regular duties of CCOs and the new
responsibilities do not impair the CCOs' performance of
regular duties;
clarify policies and procedures CCOs must
establish and administer; and
eliminate the statutory requirement that
CCOs sign annual reports, allow senior officers to
submit annual reports prepared by CCOs, and establish
that such reports must be materially accurate.
Sec. 112. Applicability of prohibitions on fraud and manipulation
activities outside the United States
This section clarifies that the CFTC's various authorities
to prosecute fraud, attempted fraud, manipulation, and
attempted manipulation apply to activities outside the United
States where such activities, independently or in conjunction
with activities in the United States, have or would have a
reasonably foreseeable substantial effect within the United
States.
Sec. 113. Privilege retention
This section facilitates cooperation between the CFTC,
other agencies, and self-regulatory organizations by specifying
that the CFTC does not waive certain privileges by sharing
information with other Federal and State authorities, foreign
authorities, and self-regulatory organizations. In turn, those
authorities and organizations will also not have waived the
same privileges by sharing information with the CFTC. The non-
waiver of privilege for information shared with the CFTC does
not apply to information the Commission obtains from registered
entities, registered futures associations, or self-regulatory
organizations in an investigation or other adverse action. For
the purposes of this section, ``privilege'' is defined as work-
product privilege, attorney-client privilege, governmental
privilege, or any other privilege recognized under Federal,
State or foreign law.
Sec. 114. Proprietary information
This section clarifies the CFTC's authority to apply
Section 8 disclosure protections to proprietary information
obtained or received by the CFTC. Requires the CFTC to adopt
policies to:
address circumstances when the CFTC requests
proprietary information;
safeguard such information;
limit access to such information to
appropriate staff; and
protect the information from unlawful use or
disclosure.
Requires the CFTC, in sharing proprietary information with
other governmental entities, to receive assurances that such
entities maintain sufficient safeguards consistent with such
policies and to apply disclosure limits upon such entities.
Sec. 115. Authority to provide food and incidental assistance to
foreign officials hosted by the CFTC
This section authorizes the CFTC to incur expenses for
meetings hosted by the CFTC with foreign officials to exchange
views on derivative matters, including expenses relating to
meals and local travel and transportation.
Sec. 116. Extension of operations
This section authorizes the CFTC from FY 2020 through FY
2025.
Sec. 117. Aiding and abetting
This section adds a ``reckless'' standard to the CFTC's
aiding and abetting provisions.
Sec. 118. Modernization of authority of the CFTC to conduct research,
development, demonstration, and information programs
This section authorizes the CFTC to establish research,
development, and information programs to further the purposes
of the Commodity Exchange Act. Authorizes the CFTC to adopt a
research and development plan for any such program established.
Authorizes the CFTC to enter into transactions, notwithstanding
Federal procurement laws, in furtherance of such research and
development plans. Authorizes the CFTC to accept gifts of
provision of access, use of facilities, personal property, or
services, if such gift is in furtherance of a research and
development plan. Requires reporting of gifts within 30 days of
acceptance and annual reports to the House and Senate
Agriculture Committees on use of other transaction or gift
authorities.
Sec. 119. Protecting customer property during commodity broker
bankruptcy
This section clarifies that when there is a shortfall in
funds segregated for the benefit of customers during a
commodity broker bankruptcy, assets from the debtor's estate
may make up the shortfall.
Sec. 120. Elimination of the double-sided confirmation requirement for
swap data repositories
This section changes the statutory requirements on swap
data repositories (SDRs) to obtain confirmation of accuracy of
swap data from both counterparties to any counterparty, as
determined by the CFTC. Such counterparty is directed to comply
with a SDR's rules and procedures to confirm the accuracy of
such data.
Sec. 121. Whistleblower protections for internal disclosures
This section expands the definition of a whistleblower from
``a person who provides information relating to a violation of
the CEA to the CFTC,'' to also include:
a person who provides information regarding
any conduct that the person reasonably believes
violates any CFTC law, rule, or regulation to: a
supervisor (if the employer is a CFTC-registered
entity, a self-regulatory organization, or a State
securities regulator); or
another person working for the employer who
the whistleblower reasonably believes has the authority
to address the misconduct (e.g., internal reporting
office or general counsel).
Additionally, the section expedites payments to
whistleblowers and increases the cap on the CFTC Consumer
Protection Fund by $50 million.
Sec. 122. Updating standards for natural persons to meet requirements
for qualified eligible persons
This section directs the CFTC to engage in rulemaking to
update the requirements for natural persons to be qualified
eligible persons (QEPs) for the purposes of providing relief to
commodity pool operators (CPO) and commodity trading advisors
(CTA) in their dealings with QEPs. Directs the CFTC in such
rulemaking to increase net worth, income, and investment
portfolio standards and index such standards to inflation.
Requires the CFTC, in such rulemaking, to grandfather existing
QEP status for QEPs prior to a change in requirements, for
their previous investments, provided they do not liquidate
their holdings or make new investments in their respective CPOs
and CTAs.
Sec. 123. Government Accountability Office study on aluminum markets
This section requires the Government Accountability Office
to study the global aluminum market and return a report to the
House and Senate Agriculture Committees.
Sec. 124. Response to foreign regulatory authority
This section gives direction to the CFTC to review the
appropriateness of current exemptions granted to entities in a
foreign jurisdiction when regulators in such a jurisdiction are
seeking to assert direct supervisory authority over U.S.
clearinghouses.
Sec. 125. Affiliate conditions
This section clarifies that a non-financial entity
affiliate who does not enter into any swaps with its treasury
affiliate may enter into swaps with any other affiliate within
the corporate group and expands swap trading ability for
affiliates to non-financial entities provided they can
demonstrate to the CFTC their compliance with current statutory
requirements for hedging or mitigating the commercial risk of
such non-financial entities.
TITLE II--TECHNICAL CHANGES
This title contains technical changes that have no effect
on policy. The changes correct and clarify current CEA
provisions, and remove obsolete references and drafting errors.
Committee Consideration
I. HEARINGS
The Committee on Agriculture and Subcommittee on Commodity
Exchanges, Energy, and Credit held five hearings in the 115th
and 116th Congresses in anticipation of legislation to
reauthorize the Commodity Futures Trading Commission (CFTC).
On June 27, 2017, the full Committee on Agriculture held a
hearing entitled ``Clearing the Next Crisis: Resilience,
Recovery and Resolution of Derivative Clearinghouses'' where
the following witnesses testified on matters included in H.R.
4895:
Mr. John Dabbs, Global Head of Prime
Derivatives, Credit Suisse, Washington, D.C.
Ms. Amias Moore Gerety, Special Advisor, QED
Investors, Washington, D.C.
Mr. Scott A. Hill, Chief Financial Officer,
Intercontinental Exchange, Atlanta, GA
Mr. Jerrold Salzman, Of Counsel, Skadden,
Arps, Slate, Meagher & Flom, Chicago, IL; on behalf of
CME Group
Mr. Robert Steigerwald, Senior Policy
Advisor, Federal Reserve Bank of Chicago, Chicago, IL
On July 18, 2018, the full Committee on Agriculture held a
hearing entitled ``Cryptocurrencies: Oversight of Assets in the
Digital Age'' where the following witnesses testified on
matters included in H.R. 4895:
Ms. Amber Baldet, Co-Founder and CEO,
Clovyr, New York, NY
Mr. Joshua Fairfield, William Donald Bain
Family Professor of Law, Washington and Lee University
School of Law, Staunton, VA
The Honorable Gary Gensler, Senior Lecturer,
MIT Sloan School of Management, Brooklandville, MD
Mr. Daniel Gorfine, Director, LabCFTC and
Chief Innovation Officer, CFTC, Washington, D.C.
Mr. Scott Kupor, Managing Partner,
Andreessen Horowitz, Menlo Park, CA
Mr. Lowell Ness, Managing Partner, Perkins
Coie LLP, Palo Alto, CA
On July 25, 2018, the full Committee on Agriculture held a
hearing entitled ``Examining the Upcoming Agenda for the
Commodity Futures Trading Commission'' where Chairman
Christopher Giancarlo testified on matters included in H.R.
4895.
On May 1, 2019, the Subcommittee on Commodity Exchanges,
Credit, and Energy held a hearing entitled ``State of the
CFTC'' where Chairman Christopher Giancarlo testified on
matters included in H.R. 4895.
On June 26, 2019, the Subcommittee on Commodity Exchanges,
Energy, and Credit held a hearing entitled ``Brexit and Other
International Developments Affecting U.S. Derivatives Markets''
where the following witnesses testified on matters included in
H.R. 4895:
The Honorable Terrence A. Duffy, Chairman
and CEO, CME Group, Chicago, IL
Mr. Christopher Edmonds, Senior Vice
President of Financial Markets, Intercontinental
Exchange, Chicago, IL
Mr. Daniel Maguire, CEO, LCH Group, London,
United Kingdom
The Honorable Walt Lukken, President and
CEO, Futures Industry Association, Washington, D.C.
Mr. Stephen Berger, Managing Director,
Global Head of Government and Regulatory Policy,
Citadel LLC, on behalf of Managed Funds Association,
New York, NY
II. FULL COMMITTEE
On October 30, 2019, the Committee on Agriculture met
pursuant to notice, with a quorum present, to consider H.R.
4895. Chairman Peterson made an opening statement as did
Ranking Member Conaway, Subcommittee Chairman David Scott, and
Subcommittee Ranking Member Austin Scott.
Ranking Member Conaway sought recognition to engage in a
brief colloquy with Chairman Peterson regarding Section 112 of
the legislation, which permits the CFTC to pursue fraud and
manipulative activities which occur overseas and have an effect
on the United States. Ranking Member Conaway expressed his
desire for the Committee to work together in a bipartisan
manner, going forward, to ensure that CFTC's authority is
clear, precise, and does not interrupt legitimate business
activities. Chairman Peterson thanked the Ranking Member for
his comments and committed to work with him to avoid any
unintended consequences from Section 112.
Chairman Peterson placed H.R. 4895 before the Committee
and, without objection, a first reading of the bill was waived
and it was open to amendment. Chairman Peterson recognized
himself to offer a Managers Amendment to the bill, which
directed the CFTC to review the appropriateness of current
exemptions granted to foreign entities in foreign jurisdictions
that are seeking to assert direct supervisory authority over
U.S. clearinghouses, clarified that a non-financial entity
affiliate who does not enter into any swaps with its treasury
affiliate may enter into swaps with any other affiliate within
the corporate group, expanded swap trading ability for
affiliates to non-financial entities provided they can
demonstrate to the CFTC their compliance with current statutory
requirements for hedging or mitigating the commercial risk of
such non-financial entities, and made minor technical changes
and corrections to the legislation.
Ranking Member Conaway was recognized to offer comments in
support of the Managers Amendment, highlighting specifically
his support of the changes in Section 105, permitting the CFTC
to exchange staff with foreign regulators.
Ms. Adams asked to strike the last word and offered a brief
statement in support of the legislation, specifically
highlighting the provision of the bill which establishes an
internship program for students attending 1890s land-grant
universities, 1994 land-grant Tribal colleges, Hispanic-serving
agricultural universities, and students in agricultural
programs in U.S. territories.
Ms. Plaskett asked to strike the last word and offered a
brief statement in support of the legislation, but highlighted
concerns around the new standard for extraterritoriality
provided in section 112 which she stated might be overly broad
and have a chilling effect on international commerce.
Mr. Van Drew asked to strike the last word and offered a
brief statement in support of the legislation, specifically
highlighting the inclusion of language from H.R. 4325,
establishing protections to retain privileges for information
shared with the CFTC.
Mr. Harder asked to strike the last word and offered a
brief statement in support of the legislation, specifically
highlighting the inclusion of language from H.R. 4247, the
Financial Watchdog Support Act.
Mrs. Hayes asked to strike the last word and offered a
brief statement in support of the legislation, specifically
highlighting language in Section 114 regarding safeguards for
the handling of proprietary information.
Mr. O'Halleran asked to strike the last word and offered a
brief statement in support of the legislation, specifically
highlighting his support of provisions giving the CFTC more
tools to detect, investigate, and stop financial fraud.
Mrs. Axne asked to strike the last word and offered a brief
statement in support of the legislation, specifically
highlighting language included from H.R. 4816, the
Whistleblower Programs Improvement Act.
Mr. Costa asked to strike the last word and offered a brief
statement in support of the legislation and expressed his
desire for the Subcommittee on Livestock and Foreign
Agriculture to work closely with Chairman David Scott and
Ranking Member Austin Scott to work out differences between the
United States and European Union as it relates to trade.
Mr. David Scott asked to strike the last word and offered a
brief statement in support of the legislation, and his
appreciation of the bipartisan nature of the bill. He also
expressed concerns with the effects of Brexit and the EMIR
regulations effort on U.S. markets.
No further discussion was heard on the amendment, and by
voice vote, the amendment passed.
Ranking Member Conaway was recognized for a motion and
moved that the bill, H.R. 4895, as amended, be reported
favorably to the House with the recommendation that it do pass.
By voice vote, the bill was passed.
At the conclusion of the meeting, Chairman Peterson asked
if any Member wished to file supplementary, minority,
additional, or dissenting views to H.R. 4895: no request was
made.
Without objection, staff was given permission to make any
necessary clerical, technical or conforming changes to reflect
the intent of the Committee. Chairman Peterson thanked the
Members and adjourned the meeting.
Committee Votes
In compliance with clause 3(b) of rule XIII of the House of
Representatives, H.R. 4895 was reported by voice vote with a
majority quorum present. There was no request for a recorded
vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee on Agriculture's
oversight findings and recommendations are reflected in the
body of this report.
Budget Act Compliance (Sections 308, 402, and 423)
The provisions of clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives and section 308(a)(1) of the
Congressional Budget Act of 1974 (relating to estimates of new
budget authority, new spending authority, new credit authority,
or increased or decreased revenues or tax expenditures) are not
considered applicable. The estimate and comparison required to
be prepared by the Director of the Congressional Budget Office
under clause 3(c)(3) of rule XIII of the Rules of the House of
Representatives and sections 402 and 423 of the Congressional
Budget Act of 1974 submitted to the Committee prior to the
filing of this report are as follows:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 25, 2019.
Hon. Collin C. Peterson,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4895, the CFTC
Reauthorization Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is David Hughes.
Sincerely,
Phillip L. Swagel,
Director.
Enclosure.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
H.R. 4895 would authorize the appropriation of whatever
amounts are necessary each year through 2025 for the operations
of the Commodity Futures Trading Commission (CFTC). Under H.R.
4895, the CFTC would:
Adopt new rules regarding digital
commodities;
Require commodities exchanges, derivatives
clearing organizations, and swap execution facilities
to safeguard their data and periodically test their
automated systems;
Expand enforcement to cover violations that
occur outside the United States;
Expand whistleblower protections; and
Codify increased net worth, income, and
portfolio standards for investors who wish to trade in
certain sophisticated financial instruments including
hedge funds.
Using information from the CFTC, CBO expects that the
agency's cost of operations would not change substantially
under H.R. 4895. Accordingly, CBO estimates that the
authorization in the bill would equal the same amount each year
as the CFTC received in 2019 ($268 million), with an increase
each year through 2025 to account for expected inflation.
Assuming appropriation of the estimated amounts and based on
historical spending patterns, CBO estimates that implementing
the bill would cost $1.1 billion over the 2020-2024 period (see
Table 1) and $340 million after 2024. The costs of the
legislation fall within budget function 370 (commerce and
housing credit).\1\
---------------------------------------------------------------------------
\1\See also CBO's Cost Estimates Explained, www.cbo.gov/
publication/54437; How CBO Prepares Cost Estimates, www.cbo.gov/
publication/53519; and Glossary, www.cbo.gov/publication/42904.
TABLE 1.--ESTIMATED INCREASES IN SPENDING SUBJECT TO APPROPRIATION UNDER H.R. 4895
----------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
---------------------------------------------
2020 2021 2022 2023 2024 2020-2024
----------------------------------------------------------------------------------------------------------------
Estimated Authorizationa.......................................... 7 283 291 299 308 1,188
Estimated Outlays................................................. 6 252 284 292 301 1,135
----------------------------------------------------------------------------------------------------------------
CBO estimates that enacting H.R. 4895 also would increase revenues by less than $500,000 each year and by $2
million over the 2020-2029 period.
a Although H.R. 4895 would authorize appropriations for the Commodity Futures Trading Commission for 2020, CBO
estimates that $268 million has been allocated, on an annualized basis, from funds made available under the
current continuing resolution (Public Law 116-69), which provided appropriations through December 20, 2019.
CBO estimates that adjusting the 2019 level for inflation would authorize the appropriation of an additional
$7 million in 2020.
H.R. 4895 would authorize the CFTC to bring enforcement
actions against, and secure civil monetary penalties from,
people who recklessly assist violators of commodities law.
Using information from the CFTC, CBO expects the agency would
pursue additional cases related to violations of commodities
law and estimates that collections of civil monetary penalties
(which are recorded as revenues in the federal budget) would
increase by $2 million over the 2020-2029 period.
The bill contains private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA), but CBO cannot determine
whether the aggregate cost of those mandates would exceed the
threshold established in UMRA ($164 million in 2019, adjusted
annually for inflation).
H.R. 4895 would impose several new requirements that would
broaden current practices and impose small changes to
administrative procedures. Specifically, those provisions
would:
Require swap execution facilities to consult
and cooperate with other entities--including designated
contract markets--that are registered with the CFTC
concerning the rules that govern certain emergencies
(such as liquidation and suspension of swaps).
Require chief compliance officers at swap
execution facilities to implement policies and
procedures regarding conflicts of interest.
Expand Federal protections for
whistleblowers and prohibit employers from retaliating
against employees for disclosing information to their
supervisors about violations of CFTC rules or
regulations.
Increase the net worth, income, and
portfolio thresholds that investors must meet to trade
in certain ``sophisticated funds,'' including futures
and hedge funds. Increasing the thresholds would raise
the barriers to entry for such funds, thus restricting
investors who seek to trade in such funds but not
affecting the status of investors who currently trade
in those funds.
CBO estimates that the cost for private entities to comply
with those provisions would be small.
H.R. 4895 also would direct the CFTC to issue rules that
would impose new requirements on private entities.
Specifically, the bill would direct the CFTC to issue
regulations establishing:
Disclosure requirements that contract
markets and swap execution facilities must follow to
trade digital-commodity derivatives,
Requirements that commodity brokers include
cash, securities, and other inventory of their
businesses in customer property in the event of the
broker's bankruptcy; and
Requirements that swap execution facilities
publicly disclose information deemed necessary by the
CFTC.
Because the CFTC has not yet established those rules, CBO
cannot determine the costs to comply with these provisions.
The bill contains no intergovernmental mandates as defined
in UMRA.
The CBO staff contacts for this estimate are David Hughes
(for Federal costs), Joshua Shakin (for revenues), and Rachel
Austin (for mandates). The estimate was reviewed by H. Samuel
Papenfuss, Deputy Assistant Director for Budget Analysis.
Performance Goals and Objectives
With respect to the requirement of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
performance goals and objectives of this legislation are to
reauthorize the Commodity Futures Trading Commission, to
promote the integrity, resilience, and vibrancy of the U.S.
derivatives markets through sound regulation, to maintain
competitive and free markets, and for other purposes.
Committee Cost Estimate
Pursuant to clause 3(d)(2) of rule XIII of the Rules of the
House of Representatives, the Committee report incorporates the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to sections 402 and 423 of the
Congressional Budget Act of 1974.
Advisory Committee Statement
No advisory committee within the meaning of section 5(b) of
the Federal Advisory Committee Act was created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act (Public Law
104-1).
Federal Mandates Statement
The Committee adopted as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act (Public Law 104-4).
Earmark Statement
H.R. 4895 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(e), 9(f), or 9(g) of rule XXI of the Rules of the
House Representatives.
Duplication of Federal Programs
This bill does not establish or reauthorize a program of
the Federal Government known to be duplicative of another
Federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Disclosure of Directed Rule Making
The Committee estimates that H.R. 4895 includes the
following rule makings within the meaning of 5 U.S.C. 551:
Sec. 109 requires the Commission to adopt rules
detailing the content and availability of trade and
trader data and other information DCMs and SEFs must be
able to access from cash markets regarding their
derivative contracts that reference a digital
commodity.
Sec. 122 requires the Commission to adopt a rule to
update its regulations governing the requirements for
natural persons to be qualified eligible persons who
must satisfy portfolio requirements, for the purposes
of providing relief to commodity trading advisors and
commodity pool operators in their dealings with
qualified eligible persons.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
COMMODITY EXCHANGE ACT
* * * * * * *
SEC. 1A. DEFINITIONS.
As used in this Act:
(1) Alternative trading system.--The term
``alternative trading system'' means an organization,
association, or group of persons that--
(A) is registered as a broker or dealer
pursuant to section 15(b) of the Securities
Exchange Act of 1934 (except paragraph (11)
thereof);
(B) performs the functions commonly performed
by an exchange (as defined in section 3(a)(1)
of the Securities Exchange Act of 1934);
(C) does not--
(i) set rules governing the conduct
of subscribers other than the conduct
of such subscribers' trading on the
alternative trading system; or
(ii) discipline subscribers other
than by exclusion from trading; and
(D) is exempt from the definition of the term
``exchange'' under such section 3(a)(1) by rule
or regulation of the Securities and Exchange
Commission on terms that require compliance
with regulations of its trading functions.
(2) Appropriate federal banking agency.--The term
``appropriate Federal banking agency''--
(A) has the meaning given the term in section
3 of the Federal Deposit Insurance Act (12
U.S.C. 1813);
(B) means the Board in the case of a
noninsured State bank; and
(C) is the Farm Credit Administration for
farm credit system institutions.
(3) Associated person of a security-based swap dealer
or major security-based swap participant.--The term
``associated person of a security-based swap dealer or
major security-based swap participant'' has the meaning
given the term in section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)).
(4) Associated person of a swap dealer or major swap
participant.--
(A) In general.--The term ``associated person
of a swap dealer or major swap participant''
means a person who is associated with a swap
dealer or major swap participant as a partner,
officer, employee, or agent (or any person
occupying a similar status or performing
similar functions), in any capacity that
involves--
(i) the solicitation or acceptance of
swaps; or
(ii) the supervision of any person or
persons so engaged.
(B) Exclusion.--Other than for purposes of
section 4s(b)(6), the term ``associated person
of a swap dealer or major swap participant''
does not include any person associated with a
swap dealer or major swap participant the
functions of which are solely clerical or
ministerial.
(5) Board.--The term ``Board'' means the Board of
Governors of the Federal Reserve System.
(6) Board of trade.--The term ``board of trade''
means any organized exchange or other trading facility.
(7) Cleared swap.--The term ``cleared swap'' means
any swap that is, directly or indirectly, submitted to
and cleared by a derivatives clearing organization
registered with the Commission.
(8) Commission.--The term ``Commission'' means the
Commodity Futures Trading Commission established under
section 2(a)(2).
(9) Commodity.--The term ``commodity'' means wheat,
cotton, rice, corn, oats, barley, rye, flaxseed, grain
sorghums, mill feeds, butter, eggs, Solanum tuberosum
(Irish potatoes), wool, wool tops, fats and oils
(including lard, tallow, cottonseed oil, peanut oil,
soybean oil, and all other fats and oils), cottonseed
meal, cottonseed, peanuts, soybeans, soybean meal,
livestock, livestock products, and frozen concentrated
orange juice, and all other goods and articles, except
onions (as provided by the first section of Public Law
85-839 (7 U.S.C. 13-1)) and motion picture box office
receipts (or any index, measure, value, or data related
to such receipts), and all services, rights, and
interests (except motion picture box office receipts,
or any index, measure, value or data related to such
receipts) in which contracts for future delivery are
presently or in the future dealt in.
(10) Commodity pool.--
(A) In general.--The term ``commodity pool''
means any investment trust, syndicate, or
similar form of enterprise operated for the
purpose of trading in commodity interests,
including any--
(i) commodity for future delivery,
security futures product, or swap;
(ii) agreement, contract, or
transaction described in section
2(c)(2)(C)(i) or section 2(c)(2)(D)(i);
(iii) commodity option authorized
under section 4c; or
(iv) leverage transaction authorized
under section 19.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``commodity pool'' any
investment trust, syndicate, or similar form of
enterprise if the Commission determines that
the rule or regulation will effectuate the
purposes of this Act.
(11) Commodity pool operator.--
(A) In general.--The term ``commodity pool
operator'' means any person--
(i) engaged in a business that is of
the nature of a commodity pool,
investment trust, syndicate, or similar
form of enterprise, and who, in
connection therewith, solicits,
accepts, or receives from others,
funds, securities, or property, either
directly or through capital
contributions, the sale of stock or
other forms of securities, or
otherwise, for the purpose of trading
in commodity interests, including any--
(I) commodity for future
delivery, security futures
product, or swap;
(II) agreement, contract, or
transaction described in
section 2(c)(2)(C)(i) or
section 2(c)(2)(D)(i);
(III) commodity option
authorized under section 4c; or
(IV) leverage transaction
authorized under section 19; or
(ii) who is registered with the
Commission as a commodity pool
operator.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``commodity pool
operator'' any person engaged in a business
that is of the nature of a commodity pool,
investment trust, syndicate, or similar form of
enterprise if the Commission determines that
the rule or regulation will effectuate the
purposes of this Act.
(12) Commodity trading advisor.--
(A) In general.--Except as otherwise provided
in this paragraph, the term ``commodity trading
advisor'' means any person who--
(i) for compensation or profit,
engages in the business of advising
others, either directly or through
publications, writings, or electronic
media, as to the value of or the
advisability of trading in--
(I) any contract of sale of a
commodity for future delivery,
security futures product, or
swap;
(II) any agreement, contract,
or transaction described in
section 2(c)(2)(C)(i) or
section 2(c)(2)(D)(i);
(III) any commodity option
authorized under section 4c; or
(IV) any leverage transaction
authorized under section 19;
(ii) for compensation or profit, and
as part of a regular business, issues
or promulgates analyses or reports
concerning any of the activities
referred to in clause (i);
(iii) is registered with the
Commission as a commodity trading
advisor; or
(iv) the Commission, by rule or
regulation, may include if the
Commission determines that the rule or
regulation will effectuate the purposes
of this Act.
(B) Exclusions.--Subject to subparagraph (C),
the term ``commodity trading advisor'' does not
include--
(i) any bank or trust company or any
person acting as an employee thereof;
(ii) any news reporter, news
columnist, or news editor of the print
or electronic media, or any lawyer,
accountant, or teacher;
(iii) any floor broker or futures
commission merchant;
(iv) the publisher or producer of any
print or electronic data of general and
regular dissemination, including its
employees;
(v) the fiduciary of any defined
benefit plan that is subject to the
Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1001 et seq.);
(vi) any contract market or
[derivatives transaction execution
facility] swap execution facility; and
(vii) such other persons not within
the intent of this paragraph as the
Commission may specify by rule,
regulation, or order.
(C) Incidental services.--Subparagraph (B)
shall apply only if the furnishing of such
services by persons referred to in subparagraph
(B) is solely incidental to the conduct of
their business or profession.
(D) Advisors.--The Commission, by rule or
regulation, may include within the term
``commodity trading advisor'', any person
advising as to the value of commodities or
issuing reports or analyses concerning
commodities if the Commission determines that
the rule or regulation will effectuate the
purposes of this paragraph.
(13) Contract of sale.--The term ``contract of sale''
includes sales, agreements of sale, and agreements to
sell.
(14) Cooperative association of producers.--The term
``cooperative association of producers'' means any
cooperative association, corporate, or otherwise, not
less than 75 percent in good faith owned or controlled,
directly or indirectly, by producers of agricultural
products and otherwise complying with the Act of
February 18, 1922 (42 Stat. 388, chapter 57; 7 U.S.C.
291 and 292), including any organization acting for a
group of such associations and owned or controlled by
such associations, except that business done for or
with the United States, or any agency thereof, shall
not be considered either member or nonmember business
in determining the compliance of any such association
with this Act.
(15) Derivatives clearing organization.--
(A) In general.--The term ``derivatives
clearing organization'' means a clearinghouse,
clearing association, clearing corporation, or
similar entity, facility, system, or
organization that, with respect to an
agreement, contract, or transaction--
(i) enables each party to the
agreement, contract, or transaction to
substitute, through novation or
otherwise, the credit of the
derivatives clearing organization for
the credit of the parties;
(ii) arranges or provides, on a
multilateral basis, for the settlement
or netting of obligations resulting
from such agreements, contracts, or
transactions executed by participants
in the derivatives clearing
organization; or
(iii) otherwise provides clearing
services or arrangements that mutualize
or transfer among participants in the
derivatives clearing organization the
credit risk arising from such
agreements, contracts, or transactions
executed by the participants.
(B) Exclusions.--The term ``derivatives
clearing organization'' does not include an
entity, facility, system, or organization
solely because it arranges or provides for--
(i) settlement, netting, or novation
of obligations resulting from
agreements, contracts, or transactions,
on a bilateral basis and without a
central counterparty;
(ii) settlement or netting of cash
payments through an interbank payment
system; or
(iii) settlement, netting, or
novation of obligations resulting from
a sale of a commodity in a transaction
in the spot market for the commodity.
(16) Electronic trading facility.--The term
``electronic trading facility'' means a trading
facility that--
(A) operates by means of an electronic or
telecommunications network; and
(B) maintains an automated audit trail of
bids, offers, and the matching of orders or the
execution of transactions on the facility.
(17) Eligible commercial entity.--The term ``eligible
commercial entity'' means, with respect to an
agreement, contract or transaction in a commodity--
(A) an eligible contract participant
described in clause (i), (ii), (v), (vii),
(viii), or (ix) of paragraph (18)(A) that, in
connection with its business--
(i) has a demonstrable ability,
directly or through separate
contractual arrangements, to make or
take delivery of the underlying
commodity;
(ii) incurs risks, in addition to
price risk, related to the commodity;
or
(iii) is a dealer that regularly
provides risk management or hedging
services to, or engages in market-
making activities with, the foregoing
entities involving transactions to
purchase or sell the commodity or
derivative agreements, contracts, or
transactions in the commodity;
(B) an eligible contract participant, other
than a natural person or an instrumentality,
department, or agency of a State or local
governmental entity, that--
(i) regularly enters into
transactions to purchase or sell the
commodity or derivative agreements,
contracts, or transactions in the
commodity; and
(ii) either--
(I) in the case of a
collective investment vehicle
whose participants include
persons other than--
(aa) qualified
eligible persons, as
defined in Commission
rule 4.7(a) (17 CFR
4.7(a));
(bb) accredited
investors, as defined
in Regulation D of the
Securities and Exchange
Commission under the
Securities Act of 1933
(17 CFR 230.501(a)),
with total assets of
$2,000,000; or
(cc) qualified
purchasers, as defined
in section 2(a)(51)(A)
of the Investment
Company Act of 1940;
in each case as in effect on
the date of the enactment of
the Commodity Futures
Modernization Act of 2000, has,
or is one of a group of
vehicles under common control
or management having in the
aggregate, $1,000,000,000 in
total assets; or
(II) in the case of other
persons, has, or is one of a
group of persons under common
control or management having in
the aggregate, $100,000,000 in
total assets; or
(C) such other persons as the Commission
shall determine appropriate and shall designate
by rule, regulation, or order.
(18) Eligible contract participant.--The term
``eligible contract participant'' means--
(A) acting for its own account--
(i) a financial institution;
(ii) an insurance company that is
regulated by a State, or that is
regulated by a foreign government and
is subject to comparable regulation as
determined by the Commission, including
a regulated subsidiary or affiliate of
such an insurance company;
(iii) an investment company subject
to regulation under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) or a foreign person performing a
similar role or function subject as
such to foreign regulation (regardless
of whether each investor in the
investment company or the foreign
person is itself an eligible contract
participant);
(iv) a commodity pool that--
(I) has total assets
exceeding $5,000,000; and
(II) is formed and operated
by a person subject to
regulation under this Act or a
foreign person performing a
similar role or function
subject as such to foreign
regulation (regardless of
whether each investor in the
commodity pool or the foreign
person is itself an eligible
contract participant) provided,
however, that for purposes of
section 2(c)(2)(B)(vi) and
section 2(c)(2)(C)(vii), the
term ``eligible contract
participant'' shall not include
a commodity pool in which any
participant is not otherwise an
eligible contract participant;
(v) a corporation, partnership,
proprietorship, organization, trust, or
other entity--
(I) that has total assets
exceeding $10,000,000;
(II) the obligations of which
under an agreement, contract,
or transaction are guaranteed
or otherwise supported by a
letter of credit or keepwell,
support, or other agreement by
an entity described in
subclause (I), in clause (i),
(ii), (iii), (iv), or (vii), or
in subparagraph (C); or
(III) that--
(aa) has a net worth
exceeding $1,000,000;
and
(bb) enters into an
agreement, contract, or
transaction in
connection with the
conduct of the entity's
business or to manage
the risk associated
with an asset or
liability owned or
incurred or reasonably
likely to be owned or
incurred by the entity
in the conduct of the
entity's business;
(vi) an employee benefit plan subject
to the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1001 et
seq.), a governmental employee benefit
plan, or a foreign person performing a
similar role or function subject as
such to foreign regulation--
(I) that has total assets
exceeding $5,000,000; or
(II) the investment decisions
of which are made by--
(aa) an investment
adviser or commodity
trading advisor subject
to regulation under the
Investment Advisers Act
of 1940 (15 U.S.C. 80b-
1 et seq.) or this Act;
(bb) a foreign person
performing a similar
role or function
subject as such to
foreign regulation;
(cc) a financial
institution; or
(dd) an insurance
company described in
clause (ii), or a
regulated subsidiary or
affiliate of such an
insurance company;
(vii)(I) a governmental entity
(including the United States, a State,
or a foreign government) or political
subdivision of a governmental entity;
(II) a multinational or supranational
government entity; or
(III) an instrumentality, agency, or
department of an entity described in
subclause (I) or (II);
except that such term does not include
an entity, instrumentality, agency, or
department referred to in subclause (I)
or (III) of this clause unless (aa) the
entity, instrumentality, agency, or
department is a person described in
clause (i), (ii), or (iii) of paragraph
(17)(A); (bb) the entity,
instrumentality, agency, or department
owns and invests on a discretionary
basis $50,000,000 or more in
investments; or (cc) the agreement,
contract, or transaction is offered by,
and entered into with, an entity that
is listed in any of subclauses (I)
through (VI) of section 2(c)(2)(B)(ii);
(viii)(I) a broker or dealer subject
to regulation under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.) or a foreign person performing a
similar role or function subject as
such to foreign regulation, except
that, if the broker or dealer or
foreign person is a natural person or
proprietorship, the broker or dealer or
foreign person shall not be considered
to be an eligible contract participant
unless the broker or dealer or foreign
person also meets the requirements of
clause (v) or (xi);
(II) an associated person of a
registered broker or dealer concerning
the financial or securities activities
of which the registered person makes
and keeps records under section 15C(b)
or 17(h) of the Securities Exchange Act
of 1934 (15 U.S.C. 78o-5(b), 78q(h));
(III) an investment bank holding
company (as defined in section 17(i) of
the Securities Exchange Act of 1934 (15
U.S.C. 78q(i));
(ix) a futures commission merchant
subject to regulation under this Act or
a foreign person performing a similar
role or function subject as such to
foreign regulation, except that, if the
futures commission merchant or foreign
person is a natural person or
proprietorship, the futures commission
merchant or foreign person shall not be
considered to be an eligible contract
participant unless the futures
commission merchant or foreign person
also meets the requirements of clause
(v) or (xi);
(x) a floor broker or floor trader
subject to regulation under this Act in
connection with any transaction that
takes place on or through the
facilities of a registered entity
[(other than an electronic trading
facility with respect to a significant
price discovery contract) or an exempt
board of trade], or any affiliate
thereof, on which such person regularly
trades; or
(xi) an individual who has amounts
invested on a discretionary basis, the
aggregate of which is in excess of--
(I) $10,000,000; or
(II) $5,000,000 and who
enters into the agreement,
contract, or transaction in
order to manage the risk
associated with an asset owned
or liability incurred, or
reasonably likely to be owned
or incurred, by the individual;
(B)(i) a person described in clause (i),
(ii), (iv), (v), (viii), (ix), or (x) of
subparagraph (A) or in subparagraph (C), acting
as broker or performing an equivalent agency
function on behalf of another person described
in subparagraph (A) or (C); or
(ii) an investment adviser subject to
regulation under the Investment Advisers Act of
1940, a commodity trading advisor subject to
regulation under this Act, a foreign person
performing a similar role or function subject
as such to foreign regulation, or a person
described in clause (i), (ii), (iv), (v),
(viii), (ix), or (x) of subparagraph (A) or in
subparagraph (C), in any such case acting as
investment manager or fiduciary (but excluding
a person acting as broker or performing an
equivalent agency function) for another person
described in subparagraph (A) or (C) and who is
authorized by such person to commit such person
to the transaction; or
(C) any other person that the Commission
determines to be eligible in light of the
financial or other qualifications of the
person.
(19) Excluded commodity.--The term ``excluded
commodity'' means--
(i) an interest rate, exchange rate,
currency, security, security index,
credit risk or measure, debt or equity
instrument, index or measure of
inflation, or other macroeconomic index
or measure;
(ii) any other rate, differential,
index, or measure of economic or
commercial risk, return, or value that
is--
(I) not based in substantial
part on the value of a narrow
group of commodities not
described in clause (i); or
(II) based solely on one or
more commodities that have no
cash market;
(iii) any economic or commercial
index based on prices, rates, values,
or levels that are not within the
control of any party to the relevant
contract, agreement, or transaction; or
(iv) an occurrence, extent of an
occurrence, or contingency (other than
a change in the price, rate, value, or
level of a commodity not described in
clause (i)) that is--
(I) beyond the control of the
parties to the relevant
contract, agreement, or
transaction; and
(II) associated with a
financial, commercial, or
economic consequence.
(20) Exempt commodity.--The term ``exempt commodity''
means a commodity that is not an excluded commodity or
an agricultural commodity.
(21) Financial institution.--The term ``financial
institution'' means--
(A) a corporation operating under the fifth
undesignated paragraph of section 25 of the
Federal Reserve Act (12 U.S.C. 603), commonly
known as ``an agreement corporation'';
(B) a corporation organized under section 25A
of the Federal Reserve Act (12 U.S.C. 611 et
seq.), commonly known as an ``Edge Act
corporation'';
(C) an institution that is regulated by the
Farm Credit Administration;
(D) a Federal credit union or State credit
union (as defined in section 101 of the Federal
Credit Union Act (12 U.S.C. 1752));
(E) a depository institution (as defined in
section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813));
(F) a foreign bank or a branch or agency of a
foreign bank (each as defined in section 1(b)
of the International Banking Act of 1978 (12
U.S.C. 3101(b)));
(G) any financial holding company (as defined
in section 2 of the Bank Holding Company Act of
1956);
(H) a trust company; or
(I) a similarly regulated subsidiary or
affiliate of an entity described in any of
subparagraphs (A) through (H).
(22) Floor broker.--
(A) In general.--The term ``floor broker''
means any person--
(i) who, in or surrounding any pit,
ring, post, or other place provided by
a contract market for the meeting of
persons similarly engaged, shall
purchase or sell for any other person--
(I) any commodity for future
delivery, security futures
product, or swap; or
(II) any commodity option
authorized under section 4c; or
(ii) who is registered with the
Commission as a floor broker.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``floor broker'' any
person in or surrounding any pit, ring, post,
or other place provided by a contract market
for the meeting of persons similarly engaged
who trades for any other person if the
Commission determines that the rule or
regulation will effectuate the purposes of this
Act.
(23) Floor trader.--
(A) In general.--The term ``floor trader''
means any person--
(i) who, in or surrounding any pit,
ring, post, or other place provided by
a contract market for the meeting of
persons similarly engaged, purchases,
or sells solely for such person's own
account--
(I) any commodity for future
delivery, security futures
product, or swap; or
(II) any commodity option
authorized under section 4c; or
(ii) who is registered with the
Commission as a floor trader.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``floor trader'' any
person in or surrounding any pit, ring, post,
or other place provided by a contract market
for the meeting of persons similarly engaged
who trades solely for such person's own account
if the Commission determines that the rule or
regulation will effectuate the purposes of this
Act.
(24) Foreign exchange forward.--The term ``foreign
exchange forward'' means a transaction that solely
involves the exchange of 2 different currencies on a
specific future date at a fixed rate agreed upon on the
inception of the contract covering the exchange.
(25) Foreign exchange swap.--The term ``foreign
exchange swap'' means a transaction that solely
involves--
(A) an exchange of 2 different currencies on
a specific date at a fixed rate that is agreed
upon on the inception of the contract covering
the exchange; and
(B) a reverse exchange of the 2 currencies
described in subparagraph (A) at a later date
and at a fixed rate that is agreed upon on the
inception of the contract covering the
exchange.
[(26) Foreign futures authority.--The term ``foreign
futures authority'' means any foreign government, or
any department, agency, governmental body, or
regulatory organization empowered by a foreign
government to administer or enforce a law, rule, or
regulation as it relates to a futures or options
matter, or any department or agency of a political
subdivision of a foreign government empowered to
administer or enforce a law, rule, or regulation as it
relates to a futures or options matter.]
(26) Foreign futures authority.--The term ``foreign
futures authority'' means any foreign government, or
any law enforcement authority, department, central
bank, ministry, agency, governmental body, or
regulatory organization empowered by a foreign
government to administer, enforce, or prosecute a law,
rule, or regulation relating to matters involving
futures, options, swaps, or commodities, or any such
authority, department, or agency of a political
subdivision of a foreign government empowered to
administer, enforce, or prosecute a law, rule, or
regulation as it relates to such matters.
(27) Future delivery.--The term ``future delivery''
does not include any sale of any cash commodity for
deferred shipment or delivery.
(28) Futures commission merchant.--
(A) In general.--The term ``futures
commission merchant'' means an individual,
association, partnership, corporation, or
trust--
(i) that--
(I) is--
(aa) engaged in
soliciting or in
accepting orders for--
(AA) the
purchase or
sale of a
commodity for
future
delivery;
(BB) a
security
futures
product;
(CC) a swap;
(DD) any
agreement,
contract, or
transaction
described in
section
2(c)(2)(C)(i)
or section
2(c)(2)(D)(i);
(EE) any
commodity
option
authorized
under section
4c; or
(FF) any
leverage
transaction
authorized
under section
19; or
(bb) acting as a
counterparty in any
agreement, contract, or
transaction described
in section
2(c)(2)(C)(i) or
section 2(c)(2)(D)(i);
and
(II) in or in connection with
the activities described in
items (aa) or (bb) of subclause
(I), accepts any money,
securities, or property (or
extends credit in lieu thereof)
to margin, guarantee, or secure
any trades or contracts that
result or may result therefrom;
or
(ii) that is registered with the
Commission as a futures commission
merchant.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``futures commission
merchant'' any person who engages in soliciting
or accepting orders for, or acting as a
counterparty in, any agreement, contract, or
transaction subject to this Act, and who
accepts any money, securities, or property (or
extends credit in lieu thereof) to margin,
guarantee, or secure any trades or contracts
that result or may result therefrom, if the
Commission determines that the rule or
regulation will effectuate the purposes of this
Act.
(29) Hybrid instrument.--The term ``hybrid
instrument'' means a security having one or more
payments indexed to the value, level, or rate of, or
providing for the delivery of, one or more commodities.
(30) Interstate commerce.--The term ``interstate
commerce'' means commerce--
(A) between any State, territory, or
possession, or the District of Columbia, and
any place outside thereof; or
(B) between points within the same State,
territory, or possession, or the District of
Columbia, but through any place outside
thereof, or within any territory or possession,
or the District of Columbia.
(31) Introducing broker.--
(A) In general.--The term ``introducing
broker'' means any person (except an individual
who elects to be and is registered as an
associated person of a futures commission
merchant)--
(i) who--
(I) is engaged in soliciting
or in accepting orders for--
(aa) the purchase or
sale of any commodity
for future delivery,
security futures
product, or swap;
(bb) any agreement,
contract, or
transaction described
in section
2(c)(2)(C)(i) or
section 2(c)(2)(D)(i);
(cc) any commodity
option authorized under
section 4c; or
(dd) any leverage
transaction authorized
under section 19; and
(II) does not accept any
money, securities, or property
(or extend credit in lieu
thereof) to margin, guarantee,
or secure any trades or
contracts that result or may
result therefrom; or
(ii) who is registered with the
Commission as an introducing broker.
(B) Further definition.--The Commission, by
rule or regulation, may include within, or
exclude from, the term ``introducing broker''
any person who engages in soliciting or
accepting orders for any agreement, contract,
or transaction subject to this Act, and who
does not accept any money, securities, or
property (or extend credit in lieu thereof) to
margin, guarantee, or secure any trades or
contracts that result or may result therefrom,
if the Commission determines that the rule or
regulation will effectuate the purposes of this
Act.
(32) Major security-based swap participant.--The term
``major security-based swap participant'' has the
meaning given the term in section 3(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
(33) Major swap participant.--
(A) In general.--The term ``major swap
participant'' means any person who is not a
swap dealer, and--
(i) maintains a substantial position
in swaps for any of the major swap
categories as determined by the
Commission, excluding--
(I) positions held for
hedging or mitigating
commercial risk; and
(II) positions maintained by
any employee benefit plan (or
any contract held by such a
plan) as defined in paragraphs
(3) and (32) of section 3 of
the Employee Retirement Income
Security Act of 1974 (29 U.S.C.
1002) for the primary purpose
of hedging or mitigating any
risk directly associated with
the operation of the plan;
(ii) whose outstanding swaps create
substantial counterparty exposure that
could have serious adverse effects on
the financial stability of the United
States banking system or financial
markets; or
(iii)(I) is a financial entity that
is highly leveraged relative to the
amount of capital it holds and that is
not subject to capital requirements
established by an appropriate Federal
banking agency; and
(II) maintains a substantial position
in outstanding swaps in any major swap
category as determined by the
Commission.
(B) Definition of substantial position.--For
purposes of subparagraph (A), the Commission
shall define by rule or regulation the term
``substantial position'' at the threshold that
the Commission determines to be prudent for the
effective monitoring, management, and oversight
of entities that are systemically important or
can significantly impact the financial system
of the United States. In setting the definition
under this subparagraph, the Commission shall
consider the person's relative position in
uncleared as opposed to cleared swaps and may
take into consideration the value and quality
of collateral held against counterparty
exposures.
(C) Scope of designation.--For purposes of
subparagraph (A), a person may be designated as
a major swap participant for 1 or more
categories of swaps without being classified as
a major swap participant for all classes of
swaps.
(D) Exclusions.--The definition under this
paragraph shall not include an entity whose
primary business is providing financing, and
uses derivatives for the purpose of hedging
underlying commercial risks related to interest
rate and foreign currency exposures, 90 percent
or more of which arise from financing that
facilitates the purchase or lease of products,
90 percent or more of which are manufactured by
the parent company or another subsidiary of the
parent company.
(34) Member of a registered entity[; member of a
derivatives transaction execution facility].--The term
``member'' means, with respect to a registered entity
[or derivatives transaction execution facility], an
individual, association, partnership, corporation, or
trust--
(A) owning or holding membership in, or
admitted to membership representation on, the
registered entity [or derivatives transaction
execution facility]; or
(B) having trading privileges on the
registered entity [or derivatives transaction
execution facility].
A participant in an alternative trading system that is
designated as a contract market pursuant to section 5f
is deemed a member of the contract market for purposes
of transactions in security futures products through
the contract market.
(35) Narrow-based security index.--
(A) The term ``narrow-based security index''
means an index--
(i) that has 9 or fewer component
securities;
(ii) in which a component security
comprises more than 30 percent of the
index's weighting;
(iii) in which the five highest
weighted component securities in the
aggregate comprise more than 60 percent
of the index's weighting; or
(iv) in which the lowest weighted
component securities comprising, in the
aggregate, 25 percent of the index's
weighting have an aggregate dollar
value of average daily trading volume
of less than $50,000,000 (or in the
case of an index with 15 or more
component securities, $30,000,000),
except that if there are two or more
securities with equal weighting that
could be included in the calculation of
the lowest weighted component
securities comprising, in the
aggregate, 25 percent of the index's
weighting, such securities shall be
ranked from lowest to highest dollar
value of average daily trading volume
and shall be included in the
calculation based on their ranking
starting with the lowest ranked
security.
(B) Notwithstanding subparagraph (A), an
index is not a narrow-based security index if--
(i)(I) it has at least 9 component
securities;
(II) no component security comprises
more than 30 percent of the index's
weighting; and
(III) each component security is--
(aa) registered pursuant to
section 12 of the Securities
Exchange Act of 1934;
(bb) one of 750 securities
with the largest market
capitalization; and
(cc) one of 675 securities
with the largest dollar value
of average daily trading
volume;
(ii) a board of trade was designated
as a contract market by the Commodity
Futures Trading Commission with respect
to a contract of sale for future
delivery on the index, before the date
of the enactment of the Commodity
Futures Modernization Act of 2000;
(iii)(I) a contract of sale for
future delivery on the index traded on
a designated contract market [or
registered derivatives transaction
execution facility] for at least 30
days as a contract of sale for future
delivery on an index that was not a
narrow-based security index; and
(II) it has been a narrow-based
security index for no more than 45
business days over 3 consecutive
calendar months;
(iv) a contract of sale for future
delivery on the index is traded on or
subject to the rules of a foreign board
of trade and meets such requirements as
are jointly established by rule or
regulation by the Commission and the
Securities and Exchange Commission;
(v) no more than 18 months have
passed since the date of the enactment
of the Commodity Futures Modernization
Act of 2000 and--
(I) it is traded on or
subject to the rules of a
foreign board of trade;
(II) the offer and sale in
the United States of a contract
of sale for future delivery on
the index was authorized before
the date of the enactment of
the Commodity Futures
Modernization Act of 2000; and
(III) the conditions of such
authorization continue to be
met; or
(vi) a contract of sale for future
delivery on the index is traded on or
subject to the rules of a board of
trade and meets such requirements as
are jointly established by rule,
regulation, or order by the Commission
and the Securities and Exchange
Commission.
(C) Within 1 year after the date of the
enactment of the Commodity Futures
Modernization Act of 2000, the Commission and
the Securities and Exchange Commission jointly
shall adopt rules or regulations that set forth
the requirements under subparagraph (B)(iv).
(D) An index that is a narrow-based security
index solely because it was a narrow-based
security index for more than 45 business days
over 3 consecutive calendar months pursuant to
clause (iii) of subparagraph (B) shall not be a
narrow-based security index for the 3 following
calendar months.
(E) For purposes of subparagraphs (A) and
(B)--
(i) the dollar value of average daily
trading volume and the market
capitalization shall be calculated as
of the preceding 6 full calendar
months; and
(ii) the Commission and the
Securities and Exchange Commission
shall, by rule or regulation, jointly
specify the method to be used to
determine market capitalization and
dollar value of average daily trading
volume.
(36) Option.--The term ``option'' means an agreement,
contract, or transaction that is of the character of,
or is commonly known to the trade as, an ``option'',
``privilege'', ``indemnity'', ``bid'', ``offer'',
``put'', ``call'', ``advance guaranty'', or ``decline
guaranty''.
(37) Organized exchange.--The term ``organized
exchange'' means a trading facility that--
(A) permits trading--
(i) by or on behalf of a person that
is not an eligible contract
participant; or
(ii) by persons other than on a
principal-to-principal basis; or
(B) has adopted (directly or through another
nongovernmental entity) rules that--
(i) govern the conduct of
participants, other than rules that
govern the submission of orders or
execution of transactions on the
trading facility; and
(ii) include disciplinary sanctions
other than the exclusion of
participants from trading.
(38) Person.--The term ``person'' imports the plural
or singular, and includes individuals, associations,
partnerships, corporations, and trusts.
(39) Prudential regulator.--The term ``prudential
regulator'' means--
(A) the Board in the case of a swap dealer,
major swap participant, security-based swap
dealer, or major security-based swap
participant that is--
(i) a State-chartered bank that is a
member of the Federal Reserve System;
(ii) a State-chartered branch or
agency of a foreign bank;
(iii) any foreign bank which does not
operate an insured branch;
(iv) any organization operating under
section 25A of the Federal Reserve Act
or having an agreement with the Board
under section 225 of the Federal
Reserve Act;
(v) any bank holding company (as
defined in section 2 of the Bank
Holding Company Act of 1965 (12 U.S.C.
1841)), any foreign bank (as defined in
section 1(b)(7) of the International
Banking Act of 1978 (12 U.S.C.
3101(b)(7)) that is treated as a bank
holding company under section 8(a) of
the International Banking Act of 1978
(12 U.S.C. 3106(a)), and any subsidiary
of such a company or foreign bank
(other than a subsidiary that is
described in subparagraph (A) or (B) or
that is required to be registered with
the Commission as a swap dealer or
major swap participant under this Act
or with the Securities and Exchange
Commission as a security-based swap
dealer or major security-based swap
participant);
(vi) after the transfer date (as
defined in section 311 of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act), any savings and loan
holding company (as defined in section
10 of the Home Owners' Loan Act (12
U.S.C. 1467a)) and any subsidiary of
such company (other than a subsidiary
that is described in subparagraph (A)
or (B) or that is required to be
registered as a swap dealer or major
swap participant with the Commission
under this Act or with the Securities
and Exchange Commission as a security-
based swap dealer or major security-
based swap participant); or
(vii) any organization operating
under section 25A of the Federal
Reserve Act (12U.S.C. 611 et seq.) or
having an agreement with the Board
under section 25 of the Federal Reserve
Act (12 U.S.C. 601 et seq.);
(B) the Office of the Comptroller of the
Currency in the case of a swap dealer, major
swap participant, security-based swap dealer,
or major security-based swap participant that
is--
(i) a national bank;
(ii) a federally chartered branch or
agency of a foreign bank; or
(iii) any Federal savings
association;
(C) the Federal Deposit Insurance Corporation
in the case of a swap dealer, major swap
participant, security-based swap dealer, or
major security-based swap participant that is--
(i) a State-chartered bank that is
not a member of the Federal Reserve
System; or
(ii) any State savings association;
(D) the Farm Credit Administration, in the
case of a swap dealer, major swap participant,
security-based swap dealer, or major security-
based swap participant that is an institution
chartered under the Farm Credit Act of 1971 (12
U.S.C. 2001 et seq.); and
(E) the Federal Housing Finance Agency in the
case of a swap dealer, major swap participant,
security-based swap dealer, or major security-
based swap participant that is a regulated
entity (as such term is defined in section 1303
of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992).
(40) Registered entity.--The term ``registered
entity'' means--
(A) a board of trade designated as a contract
market under section 5;
(B) a derivatives clearing organization
registered under section 5b;
(C) a board of trade designated as a contract
market under section 5f;
(D) a swap execution facility registered
under section 5h; and
(E) a swap data repository registered under
section 21[; and].
(F) with respect to a contract that the
Commission determines is a significant price
discovery contract, any electronic trading
facility on which the contract is executed or
traded.
(41) Security.--The term ``security'' means a
security as defined in section 2(a)(1) of the
Securities Act of 1933 (15 U.S.C. 77b(a)(1)) or section
3(a)(10) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(10)).
(42) Security-based swap.--The term ``security-based
swap'' has the meaning given the term in section 3(a)
of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)).
(43) Security-based swap dealer.--The term
``security-based swap dealer'' has the meaning given
the term in section 3(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)).
(44) Security future.--The term ``security future''
means a contract of sale for future delivery of a
single security or of a narrow-based security index,
including any interest therein or based on the value
thereof, except an exempted security under section
3(a)(12) of the Securities Exchange Act of 1934 as in
effect on the date of the enactment of the Futures
Trading Act of 1982 (other than any municipal security
as defined in section 3(a)(29) of the Securities
Exchange Act of 1934 as in effect on the date of the
enactment of the Futures Trading Act of 1982). The term
``security future'' does not include any agreement,
contract, or transaction excluded from this Act under
section 2(c), 2(d), 2(f), or 2(g) of this Act (as in
effect on the date of the enactment of the Commodity
Futures Modernization Act of 2000) or title IV of the
Commodity Futures Modernization Act of 2000.
(45) Security futures product.--The term ``security
futures product'' means a security future or any put,
call, straddle, option, or privilege on any security
future.
(46) Significant price discovery contract.--The term
``significant price discovery contract'' means an
agreement, contract, or transaction subject to section
2(h)(5).
(47) Swap.--
(A) In general.--Except as provided in
subparagraph (B), the term ``swap'' means any
agreement, contract, or transaction--
(i) that is a put, call, cap, floor,
collar, or similar option of any kind
that is for the purchase or sale, or
based on the value, of 1 or more
interest or other rates, currencies,
commodities, securities, instruments of
indebtedness, indices, quantitative
measures, or other financial or
economic interests or property of any
kind;
(ii) that provides for any purchase,
sale, payment, or delivery (other than
a dividend on an equity security) that
is dependent on the occurrence,
nonoccurrence, or the extent of the
occurrence of an event or contingency
associated with a potential financial,
economic, or commercial consequence;
(iii) that provides on an executory
basis for the exchange, on a fixed or
contingent basis, of 1 or more payments
based on the value or level of 1 or
more interest or other rates,
currencies, commodities, securities,
instruments of indebtedness, indices,
quantitative measures, or other
financial or economic interests or
property of any kind, or any interest
therein or based on the value thereof,
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 without also conveying a
current or future direct or indirect
ownership interest in an asset
(including any enterprise or investment
pool) or liability that incorporates
the financial risk so transferred,
including any agreement, contract, or
transaction commonly known as--
(I) an interest rate swap;
(II) a rate floor;
(III) a rate cap;
(IV) a rate collar;
(V) a cross-currency rate
swap;
(VI) a basis swap;
(VII) a currency swap;
(VIII) a foreign exchange
swap;
(IX) a total return swap;
(X) an equity index swap;
(XI) an equity swap;
(XII) a debt index swap;
(XIII) a debt swap;
(XIV) a credit spread;
(XV) a credit default swap;
(XVI) a credit swap;
(XVII) a weather swap;
(XVIII) an energy swap;
(XIX) a metal swap;
(XX) an agricultural swap;
(XXI) an emissions swap; and
(XXII) a commodity swap;
(iv) that is an agreement, contract,
or transaction that is, or in the
future becomes, commonly known to the
trade as a swap;
(v) including any security-based swap
agreement which meets the definition of
``swap agreement'' as defined in
section 206A of the Gramm-Leach-Bliley
Act (15 U.S.C. 78c note) of which a
material term is based on the price,
yield, value, or volatility of any
security or any group or index of
securities, or any interest therein; or
(vi) that is any combination or
permutation of, or option on, any
agreement, contract, or transaction
described in any of clauses (i) through
(v).
(B) Exclusions.--The term ``swap'' does not
include--
(i) any contract of sale of a
commodity for future delivery (or
option on such a contract), leverage
contract authorized under section 19,
security futures product, or agreement,
contract, or transaction described in
section 2(c)(2)(C)(i) or section
2(c)(2)(D)(i);
(ii) any sale of a nonfinancial
commodity or security for deferred
shipment or delivery, so long as the
transaction is intended to be
physically settled;
(iii) any put, call, straddle,
option, or privilege on any security,
certificate of deposit, or group or
index of securities, including any
interest therein or based on the value
thereof, that is subject to--
(I) the Securities Act of
1933 (15 U.S.C. 77a et seq.);
and
(II) the Securities Exchange
Act of 1934 (15 U.S.C. 78a et
seq.);
(iv) any put, call, straddle, option,
or privilege relating to a foreign
currency entered into on a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a));
(v) any agreement, contract, or
transaction providing for the purchase
or sale of 1 or more securities on a
fixed basis that is subject to--
(I) the Securities Act of
1933 (15 U.S.C. 77a et seq.);
and
(II) the Securities Exchange
Act of 1934 (15 U.S.C. 78a et
seq.);
(vi) any agreement, contract, or
transaction providing for the purchase
or sale of 1 or more securities on a
contingent basis that is subject to the
Securities Act of 1933 (15 U.S.C. 77a
et seq.) and the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.),
unless the agreement, contract, or
transaction predicates the purchase or
sale on the occurrence of a bona fide
contingency that might reasonably be
expected to affect or be affected by
the creditworthiness of a party other
than a party to the agreement,
contract, or transaction;
(vii) any note, bond, or evidence of
indebtedness that is a security, as
defined in section 2(a)(1) of the
Securities Act of 1933 (15 U.S.C.
77b(a)(1));
(viii) any agreement, contract, or
transaction that is--
(I) based on a security; and
(II) entered into directly or
through an underwriter (as
defined in section 2(a)(11) of
the Securities Act of 1933 (15
U.S.C. 77b(a)(11)) by the
issuer of such security for the
purposes of raising capital,
unless the agreement, contract,
or transaction is entered into
to manage a risk associated
with capital raising;
(ix) any agreement, contract, or
transaction a counterparty of which is
a Federal Reserve bank, the Federal
Government, or a Federal agency that is
expressly backed by the full faith and
credit of the United States; and
(x) any security-based swap, other
than a security-based swap as described
in subparagraph (D).
(C) Rule of construction regarding master
agreements.--
(i) In general.--Except as provided
in clause (ii), the term ``swap''
includes a master agreement that
provides for an agreement, contract, or
transaction that is a swap under
subparagraph (A), together with each
supplement to any master agreement,
without regard to whether the master
agreement contains an agreement,
contract, or transaction that is not a
swap pursuant to subparagraph (A).
(ii) Exception.--For purposes of
clause (i), the master agreement shall
be considered to be a swap only with
respect to each agreement, contract, or
transaction covered by the master
agreement that is a swap pursuant to
subparagraph (A).
(D) Mixed swap.--The term ``security-based
swap'' includes any agreement, contract, or
transaction that is as described in section
3(a)(68)(A) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(68)(A)) and also is
based on the value of 1 or more interest or
other rates, currencies, commodities,
instruments of indebtedness, indices,
quantitative measures, other financial or
economic interest or property of any kind
(other than a single security or a narrow-based
security index), or the occurrence, non-
occurrence, or the extent of the occurrence of
an event or contingency associated with a
potential financial, economic, or commercial
consequence (other than an event described in
subparagraph (A)(iii)).
(E) Treatment of foreign exchange swaps and
forwards.--
(i) In general.--Foreign exchange
swaps and foreign exchange forwards
shall be considered swaps under this
paragraph unless the Secretary makes a
written determination under section 1b
that either foreign exchange swaps or
foreign exchange forwards or both--
(I) should be not be
regulated as swaps under this
Act; and
(II) are not structured to
evade the Dodd-Frank Wall
Street Reform and Consumer
Protection Act in violation of
any rule promulgated by the
Commission pursuant to section
721(c) of that Act.
(ii) Congressional notice;
effectiveness.--The Secretary shall
submit any written determination under
clause (i) to the appropriate
committees of Congress, including the
Committee on Agriculture, Nutrition,
and Forestry of the Senate and the
Committee on Agriculture of the House
of Representatives. Any such written
determination by the Secretary shall
not be effective until it is submitted
to the appropriate committees of
Congress.
(iii) Reporting.--Notwithstanding a
written determination by the Secretary
under clause (i), all foreign exchange
swaps and foreign exchange forwards
shall be reported to either a swap data
repository, or, if there is no swap
data repository that would accept such
swaps or forwards, to the Commission
pursuant to section 4r within such time
period as the Commission may by rule or
regulation prescribe.
(iv) Business standards.--
Notwithstanding a written determination
by the Secretary pursuant to clause
(i), any party to a foreign exchange
swap or forward that is a swap dealer
or major swap participant shall conform
to the business conduct standards
contained in section 4s(h).
(v) Secretary.--For purposes of this
subparagraph, the term ``Secretary''
means the Secretary of the Treasury.
(F) Exception for certain foreign exchange
swaps and forwards.--
(i) Registered entities.--Any foreign
exchange swap and any foreign exchange
forward that is listed and traded on or
subject to the rules of a designated
contract market or a swap execution
facility, or that is cleared by a
derivatives clearing organization,
shall not be exempt from any provision
of this Act or amendments made by the
Wall Street Transparency and
Accountability Act of 2010 prohibiting
fraud or manipulation.
(ii) Retail transactions.--Nothing in
subparagraph (E) shall affect, or be
construed to affect, the applicability
of this Act or the jurisdiction of the
Commission with respect to agreements,
contracts, or transactions in foreign
currency pursuant to section 2(c)(2).
(48) Swap data repository.--The term ``swap data
repository'' means any person that collects and
maintains information or records with respect to
transactions or positions in, or the terms and
conditions of, swaps entered into by third parties for
the purpose of providing a centralized recordkeeping
facility for swaps.
(49) Swap dealer.--
(A) In general.--The term ``swap dealer''
means any person who--
(i) holds itself out as a dealer in
swaps;
(ii) makes a market in swaps;
(iii) regularly enters into swaps
with counterparties as an ordinary
course of business for its own account;
or
(iv) engages in any activity causing
the person to be commonly known in the
trade as a dealer or market maker in
swaps,
provided however, in no event shall an insured
depository institution be considered to be a
swap dealer to the extent it offers to enter
into a swap with a customer in connection with
originating a loan with that customer.
(B) Inclusion.--A person may be designated as
a swap dealer for a single type or single class
or category of swap or activities and
considered not to be a swap dealer for other
types, classes, or categories of swaps or
activities.
(C) Exception.--The term ``swap dealer'' does
not include a person that enters into swaps for
such person's own account, either individually
or in a fiduciary capacity, but not as a part
of a regular business.
(D) De minimis exception.--The Commission
shall exempt from designation as a swap dealer
an entity that engages in a de minimis quantity
of swap dealing in connection with transactions
with or on behalf of its customers. The
Commission shall promulgate regulations to
establish factors with respect to the making of
this determination to exempt.
(50) Swap execution facility.--The term ``swap
execution facility'' means a trading system or platform
in which multiple participants have the ability to
execute or trade swaps by accepting bids and offers
made by multiple participants in the facility or
system, through any means of interstate commerce,
including any trading facility, that--
(A) facilitates the execution of swaps
between persons; and
(B) is not a designated contract market.
(51) Trading facility.--
(A) In general.--The term ``trading
facility'' means a person or group of persons
that constitutes, maintains, or provides a
physical or electronic facility or system in
which multiple participants have the ability to
execute or trade agreements, contracts, or
transactions--
(i) by accepting bids or offers made
by other participants that are open to
multiple partipants in the facility or
system; or
(ii) through the interaction of
multiple bids or multiple offers within
a system with a pre-determined non-
discretionary automated trade matching
and execution algorithm.
(B) Exclusions.--The term ``trading
facility'' does not include--
(i) a person or group of persons
solely because the person or group of
persons constitutes, maintains, or
provides an electronic facility or
system that enables participants to
negotiate the terms of and enter into
bilateral transactions as a result of
communications exchanged by the parties
and not from interaction of multiple
bids and multiple offers within a
predetermined, nondiscretionary
automated trade matching and execution
algorithm;
(ii) a government securities dealer
or government securities broker, to the
extent that the dealer or broker
executes or trades agreements,
contracts, or transactions in
government securities, or assists
persons in communicating about,
negotiating, entering into, executing,
or trading an agreement, contract, or
transaction in government securities
(as the terms ``government securities
dealer'', ``government securities
broker'', and ``government securities''
are defined in section 3(a) of the
Securities Exchange Act of 1934 (15
U.S.C. 78c(a))); or
(iii) facilities on which bids and
offers, and acceptances of bids and
offers effected on the facility, are
not binding.
Any person, group of persons, dealer, broker,
or facility described in clause (i) or (ii) is
excluded from the meaning of the term ``trading
facility'' for the purposes of this Act without
any prior specific approval, certification, or
other action by the Commission.
(C) Special rule.--A person or group of
persons that would not otherwise constitute a
trading facility shall not be considered to be
a trading facility solely as a result of the
submission to a derivatives clearing
organization of transactions executed on or
through the person or group of persons.
* * * * * * *
SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF
AGENT; COMMODITY FUTURES TRADING COMMISSION;
TRANSACTION IN INTERSTATE COMMERCE.
(a) Jurisdiction of Commission; Commodity Futures Trading
Commission.--
(1) Jurisdiction of commission.--
(A) In general.--The Commission shall have
exclusive jurisdiction, except to the extent
otherwise provided in the Wall Street
Transparency and Accountability Act of 2010
(including an amendment made by that Act) and
subparagraphs (C), (D), and (I) of this
paragraph and subsections (c) and (f), with
respect to accounts, agreements (including any
transaction which is of the character of, or is
commonly known to the trade as, an ``option'',
``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance
guaranty'', or ``decline guaranty''), and
transactions involving swaps or contracts of
sale of a commodity for future delivery
(including significant price discovery
contracts), traded or executed on a contract
market designated pursuant to section 5 or a
swap execution facility pursuant to section 5h
or any other board of trade, exchange, or
market, and transactions subject to regulation
by the Commission pursuant to section 19 of
this Act. Except as hereinabove provided,
nothing contained in this section shall (I)
supersede or limit the jurisdiction at any time
conferred on the Securities and Exchange
Commission or other regulatory authorities
under the laws of the United States or of any
State, or (II) restrict the Securities and
Exchange Commission and such other authorities
from carrying out their duties and
responsibilities in accordance with such laws.
Nothing in this section shall supersede or
limit the jurisdiction conferred on courts of
the United States or any State.
(B) Liability of principal for act of
agent.--The act, omission, or failure of any
official, agent, or other person acting for any
individual, association, partnership,
corporation, or trust within the scope of his
employment or office shall be deemed the act,
omission, or failure of such individual,
association, partnership, corporation, or
trust, as well as of such official, agent, or
other person.
(C) Notwithstanding any other provision of law--
(i)(I) Except as provided in subclause (II), this Act
shall not apply to and the Commission shall have no
jurisdiction to designate a board of trade as a
contract market for any transaction whereby any party
to such transaction acquires any put, call, or other
option on one or more securities (as defined in section
2(1) of the Securities Act of 1933 or section 3(a)(10)
of the Securities Exchange Act of 1934 on the date of
enactment of the Futures Trading Act of 1982),
including any group or index of such securities, or any
interest therein or based on the value thereof.
(II) This Act shall apply to and the
Commission shall have jurisdiction with respect
to accounts, agreements, and transactions
involving, and may permit the listing for
trading pursuant to section 5c(c) of, a put,
call, or other option on 1 or more securities
(as defined in section 2(a)(1) of the
Securities Act of 1933 or section 3(a)(10) of
the Securities Exchange Act of 1934 on the date
of enactment of the Futures Trading Act of
1982), including any group or index of such
securities, or any interest therein or based on
the value thereof, that is exempted by the
Securities and Exchange Commission pursuant to
section 36(a)(1) of the Securities Exchange Act
of 1934 with the condition that the Commission
exercise concurrent jurisdiction over such put,
call, or other option; provided, however, that
nothing in this paragraph shall be construed to
affect the jurisdiction and authority of the
Securities and Exchange Commission over such
put, call, or other option.
(ii) This Act shall apply to and the Commission shall
have exclusive jurisdiction with respect to accounts,
agreements (including any transaction which is of the
character of, or is commonly known to the trade as, an
``option'', ``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance guaranty'', or
``decline guaranty'') and transactions involving, and
may designate a board of trade as a contract market
in[, or register a derivatives transaction execution
facility that trades or executes,] contracts of sale
(or options on such contracts) for future delivery of a
group or index of securities (or any interest therein
or based upon the value thereof): Provided, however,
That no board of trade shall be designated as a
contract market with respect to any such contracts of
sale (or options on such contracts) for future
delivery[, and no derivatives transaction execution
facility shall trade or execute such contracts of sale
(or options on such contracts) for future delivery],
unless the board of trade [or the derivatives
transaction execution facility,] and the applicable
contract, meet the following minimum requirements:
(I) Settlement of or delivery on such
contract (or option on such contract) shall be
effected in cash or by means other than the
transfer or receipt of any security, except an
exempted security under section 3 of the
Securities Act of 1933 or section 3(a)(12) of
the Securities Exchange Act of 1934 as in
effect on the date of enactment of the Futures
Trading Act of 1982 (other than any municipal
security, as defined in section 3(a)(29) of the
Securities Exchange Act of 1934 on the date of
enactment of the Futures Trading Act of 1982);
(II) Trading in such contract (or option on
such contract) shall not be readily susceptible
to manipulation of the price of such contract
(or option on such contract), nor to causing or
being used in the manipulation of the price of
any underlying security, option on such
security or option on a group or index
including such securities; and
(III) Such group or index of securities shall
not constitute a narrow-based security index.
(iii) If, in its discretion, the Commission
determines that a stock index futures contract,
notwithstanding its conformance with the requirements
in clause (ii) of this subparagraph, can reasonably be
used as a surrogate for trading a security (including a
security futures product), it may, by order, require
such contract and any option thereon be traded and
regulated as security futures products as defined in
section 3(a)(56) of the Securities Exchange Act of 1934
and section 1a of this Act subject to all rules and
regulations applicable to security futures products
under this Act and the securities laws as defined in
section 3(a)(47) of the Securities Exchange Act of
1934.
(iv) No person shall offer to enter into, enter into,
or confirm the execution of any contract of sale (or
option on such contract) for future delivery of any
security, or interest therein or based on the value
thereof, except an exempted security [under or] under
section 3(a)(12) of the Securities Exchange Act of 1934
as in effect on the date of enactment of the Futures
Trading Act of 1982 (other than any municipal security
as defined in section 3(a)(29) of the Securities
Exchange Act of 1934 on the date of enactment of the
Futures Trading Act of 1982), or except as provided in
clause (ii) of this subparagraph or subparagraph (D),
any group or index of such securities or any interest
therein or based on the value thereof.
(v)(I) Notwithstanding any other provision of this
Act, any contract market in a stock index futures
contract (or option thereon) other than a security
futures product[, or any derivatives transaction
execution facility on which such contract or option is
traded,] shall file with the Board of Governors of the
Federal Reserve System any rule establishing or
changing the levels of margin (initial and maintenance)
for such stock index futures contract (or option
thereon) other than security futures products.
(II) The Board may at any time request any contract
market [or derivatives transaction execution facility]
to set the margin for any stock index futures contract
(or option thereon), other than for any security
futures product, at such levels as the Board in its
judgment determines are appropriate to preserve the
financial integrity of the contract market [or
derivatives transaction execution facility], or its
clearing system, or to prevent systemic risk. If the
contract market [or derivatives transaction execution
facility] fails to do so within the time specified by
the Board in its request, the Board may direct the
contract market [or derivatives transaction execution
facility] to alter or supplement the rules of the
contract market [or derivatives transaction execution
facility] as specified in the request.
(III) Subject to such conditions as the Board may
determine, the Board may delegate any or all of its
authority, relating to margin for any stock index
futures contract (or option thereon), other than
security futures products, under this clause to the
Commission.
(IV) It shall be unlawful for any futures commission
merchant to, directly or indirectly, extend or maintain
credit to or for, or collect margin from any customer
on any security futures product unless such activities
comply with the regulations prescribed pursuant to
section 7(c)(2)(B) of the Securities Exchange Act of
1934.
(V) Nothing in this clause shall supersede or limit
the authority granted to the Commission in section
8a(9) to direct a contract market [or registered
derivatives transaction execution facility], on finding
an emergency to exist, to raise temporary margin levels
on any futures contract, or option on the contract
covered by this clause, or on any security futures
product.
(VI) Any action taken by the Board, or by the
Commission acting under the delegation of authority
under subclause [III] (III), under this clause
directing a contract market to alter or supplement a
contract market rule shall be subject to review only in
the Court of Appeals where the party seeking review
resides or has its principal place of business, or in
the United States Court of Appeals for the District of
Columbia Circuit. The review shall be based on the
examination of all information before the Board or the
Commission, as the case may be, at the time the
determination was made. The court reviewing the action
of the Board or the Commission shall not enter a stay
or order of mandamus unless the court has determined,
after notice and a hearing before a panel of the court,
that the agency action complained of was arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.
(D)(i) Notwithstanding any other provision of this Act, the
Securities and Exchange Commission shall have jurisdiction and
authority over security futures as defined in section 3(a)(55)
of the Securities Exchange Act of 1934, section 2(a)(16) of the
Securities Act of 1933, section 2(a)(52) of the Investment
Company Act of 1940, and section 202(a)(27) of the Investment
Advisers Act of 1940, options on security futures, and persons
effecting transactions in security futures and options thereon,
and this Act shall apply to and the Commission shall have
jurisdiction with respect to accounts, agreements (including
any transaction which is of the character of, or is commonly
known to the trade as, an ``option'', ``privilege'',
``indemnity'', ``bid'', ``offer'', ``put'', ``call'', ``advance
guaranty'', or ``decline guaranty''), contracts, and
transactions involving, and may designate a board of trade as a
contract market [in, or register a derivatives transaction
execution facility] that trades or executes, a security futures
product as defined in section 1a of this Act: Provided,
however, That, except as provided in clause (vi) of this
subparagraph, no board of trade shall be designated as a
contract market with respect to[, or registered as a
derivatives transaction execution facility for,] any such
contracts of sale for future delivery unless the board of trade
and the applicable contract meet the following criteria:
(I) Except as otherwise provided in a rule,
regulation, or order issued pursuant to clause (v) of
this subparagraph, any security underlying the security
future, including each component security of a narrow-
based security index, is registered pursuant to section
12 of the Securities Exchange Act of 1934.
(II) If the security futures product is not cash
settled, the board of trade on which the security
futures product is traded has arrangements in place
with a clearing agency registered pursuant to section
17A of the Securities Exchange Act of 1934 for the
payment and delivery of the securities underlying the
security futures product.
(III) Except as otherwise provided in a rule,
regulation, or order issued pursuant to clause (v) of
this subparagraph, the security future is based upon
common stock and such other equity securities as the
Commission and the Securities and Exchange Commission
jointly determine appropriate.
(IV) The security futures product is cleared by a
clearing agency that has in place provisions for linked
and coordinated clearing with other clearing agencies
that clear security futures products, which permits the
security futures product to be purchased on a
designated contract market, [registered derivatives
transaction execution facility,] national securities
exchange registered under section 6(a) of the
Securities Exchange Act of 1934, or national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 and offset on
another designated contract market, [registered
derivatives transaction execution facility,] national
securities exchange registered under section 6(a) of
the Securities Exchange Act of 1934, or national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934.
(V) Only futures commission merchants, introducing
brokers, commodity trading advisors, commodity pool
operators or associated persons subject to suitability
rules comparable to those of a national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 solicit, accept any
order for, or otherwise deal in any transaction in or
in connection with the security futures product.
(VI) The security futures product is subject to a
prohibition against dual trading in section 4j of this
Act and the rules and regulations thereunder or the
provisions of section 11(a) of the Securities Exchange
Act of 1934 and the rules and regulations thereunder,
except to the extent otherwise permitted under the
Securities Exchange Act of 1934 and the rules and
regulations thereunder.
(VII) Trading in the security futures product is not
readily susceptible to manipulation of the price of
such security futures product, nor to causing or being
used in the manipulation of the price of any underlying
security, option on such security, or option on a group
or index including such securities;
(VIII) The board of trade on which the security
futures product is traded has procedures in place for
coordinated surveillance among such board of trade, any
market on which any security underlying the security
futures product is traded, and other markets on which
any related security is traded to detect manipulation
and insider trading, except that, if the board of trade
is an alternative trading system, a national securities
association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 or national
securities exchange registered pursuant to section 6(a)
of the Securities Exchange Act of 1934 of which such
alternative trading system is a member has in place
such procedures.
(IX) The board of trade on which the security futures
product is traded has in place audit trails necessary
or appropriate to facilitate the coordinated
surveillance required in subclause (VIII), except that,
if the board of trade is an alternative trading system,
a national securities association registered pursuant
to section 15A(a) of the Securities Exchange Act of
1934 or national securities exchange registered
pursuant to section 6(a) of the Securities Exchange Act
of 1934 of which such alternative trading system is a
member has rules to require such audit trails.
(X) The board of trade on which the security futures
product is traded has in place procedures to coordinate
trading halts between such board of trade and markets
on which any security underlying the security futures
product is traded and other markets on which any
related security is traded, except that, if the board
of trade is an alternative trading system, a national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934 or
national securities exchange registered pursuant to
section 6(a) of the Securities Exchange Act of 1934 of
which such alternative trading system is a member has
rules to require such coordinated trading halts.
(XI) The margin requirements for a security futures
product comply with the regulations prescribed pursuant
to section 7(c)(2)(B) of the Securities Exchange Act of
1934, except that nothing in this subclause shall be
construed to prevent a board of trade from requiring
higher margin levels for a security futures product
when it deems such action to be necessary or
appropriate.
(ii) It shall be unlawful for any person to offer, to enter
into, to execute, to confirm the execution of, or to conduct
any office or business anywhere in the United States, its
territories or possessions, for the purpose of soliciting, or
accepting any order for, or otherwise dealing in, any
transaction in, or in connection with, a security futures
product unless--
[(I) the transaction is conducted on or subject to
the rules of a board of trade that--
[(aa) has been designated by the Commission
as a contract market in such security futures
product; or
[(bb) is a registered derivatives transaction
execution facility for the security futures
product that has provided a certification with
respect to the security futures product
pursuant to clause (vii);]
(I) the transaction is conducted on or subject to the
rules of a board of trade that has been designated by
the Commission as a contract market in such security
futures product;
(II) the contract is executed or consummated by,
through, or with a member of the contract market [or
registered derivatives transaction execution facility];
and
(III) the security futures product is evidenced by a
record in writing which shows the date, the parties to
such security futures product and their addresses, the
property covered, and its price, and each contract
market member [or registered derivatives transaction
execution facility member] shall keep the record for a
period of 3 years from the date of the transaction, or
for a longer period if the Commission so directs, which
record shall at all times be open to the inspection of
any duly authorized representative of the Commission.
(iii)(I) Except as provided in subclause (II) but
notwithstanding any other provision of this Act, no person
shall offer to enter into, enter into, or confirm the execution
of any option on a security future.
(II) After 3 years after the date of the enactment of the
Commodity Futures Modernization Act of 2000, the Commission and
the Securities and Exchange Commission may by order jointly
determine to permit trading of options on any security future
authorized to be traded under the provisions of this Act and
the Securities Exchange Act of 1934.
(iv)(I) All relevant records of a futures commission merchant
or introducing broker registered pursuant to section 4f(a)(2),
floor broker or floor trader exempt from registration pursuant
to section 4f(a)(3), associated person exempt from registration
pursuant to section 4k(6), or board of trade designated as a
contract market in a security futures product pursuant to
section 5f shall be subject to such reasonable periodic or
special examinations by representatives of the Commission as
the Commission deems necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this Act, and the Commission,
before conducting any such examination, shall give notice to
the Securities and Exchange Commission of the proposed
examination and consult with the Securities and Exchange
Commission concerning the feasibility and desirability of
coordinating the examination with examinations conducted by the
Securities and Exchange Commission in order to avoid
unnecessary regulatory duplication or undue regulatory burdens
for the registrant or board of trade.
(II) The Commission shall notify the Securities and Exchange
Commission of any examination conducted of any futures
commission merchant or introducing broker registered pursuant
to section 4f(a)(2), floor broker or floor trader exempt from
registration pursuant to section 4f(a)(3), associated person
exempt from registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security futures
product pursuant to section 5f, and, upon request, furnish to
the Securities and Exchange Commission any examination report
and data supplied to or prepared by the Commission in
connection with the examination.
(III) Before conducting an examination under subclause (I),
the Commission shall use the reports of examinations, unless
the information sought is unavailable in the reports, of any
futures commission merchant or introducing broker registered
pursuant to section 4f(a)(2), floor broker or floor trader
exempt from registration pursuant to section 4f(a)(3),
associated person exempt from registration pursuant to section
4k(6), or board of trade designated as a contract market in a
security futures product pursuant to section 5f that is made by
the Securities and Exchange Commission, a national securities
association registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-3(a)), or a
national securities exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).
(IV) Any records required under this subsection for a futures
commission merchant or introducing broker registered pursuant
to section 4f(a)(2), floor broker or floor trader exempt from
registration pursuant to section 4f(a)(3), associated person
exempt from registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security futures
product pursuant to section 5f, shall be limited to records
with respect to accounts, agreements, contracts, and
transactions involving security futures products.
(v)(I) The Commission and the Securities and Exchange
Commission, by rule, regulation, or order, may jointly modify
the criteria specified in subclause (I) or (III) of clause (i),
including the trading of security futures based on securities
other than equity securities, to the extent such modification
fosters the development of fair and orderly markets in security
futures products, is necessary or appropriate in the public
interest, and is consistent with the protection of investors.
(II) The Commission and the Securities and Exchange
Commission, by order, may jointly exempt any person from
compliance with the criterion specified in clause (i)(IV) to
the extent such exemption fosters the development of fair and
orderly markets in security futures products, is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
(vi)(I) Notwithstanding clauses (i) and (vii), until the
compliance date, a board of trade shall not be required to meet
the criterion specified in clause (i)(IV).
(II) The Commission and the Securities and Exchange
Commission shall jointly publish in the Federal Register a
notice of the compliance date no later than 165 days before the
compliance date.
(III) For purposes of this clause, the term ``compliance
date'' means the later of--
(aa) 180 days after the end of the first full
calendar month period in which the average aggregate
comparable share volume for all security futures
products based on single equity securities traded on
all designated contract markets and registered
derivatives transaction execution facilities equals or
exceeds 10 percent of the average aggregate comparable
share volume of options on single equity securities
traded on all national securities exchanges registered
pursuant to section 6(a) of the Securities Exchange Act
of 1934 and any national securities associations
registered pursuant to section 15A(a) of such Act; or
(bb) 2 years after the date on which trading in any
security futures product commences under this Act.
(vii) It shall be unlawful for a board of trade to trade or
execute a security futures product unless the board of trade
has provided the Commission with a certification that the
specific security futures product and the board of trade, as
applicable, meet the criteria specified in subclauses (I)
through (XI) of clause (i), except as otherwise provided in
clause (vi).
(E)(i) To the extent necessary or appropriate in the public
interest, to promote fair competition, and consistent with
promotion of market efficiency, innovation, and expansion of
investment opportunities, the protection of investors, and the
maintenance of fair and orderly markets, the Commission and the
Securities and Exchange Commission shall jointly issue such
rules, regulations, or orders as are necessary and appropriate
to permit the offer and sale of a security futures product
traded on or subject to the rules of a foreign board of trade
to United States persons.
(ii) The rules, regulations, or orders adopted under clause
(i) shall take into account, as appropriate, the nature and
size of the markets that the securities underlying the security
futures product reflects.
(F)(i) Nothing in this Act is intended to prohibit a futures
commission merchant from carrying security futures products
traded on or subject to the rules of a foreign board of trade
in the accounts of persons located outside of the United
States.
(ii) Nothing in this Act is intended to prohibit any eligible
contract participant located in the United States from
purchasing or carrying securities futures products traded on or
subject to the rules of a foreign board of trade, exchange, or
market to the same extent such person may be authorized to
purchase or carry other securities traded on a foreign board of
trade, exchange, or market so long as any underlying security
for such security futures products is traded principally on,
by, or through any exchange or market located outside the
United States.
(G)(i) Nothing in this paragraph shall limit
the jurisdiction conferred on the Securities
and Exchange Commission by the Wall Street
Transparency and Accountability Act of 2010
with regard to security-based swap agreements
as defined pursuant to section 3(a)(78) of the
Securities Exchange Act of 1934, and security-
based swaps.
(ii) In addition to the authority of the
Securities and Exchange Commission described in
clause (i), nothing in this subparagraph shall
limit or affect any statutory authority of the
Commission with respect to an agreement,
contract, or transaction described in clause
(i).
(H) Notwithstanding any other provision of
law, the Wall Street Transparency and
Accountability Act of 2010 shall not apply to,
and the Commodity Futures Trading Commission
shall have no jurisdiction under such Act (or
any amendments to the Commodity Exchange Act
made by such Act) with respect to, any security
other than a security-based swap.
(I)(i) Nothing in this Act shall limit or
affect any statutory authority of the Federal
Energy Regulatory Commission or a State
regulatory authority (as defined in section
3(21) of the Federal Power Act (16 U.S.C.
796(21)) with respect to an agreement,
contract, or transaction that is entered into
pursuant to a tariff or rate schedule approved
by the Federal Energy Regulatory Commission or
a State regulatory authority and is--
(I) not executed, traded, or cleared
on a registered entity or trading
facility; or
(II) executed, traded, or cleared on
a registered entity or trading facility
owned or operated by a regional
transmission organization or
independent system operator.
(ii) In addition to the authority of the
Federal Energy Regulatory Commission or a State
regulatory authority described in clause (i),
nothing in this subparagraph shall limit or
affect--
(I) any statutory authority of the
Commission with respect to an
agreement, contract, or transaction
described in clause (i); or
(II) the jurisdiction of the
Commission under subparagraph (A) with
respect to an agreement, contract, or
transaction that is executed, traded,
or cleared on a registered entity or
trading facility that is not owned or
operated by a regional transmission
organization or independent system
operator (as defined by sections 3(27)
and (28) of the Federal Power Act (16
U.S.C. 796(27), 796(28)).
(2)(A) There is hereby established, as an independent
agency of the United States Government, a Commodity
Futures Trading Commission. The Commission shall be
composed of five Commissioners who shall be appointed
by the President, by and with the advice and consent of
the Senate. In nominating persons for appointment, the
President shall--
(i) select persons who shall each have
demonstrated knowledge in futures trading or
its regulation, or the production,
merchandising, processing or distribution of
one or more of the commodities or other goods
and articles, services, rights, and interests
covered by this Act; and
(ii) seek to ensure that the demonstrated
knowledge of the Commissioners is balanced with
respect to such areas.
Not more than three of the members of the Commission
shall be members of the same political party. Each
Commissioner shall hold office for a term of five years
and until his successor is appointed and has qualified,
except that he shall not so continue to serve beyond
the expiration of the next session of Congress
subsequent to the expiration of said fixed term of
office, and except (i) any Commissioner appointed to
fill a vacancy occurring prior to the expiration of the
term for which his predecessor was appointed shall be
appointed for the remainder of such term, and (ii) the
terms of office of the Commissioners first taking
office after the enactment of this paragraph shall
expire as designated by the President at the time of
nomination, one at the end of one year, one at the end
of two years, one at the end of three years, one at the
end of four years, and one at the end of five years.
(B) The President shall appoint, by and with the
advice and consent of the Senate, a member of the
Commission as Chairman, who shall serve as Chairman at
the pleasure of the President. An individual may be
appointed as Chairman at the same time that person is
appointed as a Commissioner. The Chairman shall be the
chief administrative officer of the Commission and
shall preside at hearings before the Commission. At any
time, the President may appoint, by and with the advice
and consent of the Senate, a different Chairman, and
the Commissioner previously appointed as Chairman may
complete that Commissioner's term as a Commissioner.
(3) A vacancy in the Commission shall not impair the
right of the remaining Commissioners to exercise all
the powers of the Commission.
(4) The Commission shall have a General Counsel, who
shall be appointed by the Commission and serve at the
pleasure of the Commission. The General Counsel shall
report directly to the Commission and serve as its
legal advisor. The Commission shall appoint such other
attorneys as may be necessary, in the opinion of the
Commission, to assist the General Counsel, represent
the Commission in all disciplinary proceedings pending
before it, represent the Commission in courts of law
whenever appropriate, assist the Department of Justice
in handling litigation concerning the Commission in
courts of law, and perform such other legal duties and
functions as the Commission may direct.
(5) The Commission shall have an Executive Director,
who shall be appointed by the Commission and serve at
the pleasure of the Commission. The Executive Director
shall report directly to the Commission and perform
such functions and duties as the Commission may
prescribe.
(6)(A) Except as otherwise provided in this paragraph
and in paragraphs (4) and (5) of this subsection, the
executive and administrative functions of the
Commission, including functions of the Commission with
respect to the appointment and supervision of personnel
employed under the Commission, the distribution of
business among such personnel and among administrative
units of the Commission, and the use and expenditure of
funds, according to budget categories, plans, programs,
and priorities established and approved by the
Commission, shall be exercised solely by the Chairman.
(B) In carrying out any of his functions under the
provisions of this paragraph, the Chairman shall be
governed by general policies, plans, priorities, and
budgets approved by the Commission and by such
regulatory decisions, findings, and determinations as
the Commission may by law be authorized to make.
(C) The appointment by the Chairman of the heads of
major administrative units under the Commission shall
be subject to the approval of the Commission.
(D) Personnel employed regularly and full time in the
immediate offices of Commissioners other than the
Chairman shall not be affected by the provisions of
this paragraph.
(E) There are hereby reserved to the Commission its
functions with respect to revising budget estimates and
with respect to determining the distribution of
appropriated funds according to major programs and
purposes.
(F) The Chairman may from time to time make such
provisions as he shall deem appropriate authorizing the
performance by any officer, employee, or administrative
unit under his jurisdiction of any functions of the
Chairman under this paragraph.
(7) Appointment and compensation.--
(A) In general.--The Commission may appoint
and fix the compensation of such officers,
attorneys, economists, examiners, and other
employees as may be necessary for carrying out
the functions of the Commission under this Act.
(B) Rates of pay.--Rates of basic pay for all
employees of the Commission may be set and
adjusted by the Commission without regard to
chapter 51 or subchapter III of chapter 53 of
title 5, United States Code.
(C) Comparability.--
(i) In general.--The Commission may
provide additional compensation and
benefits to employees of the Commission
if the same type of compensation or
benefits are provided by any agency
referred to in section 1206(a) of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
(12 U.S.C. 1833b(a)) or could be
provided by such an agency under
applicable provisions of law (including
rules and regulations).
(ii) Consultation.--In setting and
adjusting the total amount of
compensation and benefits for
employees, the Commission shall consult
with, and seek to maintain
comparability with, the agencies
referred to in section 1206(a) of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989
(12 U.S.C. 1833b(a)).
(D) Honors program.--The Commission may
establish the Honors Program under its
appointment and compensation authorities.
(8) No Commissioner or employee of the Commission
shall accept employment or compensation from any
person, exchange, or clearinghouse subject to
regulation by the Commission under this Act during his
term of office, nor shall he participate, directly or
indirectly, in any registered entity operations or
transactions of a character subject to regulation by
the Commission.
(9)(A) The Commission shall, in cooperation with the
Secretary of Agriculture, maintain a liaison between
the Commission and the Department of Agriculture. The
Secretary shall take such steps as may be necessary to
enable the Commission to obtain information and utilize
such services and facilities of the Department of
Agriculture as may be necessary in order to maintain
effectively such liaison. In addition, the Secretary
shall appoint a liaison officer, who shall be an
employee of the Office of the Secretary, for the
purpose of maintaining a liaison between the Department
of Agriculture and the Commission. The Commission shall
furnish such liaison officer appropriate office space
within the offices of the Commission and shall allow
such liaison officer to attend and observe all
deliberations and proceedings of the Commission.
(B)(i) The Commission shall maintain communications
with the Department of the Treasury, the Board of
Governors of the Federal Reserve System, and the
Securities and Exchange Commission for the purpose of
keeping such agencies fully informed of Commission
activities that relate to the responsibilities of those
agencies, for the purpose of seeking the views of those
agencies on such activities, and for considering the
relationships between the volume and nature of
investment and trading in contracts of sale of a
commodity for future delivery and in securities and
financial instruments under the jurisdiction of such
agencies.
(ii) When a board of trade applies for designation
[or registration] as a contract market [or derivatives
transaction execution facility] involving transactions
for future delivery of any security issued or
guaranteed by the United States or any agency thereof,
the Commission shall promptly deliver a copy of such
application to the Department of the Treasury and the
Board of Governors of the Federal Reserve System. The
Commission may not designate [or register] a board of
trade as a contract market [or derivatives transaction
execution facility] based on such application until
forty-five days after the date the Commission delivers
the application to such agencies or until the
Commission receives comments from each of such agencies
on the application, whichever period is shorter. Any
comments received by the Commission from such agencies
shall be included as part of the public record of the
Commission's designation proceeding. In designating[,
registering,] or refusing, suspending, or revoking the
designation [or registration] of, a board of trade as a
contract market [or derivatives transaction execution
facility] involving transactions for future delivery
referred to in this clause or in considering any
possible action under this Act (including without
limitation emergency action under section 8a(9)) with
respect to such transactions, the Commission shall take
into consideration all comments it receives from the
Department of the Treasury and the Board of Governors
of the Federal Reserve System and shall consider the
effect that any such designation, [registration,]
suspension, revocation, or action may have on the debt
financing requirements of the United States Government
and the continued efficiency and integrity of the
underlying market for government securities.
(iii) The provisions of this subparagraph shall not
create any rights, liabilities, or obligations upon
which actions may be brought against the Commission.
(10)(A) Whenever the Commission submits any budget
estimate or request to the President or the Office of
Management and Budget, it shall concurrently transmit
copies of that estimate or request to the House and
Senate Appropriations Committees and the House
Committee on Agriculture and the Senate Committee on
Agriculture, Nutrition, and Forestry.
(B) Whenever the Commission transmits any legislative
recommendations, or testimony, or comments on
legislation to the President or the Office of
Management and Budget, it shall concurrently transmit
copies thereof to the House Committee on Agriculture
and the Senate Committee on Agriculture, Nutrition, and
Forestry. No officer or agency of the United States
shall have any authority to require the Commission to
submit its legislative recommendations, or testimony,
or comments on legislation to any officer or agency of
the United States for approval, comments, or review,
prior to the submission of such recommendations,
testimony, or comments to the Congress. In instances in
which the Commission voluntarily seeks to obtain the
comments or review of any officer or agency of the
United States, the Commission shall include a
description of such actions in its legislative
recommendations, testimony, or comments on legislation
which it transmits to the Congress.
(C) Whenever the Commission issues for official
publication any opinion, release, rule, order,
interpretation, or other determination on a matter, the
Commission shall provide that any dissenting,
concurring, or separate opinion by any Commissioner on
the matter be published in full along with the
Commission opinion, release, rule, order,
interpretation, or determination.
(11) The Commission shall have an official seal, which shall
be judicially noticed.
(12) The Commission is authorized to promulgate such rules
and regulations as it deems necessary to govern the operating
procedures and conduct of the business of the Commission.
(13) Public availability of swap transaction data.--
(A) Definition of real-time public
reporting.--In this paragraph, the term ``real-
time public reporting'' means to report data
relating to a swap transaction, including price
and volume, as soon as technologically
practicable after the time at which the swap
transaction has been executed.
(B) Purpose.--The purpose of this section is
to authorize the Commission to make swap
transaction and pricing data available to the
public in such form and at such times as the
Commission determines appropriate to enhance
price discovery.
(C) General rule.--The Commission is
authorized and required to provide by rule for
the public availability of swap transaction and
pricing data as follows:
(i) With respect to those swaps that
are subject to the mandatory clearing
requirement described in subsection
(h)(1) (including those swaps that are
excepted from the requirement pursuant
to subsection (h)(7)), the Commission
shall require real-time public
reporting for such transactions.
(ii) With respect to those swaps that
are not subject to the mandatory
clearing requirement described in
subsection (h)(1), but are cleared at a
registered derivatives clearing
organization, the Commission shall
require real-time public reporting for
such transactions.
(iii) With respect to swaps that are
not cleared at a registered derivatives
clearing organization and which are
reported to a swap data repository or
the Commission under subsection (h)(6),
the Commission shall require real-time
public reporting for such transactions,
in a manner that does not disclose the
business transactions and market
positions of any person.
(iv) With respect to swaps that are
determined to be required to be cleared
under subsection (h)(2) but are not
cleared, the Commission shall require
real-time public reporting for such
transactions.
(D) Registered entities and public
reporting.--The Commission may require
registered entities to publicly disseminate the
swap transaction and pricing data required to
be reported under this paragraph.
(E) Rulemaking required.--With respect to the
rule providing for the public availability of
transaction and pricing data for swaps
described in clauses (i) and (ii) of
subparagraph (C), the rule promulgated by the
Commission shall contain provisions--
(i) to ensure such information does
not identify the participants;
(ii) to specify the criteria for
determining what constitutes a large
notional swap transaction (block trade)
for particular markets and contracts;
(iii) to specify the appropriate time
delay for reporting large notional swap
transactions (block trades) to the
public; and
(iv) that take into account whether
the public disclosure will materially
reduce market liquidity.
(F) Timeliness of reporting.--Parties to a
swap (including agents of the parties to a
swap) shall be responsible for reporting swap
transaction information to the appropriate
registered entity in a timely manner as may be
prescribed by the Commission.
(G) Reporting of swaps to registered swap
data repositories.--Each swap (whether cleared
or uncleared) shall be reported to a registered
swap data repository.
(14) Semiannual and annual public reporting of
aggregate swap data.--
(A) In general.--In accordance with
subparagraph (B), the Commission shall issue a
written report on a semiannual and annual basis
to make available to the public information
relating to--
(i) the trading and clearing in the
major swap categories; and
(ii) the market participants and
developments in new products.
(B) Use; consultation.--In preparing a report
under subparagraph (A), the Commission shall--
(i) use information from swap data
repositories and derivatives clearing
organizations; and
(ii) consult with the Office of the
Comptroller of the Currency, the Bank
for International Settlements, and such
other regulatory bodies as may be
necessary.
(C) Authority of the commission.--The
Commission may, by rule, regulation, or order,
delegate the public reporting responsibilities
of the Commission under this paragraph in
accordance with such terms and conditions as
the Commission determines to be appropriate and
in the public interest.
[(15) Energy and environmental markets advisory
committee.--
[(A) Establishment.--
[(i) In general.--An Energy and
Environmental Markets Advisory
Committee is hereby established.
[(ii) Membership.--The Committee
shall have 9 members.
[(iii) Activities.--The Committee's
objectives and scope of activities
shall be--
[(I) to conduct public
meetings;
[(II) to submit reports and
recommendations to the
Commission (including
dissenting or minority views,
if any); and
[(III) otherwise to serve as
a vehicle for discussion and
communication on matters of
concern to exchanges, firms,
end users, and regulators
regarding energy and
environmental markets and their
regulation by the Commission.
[(B) Requirements.--
[(i) In general.--The Committee shall
hold public meetings at such intervals
as are necessary to carry out the
functions of the Committee, but not
less frequently than 2 times per year.
[(ii) Members.--Members shall be
appointed to 3-year terms, but may be
removed for cause by vote of the
Commission.
[(C) Appointment.--The Commission shall
appoint members with a wide diversity of
opinion and who represent a broad spectrum of
interests, including hedgers and consumers.
[(D) Reimbursement.--Members shall be
entitled to per diem and travel expense
reimbursement by the Commission.
[(E) FACA.--The Committee shall not be
subject to the Federal Advisory Committee Act
(5 U.S.C. App.).]
(15) Advisory committees.--
(A) Establishment.--
(i) In general.--The Commission shall
establish advisory committees to serve
as vehicles for discussion and
communication on matters related to the
regulatory activities of the
Commission.
(ii) Membership.--The Commission
shall appoint to an advisory committee
such members as the Commission finds
appropriate to promote robust
discussion of the subject mater before
the advisory committee. In appointing
members to an advisory committee, the
Commission shall seek to include a wide
diversity of opinion and represent a
broad cross-section of interests, as
applicable to the subject matter.
(B) Activities.--The activities of an
advisory committee shall include the following:
(i) to hold meetings at such
intervals as necessary to carry out the
functions of the advisory committee;
(ii) to submit to the Commission such
reports and recommendations to the
Commission (including minority views,
if any) as the advisory committee deems
appropriate; and
(iii) such activities as the
Commission determines is appropriate.
(C) Applicability of the federal advisory
committee act.--An advisory committee
established under this paragraph shall be
subject to the Federal Advisory Committee Act.
(16) Office of Minority and Women Inclusion.--Within
1 year after the date of the enactment of this
paragraph, the Commission shall comply with section 342
of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
(17) Annual Internship Program.--
(A) In general.--The Executive Director shall
establish a program to place an appropriate
number of students attending qualified
institutions in a semester-length internship
within the Commission's divisions and offices.
(B) Funding.--The Commission shall set aside
an appropriate percentage of the funds
allocated to the office of the Chairman to
enable the selected interns identified in
subparagraph (A) to afford living expenses,
including rent and a per-diem, in the
metropolitan areas where the Director
identifies internship opportunities.
(C) Qualified institution defined.--In this
paragraph, the term ``qualified institution''
means--
(i) an 1890 Institution (as defined
in section 2 of the Agricultural
Research, Extension, and Education
Reform Act of 1998 (7 U.S.C. 7601));
(ii) a 1994 Institution (as defined
in section 532 of the Equity in
Educational Land-Grant Status Act of
1994 (Public Law 103-382; 7 U.S.C. 301
note));
(iii) an eligible institution (as
defined in section 1489 of the National
Agricultural Research, Extension, and
Teaching Policy Act of 1977 (7 U.S.C.
3361)); or
(iv) a Hispanic-serving institution
(as defined in section 1404 of the Food
and Agriculture Act of 1977 (7 U.S.C.
3103)).
(18) Assistance from federal agencies.--
(A) In general.--The Commission may accept
any assistance, including services, funds,
facilities, and other support services as
determined by the Commission, to effectuate the
purposes and provisions of this Act, from any
department or agency of the United States that
is authorized under other law to provide the
assistance.
(B) Detail flexibility.--When an employee
from another department or agency is detailed
to the Commission, the employee may be detailed
on either a reimbursable or non-reimbursable
basis, and such detail shall be without
interruption or loss of civil service status or
privilege.
(19) Assistance from foreign governmental entities.--
(A) In general.--The Commission may--
(i) accept details of officers or
employees of a foreign futures
authority or any department or agency
of a foreign government, including a
central bank or ministry, on a
temporary basis as employees of the
Commission pursuant to section 12(b) of
this Act, or section 3101 or 3109 of
title 5, United States Code; and
(ii) detail officers or employees of
the Commission to work on a temporary
basis for an entity described in clause
(i).
(B) Reciprocity and reimbursement.--
(i) Reciprocity not required.--
Assistance described in subparagraph
(A) need not be provided on a
reciprocal basis.
(ii) Reimbursement.--
(I) In general.--The
Commission may provide and
accept assistance described in
subparagraph (A) on a
reimbursable or non-
reimbursable basis, only in
accordance with a written
agreement between the
Commission and the respective
foreign governmental entity.
(II) Form.--A reimbursement
to or from the Commission may
be made in cash or in kind. The
Commission shall credit a
reimbursement received from a
foreign governmental entity to
the appropriate Commission
appropriation, fund, or
account.
(C) Standards of conduct.--An officer or
employee detailed under subparagraph (A)(i)
shall be subject to the provisions of law
relating to ethics, conflicts of interest, or
corruption, and to any other statute governing
the standards of conduct for Commission
employees that are applicable to the type of
appointment.
(D) Limitation.--An officer or employee
detailed under subparagraph (A)(i) may not hold
any management position at the Commission.
(20) Office of the chief economist.--
(A) Establishment.--There is established in
the Commission the Office of Chief Economist.
(B) Head.--The Office of Chief Economist
shall be headed by the Chief Economist.
(C) Functions.--The Chief Economist shall
serve as economic advisor to the Commission and
perform functions such as economic analysis,
regulatory cost-benefit analysis, and research.
(D) Professional staff.--
(i) In general.--The Commission shall
appoint such other economists and any
related positions as may be necessary
for the Office of the Chief Economist--
(I) in accordance with the
statutes, rules, and
regulations governing
appointments in the excepted
service; and
(II) notwithstanding any
statutes, rules, and
regulations governing
appointments in the competitive
service.
(ii) Rule of construction.--The
appointment of a candidate to a
position under authority of this
subsection shall not be considered to
cause such position to be converted
from the competitive service to the
excepted service.
(b) For the purposes of this Act (but not in any wise
limiting the foregoing definition of interstate commerce) a
transaction in respect to any article shall be considered to be
in interstate commerce if such article is part of that current
of commerce usual in the commodity trade whereby commodities
and commodity products and by-products thereof are sent from
one State with the expectation that they will end their
transit, after purchase, in another, including, in addition to
cases within the above general description, all cases where
purchase or sale is either for shipment to another State, or
for manufacture within the State and the shipment outside the
State of the products resulting from such manufacture. Articles
normally in such current of commerce shall not be considered
out of such commerce through resort being had to any means or
device intended to remove transactions in respect thereto from
the provisions of this Act. For the purpose of this paragraph
the word ``State'' includes Territory, the District of
Columbia, possession of the United States, and foreign nation.
(c) Agreements, Contracts, and Transactions in Foreign
Currency, Government Securities, and Certain Other
Commodities.--
(1) In general.--Except as provided in paragraph (2),
nothing in this Act (other than section[,] 5b, or
12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in--
(A) foreign currency;
(B) government securities;
(C) security warrants;
(D) security rights;
(E) resales of installment loan contracts;
(F) repurchase transactions in an excluded
commodity; or
(G) mortgages or mortgage purchase
commitments.
(2) Commission jurisdiction.--
(A) Agreements, contracts, and transactions
traded on an organized exchange.--This Act
applies to, and the Commission shall have
jurisdiction over, an agreement, contract, or
transaction described in paragraph (1) that
is--
(i) a contract of sale of a commodity
for future delivery (or an option on
such a contract), or an option on a
commodity (other than foreign currency
or a security or a group or index of
securities), that is executed or traded
on an organized exchange;
(ii) a swap; or
(iii) an option on foreign currency
executed or traded on an organized
exchange that is not a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934.
(B) Agreements, contracts, and transactions
in retail foreign currency.--
(i) This Act applies to, and the
Commission shall have jurisdiction
over, an agreement, contract, or
transaction in foreign currency that--
(I) is a contract of sale of
a commodity for future delivery
(or an option on such a
contract) or an option (other
than an option executed or
traded on a national securities
exchange registered pursuant to
section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a))); and
(II) is offered to, or
entered into with, a person
that is not an eligible
contract participant, unless
the counterparty, or the person
offering to be the
counterparty, of the person
is--
(aa) a United States
financial institution;
(bb)(AA) a broker or
dealer registered under
section 15(b) (except
paragraph (11) thereof)
or 15C of the
Securities Exchange Act
of 1934 (15 U.S.C.
78o(b), 78o-5); or
(BB) an associated
person of a broker or
dealer registered under
section 15(b) (except
paragraph (11) thereof)
or 15C of the
Securities Exchange Act
of 1934 (15 U.S.C.
78o(b), 78o-5)
concerning the
financial or securities
activities of which the
broker or dealer makes
and keeps records under
section 15C(b) or 17(h)
of the Securities
Exchange Act of 1934
(15 U.S.C. 78o-5(b),
78q(h));
(cc)(AA) a futures
commission merchant
that is primarily or
substantially engaged
in the business
activities described in
section 1a of this Act,
is registered under
this Act, is not a
person described in
item (bb) of this
subclause, and
maintains adjusted net
capital equal to or in
excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph;
or
(BB) an affiliated
person of a futures
commission merchant
that is primarily or
substantially engaged
in the business
activities described in
section 1a of this Act,
is registered under
this Act, and is not a
person described in
item (bb) of this
subclause, if the
affiliated person
maintains adjusted net
capital equal to or in
excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph
and is not a person
described in such item
(bb), and the futures
commission merchant
makes and keeps records
under section
4f(c)(2)(B) of this Act
concerning the futures
and other financial
activities of the
affiliated person;
(dd) a financial
holding company (as
defined in section 2 of
the Bank Holding
Company Act of 1956);
or
[(ff)] (ee) a retail
foreign exchange dealer
that maintains adjusted
net capital equal to or
in excess of the dollar
amount that applies for
purposes of clause (ii)
of this subparagraph
and is registered in
such capacity with the
Commission, subject to
such terms and
conditions as the
Commission shall
prescribe, and is a
member of a futures
association registered
under section 17.
(ii) The dollar amount that applies
for purposes of this clause is--
(I) $10,000,000, beginning
120 days after the date of the
enactment of this clause;
(II) $15,000,000, beginning
240 days after such date of
enactment; and
(III) $20,000,000, beginning
360 days after such date of
enactment.
(iii) Notwithstanding items (cc) and
[(gg)] (ee) of clause (i)(II) of this
subparagraph, agreements, contracts, or
transactions described in clause (i) of
this subparagraph, and accounts or
pooled investment vehicles described in
clause (vi), shall be subject to
subsection (a)(1)(B) of this section
and sections 4(b), 4b, 4c(b), 4o, 6(c)
and 6(d) (except to the extent that
sections 6(c) and 6(d) prohibit
manipulation of the market price of any
commodity in interstate commerce, or
for future delivery on or subject to
the rules of any market), 6c, 6d, 8(a),
13(a), and 13(b) if the agreements,
contracts, or transactions are offered,
or entered into, by a person that is
registered as a futures commission
merchant or retail foreign exchange
dealer, or an affiliated person of a
futures commission merchant registered
under this Act that is not also a
person described in any of item (aa),
(bb), [(ee), or (ff) of clause (i)(II)
of this subparagraph] or (dd) of clause
(i)(II).
(iv)(I) Notwithstanding items (cc)
and [(gg)] (ee) of clause (i)(II), a
person, unless registered in such
capacity as the Commission by rule,
regulation, or order shall determine
and a member of a futures association
registered under section 17, shall
not--
(aa) solicit or accept orders
from any person that is not an
eligible contract participant
in connection with agreements,
contracts, or transactions
described in clause (i) entered
into with or to be entered into
with a person who is not
described in item (aa), (bb),
[(ee), or (ff)] or (dd) of
clause (i)(II);
(bb) exercise discretionary
trading authority or obtain
written authorization to
exercise discretionary trading
authority over any account for
or on behalf of any person that
is not an eligible contract
participant in connection with
agreements, contracts, or
transactions described in
clause (i) entered into with or
to be entered into with a
person who is not described in
item (aa), (bb), [(ee), or
(ff)] or (dd) of clause
(i)(II), or otherwise act as a
commodity trading advisor with
respect to any agreement,
contract, or transaction
described in clause (i); or
(cc) operate or solicit
funds, securities, or property
for any pooled investment
vehicle that is not an eligible
contract participant in
connection with agreements,
contracts, or transactions
described in clause (i) entered
into with or to be entered into
with a person who is not
described in item (aa), (bb),
[(ee), or (ff)] or (dd) of
clause (i)(II).
(II) Subclause (I) of this clause
shall not apply to--
(aa) any person described in
any of item (aa), (bb), [(ee),
or (ff)] or (dd) of clause
(i)(II);
(bb) any such person's
associated persons; or
(cc) any person who would be
exempt from registration if
engaging in the same activities
in connection with transactions
conducted on or subject to the
rules of a contract market [or
a derivatives transaction
execution facility].
(III) Notwithstanding items (cc) and
[(gg)] (ee) of clause (i)(II), the
Commission may make, promulgate, and
enforce such rules and regulations as,
in the judgment of the Commission, are
reasonably necessary to effectuate any
of the provisions of, or to accomplish
any of the purposes of, this Act in
connection with the activities of
persons subject to subclause (I).
(IV) Subclause (III) of this clause
shall not apply to--
(aa) any person described in
any of item (aa) through [(ff)]
(dd) of clause (i)(II);
(bb) any such person's
associated persons; or
(cc) any person who would be
exempt from registration if
engaging in the same activities
in connection with transactions
conducted on or subject to the
rules of a contract market [or
a derivatives transaction
execution facility].
(v) Notwithstanding items (cc) and
[(gg)] (ee) of clause (i)(II), the
Commission may make, promulgate, and
enforce such rules and regulations as,
in the judgment of the Commission, are
reasonably necessary to effectuate any
of the provisions of, or to accomplish
any of the purposes of, this Act in
connection with agreements, contracts,
or transactions described in clause (i)
which are offered, or entered into, by
a person described in item (cc) or
[(gg)] (ee) of clause (i)(II).
(vi) This Act applies to, and the
Commission shall have jurisdiction
over, an account or pooled investment
vehicle that is offered for the purpose
of trading, or that trades, any
agreement, contract, or transaction in
foreign currency described in clause
(i).
(C)(i)(I) This subparagraph shall apply to
any agreement, contract, or transaction in
foreign currency that is--
(aa) offered to, or entered
into with, a person that is not
an eligible contract
participant (except that this
subparagraph shall not apply if
the counterparty, or the person
offering to be the
counterparty, of the person
that is not an eligible
contract participant is a
person described in any of item
(aa), (bb), [(ee), or (ff)] or
(dd) of subparagraph
(B)(i)(II)); and
(bb) offered, or entered
into, on a leveraged or
margined basis, or financed by
the offeror, the counterparty,
or a person acting in concert
with the offeror or
counterparty on a similar
basis.
(II) Subclause (I) of this clause shall not
apply to--
(aa) a security that is not a
security futures product; or
(bb) a contract of sale that--
(AA) results in actual
delivery within 2 days; or
(BB) creates an enforceable
obligation to deliver between a
seller and buyer that have the
ability to deliver and accept
delivery, respectively, in
connection with their line of
business.
(ii)(I) Agreements, contracts, or
transactions described in clause (i) of this
subparagraph, and accounts or pooled investment
vehicles described in clause (vii), shall be
subject to subsection (a)(1)(B) of this section
and sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d)
(except to the extent that sections 6(c) and
6(d) prohibit manipulation of the market price
of any commodity in interstate commerce, or for
future delivery on or subject to the rules of
any market), 6c, 6d, 8(a), 13(a), and 13(b).
(II) Subclause (I) of this clause shall not
apply to--
(aa) any person described in any of
item (aa), (bb), [(ee), or (ff)] or
(dd) of subparagraph (B)(i)(II); or
(bb) any such person's associated
persons.
(III) The Commission may make, promulgate,
and enforce such rules and regulations as, in
the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions
of or to accomplish any of the purposes of this
Act in connection with agreements, contracts,
or transactions described in clause (i) of this
subparagraph if the agreements, contracts, or
transactions are offered, or entered into, by a
person that is not described in item (aa)
through (ff) of subparagraph (B)(i)(II).
(iii)(I) A person, unless registered in such
capacity as the Commission by rule, regulation,
or order shall determine and a member of a
futures association registered under section
17, shall not--
(aa) solicit or accept orders from
any person that is not an eligible
contract participant in connection with
agreements, contracts, or transactions
described in clause (i) of this
subparagraph entered into with or to be
entered into with a person who is not
described in item (aa), (bb), [(ee), or
(ff)] or (dd) of subparagraph
(B)(i)(II);
(bb) exercise discretionary trading
authority or obtain written
authorization to exercise written
trading authority over any account for
or on behalf of any person that is not
an eligible contract participant in
connection with agreements, contracts,
or transactions described in clause (i)
of this subparagraph entered into with
or to be entered into with a person who
is not described in item (aa), (bb),
[(ee), or (ff)] or (dd) of subparagraph
(B)(i)(II), or otherwise act as a
commodity trading advisor with respect
to any agreement, contract, or
transaction described in clause (i); or
(cc) operate or solicit funds,
securities, or property for any pooled
investment vehicle that is not an
eligible contract participant in
connection with agreements, contracts,
or transactions described in clause (i)
of this subparagraph entered into with
or to be entered into with a person who
is not described in item (aa), (bb),
[(ee), or (ff)] or (dd) of subparagraph
(B)(i)(II).
(II) Subclause (I) of this clause shall not
apply to--
(aa) any person described in item
(aa), (bb), [(ee), or (ff)] or (dd) of
subparagraph (B)(i)(II);
(bb) any such person's associated
persons; or
(cc) any person who would be exempt
from registration if engaging in the
same activities in connection with
transactions conducted on or subject to
the rules of a contract market [or a
derivatives transaction execution
facility].
(III) The Commission may make, promulgate,
and enforce such rules and regulations as, in
the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions
of, or to accomplish any of the purposes of,
this Act in connection with the activities of
persons subject to subclause (I).
(IV) Subclause (III) of this clause shall not
apply to--
(aa) any person described in [item
(aa) through (ff)] items (aa) through
(dd) of subparagraph (B)(i)(II);
(bb) any such person's associated
persons; or
(cc) any person who would be exempt
from registration if engaging in the
same activities in connection with
transactions conducted on or subject to
the rules of a contract market [or a
derivatives transaction execution
facility].
(iv) Sections 4(b) and 4b shall apply to any
agreement, contract, or transaction described
in clause (i) of this subparagraph as if the
agreement, contract, or transaction were a
contract of sale of a commodity for future
delivery.
(v) This subparagraph shall not be construed
to limit any jurisdiction that the Commission
may otherwise have under any other provision of
this Act over an agreement, contract, or
transaction that is a contract of sale of a
commodity for future delivery.
(vi) This subparagraph shall not be construed
to limit any jurisdiction that the Commission
or the Securities and Exchange Commission may
otherwise have under any other provision of
this Act with respect to security futures
products and persons effecting transactions in
security futures products.
(vii) This Act applies to, and the
Commission shall have jurisdiction
over, an account or pooled investment
vehicle that is offered for the purpose
of trading, or that trades, any
agreement, contract, or transaction in
foreign currency described in clause
(i).
(D) Retail commodity transactions.--
(i) Applicability.--Except as
provided in clause (ii), this
subparagraph shall apply to any
agreement, contract, or transaction in
any commodity that is--
(I) entered into with, or
offered to (even if not entered
into with), a person that is
not an eligible contract
participant or eligible
commercial entity; and
(II) entered into, or offered
(even if not entered into), on
a leveraged or margined basis,
or financed by the offeror, the
counterparty, or a person
acting in concert with the
offeror or counterparty on a
similar basis.
(ii) Exceptions.--This subparagraph
shall not apply to--
(I) an agreement, contract,
or transaction described in
paragraph (1) or subparagraphs
(A), (B), or (C), including any
agreement, contract, or
transaction specifically
excluded from subparagraph (A),
(B), or (C);
(II) any security;
(III) a contract of sale
that--
(aa) results in
actual delivery within
28 days or such other
longer period as the
Commission may
determine by rule or
regulation based upon
the typical commercial
practice in cash or
spot markets for the
commodity involved; or
(bb) creates an
enforceable obligation
to deliver between a
seller and a buyer that
have the ability to
deliver and accept
delivery, respectively,
in connection with the
line of business of the
seller and buyer; or
(IV) an agreement, contract,
or transaction that is listed
on a national securities
exchange registered under
section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a)); or
(V) an identified banking
product, as defined in section
402(b) of the Legal Certainty
for Bank Products Act of 2000
(7 U.S.C.27(b)).
(iii) Enforcement.--Sections 4(a),
4(b), and 4b apply to any agreement,
contract, or transaction described in
clause (i), as if the agreement,
contract, or transaction was a contract
of sale of a commodity for future
delivery.
(iv) Eligible commercial entity.--For
purposes of this subparagraph, an
agricultural producer, packer, or
handler shall be considered to be an
eligible commercial entity for any
agreement, contract, or transaction for
a commodity in connection with the line
of business of the agricultural
producer, packer, or handler.
(E) Prohibition.--
(i) Definition of federal regulatory
agency.--In this subparagraph, the term
``Federal regulatory agency'' means--
(I) the Commission;
(II) the Securities and
Exchange Commission;
(III) an appropriate Federal
banking agency;
(IV) the National Credit
Union Association; and
(V) the Farm Credit
Administration.
(ii) Prohibition.--
(I) In general.--Except as
provided in subclause (II), a
person described in
subparagraph (B)(i)(II) for
which there is a Federal
regulatory agency shall not
offer to, or enter into with, a
person that is not an eligible
contract participant, any
agreement, contract, or
transaction in foreign currency
described in subparagraph
(B)(i)(I) or (C)(i)(I) except
pursuant to a rule or
regulation of a Federal
regulatory agency allowing the
agreement, contract, or
transaction under such terms
and conditions as the Federal
regulatory agency shall
prescribe.
(II) Effective date.--With
regard to persons described in
subparagraph (B)(i)(II) for
which a Federal regulatory
agency has issued a proposed
rule concerning agreements,
contracts, or transactions in
foreign currency described in
subparagraph (B)(i)(I) prior to
the date of enactment of this
subclause, subclause (I) shall
take effect 90 days after the
date of enactment of this
subclause.
(iii) Requirements of rules and
regulations.--
(I) In general.--The rules
and regulations described in
clause (ii) shall prescribe
appropriate requirements with
respect to--
(aa) disclosure;
(bb) recordkeeping;
(cc) capital and
margin;
(dd) reporting;
(ee) business
conduct;
(ff) documentation;
and
(gg) such other
standards or
requirements as the
Federal regulatory
agency shall determine
to be necessary.
(II) Treatment.--The rules or
regulations described in clause
(ii) shall treat all
agreements, contracts, and
transactions in foreign
currency described in
subparagraph (B)(i)(I), and all
agreements, contracts, and
transactions in foreign
currency that are functionally
or economically similar to
agreements, contracts, or
transactions described in
subparagraph (B)(i)(I),
similarly.
(d) Swaps.--Nothing in this Act (other than subparagraphs
(A), (B), (C), (D), (G), and (H) of subsection (a)(1),
subsections (f) and (g), sections 1a, 2(a)(13), 2(c)(2)(A)(ii),
2(e), 2(h), 4(c), 4a, 4b, and 4b-1, subsections (a), (b), and
[(g) of] (e) of section 4c, sections 4d, 4e, 4f, 4g, 4h, 4i,
4j, 4k, 4l, 4m, 4n, 4o, 4p, 4r, 4s, 4t, 5, 5b, 5c, 5e, and 5h,
subsections (c) and (d) of section 6, sections 6c, 6d, 8, 8a,
and 9, subsections (e)(2), (f), and (h) of section 12,
subsections (a) and (b) of section 13, sections 17, 20, 21, and
22(a)(4), and any other provision of this Act that is
applicable to registered entities or Commission registrants)
governs or applies to a swap.
(e) Limitation on Participation.--It shall be unlawful for
any person, other than an eligible contract participant, to
enter into a swap unless the swap is entered into on, or
subject to the rules of, a board of trade designated as a
contract market under section 5.
(f) Exclusion for Qualifying Hybrid Instruments.--
(1) In general.--Nothing in this Act (other than
section 12(e)(2)(B)) governs or is applicable to a
hybrid instrument that is predominantly a security.
(2) Predominance.--A hybrid instrument shall be
considered to be predominantly a security if--
(A) the issuer of the hybrid instrument
receives payment in full of the purchase price
of the hybrid instrument, substantially
contemporaneously with delivery of the hybrid
instrument;
(B) the purchaser or holder of the hybrid
instrument is not required to make any payment
to the issuer in addition to the purchase price
paid under subparagraph (A), whether as margin,
settlement payment, or otherwise, during the
life of the hybrid instrument or at maturity;
(C) the issuer of the hybrid instrument is
not subject by the terms of the instrument to
mark-to-market margining requirements; and
(D) the hybrid instrument is not marketed as
a contract of sale of a commodity for future
delivery (or option on such a contract) subject
to this Act.
(3) Mark-to-market margining requirements.--For the
purposes of paragraph (2)(C), mark-to-market margining
requirements do not include the obligation of an issuer
of a secured debt instrument to increase the amount of
collateral held in pledge for the benefit of the
purchaser of the secured debt instrument to secure the
repayment obligations of the issuer under the secured
debt instrument.
(g) Application of Commodity Futures Laws.--
(1) No provision of this Act shall be construed as
implying or creating any presumption that--
(A) any agreement, contract, or transaction
that is excluded from this Act under section
2(c), 2(d), 2(e), 2(f), or 2(g) of this Act or
title IV of the Commodity Futures Modernization
Act of 2000, or exempted under section 2(h) or
4(c) of this Act; or
(B) any agreement, contract, or transaction,
not otherwise subject to this Act, that is not
so excluded or exempted,
is or would otherwise be subject to this Act.
(2) No provision of, or amendment made by, the
Commodity Futures Modernization Act of 2000 shall be
construed as conferring jurisdiction on the Commission
with respect to any such agreement, contract, or
transaction, except as expressly provided in section 5b
of this Act.
(h) Clearing Requirement.--
(1) In general.--
(A) Standard for clearing.--It shall be
unlawful for any person to engage in a swap
unless that person submits such swap for
clearing to a derivatives clearing organization
that is registered under this Act or a
derivatives clearing organization that is
exempt from registration under this Act if the
swap is required to be cleared.
(B) Open access.--The rules of a derivatives
clearing organization described in subparagraph
(A) shall--
(i) prescribe that all swaps (but not
contracts of sale of a commodity for
future delivery or options on such
contracts) submitted to the derivatives
clearing organization with the same
terms and conditions are economically
equivalent within the derivatives
clearing organization and may be offset
with each other within the derivatives
clearing organization; and
(ii) provide for non-discriminatory
clearing of a swap (but not a contract
of sale of a commodity for future
delivery or option on such contract)
executed bilaterally or on or through
the rules of an unaffiliated designated
contract market or swap execution
facility.
(2) Commission review.--
(A) Commission-initiated review.--
(i) The Commission on an ongoing
basis shall review each swap, or any
group, category, type, or class of
swaps to make a determination as to
whether the swap or group, category,
type, or class of swaps should be
required to be cleared.
(ii) The Commission shall provide at
least a 30-day public comment period
regarding any determination made under
clause (i).
(B) Swap submissions.--
(i) A derivatives clearing
organization shall submit to the
Commission each swap, or any group,
category, type, or class of swaps that
it plans to accept for clearing, and
provide notice to its members (in a
manner to be determined by the
Commission) of the submission.
(ii) Any swap or group, category,
type, or class of swaps listed for
clearing by a derivative clearing
organization as of the date of
enactment of this subsection shall be
considered submitted to the Commission.
(iii) The Commission shall--
(I) make available to the
public submissions received
under clauses (i) and (ii);
(II) review each submission
made under clauses (i) and
(ii), and determine whether the
swap, or group, category, type,
or class of swaps described in
the submission is required to
be cleared; and
(III) provide at least a 30-
day public comment period
regarding its determination as
to whether the clearing
requirement under paragraph
(1)(A) shall apply to the
submission.
(C) Deadline.--The Commission shall make its
determination under subparagraph (B)(iii) not
later than 90 days after receiving a submission
made under subparagraphs (B)(i) and (B)(ii),
unless the submitting derivatives clearing
organization agrees to an extension for the
time limitation established under this
subparagraph.
(D) Determination.--
(i) In reviewing a submission made
under subparagraph (B), the Commission
shall review whether the submission is
consistent with section 5b(c)(2).
(ii) In reviewing a swap, group of
swaps, or class of swaps pursuant to
subparagraph (A) or a submission made
under subparagraph (B), the Commission
shall take into account the following
factors:
(I) The existence of
significant outstanding
notional exposures, trading
liquidity, and adequate pricing
data.
(II) The availability of rule
framework, capacity,
operational expertise and
resources, and credit support
infrastructure to clear the
contract on terms that are
consistent with the material
terms and trading conventions
on which the contract is then
traded.
(III) The effect on the
mitigation of systemic risk,
taking into account the size of
the market for such contract
and the resources of the
derivatives clearing
organization available to clear
the contract.
(IV) The effect on
competition, including
appropriate fees and charges
applied to clearing.
(V) The existence of
reasonable legal certainty in
the event of the insolvency of
the relevant derivatives
clearing organization or 1 or
more of its clearing members
with regard to the treatment of
customer and swap counterparty
positions, funds, and property.
(iii) In making a determination under
subparagraph (A) or (B)(iii) that the
clearing requirement shall apply, the
Commission may require such terms and
conditions to the requirement as the
Commission determines to be
appropriate.
(E) Rules.--Not later than 1 year after the
date of the enactment of this subsection, the
Commission shall adopt rules for a derivatives
clearing organization's submission for review,
pursuant to this paragraph, of a swap, or a
group, category, type, or class of swaps, that
it seeks to accept for clearing. Nothing in
this subparagraph limits the Commission from
making a determination under subparagraph
(B)(iii) for swaps described in subparagraph
(B)(ii).
(3) Stay of clearing requirement.--
(A) In general.--After making a determination
pursuant to paragraph (2)(B), the Commission,
on application of a counterparty to a swap or
on its own initiative, may stay the clearing
requirement of paragraph (1) until the
Commission completes a review of the terms of
the swap (or the group, category, type, or
class of swaps) and the clearing arrangement.
(B) Deadline.--The Commission shall complete
a review undertaken pursuant to subparagraph
(A) not later than 90 days after issuance of
the stay, unless the derivatives clearing
organization that clears the swap, or group,
category, type, or class of swaps agrees to an
extension of the time limitation established
under this subparagraph.
(C) Determination.--Upon completion of the
review undertaken pursuant to subparagraph (A),
the Commission may--
(i) determine, unconditionally or
subject to such terms and conditions as
the Commission determines to be
appropriate, that the swap, or group,
category, type, or class of swaps must
be cleared pursuant to this subsection
if it finds that such clearing is
consistent with paragraph (2)(D); or
(ii) determine that the clearing
requirement of paragraph (1) shall not
apply to the swap, or group, category,
type, or class of swaps.
(D) Rules.--Not later than 1 year after the
date of the enactment of the Wall Street
Transparency and Accountability Act of 2010,
the Commission shall adopt rules for reviewing,
pursuant to this paragraph, a derivatives
clearing organization's clearing of a swap, or
a group, category, type, or class of swaps,
that it has accepted for clearing.
(4) Prevention of evasion.--
(A) In general.--The Commission shall
prescribe rules under this subsection (and
issue interpretations of rules prescribed under
this subsection) as determined by the
Commission to be necessary to prevent evasions
of the mandatory clearing requirements under
this Act.
(B) Duty of commission to investigate and
take certain actions.--To the extent the
Commission finds that a particular swap, group,
category, type, or class of swaps would
otherwise be subject to mandatory clearing but
no derivatives clearing organization has listed
the swap, group, category, type, or class of
swaps for clearing, the Commission shall--
(i) investigate the relevant facts
and circumstances;
(ii) within 30 days issue a public
report containing the results of the
investigation; and
(iii) take such actions as the
Commission determines to be necessary
and in the public interest, which may
include requiring the retaining of
adequate margin or capital by parties
to the swap, group, category, type, or
class of swaps.
(C) Effect on authority.--Nothing in this
paragraph--
(i) authorizes the Commission to
adopt rules requiring a derivatives
clearing organization to list for
clearing a swap, group, category, type,
or class of swaps if the clearing of
the swap, group, category, type, or
class of swaps would threaten the
financial integrity of the derivatives
clearing organization; and
(ii) affects the authority of the
Commission to enforce the open access
provisions of paragraph (1)(B) with
respect to a swap, group, category,
type, or class of swaps that is listed
for clearing by a derivatives clearing
organization.
(5) Reporting transition rules.--Rules adopted by the
Commission under this section shall provide for the
reporting of data, as follows:
(A) Swaps entered into before the date of the
enactment of this subsection shall be reported
to a registered swap data repository or the
Commission no later than 180 days after the
effective date of this subsection.
(B) Swaps entered into on or after such date
of enactment shall be reported to a registered
swap data repository or the Commission no later
than the later of--
(i) 90 days after such effective
date; or
(ii) such other time after entering
into the swap as the Commission may
prescribe by rule or regulation.
(6) Clearing transition rules.--
(A) Swaps entered into before the date of the
enactment of this subsection are exempt from
the clearing requirements of this subsection if
reported pursuant to paragraph (5)(A).
(B) Swaps entered into before application of
the clearing requirement pursuant to this
subsection are exempt from the clearing
requirements of this subsection if reported
pursuant to paragraph (5)(B).
(7) Exceptions.--
(A) In general.--The requirements of
paragraph (1)(A) shall not apply to a swap if 1
of the counterparties to the swap--
(i) is not a financial entity;
(ii) is using swaps to hedge or
mitigate commercial risk; and
(iii) notifies the Commission, in a
manner set forth by the Commission, how
it generally meets its financial
obligations associated with entering
into non-cleared swaps.
(B) Option to clear.--The application of the
clearing exception in subparagraph (A) is
solely at the discretion of the counterparty to
the swap that meets the conditions of clauses
(i) through (iii) of subparagraph (A).
(C) Financial entity definition.--
(i) In general.--For the purposes of
this paragraph, the term ``financial
entity'' means--
(I) a swap dealer;
(II) a security-based swap
dealer;
(III) a major swap
participant;
(IV) a major security-based
swap participant;
(V) a commodity pool;
(VI) a private fund as
defined in section 202(a) of
the Investment Advisers Act of
1940 (15 U.S.C. 80-b-2(a));
(VII) an employee benefit
plan as defined in paragraphs
(3) and (32) of section 3 of
the Employee Retirement Income
Security Act of 1974 (29 U.S.C.
1002);
(VIII) a person predominantly
engaged in activities that are
in the business of banking, or
in activities that are
financial in nature, as defined
in section 4(k) of the Bank
Holding Company Act of 1956.
(ii) Exclusion.--The Commission shall
consider whether to exempt small banks,
savings associations, farm credit
system institutions, and credit
[unions, including--] unions, bank
holding companies, and savings and loan
holding companies, including--
(I) depository institutions
with total assets of
$10,000,000,000 or less;
(II) farm credit system
institutions with total assets
of $10,000,000,000 or less;
[or]
(III) credit unions with
total assets of $10,000,000,000
or less[.];
(IV) bank holding companies
(as defined in section 2 of the
Bank Holding Company Act of
1956) that have aggregated
assets, including the assets of
their subsidiaries, of
$10,000,000,000 or less; and
(V) savings and loan holding
companies (as defined in
section 10 of the Home Owners'
Loan Act of 1933) that have
aggregated assets, including
the assets of their
subsidiaries, of
$10,000,000,000 or less.
(iii) Limitation.--Such definition
shall not include an entity whose
primary business is providing
financing, and uses derivatives for the
purpose of hedging underlying
commercial risks related to interest
rate and foreign currency exposures, 90
percent or more of which arise from
financing that facilitates the purchase
or lease of products, 90 percent or
more of which are manufactured by the
parent company or another subsidiary of
the parent company.
(D) Treatment of affiliates.--
(i) In general.--An affiliate of a
person that qualifies for an exception
under subparagraph (A) (including
affiliate entities predominantly
engaged in providing financing for the
purchase of the merchandise or
manufactured goods of the person) may
qualify for the exception only if the
affiliate--
(I) enters into the swap to
hedge or mitigate the
commercial risk of the person
or other affiliate of the
person that is not a financial
entity, and the commercial risk
that the affiliate is hedging
or mitigating has been
transferred to the affiliate;
(II) is directly and wholly-
owned by another affiliate
qualified for the exception
under this subparagraph or an
entity that is not a financial
entity;
(III) is not indirectly
majority-owned by a financial
entity;
(IV) is not ultimately owned
by a parent company that is a
financial entity; and
(V) does not provide any
services, financial or
otherwise, to any affiliate
that is a nonbank financial
company supervised by the Board
of Governors (as defined under
section 102 of the Financial
Stability Act of 2010).
(ii) Limitation on qualifying
affiliates.--The exception in clause
(i) shall not apply if the affiliate
is--
(I) a swap dealer;
(II) a security-based swap
dealer;
(III) a major swap
participant;
(IV) a major security-based
swap participant;
(V) a commodity pool;
(VI) a bank holding company;
(VII) a private fund, as
defined in section 202(a) of
the Investment Advisers Act of
1940 (15 U.S.C. 80-b-2(a));
(VIII) an employee benefit
plan or government plan, as
defined in paragraphs (3) and
(32) of section 3 of the
Employee Retirement Income
Security Act of 1974 (29 U.S.C.
1002);
(IX) an insured depository
institution;
(X) a farm credit system
institution;
(XI) a credit union;
(XII) a nonbank financial
company supervised by the Board
of Governors (as defined under
section 102 of the Financial
Stability Act of 2010); or
(XIII) an entity engaged in
the business of insurance and
subject to capital requirements
established by an insurance
governmental authority of a
State, a territory of the
United States, the District of
Columbia, a country other than
the United States, or a
political subdivision of a
country other than the United
States that is engaged in the
supervision of insurance
companies under insurance law.
(iii) Limitation on affiliates'
affiliates.--Unless the Commission
determines, by order, rule, or
regulation, that it is in the public
interest, the exception in clause (i)
shall not apply with respect to an
affiliate if the affiliate is itself
affiliated with--
(I) a major security-based
swap participant;
(II) a security-based swap
dealer;
(III) a major swap
participant; or
(IV) a swap dealer.
(iv) Conditions on transactions.--
With respect to an affiliate that
qualifies for the exception in clause
(i)--
(I) the affiliate may not
enter into any swap other than
for the purpose of hedging or
mitigating commercial [risk;
and] risk, unless the affiliate
can demonstrate to the
Commission, as determined by
the Commission, that--
(aa) the affiliate
has utilized the
exception in clause (i)
only to hedge or
mitigate commercial
risk; and
(bb) the affiliate
complies, as a
financial entity, with
the obligations of the
affiliate with respect
to any swap for which
the exception in clause
(i) is not exercised;
and
(II) [neither the affiliate
nor any person affiliated with
the affiliate that is not a
financial entity] neither the
affiliate that qualifies for
the exception in clause (i) nor
any person affiliated with the
affiliate, that is directly or
indirectly wholly- or majority-
owned by the same ultimate
parent, and that enters into
swaps with the affiliate may
enter into a swap with or on
behalf of any affiliate that is
a financial entity or otherwise
assume, net, combine, or
consolidate the risk of swaps
entered into by any such
financial entity, except one
that is an affiliate that
qualifies for the exception
under clause (i).
(v) Transition rule for affiliates.--
An affiliate, subsidiary, or a wholly
owned entity of a person that qualifies
for an exception under subparagraph (A)
and is predominantly engaged in
providing financing for the purchase or
lease of merchandise or manufactured
goods of the person shall be exempt
from the margin requirement described
in section 4s(e) and the clearing
requirement described in paragraph (1)
with regard to swaps entered into to
mitigate the risk of the financing
activities for not less than a 2-year
period beginning on the date of
enactment of this clause.
(vi) Risk management program.--Any
swap entered into by an affiliate that
qualifies for the exception in clause
(i) shall be subject to a centralized
risk management program of the
affiliate, which is reasonably designed
both to monitor and manage the risks
associated with the swap and to
identify each of the affiliates on
whose behalf a swap was entered into.
(E) Election of counterparty.--
(i) Swaps required to be cleared.--
With respect to any swap that is
subject to the mandatory clearing
requirement under this subsection and
entered into by a swap dealer or a
major swap participant with a
counterparty that is not a swap dealer,
major swap participant, security-based
swap dealer, or major security-based
swap participant, the counterparty
shall have the sole right to select the
derivatives clearing organization at
which the swap will be cleared.
(ii) Swaps not required to be
cleared.--With respect to any swap that
is not subject to the mandatory
clearing requirement under this
subsection and entered into by a swap
dealer or a major swap participant with
a counterparty that is not a swap
dealer, major swap participant,
security-based swap dealer, or major
security-based swap participant, the
counterparty--
(I) may elect to require
clearing of the swap; and
(II) shall have the sole
right to select the derivatives
clearing organization at which
the swap will be cleared.
(F) Abuse of exception.--The Commission may
prescribe such rules or issue interpretations
of the rules as the Commission determines to be
necessary to prevent abuse of the exceptions
described in this paragraph. The Commission may
also request information from those persons
claiming the clearing exception as necessary to
prevent abuse of the exceptions described in
this paragraph.
(8) Trade execution.--
(A) In general.--With respect to transactions
involving swaps subject to the clearing
requirement of paragraph (1), counterparties
shall--
(i) execute the transaction on a
board of trade designated as a contract
market under section 5; or
(ii) execute the transaction on a
swap execution facility registered
under 5h or a swap execution facility
that is exempt from registration under
section [5h(f) of this Act] 5h(g).
(B) Exception.--The requirements of clauses
(i) and (ii) of subparagraph (A) shall not
apply if no board of trade or swap execution
facility makes the swap available to trade or
for swap transactions subject to the clearing
exception under paragraph (7).
(i) Applicability.--The provisions of this Act relating to
swaps that were enacted by the Wall Street Transparency and
Accountability Act of 2010 (including any rule prescribed or
regulation promulgated under that Act), shall not apply to
activities outside the United States unless those activities--
(1) have a direct and significant connection with
activities in, or effect on, commerce of the United
States; or
(2) contravene such rules or regulations as the
Commission may prescribe or promulgate as are necessary
or appropriate to prevent the evasion of any provision
of this Act that was enacted by the Wall Street
Transparency and Accountability Act of 2010.
(j) Committee Approval by Board.--Exemptions from the
requirements of subsection (h)(1) to clear a swap and
subsection (h)(8) to execute a swap through a board of trade or
swap execution facility shall be available to a counterparty
that is an issuer of securities that are registered under
section 12 of the Securities Exchange Act of 1934 (15 U.S.C.
78l) or that is required to file reports pursuant to section
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o)
only if an appropriate committee of the issuer's board or
governing body has reviewed and approved its decision to enter
into swaps that are subject to such exemptions.
* * * * * * *
Sec. 4. (a) Unless exempted by the Commission pursuant to
subsection (c) or by subsection (e), it shall be unlawful for
any person to offer to enter into, to enter into, to execute,
to confirm the execution of, or to conduct any office or
business anywhere in the United States, its territories or
possessions, for the purpose of soliciting, or accepting any
order for, or otherwise dealing in, any transaction in, or in
connection with, a contract for the purchase or sale of a
commodity for future delivery (other than a contract which is
made on or subject to the rules of a board of trade, exchange,
or market located outside the United States, its territories or
possessions) unless--
(1) such transaction is conducted on or subject to
the rules of a board of trade which has been designated
[or registered] by the Commission as a contract market
[or derivatives transaction execution facility] for
such commodity;
(2) such contract is executed or consummated by or
through a contract market; and
(3) such contract is evidenced by a record in writing
which shows the date, the parties to such contract and
their addresses, the property covered and its price,
and the terms of delivery: Provided, That each contract
market [or derivatives transaction execution facility]
member shall keep such record for a period of three
years from the date thereof, or for a longer period if
the Commission shall so direct, which record shall at
all times be open to the inspection of any
representative of the Commission or the Department of
Justice.
(b)
(1) Foreign boards of trade.--
(A) Registration.--The Commission may adopt
rules and regulations requiring registration
with the Commission for a foreign board of
trade that provides the members of the foreign
board of trade or other participants located in
the United States with direct access to the
electronic trading and order matching system of
the foreign board of trade, including rules and
regulations prescribing procedures and
requirements applicable to the registration of
such foreign boards of trade. For purposes of
this paragraph, ``direct access'' refers to an
explicit grant of authority by a foreign board
of trade to an identified member or other
participant located in the United States to
enter trades directly into the trade matching
system of the foreign board of trade. In
adopting such rules and regulations, the
commission shall consider--
(i) whether any such foreign board of
trade is subject to comparable,
comprehensive supervision and
regulation by the appropriate
governmental authorities in the foreign
board of trade's home country; and
(ii) any previous commission findings
that the foreign board of trade is
subject to comparable comprehensive
supervision and regulation by the
appropriate government authorities in
the foreign board of trade's home
country.
(B) Linked contracts.--The Commission may not
permit a foreign board of trade to provide to
the members of the foreign board of trade or
other participants located in the United States
direct access to the electronic trading and
order-matching system of the foreign board of
trade with respect to an agreement, contract,
or transaction that settles against any price
(including the daily or final settlement price)
of 1 or more contracts listed for trading on a
registered entity, unless the Commission
determines that--
(i) the foreign board of trade makes
public daily trading information
regarding the agreement, contract, or
transaction that is comparable to the
daily trading information published by
the registered entity for the 1 or more
contracts against which the agreement,
contract, or transaction traded on the
foreign board of trade settles; and
(ii) the foreign board of trade (or
the foreign futures authority that
oversees the foreign board of trade)--
(I) adopts position limits
(including related hedge
exemption provisions) for the
agreement, contract, or
transaction that are comparable
to the position limits
(including related hedge
exemption provisions) adopted
by the registered entity for
the 1 or more contracts against
which the agreement, contract,
or transaction traded on the
foreign board of trade settles;
(II) has the authority to
require or direct market
participants to limit, reduce,
or liquidate any position the
foreign board of trade (or the
foreign futures authority that
oversees the foreign board of
trade) determines to be
necessary to prevent or reduce
the threat of price
manipulation, excessive
speculation as described in
section 4a, price distortion,
or disruption of delivery or
the cash settlement process;
(III) agrees to promptly
notify the Commission, with
regard to the agreement,
contract, or transaction that
settles against any price
(including the daily or final
settlement price) of 1 or more
contracts listed for trading on
a registered entity, of any
change regarding--
(aa) the information
that the foreign board
of trade will make
publicly available;
(bb) the position
limits that the foreign
board of trade or
foreign futures
authority will adopt
and enforce;
(cc) the position
reductions required to
prevent manipulation,
excessive speculation
as described in section
4a, price distortion,
or disruption of
delivery or the cash
settlement process; and
(dd) any other area
of interest expressed
by the Commission to
the foreign board of
trade or foreign
futures authority;
(IV) provides information to
the Commission regarding large
trader positions in the
agreement, contract, or
transaction that is comparable
to the large trader position
information collected by the
Commission for the 1 or more
contracts against which the
agreement, contract, or
transaction traded on the
foreign board of trade settles;
and
(V) provides the Commission
such information as is
necessary to publish reports on
aggregate trader positions for
the agreement, contract, or
transaction traded on the
foreign board of trade that are
comparable to such reports on
aggregate trader positions for
the 1 or more contracts against
which the agreement, contract,
or transaction traded on the
foreign board of trade settles.
(C) Existing foreign boards of trade.--
Subparagraphs (A) and (B) shall not be
effective with respect to any foreign board of
trade to which, prior to the date of enactment
of this paragraph, the Commission granted
direct access permission until the date that is
180 days after that date of enactment.
(2) Persons located in the united states.--
(A) In general.--The Commission may adopt
rules and regulations proscribing fraud and
requiring minimum financial standards, the
disclosure of risk, the filing of reports, the
keeping of books and records, the safeguarding
of customers' funds, and registration with the
Commission by any person located in the United
States, its territories or possessions, who
engages in the offer or sale of any contract of
sale of a commodity for future delivery that is
made or to be made on or subject to the rules
of a board of trade, exchange, or market
located outside the United States, its
territories or possessions.
(B) Different requirements.--Rules and
regulations described in subparagraph (A) may
impose different requirements for such persons
depending upon the particular foreign board of
trade, exchange, or market involved.
(C) Prohibition.--Except as provided in
paragraphs (1) and (2), no rule or regulation
may be adopted by the Commission under this
subsection that--
(i) requires Commission approval of
any contract, rule, regulation, or
action of any foreign board of trade,
exchange, or market, or clearinghouse
for such board of trade, exchange, or
market; or
(ii) governs in any way any rule or
contract term or action of any foreign
board of trade, exchange, or market, or
clearinghouse for such board of trade,
exchange, or market.
(c)(1) In order to promote responsible economic or financial
innovation and fair competition, the Commission by rule,
regulation, or order, after notice and opportunity for hearing,
may (on its own initiative or on application of any person,
including any board of trade designated [or registered] as a
contract market [or derivatives transaction execution facility]
for transactions for future delivery in any commodity under
section 5 of this Act) exempt any agreement, contract, or
transaction (or class thereof) that is otherwise subject to
subsection (a) (including any person or class of persons
offering, entering into, rendering advice or rendering other
services with respect to, the agreement, contract, or
transaction), either unconditionally or on stated terms or
conditions or for stated periods and either retroactively or
prospectively, or both, from any of the requirements of
subsection (a), or from any other provision of this Act (except
subparagraphs (C)(ii) and (D) of section 2(a)(1), except that--
(A) unless the Commission is expressly authorized by
any provision described in this subparagraph to grant
exemptions, with respect to amendments made by subtitle
A of the Wall Street Transparency and Accountability
Act of 2010--
(i) with respect to--
(I) paragraphs (2), (3), (4), (5),
and (7), paragraph (18)(A)(vii)(III),
paragraphs (23), (24), (31), (32),
(38), (39), (41), (42), (46), (47),
(48), and (49) of section 1a, and
sections 2(a)(13), 2(c)(1)(D), 4a(a),
4a(b), 4d(c), 4d(d), 4r, 4s, 5b(a),
5b(b), 5(d), 5(g), 5(h), 5b(c), 5b(i),
8e, and 21; and
(II) section 206(e) of the Gramm-
Leach-Bliley Act (Public Law 106-102;
15 U.S.C. 78c note); and
(ii) in sections 721(c) and 742 of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act; and
(B) the Commission and the Securities and Exchange
Commission may by rule, regulation, or order jointly
exclude any agreement, contract, or transaction from
section 2(a)(1)(D)) if the Commissions determine that
the exemption would be consistent with the public
interest.
(2) The Commission shall not grant any exemption under
paragraph (1) from any of the requirements of subsection (a)
unless the Commission determines that--
(A) the requirement should not be applied to the
agreement, contract, or transaction for which the
exemption is sought and that the exemption would be
consistent with the public interest and the purposes of
this Act; and
(B) the agreement, contract, or transaction--
(i) will be entered into solely between
appropriate persons; and
(ii) will not have a material adverse effect
on the ability of the Commission or any
contract market or derivatives transaction
execution facility to discharge its regulatory
or self-regulatory duties under this Act.
(3) For purposes of this subsection, the term ``appropriate
person'' shall be limited to the following persons or classes
thereof:
(A) A bank or trust company (acting in an individual
or fiduciary capacity).
(B) A savings association.
(C) An insurance company.
(D) An investment company subject to regulation under
the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.).
(E) A commodity pool formed or operated by a person
subject to regulation under this Act.
(F) A corporation, partnership, proprietorship,
organization, trust, or other business entity with a
net worth exceeding $1,000,000 or total assets
exceeding $5,000,000, or the obligations of which under
the agreement, contract or transaction are guaranteed
or otherwise supported by a letter of credit or
keepwell, support, or other agreement by any such
entity or by an entity referred to in subparagraph (A),
(B), (C), (H), (I), or (K) of this paragraph.
(G) An employee benefit plan with assets exceeding
$1,000,000, or whose investment decisions are made by a
bank, trust company, insurance company, investment
adviser registered under the Investment Advisers Act of
1940 (15 U.S.C. 80a-1 et seq.), or a commodity trading
advisor subject to regulation under this Act.
(H) Any governmental entity (including the United
States, any [state] State, or any foreign government)
or political subdivision thereof, or any multinational
or supranational entity or any instrumentality, agency,
or department of any of the foregoing.
(I) A broker-dealer subject to regulation under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
acting on its own behalf or on behalf of another
appropriate person.
(J) A futures commission merchant, floor broker, or
floor trader subject to regulation under this Act
acting on its own behalf or on behalf of another
appropriate person.
(K) Such other persons that the Commission determines
to be appropriate in light of their financial or other
qualifications, or the applicability of appropriate
regulatory protections.
(4) During the pendency of an application for an order
granting an exemption under paragraph (1), the Commission may
limit the public availability of any information received from
the applicant if the applicant submits a written request to
limit disclosure contemporaneous with the application, and the
Commission determines that--
(A) the information sought to be restricted
constitutes a trade secret; or
(B) public disclosure of the information would result
in material competitive harm to the applicant.
(5) The Commission may--
(A) promptly following the enactment of this
subsection, or upon application by any person, exercise
the exemptive authority granted under paragraph (1)
with respect to classes of hybrid instruments that are
predominantly securities or depository instruments, to
the extent that such instruments may be regarded as
subject to the provisions of this Act; or
(B) promptly following the enactment of this
subsection, or upon application by any person, exercise
the exemptive authority granted under paragraph (1)
effective as of October 23, 1974, with respect to
classes of swap agreements (as defined in section 101
of title 11, United States Code) that are not part of a
fungible class of agreements that are standardized as
to their material economic terms, to the extent that
such agreements may be regarded as subject to the
provisions of this Act.
Any exemption pursuant to this paragraph shall be subject to
such terms and conditions as the Commission shall determine to
be appropriate pursuant to paragraph (1).
(6) If the Commission determines that the exemption
would be consistent with the public interest and the
purposes of this Act, the Commission shall, in
accordance with paragraphs (1) and (2), exempt from the
requirements of this Act an agreement, contract, or
transaction that is entered into--
(A) pursuant to a tariff or rate schedule
approved or permitted to take effect by the
Federal Energy Regulatory Commission;
(B) pursuant to a tariff or rate schedule
establishing rates or charges for, or protocols
governing, the sale of electric energy approved
or permitted to take effect by the regulatory
authority of the State or municipality having
jurisdiction to regulate rates and charges for
the sale of electric energy within the State or
municipality; or
(C) between entities described in section
201(f) of the Federal Power Act (16 U.S.C.
824(f)).
(d) The granting of an exemption under this section shall not
affect the authority of the Commission under any other
provision of this Act to conduct investigations in order to
determine compliance with the requirements or conditions of
such exemption or to take enforcement action for any violation
of any provision of this Act or any rule, regulation or order
thereunder caused by the failure to comply with or satisfy such
conditions or requirements.
(e) Liability of Registered Persons Trading on a Foreign
Board of Trade.--
(1) In general.--A person registered with the
Commission, or exempt from registration by the
Commission, under this Act may not be found to have
violated subsection (a) with respect to a transaction
in, or in connection with, a contract of sale of a
commodity for future delivery if the person--
(A) has reason to believe that the
transaction and the contract is made on or
subject to the rules of a foreign board of
trade that is--
(i) legally organized under the laws
of a foreign country;
(ii) authorized to act as a board of
trade by a foreign futures authority;
and
(iii) subject to regulation by the
foreign futures authority; and
(B) has not been determined by the Commission
to be operating in violation of subsection (a).
(2) Rule of construction.--Nothing in this subsection
shall be construed as implying or creating any
presumption that a board of trade, exchange, or market
is located outside the United States, or its
territories or possessions, for purposes of subsection
(a).
Sec. 4a. (a)
(1) In general.--Excessive speculation in any
commodity under contracts of sale of such commodity for
future delivery made on or subject to the rules of
contract markets [or derivatives transaction execution
facilities], or swaps that perform or affect a
significant price discovery function with respect to
registered entities causing sudden or unreasonable
fluctuations or unwarranted changes in the price of
such commodity, is an undue and unnecessary burden on
interstate commerce in such commodity. For the purpose
of diminishing, eliminating, or preventing such burden,
the Commission shall, from time to time, after due
notice and opportunity for hearing, by rule,
regulation, or order, proclaim and fix such limits on
the amounts of trading which may be done or positions
which may be held by any person, including any group or
class of traders, under contracts of sale of such
commodity for future delivery on or subject to the
rules of any contract market [or derivatives
transaction execution facility], swaps traded on or
subject to the rules of a designated contract market or
a swap execution facility, or swaps not traded on or
subject to the rules of a designated contract market or
a swap execution facility that performs a significant
price discovery function with respect to a registered
entity, as the Commission finds are necessary to
diminish, eliminate, or prevent such burden. In
determining whether any person has exceeded such
limits, the positions held and trading done by any
persons directly or indirectly controlled by such
person shall be included with the positions held and
trading done by such person; and further, such limits
upon positions and trading shall apply to positions
held by, and trading done by, two or more persons
acting pursuant to an expressed or implied agreement or
understanding, the same as if the positions were held
by, or the trading were done by, a single person.
Nothing in this section shall be construed to prohibit
the Commission from fixing different trading or
position limits for different commodities, markets,
futures, or delivery months, or for different number of
days remaining until the last day of trading in a
contract, or different trading limits for buying and
selling operations, or different limits for the
purposes of paragraphs (1) and (2) of subsection (b) of
this section, or from exempting transactions normally
known to the trade as ``spreads'' or ``straddles'' or
``arbitrage'' or from fixing limits applying to such
transactions or positions different from limits fixed
for other transactions or positions. The word
``arbitrage'' in domestic markets shall be defined to
mean the same as a ``spread'' or ``straddle''. The
Commission is authorized to define the term
``international arbitrage''.
(2) Establishment of limitations.--
(A) In general.--In accordance with the
standards set forth in paragraph (1) of this
subsection and consistent with the good faith
exception cited in subsection (b)(2), with
respect to physical commodities other than
excluded commodities as defined by the
Commission, the Commission shall by rule,
regulation, or order establish limits on the
amount of positions, as appropriate, other than
bona fide hedge positions, that may be held by
any person with respect to contracts of sale
for future delivery or with respect to options
on the contracts or commodities traded on or
subject to the rules of a designated contract
market.
(B) Timing.--
(i) Exempt commodities.--For exempt
commodities, the limits required under
subparagraph (A) shall be established
within 180 days after the date of the
enactment of this paragraph.
(ii) Agricultural commodities.--For
agricultural commodities, the limits
required under subparagraph (A) shall
be established within 270 days after
the date of the enactment of this
paragraph.
(C) Goal.--In establishing the limits
required under subparagraph (A), the Commission
shall strive to ensure that trading on foreign
boards of trade in the same commodity will be
subject to comparable limits and that any
limits to be imposed by the Commission will not
cause price discovery in the commodity to shift
to trading on the foreign boards of trade.
(3) Specific limitations.--In establishing the limits
required in paragraph (2), the Commission, as
appropriate, shall set limits--
(A) on the number of positions that may be
held by any person for the spot month, each
other month, and the aggregate number of
positions that may be held by any person for
all months; and
(B) to the maximum extent practicable, in its
discretion--
(i) to diminish, eliminate, or
prevent excessive speculation as
described under this section;
(ii) to deter and prevent market
manipulation, squeezes, and corners;
(iii) to ensure sufficient market
liquidity for bona fide hedgers; and
(iv) to ensure that the price
discovery function of the underlying
market is not disrupted.
(4) Significant price discovery function.--In making
a determination whether a swap performs or affects a
significant price discovery function with respect to
regulated markets, the Commission shall consider, as
appropriate:
(A) Price linkage.--The extent to which the
swap uses or otherwise relies on a daily or
final settlement price, or other major price
parameter, of another contract traded on a
regulated market based upon the same underlying
commodity, to value a position, transfer or
convert a position, financially settle a
position, or close out a position.
(B) Arbitrage.--The extent to which the price
for the swap is sufficiently related to the
price of another contract traded on a regulated
market based upon the same underlying commodity
so as to permit market participants to
effectively arbitrage between the markets by
simultaneously maintaining positions or
executing trades in the swaps on a frequent and
recurring basis.
(C) Material price reference.--The extent to
which, on a frequent and recurring basis, bids,
offers, or transactions in a contract traded on
a regulated market are directly based on, or
are determined by referencing, the price
generated by the swap.
(D) Material liquidity.--The extent to which
the volume of swaps being traded in the
commodity is sufficient to have a material
effect on another contract traded on a
regulated market.
(E) Other material factors.--Such other
material factors as the Commission specifies by
rule or regulation as relevant to determine
whether a swap serves a significant price
discovery function with respect to a regulated
market.
(5) Economically equivalent contracts.--
(A) Notwithstanding any other provision of
this section, the Commission shall establish
limits on the amount of positions, including
aggregate position limits, as appropriate,
other than bona fide hedge positions, that may
be held by any person with respect to swaps
that are economically equivalent to contracts
of sale for future delivery or to options on
the contracts or commodities traded on or
subject to the rules of a designated contract
market subject to paragraph (2).
(B) In establishing limits pursuant to
subparagraph (A), the Commission shall--
(i) develop the limits concurrently
with limits established under paragraph
(2), and the limits shall have similar
requirements as under paragraph (3)(B);
and
(ii) establish the limits
simultaneously with limits established
under paragraph (2).
(6) Aggregate position limits.--The Commission shall,
by rule or regulation, establish limits (including
related hedge exemption provisions) on the aggregate
number or amount of positions in contracts based upon
the same underlying commodity (as defined by the
Commission) that may be held by any person, including
any group or class of traders, for each month across--
(A) contracts listed by designated contract
markets;
(B) with respect to an agreement contract, or
transaction that settles against any price
(including the daily or final settlement price)
of 1 or more contracts listed for trading on a
registered entity, contracts traded on a
foreign board of trade that provides members or
other participants located in the United States
with direct access to its electronic trading
and order matching system; and
(C) swap contracts that perform or affect a
significant price discovery function with
respect to regulated entities.
(7) Exemptions.--The Commission, by rule, regulation,
or order, may exempt, conditionally or unconditionally,
any person or class of persons, any swap or class of
swaps, any contract of sale of a commodity for future
delivery or class of such contracts, any option or
class of options, or any transaction or class of
transactions from any requirement it may establish
under this section with respect to position limits.
(b) The Commission shall, in such rule, regulation, or order,
fix a reasonable time (not to exceed ten days) after the
promulgation of the rule, regulation, or order; after which,
and until such rule, regulation, or order is suspended,
modified, or revoked, it shall be unlawful for any person--
(1) directly or indirectly to buy or sell, or agree
to buy or sell, under contracts of sale of such
commodity for future delivery on or subject to the
rules of the contract market or markets, or swap
execution facility or facilities with respect to a
significant price discovery contract, to which the
rule, regulation, or order applies, any amount of such
commodity during any one business day in excess of any
trading limit fixed for one business day by the
Commission in such rule, regulation, or order for or
with respect to such commodity; or
(2) directly or indirectly to hold or control a net
long or a net short position in any commodity for
future delivery on or subject to the rules of any
contract market or swap execution facility with respect
to a significant price discovery contract in excess of
any position limit fixed by the Commission for or with
respect to such commodity: Provided, That such position
limit shall not apply to a position acquired in good
faith prior to the effective date of such rule,
regulation, or order.
(c)(1) No rule, regulation, or order issued under subsection
(a) of this section shall apply to transactions or positions
which are shown to be bona fide hedging transactions or
positions, as such terms shall be defined by the Commission by
rule, regulation, or order consistent with the purposes of this
Act. Such terms may be defined to permit producers, purchasers,
sellers, middlemen, and users of a commodity or a product
derived therefrom to hedge their legitimate anticipated
business needs for that period of time into the future for
which an appropriate futures contract is open and available on
an exchange. To determine the adequacy of this Act and the
powers of the Commission acting thereunder to prevent
unwarranted price pressures by large hedgers, the Commission
shall monitor and analyze the trading activities of the largest
hedgers, as determined by the Commission, operating in the
cattle, hog, or pork belly markets and shall report its
findings and recommendations to the Senate Committee on
Agriculture, Nutrition, and Forestry and the House Committee on
Agriculture in its annual reports for at least two years
following the date of enactment of the Futures Trading Act of
1982.
(2) For the purposes of implementation of subsection
(a)(2) for contracts of sale for future delivery or
options on the contracts or commodities, the Commission
shall define what constitutes a bona fide hedging
transaction or position as a transaction or position
that--
(A)(i) represents a substitute for
transactions made or to be made or positions
taken or to be taken at a later time in a
physical marketing channel;
(ii) is economically appropriate to the
reduction of risks in the conduct and
management of a commercial enterprise; and
(iii) arises from the potential change in the
value of--
(I) assets that a person owns,
produces, manufactures, processes, or
merchandises or anticipates owning,
producing, manufacturing, processing,
or merchandising;
(II) liabilities that a person owns
or anticipates incurring; or
(III) services that a person
provides, purchases, or anticipates
providing or purchasing; or
(B) reduces risks attendant to a position
resulting from a swap that--
(i) was executed opposite a
counterparty for which the transaction
would qualify as a bona fide hedging
transaction pursuant to subparagraph
(A); or
(ii) meets the requirements of
subparagraph (A).
(d) This section shall apply to a person that is registered
as a futures commission merchant, an introducing broker, or a
floor broker under authority of this Act only to the extent
that transactions made by such person are made on behalf of or
for the account or benefit of such person. This section shall
not apply to transactions made by, or on behalf of, or at the
direction of, the United States, or a duly authorized agency
thereof.
(e) Nothing in this section shall prohibit or impair the
adoption by any contract market[, derivatives transaction
execution facility,] or by any other board of trade licensed,
designated, or registered by the Commission [or by any
electronic trading facility] of any bylaw, rule, regulation, or
resolution fixing limits on the amount of trading which may be
done or positions which may be held by any person under
contracts of sale of any commodity for future delivery traded
on or subject to the rules of such contract market [or
derivatives transaction execution facility] [or on an
electronic trading facility], or under options on such
contracts or commodities traded on or subject to the rules of
such contract market[, derivatives transaction execution
facility,][or electronic trading facility] or such board of
trade: Provided, That if the Commission shall have fixed limits
under this section for any contract or under section 4c of this
Act for any commodity option, then the limits fixed by the
bylaws, rules, regulations, and resolutions adopted by such
contract market[, derivatives transaction execution
facility,][or electronic trading facility] or such board of
trade shall not be higher than the limits fixed by the
Commission. It shall be a violation of this Act for any person
to violate any bylaw, rule, regulation, or resolution of any
contract market[, derivatives transaction execution facility,]
or other board of trade licensed, designated, or registered by
the Commission [or electronic trading facility with respect to
a significant price discovery contract] fixing limits on the
amount of trading which may be done or positions which may be
held by any person under contracts of sale of any commodity for
future delivery or under options on such contracts or
commodities, if such bylaw, rule, regulation, or resolution has
been approved by the Commission or certified by a registered
entity pursuant to section 5c(c)(1): Provided, That the
provisions of section 9(a)(5) of this Act shall apply only to
those who knowingly violate such limits.
* * * * * * *
SEC. 4C. PROHIBITED TRANSACTIONS.
(a) In General.--
(1) Prohibition.--It shall be unlawful for any person
to offer to enter into, enter into, or confirm the
execution of a transaction described in paragraph (2)
involving the purchase or sale of any commodity for
future delivery (or any option on such a transaction or
option on a commodity) or swap if the transaction is
used or may be used to--
(A) hedge any transaction in interstate
commerce in the commodity or the product or
byproduct of the commodity;
(B) determine the price basis of any such
transaction in interstate commerce in the
commodity; or
(C) deliver any such commodity sold, shipped,
or received in interstate commerce for the
execution of the transaction.
(2) Transaction.--A transaction referred to in
paragraph (1) is a transaction that--
(A)(i) is, of the character of, or is
commonly known to the trade as, a ``wash sale''
or ``accommodation trade''; or
(ii) is a fictitious sale; or
(B) is used to cause any price to be
reported, registered, or recorded that is not a
true and bona fide price.
(3) Contract of sale.--It shall be unlawful for any
employee or agent of any department or agency of the
Federal Government or any Member of Congress or
employee of Congress (as such terms are defined under
section 2 of the STOCK Act) or any judicial officer or
judicial employee (as such terms are defined,
respectively, under section 2 of the STOCK Act) who, by
virtue of the employment or position of the Member,
officer, employee or agent, acquires information that
may affect or tend to affect the price of any commodity
in interstate commerce, or for future delivery, or any
swap, and which information has not been disseminated
by the department or agency of the Federal Government
holding or creating the information or by Congress or
by the judiciary in a manner which makes it generally
available to the trading public, or disclosed in a
criminal, civil, or administrative hearing, or in a
congressional, administrative, or Government
Accountability Office report, hearing, audit, or
investigation, to use the information in his personal
capacity and for personal gain to enter into, or offer
to enter into--
(A) a contract of sale of a commodity for
future delivery (or option on such a contract);
(B) an option (other than an option executed
or traded on a national securities exchange
registered pursuant to section 6(a) of the
Securities Exchange Act of 1934 (15 U.S.C.
78f(a)); or
(C) a swap.
(4) Nonpublic information.--
(A) Imparting of nonpublic information.--It
shall be unlawful for any employee or agent of
any department or agency of the Federal
Government or any Member of Congress or
employee of Congress or any judicial officer or
judicial employee who, by virtue of the
employment or position of the Member, officer,
employee or agent, acquires information that
may affect or tend to affect the price of any
commodity in interstate commerce, or for future
delivery, or any swap, and which information
has not been disseminated by the department or
agency of the Federal Government holding or
creating the information or by Congress or by
the judiciary in a manner which makes it
generally available to the trading public, or
disclosed in a criminal, civil, or
administrative hearing, or in a congressional,
administrative, or Government Accountability
Office report, hearing, audit, or
investigation, to impart the information in his
personal capacity and for personal gain with
intent to assist another person, directly or
indirectly, to use the information to enter
into, or offer to enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a)); or
(iii) a swap.
(B) Knowing use.--It shall be unlawful for
any person who receives information imparted by
any employee or agent of any department or
agency of the Federal Government or any Member
of Congress or employee of Congress or any
judicial officer or judicial employee as
described in subparagraph (A) to knowingly use
such information to enter into, or offer to
enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a)); or
(iii) a swap.
(C) Theft of nonpublic information.--It shall
be unlawful for any person to steal, convert,
or misappropriate, by any means whatsoever,
information held or created by any department
or agency of the Federal Government or by
Congress or by the judiciary that may affect or
tend to affect the price of any commodity in
interstate commerce, or for future delivery, or
any swap, where such person knows, or acts in
reckless disregard of the fact, that such
information has not been disseminated by the
department or agency of the Federal Government
holding or creating the information or by
Congress or by the judiciary in a manner which
makes it generally available to the trading
public, or disclosed in a criminal, civil, or
administrative hearing, or in a congressional,
administrative, or Government Accountability
Office report, hearing, audit, or
investigation, and to use such information, or
to impart such information with the intent to
assist another person, directly or indirectly,
to use such information to enter into, or offer
to enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a)); or
(iii) a swap, provided, however, that
nothing in this subparagraph shall
preclude a person that has provided
information concerning, or generated
by, the person, its operations or
activities, to any employee or agent of
any department or agency of the Federal
Government, to Congress, any Member of
Congress, any employee of Congress, any
judicial officer, or any judicial
employee, voluntarily or as required by
law, from using such information to
enter into, or offer to enter into, a
contract of sale, option, or swap
described in clauses (i), (ii), or
(iii).
(5) Disruptive practices.--It shall be unlawful for
any person to engage in any trading, practice, or
conduct on or subject to the rules of a registered
entity that--
(A) violates bids or offers;
(B) demonstrates intentional or reckless
disregard for the orderly execution of
transactions during the closing period; or
(C) is, is of the character of, or is
commonly known to the trade as, ``spoofing''
(bidding or offering with the intent to cancel
the bid or offer before execution).
(6) Rulemaking authority.--The Commission may make
and promulgate such rules and regulations as, in the
judgment of the Commission, are reasonably necessary to
prohibit the trading practices described in paragraph
(5) and any other trading practice that is disruptive
of fair and equitable trading.
(7) Use of swaps to defraud.--It shall be unlawful
for any person to enter into a swap knowing, or acting
in reckless disregard of the fact, that its
counterparty will use the swap as part of a device,
scheme, or artifice to defraud any third party.
(b) No person shall offer to enter into, enter into or
confirm the execution of, any transaction involving any
commodity regulated under this Act which is of the character
of, or is commonly known to the trade as, an ``option'',
``privilege'', ``indemnity'', ``bid'', ``offer'', ``put'',
``call'', ``advance guaranty'', or ``decline guaranty'',
contrary to any rule, regulation, or order of the Commission
prohibiting any such transaction or allowing any such
transaction under such terms and conditions as the Commission
shall prescribe. Any such order, rule, or regulation may be
made only after notice and opportunity for hearing, and the
Commission may set different terms and conditions for different
markets.
[(c) Not later than 90 days after the date of the enactment
of the Futures Trading Act of 1986, the Commission shall issue
regulations--
[(1) to eliminate the pilot status of its program for
commodity option transactions involving the trading of
options on contract markets, including any numerical
restrictions on the number of commodities or option
contracts for which a contract market may be
designated; and
[(2) otherwise to continue to permit the trading of
such commodity options under such terms and conditions
that the Commission from time to time may prescribe.
[(d) Notwithstanding the provisions of subsection (c) of this
section--
[(1) any person domiciled in the United States who on
May 1, 1978, was in the business of granting an option
on a physical commodity, other than a commodity
specifically set forth in section 2(a) of this Act
prior to enactment of the Commodity Futures Trading
Commission Act of 1974, and was in the business of
buying, selling, producing, or otherwise using that
commodity, may continue to grant or issue options on
that commodity in accordance with Commission
regulations in effect on August 17, 1978, until thirty
days after the effective date of regulations issued by
the Commission under clause (2) of this subsection:
Provided, That if such person files an application for
registration under the regulations issued under clause
(2) of this subsection within thirty days after the
effective date of such regulations, that person may
continue to grant or issue options pending a final
determination by the Commission on the application; and
[(2) the Commission shall issue regulations that
permit grantors and futures commission merchants to
offer to enter into, enter into, or confirm the
execution of, any commodity option transaction on a
physical commodity subject to the provisions of
subsection (b) of this section, other than a commodity
specifically set forth in section 2(a) of this Act
prior to enactment of the Commodity Futures Trading
Commission Act of 1974, if--
[(A) the grantor is a person domiciled in the
United States who--
[(i) is in the business of buying,
selling, producing, or otherwise using
the underlying commodity;
[(ii) at all times has a net worth of
at least $5,000,000 certified annually
by an independent public accountant
using generally accepted accounting
principles;
[(iii) notifies the Commission and
every futures commission merchant
offering the grantor's option if the
grantor knows or has reason to believe
that the grantor's net worth has fallen
below $5,000,000;
[(iv) segregates daily, exclusively
for the benefit of purchasers, money,
exempted securities (within the meaning
of section 3(a)(12) of the Securities
Exchange Act of 1934 (15 U.S.C.
78c(a)(12)), commercial paper, bankers'
acceptances, commercial bills, or
unencumbered warehouse receipts, equal
to an amount by which the value of each
transaction exceeds the amount received
or to be received by the grantor for
such transaction;
[(v) provides an identification
number for each transaction; and
[(vi) provides confirmation of all
orders for such transactions executed,
including the execution price and a
transaction identification number;
[(B) the futures commission merchant is a
person who--
[(i) has evidence that the grantor
meets the requirements specified in
subclause (A) of this clause;
[(ii) treats and deals with all
money, securities, or property received
from its customers as payment of the
purchase price in connection with such
transactions, as belonging to such
customers until the expiration of the
term of the option, or, if the customer
exercises the option, until all rights
of the customer under the commodity
option transaction have been fulfilled;
[(iii) records each transaction in
its customer's name by the transaction
identification number provided by the
grantor;
[(iv) provides a disclosure statement
to its customers, under regulations of
the Commission, that discloses, among
other things, all costs, including any
markups or commissions involved in such
transaction; and
[(C) the grantor and futures commission
merchant comply with any additional uniform and
reasonable terms and conditions the Commission
may prescribe, including registration with the
Commission.
The Commission may permit persons not domiciled in the United
States to grant options under this subsection, other than
options on a commodity specifically set forth in section 2(a)
of this Act prior to enactment of the Commodity Futures Trading
Commission Act of 1974, under such additional rules,
regulations, and orders as the Commission may adopt to provide
protection to purchasers that are substantially the equivalent
of those applicable to grantors domiciled in the United States.
The Commission may terminate the right of any person to grant,
offer, or sell options under this subsection only after a
hearing, including a finding that the continuation of such
right is contrary to the public interest: Provided, That
pending the completion of such termination proceedings, the
Commission may suspend the right to grant, offer, or sell
options of any person whose activities in the Commission's
judgment present a substantial risk to the public interest.
[(e) The Commission may adopt rules and regulations, after
public notice and opportunity for a hearing on the record,
prohibiting the granting, issuance, or sale of options
permitted under subsection (d) of this section if the
Commission determines that such options are contrary to the
public interest.]
(c) The Commission shall issue regulations to continue to
permit the trading of options on contract markets under such
terms and conditions that the Commission from time to time may
prescribe.
[(f)] (d) Nothing in this Act shall be deemed to govern or in
any way be applicable to any transaction in an option on
foreign currency traded on a national securities exchange.
[(g)] (e) The Commission shall adopt rules requiring that a
contemporaneous written record be made, as practicable, of all
orders for execution on the floor or subject to the rules of
each contract market [or derivatives transaction execution
facility] placed by a member of the contract market [or
derivatives transaction execution facility] who is present on
the floor at the time such order is placed.
Sec. 4d. (a) It shall be unlawful for any person to be a
futures commission merchant unless--
(1) such person shall have registered, under this
Act, with the Commission as such futures commission
merchant and such registration shall not have expired
nor been suspended nor revoked; and
(2) such person shall, whether a member or nonmember
of a contract market [or derivatives transaction
execution facility], treat and deal with all money,
securities, and property received by such person to
margin, guarantee, or secure the trades or contracts of
any customer of such person, or accruing to such
customer as the result of such trades or contracts, as
belonging to such customer. Such money, securities, and
property shall be separately accounted for and shall
not be commingled with the funds of such commission
merchant or be used to margin or guarantee the trades
or contracts, or to secure or extend the credit, of any
customer or person other than the one for whom the same
are held: Provided, however, That such money,
securities, and property of the customers of such
futures commission merchant may, for convenience, be
commingled and deposited in the same account or
accounts with any bank or trust company or with the
clearing house organization of such contract market [or
derivatives transaction execution facility], and that
such share thereof as in the normal course of business
shall be necessary to margin, guarantee, secure,
transfer, adjust, or settle the contracts or trades of
such customers, or resulting market positions, with the
clearing-house organization of such contract market [or
derivatives transaction execution facility] or with any
member of such contract market [or derivatives
transaction execution facility], may be withdrawn and
applied to such purposes, including the payment of
commissions, brokerage, interest, taxes, storage, and
other charges, lawfully accruing in connection with
such contracts and trades: Provided further, That in
accordance with such terms and conditions as the
Commission may prescribe by rule, regulation, or order,
such money, securities, and property of the customers
of such futures commission merchant may be commingled
and deposited as provided in this section with any
other money, securities, and property received by such
futures commission merchant and required by the
Commission to be separately accounted for and treated
and dealt with as belonging to the customers of such
futures commission merchant: Provided further, That
such money may be invested in obligations of the United
States, in general obligations of any State or of any
political subdivision thereof, and in obligations fully
guaranteed as to principal and interest by the United
States, such investments to be made in accordance with
such rules and regulations and subject to such
conditions as the Commission may prescribe.
(b) It shall be unlawful for any person, including but not
limited to any clearing agency of a contract market [or
derivatives transaction execution facility] and any depository,
that has received any money, securities, or property for
deposit in a separate account as provided in [paragraph (2) of
this section] subsection (a)(2), to hold, dispose of, or use
any such money, securities, or property as belonging to the
depositing futures commission merchant or any person other than
the customers of such futures commission merchant.
(c) Conflicts of Interest.--The Commission shall require that
futures commission merchants and introducing brokers implement
conflict-of-interest systems and procedures that--
(1) establish structural and institutional safeguards
to ensure that the activities of any person within the
firm relating to research or analysis of the price or
market for any commodity are separated by appropriate
informational partitions within the firm from the
review, pressure, or oversight of persons whose
involvement in trading or clearing activities might
potentially bias the judgment or supervision of the
persons; and
(2) address such other issues as the Commission
determines to be appropriate.
(d) Designation of Chief Compliance Officer.--Each futures
commission merchant shall designate an individual to serve as
its Chief Compliance Officer and perform such duties and
responsibilities as shall be set forth in regulations to be
adopted by the Commission or rules to be adopted by a futures
association registered under section 17.
(e) Consistent with this Act, the Commission, in consultation
with the Securities and Exchange Commission, shall issue such
rules, regulations, or orders as are necessary to avoid
duplicative or conflicting regulations applicable to any
futures commission merchant registered with the Commission
pursuant to section 4f(a) (except paragraph (2) thereof), that
is also registered with the Securities and Exchange Commission
pursuant to section 15(b) of the Securities Exchange Act
(except paragraph (11) thereof), involving the application of--
(1) section 8, section 15(c)(3), and section 17 of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder related to the treatment of
customer funds, securities, or property, maintenance of
books and records, financial reporting or other
financial responsibility rules (as defined in section
3(a)(40) of the Securities Exchange Act of 1934),
involving security futures products; and
(2) similar provisions of this Act and the rules and
regulations thereunder involving security futures
products.
(f) Swaps.--
(1) Registration requirement.--It shall be unlawful
for any person to accept any money, securities, or
property (or to extend any credit in lieu of money,
securities, or property) from, for, or on behalf of a
swaps customer to margin, guarantee, or secure a swap
cleared by or through a derivatives clearing
organization (including money, securities, or property
accruing to the customer as the result of such a swap),
unless the person shall have registered under this Act
with the Commission as a futures commission merchant,
and the registration shall not have expired nor been
suspended nor revoked.
(2) Cleared swaps.--
(A) Segregation required.--A futures
commission merchant shall treat and deal with
all money, securities, and property of any
swaps customer received to margin, guarantee,
or secure a swap cleared by or though a
derivatives clearing organization (including
money, securities, or property accruing to the
swaps customer as the result of such a swap) as
belonging to the swaps customer.
(B) Commingling prohibited.--Money,
securities, and property of a swaps customer
described in subparagraph (A) shall be
separately accounted for and shall not be
commingled with the funds of the futures
commission merchant or be used to margin,
secure, or guarantee any trades or contracts of
any swaps customer or person other than the
person for whom the same are held.
(3) Exceptions.--
(A) Use of funds.--
(i) In general.--Notwithstanding
paragraph (2), money, securities, and
property of swap customers of a futures
commission merchant described in
paragraph (2) may, for convenience, be
commingled and deposited in the same
account or accounts with any bank or
trust company or with a derivatives
clearing organization.
(ii) Withdrawal.--Notwithstanding
paragraph (2), such share of the money,
securities, and property described in
clause (i) as in the normal course of
business shall be necessary to margin,
guarantee, secure, transfer, adjust, or
settle a cleared swap with a
derivatives clearing organization, or
with any member of the derivatives
clearing organization, may be withdrawn
and applied to such purposes, including
the payment of commissions, brokerage,
interest, taxes, storage, and other
charges, lawfully accruing in
connection with the cleared swap.
(B) Commission action.--Notwithstanding
paragraph (2), in accordance with such terms
and conditions as the Commission may prescribe
by rule, regulation, or order, any money,
securities, or property of the swaps customers
of a futures commission merchant described in
paragraph (2) may be commingled and deposited
in customer accounts with any other money,
securities, or property received by the futures
commission merchant and required by the
Commission to be separately accounted for and
treated and dealt with as belonging to the
swaps customer of the futures commission
merchant.
(4) Permitted investments.--Money described in
paragraph (2) may be invested in obligations of the
United States, in general obligations of any State or
of any political subdivision of a State, and in
obligations fully guaranteed as to principal and
interest by the United States, or in any other
investment that the Commission may by rule or
regulation prescribe, and such investments shall be
made in accordance with such rules and regulations and
subject to such conditions as the Commission may
prescribe.
(5) Commodity contract.--A swap cleared by or through
a derivatives clearing organization shall be considered
to be a commodity contract as such term is defined in
section 761 of title 11, United States Code, with
regard to all money, securities, and property of any
swaps customer received by a futures commission
merchant or a derivatives clearing organization to
margin, guarantee, or secure the swap (including money,
securities, or property accruing to the customer as the
result of the swap).
(6) Prohibition.--It shall be unlawful for any
person, including any derivatives clearing organization
and any depository institution, that has received any
money, securities, or property for deposit in a
separate account or accounts as provided in paragraph
(2) to hold, dispose of, or use any such money,
securities, or property as belonging to the depositing
futures commission merchant or any person other than
the swaps customer of the futures commission merchant.
(g) It shall be unlawful for any person to be an introducing
broker unless such person shall have registered under this Act
with the Commission as an introducing broker and such
registration shall not have expired nor been suspended nor
revoked.
(h) Notwithstanding subsection (a)(2) or the rules and
regulations thereunder, and pursuant to an exemption granted by
the Commission under section 4(c) of this Act or pursuant to a
rule or regulation, a futures commission merchant that is
registered pursuant to section 4f(a)(1) of this Act and also
registered as a broker or dealer pursuant to section 15(b)(1)
of the Securities Exchange Act of 1934 may, pursuant to a
portfolio margining program approved by the Securities and
Exchange Commission pursuant to section 19(b) of the Securities
Exchange Act of 1934, hold in a portfolio margining account
carried as a securities account subject to section 15(c)(3) of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder, a contract for the purchase or sale of
a commodity for future delivery or an option on such a
contract, and any money, securities or other property received
from a customer to margin, guarantee or secure such a contract,
or accruing to a customer as the result of such a contract. The
Commission shall consult with the Securities and Exchange
Commission to adopt rules to ensure that such transactions and
accounts are subject to comparable requirements to the extent
practical for similar products.
Sec. 4e. It shall be unlawful for any person to act as floor
trader in executing purchases and sales, or as floor broker in
executing any orders for the purchase or sale, of any commodity
for future delivery, or involving any contracts of sale of any
commodity for future delivery, on or subject to the rules of
any contract market [or derivatives transaction execution
facility] unless such person shall have registered, under this
Act, with the Commission as such floor trader or floor broker
and such registration shall not have expired nor been suspended
nor revoked.
Sec. 4f. (a)(1) Any person desiring to register as a futures
commission merchant, introducing broker, floor broker, or floor
trader hereunder shall be registered upon application to the
Commission. The application shall be made in such form and
manner as prescribed by the Commission, giving such information
and facts as the Commission may deem necessary concerning the
business in which the applicant is or will be engaged,
including in the case of an application of a futures commission
merchant or an introducing broker, the names and addresses of
the managers of all branch offices, and the names of such
officers and partners, if a partnership, and of such officers,
directors, and stockholders, if a corporation, as the
Commission may direct. Such person, when registered hereunder,
shall likewise continue to report and furnish to the Commission
the above-mentioned information and such other information
pertaining to such person's business as the Commission may
require. Each registration shall expire on December 31 of the
year for which issued or at such other time, not less than one
year from the date of issuance, as the Commission may by rule,
regulation, or order prescribe, and shall be renewed upon
application therefor unless the registration has been suspended
(and the period of such suspension has not expired) or revoked
pursuant to the provisions of this Act.
(2) Notwithstanding paragraph (1), and except as provided in
paragraph (3), any broker or dealer that is registered with the
Securities and Exchange Commission shall be registered as a
futures commission merchant or introducing broker, as
applicable, if--
(A) the broker or dealer limits its solicitation of
orders, acceptance of orders, or execution of orders,
or placing of orders on behalf of others involving any
contracts of sale of any commodity for future delivery,
on or subject to the rules of any contract market [or
registered derivatives transaction execution facility]
to security futures products;
(B) the broker or dealer files written notice with
the Commission in such form as the Commission, by rule,
may prescribe containing such information as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors;
(C) the registration of the broker or dealer is not
suspended pursuant to an order of the Securities and
Exchange Commission; and
(D) the broker or dealer is a member of a national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934.
The registration shall be effective contemporaneously with the
submission of notice, in written or electronic form, to the
Commission.
(3) A floor broker or floor trader shall be exempt from the
registration requirements of section 4e and paragraph (1) of
this subsection if--
(A) the floor broker or floor trader is a broker or
dealer registered with the Securities and Exchange
Commission;
(B) the floor broker or floor trader limits its
solicitation of orders, acceptance of orders, or
execution of orders, or placing of orders on behalf of
others involving any contracts of sale of any commodity
for future delivery, on or subject to the rules of any
contract market to security futures products; and
(C) the registration of the floor broker or floor
trader is not suspended pursuant to an order of the
Securities and Exchange Commission.
(4)(A) A broker or dealer that is registered as a futures
commission merchant or introducing broker pursuant to paragraph
(2), or that is a floor broker or floor trader exempt from
registration pursuant to paragraph (3), shall be exempt from
the following provisions of this Act and the rules thereunder:
(i) Subsections (b)[, (d), (e), and (g)] and (e) of
section 4c.
(ii) Sections 4d, 4e, and 4h.
(iii) Subsections (b) and (c) of this section.
(iv) Section 4j.
(v) Section 4k(1).
(vi) Section 4p.
(vii) Section 6d.
(viii) Subsections (d) and (g) of section 8.
(ix) Section 16.
(B)(i) Except as provided in clause (ii) of this
subparagraph, but notwithstanding any other provision of this
Act, the Commission, by rule, regulation, or order, may
conditionally or unconditionally exempt any broker or dealer
subject to the registration requirement of paragraph (2), or
any broker or dealer exempt from registration pursuant to
paragraph (3), from any provision of this Act or of any rule or
regulation thereunder, to the extent the exemption is necessary
or appropriate in the public interest and is consistent with
the protection of investors.
(ii) The Commission shall, by rule or regulation, determine
the procedures under which an exemptive order under this
section shall be granted and may, in its sole discretion,
decline to entertain any application for an order of exemption
under this section.
(C)(i) A broker or dealer that is registered as a futures
commission merchant or introducing broker pursuant to paragraph
(2) or an associated person thereof, or that is a floor broker
or floor trader exempt from registration pursuant to paragraph
(3), shall not be required to become a member of any futures
association registered under section 17.
(ii) No futures association registered under section 17 shall
limit its members from carrying an account, accepting an order,
or transacting business with a broker or dealer that is
registered as a futures commission merchant or introducing
broker pursuant to paragraph (2) or an associated person
thereof, or that is a floor broker or floor trader exempt from
registration pursuant to paragraph (3).
(b) Notwithstanding any other provisions of this Act, no
person desiring to register as futures commission merchant or
as introducing broker shall be so registered unless he meets
such minimum financial requirements as the Commission may by
regulation prescribe as necessary to insure his meeting his
obligations as a registrant, and each person so registered
shall at all times continue to meet such prescribed minimum
financial requirements: Provided, That such minimum financial
requirements will be considered met if the applicant for
registration or registrant is a member of a contract market [or
derivatives transaction execution facility] and conforms to
minimum financial standards and related reporting requirements
set by such contract market [or derivatives transaction
execution facility] in its bylaws, rules, regulations, or
resolutions and approved by the Commission as adequate to
effectuate the purposes of this subsection.
(c)(1) As used in this subsection:
(i) The term ``affiliated person'' means any person
directly or indirectly controlling, controlled by, or
under common control with a futures commission
merchant, as the Commission, by rule or regulation, may
determine will effectuate the purposes of this
subsection.
(ii) The term ``Federal banking agency'' shall have
the same meaning as the term ``appropriate Federal
banking agency'' in section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q)).
(2)(A) Each registered futures commission merchant shall
obtain such information and make and keep such records as the
Commission, by rule or regulation, prescribes concerning the
registered futures commission merchant's policies, procedures,
or systems for monitoring and controlling financial and
operational risks to it resulting from the activities of any of
its affiliated persons, other than a natural person.
(B) The records required under subparagraph (A) shall
describe, in the aggregate, each of the futures and other
financial activities conducted by, and the customary sources of
capital and funding of, those of its affiliated persons whose
business activities are reasonably likely to have a material
impact on the financial or operational condition of the futures
commission merchant, including its adjusted net capital, its
liquidity, or its ability to conduct or finance its operations.
(C) The Commission, by rule or regulation, may require
summary reports of such information to be filed by the futures
commission merchant with the Commission no more frequently than
quarterly.
(3)(A) [,]If, as a result of adverse market conditions or
based on reports provided to the Commission pursuant to
paragraph (2) or other available information, the Commission
reasonably concludes that the Commission has concerns regarding
the financial or operational condition of any registered
futures commission merchant, the Commission may require the
futures commission merchant to make reports concerning the
futures and other financial activities of any of such person's
affiliated persons, other than a natural person, whose business
activities are reasonably likely to have a material impact on
the financial or operational condition of the futures
commission merchant.
(B) The Commission, in requiring reports pursuant to this
paragraph, shall specify the information required, the period
for which it is required, the time and date on which the
information must be furnished, and whether the information is
to be furnished directly to the Commission or to a contract
market or derivatives transaction execution facility or other
self-regulatory organization with primary responsibility for
examining the registered futures commission merchant's
financial and operational condition.
(4)(A) [in developing] In developing and implementing
reporting requirements pursuant to paragraph (2) with respect
to affiliated persons subject to examination by or reporting
requirements of a Federal banking agency, the Commission shall
consult with and consider the views of each such Federal
banking agency. If a Federal banking agency comments in writing
on a proposed rule of the Commission under this subsection that
has been published for comment, the Commission shall respond in
writing to the written comment before adopting the proposed
rule. The Commission shall, at the request of the Federal
banking agency, publish the comment and response in the Federal
Register at the time of publishing the adopted rule.
(B)(i) Except as provided in clause (ii), a registered
futures commission merchant shall be considered to have
complied with a recordkeeping or reporting requirement adopted
pursuant to paragraph (2) concerning an affiliated person that
is subject to examination by, or reporting requirements of, a
Federal banking agency if the futures commission merchant
utilizes for the recordkeeping or reporting requirement copies
of reports filed by the affiliated person with the Federal
banking agency pursuant to section 5211 of the Revised Statutes
(12 U.S.C. 161), section 9 of the Federal Reserve Act (12
U.S.C. 321 et seq.), section 7(a) of the Federal Deposit
Insurance Act (12 U.S.C. [1817(a)] 1817(a)), section 10(b) of
the Home Owners' Loan Act (12 U.S.C. 1467a(b)), or section 5 of
the Bank Holding Company Act of 1956 (12 U.S.C. 1844).
(ii) The Commission may, by rule adopted pursuant to
paragraph (2), require any futures commission merchant filing
the reports with the Commission to obtain, maintain, or report
supplemental information if the Commission makes an explicit
finding that the supplemental information is necessary to
inform the Commission regarding potential risks to the futures
commission merchant. Prior to requiring any such supplemental
information, the Commission shall first request the Federal
banking agency to expand its reporting requirements to include
the information.
(5) Prior to making a request pursuant to paragraph (3) for
information with respect to an affiliated person that is
subject to examination by or reporting requirements of a
Federal banking agency, the Commission shall--
(A) notify the agency of the information required
with respect to the affiliated person; and
(B) consult with the agency to determine whether the
information required is available from the agency and
for other purposes, unless the Commission determines
that any delay resulting from the consultation would be
inconsistent with ensuring the financial and
operational condition of the futures commission
merchant or the stability or integrity of the futures
markets.
(6) Nothing in this subsection shall be construed to permit
the Commission to require any futures commission merchant to
obtain, maintain, or furnish any examination report of any
Federal banking agency or any supervisory recommendations or
analysis contained in the report.
(7) No information provided to or obtained by the Commission
from any Federal banking agency pursuant to a request under
paragraph (5) regarding any affiliated person that is subject
to examination by or reporting requirements of a Federal
banking agency may be disclosed to any other person (other than
as provided in section 8 or section 8a(6)), without the prior
written approval of the Federal banking agency.
(8) The Commission shall notify a Federal banking agency of
any concerns of the Commission regarding significant financial
or operational risks resulting from the activities of any
futures commission merchant to any affiliated person thereof
that is subject to examination by or reporting requirements of
the Federal banking agency.
(9) The Commission, by rule, regulation, or order, may exempt
any person or class of persons under such terms and conditions
and for such periods as the Commission shall provide in the
rule, regulation, or order, from this subsection and the rules
and regulations issued under this subsection. In granting the
exemption, the Commission shall consider, among other factors--
(A) whether information of the type required under
this subsection is available from a supervisory agency
(as defined in section 1101(7) of the Right to
Financial Privacy Act of 1978 (12 U.S.C. 3401(7))), a
State insurance commission or similar State agency, the
Securities and Exchange Commission, or a similar
foreign regulator;
(B) the primary business of any affiliated person;
(C) the nature and extent of domestic or foreign
regulation of the affiliated person's activities;
(D) the nature and extent of the registered futures
commission merchant's commodity futures and options
activities; and
(E) with respect to the registered futures commission
merchant and its affiliated persons, on a consolidated
basis, the amount and proportion of assets devoted to,
and revenues derived from activities in the United
States futures markets.
(10) Information required to be provided pursuant to this
subsection shall be subject to section 8. Except as
specifically provided in section 8 and notwithstanding any
other provision of law, the Commission shall not be compelled
to disclose any information required to be reported under this
subsection, or any information supplied to the Commission by
any domestic or foreign regulatory agency that relates to the
financial or operational condition of any affiliated person of
a registered futures commission merchant.
(11) Nothing in paragraphs (1) through (10) shall be
construed to supersede or to limit in any way the authority or
powers of the Commission pursuant to any other provision of
this Act or regulations issued under this Act.
Sec. 4g. (a) Every person registered hereunder as futures
commission merchant, introducing broker, floor broker, or floor
trader shall make such reports as are required by the
Commission regarding the transactions and positions of such
person, and the transactions and positions of the customer
thereof, in commodities for future delivery on any board of
trade in the United States or elsewhere, and in [any
significant price discovery contract traded or executed on an
electronic trading facility or] any agreement, contract, or
transaction that is treated by a derivatives clearing
organization, whether registered or not registered, as fungible
with a significant price discovery contract; shall keep books
and records pertaining to such transactions and positions in
such form and manner and for such period as may be required by
the Commission; and shall keep such books and records open to
inspection by any representative of the Commission or the
United States Department of Justice.
(b) Every registered entity shall maintain daily trading
records. The daily trading records shall include such
information as the Commission shall prescribe by rule.
(c) Floor brokers, introducing brokers, and futures
commission merchants shall maintain daily trading records for
each customer in such manner and form as to be identifiable
with the trades referred to in subsection (b).
(d) Daily trading records shall be maintained in a form
suitable to the Commission for such period as may be required
by the Commission. Reports shall be made from the records
maintained at such times and at such places and in such form as
the Commission may prescribe by rule, order, or regulation in
order to protect the public interest and the interest of
persons trading in commodity futures.
(e) Before the beginning of trading each day, [the exchange]
each designated contract market and swap execution facility
shall, insofar as is practicable and under terms and conditions
specified by the Commission, make public the volume of trading
on each type of contract for the previous day and such other
information as the Commission deems necessary in the public
interest and prescribes by rule, order, or regulation.
(f) Nothing contained in this section shall be construed to
prohibit the Commission from making separate determinations for
different registered entities when such determinations are
warranted in the judgment of the Commission.
* * * * * * *
Sec. 4i. It shall be unlawful for any person to make any
contract for the purchase or sale of any commodity for future
delivery on or subject to the rules of any contract market [or
derivatives transaction execution facility, or any significant
price discovery contract traded or executed on an electronic
trading facility] or any agreement, contract, or transaction
that is treated by a derivatives clearing organization, whether
registered or not registered, as fungible with a significant
price discovery contract--
(1) if such person shall directly or indirectly make
such contracts with respect to any commodity or any
future of such commodity during any one day in an
amount equal to or in excess of such amount as shall be
fixed from time to time by the Commission, and
(2) if such person shall directly or indirectly have
or obtain a long or short position in any commodity or
any future of such commodity equal to or in excess of
such amount as shall be fixed from time to time by the
Commission,
unless such person files or causes to be filed with the
properly designated officer of the Commission such reports
regarding any transactions or positions described in clauses
(1) and (2) hereof as the Commission may by rule or regulation
require and unless, in accordance with rules and regulations of
the Commission, such person shall keep books and records of all
such transactions and positions and transactions and positions
in any such commodity traded on or subject to the rules of any
other board of trade [or electronic trading facility], and of
cash or spot transactions in, and inventories and purchase and
sale commitments of such commodity. Such books and records
shall show complete details concerning all such transactions,
positions, inventories, and commitments, including the names
and addresses of all persons having any interest therein, and
shall be open at all times to inspection by any representative
of the Commission or the Department of Justice. For the
purposes of this section, the futures and cash or spot
transactions and positions of any person shall include such
transactions and positions of any persons directly or
indirectly controlled by such person.
SEC. 4J. RESTRICTIONS ON DUAL TRADING IN SECURITY FUTURES PRODUCTS ON
DESIGNATED CONTRACT MARKETS [AND REGISTERED
DERIVATIVES TRANSACTION EXECUTION FACILITIES].
(a) The Commission shall issue regulations to prohibit the
privilege of dual trading in security futures products on each
contract market [and registered derivatives transaction
execution facility]. The regulations issued by the Commission
under this section--
(1) shall provide that the prohibition of dual
trading thereunder shall take effect upon issuance of
the regulations; and
(2) shall provide exceptions, as the Commission
determines appropriate, to ensure fairness and orderly
trading in security futures product markets,
including--
(A) exceptions for spread transactions and
the correction of trading errors;
(B) allowance for a customer to designate in
writing not less than once annually a named
floor broker to execute orders for such
customer, notwithstanding the regulations to
prohibit the privilege of dual trading required
under this section; and
(C) other measures reasonably designed to
accommodate unique or special characteristics
of individual boards of trade or contract
markets, to address emergency or unusual market
conditions, or otherwise to further the public
interest consistent with the promotion of
market efficiency, innovation, and expansion of
investment opportunities, the protection of
investors, and with the purposes of this
section.
(b) As used in this section, the term ``dual trading'' means
the execution of customer orders by a floor broker during the
same trading session in which the floor broker executes any
trade in the same contract market [or registered derivatives
transaction execution facility] for--
(1) the account of such floor broker;
(2) an account for which such floor broker has
trading discretion; or
(3) an account controlled by a person with whom such
floor broker has a relationship through membership in a
broker association.
(c) As used in this section, the term ``broker association''
shall include two or more contract market members [or
registered derivatives transaction execution facility members]
with floor trading privileges of whom at least one is acting as
a floor broker, who--
(1) engage in floor brokerage activity on behalf of
the same employer,
(2) have an employer and employee relationship which
relates to floor brokerage activity,
(3) share profits and losses associated with their
brokerage or trading activity, or
(4) regularly share a deck of orders.
Sec. 4k. (1) It shall be unlawful for any person to be
associated with a futures commission merchant as a partner,
officer, or employee, or to be associated with an introducing
broker as a partner, officer, employee, or agent (or any person
occupying a similar status or performing similar functions), in
any capacity that involves (i) the solicitation or acceptance
of customers' orders (other than in a clerical capacity) or
(ii) the supervision of any person or persons so engaged,
unless such person is registered with the Commission under this
Act as an associated person of such futures commission merchant
or of such introducing broker and such registration shall not
have expired, been suspended (and the period of suspension has
not expired), or been revoked. It shall be unlawful for a
futures commission merchant or introducing broker to permit
such a person to become or remain associated with the futures
commission merchant or introducing broker in any such capacity
if such futures commission merchant or introducing broker knew
or should have known that such person was not so registered or
that such registration had expired, been suspended (and the
period of suspension has not expired), or been revoked. Any
individual who is registered as a floor broker, futures
commission merchant, or introducing broker (and such
registration is not suspended or revoked) need not also
register under this subsection.
(2) It shall be unlawful for any person to be associated with
a commodity pool operator as a partner, officer, employee,
consultant, or agent (or any person occupying a similar status
or performing similar functions), in any capacity that involves
(i) the solicitation of funds, securities, or property for a
participation in a commodity pool or (ii) the supervision of
any person or persons so engaged, unless such person is
registered with the Commission under this Act as an associated
person of such commodity pool operator and such registration
shall not have expired, been suspended (and the period of
suspension has not expired), or been revoked. It shall be
unlawful for a commodity pool operator to permit such a person
to become or remain associated with the commodity pool operator
in any such capacity if the commodity pool operator knew or
should have known that such person was not so registered or
that such registration had expired, been suspended (and the
period of suspension has not expired), or been revoked. Any
individual who is registered as a floor broker, futures
commission merchant, introducing broker, commodity pool
operator, or as an associated person of another category of
registrant under this section (and such registration is not
suspended or revoked) need not also register under this
subsection. The Commission may exempt any person or class of
persons from having to register under this subsection by rule,
regulation, or order.
(3) It shall be unlawful for any person to be associated with
a commodity trading advisor as a partner, officer, employee,
consultant, or agent (or any person occupying a similar status
or performing similar functions), in any capacity which
involves (i) the solicitation of a client's or prospective
client's discretionary account or (ii) the supervision of any
person or persons so engaged, unless such person is registered
with the Commission under this Act as an associated person of
such commodity trading advisor and such registration shall not
have expired, been suspended (and the period of suspension has
not expired), or been revoked. It shall be unlawful for a
commodity trading advisor to permit such a person to become or
remain associated with the commodity trading advisor in any
such capacity if the commodity trading advisor knew or should
have known that such person was not so registered or that such
registration had expired, been suspended (and the period of
suspension has not expired), or been revoked. Any individual
who is registered as a floor broker, futures commission
merchant, introducing broker, commodity trading advisor, or as
an associated person of another category of registrant under
this section (and such registration is not suspended or
revoked) need not also register under this subsection. The
Commission may exempt any person or class of persons from
having to register under this subsection by rule, regulation,
or order.
(4) Any person desiring to be registered as an associated
person of a futures commission merchant, of an introducing
broker, of a commodity pool operator, or of a commodity trading
advisor shall make application to the Commission in the form
and manner prescribed by the Commission, giving such
information and facts as the Commission may deem necessary
concerning the applicant. Such person, when registered
hereunder, shall likewise continue to report and furnish to the
Commission such information as the Commission may require. Such
registration shall expire at such time as the Commission may by
rule, regulation, or order prescribe.
(5) Any associated person of a broker or dealer that is
registered with the Securities and Exchange Commission, and who
limits its solicitation of orders, acceptance of orders, or
execution of orders, or placing of orders on behalf of others
involving any contracts of sale of any commodity for future
delivery or any option on such a contract, on or subject to the
rules of any contract market [or registered derivatives
transaction execution facility] to security futures products,
shall be exempt from the following provisions of this Act and
the rules thereunder:
(A) Subsections (b)[, (d), (e), and (g)] and (e) of
section 4c.
(B) Sections 4d, 4e, and 4h.
(C) Subsections (b) and (c) of section 4f.
(D) Section 4j.
(E) Paragraph (1) of this section.
(F) Section 4p.
(G) Section 6d.
(H) Subsections (d) and (g) of section 8.
(I) Section 16.
(6) It shall be unlawful for any registrant to permit a
person to become or remain an associated person of such
registrant, if the registrant knew or should have known of
facts regarding such associated person that are set forth as
statutory disqualifications in section 8a(2) of this Act,
unless such registrant has notified the Commission of such
facts and the Commission has determined that such person should
be registered or temporarily licensed.
Sec. 4l. It is hereby found that the activities of commodity
trading advisors and commodity pool operators are affected with
a national public interest in that, among other things--
(1) their advice, counsel, publications, writings,
analyses, and reports are furnished and distributed,
and their contracts, solicitations, subscriptions,
agreements, and other arrangements with clients take
place and are negotiated and performed by the use of
the mails and other means and instrumentalities of
interstate commerce;
(2) their advice, counsel, publications, writings,
analyses, and reports customarily relate to and their
operations are directed toward and cause the purchase
and sale of commodities for future delivery on or
subject to the rules of contract markets [or
derivatives transaction execution facilities]; and
(3) the foregoing transactions occur in such volume
as to affect substantially transactions on contract
markets [or derivatives transaction execution
facilities].
[Sec. 4m. (1) It shall be unlawful for any commodity trading
advisor or commodity pool operator, unless registered under
this Act, to make use of the mails or any means or
instrumentality of interstate commerce in connection with his
business as such commodity trading advisor or commodity pool
operator: Provided, That the provisions of this section shall
not apply to any commodity trading advisor who, during the
course of the preceding twelve months, has not furnished
commodity trading advice to more than fifteen persons and who
does not hold himself out generally to the public as a
commodity trading advisor. The provisions of this section shall
not apply to any commodity trading advisor who is a (1) dealer,
processor, broker, or seller in cash market transactions of any
commodity specifically set forth in section 2(a) of this Act
prior to the enactment of the Commodity Futures Trading
Commission Act of 1974 (or products thereof) or (2) nonprofit,
voluntary membership, general farm organization, who provides
advice on the sale or purchase of any commodity specifically
set forth in section 2(a) of this Act prior to the enactment of
the Commodity Futures Trading Commission Act of 1974; if the
advice by the person described in clause (1) or (2) of this
sentence as a commodity trading advisor is solely incidental to
the conduct of that person's business: Provided, That such
person shall be subject to proceedings under section 14 of this
Act.
[(2) Nothing in this Act shall relieve any person of any
obligation or duty, or affect the availability of any right or
remedy available to the Securities and Exchange Commission or
any private party arising under the Securities Act of 1933 or
the Securities Exchange Act of 1934 governing the issuance,
offer, purchase, or sale of securities of a commodity pool, or
of persons engaged in transactions with respect to such
securities, or reporting by a commodity pool.
[(3) Exception.--
[(A) In general.--Paragraph (1) shall not apply to
any commodity trading advisor that is registered with
the Securities and Exchange Commission as an investment
adviser whose business does not consist primarily of
acting as a commodity trading advisor, as defined in
section 1a, and that does not act as a commodity
trading advisor to any commodity pool that is engaged
primarily in trading commodity interests.
[(B) Engaged primarily.--For purposes of subparagraph
(A), a commodity trading advisor or a commodity pool
shall be considered to be ``engaged primarily'' in the
business of being a commodity trading advisor or
commodity pool if it is or holds itself out to the
public as being engaged primarily, or proposes to
engage primarily, in the business of advising on
commodity interests or investing, reinvesting, owning,
holding, or trading in commodity interests,
respectively.
[(C) Commodity interests.--For purposes of this
paragraph, commodity interests shall include contracts
of sale of a commodity for future delivery, options on
such contracts, security futures, swaps, leverage
contracts, foreign exchange, spot and forward contracts
on physical commodities, and any monies held in an
account used for trading commodity interests.]
SEC. 4M. USE OF MAILS OR OTHER MEANS OR INSTRUMENTALITIES OF INTERSTATE
COMMERCE BY COMMODITY TRADING ADVISORS AND
COMMODITY POOL OPERATORS.
(a) Prohibition.--It shall be unlawful for any commodity
trading advisor or commodity pool operator, unless registered
under this Act, to make use of the mails or any means or
instrumentality of interstate commerce in connection with
business as the commodity trading advisor or commodity pool
operator.
(b) Exceptions.--
(1) In general.--Subsection (a) shall not apply to a
commodity trading advisor whose commodity trading
advice is solely incidental to the conduct of that
person's business, and who is a--
(A) dealer, processor, broker, or seller in
cash market transactions of any commodity
specifically set forth in section 2(a) of this
Act before the enactment of the Commodity
Futures Trading Commission Act of 1974 (or
products thereof); or
(B) nonprofit, voluntary membership, general
farm organization, that provides advice on the
sale or purchase of any commodity specifically
set forth in section 2(a) of this Act before
the enactment of the Commodity Futures Trading
Commission Act of 1974.
(2) Charitable organization.--Subsection (a) shall
not apply to any commodity trading advisor or commodity
pool operator that is--
(A) a charitable organization, as defined in
section 3(c)(10)(D) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(10)(D)), or a
trustee, director, officer, employee, or
volunteer of such a charitable organization
acting within the scope of the employment or
duties of the person with the organization,
whose advisory or pool activities are conducted
only on behalf of, or with respect to, 1 or
more of--
(i) any such charitable organization;
or
(ii) an investment trust, syndicate,
or similar form of enterprise excluded
from the definition of ``investment
company'' pursuant to section 3(c)(10)
of the Investment Company Act of 1940
(15 U.S.C. 80a-3(c)(10)), or the
trustees, administrators, settlors (or
potential settlors), or beneficiaries
of the foregoing; or
(B) any plan, company, or account described
in section 3(c)(14) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(14)), any
person or entity who establishes or maintains
such a plan, company, or account, or any
trustee, director, officer, employee, or
volunteer for any of the foregoing plans,
persons, or entities acting within the scope of
the employment or duties of the person with the
organization, whose advisory or pool activities
are conducted only on behalf of, or with
respect to, any investment trust, syndicate, or
similar form of enterprise excluded from the
definition of ``investment company'' pursuant
to section 3(c)(14) of the Investment Company
Act of 1940 (15 U.S.C. 80a-3(c)(14)).
(3) Small commodity trading advisors.--Subsection (a)
shall not apply to any commodity trading advisor who,
during the course of the preceding 12 months, has not
furnished commodity trading advice to more than 15
persons and who does not hold themselves out generally
to the public as a commodity trading advisor.
(4) Sec-registered.--
(A) In general.--Subsection (a) shall not
apply to any commodity trading advisor that is
registered with the Securities and Exchange
Commission as an investment adviser whose
business does not consist primarily of acting
as a commodity trading advisor and that does
not act as a commodity trading advisor to any
commodity pool that is primarily engaged in
trading commodity interests.
(B) Engaged primarily.--For purposes of this
paragraph, a commodity trading advisor or a
commodity pool shall be considered to be
``engaged primarily'' in the business of being
a commodity trading advisor or commodity pool
if it is or holds itself out to the public as
being engaged primarily, or proposes to engage
primarily, in the business of advising on
commodity interests or investing, reinvesting,
owning, holding, or trading in commodity
interests, respectively.
(C) Commodity interests.--For purposes of
this paragraph, commodity interests shall
include contracts of sale of a commodity for
future delivery, options on such contracts,
security futures, swaps, leverage contracts,
foreign exchange, spot and forward contracts on
physical commodities, and any monies held in an
account used for trading commodity interests.
(5) Subject to proceedings.--A person described in
paragraphs (1) and (2) shall be subject to proceedings
under section 14.
(c) Relationship to Other Law.--Nothing in this Act shall
relieve any person of any obligation or duty, or affect the
availability of any right or remedy available to the Securities
and Exchange Commission or any private party arising under the
Securities Act of 1933 (15 U.S.C. 77a et seq.) or the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)
governing the issuance, offer, purchase, or sale of securities
of a commodity pool, or of persons engaged in transactions with
respect to the securities, or reporting by a commodity pool.
(d) Disclosure Concerning Exempted Charitable
Organizations.--A commodity trading advisor or commodity pool
operator that is an organization or person described in
subsection (b)(2)(A) of this section to or of any investment
trust, syndicate, or similar form of enterprise excluded from
the definition of ``investment company'' pursuant to section
3(c)(10)(B) of the Investment Company Act of 1940 (15 U.S.C.
80a-3(c)(10)(B)) shall provide disclosure in accordance with
section 7(e) of that Act (15 U.S.C. 80a-7(e)).
* * * * * * *
Sec. 4p. (a) The Commission may specify by rules and
regulations appropriate standards with respect to training,
experience, and such other qualifications as the Commission
finds necessary or desirable to insure the fitness of persons
required to be registered with the Commission. In connection
therewith, the Commission may prescribe by rules and
regulations the adoption of written proficiency examinations to
be given to applicants for registration and the establishment
of reasonable fees to be charged to such applicants to cover
the administration of such examinations. The Commission may
further prescribe by rules and regulations that, in lieu of
examinations administered by the Commission, futures
associations registered under section 17 of this Act, contract
markets[, or derivatives transaction execution facilities] may
adopt written proficiency examinations to be given to
applicants for registration and charge reasonable fees to such
applicants to cover the administration of such examinations.
Notwithstanding any other provision of this section, the
Commission may specify by rules and regulations such terms and
conditions as it deems appropriate to protect the public
interest wherein exception to any written proficiency
examination shall be made with respect to individuals who have
demonstrated, through training and experience, the degree of
proficiency and skill necessary to protect the interests of
customers, clients, pool participants, or other members of the
public with whom such individuals deal.
(b) The Commission shall issue regulations to require new
registrants, within six months after receiving such
registration, to attend a training session, and all other
registrants to attend periodic training sessions, to ensure
that registrants understand their responsibilities to the
public under this Act, including responsibilities to observe
just and equitable principles of trade, any rule or regulation
of the Commission, any rule of any appropriate contract market,
[derivatives transaction execution facility,] registered
futures association, or other self-regulatory organization, or
any other applicable Federal or state law, rule or regulation.
* * * * * * *
SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.
(a) Applications.--A board of trade applying to the
Commission for designation as a contract market shall submit an
application to the Commission that includes any relevant
materials and records the Commission may require consistent
with this Act.
[(c)] (b) Existing Contract Markets.--A board of trade that
is designated as a contract market on the date of the enactment
of the Commodity Futures Modernization Act of 2000 shall be
considered to be a designated contract market under this
section.
[(d)] (c) Core Principles for Contract Markets.--
(1) Designation as contract market.--
(A) In general.--To be designated, and
maintain a designation, as a contract market, a
board of trade shall comply with--
(i) any core principle described in
this subsection; and
(ii) any requirement that the
Commission may impose by rule or
regulation pursuant to section 8a(5).
(B) Reasonable discretion of contract
market.--Unless otherwise determined by the
Commission by rule or regulation, a board of
trade described in subparagraph (A) shall have
reasonable discretion in establishing the
manner in which the board of trade complies
with the core principles described in this
subsection.
(2) Compliance with rules.--
(A) In general.--The board of trade shall
establish, monitor, and enforce compliance with
the rules of the contract market, including--
(i) access requirements;
(ii) the terms and conditions of any
contracts to be traded on the contract
market; and
(iii) rules prohibiting abusive trade
practices on the contract market.
(B) Capacity of contract market.--The board
of trade shall have the capacity to detect,
investigate, and apply appropriate sanctions to
any person that violates any rule of the
contract market.
(C) Requirement of rules.--The rules of the
contract market shall provide the board of
trade with the ability and authority to obtain
any necessary information to perform any
function described in this subsection,
including the capacity to carry out such
international information-sharing agreements as
the Commission may require.
(3) Contracts not readily subject to manipulation.--
The board of trade shall list on the contract market
only contracts that are not readily susceptible to
manipulation.
[(4) Prevention of Market Disruption.--The]
(4) Prevention of market disruption.--
(A) In general.--The board of trade shall
have the capacity and responsibility to prevent
manipulation, price distortion, and disruptions
of the delivery or cash-settlement process
through market surveillance, compliance, and
enforcement practices and procedures,
including--
[(A)] (i) methods for conducting
real-time monitoring of trading; and
[(B)] (ii) comprehensive and accurate
trade reconstructions.
(B) Digital commodity.--With regard to a
contract on the contract market that references
a digital commodity available on a cash market,
the Commission shall adopt rules detailing the
content and availability of trade and trader
data and other information the board of trade
must be able to access from the referenced cash
markets and data sources in order to comply
with this paragraph.
(5) Position limitations or accountability.--
(A) In general.--To reduce the potential
threat of market manipulation or congestion
(especially during trading in the delivery
month), the board of trade shall adopt for each
contract of the board of trade, as is necessary
and appropriate, position limitations or
position accountability for speculators.
(B) Maximum allowable position limitation.--
For any contract that is subject to a position
limitation established by the Commission
pursuant to section 4a(a), the board of trade
shall set the position limitation of the board
of trade at a level not higher than the
position limitation established by the
Commission.
(6) Emergency authority.--The board of trade, in
consultation or cooperation with the Commission, shall
adopt rules to provide for the exercise of emergency
authority, as is necessary and appropriate, including
the authority--
(A) to liquidate or transfer open positions
in any contract;
(B) to suspend or curtail trading in any
contract; and
(C) to require market participants in any
contract to meet special margin requirements.
(7) Availability of general information.--The board
of trade shall make available to market authorities,
market participants, and the public accurate
information concerning--
(A) the terms and conditions of the contracts
of the contract market; and
(B)(i) the rules, regulations, and mechanisms
for executing transactions on or through the
facilities of the contract market; and
(ii) the rules and specifications describing
the operation of the contract market's--
(I) electronic matching platform; or
(II) trade execution facility.
(8) Daily publication of trading information.--The
board of trade shall make public daily information on
settlement prices, volume, open interest, and opening
and closing ranges for actively traded contracts on the
contract market.
(9) Execution of transactions.--
(A) In general.--The board of trade shall
provide a competitive, open, and efficient
market and mechanism for executing transactions
that protects the price discovery process of
trading in the centralized market of the board
of trade.
(B) Rules.--The rules of the board of trade
may authorize, for bona fide business
purposes--
(i) transfer trades or office trades;
(ii) an exchange of--
(I) futures in connection
with a cash commodity
transaction;
(II) futures for cash
commodities; or
(III) futures for swaps; or
(iii) a futures commission merchant,
acting as principal or agent, to enter
into or confirm the execution of a
contract for the purchase or sale of a
commodity for future delivery if the
contract is reported, recorded, or
cleared in accordance with the rules of
the contract market or a derivatives
clearing organization.
(10) Trade information.--The board of trade shall
maintain rules and procedures to provide for the
recording and safe storage of all identifying trade
information in a manner that enables the contract
market to use the information--
(A) to assist in the prevention of customer
and market abuses; and
(B) to provide evidence of any violations of
the rules of the contract market.
(11) Financial integrity of transactions.--The board
of trade shall establish and enforce--
(A) rules and procedures for ensuring the
financial integrity of transactions entered
into on or through the facilities of the
contract market (including the clearance and
settlement of the transactions with a
derivatives clearing organization); and
(B) rules to ensure--
(i) the financial integrity of any--
(I) futures commission
merchant; and
(II) introducing broker; and
(ii) the protection of customer
funds.
(12) Protection of markets and market participants.--
The board of trade shall establish and enforce rules--
(A) to protect markets and market
participants from abusive practices committed
by any party, including abusive practices
committed by a party acting as an agent for a
participant; and
(B) to promote fair and equitable trading on
the contract market.
(13) Disciplinary procedures.--The board of trade
shall establish and enforce disciplinary procedures
that authorize the board of trade to discipline,
suspend, or expel members or market participants that
violate the rules of the board of trade, or similar
methods for performing the same functions, including
delegation of the functions to third parties.
(14) Dispute resolution.--The board of trade shall
establish and enforce rules regarding, and provide
facilities for alternative dispute resolution as
appropriate for, market participants and any market
intermediaries.
(15) Governance fitness standards.--The board of
trade shall establish and enforce appropriate fitness
standards for directors, members of any disciplinary
committee, members of the contract market, and any
other person with direct access to the facility
(including any party affiliated with any person
described in this paragraph).
(16) Conflicts of interest.--The board of trade shall
establish and enforce rules--
(A) to minimize conflicts of interest in the
decision-making process of the contract market;
and
(B) to establish a process for resolving
conflicts of interest described in subparagraph
(A).
(17) Composition of governing boards of contract
markets.--The governance arrangements of the board of
trade shall be designed to permit consideration of the
views of market participants.
(18) Recordkeeping.--The board of trade shall
maintain records of all activities relating to the
business of the contract market--
(A) in a form and manner that is acceptable
to the Commission; and
(B) for a period of at least 5 years.
(19) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the
board of trade shall not--
(A) adopt any rule or taking any action that
results in any unreasonable restraint of trade;
or
(B) impose any material anticompetitive
burden on trading on the contract market.
(20) System safeguards.--The board of trade shall--
(A) establish and maintain a program of risk
analysis and oversight to identify and minimize
sources of operational risk, [through the
development of appropriate controls and
procedures, and the development of automated
systems, that are reliable, secure, and have
adequate scalable capacity;] through--
(i) the implementation of appropriate
controls and procedures; and
(ii) the development and operation of
automated systems that--
(I) are reliable, secure, and
resilient;
(II) have adequate scalable
capacity; and
(III) maintain the
confidentiality, integrity, and
availability of the data they
contain;
(B) establish and maintain emergency
procedures, backup facilities, and a plan for
disaster recovery that allow for the timely
recovery and resumption of operations and the
fulfillment of the responsibilities and
obligations of the board of trade; and
(C) periodically conduct [tests to verify
that backup resources are sufficient to ensure
continued order processing and trade matching,
price reporting, market surveillance, and
maintenance of a comprehensive and accurate
audit trail.] tests to--
(i) verify the reliability, security,
resilience, and capacity of the board
of trade's automated systems;
(ii) verify the confidentiality,
integrity, and availability of the data
contained in those systems; and
(iii) verify that backup resources
are sufficient to ensure continued
order processing and trade matching,
price reporting, market surveillance,
and maintenance of a comprehensive and
accurate audit trail.
(21) Financial resources.--
(A) In general.--The board of trade shall
have adequate financial, operational, and
managerial resources to discharge each
responsibility of the board of trade.
(B) Determination of adequacy.--The financial
resources of the board of trade shall be
considered to be adequate if the value of the
financial resources exceeds the total amount
that would enable the contract market to cover
the operating costs of the contract market for
a 1-year period, as calculated on a rolling
basis.
(22) Diversity of board of directors.--The board of
trade, if a publicly traded company, shall endeavor to
recruit individuals to serve on the board of directors
and the other decision-making bodies (as determined by
the Commission) of the board of trade from among, and
to have the composition of the bodies reflect, a broad
and culturally diverse pool of qualified candidates.
(23) Securities and exchange commission.--The board
of trade shall keep any such records relating to swaps
defined in section 1a(47)(A)(v) open to inspection and
examination by the Securities and Exchange Commission.
[(e) Current Agricultural Commodities.--]
[(1) Subject to paragraph (2) of this subsection, a
contract for]
(d) Current Agricultural Commodities.--A contract for
purchase or sale for future delivery of an agricultural
commodity enumerated in section 1a(9) that is available for
trade on a contract market, as of the date of the enactment of
this subsection, may be traded only on a contract market
designated under this section.
[(2) In order to promote responsible economic or
financial innovation and fair competition, the
Commission, on application by any person, after notice
and public comment and opportunity for hearing, may
prescribe rules and regulations to provide for the
offer and sale of contracts for future delivery or
options on such contracts to be conducted on a
derivatives transaction execution facility.]
SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.
(a) Registration Requirement.--
(1) In general.--Except as provided in paragraph (2),
it shall be unlawful for a derivatives clearing
organization, directly or indirectly, to make use of
the mails or any means or instrumentality of interstate
commerce to perform the functions of a derivatives
clearing organization with respect to--
(A) a contract of sale of a commodity for
future delivery (or an option on the contract
of sale) or option on a commodity, in each
case, unless the contract or option is--
(i) excluded from this Act by
subsection (a)(1)(C)(i), (c), or (f) of
section 2; or
(ii) a security futures product
cleared by a clearing agency registered
with the Securities and Exchange
Commission under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.); or
(B) a swap.
(2) Exception.--Paragraph (1) shall not apply to a
derivatives clearing organization that is registered
with the Commission.
(b) Voluntary Registration.--A person that clears 1 or more
agreements, contracts, or transactions that are not required to
be cleared under this Act may register with the Commission as a
derivatives clearing organization.
(c) Registration of Derivatives Clearing Organizations.--
(1) Application.--A person desiring to register as a
derivatives clearing organization shall submit to the
Commission an application in such form and containing
such information as the Commission may require for the
purpose of making the determinations required for
approval under paragraph (2).
(2) Core principles for derivatives clearing
organizations.--
(A) Compliance.--
(i) In general.--To be registered and
to maintain registration as a
derivatives clearing organization, a
derivatives clearing organization shall
comply with each core principle
described in this paragraph and any
requirement that the Commission may
impose by rule or regulation pursuant
to section 8a(5).
(ii) Discretion of derivatives
clearing organization.--Subject to any
rule or regulation prescribed by the
Commission, a derivatives clearing
organization shall have reasonable
discretion in establishing the manner
by which the derivatives clearing
organization complies with each core
principle described in this paragraph.
(B) Financial resources.--
(i) In general.--Each derivatives
clearing organization shall have
adequate financial, operational, and
managerial resources, as determined by
the Commission, to discharge each
responsibility of the derivatives
clearing organization.
(ii) Minimum amount of financial
resources.--Each derivatives clearing
organization shall possess financial
resources that, at a minimum, exceed
the total amount that would--
(I) enable the organization
to meet its financial
obligations to its members and
participants notwithstanding a
default by the member or
participant creating the
largest financial exposure for
that organization in extreme
but plausible market
conditions; and
(II) enable the derivatives
clearing organization to cover
the operating costs of the
derivatives clearing
organization for a period of 1
year (as calculated on a
rolling basis).
(C) Participant and product eligibility.--
(i) In general.--Each derivatives
clearing organization shall establish--
(I) appropriate admission and
continuing eligibility
standards (including sufficient
financial resources and
operational capacity to meet
obligations arising from
participation in the
derivatives clearing
organization) for members of,
and participants in, the
derivatives clearing
organization; and
(II) appropriate standards
for determining the eligibility
of agreements, contracts, or
transactions submitted to the
derivatives clearing
organization for clearing.
(ii) Required procedures.--Each
derivatives clearing organization shall
establish and implement procedures to
verify, on an ongoing basis, the
compliance of each participation and
membership requirement of the
derivatives clearing organization.
(iii) Requirements.--The
participation and membership
requirements of each derivatives
clearing organization shall--
(I) be objective;
(II) be publicly disclosed;
and
(III) permit fair and open
access.
(D) Risk management.--
(i) In general.--Each derivatives
clearing organization shall ensure that
the derivatives clearing organization
possesses the ability to manage the
risks associated with discharging the
responsibilities of the derivatives
clearing organization through the use
of appropriate tools and procedures.
(ii) Measurement of credit
exposure.--Each derivatives clearing
organization shall--
(I) not less than once during
each business day of the
derivatives clearing
organization, measure the
credit exposures of the
derivatives clearing
organization to each member and
participant of the derivatives
clearing organization; and
(II) monitor each exposure
described in subclause (I)
periodically during the
business day of the derivatives
clearing organization.
(iii) Limitation of exposure to
potential losses from defaults.--Each
derivatives clearing organization,
through margin requirements and other
risk control mechanisms, shall limit
the exposure of the derivatives
clearing organization to potential
losses from defaults by members and
participants of the derivatives
clearing organization to ensure that--
(I) the operations of the
derivatives clearing
organization would not be
disrupted; and
(II) nondefaulting members or
participants would not be
exposed to losses that
nondefaulting members or
participants cannot anticipate
or control.
(iv) Margin requirements.--The margin
required from each member and
participant of a derivatives clearing
organization shall be sufficient to
cover potential exposures in normal
market conditions.
(v) Requirements regarding models and
parameters.--Each model and parameter
used in setting margin requirements
under clause (iv) shall be--
(I) risk-based; and
(II) reviewed on a regular
basis.
(E) Settlement procedures.--Each derivatives
clearing organization shall--
(i) complete money settlements on a
timely basis (but not less frequently
than once each business day);
(ii) employ money settlement
arrangements to eliminate or strictly
limit the exposure of the derivatives
clearing organization to settlement
bank risks (including credit and
liquidity risks from the use of banks
to effect money settlements);
(iii) ensure that money settlements
are final when effected;
(iv) maintain an accurate record of
the flow of funds associated with each
money settlement;
(v) possess the ability to comply
with each term and condition of any
permitted netting or offset arrangement
with any other clearing organization;
(vi) regarding physical settlements,
establish rules that clearly state each
obligation of the derivatives clearing
organization with respect to physical
deliveries; and
(vii) ensure that each risk arising
from an obligation described in clause
(vi) is identified and managed.
(F) Treatment of funds.--
(i) Required standards and
procedures.--Each derivatives clearing
organization shall establish standards
and procedures that are designed to
protect and ensure the safety of member
and participant funds and assets.
(ii) Holding of funds and assets.--
Each derivatives clearing organization
shall hold member and participant funds
and assets in a manner by which to
minimize the risk of loss or of delay
in the access by the derivatives
clearing organization to the assets and
funds.
(iii) Permissible investments.--Funds
and assets invested by a derivatives
clearing organization shall be held in
instruments with minimal credit,
market, and liquidity risks.
(G) Default rules and procedures.--
(i) In general.--Each derivatives
clearing organization shall have rules
and procedures designed to allow for
the efficient, fair, and safe
management of events during which
members or participants--
(I) become insolvent; or
(II) otherwise default on the
obligations of the members or
participants to the derivatives
clearing organization.
(ii) Default procedures.--Each
derivatives clearing organization
shall--
(I) clearly state the default
procedures of the derivatives
clearing organization;
(II) make publicly available
the default rules of the
derivatives clearing
organization; and
(III) ensure that the
derivatives clearing
organization may take timely
action--
(aa) to contain
losses and liquidity
pressures; and
(bb) to continue
meeting each obligation
of the derivatives
clearing organization.
(H) Rule enforcement.--Each derivatives
clearing organization shall--
(i) maintain adequate arrangements
and resources for--
(I) the effective monitoring
and enforcement of compliance
with the rules of the
derivatives clearing
organization; and
(II) the resolution of
disputes;
(ii) have the authority and ability
to discipline, limit, suspend, or
terminate the activities of a member or
participant due to a violation by the
member or participant of any rule of
the derivatives clearing organization;
and
(iii) report to the Commission
regarding rule enforcement activities
and sanctions imposed against members
and participants as provided in clause
(ii).
(I) System safeguards.--Each derivatives
clearing organization shall--
(i) establish and maintain a program
of risk analysis and oversight to
identify and minimize sources of
operational risk [through the
development of appropriate controls and
procedures, and automated systems, that
are reliable, secure, and have adequate
scalable capacity;] through the--
(I) implementation of
appropriate controls and
procedures; and
(II) development and
operation of automated systems
that--
(aa) are reliable,
secure, and resilient;
(bb) have adequate
scalable capacity; and
(cc) maintain the
confidentiality,
integrity, and
availability of the
data that they contain;
(ii) establish and maintain emergency
procedures, backup facilities, and a
plan for disaster recovery that
[allows] allow for--
(I) the timely recovery and
resumption of operations of the
derivatives clearing
organization; and
(II) the fulfillment of each
obligation and responsibility
of the derivatives clearing
organization; and
(iii) periodically conduct [tests to
verify that the backup resources of the
derivatives clearing organization are
sufficient to ensure daily processing,
clearing, and settlement.] tests to--
(I) verify the reliability,
security, resilience, and
capacity of the derivatives
clearing organization's
automated systems;
(II) verify the
confidentiality, integrity, and
availability of the data
contained in those systems; and
(III) verify that the backup
resources of the derivatives
clearing organization are
sufficient to ensure daily
processing, clearing, and
settlement.
(J) Reporting.--Each derivatives clearing
organization shall provide to the Commission
all information that the Commission determines
to be necessary to conduct oversight of the
derivatives clearing organization.
(K) Recordkeeping.--Each derivatives clearing
organization shall maintain records of all
activities related to the business of the
derivatives clearing organization as a
derivatives clearing organization--
(i) in a form and manner that is
acceptable to the Commission; and
(ii) for a period of not less than 5
years.
(L) Public information.--
(i) In general.--Each derivatives
clearing organization shall provide to
market participants sufficient
information to enable the market
participants to identify and evaluate
accurately the risks and costs
associated with using the services of
the derivatives clearing organization.
(ii) Availability of information.--
Each derivatives clearing organization
shall make information concerning the
rules and operating and default
procedures governing the clearing and
settlement systems of the derivatives
clearing organization available to
market participants.
(iii) Public disclosure.--Each
derivatives clearing organization shall
disclose publicly and to the Commission
information concerning--
(I) the terms and conditions
of each contract, agreement,
and transaction cleared and
settled by the derivatives
clearing organization;
(II) each clearing and other
fee that the derivatives
clearing organization charges
the members and participants of
the derivatives clearing
organization;
(III) the margin-setting
methodology, and the size and
composition, of the financial
resource package of the
derivatives clearing
organization;
(IV) daily settlement prices,
volume, and open interest for
each contract settled or
cleared by the derivatives
clearing organization; and
(V) any other matter relevant
to participation in the
settlement and clearing
activities of the derivatives
clearing organization.
(M) Information-sharing.--Each derivatives
clearing organization shall--
(i) enter into, and abide by the
terms of, each appropriate and
applicable domestic and international
information-sharing agreement; and
(ii) use relevant information
obtained from each agreement described
in clause (i) in carrying out the risk
management program of the derivatives
clearing organization.
(N) Antitrust considerations.--Unless
necessary or appropriate to achieve the
purposes of this Act, a derivatives clearing
organization shall not--
(i) adopt any rule or take any action
that results in any unreasonable
restraint of trade; or
(ii) impose any material
anticompetitive burden.
(O) Governance fitness standards.--
(i) Governance arrangements.--Each
derivatives clearing organization shall
establish governance arrangements that
are transparent--
(I) to fulfill public
interest requirements; and
(II) to permit the
consideration of the views of
owners and participants.
(ii) Fitness standards.--Each
derivatives clearing organization shall
establish and enforce appropriate
fitness standards for--
(I) directors;
(II) members of any
disciplinary committee;
(III) members of the
derivatives clearing
organization;
(IV) any other individual or
entity with direct access to
the settlement or clearing
activities of the derivatives
clearing organization; and
(V) any party affiliated with
any individual or entity
described in this clause.
(P) Conflicts of interest.--Each derivatives
clearing organization shall--
(i) establish and enforce rules to
minimize conflicts of interest in the
decision-making process of the
derivatives clearing organization; and
(ii) establish a process for
resolving conflicts of interest
described in clause (i).
(Q) Composition of governing boards.--Each
derivatives clearing organization shall ensure
that the composition of the governing board or
committee of the derivatives clearing
organization includes market participants.
(R) Legal risk.--Each derivatives clearing
organization shall have a well-founded,
transparent, and enforceable legal framework
for each aspect of the activities of the
derivatives clearing organization.''.
(3) Orders concerning competition.--A derivatives
clearing organization may request the Commission to
issue an order concerning whether a rule or practice of
the applicant is the least anticompetitive means of
achieving the objectives, purposes, and policies of
this Act.
(d) Existing Derivatives Clearing Organizations.--A
derivatives clearing organization shall be deemed to be
registered under this section to the extent that the
derivatives clearing organization clears agreements, contracts,
or transactions for a board of trade that has been designated
by the Commission as a contract market for such agreements,
contracts, or transactions before the date of the enactment of
this section.
(e) Appointment of Trustee.--
(1) In general.--If a proceeding under section 5e
results in the suspension or revocation of the
registration of a derivatives clearing organization, or
if a derivatives clearing organization withdraws from
registration, the Commission, on notice to the
derivatives clearing organization, may apply to the
appropriate United States district court where the
derivatives clearing organization is located for the
appointment of a trustee.
(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph
(1)--
(A) the court may take exclusive jurisdiction
over the derivatives clearing organization and
the records and assets of the derivatives
clearing organization, wherever located; and
(B) if the court takes jurisdiction under
subparagraph (A), the court shall appoint the
Commission, or a person designated by the
Commission, as trustee with power to take
possession and continue to operate or terminate
the operations of the derivatives clearing
organization in an orderly manner for the
protection of participants, subject to such
terms and conditions as the court may
prescribe.
(f) Linking of Regulated Clearing Facilities.--
(1) In general.--The Commission shall facilitate the
linking or coordination of derivatives clearing
organizations registered under this Act with other
regulated clearance facilities for the coordinated
settlement of cleared transactions. In order to
minimize systemic risk, under no circumstances shall a
derivatives clearing organization be compelled to
accept the counterparty credit risk of another clearing
organization.
(2) Coordination.--In carrying out paragraph (1), the
Commission shall coordinate with the Federal banking
agencies and the Securities and Exchange Commission.
(g) Existing Depository Institutions and Clearing Agencies.--
(1) In general.--A depository institution or clearing
agency registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.) that is required to be
registered as a derivatives clearing organization under
this section is deemed to be registered under this
section to the extent that, before the date of
enactment of this subsection--
(A) the depository institution cleared swaps
as a multilateral clearing organization; or
(B) the clearing agency cleared swaps.
(2) Conversion of depository institutions.--A
depository institution to which this subsection applies
may, by the vote of the shareholders owning not less
than 51 percent of the voting interests of the
depository institution, be converted into a State
corporation, partnership, limited liability company, or
similar legal form pursuant to a plan of conversion, if
the conversion is not in contravention of applicable
State law.
(3) Sharing of information.--The Securities and
Exchange Commission shall make available to the
Commission, upon request, all information determined to
be relevant by the Securities and Exchange Commission
regarding a clearing agency deemed to be registered
with the Commission under paragraph (1).
(h) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a derivatives clearing organization from
registration under this section for the clearing of swaps if
the Commission determines that the derivatives clearing
organization is subject to comparable, comprehensive
supervision and regulation by the Securities and Exchange
Commission or the appropriate government authorities in the
home country of the organization. Such conditions may include,
but are not limited to, requiring that the derivatives clearing
organization be available for inspection by the Commission and
make available all information requested by the Commission.
(i) Designation of Chief Compliance Officer.--
(1) In general.--Each derivatives clearing
organization shall designate an individual to serve as
a chief compliance officer.
(2) Duties.--The chief compliance officer shall--
(A) report directly to the board or to the
senior officer of the derivatives clearing
organization;
(B) review the compliance of the derivatives
clearing organization with respect to the core
principles described in subsection (c)(2);
(C) in consultation with the board of the
derivatives clearing organization, a body
performing a function similar to the board of
the derivatives clearing organization, or the
senior officer of the derivatives clearing
organization, resolve any conflicts of interest
that may arise;
(D) be responsible for administering each
policy and procedure that is required to be
established pursuant to this section;
(E) ensure compliance with this Act
(including regulations) relating to agreements,
contracts, or transactions, including each rule
prescribed by the Commission under this
section;
(F) establish procedures for the remediation
of noncompliance issues identified by the
compliance officer through any--
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit
finding;
(iv) self-reported error; or
(v) validated complaint; and
(G) establish and follow appropriate
procedures for the handling, management
response, remediation, retesting, and closing
of noncompliance issues.
(3) Annual reports.--
(A) In general.--In accordance with rules
prescribed by the Commission, the chief
compliance officer shall annually prepare and
sign a report that contains a description of--
(i) the compliance of the derivatives
clearing organization of the compliance
officer with respect to this Act
(including regulations); and
(ii) each policy and procedure of the
derivatives clearing organization of
the compliance officer (including the
code of ethics and conflict of interest
policies of the derivatives clearing
organization).
(B) Requirements.--A compliance report under
subparagraph (A) shall--
(i) accompany each appropriate
financial report of the derivatives
clearing organization that is required
to be furnished to the Commission
pursuant to this section; and
(ii) include a certification that,
under penalty of law, the compliance
report is accurate and complete.
[(k)] (j) Reporting Requirements.--
(1) Duty of derivatives clearing organizations.--Each
derivatives clearing organization that clears swaps
shall provide to the Commission all information that is
determined by the Commission to be necessary to perform
each responsibility of the Commission under this Act.
(2) Data collection and maintenance requirements.--
The Commission shall adopt data collection and
maintenance requirements for swaps cleared by
derivatives clearing organizations that are comparable
to the corresponding requirements for--
(A) swaps data reported to swap data
repositories; and
(B) swaps traded on swap execution
facilities.
(3) Reports on security-based swap agreements to be
shared with the securities and exchange commission.--
(A) In general.--A derivatives clearing
organization that clears security-based swap
agreements (as defined in section 1a(47)(A)(v))
shall, upon request, open to inspection and
examination to the Securities and Exchange
Commission all books and records relating to
such security-based swap agreements, consistent
with the confidentiality and disclosure
requirements of section 8.
(B) Jurisdiction.--Nothing in this paragraph
shall affect the exclusive jurisdiction of the
Commission to prescribe recordkeeping and
reporting requirements for a derivatives
clearing organization that is registered with
the Commission.
(4) Information sharing.--Subject to section 8, and
upon request, the Commission shall share information
collected under paragraph (2) with--
(A) the Board;
(B) the Securities and Exchange Commission;
(C) each appropriate prudential regulator;
(D) the Financial Stability Oversight
Council;
(E) the Department of Justice; and
(F) any other person that the Commission
determines to be appropriate, including--
(i) foreign financial supervisors
(including foreign futures
authorities);
(ii) foreign central banks; and
(iii) foreign ministries.
(5) Confidentiality agreement.--Before the Commission
may share information with any entity described in
paragraph (4), the Commission shall receive a written
agreement from each entity stating that the entity
shall abide by the confidentiality requirements
described in section 8 relating to the information on
swap transactions that is provided.
(6) Public information.--Each derivatives clearing
organization that clears swaps shall provide to the
Commission (including any designee of the Commission)
information under paragraph (2) in such form and at
such frequency as is required by the Commission to
comply with the public reporting requirements contained
in section 2(a)(13).
SEC. 5C. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.
(a) Acceptable Business Practices Under Core Principles.--
(1) In general.--Consistent with the purposes of this
Act, the Commission may issue interpretations, or
approve interpretations submitted to the Commission, of
sections 5(d) and 5b(c)(2), to describe what would
constitute an acceptable business practice under such
sections.
(2) Effect of interpretation.--An interpretation
issued under paragraph (1) may provide the exclusive
means for complying with each section described in
paragraph (1).
(b) Delegation of Functions Under Core Principles.--
[(1) In general.--] [A]
(1) Delegation._
(A) In general._A [contract market,
derivatives transaction execution facility, or
electronic trading facility] registered entity
[with respect to a significant price discovery
contract] may comply with any applicable core
principle through delegation of any relevant
function to a registered futures association or
a registered entity that is not an electronic
trading facility.
(B) Swaps.--In addition to the authority
described in subparagraph (A), a registered
entity may also comply with any applicable core
principle, as it applies to swaps, through
delegation of any relevant function to a
registered national securities association.
(2) Responsibility.--A [contract market, derivatives
transaction execution facility, or electronic trading
facility] registered entity that delegates a function
under paragraph (1) shall remain responsible for
carrying out the function.
(3) Noncompliance.--If a contract market[,
derivatives transaction execution facility,] or
electronic trading facility that delegates a function
under paragraph (1) becomes aware that a delegated
function is not being performed as required under this
Act, the contract market[, derivatives transaction
execution facility,] or electronic trading facility
shall promptly take steps to address the noncompliance.
(c) New Contracts, New Rules, and Rule Amendments.--
(1) In general.--A registered entity may elect to
list for trading or accept for clearing any new
contract, or other instrument, or may elect to approve
and implement any new rule or rule amendment, by
providing to the Commission (and the Secretary of the
Treasury, in the case of a contract of sale of a
government security for future delivery (or option on
such a contract) or a rule or rule amendment
specifically related to such a contract) a written
certification that the new contract or instrument or
clearing of the new contract or instrument, new rule,
or rule amendment complies with this Act (including
regulations under this Act).
(2) Rule review.--The new rule or rule amendment
described in paragraph (1) shall become effective,
pursuant to the certification of the registered entity
and notice of such certification to its members (in a
manner to be determined by the Commission), on the date
that is 10 business days after the date on which the
Commission receives the certification (or such shorter
period as determined by the Commission by rule or
regulation) unless the Commission notifies the
registered entity within such time that it is staying
the certification because there exist novel or complex
issues that require additional time to analyze, an
inadequate explanation by the submitting registered
entity, or a potential inconsistency with this Act
(including regulations under this Act).
(3) Stay of certification for rules.--
(A) A notification by the Commission pursuant
to paragraph (2) shall stay the certification
of the new rule or rule amendment for up to an
additional 90 days from the date of the
notification.
(B) A rule or rule amendment subject to a
stay pursuant to subparagraph (A) shall become
effective, pursuant to the certification of the
registered entity, at the expiration of the
period described in subparagraph (A) unless the
Commission--
(i) withdraws the stay prior to that
time; or
(ii) notifies the registered entity
during such period that it objects to
the proposed certification on the
grounds that it is inconsistent with
this Act (including regulations under
this Act).
(C) The Commission shall provide a not less
than 30-day public comment period, within the
90-day period in which the stay is in effect as
described in subparagraph (A), whenever the
Commission reviews a rule or rule amendment
pursuant to a notification by the Commission
under this paragraph.
(4) Prior approval.--
(A) In general.--A registered entity may
request that the Commission grant prior
approval to any new contract or other
instrument, new rule, or rule amendment.
(B) Prior approval required.--Notwithstanding
any other provision of this section, a
designated contract market shall submit to the
Commission for prior approval each rule
amendment that materially changes the terms and
conditions, as determined by the Commission, in
any contract of sale for future delivery of a
commodity specifically enumerated in section
1a(10) (or any option thereon) traded through
its facilities if the rule amendment applies to
contracts and delivery months which have
already been listed for trading and have open
interest.
(C) Deadline.--If prior approval is requested
under subparagraph (A), the Commission shall
take final action on the request not later than
90 days after submission of the request, unless
the person submitting the request agrees to an
extension of the time limitation established
under this subparagraph.
(5) Approval.--
(A) Rules.--The Commission shall approve a
new rule, or rule amendment, of a registered
entity unless the Commission finds that the new
rule, or rule amendment, is inconsistent with
this subtitle (including regulations).
(B) Contracts and instruments.--The
Commission shall approve a new contract or
other instrument unless the Commission finds
that the new contract or other instrument would
violate this Act (including regulations).
(C) Special rule for review and approval of
event contracts and swaps contracts.--
(i) Event contracts.--In connection
with the listing of agreements,
contracts, transactions, or swaps in
excluded commodities that are based
upon the occurrence, extent of an
occurrence, or contingency (other than
a change in the price, rate, value, or
levels of a commodity described in
section [1a(2)(i))] 1a(19)(i)), by a
designated contract market or swap
execution facility, the Commission may
determine that such agreements,
contracts, or transactions are contrary
to the public interest if the
agreements, contracts, or transactions
involve--
(I) activity that is unlawful
under any Federal or State law;
(II) terrorism;
(III) assassination;
(IV) war;
(V) gaming; or
(VI) other similar activity
determined by the Commission,
by rule or regulation, to be
contrary to the public
interest.
(ii) Prohibition.--No agreement,
contract, or transaction determined by
the Commission to be contrary to the
public interest under clause (i) may be
listed or made available for clearing
or trading on or through a registered
entity.
(iii) Swaps contracts.--
(I) In general.--In
connection with the listing of
a swap for clearing by a
derivatives clearing
organization, the Commission
shall determine, upon request
or on its own motion, the
initial eligibility, or the
continuing qualification, of a
derivatives clearing
organization to clear such a
swap under those criteria,
conditions, or rules that the
Commission, in its discretion,
determines.
(II) Requirements.--Any such
criteria, conditions, or rules
shall consider--
(aa) the financial
integrity of the
derivatives clearing
organization; and
(bb) any other
factors which the
Commission determines
may be appropriate.
(iv) Deadline.--The Commission shall
take final action under clauses (i) and
(ii) in not later than 90 days from the
commencement of its review unless the
party seeking to offer the contract or
swap agrees to an extension of this
time limitation.
(e) Reservation of Emergency Authority.--Nothing in this
section shall limit or in any way affect the emergency powers
of the Commission provided in section 8a(9).
(f) Consistent with this Act, each designated contract market
[and registered derivatives transaction execution facility]
shall issue such rules as are necessary to avoid duplicative or
conflicting rules applicable to any futures commission merchant
registered with the Commission pursuant to section 4f(a) of
this Act (except paragraph (2) thereof), that is also
registered with the Securities and Exchange Commission pursuant
to section 15(b) of the Securities Exchange Act of 1934 (except
paragraph (11) thereof) with respect to the application of--
(1) rules of such designated contract market [or
registered derivatives transaction execution facility]
of the type specified in section 4d(e) involving
security futures products; and
(2) similar rules of national securities associations
registered pursuant to section 15A(a) of the Securities
Exchange Act of 1934 and national securities exchanges
registered pursuant to section 6(g) of such Act
involving security futures products.
* * * * * * *
SEC. 5F. DESIGNATION OF SECURITIES EXCHANGES AND ASSOCIATIONS AS
CONTRACT MARKETS.
(a) Any board of trade that is registered with the Securities
and Exchange Commission as a national securities exchange, is a
national securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934, or is an
alternative trading system shall be a designated contract
market in security futures products if--
(1) such national securities exchange, national
securities association, or alternative trading system
lists or trades no other contracts of sale for future
delivery, except for security futures products;
(2) such national securities exchange, national
securities association, or alternative trading system
files written notice with the Commission in such form
as the Commission, by rule, may prescribe containing
such information as the Commission, by rule, may
prescribe as necessary or appropriate in the public
interest or for the protection of customers; and
(3) the registration of such national securities
exchange, national securities association, or
alternative trading system is not suspended pursuant to
an order by the Securities and Exchange Commission.
Such designation shall be effective contemporaneously with the
submission of notice, in written or electronic form, to the
Commission.
(b)(1) A national securities exchange, national securities
association, or alternative trading system that is designated
as a contract market pursuant to [section 5f] this section
shall be exempt from the following provisions of this Act and
the rules thereunder:
(A) Subsections (c)[, (e), and (g)] and (e) of
section 4c.
(B) Section 4j.
(C) Section 5.
(D) Section 5c.
(E) Section 6a.
(F) Section 8(d).
(G) Section 9(f).
(H) Section 16.
(2) An alternative trading system that is a designated
contract market under this section shall be required to be a
member of a futures association registered under section 17 and
shall be exempt from any provision of this Act that would
require such alternative trading system to--
(A) set rules governing the conduct of subscribers
other than the conduct of such subscribers' trading on
such alternative trading system; or
(B) discipline subscribers other than by exclusion
from trading.
(3) To the extent that an alternative trading system is
exempt from any provision of this Act pursuant to paragraph (2)
of this subsection, the futures association registered under
section 17 of which the alternative trading system is a member
shall set rules governing the conduct of subscribers to the
alternative trading system and discipline the subscribers.
(4)(A) Except as provided in subparagraph (B), but
notwithstanding any other provision of this Act, the
Commission, by rule, regulation, or order, may conditionally or
unconditionally exempt any designated contract market in
security futures subject to the designation requirement of this
section from any provision of this Act or of any rule or
regulation thereunder, to the extent such exemption is
necessary or appropriate in the public interest and is
consistent with the protection of investors.
(B) The Commission shall, by rule or regulation, determine
the procedures under which an exemptive order under this
section is granted and may, in its sole discretion, decline to
entertain any application for an order of exemption under this
section.
(C) An alternative trading system shall not be deemed to be
an exchange for any purpose as a result of the designation of
such alternative trading system as a contract market under this
section.
* * * * * * *
SEC. 5H. SWAP EXECUTION FACILITIES.
(a) Registration.--
(1) In general.--No person may operate a facility for
the trading or processing of swaps unless the facility
is registered as a swap execution facility or as a
designated contract market under this section.
(2) Dual registration.--Any person that is registered
as a swap execution facility under this section shall
register with the Commission regardless of whether the
person also is registered with the Securities and
Exchange Commission as a swap execution facility.
(b) Trading and Trade Processing.--
(1) In general.--Except as specified in paragraph
(2), a swap execution facility that is registered under
subsection (a) may--
(A) make available for trading any swap; and
(B) facilitate trade processing of any swap.
(2) Agricultural swaps.--A swap execution facility
may not list for trading or confirm the execution of
any swap in an agricultural commodity (as defined by
the Commission) except pursuant to a rule or regulation
of the Commission allowing the swap under such terms
and conditions as the Commission shall prescribe.
(c) Identification of Facility Used To Trade Swaps by
Contract Markets.--A board of trade that operates a contract
market shall, to the extent that the board of trade also
operates a swap execution facility and uses the same electronic
trade execution system for listing and executing trades of
swaps on or through the contract market and the swap execution
facility, identify whether the electronic trading of such swaps
is taking place on or through the contract market or the swap
execution facility.
(d) Rule-writing.--
(1) The Securities and Exchange Commission and
Commodity Futures Trading Commission may promulgate
rules defining the universe of swaps that can be
executed on a swap execution facility. These rules
shall take into account the price and nonprice
requirements of the counterparties to a swap and the
goal of this section as set forth in subsection (e).
(2) For all swaps that are not required to be
executed through a swap execution facility as defined
in paragraph (1), such trades may be executed through
any other available means of interstate commerce.
(3) The Securities and Exchange Commission and
Commodity Futures Trading Commission shall update these
rules as necessary to account for technological and
other innovation.
(e) Rule of Construction.--The goal of this section is to
promote the trading of swaps on swap execution facilities and
to promote pre-trade price transparency in the swaps market.
(f) Core Principles for Swap Execution Facilities.--
(1) Compliance with core principles.--
(A) In general.--To be registered, and
maintain registration, as a swap execution
facility, the swap execution facility shall
comply with--
(i) the core principles described in
this subsection; and
(ii) any requirement that the
Commission may impose by rule or
regulation pursuant to section 8a(5).
(B) Reasonable discretion of swap execution
facility.--Unless otherwise determined by the
Commission by rule or regulation, a swap
execution facility described in subparagraph
(A) shall have reasonable discretion in
establishing the manner in which the swap
execution facility complies with the core
principles described in this subsection.
(2) Compliance with rules.--A swap execution facility
shall--
(A) establish and enforce compliance with any
rule of the swap execution facility,
including--
(i) the terms and conditions of the
swaps traded or processed on or through
the swap execution facility; and
(ii) any limitation on access to the
swap execution facility;
(B) establish and enforce trading, trade
processing, and participation rules that will
deter abuses and have the capacity to detect,
investigate, and enforce those rules, including
means--
(i) to provide market participants
with impartial access to the market;
and
(ii) to capture information that may
be used in establishing whether rule
violations have occurred;
(C) establish rules governing the operation
of the facility, including rules specifying
trading procedures to be used in entering and
executing orders traded or posted on the
facility, including block trades; and
(D) provide by its rules that when a swap
dealer or major swap participant enters into or
facilitates a swap that is subject to the
mandatory clearing requirement of section 2(h),
the swap dealer or major swap participant shall
be responsible for compliance with the
mandatory trading requirement under section
2(h)(8).
(3) Swaps not readily susceptible to manipulation.--
The swap execution facility shall permit trading only
in swaps that are not readily susceptible to
manipulation.
[Craig started making edits here--]
(4) Monitoring of trading and trade processing.--
(A) In general.--The swap execution facility
shall--
[(A)] (i) establish and enforce rules
or terms and conditions defining, or
specifications detailing--
[(i)] (I) trading procedures
to be used in entering and
executing orders traded on or
through the facilities of the
swap execution facility; and
[(ii)] (II) procedures for
trade processing of swaps on or
through the facilities of the
swap execution facility; and
[(B)] (ii) monitor trading in swaps
to prevent manipulation, price
distortion, and disruptions of the
delivery or cash settlement process
through surveillance, compliance, and
disciplinary practices and procedures,
including methods for conducting real-
time monitoring of trading and
comprehensive and accurate trade
reconstructions.
(B) Digital commodity.--With regard to a swap
on the swap execution facility that references
a digital commodity available on a cash market,
the Commission shall adopt rules detailing the
content and availability of trade and trader
data and other information the swap execution
facility must be able to access from the
referenced cash markets and data sources in
order to comply with this paragraph.
(5) Ability to obtain information.--The swap
execution facility shall--
(A) establish and enforce rules that will
allow the facility to obtain any necessary
information to perform any of the functions
described in this section;
(B) provide the information to the Commission
on request; and
(C) have the capacity to carry out such
international information-sharing agreements as
the Commission may require.
(6) Position limits or accountability.--
(A) In general.--To reduce the potential
threat of market manipulation or congestion,
especially during trading in the delivery
month, a swap execution facility that is a
trading facility shall adopt for each of the
contracts of the facility, as is necessary and
appropriate, position limitations or position
accountability for speculators.
(B) Position limits.--For any contract that
is subject to a position limitation established
by the Commission pursuant to section 4a(a),
the swap execution facility shall--
(i) set its position limitation at a
level no higher than the Commission
limitation; and
(ii) monitor positions established on
or through the swap execution facility
for compliance with the limit set by
the Commission and the limit, if any,
set by the swap execution facility.
(7) Financial integrity of transactions.--The swap
execution facility shall establish and enforce rules
and procedures for ensuring the financial integrity of
swaps entered on or through the facilities of the swap
execution facility, including the clearance and
settlement of the swaps pursuant to section 2(h)(1).
(8) Emergency authority.--The swap execution facility
shall adopt rules to provide for the exercise of
emergency authority, in consultation or cooperation
with the Commission[, as is necessary and appropriate,
including the authority to liquidate or transfer open
positions in any swap or to suspend or curtail trading
in a swap.] and other registered entities, as is
necessary and appropriate, to facilitate the
liquidation or transfer of open positions in any swap,
or to suspend or curtail trading in a swap.
(9) Timely publication of trading information.--
(A) In general.--The swap execution facility
shall make public timely information on price,
trading volume, and other trading data on swaps
to the extent prescribed by the Commission.
(B) Capacity of swap execution facility.--The
swap execution facility shall be required to
have the capacity to electronically capture and
transmit trade information with respect to
transactions executed on the facility.
(10) Recordkeeping and reporting.--
(A) In general.--A swap execution facility
shall--
(i) maintain records of all
activities relating to the business of
the facility, including a complete
audit trail, in a form and manner
acceptable to the Commission for a
period of 5 years;
(ii) report to the Commission, in a
form and manner acceptable to the
Commission, such information as the
Commission determines to be necessary
or appropriate for the Commission to
perform the duties of the Commission
under this Act; and
(iii) shall keep any such records
relating to swaps defined in section
1a(47)(A)(v) open to inspection and
examination by the Securities and
Exchange Commission.''
(B) Requirements.--The Commission shall adopt
data collection and reporting requirements for
swap execution facilities that are comparable
to corresponding requirements for derivatives
clearing organizations and swap data
repositories.
(11) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the
swap execution facility shall not--
(A) adopt any rules or taking any actions
that result in any unreasonable restraint of
trade; or
(B) impose any material anticompetitive
burden on trading or clearing.
(12) Conflicts of interest.--The swap execution
facility shall--
(A) establish and enforce rules to minimize
conflicts of interest in its decision-making
process; and
(B) establish a process for resolving the
conflicts of interest.
(13) Financial resources.--
(A) In general.--The swap execution facility
shall have adequate financial, operational, and
managerial resources to discharge each
responsibility of the swap execution facility.
(B) Determination of resource adequacy.--The
financial resources of a swap execution
facility shall be considered to be adequate if
the value of the financial resources exceeds
the total amount that would enable the swap
execution facility to cover the operating costs
of the swap execution facility for a 1-year
period, as calculated on a rolling basis.
(14) System safeguards.--The swap execution facility
shall--
(A) establish and maintain a program of risk
analysis and oversight to identify and minimize
sources of operational risk, [through the
development of appropriate controls and
procedures, and automated systems, that--
[(i) are reliable and secure; and
[(ii) have adequate scalable
capacity;] through--
(i) the implementation of appropriate
controls and procedures; and
(ii) the development and operation of
automated systems that--
(I) are reliable, secure, and
resilient;
(II) have adequate scalable
capacity; and
(III) maintain the
confidentiality, integrity, and
availability of the data they
contain;
(B) establish and maintain emergency
procedures, backup facilities, and a plan for
disaster recovery that allow for--
(i) the timely recovery and
resumption of operations; and
(ii) the fulfillment of the
responsibilities and obligations of the
swap execution facility; and
(C) periodically conduct [tests to verify
that the backup resources of the swap execution
facility are sufficient to ensure continued--
[(i) order processing and trade
matching;
[(ii) price reporting;
[(iii) market surveillance and
[(iv) maintenance of a comprehensive
and accurate audit trail.] tests to--
(i) verify the reliability, security,
resilience, and capacity of the swap
execution facility's automated systems;
(ii) verify the confidentiality,
integrity, and availability of the data
contained in those systems; and
(iii) verify that backup resources
are sufficient to ensure continued
order processing and trade matching,
price reporting, market surveillance,
and maintenance of a comprehensive and
accurate audit trail.
(15) Designation of chief compliance officer.--
(A) In general.--Each swap execution facility
shall designate an individual to serve as a
chief compliance officer. The individual may
also perform other responsibilities for the
swap execution facility, if--
(i) there are no conflicts of
interest between the other
responsibilities and the duties and
obligations of the chief compliance
officer under this Act and the
regulations thereto; and
(ii) the other responsibilities do
not limit the ability of the chief
compliance officer to carry out the
responsibilities of the chief
compliance officer.
(B) Duties.--The chief compliance officer
shall--
(i) report directly to the board or
to the senior officer of the facility;
(ii) review compliance with the core
principles in this subsection;
[(iii) in consultation with the board
of the facility, a body performing a
function similar to that of a board, or
the senior officer of the facility,
resolve any conflicts of interest that
may arise;
[(iv) be responsible for establishing
and administering the policies and
procedures required to be established
pursuant to this section;
[(v) ensure compliance with this Act
and the rules and regulations issued
under this Act, including rules
prescribed by the Commission pursuant
to this section; and]
(iii) establish and administer--
(I) policies and procedures,
in consultation with the board
of the facility, a body
performing a function similar
to that of a board, or the
senior officer of the facility,
that are reasonably designed,
as determined by the
Commission, to resolve any
conflicts of interest that may
arise;
(II) the policies and
procedures required to be
established pursuant to this
section; and
(III) policies and procedures
that reasonably ensure, as
determined by the Commission,
compliance with this Act and
the rules and regulations
issued under this Act,
including rules prescribed by
the Commission pursuant to this
section; and
[(vi)] (iv) establish procedures for
the remediation of noncompliance issues
found during compliance office reviews,
look backs, internal or external audit
findings, self-reported errors, or
through validated complaints.
(C) Requirements for procedures.--In
establishing procedures under subparagraph
[(B)(vi)] (B)(iv), the chief compliance officer
shall design the procedures to establish the
handling, management response, remediation,
retesting, and closing of noncompliance issues.
(D) Annual reports.--
(i) In general.--In accordance with
rules prescribed by the Commission, the
chief compliance officer shall annually
prepare [and sign] a report that
contains a description of--
(I) the compliance of the
swap execution facility with
this Act; and
(II) the policies and
procedures, including the code
of ethics and conflict of
interest policies, of the swap
execution facility.
(ii) Requirements.--The chief
compliance officer or senior officer
shall--
(I) submit each report
described in clause (i) with
the appropriate financial
report of the swap execution
facility that is required to be
submitted to the Commission
pursuant to this section; and
(II) include in the report a
certification that, under
penalty of law, the report is
materially accurate and
complete.
(g) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a swap execution facility from registration
under this section if the Commission finds that the facility is
subject to comparable, comprehensive supervision and regulation
on a consolidated basis by the Securities and Exchange
Commission, a prudential regulator, or the appropriate
governmental authorities in the home country of the facility.
(h) Rules.--The Commission shall prescribe rules governing
the regulation of [alternative] swap execution facilities under
this section.
Sec. 6. (a) Any person desiring to be designated [or
registered] as a contract market [or derivatives transaction
execution facility] shall make application to the Commission
for the designation [or registration] and accompany the same
with a showing that it complies with the conditions set forth
in this Act, and with a sufficient assurance that it will
continue to comply with [the the] the requirements of this Act.
The Commission shall approve or deny an application for
designation [or registration] as a contract market [or
derivatives transaction execution facility] within 180 days of
the filing of the application. If the Commission notifies the
person that its application is materially incomplete and
specifies the deficiencies in the application, the running of
the 180-day period shall be stayed from the time of such
notification until the application is resubmitted in completed
form: Provided, That the Commission shall have not less than
sixty days to approve or deny the application from the time the
application is resubmitted in completed form. If the Commission
denies an application, it shall specify the grounds for the
denial. In the event of a refusal to designate or register as a
contract market [or derivatives transaction execution facility]
any person that has made application therefor, the person shall
be afforded an opportunity for a hearing on the record before
the Commission, with the right to appeal an adverse decision
after such hearing to the court of appeals as provided for in
other cases in subsection (b) of this section.
(b) The Commission is authorized to suspend for a period not
to exceed 6 months or to revoke the designation [or
registration] of any contract market [or derivatives
transaction execution facility] on a showing that the contract
market [or derivatives transaction execution facility] is not
enforcing or has not enforced its rules of government, made a
condition of its designation [or registration] as set forth in
sections 5 through 5b or section 5f, or that the contract
market [or derivatives transaction execution facility or
electronic trading facility], or any director, officer, agent,
or employee thereof, otherwise is violating or has violated any
of the provisions of this Act or any of the rules, regulations,
or orders of the Commission thereunder. Such suspension or
revocation shall only be made after a notice to the officers of
the contract market [or derivatives transaction execution
facility or electronic trading facility] affected and upon a
hearing on the record: Provided, That such suspension or
revocation shall be final and conclusive, unless within fifteen
days after such suspension or revocation by the Commission such
person appeals to the court of appeals for the circuit in which
it has its principal place of business, by filing with the
clerk of such court a written petition praying that the order
of the Commission be set aside or modified in the manner stated
in the petition, together with a bond in such sum as the court
may determine, conditioned that such person will pay the costs
of the proceedings if the court so directs. The clerk of the
court in which such a petition is filed shall immediately cause
a copy thereof to be delivered to the Commission and file in
the court the record in such proceedings, as provided in
section 2112 of title 28, United States Code. The testimony and
evidence taken or submitted before the Commission, duly filed
as aforesaid as a part of the record, shall be considered by
the court of appeals as the evidence in the case. Such a court
may affirm or set aside the order of the Commission or may
direct it to modify its order. No such order of the Commission
shall be modified or set aside by the court of appeals unless
it is shown by the person that the order is unsupported by the
weight of the evidence or was issued without due notice and a
reasonable opportunity having been afforded to such person for
a hearing, or infringes the Constitution of the United States,
or is beyond the jurisdiction of the Commission.
(c) Prohibition Regarding Manipulation and False
Information.--
(1) Prohibition against manipulation.--It shall be
unlawful for any person, directly or indirectly, to use
or employ, or attempt to use or employ, in connection
with any swap, or a contract of sale of any commodity
in interstate commerce, or for future delivery on or
subject to the rules of any registered entity, any
manipulative or deceptive device or contrivance, in
contravention of such rules and regulations as the
Commission shall promulgate by not later than 1 year
after the date of enactment of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, provided no
rule or regulation promulgated by the Commission shall
require any person to disclose to another person
nonpublic information that may be material to the
market price, rate, or level of the commodity
transaction, except as necessary to make any statement
made to the other person in or in connection with the
transaction not misleading in any material respect.
(A) Special provision for manipulation by
false reporting.--Unlawful manipulation for
purposes of this paragraph shall include, but
not be limited to, delivering, or causing to be
delivered for transmission through the mails or
interstate commerce, by any means of
communication whatsoever, a false or misleading
or inaccurate report concerning crop or market
information or conditions that affect or tend
to affect the price of any commodity in
interstate commerce, knowing, or acting in
reckless disregard of the fact that such report
is false, misleading or inaccurate.
(B) Effect on other law.--Nothing in this
paragraph shall affect, or be construed to
affect, the applicability of section 9(a)(2).
(C) Good faith mistakes.--Mistakenly
transmitting, in good faith, false or
misleading or inaccurate information to a price
reporting service would not be sufficient to
violate subsection (c)(1)(A).
(2) Prohibition regarding false information.--It
shall be unlawful for any person to make any false or
misleading statement of a material fact to the
Commission, including in any registration application
or any report filed with the Commission under this Act,
or any other information relating to a swap, or a
contract of sale of a commodity, in interstate
commerce, or for future delivery on or subject to the
rules of any registered entity, or to omit to state in
any such statement any material fact that is necessary
to make any statement of a material fact made not
misleading in any material respect, if the person knew,
or reasonably should have known, the statement to be
false or misleading.
(3) Other manipulation.--In addition to the
prohibition in paragraph (1), it shall be unlawful for
any person, directly or indirectly, to manipulate or
attempt to manipulate the price of any swap, or of any
commodity in interstate commerce, or for future
delivery on or subject to the rules of any registered
entity.
(4) Enforcement.--
(A) Authority of commission.--If the
Commission has reason to believe that any
person (other than a registered entity) is
violating or has violated this subsection, or
any other provision of this Act (including any
rule, regulation, or order of the Commission
promulgated in accordance with this subsection
or any other provision of this Act), the
Commission may serve upon the person a
complaint.
(B) Contents of complaint.--A complaint under
subparagraph (A) shall--
(i) contain a description of the
charges against the person that is the
subject of the complaint; and
(ii) have attached or contain a
notice of hearing that specifies the
date and location of the hearing
regarding the complaint.
(C) Hearing.--A hearing described in
subparagraph (B)(ii)--
(i) shall be held not later than 3
days after service of the complaint
described in subparagraph (A);
(ii) shall require the person to show
cause regarding why--
(I) an order should not be
made--
(aa) to prohibit the
person from trading on,
or subject to the rules
of, any registered
entity; and
(bb) to direct all
registered entities to
refuse all privileges
to the person until
further notice of the
Commission; and
(II) the registration of the
person, if registered with the
Commission in any capacity,
should not be suspended or
revoked; and
(iii) may be held before--
(I) the Commission; or
(II) an administrative law
judge designated by the
Commission, under which the
administrative law judge shall
ensure that all evidence is
recorded in written form and
submitted to the Commission.
(5) Subpoena.--For the purpose of securing effective
enforcement of the provisions of this Act, for the
purpose of any investigation or proceeding under this
Act, and for the purpose of any action taken under
section 12(f), any member of the Commission or any
Administrative Law Judge or other officer designated by
the Commission (except as provided in paragraph (7))
may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and
require the production of any books, papers,
correspondence, memoranda, or other records that the
Commission deems relevant or material to the inquiry.
(6) Witnesses.--The attendance of witnesses and the
production of any such records may be required from any
place in the United States, any State, or any foreign
country or jurisdiction at any designated place of
hearing.
(7) Service.--A subpoena issued under this section
may be served upon any person who is not to be found
within the territorial jurisdiction of any court of the
United States in such manner as the Federal Rules of
Civil Procedure prescribe for service of process in a
foreign country, except that a subpoena to be served on
a person who is not to be found within the territorial
jurisdiction of any court of the United States may be
issued only on the prior approval of the Commission.
(8) Refusal to obey.--In case of contumacy by, or
refusal to obey a subpoena issued to, any person, the
Commission may invoke the aid of any court of the
United States within the jurisdiction in which the
investigation or proceeding is conducted, or where such
person resides or transacts business, in requiring the
attendance and testimony of witnesses and the
production of books, papers, correspondence, memoranda,
and other records. Such court may issue an order
requiring such person to appear before the Commission
or member or Administrative Law Judge or other officer
designated by the Commission, there to produce records,
if so ordered, or to give testimony touching the matter
under investigation or in question.
(9) Failure to obey.--Any failure to obey such order
of the court may be punished by the court as a contempt
thereof. All process in any such case may be served in
the judicial district wherein such person is an
inhabitant or transacts business or wherever such
person may be found.
(10) Evidence.--On the receipt of evidence under
paragraph (4)(C)(iii), the Commission may--
(A) prohibit the person that is the subject
of the hearing from trading on, or subject to
the rules of, any registered entity and require
all registered entities to refuse the person
all privileges on the registered entities for
such period as the Commission may require in
the order;
(B) if the person is registered with the
Commission in any capacity, suspend, for a
period not to exceed 180 days, or revoke, the
registration of the person;
(C) assess such person--
(i) a civil penalty of not more than
an amount equal to the greater of--
(I) $140,000; or
(II) triple the monetary gain
to such person for each such
violation; or
(ii) in any case of manipulation or
attempted manipulation in violation of
this subsection or section 9(a)(2), a
civil penalty of not more than an
amount equal to the greater of--
(I) $1,000,000; or
(II) triple the monetary gain
to the person for each such
violation; and
(D) require restitution to customers of
damages proximately caused by violations of the
person.
(11) Orders.--
(A) Notice.--The Commission shall provide to
a person described in paragraph (10) and the
appropriate governing board of the registered
entity notice of the order described in
paragraph (10) by--
(i) registered mail;
(ii) certified mail; or
(iii) personal delivery.
(B) Review.--
(i) In general.--A person described
in paragraph (10) may obtain a review
of the order or such other equitable
relief as determined to be appropriate
by a court described in clause (ii).
(ii) Petition.--To obtain a review or
other relief under clause (i), a person
may, not later than 15 days after
notice is given to the person under
clause (i), file a written petition to
set aside the order with the United
States Court of Appeals--
(I) for the circuit in which
the petitioner carries out the
business of the petitioner; or
(II) in the case of an order
denying registration, the
circuit in which the principal
place of business of the
petitioner is located, as
listed on the application for
registration of the petitioner.
(C) Procedure.--
(i) Duty of clerk of appropriate
court.--The clerk of the appropriate
court under subparagraph (B)(ii) shall
transmit to the Commission a copy of a
petition filed under subparagraph
(B)(ii).
(ii) Duty of commission.--In
accordance with section 2112 of title
28, United States Code, the Commission
shall file in the appropriate court
described in subparagraph (B)(ii) the
record theretofore made.
(iii) Jurisdiction of appropriate
court.--Upon the filing of a petition
under subparagraph (B)(ii), the
appropriate court described in
subparagraph (B)(ii) may affirm, set
aside, or modify the order of the
Commission.
(d) If any person (other than a registered entity), is
violating or has violated subsection (c) or any other
provisions of this Act or of the rules, regulations, or orders
of the Commission thereunder, the Commission may, upon notice
and hearing, and subject to appeal as in other cases provided
for in subsection (c), make and enter an order directing that
such person shall cease and desist therefrom and, if such
person thereafter and after the lapse of the period allowed for
appeal of such order or after the affirmance of such order,
shall knowingly fail or refuse to obey or comply with such
order, such person, upon conviction thereof, shall be fined not
more than the higher of $140,000 or triple the monetary gain to
such person, or imprisoned for not more than 1 year, or both,
except that if such knowing failure or refusal to obey or
comply with such order involves any offense within subsection
(a) or (b) of section 9, such person, upon conviction thereof,
shall be subject to the penalties of said subsection (a) or
(b): Provided, That any such cease and desist order under this
subsection against any respondent in any case of manipulation
shall be issued only in conjunction with an order issued
against such respondent under subsection (c).
(e)(1) In determining the amount of the money penalty
assessed under subsection (c), the Commission shall consider
the appropriateness of such penalty to the gravity of the
violation.
(2) Unless the person against whom a money penalty is
assessed under subsection (c) shows to the satisfaction of the
Commission within fifteen days from the expiration of the
period allowed for payment of such penalty that either an
appeal as authorized by subsection (c) has been taken or
payment of the full amount of the penalty then due has been
made, at the end of such fifteen-day period and until such
person shows to the satisfaction of the Commission that payment
of such amount with interest thereon to date of payment has
been made--
(A) such person shall be prohibited automatically
from the privileges of all registered entities; and
(B) if such person is registered with the Commission,
such registration shall be suspended automatically.
(3) If a person against whom a money penalty is assessed
under subsection (c) takes an appeal and if the Commission
prevails or the appeal is dismissed, unless such person shows
to the satisfaction of the Commission that payment of the full
amount of the penalty then due has been made by the end of
thirty days from the date of entry of judgment on the appeal--
(A) such person shall be prohibited automatically
from the privileges of all registered entities; and
(B) if such person is registered with the Commission,
such registration shall be suspended automatically.
If the person against whom the money penalty is assessed fails
to pay such penalty after the lapse of the period allowed for
appeal or after the affirmance of such penalty, the Commission
may refer the matter to the Attorney General who shall recover
such penalty by action in the appropriate United States
district court.
(4) Any designated clearing organization that
knowingly or recklessly evades or participates in or
facilitates an evasion of the requirements of section
2(h) shall be liable for a civil money penalty in twice
the amount otherwise available for a violation of
section 2(h).
(5) Any swap dealer or major swap participant that
knowingly or recklessly evades or participates in or
facilitates an evasion of the requirements of section
2(h) shall be liable for a civil money penalty in twice
the amount otherwise available for a violation of
section 2(h).
(f)(1) Except as provided in paragraph (2), not later than
six months after the effective date of rules promulgated by the
Federal Trade Commission under section 3(a) of the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the
Commission shall promulgate, or require each registered futures
association to promulgate, rules substantially similar to such
rules to prohibit deceptive and other abusive telemarketing
acts or practices by any person registered or exempt from
registration under this Act in connection with such person's
business as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, leverage
transaction merchant, floor broker, or floor trader, or a
person associated with any such person.
(2) The Commission is not required to promulgate rules under
paragraph (1) if it determines that--
(A) rules adopted by the Commission under this Act
provide protection from deceptive and abusive
telemarketing by persons described under paragraph (1)
substantially similar to that provided by rules
promulgated by the Federal Trade Commission under
section 3(a) of the Telemarketing and Consumer Fraud
and Abuse Prevention Act; or
(B) such a rule promulgated by the Commission is not
necessary or appropriate in the public interest, or for
the pro- tection of customers in the futures and
options markets, or would be inconsistent with the
maintenance of fair and orderly markets.
If the Commission determines that an exception described in
subparagraph (A) or (B) applies, the Commission shall publish
in the Federal Register its determination with the reasons for
it.
(g) The Commission shall provide the Securities and Exchange
Commission with notice of the commencement of any proceeding
and a copy of any order entered by the Commission pursuant to
subsections (c) and (d) of this section against any futures
commission merchant or introducing broker registered pursuant
to section 4f(a)(2), any floor broker or floor trader exempt
from registration pursuant to section 4f(a)(3), any associated
person exempt from registration pursuant to section 4k(6), or
any board of trade designated as a contract market pursuant to
section 5f.
(h) Applicability to Activities Outside the United States.--
(1) Applicability.--The provisions of this Act
prohibiting fraud, manipulation, attempted fraud, and
attempted manipulation, and providing for enforcement
by the Commission or the United States of such
prohibitions (including sections 4b, 4c(a)(1)-(4),
4c(a)(7), 4c(b), 4o, 4s(h)(1), 4s(h)(4), 6(c), 6(e)(1)-
(3), 6c, 9(a), 9(c), 9(d), and 9(e), including any rule
or regulation promulgated thereunder), shall apply to
activities outside the United States where such
activities, independently or in conjunction with
activities in the United States, have or would have a
reasonably foreseeable substantial effect within the
United States.
(2) Effect on other authority.--Nothing in this
subsection affects the application or interpretation
of, or liability under, any other provision of this
Act, including section 22.
Sec. 6a. (a) No board of trade which has been designated [or
registered] as a contract market [or a derivatives transaction
execution facility] shall exclude from membership in, and all
privileges on, such board of trade, any association or
corporation engaged in cash commodity business having adequate
financial responsibility which is organized under the
cooperative laws of any State, or which has been recognized as
a cooperative association of producers by the United States
Government or by any agency thereof, if such association or
corporation complies and agrees to comply with such terms and
conditions as are or may be imposed lawfully upon other members
of such board, and as are or may be imposed lawfully upon a
cooperative association of producers engaged in cash commodity
business, unless such board of trade is authorized by the
Commission to exclude such association or corporation from
membership and privileges after hearing held upon at least
three days' notice subsequent to the filing of complaint by the
board of trade: Provided, however, That if any such association
or corporation shall fail to meet its obligations with any
established clearing house or clearing agency of any contract
market, such association or corporation shall be ipso facto
debarred from further trading on such contract market, except
such trading as may be necessary to close open trades and to
discharge existing contracts in accordance with the rules of
such contract market applicable in such cases. Such Commission
may prescribe that such association or corporation shall have
and retain membership and privileges, with or without imposing
conditions, or it may permit such board of trade immediately to
bar such association or corporation from membership and
privileges. Any order of said Commission entered hereunder
shall be reviewable by the court of appeals for the circuit in
which such association or corporation, or such board of trade,
has its principal place of business, on written petition either
of such association or corporation, or of such board of trade,
under the procedure provided in section 6(b) of this Act, but
such order shall not be stayed by the court pending review.
(b) No rule of any board of trade designated [or registered]
as a contract market [or a derivatives transaction execution
facility] shall forbid or be construed to forbid the payment of
compensation on a commodity-unit basis, or otherwise, by any
federated cooperative association to its regional member-
associations for services rendered or to be rendered in
connection with any organization work, educational activity, or
procurement of patronage, provided no part of any such
compensation is returned to patrons (whether members or
nonmembers) of such cooperative association, or of its regional
or local member-associations, otherwise than as a dividend on
capital stock or as a patronage dividend out of the net
earnings or surplus of such federated cooperative association.
Sec. 6b. If any registered entity is not enforcing or has not
enforced its rules of government made a condition of its
designation or registration as set forth in sections 5 through
5c or section 5h, or if any registered entity, or any director,
officer, agent, or employee of any registered entity otherwise
is violating or has violated any of the provisions of this Act
or any of the rules, regulations, or orders of the Commission
thereunder, the Commission may, upon notice and hearing on the
record and subject to appeal as in other cases provided for in
section 6(b) of this Act, make and enter an order directing
that such registered entity, director, officer, agent, or
employee shall cease and desist from such violation, and assess
a civil penalty of not more than $500,000 for each such
violation, or, in any case of manipulation or attempted
manipulation in violation of section 6(c), 6(d), or 9(a)(2), a
civil penalty of not more than $1,000,000 for each such
violation. If such registered entity, director, officer, agent,
or employee, after the entry of such a cease and desist order
and the lapse of the period allowed for appeal of such order or
after the affirmance of such order, shall fail or refuse to
obey or comply with such order, such registered entity,
director, officer, agent, or employee shall be guilty of a
misdemeanor and, upon conviction thereof, shall be fined not
more than $500,000 or imprisoned for not less than six months
nor more than one year, or both, except that if the failure or
refusal to obey or comply with the order involved any offense
under section 9(a)(2), the registered entity, director,
officer, agent, or employee shall be guilty of a felony and, on
conviction, shall be subject to penalties under section
9(a)(2). Each day during which such failure or refusal to obey
such cease and desist order continues shall be deemed a
separate offense. If the offending registered entity or other
person upon whom such penalty is imposed, after the lapse of
the period allowed for appeal or after the affirmance of such
penalty, shall fail to pay such penalty, the Commission shall
refer the matter to the Attorney General who shall recover such
penalty by action in the appropriate United States district
court. In determining the amount of the money penalty assessed
under this section, the Commission shall consider the gravity
of the offense, and in the case of a registered entity shall
further consider whether the amount of the penalty will
materially impair the ability of the registered entity to carry
on its operations and duties.
* * * * * * *
Sec. 6d. (1) Whenever it shall appear to the attorney general
of any State, the administrator of the securities laws of any
State, or such other official as a State may designate, that
the interests of the residents of that State have been, are
being, or may be threatened or adversely affected because any
person (other than a contract market, [derivatives transaction
execution facility,] clearinghouse, floor broker, or floor
trader) has engaged in, is engaging or is about to engage in,
any act or practice constituting a violation of any provision
of this Act or any rule, regulation, or order of the Commission
thereunder, the State may bring a suit in equity or an action
at law on behalf of its residents to enjoin such act or
practice, to enforce compliance with this Act, or any rule,
regulation, or order of the Commission thereunder, to obtain
damages on behalf of their residents, or to obtain such further
and other relief as the court may deem appropriate.
(2) The district courts of the United States, the United
States courts of any territory, and the District Court of the
United States for the District of Columbia, shall have
jurisdiction of all suits in equity and actions at law brought
under this section to enforce any liability or duty created by
this Act or any rule, regulation, or order of the Commission
thereunder, or to obtain damages or other relief with respect
thereto. Upon proper application, such courts shall also have
jurisdiction to issue writs of mandamus, or orders affording
like relief, commanding the defendant to comply with the
provisions of this Act, or any rule, regulation, or order of
the Commission thereunder, including the requirement that the
defendant take such action as is necessary to remove the danger
of violation of this Act or of any such rule, regulation, or
order. Upon a proper showing, a permanent or temporary
injunction or restraining order shall be granted without bond.
(3) Immediately upon instituting any such suit or action, the
State shall serve written notice thereof upon the Commission
and provide the Commission with a copy of its complaint, and
the Commission shall have the right to (A) intervene in the
suit or action and, upon doing so, shall be heard on all
matters arising therein, and (B) file petitions for appeal.
(4) Any suit or action brought under this section in a
district court of the United States may be brought in the
district wherein the defendant is found or is an inhabitant or
transacts business or wherein the act or practice occurred, is
occurring, or is about to occur, and process in such cases may
be served in any district in which the defendant is an
inhabitant or wherever the defendant may be found.
(5) For purposes of bringing any suit or action under this
section, nothing in this Act shall prevent the attorney
general, the administrator of the State securities laws, or
other duly authorized State officials from exercising the
powers conferred on them by the laws of such State to conduct
investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of
documentary and other evidence.
(6) For purposes of this section ``State'' means any State of
the United States, the District of Columbia, the Commonwealth
of Puerto Rico, or any territory or possession of the United
States.
(7) Nothing contained in this section shall prohibit an
authorized State official from proceeding in State court on the
basis of an alleged violation of any general civil or criminal
antifraud statute of such State.
(8)(A) Nothing in this Act shall prohibit an authorized State
official from proceeding in a State court against any person
registered under this Act (other than a floor broker, floor
trader, or registered futures association) for an alleged
violation of any antifraud provision of this Act or any
antifraud rule, regulation, or order issued pursuant to the
Act.
(B) The State shall give the Commission prior written notice
of its intent to proceed before instituting a proceeding in
State court as described in this subsection and shall furnish
the Commission with a copy of its complaint immediately upon
instituting any such proceeding. The Commission shall have the
right to (i) intervene in the proceeding and, upon doing so,
shall be heard on all matters arising therein, and (ii) file a
petition for appeal. The Commission or the defendant may remove
such proceeding to the district court of the United States for
the proper district by following the procedure for removal
otherwise provided by law, except that the petition for removal
shall be filed within sixty days after service of the summons
and complaint upon the defendant. The Commission shall have the
right to appear as amicus curiae in any such proceeding.
* * * * * * *
Sec. 8. (a)(1) For the efficient execution of the provisions
of this Act, and in order to provide information for the use of
Congress, the Commission may make such investigations as it
deems necessary to ascertain the facts regarding the operations
of boards of trade and other persons subject to the provisions
of this Act. The Commission may publish from time to time the
results of any such investigation and such general statistical
information gathered therefrom as it deems of interest to the
public: Provided, That except as otherwise specifically
authorized in this Act, the Commission may not publish data and
information that would separately disclose the business
transactions or market positions of any person and trade
secrets or names of customers: Provided further, That the
Commission may withhold from public disclosure any data or
information concerning or obtained in connection with any
pending investigation of any person. The Commission shall not
be compelled to disclose any information or data obtained from
a foreign futures authority if--
(A) the foreign futures authority has in good faith
determined and represented to the Commission that
disclosure of such information or data by that foreign
futures authority would violate the laws applicable to
that foreign futures authority; and
(B) the Commission obtains such information pursuant
to--
(i) such procedure as the Commission may
authorize for use in connection with the
administration or enforcement of this Act; or
(ii) a memorandum of understanding with that
foreign futures authority;
except that nothing in this subsection shall prevent
the Commission from disclosing publicly any information
or data obtained by the Commission from a foreign
futures authority when such disclosure is made in
connection with a congressional proceeding, an
administrative or judicial proceeding commenced by the
United States or the Commission, in any receivership
proceeding involving a receiver appointed in a judicial
proceeding commenced by the United States or the
Commission, or in any proceeding under title 11 of the
United States Code in which the Commission has
intervened or in which the Commission has the right to
appear and be heard. Nothing in this subsection shall
be construed to authorize the Commission to withhold
information or data from Congress. For purposes of
section 552 of title 5, United States Code, this
subsection shall be considered a statute described in
subsection (b)(3)(B) of section 552.
(2) In conducting investigations authorized under this
subsection or any other provision of this Act, the Commission
shall continue, as the Commission determines necessary, to
request the assistance of and cooperate with the appropriate
Federal agencies in the conduct of such investigations,
including undercover operations by such agencies. The
Commission and the Department of Justice shall assess the
effectiveness of such undercover operations and, within two
years of the date of enactment of the Futures Trading Practices
Act of 1992, shall recommend to Congress any additional
undercover or other authority for the Commission that the
Commission or the Department of Justice believes to be
necessary.
(3) The Commission shall provide the Securities and Exchange
Commission with notice of the commencement of any proceeding
and a copy of any order entered by the Commission against any
futures commission merchant or introducing broker registered
pursuant to section 4f(a)(2), any floor broker or floor trader
exempt from registration pursuant to section 4f(a)(3), any
associated person exempt from registration pursuant to section
4k(6), or any board of trade designated as a contract market
pursuant to section 5f.
(b) The Commission may disclose publicly any data or
information that would separately disclose the market
positions, business transactions, trade secrets, or names of
customers of any person when such disclosure is made in
connection with a congressional proceeding, in an
administrative or judicial proceeding brought under this Act,
in any receivership proceeding involving a receiver appointed
in a judicial proceeding brought under this Act, or in any
bankruptcy proceeding in which the Commission has intervened or
in which the Commission has the right to appear and be heard
under title 11 of the United States Code. This subsection shall
not apply to the disclosure of data or information obtained by
the Commission from a foreign futures authority.
(c) The Commission may make or issue such reports as it deems
necessary, or such opinions or orders as may be required under
other provisions of law, relative to the conduct of any
registered entity or to the transactions of any person found
guilty of violating the provisions of this Act or the rules,
regulations, or orders of the Commission thereunder in
proceedings brought under section 6 of this Act. In any such
report or opinion, the Commission may set forth the facts as to
any actual transaction or any information referred to in
subsection (b) of this section, if such facts or information
have previously been disclosed publicly in connection with a
congressional proceeding, or in an administrative or judicial
proceeding brought under this Act.
(d) The Commission, upon its own initiative or in cooperation
with existing governmental agencies, shall investigate the
marketing conditions of commodities and commodity products and
byproducts, including supply and demand for these commodities,
cost to the consumer, and handling and transportation charges.
It shall also compile and furnish to producers, consumers, and
distributors, by means of regular or special reports, or by
such other methods as it deems most effective, information
respecting the commodity markets, together with information on
supply, demand, prices, and other conditions in this and other
countries that affect the markets.
[(e) The Commission may disclose and make public, where such
information has previously been disclosed publicly in
accordance with the provisions of this section, the names and
addresses of all traders on the boards of trade on the
commodity markets with respect to whom the Commission has
information, and any other information in the possession of the
Commission relating to the amount of commodities purchased or
sold by each such trader. Upon the request of any committee of
either House of Congress, acting within the scope of its
jurisdiction, the Commission shall furnish to such committee
the names and addresses of all traders on such boards of trade
with respect to whom the Commission has information, and any
other information in the possession of the Commission relating
to the amount of any commodity purchased or sold by each such
trader. Upon the request of any department or agency of the
Government of the United States, acting within the scope of its
jurisdiction, the Commission may furnish to such department or
agency any information in the possession of the Commission
obtained in connection with the administration of this Act.
However, any information furnished under this subsection to any
Federal department or agency shall not be disclosed by such
department or agency except in any action or proceeding under
the laws of the United States to which it, the Commission, or
the United States is a party. Upon the request of any
department or agency of any State or any political subdivision
thereof, acting within the scope of its jurisdiction, any
foreign futures authority, or any department or agency of any
foreign government or any political subdivision thereof, acting
within the scope of its jurisdiction, the Commission may
furnish to such foreign futures authority, department or agency
any information in the possession of the Commission obtained in
connection with the administration of this Act. Any information
furnished to any department or agency of any State or political
subdivision thereof shall not be disclosed by such department
or agency except in connection with an adjudicatory action or
proceeding brought under this Act or the laws of such State or
political subdivision to which such State or political
subdivision or any department or agency thereof is a party. The
Commission shall not furnish any information to a foreign
futures authority or to a department, central bank and
ministries, or agency of a foreign government or political
subdivision thereof unless the Commission is satisfied that the
information will not be disclosed by such foreign futures
authority, department, central bank and ministries, or agency
except in connection with an adjudicatory action or proceeding
brought under the laws of such foreign government or political
subdivision to which such foreign government or political
subdivision or any department or agency thereof, or foreign
futures authority is a party.]
(e) Disclosure Authorities.--
(1) In general.--
(A) Previously disclosed.--The Commission may
disclose and make public, where such
information has previously been disclosed
publicly in accordance with the provisions of
this section, the names and addresses of all
traders on the boards of trade on the commodity
markets with respect to whom the Commission has
information, and any other information in the
possession of the Commission relating to the
amount of commodities purchased or sold by each
such trader.
(B) Congressional access.--Upon the request
of any committee of either House of Congress,
acting within the scope of its jurisdiction,
the Commission shall furnish to the committee
the names and addresses of all traders on the
boards of trade with respect to whom the
Commission has information, and any other
information in the possession of the Commission
relating to the amount of any commodity
purchased or sold by each such trader.
(2) Domestic agencies.--
(A) In general.--Upon the request of any
department or agency of the Government of the
United States, acting within the scope of its
jurisdiction, the Commission may furnish to the
department or agency any information in the
possession of the Commission obtained in
connection with the administration of this Act.
(B) Conditions.--Any information furnished
under this paragraph to any Federal department
or agency shall not be disclosed by the
department or agency except in any action or
proceeding under the laws of the United States
to which the department or agency, the
Commission, or the United States is a party.
(C) Federal reserve banks.--In this
paragraph, the term ``agency'' includes the
Federal Reserve Banks.
(3) State agencies.--
(A) In general.--Upon the request of any
department or agency of any State or any
political subdivision thereof, acting within
the scope of its jurisdiction, the Commission
may furnish to the department, agency, or
political subdivision any information in the
possession of the Commission obtained in
connection with the administration of this Act.
(B) Conditions.--Any information furnished to
any department or agency of any State or
political subdivision thereof shall not be
disclosed by the department or agency except in
connection with an adjudicatory action or
proceeding under this Act or the laws of the
State or political subdivision to which the
State, political subdivision, department, or
agency is a party.
(4) Foreign agencies.--
(A) In general.--Upon the request of any
foreign futures authority, or any department,
central bank, ministry, or agency of any
foreign government or any political subdivision
thereof, acting within the scope of its
jurisdiction, the Commission may furnish to the
foreign futures authority, department, central
bank, ministry, agency of any foreign
government, or any political subdivision
thereof, any information in the possession of
the Commission obtained in connection with the
administration of this Act.
(B) Conditions.--The Commission shall not
furnish any information to a foreign futures
authority or to a department, central bank,
ministry, or agency of a foreign government or
political subdivision thereof, unless the
Commission is satisfied that the information
will not be disclosed by the foreign futures
authority, department, central bank, ministry,
or agency of any foreign government or any
political subdivision thereof, except in
connection with an adjudicatory action or
proceeding under the laws of the foreign
government or political subdivision to which
the foreign government, political subdivision,
department, agency, central bank, ministry, or
foreign futures authority is a party.
(f) The Commission shall disclose information in its
possession pursuant to a subpoena or summons only if--
(1) a copy of the subpoena or summons has been mailed
to the last known home or business address of the
person who submitted the information that is the
subject of the subpoena or summons, if the address is
known to the Commission, or, if such mailing would be
unduly burdensome, the Commission provides other
appropriate notice of the subpoena or summons to such
person, and
(2) at least fourteen days have expired from the date
of such mailing of the subpoena or summons, or such
other notice.
This subsection shall not apply to congressional subpoenas or
congressional requests for information.
(g) The Commission shall provide any registration information
maintained by the Commission on any registrant upon reasonable
request made by any department or agency of any State or any
political subdivision thereof. Whenever the Commission
determines that such information may be appropriate for use by
any department or agency of a State or political subdivision
thereof, the Commission shall provide such information without
request.
(h) Sharing Privileged Information With Other Authorities.--
(1) Privilege definition.--The term ``privilege''
includes any applicable work-product privilege,
attorney-client privilege, governmental privilege, or
other privilege recognized under Federal, State, or
foreign law.
(2) Privileged information provided by the
commission.--The Commission shall not be considered to
have waived any privilege by transferring information
to or permitting that information to be used in
accordance with section 8a(6) or paragraphs (2), (3),
and (4) of subsection (e) of this section.
(3) Nondisclosure of privileged information provided
to the commission.--The Commission shall not be
compelled to disclose privileged information obtained
from any foreign futures authority if the authority has
in good faith determined and represented to the
Commission that the information is privileged, except
as provided for in subsection (a)(1).
(4) Nonwaiver of privileged information provided to
the commission.--
(A) In general.--The entities listed in
paragraphs (2), (3), and (4) of subsection (e)
and section 8(a)(6) shall not be considered to
have waived any privilege by transferring
information to or permitting information to be
used by the Commission.
(B) Exception.--Subparagraph (A) shall not
apply to an entity listed in section 8a(6) with
respect to information obtained by the
Commission in an investigation relating to or
in any action against the entity.
(5) Rule of construction.--Nothing in this subsection
shall authorize the Commission to withhold information
from the Congress or prevent the Commission from
complying with an order of a court of the United States
in an action commenced by the United States or the
Commission.
[(h)] (i) The Commission shall submit to Congress a written
report within one hundred and twenty days after the end of each
fiscal year detailing the operations of the Commission during
such fiscal year. The Commission shall include in such report
such information, data, and legislative recommendations as it
deems advisable with respect to the administration of this Act
and its powers and functions under this Act.
[(i)] (j) The Comptroller General of the United States shall
conduct reviews and audits of the Commission and make reports
thereon. For the purpose of conducting such reviews and audits,
the Comptroller General shall be furnished such information
regarding the powers, duties, organizations, transactions,
operations, and activities of the Commission as the Comptroller
General may require and the Comptroller General and the duly
authorized representatives of the Comptroller General shall,
for the purpose of securing such information, have access to
and the right to examine any books, documents, papers, or
records of the Commission, except that in reports the
Comptroller General shall not include data and information that
would separately disclose the business transactions of any
person and trade secrets or names of customers, although such
data shall be provided upon request by any committee of either
House of Congress acting within the scope of its jurisdiction.
(k) Proprietary Information.--
(1) In general.--For any proprietary information
provided to the Commission, the Commission may, in its
discretion, after notice and comment, adopt rules and
regulations to apply any of the provisions of this
section to such information it obtains or receives, as
it deems necessary, to the extent such information is
not already covered by the provisions of this section.
(2) Policies.--With regard to proprietary information
it obtains or receives, the Commission shall adopt
policies, as determined by the Commission, after notice
and comment, to--
(A) address circumstances when the Commission
requests proprietary information;
(B) safeguard the information, taking into
consideration the level of sensitivity of the
information;
(C) limit access to the information to
appropriate staff, as determined by the
Commission; and
(D) protect the information from unlawful use
or disclosure.
(3) Sharing.--To the extent the Commission adopts
rules or regulations, pursuant to paragraph (1),
regarding the sharing of such proprietary information
with other governmental entities, the Commission shall
receive assurances that such other governmental entity
shall maintain sufficient safeguards consistent with--
(A) policies that achieve the objectives of
subparagraphs (B), (C), and (D) of paragraph
(2) of this subsection; and
(B) the limitations set forth in paragraphs
(2), (3), and (4) of subsection (e) concerning
the confidentiality of any such information
received.
Sec. 8a. The Commission is authorized--
(1) to register futures commission merchants,
associated persons of futures commission merchants,
introducing brokers, associated persons of introducing
brokers, commodity trading advisors, associated persons
of commodity trading advisors, commodity pool
operators, associated persons of commodity pool
operators, floor brokers, and floor traders upon
application in accordance with rules and regulations
and in the form and manner to be prescribed by the
Commission, which may require the applicant, and such
persons associated with the applicant as the Commission
may specify, to be fingerprinted and to submit, or
cause to be submitted, such fingerprints to the
Attorney General for identification and appropriate
processing, and in connection therewith to fix and
establish from time to time reasonable fees and charges
for registrations and renewals thereof: Provided, That
notwithstanding any provision of this Act, the
Commission may grant a temporary license to any
applicant for registration with the Commission pursuant
to such rules, regulations, or orders as the Commission
may adopt, except that the term of any such temporary
license shall not exceed six months from the date of
its issuance;
(2) upon notice, but without a hearing and pursuant
to such rules, regulations, or orders as the Commission
may adopt, to refuse to register, to register
conditionally, or to suspend or place restrictions upon
the registration of, any person and with such a hearing
as may be appropriate to revoke the registration of any
person--
(A) if a prior registration of such person in
any capacity has been suspended (and the period
of such suspension has not expired) or has been
revoked;
(B) if registration of such person in any
capacity has been refused under the provisions
of paragraph (3) of this section within five
years preceding the filing of the application
for registration or at any time thereafter;
(C) if such person is permanently or
temporarily enjoined by order, judgment, or
decree of any court of competent jurisdiction
(except that registration may not be revoked
solely on the basis of such temporary order,
judgment, or decree), including an order
entered pursuant to an agreement of settlement
to which the Commission or any Federal or State
agency or other governmental body is a party,
from (i) acting as a futures commission
merchant, introducing broker, floor broker,
floor trader, commodity trading advisor,
commodity pool operator, associated person of
any registrant under this Act, securities
broker, securities dealer, municipal securities
broker, municipal securities dealer, transfer
agent, clearing agency, securities information
processor, investment adviser, investment
company, or affiliated person or employee of
any of the foregoing or (ii) engaging in or
continuing any activity where such activity
involves embezzlement, theft, extortion, fraud,
fraudulent conversion, misappropriation of
funds, securities or property, forgery,
counterfeiting, false pretenses, bribery,
gambling, or any transaction in or advice
concerning contracts of sale of a commodity for
future delivery, concerning matters subject to
Commission regulation under section 4c or 19,
or concerning securities;
(D) if such person has been convicted within
ten years preceding the filing of the
application for registration or at any time
thereafter of any felony that (i) involves any
transactions or advice concerning any contract
of sale of a commodity for future delivery, or
any activity subject to Commission regulation
under section 4c or 19 of this Act, or
concerning a security, (ii) arises out of the
conduct of the business of a futures commission
merchant, introducing broker, floor broker,
floor trader, commodity trading advisor,
commodity pool operator, associated person of
any registrant under this Act, securities
broker, securities dealer, municipal securities
broker, municipal securities dealer, transfer
agent, clearing agency, securities information
processor, investment adviser, investment
company, or an affiliated person or employee of
any of the foregoing, (iii) involves
embezzlement, theft, extortion, fraud,
fraudulent conversion, misappropriation of
funds, securities or property, forgery,
counterfeiting, false pretenses, bribery, or
gambling, or (iv) involves the violation of
section 152, 1001, 1341, 1342, 1343, 1503,
1623, 1961, 1962, 1963, or 2314, or chapter 25,
47, 95, or 96 of title 18, United States Code,
or section 7201 or 7206 of the Internal Revenue
Code of 1986;
(E) if such person, within ten years
preceding the filing of the application or at
any time thereafter, has been found in a
proceeding brought by the Commission or any
Federal or State agency or other governmental
body, or by agreement of settlement to which
the Commission or any Federal or State agency
or other governmental body is a party, (i) to
have violated any provision of this Act, the
Securities Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding Company
Act of 1935, the Trust Indenture Act of 1939,
the Investment Advisers Act of 1940, the
Investment Company Act of 1940, the Securities
[Investors] Investor Protection Act of 1970,
the Foreign Corrupt Practices Act of 1977,
chapter 96 of title 18 of the United States
Code, or any similar statute of a State or
foreign jurisdiction, or any rule, regulation,
or order under any such statutes, or the rules
of the Municipal Securities Rulemaking Board
where such violation involves embezzlement,
theft, extortion, fraud, fraudulent conversion,
misappropriation of funds, securities or
property, forgery, counterfeiting, false
pretenses, bribery, or gambling, or (ii) to
have willfully aided, abetted, counseled,
commanded, induced, or procured such violation
by any other person;
(F) if such person is subject to an
outstanding order of the Commission denying
privileges on any registered entity to such
person, denying, suspending, or revoking such
person's membership in any registered entity or
registered futures association, or barring or
suspending such person from being associated
with a registrant under this Act or with a
member of a registered entity or with a member
of a registered futures association;
(G) if, as to any of the matters set forth in
this paragraph and paragraph (3), such person
willfully made any materially false or
misleading statement or omitted to state any
material fact in such person's application or
any update thereto; or
(H) if refusal, suspension, or revocation of
the registration of any principal of such
person would be warranted because of a
statutory disqualification listed in this
paragraph:
Provided, That such person may appeal from a decision
to refuse registration, condition registration,
suspend, revoke or to place restrictions upon
registration made pursuant to the provisions of this
paragraph in the manner provided in section 6(c) of
this Act; and
Provided, further, That for the purposes of paragraphs
(2) and (3) of this section, ``principal'' shall mean,
if the person is a partnership, any general partner or,
if the person is a corporation, any officer, director,
or beneficial owner of at least 10 per centum of the
voting shares of the corporation, and any other person
that the Commission by rule, regulation, or order
determines has the power, directly or indirectly,
through agreement or otherwise, to exercise a
controlling influence over the activities of such
person which are subject to regulation by the
Commission;
(3) to refuse to register or to register
conditionally any person, if it is found, after
opportunity for hearing, that--
(A) such person has been found by the
Commission or by any court of competent
jurisdiction to have violated, or has consented
to findings of a violation of, any provision of
this Act, or any rule, regulation, or order
thereunder (other than a violation set forth in
paragraph (2) of this section), or to have
willfully aided, abetted, counseled, commanded,
induced, or procured the violation by any other
person of any such provision;
(B) such person has been found by any court
of competent jurisdiction or by any Federal or
State agency or other governmental body, or by
agreement of settlement to which any Federal or
State agency or other governmental body is a
party, (i) to have violated any provision of
the Securities Act of 1933, the Securities
Exchange Act of 1934, the Public Utility
Holding Company Act of 1935, the Trust
Indenture Act of 1939, the Investment Advisers
Act of 1940, the Investment Company Act of
1940, the Securities [Investors] Investor
Protection Act of 1970, the Foreign Corrupt
Practices Act of 1977, or any similar statute
of a State or foreign jurisdiction, or any
rule, regulation, or order under any such
statutes, or the rules of the Municipal
Securities Rulemaking Board or (ii) to have
willfully aided, abetted, counseled, commanded,
induced, or procured such violation by any
other person;
(C) such person failed reasonably to
supervise another person, who is subject to
such person's supervision, with a view to
preventing violations of this Act, or of any of
the statutes set forth in subparagraph (B) of
this paragraph, or of any of the rules,
regulations, or orders thereunder, and the
person subject to supervision committed such a
violation: Provided, That no person shall be
deemed to have failed reasonably to supervise
another person, within the meaning of this
subparagraph if (i) there have been established
procedures, and a system for applying such
procedures, which would reasonably be expected
to prevent and detect, insofar as practicable,
any such violation by such other person and
(ii) such person has reasonably discharged the
duties and obligations incumbent upon that
person, as supervisor, by reason of such
procedures and system, without reasonable cause
to believe that such procedures and system were
not being complied with;
(D) such person pleaded guilty to or was
convicted of a felony other than a felony of
the type specified in paragraph (2)(D) of this
section, or was convicted of a felony of the
type specified in paragraph (2)(D) of this
section more than ten years preceding the
filing of the application;
(E) such person pleaded guilty to or was
convicted of any misdemeanor which (i) involves
any transaction or advice concerning any
contract of sale of a commodity for future
delivery or any activity subject to Commission
regulation under section 4c or 19 of this Act
or concerning a security, (ii) arises out of
the conduct of the business of a futures
commission merchant, introducing broker, floor
broker, floor trader, commodity trading
advisor, commodity pool operator, associated
person of any registrant under this Act,
securities broker, securities dealer, municipal
securities broker, municipal securities dealer,
transfer agent, clearing agency, securities
information processor, investment adviser,
investment company, or an affiliated person or
employee of any of the foregoing, (iii)
involves embezzlement, theft, extortion, fraud,
fraudulent conversion, misappropriation of
funds, securities or property, forgery,
counterfeiting, false pretenses, bribery, or
gambling, (iv) involves the violation of
section 152, 1341, 1342, or 1343 or chapter 25,
47, 95, or 96 of title 18, United States Code,
or section 7203, 7204, 7205, or 7207 of the
Internal Revenue Code of 1986;
(F) such person was debarred by any agency of
the United States from contracting with the
United States;
(G) such person willfully made any materially
false or misleading statement or willfully
omitted to state any material fact in such
person's application or any update thereto, in
any report required to be filed with the
Commission by this Act or the regulations
thereunder, in any proceeding before the
Commission or in any registration
disqualification proceeding;
(H) such person has pleaded nolo contendere
to criminal charges of felonious conduct, or
has been convicted in a State court, in a
United States military court, or in a foreign
court of conduct which would constitute a
felony under Federal law if the offense had
been committed under Federal jurisdiction;
(I) in the case of an applicant for
registration in any capacity for which there
are minimum financial requirements prescribed
under this Act or under the rules or
regulations of the Commission, such person has
not established that such person meets such
minimum financial requirements;
(J) such person is subject to an outstanding
order denying, suspending, or expelling such
person from membership in a registered entity,
a registered futures association, any other
self-regulatory organization, or any foreign
regulatory body that the Commission recognizes
as having a comparable regulatory program or
barring or suspending such person from being
associated with any member or members of such
registered entity, association, self-regulatory
organization, or foreign regulatory body;
(K) such person has been found by any court
of competent jurisdiction or by any Federal or
State agency or other governmental body, or by
agreement of settlement to which any Federal or
State agency or other governmental body is a
party, (i) to have violated any statute or any
rule, regulation, or order thereunder which
involves embezzlement, theft, extortion, fraud,
fraudulent conversion, misappropriation of
funds, securities or property, forgery,
counterfeiting, false pretenses, bribery, or
gambling or (ii) to have willfully aided,
abetted, counseled, commanded, induced or
procured such violation by any other person;
(L) such person has associated with such
person any other person and knows, or in the
exercise of reasonable care should know, of
facts regarding such other person that are set
forth as statutory disqualifications in
paragraph (2) of this section, unless such
person has notified the Commission of such
facts and the Commission has determined that
such other person should be registered or
temporarily licensed;
(M) there is other good cause; or
(N) any principal, as defined in paragraph
(2) of this section, of such person has been or
could be refused registration:
Provided, That pending final determination under this
paragraph, registration shall not be granted: Provided
further, That such person may appeal from a decision to
refuse registration or to condition registration made
pursuant to this paragraph in the manner provided in
section 6(c) of this Act;
(4) in accordance with the procedure provided for in
section 6(c) of this Act, to suspend, revoke, or place
restrictions upon the registration of any person
registered under this Act if cause exists under
paragraph (3) of this section which would warrant a
refusal of registration of such person, and to suspend
or revoke the registration of any futures commission
merchant or introducing broker who shall knowingly
accept any order for the purchase or sale of any
commodity for future delivery on or subject to the
rules of any registered entity from any person if such
person has been denied trading privileges on any
registered entity by order of the Commission under
section 6(c) of this Act and the period of denial
specified in such order shall not have expired:
Provided, That such person may appeal from a decision
to suspend, revoke, or place restrictions upon
registration made pursuant to this paragraph in the
manner provided in section 6(c) of this Act;
(5) to make and promulgate such rules and regulations
as, in the judgment of the Commission, are reasonably
necessary to effectuate any of the provisions or to
accomplish any of the purposes of this Act;
(6) to communicate to the proper committee or officer
of any registered entity, registered futures
association, or self-regulatory organization as defined
in section 3(a)(26) of the Securities Exchange Act of
1934, notwithstanding the provisions of section 8 of
this Act, the full facts concerning any transaction or
market operation, including the names of parties
thereto, which in the judgment of the Commission
disrupts or tends to disrupt any market or is otherwise
harmful or against the best interests of producers,
consumers, or investors, or which is necessary or
appropriate to effectuate the purposes of this Act:
Provided, That any information furnished by the
Commission under this paragraph shall not be disclosed
by such registered entity, registered futures
association, or self-regulatory organization except in
any self-regulatory action or proceeding;
(7) to alter or supplement the rules of a registered
entity insofar as necessary or appropriate by rule or
regulation or by order, if after making the appropriate
request in writing to a registered entity that such
registered entity effect on its own behalf specified
changes in its rules and practices, and after
appropriate notice and opportunity for hearing, the
Commission determines that such registered entity has
not made the changes so required, and that such changes
are necessary or appropriate for the protection of
swaps traders and to assure fair dealing in swaps, for
the protection of persons producing, handling,
processing, or consuming any commodity traded for
future delivery on such registered entity, or the
product or byproduct thereof, or for the protection of
traders or to insure fair dealing in commodities traded
for future delivery on such registered entity. Such
rules, regulations, or orders may specify changes with
respect to such matters as--
(A) terms or conditions in swaps or contracts
of sale or swap contracts to be executed on or
subject to the rules of such registered entity;
(B) the form or manner of execution of
purchases and sales for future delivery or
swaps;
(C) other trading requirements;
(D) margin requirements, provided that the
rules, regulations, or orders shall--
(i) be limited to protecting the
financial integrity of the derivatives
clearing organization;
(ii) be designed for risk management
purposes to protect the financial
integrity of transactions; and
(iii) not set specific margin
amounts;
(E) safeguards with respect to the financial
responsibility of members;
(F) the manner, method, and place of
soliciting business, including the content of
such solicitations; and
(G) the form and manner of handling,
recording, and accounting for customers'
orders, transactions, and accounts;
(8) to make and promulgate such rules and regulations
with respect to those persons registered under this
Act, who are not members of a registered entity, as in
the judgment of the Commission are reasonably necessary
to protect the public interest and promote just and
equitable principles of trade, including but not
limited to the manner, method, and place of soliciting
business, including the content of such solicitation;
(9) to direct the registered entity, whenever it has
reason to believe that an emergency exists, to take
such action as in the Commission's judgment is
necessary to maintain or restore orderly trading in or
liquidation of any swap or [futures contract] contract
of sale for future delivery or swap contract,
including, but not limited to, the setting of temporary
emergency margin levels on any swap or [futures
contract] contract of sale for future delivery or swap
contract, and the fixing of limits that may apply to a
market position acquired in good faith prior to the
effective date of the Commission's action. The term
``emergency'' as used herein shall mean, in addition to
threatened or actual market manipulations and corners,
any act of the United States or a foreign government
affecting a commodity or any other major market
disturbance which prevents the market from accurately
reflecting the forces of supply and demand for such
commodity. Any action taken by the Commission under
this paragraph shall be subject to review only in the
United States Court of Appeals for the circuit in which
the party seeking review resides or has its principal
place of business, or in the United States Court of
Appeals for the District of Columbia Circuit. Such
review shall be based upon an examination of all the
information before the Commission at the time the
determination was made. The court reviewing the
Commission's action shall not enter a stay or order of
mandamus unless it has determined, after notice and
hearing before a panel of the court, that the agency
action complained of was arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance
with law. Nothing herein shall be deemed to limit the
meaning or interpretation given by a registered entity
to the terms ``market emergency'', ``emergency'', or
equivalent language in its own bylaws, rules,
regulations, or resolutions;
(10) to authorize any person to perform any portion
of the registration functions under this Act, in
accordance with rules, notwithstanding any other
provision of law, adopted by such person and submitted
to the Commission for approval or, if applicable, for
review pursuant to section 17(j) of this Act, and
subject to the provisions of this Act applicable to
registrations granted by the Commission; and
(11)(A) by written notice served on the person and
pursuant to such rules, regulations, and orders as the
Commission may adopt, to suspend or modify the
registration of any person registered under this Act
who is charged (in any information, indictment, or
complaint authorized by a United States attorney or an
appropriate official of any State) with the commission
of or participation in a crime involving a violation of
this Act, or a violation of any other provision of
Federal or State law that would reflect on the honesty
or the fitness of the person to act as a fiduciary
(including an offense specified in subparagraph (D) or
(E) of paragraph (2)) that is punishable by
imprisonment for a term exceeding one year, if the
Commission determines that continued registration of
the person may pose a threat to the public interest or
may threaten to impair public confidence in any market
regulated by the Commission.
(B) Prior to the suspension or modification of the
registration of a person under this paragraph, the
person shall be afforded an opportunity for a hearing
at which the Commission shall have the burden of
showing that the continued registration of the person
does, or is likely to, pose a threat to the public
interest or threaten to impair public confidence in any
market regulated by the Commission.
(C) Any notice of suspension or modification issued
under this paragraph shall remain in effect until such
information, indictment, or complaint is disposed of or
until terminated by the Commission.
(D) On disposition of such information, indictment,
or complaint, the Commission may issue and serve on
such person an order pursuant to paragraph (2) or (4)
to suspend, restrict, or revoke the registration of
such person.
(E) A finding of not guilty or other disposition of
the charge shall not preclude the Commission from
thereafter instituting any other proceedings under this
Act.
(F) A person aggrieved by an order issued under this
paragraph may obtain review of such order in the same
manner and on the same terms and conditions as are
provided in section 6(b).
* * * * * * *
Sec. 9. (a) It shall be a felony punishable by a fine of not
more than $1,000,000 or imprisonment for not more than 10
years, or both, together with the costs of prosecution, for:
(1) Any person registered or required to be
registered under this Act, or any employee or agent
thereof, to embezzle, steal, purloin, or with criminal
intent convert to such person's use or to the use of
another, any money, securities, or property having a
value in excess of $100, which was received by such
person or any employee or agent thereof to margin,
guarantee, or secure the trades or contracts of any
customer or accruing to such customer as a result of
such trades or contracts or which otherwise was
received from any customer, client, or pool participant
in connection with the business of such person. The
word ``value'' as used in this paragraph means face,
par, or market value, or cost price, either wholesale
or retail, whichever is greater.
(2) Any person to manipulate or attempt to manipulate
the price of any commodity in interstate commerce, or
for future delivery on or subject to the rules of any
registered entity, or of any swap, or to corner or
attempt to corner any such commodity or knowingly to
deliver or cause to be delivered for transmission
through the mails or interstate commerce by telegraph,
telephone, wireless, or other means of communication
false or misleading or knowingly inaccurate reports
concerning crop or market information or conditions
that affect or tend to affect the price of any
commodity in interstate commerce, or knowingly to
violate the provisions of section 4, section 4b,
subsections (a) [through (e) of subsection] through (c)
of section 4c, section 4h, section 4o(1), or section
19.
(3) Any person knowingly to make, or cause to be
made, any statement in any application, report, or
document required to be filed under this Act or any
rule or regulation thereunder or any undertaking
contained in a registration statement required under
this Act, or by any registered entity or registered
futures association in connection with an application
for membership or participation therein or to become
associated with a member thereof, which statement was
false or misleading with respect to any material fact,
or knowingly to omit any material fact required to be
stated therein or necessary to make the statements
therein not misleading.
(4) Any person willfully to falsify, conceal, or
cover up by any trick, scheme, or artifice a material
fact, make any false, fictitious, or fraudulent
statements or representations, or make or use any false
writing or document knowing the same to contain any
false, fictitious, or fraudulent statement or entry to
a registered entity, board of trade, swap data
repository, or futures association designated or
registered under this Act acting in furtherance of its
official duties under this Act.
(5) Any person willfully to violate any other
provision of this Act, or any rule or regulation
thereunder, the violation of which is made unlawful or
the observance of which is required under the terms of
this Act, but no person shall be subject to
imprisonment under this paragraph for the violation of
any rule or regulation if such person proves that he
had no knowledge of such rule or regulation.
(6) Any person to abuse the end user clearing
exemption under section 2(h)(4), as determined by the
Commission.
(b) Any person convicted of a felony under this section shall
be suspended from registration under this Act and shall be
denied registration or reregistration for five years or such
longer period as the Commission may determine, and barred from
using, or participating in any manner in, any market regulated
by the Commission for five years or such longer period as the
Commission shall determine, on such terms and conditions as the
Commission may prescribe, unless the Commission determines that
the imposition of such suspension, denial of registration or
reregistration, or market bar is not required to protect the
public interest. The Commission may upon petition later review
such disqualification and market bar and for good cause shown
reduce the period thereof.
(c) It shall be a felony punishable by a fine of not more
than $500,000 or imprisonment for not more than five years, or
both, together with the costs of prosecution, for any
Commissioner of the Commission or any employee or agent
thereof, to participate, directly or indirectly, in any
transaction in commodity futures or any transaction of the
character of or which is commonly known to the trade as an
``option'', ``privilege'', ``indemnity'', ``bid'', ``offer'',
``put'', ``call'', ``advance guaranty'', or ``decline
guaranty'', or any transaction for the delivery of any
commodity under a standardized contract commonly known to the
trade as a margin account, margin contract, leverage account,
or leverage contract, or under any contract, account,
arrangement, scheme, or device that the Commission determines
serves the same function or functions as such a standardized
contract, or is marketed or managed in substantially the same
manner as such a standardized contract, or for any such person
to participate, directly or indirectly, in any investment
transaction in an actual commodity if nonpublic information is
used in the investment transaction, if the investment
transaction is prohibited by rule or regulation of the
Commission, or if the investment transaction is effected by
means of any instrument regulated by the Commission. The
foregoing prohibitions shall not apply to any transaction or
class of transactions that the Commission, by rule or
regulation, has determined would not be contrary to the public
interest or otherwise inconsistent with the purposes of this
subsection.
(d) It shall be a felony punishable by a fine of not more
than $500,000 or imprisonment for not more than five years, or
both, together with the costs of prosecution--(1) for any
Commissioner of the Commission or any employee or agent thereof
who, by virtue of his employment or position, acquires
information which may affect or tend to affect the price of any
commodity futures or commodity and which information has not
been made public to impart such information with intent to
assist another person, directly or indirectly, to participate
in any transaction in commodity futures, any transaction in an
actual commodity, or in any transaction of the character of or
which is commonly known to the trade as an ``option'',
``privilege'', ``indemnity'', ``bid'', ``offer'', ``put'',
``call'', ``advance guaranty'', or ``decline guaranty'', or in
any transaction for the delivery of any commodity under a
standardized contract commonly known to the trade as a margin
account, margin contract, leverage account, or leverage
contract, or under any contract, account, arrangement, scheme,
or device that the Commission determines serves the same
function or functions as such a standardized contract, or is
marketed or managed in substantially the same manner as such a
standardized contract; and (2) for any person to acquire such
information from any Commissioner of the Commission or any
employee or agent thereof and to use such information in any
transaction in commodity futures, any transaction in an actual
commodity, or in any transaction of the character of or which
is commonly known to the trade as an ``option'', ``privilege'',
``indemnity'', ``bid'', ``offer'', ``put'', ``call'', ``advance
guaranty'', or ``decline guaranty'', or in any transaction for
the delivery of any commodity under a standardized contract
commonly known to the trade as a margin account, margin
contract, leverage account, or leverage contract, or under any
contract, account, arrangement, scheme, or device that the
Commission determines serves the same function or functions as
such a standardized contract, or is marketed or managed in
substantially the same manner as such a standardized contract.
(e) It shall be a felony for any person--
(1) who is an employee, member of the governing
board, or member of any committee of a board of trade,
registered entity, swap data repository, or registered
futures association, in violation of a regulation
issued by the Commission, willfully and knowingly to
trade for such person's own account, or for or on
behalf of any other account, in contracts for future
delivery or options thereon, or swaps, on the basis of,
or willfully and knowingly to disclose for any purpose
inconsistent with the performance of such person's
official duties as an employee or member, any material
nonpublic information obtained through special access
related to the performance of such duties; or
(2) willfully and knowingly to trade for such
person's own account, or for or on behalf of any other
account, in contracts for future delivery or options
thereon on the basis of any material nonpublic
information that such person knows was obtained in
violation of paragraph (1) from an employee, member of
the governing board, or member of any committee of a
board of trade, registered entity, or registered
futures association.
Such felony shall be punishable by a fine of not more than
$500,000, plus the amount of any profits realized from such
trading or disclosure made in violation of this subsection, or
imprisonment for not more than five years, or both, together
with the costs of prosecution.
* * * * * * *
Sec. 12. (a) The Commission may cooperate with any Department
or agency of the Government, any State, territory, district, or
possession, or department, agency, or political subdivision
thereof, any foreign futures authority, any department or
agency of a foreign government or political subdivision
thereof, or any person.
(b)(1) The Commission shall have the authority to employ such
investigators, special experts, Administrative Law Judges,
clerks, and other employees as it may from time to time find
necessary for the proper performance of its duties and as may
be from time to time appropriated for by Congress. To clarify
the Commission's authority to establish the Honors Program
under section 2(a)(7)(D), the Commission may coordinate with
the Office of Personnel Management, as needed.
(2) The Commission may employ experts and consultants in
accordance with section 3109 of title 5 of the United States
Code, and compensate such persons at rates not in excess of the
maximum daily rate prescribed for GS-18 under section 5332 of
title 5 of the United States Code.
(3) The Commission shall also have authority to make and
enter into contracts with respect to all matters which in the
judgment of the Commission are necessary and appropriate to
effectuate the purposes and provisions of this Act, including,
but not limited to, the rental of necessary space at the seat
of Government and elsewhere.
(4) The Commission may request (in accordance with the
procedures set forth in subchapter II of chapter 31 of title 5,
United States Code) and the Office of Personnel Management
shall authorize pursuant to the request, eight positions in the
Senior Executive Service in addition to the number of such
positions authorized for the Commission on the date of
enactment of this sentence.
(5) The Commission may incur expenses for
consultations and meetings hosted by the Commission
with foreign governmental and other regulatory
officials to exchange views concerning derivatives
matters, such expenses to include necessary logistic
and administrative expenses, including--
(A) meals;
(B) local travel and transportation; and
(C) related incidental expenses.
(c) All of the expenses of the Commissioners, including all
necessary expenses for transportation incurred by them while on
official business of the Commission, shall be allowed and paid
on the presentation of itemized vouchers therefor approved by
the Commission.
(d) There are authorized to be appropriated such sums as are
necessary to carry out this Act for each of the fiscal years
[2008 through 2013] 2020 through 2025.
(e) Relation to Other Law, Departments, or Agencies.--
(1) Nothing in this Act shall supersede or preempt--
(A) criminal prosecution under any Federal
criminal statute;
(B) the application of any Federal or State
statute (except as provided in paragraph (2)),
including any rule or regulation thereunder, to
any transaction in or involving any commodity,
product, right, service, or interest--
(i) that is not conducted on or
subject to the rules of a registered
entity [or exempt board of trade];
(ii) (except as otherwise specified
by the Commission by rule or
regulation) that is not conducted on or
subject to the rules of any board of
trade, exchange, or market located
outside the United States, its
territories or possessions; or
(iii) that is not subject to
regulation by the Commission under
section 4c or 19; or
(C) the application of any Federal or State
statute, including any rule or regulation
thereunder, to any person required to be
registered or designated under this Act who
shall fail or refuse to obtain such
registration or designation.
(2) This Act shall supersede and preempt the
application of any State or local law that prohibits or
regulates gaming or the operation of bucket shops
(other than antifraud provisions of general
applicability) [in the case of--
[(A) an electronic trading facility excluded
under section 2(e) of this Act; and
[(B) an agreement, contract, or transaction
that is excluded from this Act under section
2(c) or 2(f) of this Act or title IV of the
Commodity Futures Modernization Act of 2000, or
exempted under section 4(c) of this Act
(regardless of whether any such agreement,
contract, or transaction is otherwise subject
to this Act).] in the case of an agreement,
contract, or transaction that is excluded from
this Act under section 2(c) or 2(f) of this Act
or title IV of the Commodity Futures
Modernization Act of 2000, or exempted under
section 4(c) of this Act (regardless of whether
any such agreement, contract, or transaction is
otherwise subject to this Act).
(f)(1) On request from a foreign futures authority, the
Commission may, in its discretion, provide assistance in
accordance with this section if the requesting authority states
that the requesting authority is conducting an investigation
which it deems necessary to determine whether any person has
violated, is violating, or is about to violate any laws, rules
or regulations relating to [futures or options] futures,
options, swaps, or commodities matters that the requesting
authority [administers or enforces] administers, enforces, or
prosecutes. The Commission may conduct such investigation as
the Commission deems necessary to collect information and
evidence pertinent to the request for assistance. Such
assistance may be provided without regard to whether the facts
stated in the request would also constitute a violation of the
laws of the United States.
(2) In deciding whether to provide assistance under this
subsection, the Commission shall consider whether--
(A) the requesting authority has agreed to provide
reciprocal assistance to the Commission [in futures and
options] in futures, options, swaps, or commodities
matters; and
(B) compliance with the request would prejudice the
public interest of the United States.
(3) Notwithstanding any other provision of law, the
Commission may accept payment and reimbursement, in cash or in
kind, from a foreign futures authority, or made on behalf of
such authority, for necessary expenses incurred by the
Commission, its members, and employees in carrying out any
investigation, or in providing any other assistance to a
foreign futures authority, pursuant to this section. Any
payment or reimbursement accepted shall be considered a
reimbursement to the appropriated funds of the Commission.
(g) Consistent with its responsibilities under section 18,
the Commission is directed to facilitate the development and
operation of computerized trading as an adjunct to the open
outcry auction system. The Commission is further directed to
cooperate with the Office of the United States Trade
Representative, the Department of the Treasury, the Department
of Commerce, and the Department of State in order to remove any
trade barriers that may be imposed by a foreign nation on the
international use of electronic trading systems.
(h) Regulation of Swaps as Insurance Under State Law.--A
swap--
(1) shall not be considered to be insurance; and
(2) may not be regulated as an insurance contract
under the law of any State.
Sec. 13. (a) Any person who commits, or who willfully aids,
abets, counsels, commands, induces, or procures the commission
of, or recklessly provides substantial assistance to, a
violation of any of the provisions of this Act, or any of the
rules, regulations, or orders issued pursuant to this Act, or
who acts in combination or concert with any other person in any
such violation, or who willfully, or who by recklessly
providing substantial assistance to another, causes an act to
be done or omitted which if directly performed or omitted by
him or another would be a violation of the provisions of this
Act or any of such rules, regulations, or orders may be held
responsible for such violation as a principal.
(b) Any person who, directly or indirectly, controls any
person who has violated any provision of this Act or any of the
rules, regulations, or orders issued pursuant to this Act may
be held liable for such violation in any action brought by the
Commission to the same extent as such controlled person. In
such action, the Commission has the burden of proving that the
controlling person did not act in good faith or knowingly
induced, directly or indirectly, the act or acts constituting
the violation.
(c) Nothing in this Act shall be construed as requiring the
Commission [or the Commission] to report minor violations of
this Act for prosecution, whenever it appears that the public
interest does not require such action.
Sec. 14. (a)(1) Any person complaining of any violation of
any provision of this Act, or any rule, regulation, or order
issued pursuant to this Act, by any person who is registered
under this Act may, at any time within two years after the
cause of action accrues, apply to the Commission for an order
awarding--
(A) actual damages proximately caused by such
violation. If an award of actual damages is made
against a floor broker in connection with the execution
of a customer order, and the futures commission
merchant which selected the floor broker for the
execution of the customer order is held to be
responsible under section 2(a)(1) for the floor
broker's violation, such futures commission merchant
may be required to satisfy such award; and
(B) in the case of any action arising from a willful
and intentional violation in the execution of an order
on the floor of a registered entity, punitive or
exemplary damages equal to no more than two times the
amount of such actual damages. If an award of punitive
or exemplary damages is made against a floor broker in
connection with the execution of a customer order, and
the futures commission merchant which selected the
floor broker for the execution of the customer order is
held to be responsible under section 2(a)(1) for the
floor broker's violation, such futures commission
merchant may be required to satisfy such award if the
floor broker fails to do so, except that such
requirement shall apply to the futures commission
merchant only if it willfully and intentionally
selected the floor broker with the intent to assist or
facilitate the floor broker's violation.
(2)(A) An action may be brought under this subsection by any
one or more persons described in this subsection for and in
behalf of such person or persons and other persons similarly
situated, if the Commission permits such actions pursuant to a
final rule issued by the Commission.
(B) Not later than two hundred and seventy days after the
date of enactment of this paragraph, the Commission shall
propose and publish for public comment such rules as are
necessary to carry out subparagraph (A). In developing such
rules, the Commission shall consider the potential impact of
such actions on resources available to the reparations system
established under this Act and the relative merits of bringing
such actions in Federal court.
(b) The Commission may promulgate such rules, regulations,
and orders as it deems necessary or appropriate for the
efficient and expeditious administration of this section.
Notwithstanding any other provision of law, such rules,
regulations, and orders may prescribe, or otherwise condition,
without limitation, the form, filing, and service of pleadings
or orders, the nature and scope of discovery, counterclaims,
motion practice (including the grounds for dismissal of any
claim or counterclaim), hearings (including the waiver thereof,
which may relate to the amount in controversy), rights of
appeal, if any, and all other matters governing proceedings
before the Commission under this section.
(c) In case a complaint is made by a nonresident of the
United States, the complainant shall be required, before any
formal action is taken on his complaint, to furnish a bond in
double the amount of the claim conditioned upon the payment of
costs, including a reasonable attorney's fee for the respondent
if the respondent shall prevail, and any reparation award that
may be issued by the Commission against the complainant on any
counterclaim by respondent: Provided, That the Commission shall
have authority to waive the furnishing of a bond by a
complainant who is a resident of a country which permits the
filing of a complaint by a resident of the United States
without the furnishing of a bond.
(d)(1) If any person against whom an award has been made does
not pay the reparation award within the time specified in the
Commission's order, the complainant, or any person for whose
benefit such order was made, within three years of the date of
the order, may file a certified copy of the order of the
Commission, in the district court of the United States for the
district in which he resides or in which is located the
principal place of business of the respondent, for enforcement
of such reparation award by appropriate orders. The orders,
writs, and processes of such district court may in such case
run, be served, and be returnable anywhere in the United
States. The petitioner shall not be liable for costs in the
district court, nor for costs at any subsequent state of the
proceedings, unless they accrue upon his appeal. If the
petitioner finally prevails, he shall be allowed a reasonable
attorney's fee, to be taxed and collected as a part of the
costs of the suit. Subject to the right of appeal under
subsection (e) of this section, an order of the Commission
awarding reparations shall be final and conclusive.
(2) A reparation award shall be directly enforceable
in district court as if it were a judgment pursuant to
section 1963 of title 28, United States Code. This
paragraph shall operate retroactively from the
effective date of its enactment, and shall apply to all
reparation awards for which a proceeding described in
paragraph (1) is commenced within 3 years of the date
of the Commission's order.
(e)(1) Any final order of the Commission entered [hereunder]
under this section shall be reviewable on petition of any party
aggrieved thereby, by the United States Court of Appeals for
any circuit in which a hearing was held, or if no hearing was
held, any circuit in which [the appellee] an appellee is
located, under the procedure provided in section 6(c) of this
Act. [Such appeal] If the order requires the petitioner to pay
reparation, or upholds a prior order requiring such a payment,
the petition for review shall not be effective unless within 30
days from and after the date of the reparation order the
[appellant] petitioner also files with the clerk of the court a
bond in double the amount of the reparation awarded against the
[appellant] petitioner conditioned upon the payment of the
judgment entered by the court, plus interest and costs,
including a reasonable attorney's fee [for the appellee, if the
appellee shall prevail] as set forth below. Such bond shall be
in the form of cash, negotiable securities having a market
value at least equivalent to the amount of bond prescribed, or
the undertaking of a surety company on the approved list of
sureties issued by the Treasury Department of the United
States. [The] An appellee shall not be liable for costs in said
court. If the appellee participates in the proceedings before
the Court of Appeals through counsel and prevails, he shall be
allowed a reasonable attorney's fee to be taxed and collected
as a part of [his] the appellee's costs.
(2) In paragraph (1), the term ``appellee'' means a party to
a proceeding before the Commission under this section in whose
favor the Commission ruled in an order that is the subject of a
petition for review under paragraph (1) and whose interests are
adverse to those of the petitioner.
(f) Unless the party against whom a reparation order has been
issued shows to the satisfaction of the Commission within
fifteen days from the expiration of the period allowed for
compliance with such order that either an appeal as herein
authorized has been taken or payment of the full amount of the
order (or any agreed settlement thereof) has been made, such
party shall be prohibited automatically from trading on all
registered entities and, if the party is registered with the
Commission, such registration shall be suspended automatically
at the expiration of such fifteen-day period until such party
shows to the satisfaction of the Commission that payment of
such amount with interest thereon to date of payment has been
made: Provided, That if on appeal the appellee prevails or if
the appeal is dismissed, the automatic prohibition against
trading and suspension of registration shall become effective
at the expiration of thirty days from the date of judgment on
the appeal, but if the judgment is stayed by a court of
competent jurisdiction, the suspension shall become effective
ten days after the expiration of such stay, unless prior
thereto the judgment of the court has been satisfied.
(g) Predispute Resolution Agreements for Institutional
Customers.--Nothing in this section prohibits a registered
futures commission merchant from requiring a customer that is
an eligible contract participant, as a condition to the
commission merchant's conducting a transaction for the
customer, to enter into an agreement waiving the right to file
a claim under this section.
SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.
(a) Costs and Benefits.--
(1) In general.--Before promulgating a regulation
under this Act or issuing an order (except as provided
in paragraph (3)), the Commission, after coordinating
with the Office of the Chief Economist, shall consider
the costs and benefits of the action of the Commission.
(2) Considerations.--The costs and benefits of the
proposed Commission action shall be evaluated in light
of--
(A) considerations of protection of market
participants and the public;
(B) considerations of the efficiency,
competitiveness, and financial integrity of
[futures markets] markets under the
jurisdiction of the Commission;
(C) considerations of price discovery;
(D) considerations of market liquidity;
[(D)] (E) considerations of sound risk
management practices; and
[(E)] (F) other public interest
considerations.
(3) Applicability.--This subsection does not apply to
the following actions of the Commission:
(A) An order that initiates, is part of, or
is the result of an adjudicatory or
investigative process of the Commission.
(B) An emergency action.
(C) A finding of fact regarding compliance
with a requirement of the Commission.
(b) Antitrust Laws.--The Commission shall take into
consideration the public interest to be protected by the
antitrust laws and endeavor to take the least anticompetitive
means of achieving the objectives of this Act, as well as the
policies and purposes of this Act, in issuing any order or
adopting any Commission rule or regulation (including any
exemption under section 4(c) or 4c(b)), or in requiring or
approving any bylaw, rule, or regulation of a [contract market]
registered entity or registered futures association established
pursuant to section 17 of this Act.
* * * * * * *
Sec. 17. (a) Any association of persons may be registered
with the Commission as a registered futures association
pursuant to subsection (b) of this section, under the terms and
conditions hereinafter provided in this section, by filing with
the Commission for review and approval a registration statement
in such form as the Commission may prescribe, setting forth the
information, and accompanied by the documents, below specified:
(1) Data as to its organization, membership, and
rules of procedure, and such other information as the
Commission may by rules and regulations require as
necessary or appropriate in the public interest; and
(2) Copies of its constitution, charter, or articles
of incorporation or association, with all amendments
thereto, and of its bylaws, and of any rules or
instruments corresponding to the foregoing, whatever
the name, hereinafter in this section collectively
referred to as the ``rules of the association''.
(b) An applicant association shall not be registered as a
futures association unless the Commission finds, under
standards established by the Commission, that--
(1) such association is in the public interest and
that it will be able to comply with the provisions of
this section and the rules and regulations thereunder
and to carry out the purposes of this section;
(2) the rules of the association provide that any
person registered under this Act, registered entity, or
any other person designated pursuant to the rules of
the Commission as eligible for membership may become a
member of such association, except such as are excluded
pursuant to paragraph (3) or (4) of this subsection, or
a rule of the association permitted under this
paragraph. The rules of the association may restrict
membership in such association on such specified basis
relating to the type of business done by its members,
or on such other specified and appropriate basis, as
appears to the Commission to be necessary or
appropriate in the public interest and to carry out the
purpose of this section. Rules adopted by the
association may provide that the association may,
unless the Commission directs otherwise in cases in
which the Commission finds it appropriate in the public
interest so to direct, deny admission to, or refuse to
continue in such association any person if (i) such
person, whether prior or subsequent to becoming
registered as such, or (ii) any person associated
within the meaning of ``associated person'' as set
forth in section 4k of this Act, whether prior or
subsequent to becoming so associated, has been and is
suspended or expelled from a registered entity or has
been and is barred or suspended from being associated
with all members of such registered entity, for
violation of any rule of such registered entity;
(3) the rules of the association provide that, except
with the approval or at the direction of the Commission
in cases in which the Commission finds it appropriate
in the public interest so to approve or direct, no
person shall be admitted to or continued in membership
in such association, if such person--
(A) has been and is suspended or expelled
from a registered futures association or from a
registered entity or has been and is barred or
suspended from being associated with all
members of such association or from being
associated with all members of such registered
entity, for violation of any rule of such
association or registered entity which
prohibits any act or transaction constituting
conduct inconsistent with just and equitable
principles of trade, or requires any act the
omission of which constitutes conduct
inconsistent with just and equitable principles
of trade;
(B) is subject to an order of the Commission
denying, suspending, or revoking his
registration pursuant to section 6(c) of this
Act, or expelling or suspending him from
membership in a registered futures association
or a registered entity, or barring or
suspending him from being associated with a
futures commission merchant;
(C) whether prior or subsequent to becoming a
member, by his conduct while associated with a
member, was a cause of any suspension,
expulsion, or order of the character described
in clause (A) or (B) which is in effect with
respect to such member, and in entering such a
suspension, expulsion, or order, the Commission
or any such registered entity or association
shall have jurisdiction to determine whether or
not any person was a cause thereof; or
(D) has associated with him any person who is
known, or in the exercise of reasonable care
should be known, to him to be a person who
would be ineligible for admission to or
continuance in membership under clause (A),
(B), or (C) of this paragraph;
(4) the rules of the association provide that, except
with the approval or at the direction of the Commission
in cases in which the Commission finds it appropriate
in the public interest so to approve or direct, no
person shall become a member and no natural person
shall become a person associated with a member, unless
such person is qualified to become a member or a person
associated with a member in conformity with specified
and appropriate standards with respect to the training,
experience, and such other qualifications of such
person as the association finds necessary or desirable,
and in the case of a member, the financial
responsibility of such a member. For the purpose of
defining such standards and the application thereof,
such rules may--
(A) appropriately classify prospective
members (taking into account relevant matters,
including type or nature of business done) and
persons proposed to be associated with members;
(B) specify that all or any portion of such
standard shall be applicable to any such class;
(C) require persons in any such class to pass
examinations prescribed in accordance with such
rules;
(D) provide that persons in any such class
other than prospective members and partners,
officers and supervisory employees (which
latter term may be defined by such rules and as
so defined shall include branch managers of
members) of members, may be qualified solely on
the basis of compliance with specified
standards of training and such other
qualifications as the association finds
appropriate;
(E) provide that applications to become a
member or a person associated with a member
shall set forth such facts as the association
may prescribe as to the training, experience,
and other qualifications (including, in the
case of an applicant for membership, financial
responsibility) of the applicant and that the
association shall adopt procedures for
verification of qualifications of the
applicant, which may require the applicant to
be fingerprinted and to submit, or cause to be
submitted, such fingerprints to the Attorney
General for identification and appropriate
processing. Notwithstanding any other provision
of law, such an association may receive from
the Attorney General all the results of such
identification and processing; and
(F) require any class of persons associated
with a member to be registered with the
association in accordance with procedures
specified by such rules (and any application or
document supplemental thereto required by such
rules of a person seeking to be registered with
such association shall, for the purposes of
section 6(c) of the Act, be deemed an
application required to be filed under this
section);
(5) the rules of the association assure a fair
representation of its members in the adoption of any
rule of the association or amendment thereto, the
selection of its officers and directors, and in all
other phases of the administration of its affairs;
(6) the rules of the association provide for the
equitable allocation of dues among its members, to
defray reasonable expenses of administration;
(7) the rules of the association are designed to
prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, in
general, to protect the public interest, and to remove
impediments to and perfect the mechanism of free and
open futures trading;
(8) the rules of the association provide that its
members and persons associated with its members shall
be appropriately disciplined, by expulsion, suspension,
fine, censure, or being suspended or barred from being
associated with all members, or any other fitting
penalty, for any violation of its rules;
(9) the rules of the association provide a fair and
orderly procedure with respect to the disciplining of
members and persons associated with members and the
denial of membership to any person seeking membership
therein or the barring of any person from being
associated with a member. In any proceeding to
determine whether any member or other person shall be
disciplined, such rules shall require that specific
charges be brought; that such member or person shall be
notified of, and be given an opportunity to defend
against, such charges; that a record shall be kept; and
that the determination shall include--
(A) a statement setting forth any act or
practice in which such member or other person
may be found to have engaged, or which such
member or other person may be found to have
omitted;
(B) a statement setting forth the specific
rule or rules of the association of which any
such act or practice, or omission to act, is
deemed to be in violation;
(C) a statement whether the acts or practices
prohibited by such rule or rules, or the
omission of any act required thereby, are
deemed to constitute conduct inconsistent with
just and equitable principles of trade; and
(D) a statement setting forth the penalty
imposed[;].
In any proceeding to determine whether a person shall
be denied membership or whether any person shall be
barred from being associated with a member, such rules
shall provide that the person shall be notified of, and
be given an opportunity to be heard upon, the specific
grounds for denial or bar which are under
consideration; that a record shall be kept; and that
the determination shall set forth the specific grounds
upon which the denial or bar is based;
(10) the rules of the association provide a fair,
equitable, and expeditious procedure through
arbitration or otherwise for the settlement of
customers' claims and grievances against any member or
employee thereof: Provided, That (A) the use of such
procedure by a customer shall be voluntary, (B) the
term ``customer'' as used in this paragraph shall not
include another member of the association, and (C) in
the case of a claim arising from a violation in the
execution of an order on the floor of a registered
entity, such procedure shall provide, to the extent
appropriate--
(i) for payment of actual damages proximately
caused by such violation. If an award of actual
damages is made against a floor broker in
connection with the execution of a customer
order, and the futures commission merchant
which selected the floor broker for the
execution of the customer order is held to be
responsible under section 2(a)(1) for the floor
broker's violation, such futures commission
merchant may be required to satisfy such award;
and
(ii) where the violation is willful and
intentional, for payment to the customer of
punitive or exemplary damages, in addition to
losses proximately caused by the violation, in
an amount equal to no more than two times the
amount of such losses. If punitive or exemplary
damages are awarded against a floor broker in
connection with the execution of a customer
order, and the futures commission merchant
which selected the floor broker for the
execution of such order is held to be
responsible under section 2(a)(1) for the floor
broker's violation, such futures commission
merchant may be required to satisfy the award
of punitive or exemplary damages if the floor
broker fails to do so, except that such
requirement shall apply to the futures
commission merchant only if it willfully and
intentionally selected the floor broker with
the intent to assist or facilitate the floor
broker's violation; [and]
(11) such association provides for meaningful
representation on the governing board of such
association of a diversity of membership interests and
provides that no less than 20 percent of the regular
voting members of such board be comprised of qualified
nonmembers of or persons who are not regulated by such
association[.];
(12)[(A)] such association provides on all major
disciplinary committees for a diversity of membership
sufficient to ensure fairness and to prevent special
treatment or preference for any person in the conduct
of disciplinary proceedings and the assessment of
penalties[.]; and
(13) [A] a major disciplinary committee hearing a
disciplinary matter shall include--
(A) qualified persons representing segments
of the association membership other than that
of the subject of the proceeding; and
(B) where appropriate to carry out the
purposes of this paragraph, qualified persons
who are not members of the association.
(c) The Commission may, after notice and opportunity for
hearing, suspend the registration of any futures association if
it finds that the rules thereof do not conform to the
requirements of the Commission, and any such suspension shall
remain in effect until the Commission issues an order
determining that such rules have been modified to conform with
such requirements.
(d) In addition to the fees and charges authorized by section
8a(1) of this Act, each person registered under this Act, who
is not a member of a futures association registered pursuant to
this section, shall pay to the Commission such reasonable fees
and charges as may be necessary to defray the costs of
additional regulatory duties required to be performed by the
Commission because such person is not a member of a registered
futures association. The Commission shall establish such
additional fees and charges by rules and regulations.
(e) Any person registered under this Act, who is not a member
of a futures association registered pursuant to this section,
in addition to the other requirements and obligations of this
Act and the regulations thereunder shall be subject to such
other rules and regulations as the Commission may find
necessary to protect the public interest and promote just and
equitable principles of trade.
(f) Upon filing of an application for registration pursuant
to subsection (a), the Commission may by order grant such
registration if the requirements of this section are satisfied.
If, after appropriate notice and opportunity for hearing, it
appears to the Commission that any requirement of this section
is not satisfied, the Commission shall by order deny such
registration.
(g) A registered futures association may, upon such
reasonable notice as the Commission may deem necessary in the
public interest, withdraw from registration by filing with the
Commission a written notice of withdrawal in such form as the
Commission may by rules and regulations prescribe.
(h)(1) If any registered futures association takes any final
disciplinary action against a member of the association or a
person associated with a member, denies admission to any person
seeking membership therein, or bars any person from being
associated with a member, the association promptly shall give
notice thereof to such member or person and file notice thereof
with the Commission. The notice shall be in such form and
contain such information as the Commission, by rule or
regulation, may prescribe as necessary or appropriate to carry
out the purposes of this Act.
(2) Any action with respect to which a registered futures
association is required by paragraph (1) to file notice shall
be subject to review by the Commission on its motion, or on
application by any person aggrieved by the action. Such
application shall be filed within 30 days after the date such
notice is filed with the Commission and received by the
aggrieved person, or within such longer period as the
Commission may determine.
(3)(A) Application to the Commission for review, or the
institution of review by the Commission on its own motion,
shall not operate as a stay of such action unless the
Commission otherwise orders, summarily or after notice and
opportunity for hearing on the question of a stay (which
hearing may consist solely of the submission of affidavits or
presentation of oral arguments).
(B) The Commission shall establish procedures for expedited
consideration and determination of the question of a stay.
(i)(1) In a proceeding to review a final disciplinary action
taken by a registered futures association against a member
thereof or a person associated with a member, after appropriate
notice and opportunity for a hearing (which hearing may consist
solely of consideration of the record before the association
and opportunity for the presentation of supporting reasons to
affirm, modify, or set aside the sanction imposed by the
association)--
(A) if the Commission finds that--
(i) the member or person associated with a
member has engaged in the acts or practices, or
has omitted the acts, that the association has
found the member or person to have engaged in
or omitted;
(ii) the acts or practices, or omissions to
act, are in violation of the rules of the
association specified in the determination of
the association; and
(iii) such rules are, and were applied in a
manner, consistent with the purposes of this
Act,
the Commission, by order, shall so declare and, as
appropriate, affirm the sanction imposed by the
association, modify the sanction in accordance with
paragraph (2), or remand the case to the association
for further proceedings; or
(B) if the Commission does not make any such finding,
the Commission, by order, shall set aside the sanction
imposed by the association and, if appropriate, remand
the case to the association for further proceedings.
(2) If, after a proceeding under paragraph (1), the
Commission finds that any penalty imposed on a member or person
associated with a member is excessive or oppressive, having due
regard for the public interest, the Commission, by order, shall
cancel, reduce, or require the remission of the penalty.
(3) In a proceeding to review the denial of membership in a
registered futures association or the barring of any person
from being associated with a member, after appropriate notice
and opportunity for a hearing (which hearing may consist solely
of consideration of the record before the association and
opportunity for the presentation of supporting reasons to
affirm, modify, or set aside the action of the association)--
(A) if the Commission finds that--
(i) the specific grounds on which the denial
or bar is based exist in fact;
(ii) the denial or bar is in accordance with
the rules of the association; and
(iii) such rules are, and were applied in a
manner, consistent with the purposes of this
Act,
the Commission, by order, shall so declare and, as
appropriate, affirm or modify the action of the
association, or remand the case to the association for
further proceedings; or
(B) if the Commission does not make any such finding,
the Commission, by order, shall set aside the action of
the association and require the association to admit
the applicant to membership or permit the person to be
associated with a member, or, as appropriate, remand
the case to the association for further proceedings.
(4) Any person aggrieved by a final order of the Commission
entered under this subsection may file a petition for review
with a United States court of appeals in the same manner as
provided in section 6(c).
(j) Every registered futures association shall file with the
Commission in accordance with such rules and regulations as the
Commission may prescribe as necessary or appropriate in the
public interest, copies of any changes in or additions to the
rules of the association, and such other information and
documents as the Commission may require to keep current or to
supplement the registration statement and documents filed
pursuant to subsection (a) of this section. A registered
futures association shall submit to the Commission any change
in or addition to its rules and may make such rules effective
ten days after receipt of such submission by the Commission
unless, within the ten-day period, the registered futures
association requests review and approval thereof by the
Commission or the Commission notifies such registered futures
association in writing of its determination to review such
rules for approval. The Commission shall approve such rules if
such rules are determined by the Commission to be consistent
with the requirements of this section and not otherwise in
violation of this Act or the regulations issued pursuant to
this Act, and the Commission shall disapprove, after
appropriate notice and opportunity for hearing, any such rule
which the Commission determines at any time to be inconsistent
with the requirements of this section or in violation of this
Act or the regulations issued pursuant to this Act. If the
Commission does not approve or institute disapproval
proceedings with respect to any rule within one hundred and
eighty days after receipt or within such longer period of time
as the registered futures association may agree to, or if the
Commission does not conclude a disapproval proceeding with
respect to any rule within one year after receipt or within
such longer period as the registered futures association may
agree to, such rule may be made effective by the registered
futures association until such time as the Commission
disapproves such rule in accordance with this subsection.
(k)(1) The Commission is authorized by order to abrogate any
rule of a registered futures association, if after appropriate
notice and opportunity for hearing, it appears to the
Commission that such abrogation is necessary or appropriate to
assure fair dealing by the members of such association, to
assure a fair representation of its members in the
administration of its affairs or effectuate the purposes of
this section.
(2) The Commission may in writing request any registered
futures association to adopt any specified alteration or
supplement to its rules with respect to any of the matters
hereinafter enumerated. If such association fails to adopt such
alteration or supplement within a reasonable time, the
Commission is authorized by order to alter or supplement the
rules of such association in the manner theretofore requested,
or with such modifications of such alteration or supplement as
it deems necessary if, after appropriate notice and opportunity
for hearing, it appears to the Commission that such alteration
or supplement is necessary or appropriate in the public
interest or to effectuate the purposes of this section, with
respect to--
(A) the basis for, and procedure in connection with,
the denial of membership or the barring from being
associated with a member or the disciplining of members
or persons associated with members, or the
qualifications required for members or natural persons
associated with members or any class thereof:
(B) the method for adoption of any change in or
addition to the rules of the association;
(C) the method of choosing officers and directors.
(l) The Commission is authorized, if such action appears to
it to be necessary or appropriate in the public interest or to
carry out the purposes of this section--
(1) after appropriate notice and opportunity for
hearing, by order to suspend for a period not exceeding
twelve months or to revoke the registration of a
registered futures association, if the Commission finds
that such association has violated any provisions of
this Act or any rule or regulation thereunder, or has
failed to enforce compliance with its own rules, or has
engaged in any other activity tending to defeat the
purposes of this Act;
(2) after appropriate notice and opportunity for
hearing, by order to suspend for a period not exceeding
twelve months or to expel from a registered futures
association any member thereof, or to suspend for a
period not exceeding twelve months or to bar any person
from being associated with a member thereof, if the
Commission finds that such member or person--
(A) has violated any provision of this Act or
any rule or regulation thereunder, or has
effected any transaction for any other person
who, he had reason to believe, was violating
with respect to such transaction any provision
of this Act or any rule or regulation
thereunder; or
(B) has willfully violated any provision of
this Act, as amended, or of any rule,
regulation, or order thereunder, or has
effected any transaction for any other person
who, he had reason to believe, was willfully
violating with respect to such transaction any
provision of such Act or rule, regulation, or
order; and
(3) after appropriate notice and opportunity for
hearing, by order to remove from office any officer or
director of a registered futures association who, the
Commission finds, has willfully failed to enforce the
rules of the association, or has willfully abused his
authority.
(m) Notwithstanding any other provision of law, the
Commission may approve rules of futures associations that,
directly or indirectly, require persons eligible for membership
in such associations to become members of at least one such
association, upon a determination by the Commission that such
rules are necessary or appropriate to achieve the purposes and
objectives of this Act.
(n) The Commission shall include in its annual reports to
Congress information concerning any futures associations
registered pursuant to this section and the effectiveness of
such associations in regulating the practices of the members.
(o)(1) The Commission may require any futures association
registered pursuant to this section to perform any portion of
the registration functions under this Act with respect to each
member of the association other than a registered entity and
with respect to each associated person of such member, in
accordance with rules, notwithstanding any other provision of
law, adopted by such futures association and submitted to the
Commission pursuant to section 17(j) of this Act, and subject
to the provisions of this Act applicable to registrations
granted by the Commission.
(2) In performing any Commission registration function
authorized by the Commission under section 8a(10), this
section, or any other applicable provisions of this Act, a
futures association may issue orders (A) to refuse to register
any person, (B) to register conditionally any person, (C) to
suspend the registration of any person, (D) to place
restrictions on the registration of any person, or (E) to
revoke the registration of any person. If such an order is the
final decision of the futures association, any person against
whom the order has been issued may petition the Commission to
review the decision. The Commission may on its own initiative
or upon petition decline review or grant review and affirm, set
aside, or modify such an order of the futures association; and
the findings of the futures association as to the facts, if
supported by the weight of the evidence, shall be conclusive.
Unless the Commission grants review under this section of an
order concerning registration issued by a futures association,
the order of the futures association shall be considered to be
an order issued by the Commission.
(3) Nothing in this section shall affect the Commission's
authority to review the granting of a registration application
by a registered futures association that is performing any
Commission registration function authorized by the Commission
under section 8a(10), this section, or any other applicable
provision of this Act.
(4) If a person against whom a futures association has issued
a registration order under this subsection petitions the
Commission to review that order and the Commission declines to
take review, such person may file a petition for review with a
United States court of appeals, in accordance with section 6(c)
of this Act.
(p) Notwithstanding any other provision of this section, each
futures association registered under this section on the date
of enactment of the Futures Trading Act of 1982, shall adopt
and submit for Commission approval not later than ninety days
after such date of enactment, and each futures association that
applies for registration after such date shall adopt and
include with its application for registration, rules of the
association that require the association to--
(1) establish training standards and proficiency
testing for persons involved in the solicitation of
transactions subject to the provisions of this Act,
supervisors of such persons, and all persons for which
it has registration responsibilities, and a program to
audit and enforce compliance with such standards;
(2) establish minimum capital, segregation, and other
financial requirements applicable to its members for
which such requirements are imposed by the Commission
and implement a program to audit and enforce compliance
with such requirements, except that such requirements
may not be less stringent an those imposed on such
firms by this Act or by Commission regulation;
(3) establish minimum standards governing the sales
practices of its members and persons associated
therewith for transactions subject to the provisions of
this Act; and
(4) establish special supervisory guidelines to
protect the public interest relating to the
solicitation by telephone of new futures or options
accounts and make such guidelines applicable to those
members determined to require such guidelines in
accordance with standards established by the Commission
consistent with this Act. Such guidelines may include a
requirement that, with respect to a customer with no
previous futures or commodity options trading
experience, the member may not enter an order for the
account of such customer for a period of three days
following opening of the account and receipt of a
signed acknowledgment by the customer of receipt of a
risk disclosure statement.
(q)(1) The Commission shall issue regulations requiring each
registered futures association to establish and make available
to the public a schedule of major violations of any rule within
the disciplinary jurisdiction of such registered futures
association.
(2) The regulations issued by the Commission pursuant to this
subsection shall prohibit, for a period of time to be
determined by the Commission, any member of a registered
futures association who is found to have committed any major
violation from service on the governing board of any registered
futures association or registered entity, or on any
disciplinary committee thereof.
[(q)] (r) Each futures association registered under this
section shall develop a comprehensive program that fully
implements the rules approved by the Commission under this
section as soon as practicable but not later than September 30,
1985, in the case of any futures association registered on the
date of enactment of the Futures Trading Act of 1982, and not
later than two and one-half years after the date of
registration in the case of any other futures association
registered under this section.
[(r)] (s) Consistent with this Act, each futures association
registered under this section shall issue such rules as are
necessary to avoid duplicative or conflicting rules applicable
to any futures commission merchant registered with the
Commission pursuant to section 4f(a) of this Act (except
paragraph (2) thereof), that is also registered with the
Securities and Exchange Commission pursuant to section 15(b) of
the Securities and Exchange Act of 1934 (except paragraph (11)
thereof), with respect to the application of--
(1) rules of such futures association of the type
specified in section 4d(e) involving security futures
products; and
(2) similar rules of national securities associations
registered pursuant to section 15A(a) of the Securities
and Exchange Act of 1934 involving security futures
products.
[Sec. 18. (a) The Commission shall establish and maintain, as
part of its ongoing operations, research and information
programs to (1) determine the feasibility of trading by
computer, and the expanded use of modern information system
technology, electronic data processing, and modern
communication systems by commodity exchanges, boards of trade,
and by the Commission itself for purposes of improving,
strengthening, facilitating, or regulating futures trading
operations; (2) assist in the development of educational and
other informational materials regarding futures trading for
dissemination and use among producers, market users, and the
general public; and (3) carry out the general purposes of this
Act.
[(b) The Commission shall include in its annual reports to
Congress plans and findings with respect to implementing this
section.]
SEC. 18. RESEARCH AND DEVELOPMENT PROGRAMS.
(a) Programs.--The Commission, as part of its ongoing
operations, shall establish and maintain research, development,
demonstration, and information programs that further the
purposes of this Act, including programs that--
(1) facilitate the understanding by the Commission of
emerging technologies, technological advances, and
innovations and their potential application to and
effect on the transactions and markets under the
jurisdiction of the Commission, and associated
implications for cybersecurity, data security, and
systemic risk;
(2) provide an environment where emerging
technologies, technological advances, and innovations
may be explored by the Commission with developers and
potential users to evaluate potential effects on the
Commission and the markets under the jurisdiction of
the Commission;
(3) identify areas where the Commission should adapt
its administration of this Act in light of emerging
technologies, technological advances, and innovations
to benefit the markets under the jurisdiction of the
Commission; and
(4) develop educational and other informational
materials for dissemination and use among producers,
market-users, and the general public regarding--
(A) derivatives;
(B) emerging technologies, technological
advances, and innovations in markets under the
jurisdiction of the Commission; and
(C) applicable requirements of this Act and
the regulations prescribed under this Act with
regard to the subjects described in
subparagraphs (A) and (B).
(b) Research and Development Plan.--
(1) In general.--The Commission may, after notice and
comment, adopt a research and development plan for a
program established under subsection (a).
(2) Conditions.--A research and development plan
adopted pursuant to paragraph (1) shall identify--
(A) specific areas of interest to the
Commission;
(B) potential activities the Commission will
undertake to investigate an area of interest;
and
(C) how the authority described in subsection
(c) will be utilized in the program.
(c) Other Transaction Authority.--
(1) In general.--Notwithstanding the Office of
Federal Procurement Policy Act of 1974 and the
Competition in Contracting Act, the Commission may
enter into and perform a transaction (other than a
standard contract) for the purpose of aiding or
facilitating the programs and activities under
subsection (a).
(2) Conditions.--The Commission may enter into a
transaction under this subsection only if--
(A) the transaction is used only in
furtherance of a research and development plan
established under subsection (b);
(B) the Commission endeavored to use a
competitive process, where appropriate, when
determining the parties to the transaction; and
(C) using a standard contract to do so is
either not feasible or not appropriate.
(3) Policies.--The Commission shall, after notice and
comment, establish and publish written policies setting
forth the manner and criteria for utilizing the
authority provided by this subsection.
(d) Gift Acceptance Authority.--
(1) In general.--The Commission may accept and use,
on behalf of the United States, any non-monetary gift
of a provision of access, use of facilities, personal
property, or services, that is related to--
(A) sharing of research, data, or other
information;
(B) public presentations; or
(C) non-commercially available services or
systems.
(2) Conditions.--
(A) In general.--A gift may be accepted
pursuant to this subsection only if it is in
furtherance of a research and development plan
established under subsection (b).
(B) Limitations.--The Commission may not
accept a gift if--
(i) conditions inconsistent with
applicable laws or regulations apply to
the gift;
(ii) the gift is conditioned on, or
will require, the expenditure of
appropriated funds not available to the
Commission;
(iii) using a standard contract or
other transaction authority under
subsection (c) to acquire the gift is
either feasible or appropriate; or
(iv) acceptance of the gift would--
(I) reflect unfavorably on
the ability of the Commission
to carry out its
responsibilities or official
duties in a fair and objective
manner, or compromise the
integrity or the appearance of
the integrity of its programs
or any official involved in its
programs, or
(II) give the endorsement or
the appearance of the
endorsement by the Commission
or Commission staff of the
products, services, activities,
or policies of the donor.
(C) Solicitation prohibition.--
(i) In general.--Except as provided
in clause (ii), no gift may be
solicited by any Commissioner, employee
of, or contractor at the Commission.
(ii) Exception.--A Commissioner or
employee of the Commission may solicit
only for a gift described in paragraph
(1)(B).
(D) Duration.--To the extent applicable, the
Commission shall return any gift accepted
pursuant to this subsection within 90 days
after accepting the gift.
(E) Rules.--The Commission shall, after
notice and comment, establish and publish
written rules setting forth the manner and
criteria to be used in determining whether a
gift meets the conditions of this paragraph.
(3) Disclosure.--Within 30 days after accepting a
gift pursuant to this subsection, the Commission shall
publish in the Federal Register a notice detailing--
(A) the source of the gift;
(B) the nature of the gift;
(C) whether the gift was solicited pursuant
to paragraph (2)(C)(ii), and if so, by whom;
and
(D) how the gift meets the conditions set
forth in paragraph (2).
(4) Sunset.--The authority provided in this
subsection may not be exercised on or after October 1,
2025.
(e) Annual Report.--Not later than 60 days after the end of
each fiscal year, the Commission shall submit to the Committee
on Agriculture, Nutrition, and Forestry of the Senate and the
Committee on Agriculture of the House of Representatives a
report on all transactions entered into under subsection (c)
and all gifts accepted under subsection (d) in the fiscal year,
which shall include the following:
(1) A brief description of the subject of each such
transaction or gift, with an explanation of--
(A) its potential utility to the Commission
or the markets regulated by the Commission;
(B) how it fulfills the goals and objectives
of the research and development plan
established under subsection (b); and
(C) the status of all related projects.
(2) The information required to be published pursuant
to subsection (d)(3).
(3) A description of all sums expended by the
Commission in connection with a transaction entered
into under subsection (c), and, if readily
ascertainable, the value of any gift accepted under
subsection (d).
* * * * * * *
Sec. 20. (a) Notwithstanding title 11 of the United States
Code, the Commission may provide, with respect to a commodity
broker that is a debtor under chapter 7 of title 11 of the
United States Code, by rule or regulation--
(1) that certain cash, securities, other property, or
commodity contracts are to be included in or excluded
from customer property or member property;
(2) that certain cash, securities, other property, or
commodity contracts are to be specifically identifiable
to a particular customer in a specific capacity;
(3) the method by which the business of such
commodity broker is to be conducted or liquidated after
the date of the filing of the petition under such
chapter, including the payment and allocation of margin
with respect to commodity contracts not specifically
identifiable to a particular customer pending their
orderly liquidation;
(4) any persons to which customer property and
commodity contracts may be transferred under section
766 of title 11 of the United States Code; [and]
(5) how the net equity of a customer is to be
determined[.]; and
(6) that cash, securities, or other property of the
estate of a commodity broker, including the trading or
operating accounts of the commodity broker and
commodities held in inventory by the commodity broker,
shall, subject to any otherwise unavoidable security
interest, or otherwise unavoidable contractual offset
or netting rights of creditors (including rights set
forth in a rule or bylaw of a derivatives clearing
organization or a clearing agency) in respect of such
property, be included in customer property, but only to
the extent that the property that is otherwise customer
property is insufficient to satisfy the net equity
claims of public customers (as such term may be defined
by the Commission by rule or regulation) of the
commodity broker.
(b) As used in this section, the terms ``commodity broker'',
``commodity contract'', ``customer'', ``customer property'',
``member property'', ``net equity'', and ``security'' have the
meanings assigned such terms for the purposes of subchapter IV
of chapter 7 of title 11 of the United States Code.
(c) The Commission shall exercise its authority to ensure
that securities held in a portfolio margining account carried
as a futures account are customer property and the owners of
those accounts are customers for the purposes of subchapter IV
of chapter 7 of title 11 of the United States Code.
SEC. 21. SWAP DATA REPOSITORIES.
(a) Registration Requirement.--
(1) Requirement; authority of derivatives clearing
organization.--
(A) In general.--It shall be unlawful for any
person, unless registered with the Commission,
directly or indirectly to make use of the mails
or any means or instrumentality of interstate
commerce to perform the functions of a swap
data repository.
(B) Registration of derivatives clearing
organizations.--A derivatives clearing
organization may register as a swap data
repository.
(2) Inspection and examination.--Each registered swap
data repository shall be subject to inspection and
examination by any representative of the Commission.
(3) Compliance with core principles.--
(A) In general.--To be registered, and
maintain registration, as a swap data
repository, the swap data repository shall
comply with--
(i) the requirements and core
principles described in this section;
and
(ii) any requirement that the
Commission may impose by rule or
regulation pursuant to section 8a(5).
(B) Reasonable discretion of swap data
repository.--Unless otherwise determined by the
Commission by rule or regulation, a swap data
repository described in subparagraph (A) shall
have reasonable discretion in establishing the
manner in which the swap data repository
complies with the core principles described in
this section.
(b) Standard Setting.--
(1) Data identification.--
(A) In general.--In accordance with
subparagraph (B), the Commission shall
prescribe standards that specify the data
elements for each swap that shall be collected
and maintained by each registered swap data
repository.
(B) Requirement.--In carrying out
subparagraph (A), the Commission shall
prescribe consistent data element standards
applicable to registered entities and reporting
counterparties.
(2) Data collection and maintenance.--The Commission
shall prescribe data collection and data maintenance
standards for swap data repositories.
(3) Comparability.--The standards prescribed by the
Commission under this subsection shall be comparable to
the data standards imposed by the Commission on
derivatives clearing organizations in connection with
their clearing of swaps.
(c) Duties.--A swap data repository shall--
(1) accept data prescribed by the Commission for each
swap under subsection (b);
[(2) confirm with both counterparties to the swap the
accuracy of the data that was submitted;]
(2) confirm with any counterparty to the swap, as
determined by the Commission, the accuracy of the data
that was submitted, and the counterparty shall comply
with the rules or procedures of a swap data repository
to confirm the accuracy of the data;
(3) maintain the data described in paragraph (1) in
such form, in such manner, and for such period as may
be required by the Commission;
(4)(A) provide direct electronic access to the
Commission (or any designee of the Commission,
including another registered entity); and
(B) provide the information described in paragraph
(1) in such form and at such frequency as the
Commission may require to comply with the public
reporting requirements contained in section 2(a)(13);
(5) at the direction of the Commission, establish
automated systems for monitoring, screening, and
analyzing swap data, including compliance and frequency
of end user clearing exemption claims by individual and
affiliated entities;
(6) maintain the privacy of any and all swap
transaction information that the swap data repository
receives from a swap dealer, counterparty, or any other
registered entity; and
(7) on a confidential basis pursuant to section 8,
upon request, and after notifying the Commission of the
request, make available swap data obtained by the swap
data repository, including individual counterparty
trade and position data, to--
(A) each appropriate prudential regulator;
(B) the Financial Stability Oversight
Council;
(C) the Securities and Exchange Commission;
(D) the Department of Justice; and
(E) any other person that the Commission
determines to be appropriate, including--
(i) foreign financial supervisors
(including foreign futures
authorities);
(ii) foreign central banks;
(iii) foreign ministries; and
(iv) other foreign authorities; and
(8) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery
that allows for the timely recovery and resumption of
operations and the fulfillment of the responsibilities
and obligations of the organization.
(d) Confidentiality Agreement.--Before the swap data
repository may share information with any entity described in
subsection (c)(7), the swap data repository shall receive a
written agreement from each entity stating that the entity
shall abide by the confidentiality requirements described in
section 8 relating to the information on swap transactions that
is provided.
(e) Designation of Chief Compliance Officer.--
(1) In general.--Each swap data repository shall
designate an individual to serve as a chief compliance
officer.
(2) Duties.--The chief compliance officer shall--
(A) report directly to the board or to the
senior officer of the swap data repository;
(B) review the compliance of the swap data
repository with respect to the requirements and
core principles described in this section;
(C) in consultation with the board of the
swap data repository, a body performing a
function similar to the board of the swap data
repository, or the senior officer of the swap
data repository, resolve any conflicts of
interest that may arise;
(D) be responsible for administering each
policy and procedure that is required to be
established pursuant to this section;
(E) ensure compliance with this Act
(including regulations) relating to agreements,
contracts, or transactions, including each rule
prescribed by the Commission under this
section;
(F) establish procedures for the remediation
of noncompliance issues identified by the chief
compliance officer through any--
(i) compliance office review;
(ii) look-back;
(iii) internal or external audit
finding;
(iv) self-reported error; or
(v) validated complaint; and
(G) establish and follow appropriate
procedures for the handling, management
response, remediation, retesting, and closing
of noncompliance issues.
(3) Annual reports.--
(A) In general.--In accordance with rules
prescribed by the Commission, the chief
compliance officer shall annually prepare and
sign a report that contains a description of--
(i) the compliance of the swap data
repository of the chief compliance
officer with respect to this Act
(including regulations); and
(ii) each policy and procedure of the
swap data repository of the chief
compliance officer (including the code
of ethics and conflict of interest
policies of the swap data repository).
(B) Requirements.--A compliance report under
subparagraph (A) shall--
(i) accompany each appropriate
financial report of the swap data
repository that is required to be
furnished to the Commission pursuant to
this section; and
(ii) include a certification that,
under penalty of law, the compliance
report is accurate and complete.
(f) Core Principles Applicable To Swap Data Repositories.--
(1) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, a swap
data repository shall not--
(A) adopt any rule or take any action that
results in any unreasonable restraint of trade;
or
(B) impose any material anticompetitive
burden on the trading, clearing, or reporting
of transactions.
(2) Governance arrangements.--Each swap data
repository shall establish governance arrangements that
are transparent--
(A) to fulfill public interest requirements;
and
(B) to support the objectives of the Federal
Government, owners, and participants.
(3) Conflicts of interest.--Each swap data repository
shall--
(A) establish and enforce rules to minimize
conflicts of interest in the decision-making
process of the swap data repository; and
(B) establish a process for resolving
conflicts of interest described in subparagraph
(A).
(4) System safeguards.--Each swap data repository
shall--
(A) establish and maintain a program of risk
analysis and oversight to identify and minimize
sources of operational risk, through--
(i) the implementation of appropriate
controls and procedures; and
(ii) the development and operation of
automated systems that--
(I) are reliable, secure, and
resilient;
(II) have adequate scalable
capacity; and
(III) maintain the
confidentiality, integrity, and
availability of the data they
contain;
(B) establish and maintain emergency
procedures, backup facilities, and a plan for
disaster recovery that allow for--
(i) the timely recovery and
resumption of operations; and
(ii) the fulfillment of the
responsibilities and obligations of the
swap data repository; and
(C) periodically conduct tests to--
(i) verify the reliability, security,
resilience, and capacity of the
automated systems of the swap data
repository;
(ii) verify the confidentiality,
integrity, and availability of the data
contained in those systems; and
(iii) verify that backup resources
are sufficient to ensure continued
fulfillment of all duties and
obligations of the swap data repository
established by this Act or the
regulations of the Commission.
[(4)] (5) Additional duties developed by
commission.--
(A) In general.--The Commission may develop 1
or more additional duties applicable to swap
data repositories.
(B) Consideration of evolving standards.--In
developing additional duties under subparagraph
(A), the Commission may take into consideration
any evolving standard of the United States or
the international community.
(C) Additional duties for commission
designees.--The Commission shall establish
additional duties for any registrant described
in section 1a(48) in order to minimize
conflicts of interest, protect data, ensure
compliance, and guarantee the safety and
security of the swap data repository.
(g) Required Registration for Swap Data Repositories.--Any
person that is required to be registered as a swap data
repository under this section shall register with the
Commission regardless of whether that person is also licensed
as a bank or registered with the Securities and Exchange
Commission as a swap data repository.
(h) Rules.--The Commission shall adopt rules governing
persons that are registered under this section.
Sec. 22. (a)(1) Any person (other than a registered entity or
registered futures association) who violates this Act or who
willfully aids, abets, counsels, induces, or procures the
commission of a violation of this Act shall be liable for
actual damages resulting from one or more of the transactions
referred to in subparagraphs (A) through (D) of this paragraph
and caused by such violation to any other person--
(A) who received trading advice from such person for
a fee;
(B) who made through such person any contract of sale
of any commodity for future delivery (or option on such
contract or any commodity) or any swap; or who
deposited with or paid to such person money,
securities, or property (or incurred debt in lieu
thereof) in connection with any order to make such
contract or any swap;
(C) who purchased from or sold to such person or
placed through such person an order for the purchase or
sale of--
(i) an option subject to section 4c of this
Act (other than an option purchased or sold on
a registered entity or other board of trade);
(ii) a contract subject to section 19 of this
Act; or
(iii) an interest or participation in a
commodity pool; or
(iv) a swap; or
(D) who purchased or sold a contract referred to in
subparagraph (B) hereof or swap if the violation
constitutes--
(i) the use or employment of, or an attempt
to use or employ, in connection with a swap, or
a contract of sale of a commodity, in
interstate commerce, or for future delivery on
or subject to the rules of any registered
entity, any manipulative device or contrivance
in contravention of such rules and regulations
as the Commission shall promulgate by not later
than 1 year after the date of enactment of the
Dodd-Frank Wall Street Reform and Consumer
Protection Act; or
(ii) a manipulation of the price of any such
contract or swap or the price of the commodity
underlying such contract or swap.
(2) Except as provided in subsection (b), the rights of
action authorized by this subsection and by sections 5(d)(13),
5b(c)(2)(H), 14, and 17(b)(10) of this Act shall be the
exclusive remedies under this Act available to any person who
sustains loss as a result of any alleged violation of this Act.
Nothing in this subsection shall limit or abridge the rights of
the parties to agree in advance of a dispute upon any forum for
resolving claims under this section, including arbitration.
(3) In any action arising from a violation in the execution
of an order on the floor of a registered entity, the person
referred to in paragraph (1) shall be liable for--
(A) actual damages proximately caused by such
violation. If an award of actual damages is made
against a floor broker in connection with the execution
of a customer order, and the futures commission
merchant which selected the floor broker for the
execution of the customer order is held to be
responsible under section 2(a)(1) for the floor
broker's violation, such futures commission merchant
may be required to satisfy such award; and
(B) where the violation is willful and intentional,
punitive or exemplary damages equal to no more than two
times the amount of such actual damages. If an award of
punitive or exemplary damages is made against a floor
broker in connection with the execution of a customer
order, and the futures commission merchant which
selected the floor broker for the execution of the
customer order is held to be responsible under section
2(a)(1) for the floor broker's violation, such futures
commission merchant may be required to satisfy such
award if the floor broker fails to do so, except that
such requirement shall apply to the futures commission
merchant only if it willfully and intentionally
selected the floor broker with the intent to assist or
facilitate the floor broker's violation.
(4) Contract Enforcement Between Eligible Counterparties.--
(A) In general.--No hybrid instrument sold to any
investor shall be void, voidable, or unenforceable, and
no party to a hybrid instrument shall be entitled to
rescind, or recover any payment made with respect to,
the hybrid instrument under this section or any other
provision of Federal or State law, based solely on the
failure of the hybrid instrument to comply with the
terms or conditions of section 2(f) or regulations of
the Commission.
(B) Swaps.--No agreement, contract, or transaction
between eligible contract participants or persons
reasonably believed to be eligible contract
participants shall be void, voidable, or unenforceable,
and no party to such agreement, contract, or
transaction shall be entitled to rescind, or recover
any payment made with respect to, the agreement,
contract, or transaction under this section or any
other provision of Federal or State law, based solely
on the failure of the agreement, contract, or
transaction--
(i) to meet the definition of a swap under
section 1a; or
(ii) to be cleared in accordance with section
2(h)(1).
(5) Legal Certainty for Long-term Swaps Entered Into Before
the Date of Enactment of the Wall Street Transparency and
Accountability Act of 2010.--
(A) Effect on swaps.--Unless specifically reserved in
the applicable swap, neither the enactment of the Wall
Street Transparency and Accountability Act of 2010, nor
any requirement under that Act or an amendment made by
that Act, shall constitute a termination event, force
majeure, illegality, increased costs, regulatory
change, or similar event under a swap (including any
related credit support arrangement) that would permit a
party to terminate, renegotiate, modify, amend, or
supplement 1 or more transactions under the swap.
(B) Position limits.--Any position limit established
under the Wall Street Transparency and Accountability
Act of 2010 shall not apply to a position acquired in
good faith prior to the effective date of any rule,
regulation, or order under the Act that establishes the
position limit; provided, however, that such positions
shall be attributed to the trader if the trader's
position is increased after the effective date of such
position limit rule, regulation, or order.
(6) Contract Enforcement for Foreign Futures Contracts.--A
contract of sale of a commodity for future delivery traded or
executed on or through the facilities of a board of trade,
exchange, or market located outside the United States for
purposes of section 4(a) shall not be void, voidable, or
unenforceable, and a party to such a contract shall not be
entitled to rescind or recover any payment made with respect to
the contract, based on the failure of the foreign board of
trade to comply with any provision of this Act.
(b)(1)(A) A registered entity that fails to enforce any
bylaw, rule, regulation, or resolution that it is required to
enforce by section 5, 5b, 5c, 5h, or 21, (B) a licensed board
of trade that fails to enforce any bylaw, rule, regulation, or
resolution that it is required to enforce by the Commission, or
(C) any registered entity that in enforcing any such bylaw,
rule, regulation, or resolution violates this Act or any
Commission rule, regulation, or order, shall be liable for
actual damages sustained by a person who engaged in any
transaction on or subject to the rules of such registered
entity to the extent of such person's actual losses that
resulted from such transaction and were caused by such failure
to enforce or enforcement of such bylaws, rules, regulations,
or resolutions.
(2) A registered futures association that fails to enforce
any bylaw or rule that is required under section 17 of this Act
or in enforcing any such bylaw or rule violates this Act or any
Commission rule, regulation, or order shall be liable for
actual damages sustained by a person that engaged in any
transaction specified in subsection (a) of this section to the
extent of such person's actual losses that resulted from such
transaction and were caused by such failure to enforce or
enforcement of such bylaw or rule.
(3) Any individual who, in the capacity as an officer,
director, governor, committee member, or employee [of
registered] of a registered entity or a registered futures
association willfully aids, abets, counsels, induces, or
procures any failure by any such entity to enforce (or any
violation of the Act in enforcing) any bylaw, rule, regulation,
or resolution referred to in paragraph (1) or (2) of this
subsection, shall be liable for actual damages sustained by a
person who engaged in any transaction specified in subsection
(a) of this section on, or subject to the rules of, such
registered entity or, in the case of an officer, director,
governor, committee member, or employee of a registered futures
association, any transaction specified in subsection (a) of
this section, in either case to the extent of such person's
actual losses that resulted from such transaction and were
caused by such failure or violation.
(4) A person seeking to enforce liability under this section
must establish that the registered entity, registered futures
association, officer, director, governor, committee member, or
employee acted in bad faith in failing to take action or in
taking such action as was taken, and that such failure or
action caused the loss.
(5) The rights of action authorized by this subsection shall
be the exclusive remedy under this Act available to any person
who sustains a loss as a result of (A) the alleged failure by a
registered entity or registered futures association or by any
officer, director, governor, committee member, or employee to
enforce any bylaw, rule, regulation, or resolution referred to
in paragraph (1) or (2) of this subsection, or (B) the taking
of action in enforcing any bylaw, rule, regulation, or
resolution referred to in this subsection that is alleged to
have violated this Act, or any Commission rule, regulation, or
order.
(c) The United States district courts shall have exclusive
jurisdiction of actions brought under this section. Any such
action shall be brought not later than two years after the date
the cause of action arises. Any action brought under subsection
(a) of this section may be brought in any judicial district
wherein the defendant is found, resides, or transacts business,
or in the judicial district wherein any act or transaction
constituting the violation occurs. Process in such action may
be served in any judicial district of which the defendant is an
inhabitant or wherever the defendant may be found.
(d) The provisions of this section shall become effective
with respect to causes of action accruing on or after the date
of enactment of the Futures Trading Act of 1982: Provided, That
the enactment of the Futures Trading Act of 1982 shall not
affect any right of any parties which may exist with respect to
causes of action accruing prior to such date.
SEC. 23. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION.
(a) Definitions.--In this section:
(1) Covered judicial or administrative action.--The
term ``covered judicial or administrative action''
means any judicial or administrative action brought by
the Commission under this Act that results in monetary
sanctions exceeding $1,000,000.
(2) Fund.--The term ``Fund'' means the Commodity
Futures Trading Commission Customer Protection Fund
established under subsection (g).
(3) Monetary sanctions.--The term ``monetary
sanctions'', when used with respect to any judicial or
administrative action means--
(A) any monies, including penalties,
disgorgement, restitution, and interest ordered
to be paid; and
(B) any monies deposited into a disgorgement
fund or other fund pursuant to section 308(b)
of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7246(b)), as a result of such action or any
settlement of such action.
(4) Original information.--The term ``original
information'' means information that--
(A) is derived from the independent knowledge
or analysis of a whistleblower;
(B) is not known to the Commission from any
other source, unless the whistleblower is the
original source of the information; and
(C) is not exclusively derived from an
allegation made in a judicial or administrative
hearing, in a governmental report, hearing,
audit, or investigation, or from the news
media, unless the whistleblower is a source of
the information.
(5) Related action.--The term ``related action'',
when used with respect to any judicial or
administrative action brought by the Commission under
this Act, means any judicial or administrative action
brought by an entity described in subclauses (I)
through (VI) of subsection (h)(2)(C) that is based upon
the original information provided by a whistleblower
pursuant to subsection (a) that led to the successful
enforcement of the Commission action.
(6) Successful resolution.--The term ``successful
resolution'', when used with respect to any judicial or
administrative action brought by the Commission under
this Act, includes any settlement of such action.
(7) Whistleblower.--[The term]
(A) In general._The term ``whistleblower''
means any individual, or 2 or more individuals
acting jointly, who provides information
relating to a violation of this Act to the
Commission, in a manner established by rule or
regulation by the Commission.
(B) Special rule.--Solely for the purposes of
subsection (h)(1), the term ``whistleblower''
includes any individual who takes, or 2 or more
individuals acting jointly who take, an action
described in subsection (h)(1)(A).
(b) Awards.--
(1) In general.--In any covered judicial or
administrative action, or related action, the
Commission, under regulations prescribed by the
Commission and subject to subsection (c), shall pay an
award or awards to 1 or more whistleblowers who
voluntarily provided original information to the
Commission that led to the successful enforcement of
the covered judicial or administrative action, or
related action, in an aggregate amount equal to--
(A) not less than 10 percent, in total, of
what has been collected of the monetary
sanctions imposed in the action or related
actions; and
(B) not more than 30 percent, in total, of
what has been collected of the monetary
sanctions imposed in the action or related
actions.
(2) Payment of awards.--Any amount paid under
paragraph (1) shall be paid from the Fund.
(3) Timely processing of claims.--
(A) Initial disposition.--
(i) In general.--Except as provided
in subparagraph (B), and subject to
clause (ii), the Commission shall make
an initial disposition with respect to
a claim submitted by a whistleblower
for an award under this section
(referred to in this paragraph as an
``award claim'') not later than 1 year
after the deadline established by the
Commission, by rule, for the
whistleblower to file the award claim.
(ii) Multiple actions.--If a covered
judicial or administrative action
involves 1 or more related actions, the
requirement under clause (i) shall
apply with respect to the latest
deadline with respect to the actions.
(B) Exceptions.--
(i) Initial extension.--If the
Director of the Division of Enforcement
of the Commission (referred to in this
paragraph as the ``Director''), or the
designee of the Director, determines
that an award claim is sufficiently
complex or involves more than 1
whistleblower, or if other good cause
exists such that the Commission cannot
reasonably satisfy the requirement
under subparagraph (A), the Director or
the designee, as applicable, after
providing notice to the Chairman of the
Commission (referred to in this
paragraph as the ``Chairman''), may
extend the deadline with respect to the
satisfaction of that subparagraph by
not more than 180 days.
(ii) Additional extensions.--If,
after providing an extension under
clause (i), the Director, or the
designee of the Director, determines
that the Commission cannot reasonably
satisfy the requirement under
subparagraph (A) with respect to an
award claim, as extended under that
clause, the Director or the designee,
as applicable, after providing notice
to the Chairman, may extend the period
in which the Commission may satisfy
subparagraph (A) by 1 additional 180-
day period.
(iii) Notice to whistleblower
required.--If the Director, or the
designee of the Director, exercises
authority under clause (i) or (ii), the
Director or the designee, as
applicable, shall submit to the
whistleblower who filed the award claim
that is subject to that action by the
Director or the designee a written
notification of that action by the
Director or the designee.
(C) Applicability.--This paragraph shall
apply only to an award claim that is timely
submitted under a deadline established by the
Commission after the date of enactment of this
paragraph.
(c) Determination of Amount of Award; Denial of Award.--
(1) Determination of amount of award.--
(A) Discretion.--The determination of the
amount of an award made under subsection (b)
shall be in the discretion of the Commission.
(B) Criteria.--In determining the amount of
an award made under subsection (b), the
Commission--
(i) shall take into consideration--
(I) the significance of the
information provided by the
whistleblower to the success of
the covered judicial or
administrative action;
(II) the degree of assistance
provided by the whistleblower
and any legal representative of
the whistleblower in a covered
judicial or administrative
action;
(III) the programmatic
interest of the Commission in
deterring violations of the Act
(including regulations under
the Act) by making awards to
whistleblowers who provide
information that leads to the
successful enforcement of such
laws; and
(IV) such additional relevant
factors as the Commission may
establish by rule or
regulation; and
(ii) shall not take into
consideration the balance of the Fund.
(2) Denial of award.--No award under subsection (b)
shall be made--
(A) to any whistleblower who is, or was at
the time the whistleblower acquired the
original information submitted to the
Commission, a member, officer, or employee of--
(i) a appropriate regulatory agency;
(ii) the Department of Justice;
(iii) a registered entity;
(iv) a registered futures
association;
(v) a self-regulatory organization as
defined in section 3(a) of the
Securities Exchange Act of 1934 (15
U.S.C. 78c(a)); or
(vi) a law enforcement organization;
(B) to any whistleblower who is convicted of
a criminal violation related to the judicial or
administrative action for which the
whistleblower otherwise could receive an award
under this section;
(C) to any whistleblower who submits
information to the Commission that is based on
the facts underlying the covered action
submitted previously by another whistleblower;
(D) to any whistleblower who fails to submit
information to the Commission in such form as
the Commission may, by rule or regulation,
require.
(d) Representation.--
(1) Permitted representation.--Any whistleblower who
makes a claim for an award under subsection (b) may be
represented by counsel.
(2) Required representation.--
(A) In general.--Any whistleblower who
anonymously makes a claim for an award under
subsection (b) shall be represented by counsel
if the whistleblower submits the information
upon which the claim is based.
(B) Disclosure of identity.--Prior to the
payment of an award, a whistleblower shall
disclose the identity of the whistleblower and
provide such other information as the
Commission may require, directly or through
counsel for the whistleblower.
(e) No Contract Necessary.--No contract with the Commission
is necessary for any whistleblower to receive an award under
subsection (b), unless otherwise required by the Commission, by
rule or regulation.
(f) Appeals.--
(1) In general.--Any determination made under this
section, including whether, to whom, or in what amount
to make awards, shall be in the discretion of the
Commission.
(2) Appeals.--Any determination described in
paragraph (1) may be appealed to the appropriate court
of appeals of the United States not more than 30 days
after the determination is issued by the Commission.
(3) Review.--The court shall review the determination
made by the Commission in accordance with [section
7064] section 706 of title 5, United States Code.
(g) Commodity Futures Trading Commission Customer Protection
Fund.--
(1) Establishment.--There is established in the
Treasury of the United States a revolving fund to be
known as the ``Commodity Futures Trading Commission
Customer Protection Fund''.
(2) Use of fund.--The Fund shall be available to the
Commission, without further appropriation or fiscal
year limitation, for--
(A) the payment of awards to whistleblowers
as provided in subsection (a); [and]
(B) the funding of customer education
initiatives designed to help customers protect
themselves against fraud or other violations of
this Act, or the rules and regulations
thereunder[.]; and
(C) the funding of initiatives designed to
educate stakeholders regarding the incentives
and protections available under this section,
including the benefits of those incentives and
protections.
(3) Deposits and credits.--There shall be deposited
into or credited to the Fund:
(A) Monetary sanctions.--Any monetary
sanctions collected by the Commission in any
covered judicial or administrative action that
is not otherwise distributed to victims of a
violation of this Act or the rules and
regulations thereunder underlying such action,
unless the balance of the Fund at the time the
monetary judgment is collected exceeds
[$100,000,000] $150,000,000.
(B) Additional amounts.--If the amounts
deposited into or credited to the Fund under
subparagraph (A) are not sufficient to satisfy
an award made under subsection (b), there shall
be deposited into or credited to the Fund an
amount equal to the unsatisfied portion of the
award from any monetary sanction collected by
the Commission in any judicial or
administrative action brought by the Commission
under this Act that is based on information
provided by a whistleblower.
(C) Investment income.--All income from
investments made under paragraph (4).
(4) Investments.--
(A) Amounts in fund may be invested.--The
Commission may request the Secretary of the
Treasury to invest the portion of the Fund that
is not, in the Commission's judgment, required
to meet the current needs of the Fund.
(B) Eligible investments.--Investments shall
be made by the Secretary of the Treasury in
obligations of the United States or obligations
that are guaranteed as to principal and
interest by the United States, with maturities
suitable to the needs of the Fund as determined
by the Commission.
(C) Interest and proceeds credited.--The
interest on, and the proceeds from the sale or
redemption of, any obligations held in the Fund
shall be credited to, and form a part of, the
Fund.
(5) Reports to congress.--Not later than October 30
of each year, the Commission shall transmit to the
Committee on Agriculture, Nutrition, and Forestry of
the Senate, and the Committee on Agriculture of the
House of Representatives a report on--
(A) the Commission's whistleblower award
program under this section, including a
description of the number of awards granted and
the types of cases in which awards were granted
during the preceding fiscal year;
(B) customer education initiatives described
in paragraph (2)(B) that were funded by the
Fund during the preceding fiscal year;
(C) the balance of the Fund at the beginning
of the preceding fiscal year;
(D) the amounts deposited into or credited to
the Fund during the preceding fiscal year;
(E) the amount of earnings on investments of
amounts in the Fund during the preceding fiscal
year;
(F) the amount paid from the Fund during the
preceding fiscal year to whistleblowers
pursuant to subsection (b);
(G) the amount paid from the Fund during the
preceding fiscal year for customer education
initiatives described in paragraph (2)(B);
(H) the balance of the Fund at the end of the
preceding fiscal year; and
(I) a complete set of audited financial
statements, including a balance sheet, income
statement, and cash flow analysis.
(h) Protection of Whistleblowers.--
(1) Prohibition against retaliation.--
(A) In general.--No employer may discharge,
demote, suspend, threaten, harass, directly or
indirectly, or in any other manner discriminate
against, a whistleblower in the terms and
conditions of employment because of any lawful
act done by the whistleblower--
(i) in providing information to the
Commission in accordance with
subsection (b); [or]
(ii) in assisting in any
investigation or judicial or
administrative action of the Commission
based upon or related to such
information[.]; or
(iii) in providing information
regarding any conduct that the
whistleblower reasonably believes
constitutes a violation of any law,
rule, or regulation subject to the
jurisdiction of the Commission to--
(I) a person with supervisory
authority over the
whistleblower at the employer
of the whistleblower, if that
employer is an entity
registered with, or required to
be registered with, the
Commission, a self-regulatory
organization, or a State
securities commission or office
performing like functions; or
(II) another individual
working for the employer
described in subclause (I) who
the whistleblower reasonably
believes has the authority--
(aa) to investigate,
discover, or terminate
the misconduct; or
(bb) to take any
other action to address
the misconduct.
(B) Enforcement.--
(i) Cause of action.--An individual
who alleges discharge or other
discrimination in violation of
subparagraph (A) may bring an action
under this subsection in the
appropriate district court of the
United States for the relief provided
in subparagraph (C), unless the
individual who is alleging discharge or
other discrimination in violation of
subparagraph (A) is an employee of the
Federal Government, in which case the
individual shall only bring an action
under section 1221 of title 5, United
States Code.
(ii) Subpoenas.--A subpoena requiring
the attendance of a witness at a trial
or hearing conducted under this
subsection may be served at any place
in the United States.
(iii) Statute of limitations.--An
action under this subsection may not be
brought more than 2 years after the
date on which the violation reported in
subparagraph (A) is committed.
(C) Relief.--Relief for an individual
prevailing in an action brought under
subparagraph (B) shall include--
(i) reinstatement with the same
seniority status that the individual
would have had, but for the
discrimination;
(ii) the amount of back pay otherwise
owed to the individual, with interest;
and
(iii) compensation for any special
damages sustained as a result of the
discharge or discrimination, including
litigation costs, expert witness fees,
and reasonable attorney's fees.
(2) Confidentiality.--
(A) In general.--Except as provided in
subparagraphs (B) and (C), the Commission, and
any officer or employee of the Commission,
shall not disclose any information, including
information provided by a whistleblower to the
Commission, which could reasonably be expected
to reveal the identity of a whistleblower,
except in accordance with the provisions of
section 552a of title 5, United States Code,
unless and until required to be disclosed to a
defendant or respondent in connection with a
public proceeding instituted by the Commission
or any entity described in subparagraph (C).
For purposes of section 552 of title 5, United
States Code, this paragraph shall be considered
a statute described in subsection (b)(3)(B) of
such section 552.
(B) Effect.--Nothing in this paragraph is
intended to limit the ability of the Attorney
General to present such evidence to a grand
jury or to share such evidence with potential
witnesses or defendants in the course of an
ongoing criminal investigation.
(C) Availability to government agencies.--
(i) In general.--Without the loss of
its status as confidential in the hands
of the Commission, all information
referred to in subparagraph (A) may, in
the discretion of the Commission, when
determined by the Commission to be
necessary or appropriate to accomplish
the purposes of this Act and protect
customers and in accordance with clause
(ii), be made available to--
(I) the Department of
Justice;
(II) an appropriate
department or agency of the
Federal Government, acting
within the scope of its
[jurisdiction;] jurisdiction,
including--
(aa) the Federal
Trade Commission;
(bb) the Internal
Revenue Service; and
(cc) the Department
of State;
(III) a registered entity,
registered futures association,
or self-regulatory organization
as defined in section 3(a) of
the Securities Exchange Act of
1934 (15 U.S.C. 78c(a));
(IV) a State attorney general
in connection with any criminal
investigation;
(V) an appropriate department
or agency of any State, acting
within the scope of its
jurisdiction; and
(VI) a foreign futures
authority or other foreign law
enforcement authority.
(ii) Maintenance of information.--
[Each]
(I) In general._Each of the
entities, agencies, or persons
described in subclauses (I)
through (V) of clause (i) shall
maintain information described
in that clause as confidential,
in accordance with the
requirements in subparagraph
(A).
(II) Foreign authorities.--An
entity described in subclause
(VI) of clause (i) shall
maintain information described
in that clause in accordance
with such assurances of
confidentiality as the
Commission determines
appropriate.
[(iii) Study on impact of foia
exemption on commodity futures trading
commission.--
[(I) Study.--The Inspector
General of the Commission shall
conduct a study--
[(aa) on whether the
exemption under section
552(b)(3) of title 5,
United States Code
(known as the Freedom
of Information Act)
established in
paragraph (2)(A) aids
whistleblowers in
disclosing information
to the Commission;
[(bb) on what impact
the exemption has had
on the public's ability
to access information
about the Commission's
regulation of commodity
futures and option
markets; and
[(cc) to make any
recommendations on
whether the Commission
should continue to use
the exemption.
[(II) Report.--Not later than
30 months after the date of
enactment of this clause, the
Inspector General shall--
[(aa) submit a report
on the findings of the
study required under
this clause to the
Committee on Banking,
Housing, and Urban
Affairs of the Senate
and the Committee on
Financial Services of
the House of
Representatives; and
[(bb) make the report
available to the public
through publication of
a report on the website
of the Commission.]
(3) Rights retained.--Nothing in this section shall
be deemed to diminish the rights, privileges, or
remedies of any whistleblower under any Federal or
State law, or under any collective bargaining
agreement.
(i) Rulemaking Authority.--The Commission shall have the
authority to issue such rules and regulations as may be
necessary or appropriate to implement the provisions of this
section consistent with the purposes of this section.
(j) Implementing Rules.--The Commission shall issue final
rules or regulations implementing the provisions of this
section not later than 270 days after the date of enactment of
the Wall Street Transparency and Accountability Act of 2010.
(k) Original Information.--Information submitted to the
Commission by a whistleblower in accordance with rules or
regulations implementing this section shall not lose its status
as original information solely because the whistleblower
submitted such information prior to the effective date of such
rules or regulations, provided such information was submitted
after the date of enactment of the Wall Street Transparency and
Accountability Act of 2010.
(l) Awards.--A whistleblower may receive an award pursuant to
this section regardless of whether any violation of a provision
of this Act, or a rule or regulation thereunder, underlying the
judicial or administrative action upon which the award is based
occurred prior to the date of enactment of the Wall Street
Transparency and Accountability Act of 2010.
(m) Provision of False Information.--A whistleblower who
knowingly and willfully makes any false, fictitious, or
fraudulent statement or representation, or who makes or uses
any false writing or document knowing the same to contain any
false, fictitious, or fraudulent statement or entry, shall not
be entitled to an award under this section and shall be subject
to prosecution under section 1001 of title 18, United States
Code.
(n) Nonenforceability of Certain Provisions Waiving Rights
and Remedies or Requiring Arbitration of Disputes.--
(1) Waiver of rights and remedies.--The rights and
remedies provided for in this section may not be waived
by any agreement, policy form, or condition of
employment including by a predispute arbitration
agreement.
(2) Predispute arbitration agreements.--No predispute
arbitration agreement shall be valid or enforceable, if
the agreement requires arbitration of a dispute arising
under this section.
----------
FUTURES TRADING ACT OF 1978
PLAN FOR USER FEES
Sec. 26. (a) Notwithstanding any other provision of law, the
Commodity Futures Trading Commission may develop and implement
a plan to charge and collect reasonable fees to cover the
estimated cost of regulating transactions under the
jurisdiction of the Commission. However, prior to implementing
such a plan, the Commission shall report its intention to do so
to the House Committee on Agriculture and the Senate Committee
on Agriculture, Nutrition, and Forestry. The Commission shall
include in its report the feasibility and desirability of
collecting such fees. Any plan developed under this section
shall not be implemented until approved by the House Committee
on Agriculture and the Senate Committee on Agriculture,
Nutrition, and Forestry. Fees collected under any plan approved
under this section shall be deposited in the Treasury of the
United States as miscellaneous receipts.
[(b) The Commodity Futures Trading Commission shall submit to
Congress a report containing the results of a study of the
regulatory experience of the National Futures Association for
the period beginning January 1, 1983 and ending September 30,
1985. The report shall be submitted not later than January 1,
1986. The report shall include (but not to be limited to) the
following--
[(1) the extent to which the National Futures
Association has fully implemented the program provided
in the rules approved by the Commission under section
17(p) and (q) of the Commodity Exchange Act and the
effectiveness of the operation of such program;
[(2) the actual and projected cost savings to the
Federal Government, if any, resulting from operations
of the National Futures Association;
[(3) the actual and projected costs which the
Commission and the public would have incurred if the
Association had not undertaken self-regulatory
responsibility for certain areas under the Commission's
jurisdiction;
[(4) problem areas, if any, encountered by the
Association;
[(5) the nature of the working relationship between
the Association and the Commission;
[(6) an assessment of the actual and projected
efficiencies the Commission has achieved or expects to
be achieved as a result of the continuing regulatory
activities of the Association; and
[(7) the immediate and projected capabilities of the
Commission at the time of submission of the study to
turn its attention to more immediate problems of
regulation, as a result of the activities of the
Association.]
[(c)] (b) Nothing in this section shall limit the authority
of the Commission to promulgate, after notice and opportunity
for hearing, a schedule of appropriate fees to be charged for
services rendered and activities and functions performed by the
Commission in conjunction with its administration and
enforcement of the Commodity Exchange Act: Provided, That the
fees for any specified service or activity or function shall
not exceed the actual cost thereof to the Commission.
[all]