HR 4626 IHCommentsClose CommentsPermalink

To reauthorize and amend the Commodity Exchange Act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the-counter derivatives, and for other purposes.CommentsClose CommentsPermalink

December 13, 2007

Mr. ETHERIDGE (for himself, Mr. MORAN of Kansas, Mr. GOODLATTE, and Mr. PETERSON of Minnesota) introduced the following bill; which was referred to the Committee on AgricultureCommentsClose CommentsPermalink

To reauthorize and amend the Commodity Exchange Act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the-counter derivatives, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the `CFTC Reauthorization Act of 2007'.CommentsClose CommentsPermalink

TITLE I--GENERAL PROVISIONS

SEC. 101. COMMISSION AUTHORITY OVER AGREEMENTS, CONTRACTS OR TRANSACTIONS IN FOREIGN CURRENCY.

(a) In General- Section 2(c)(2) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)) is amended by striking subparagraphs (B) and (C) and inserting the following:CommentsClose CommentsPermalink





`(B) AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN RETAIL FOREIGN CURRENCY-CommentsClose CommentsPermalink





`(i) This Act applies to, and the Commission shall have jurisdiction over, an agreement, contract, or transaction in foreign currency that--CommentsClose CommentsPermalink





`(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))); andCommentsClose CommentsPermalink





`(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--CommentsClose CommentsPermalink

`(aa) a financial institution;CommentsClose CommentsPermalink

`(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); orCommentsClose CommentsPermalink

`(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));CommentsClose CommentsPermalink

`(cc)(AA) a futures commission merchant that is primarily or substantially engaged in the business activities described in section 1a(20) 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 $20,000,000; orCommentsClose CommentsPermalink

`(BB) an affiliated person of a futures commission merchant that is primarily or substantially engaged in the business activities described in section 1a(20) 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 $20,000,000 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;CommentsClose CommentsPermalink

`(dd) an insurance company described in section 1a(12)(A)(ii) of this Act, or a regulated subsidiary or affiliate of such an insurance company;CommentsClose CommentsPermalink

`(ee) a financial holding company (as defined in section 2 of the Bank Holding Company Act of 1956);CommentsClose CommentsPermalink

`(ff) an investment bank holding company (as defined in section 17(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78q(i))); orCommentsClose CommentsPermalink

`(gg) a retail foreign exchange dealer that maintains adjusted net capital equal to or in excess of $20,000,000 and is registered in such capacity with the Commission, subject to such terms and conditions as the Commission shall prescribe.CommentsClose CommentsPermalink

`(ii) Notwithstanding items (cc) and (gg) of clause (i)(II) of this subparagraph, agreements, contracts, or transactions described in clause (i) of this subparagraph 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), (dd), (ee), or (ff) of clause (i) of this subparagraph.CommentsClose CommentsPermalink





`(iii)(I) Notwithstanding items (cc) and (gg) 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--CommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of clause (i);CommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of clause (i); orCommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of clause (i).CommentsClose CommentsPermalink





`(II) Subclause (I) shall not apply to--CommentsClose CommentsPermalink





`(aa) any person described in any of item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II);CommentsClose CommentsPermalink





`(bb) any such person's associated persons; orCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(III) Notwithstanding items (cc) and (gg) 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).CommentsClose CommentsPermalink





`(IV) Subclause (III) shall not apply to--CommentsClose CommentsPermalink





`(aa) any person described in any of item (aa) through (ff) of subparagraph (B)(i)(II);CommentsClose CommentsPermalink





`(bb) any such person's associated persons; orCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(iv) Notwithstanding items (cc) and (gg) 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) of clause (i)(II).CommentsClose CommentsPermalink





`(C)(i)(I) This subparagraph shall apply to any agreement, contract, or transaction in foreign currency that is--CommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of subparagraph (B)(i)(II)); andCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(II) Subclause (I) shall not apply to--CommentsClose CommentsPermalink





`(aa) a security that is not a security futures product; orCommentsClose CommentsPermalink





`(bb) a contract of sale that--CommentsClose CommentsPermalink





`(AA) results in actual delivery within 2 days; orCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(ii)(I) Agreements, contracts, or transactions described in clause (i) of this subparagraph 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).CommentsClose CommentsPermalink





`(II) Subclause (I) of this clause shall not apply to--CommentsClose CommentsPermalink





`(aa) any person described in any of item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II); orCommentsClose CommentsPermalink





`(bb) any such person's associated persons.CommentsClose CommentsPermalink





`(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).CommentsClose CommentsPermalink





`(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--CommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of subparagraph (B)(i);CommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of subparagraph (B)(i); orCommentsClose CommentsPermalink





`(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), (dd), (ee), or (ff) of subparagraph (B)(i).CommentsClose CommentsPermalink





`(II) Subclause (I) shall not apply to--CommentsClose CommentsPermalink





`(aa) any person described in item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II);CommentsClose CommentsPermalink





`(bb) any such person's associated persons; orCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(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).CommentsClose CommentsPermalink





`(IV) Subclause (III) shall not apply to--CommentsClose CommentsPermalink





`(aa) any person described in item (aa) through (ff) of subparagraph (B)(i)(II);CommentsClose CommentsPermalink





`(bb) any such person's associated persons; orCommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(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.CommentsClose CommentsPermalink





`(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.'.CommentsClose CommentsPermalink





(b) Effective Date- The following provisions of the Commodity Exchange Act, as amended by subsection (a) of this section, shall be effective 120 days after the date of the enactment of this Act or at such other time as the Commodity Futures Trading Commission shall determine:CommentsClose CommentsPermalink





(1) Subparagraphs (B)(i)(II)(gg), (B)(iii), and (C)(iii) of section 2(c)(2).CommentsClose CommentsPermalink





(2) The provisions of section 2(c)(2)(B)(i)(II)(cc) that set forth adjusted net capital requirements, and the provisions of such section that require a futures commission merchant to be primarily or substantially engaged in certain business activities.CommentsClose CommentsPermalink

SEC. 102. ANTIFRAUD AUTHORITY.

Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended--CommentsClose CommentsPermalink





(1) by redesignating subsections (b) and (c) as subsections (c) and (d), respectively; andCommentsClose CommentsPermalink





(2) by striking `SEC. 4b.' and all that follows through the end of subsection (a) and inserting the following:CommentsClose CommentsPermalink

`SEC. 4b. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.

`(a) Unlawful Actions- It shall be unlawful--CommentsClose CommentsPermalink





`(1) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce or for future delivery that is made, or to be made, on or subject to the rules of a designated contract market, for or on behalf of any other person; orCommentsClose CommentsPermalink





`(2) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, or other agreement, contract, or transaction subject to paragraphs (1) and (2) of section 5a(g), that is made, or to be made, for or on behalf of, or with, any other person, other than on or subject to the rules of a designated contract market--CommentsClose CommentsPermalink





`(A) to cheat or defraud or attempt to cheat or defraud the other person;CommentsClose CommentsPermalink





`(B) willfully to make or cause to be made to the other person any false report or statement or willfully to enter or cause to be entered for the other person any false record;CommentsClose CommentsPermalink





`(C) willfully to deceive or attempt to deceive the other person by any means whatsoever in regard to any order or contract or the disposition or execution of any order or contract, or in regard to any act of agency performed, with respect to any order or contract for or, in the case of paragraph (2), with the other person; orCommentsClose CommentsPermalink





`(D)(i) to bucket an order if the order is represented by the person as an order to be executed, or is required to be executed, on or subject to the rules of a designated contract market; orCommentsClose CommentsPermalink





`(ii) to fill an order by offset against the order or orders of any other person, or willfully and knowingly and without the prior consent of the other person to become the buyer in respect to any selling order of the other person, or become the seller in respect to any buying order of the other person, if the order is represented by the person as an order to be executed, or is required to be executed, on or subject to the rules of a designated contract market unless the order is executed in accordance with the rules of the designated contract market.CommentsClose CommentsPermalink





`(b) Clarification- Subsection (a)(2) of this section shall not obligate any person, in or in connection with a transaction in a contract of sale of a commodity for future delivery, or other agreement, contract or transaction subject to paragraphs (1) and (2) of section 5a(g), with another person, to disclose to the other person nonpublic information that may be material to the market price, rate, or level of the commodity or 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.'.CommentsClose CommentsPermalink

SEC. 103. AUTHORIZATION OF APPROPRIATIONS.

Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is amended to read as follows:CommentsClose CommentsPermalink





`(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.'.CommentsClose CommentsPermalink

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

(a) Section 4a(e) of the Commodity Exchange Act (7 U.S.C 6a(e)) is amended in the last proviso by striking `section 9(c)' and inserting `section 9(a)(5)'.CommentsClose CommentsPermalink





(b) Section 4f(c)(4)(B)(i) of such Act (7 U.S.C. 6f(c)(4)(B)(i)) is amended by striking `compiled' and inserting `complied'.CommentsClose CommentsPermalink





(c) Section 4k of such Act (7 U.S.C. 6k) is amended by redesignating the second paragraph (5) as paragraph (6).CommentsClose CommentsPermalink





(d) The Commodity Exchange Act is amended--CommentsClose CommentsPermalink





(1) by redesignating the first section 4p (7 U.S.C. 6o-1), as added by section 121 of the Commodity Futures Modernization Act of 2000, as section 4q; andCommentsClose CommentsPermalink





(2) by moving such section to after the second section 4p, as added by section 206 of Public Law 93-446.CommentsClose CommentsPermalink





(e) Subsections (a)(1) and (d)(1) of section 5c of such Act (7 U.S.C. 7a-2(a)(1), (d)(1)) are each amended by striking `5b(d)(2)' and inserting `5b(c)(2)'.CommentsClose CommentsPermalink





(f) Sections 5c(f) and 17(r) of such Act (7 U.S.C. 7a-2(f), 21(r)) are each amended by striking `4d(3)' and inserting `4d(c)'.CommentsClose CommentsPermalink





(g) Section 8(a)(1) of such Act (7 U.S.C. 12(a)(1)) is amended in the matter following subparagraph (B)--CommentsClose CommentsPermalink





(1) by striking `commenced' the 2nd place it appears; andCommentsClose CommentsPermalink





(2) by inserting `commenced' after `in a judicial proceeding'.CommentsClose CommentsPermalink





(h) Section 9 of such Act (7 U.S.C. 13) is amended--CommentsClose CommentsPermalink





(1) in subsection (f)(1), by striking the period and inserting `; or'; andCommentsClose CommentsPermalink





(2) by redesignating subsection (f) as subsection (e).CommentsClose CommentsPermalink





(i) Section 22(a)(2) of such Act (7 U.S.C. 25(a)(2)) is amended by striking `5b(b)(1)(E)' and inserting `5b(c)(2)(H)'.CommentsClose CommentsPermalink

SEC. 105. CRIMINAL AND CIVIL PENALTIES.

(a) Enforcement Powers of the Commission- Section 6(c) of the Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of the 10th sentence--CommentsClose CommentsPermalink





(1) by inserting `(A)' after `assess such person'; andCommentsClose CommentsPermalink





(2) by inserting after `each such violation' the following: `or (B) in any case of manipulation or attempted manipulation in violation of this subsection, subsection (d) of this section, or section 9(a)(2), a civil penalty of not more than the greater of $1,000,000 or triple the monetary gain to such person for each such violation,'.CommentsClose CommentsPermalink





(b) Nonenforcement of Rules of Government or Other Violations- Section 6b of such Act (7 U.S.C. 13a) is amended--CommentsClose CommentsPermalink





(1) in the 1st sentence, by inserting `, 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' before the period; andCommentsClose CommentsPermalink





(2) in the 2nd sentence, by inserting `, 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)' before the period.CommentsClose CommentsPermalink





(c) Action To Enjoin or Restrain Violations- Section 6c(d) of such Act (7 U.S.C. 13a-1(d)) is amended by striking `(d)' and all that follows through the end of the paragraph (1) and inserting the following:CommentsClose CommentsPermalink





`(d) Civil Penalties- (1) In any action brought under this section, the Commission may seek and the court shall have jurisdiction to impose, on a proper showing, on any person found in the action to have committed any violation--CommentsClose CommentsPermalink





`(A) a civil penalty in the amount of not more than the greater of $100,000 or triple the monetary gain to the person for each violation; orCommentsClose CommentsPermalink





`(B) in any case of manipulation or attempted manipulation in violation of section 6(c), 6(d), or 9(a)(2), a civil penalty in the amount of not more than the greater of $1,000,000 or triple the monetary gain to the person for each violation.'.CommentsClose CommentsPermalink





(d) Violations Generally- Section 9(a) of such Act (7 U.S.C. 13(a)) is amended--CommentsClose CommentsPermalink





(1) by striking `(or $500,000 in the case of a person who is an individual)'; andCommentsClose CommentsPermalink





(2) by striking `five years' and inserting `10 years'.CommentsClose CommentsPermalink

TITLE II--EXEMPT COMMERCIAL MARKETS

SEC. 201. SIGNIFICANT PRICE DISCOVERY CONTRACTS.

(a) Definition- Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended by redesignating paragraph (33) as paragraph (34) and by inserting after paragraph (32) the following:CommentsClose CommentsPermalink





`(33) SIGNIFICANT PRICE DISCOVERY CONTRACT- The term `significant price discovery contract' means an agreement, contract, or transaction subject to section 2(h)(7).'.CommentsClose CommentsPermalink





(b) Standards Applicable to Significant Price Discovery Contracts- Section 2(h) of such Act (7 U.S.C. 2(h)) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(7) SIGNIFICANT PRICE DISCOVERY CONTRACTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- An agreement, contract, or transaction conducted in reliance on the exemption provided in paragraph (3) shall be subject to subparagraphs (B) through (D) of this paragraph, under such rules and regulations as the Commission shall promulgate if the Commission determines that the agreement, contract, or transaction performs a significant price discovery function as described in subparagraph (B) of this paragraph.CommentsClose CommentsPermalink





`(B) SIGNIFICANT PRICE DISCOVERY DETERMINATION- In determining whether an agreement, contract, or transaction performs a significant price discovery function, the Commission shall consider, as appropriate, the following:CommentsClose CommentsPermalink





`(i) PRICE LINKAGE-CommentsClose CommentsPermalink





`(I) Whether the agreement, contract, or transaction uses or otherwise relies on a daily or final settlement price, or other major price parameter, of a contract listed for trading on or subject to the rules of a designated contract market or a derivatives transaction execution facility, or a significant price discovery contract traded on an electronic trading facility, to value a position, transfer or convert a position, cash or financially settle a position, or close out a position.CommentsClose CommentsPermalink





`(II) Whether the price for the agreement, contract, or transaction is sufficiently related to the price of a contract listed for trading on or subject to the rules of a designated contract market or derivatives transaction execution facility so as to permit market participants to effectively arbitrage between the markets by simultaneously maintaining positions or executing trades in the contracts on the electronic trading facility and the designated contract market or derivatives transaction execution facility on a frequent and recurring basis.CommentsClose CommentsPermalink





`(ii) MATERIAL PRICE REFERENCE- Whether, on a frequent and recurring basis, bids, offers, or transactions in a commodity are directly based on, or are determined by referencing, the prices generated by agreements, contracts, or transactions being traded or executed on the electronic trading facility.CommentsClose CommentsPermalink





`(iii) MATERIAL LIQUIDITY- Whether the volume of agreements, contracts, or transactions in the commodity being traded on the electronic trading facility is sufficient to have a material effect on other agreements, contracts, or transactions listed for trading on or subject to the rules of a designated contract market, a derivatives transaction execution facility, or an electronic trading facility operating in reliance on the exemption provided in paragraph (3).CommentsClose CommentsPermalink





`(iv) OTHER MATERIAL FACTORS- Such other material factors as the Commission specifies in its rules and regulations as relevant to the determination.CommentsClose CommentsPermalink





`(C) CORE PRINCIPLES APPLICABLE TO SIGNIFICANT PRICE DISCOVERY CONTRACTS- An electronic trading facility on which significant price discovery contracts are traded or executed shall, with respect to the contracts, comply with the core principles specified in this subparagraph. The electronic trading facility shall have reasonable discretion in establishing the manner in which it complies with the following core principles:CommentsClose CommentsPermalink





`(i) CONTRACTS NOT READILY SUSCEPTIBLE TO MANIPULATION- The electronic trading facility shall list only significant price discovery contracts that are not readily susceptible to manipulation.CommentsClose CommentsPermalink





`(ii) MONITORING OF TRADING- The electronic trading facility shall monitor trading in significant price discovery contracts to prevent market manipulation, price distortion, and disruptions of the delivery or cash-settlement process through market surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.CommentsClose CommentsPermalink





`(iii) ABILITY TO OBTAIN INFORMATION- The electronic trading facility shall establish and enforce rules that will allow the electronic trading facility to obtain any necessary information to perform any of the functions described in this subparagraph, shall provide such information to the Commission on request, and shall have the capacity to carry out such international information-sharing agreements as the Commission may require.CommentsClose CommentsPermalink





`(iv) POSITION LIMITATIONS OR ACCOUNTABILITY- The electronic trading facility shall adopt position limitations or position accountability for speculators in significant price discovery contracts, where necessary and appropriate to reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month.CommentsClose CommentsPermalink





`(v) EMERGENCY AUTHORITY- The electronic trading facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, where necessary and appropriate, including the authority to--CommentsClose CommentsPermalink





`(I) liquidate open positions in a significant price discovery contract; andCommentsClose CommentsPermalink





`(II) suspend or curtail trading in a significant price discovery contract.CommentsClose CommentsPermalink





`(vi) DAILY PUBLICATION OF TRADING INFORMATION- The electronic trading facility shall make public daily information on price, trading volume, and other trading data to the extent appropriate for significant price discovery contracts.CommentsClose CommentsPermalink





`(vii) COMPLIANCE WITH RULES- The electronic trading facility shall monitor and enforce compliance with any rules of the electronic trading facility applicable to significant price discovery contracts, including the terms and conditions of the contracts and any limitations on access to the electronic trading facility with respect to the contracts.CommentsClose CommentsPermalink





`(viii) CONFLICT OF INTEREST- The electronic trading facility shall establish and enforce rules to minimize conflicts of interest in its decision-making process, and establish a process for resolving the conflicts.CommentsClose CommentsPermalink





`(D) IMPLEMENTATION-CommentsClose CommentsPermalink





`(i) An electronic trading facility may implement any rule or rule amendment relating to a significant price discovery contract, including the terms and conditions of such a contract, by providing to the Commission a written certification that the rule or rule amendment complies with the requirements of this subsection (including regulations under this subsection).CommentsClose CommentsPermalink





`(ii) With respect to the core principles described in clauses (iv) and (v) of subparagraph (C), the Commission shall take into account the differences between cleared and non-cleared significant price discovery contracts.'.CommentsClose CommentsPermalink

SEC. 202. LARGE TRADER REPORTING.

(a) Section 4g(a) of the Commodity Exchange Act (7 U.S.C. 6g(a)) is amended by striking `elsewhere' and inserting `elsewhere, and in any significant price discovery contract traded or executed on an electronic trading facility'.CommentsClose CommentsPermalink





(b) Section 4i of such Act (7 U.S.C. 6i) is amended--CommentsClose CommentsPermalink





(1) by inserting `, or any significant price discovery contract on an electronic trading facility' before `--' ; andCommentsClose CommentsPermalink





(2) by inserting after `board of trade' the following: `or electronic trading facility'.CommentsClose CommentsPermalink

SEC. 203. COMMISSION EMERGENCY AUTHORITY.

Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended--CommentsClose CommentsPermalink





(1) in paragraph (6)--CommentsClose CommentsPermalink





(A) by inserting after `registered entity' the first place it appears the following: `or, with respect to a significant price discovery contract, an electronic trading facility,'; andCommentsClose CommentsPermalink





(B) by inserting after `registered entity' the second place it appears the following: `, electronic trading facility';CommentsClose CommentsPermalink





(2) in paragraph (7)--CommentsClose CommentsPermalink





(A) by inserting after `registered entity' the first place it appears the following: `or, with respect to a significant price discovery contract, an electronic trading facility'; andCommentsClose CommentsPermalink





(B) by inserting after `registered entity' each other place it appears, the following: `or electronic trading facility'; andCommentsClose CommentsPermalink





(3) in paragraph (9)--CommentsClose CommentsPermalink





(A) by inserting after `to direct the registered entity,' the following: `or, with respect to a significant price discovery contract, an electronic trading facility,'; andCommentsClose CommentsPermalink





(B) by inserting after `meaning or interpretation given by a registered entity' the following: `or electronic trading facility'.CommentsClose CommentsPermalink

SEC. 204. CONFORMING AMENDMENTS.

(a) Section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is amended by striking `of this Act' and inserting `, and significant price discovery contracts traded or executed on an electronic trading facility'.CommentsClose CommentsPermalink





(b) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3)) is amended by striking `paragraph (4)' and inserting `paragraphs (4) and (7)'.CommentsClose CommentsPermalink





(c) Section 2(h)(4) of such Act (7 U.S.C. 2(h)(4)) is amended--CommentsClose CommentsPermalink





(1) in subparagraph (B), by inserting `and' after the semicolon;CommentsClose CommentsPermalink





(2) in subparagraph (C), by striking `; and' and inserting a period; andCommentsClose CommentsPermalink





(3) by striking subparagraph (D).CommentsClose CommentsPermalink





(d) Section 2(h)(5)(B)(iii)(I) of such Act (7 U.S.C. 2(h)(5)(B)(iii)(I)) is amended by inserting `or to make the determination described in paragraph (7)(B)' before the semicolon.CommentsClose CommentsPermalink





(e) Section 5c(a)(1) of such Act (7 U.S.C. 7a-2(a)(1)), as amended by section 104(e) of this Act, is amended by inserting after `5b(c)(2)' the following: `, and section 2(h)(7) with respect to significant price discovery contracts,'.CommentsClose CommentsPermalink





(f) Section 5c(b) of such Act (7 U.S.C. 7a-2(b)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1), by striking `or derivatives transaction execution facility' and inserting `, derivatives transaction execution facility or, with respect to a significant price discovery contract, an electronic trading facility'; andCommentsClose CommentsPermalink





(2) in each of paragraphs (2) and (3), by striking `or derivatives transaction execution facility' and inserting `, derivatives transaction execution facility, or electronic trading facility'.CommentsClose CommentsPermalink





(g) Section 5c(d) of such Act (7 U.S.C. 7a-2(d)), as amended by section 104(e) of this Act, is amended--CommentsClose CommentsPermalink





(1) in paragraph (1)--CommentsClose CommentsPermalink





(A) by inserting after `registered entity' the first place it appears the following: `or, with respect to a significant price discovery contract, an electronic trading facility';CommentsClose CommentsPermalink





(B) by inserting after `registered entity' each other place it appears the following: `or electronic trading facility'; andCommentsClose CommentsPermalink





(C) by inserting after `5b(c)(2),' the following: `or section 2(h)(7)(C) with respect to a significant price discovery contract traded or executed on an electronic trading facility,'; andCommentsClose CommentsPermalink





(2) in paragraph (2), by inserting after `registered entity' the following: `or electronic trading facility'.CommentsClose CommentsPermalink