HR 3795 IHCommentsClose CommentsPermalink

To enact the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink

October 13, 2009CommentsClose CommentsPermalink

Mr. FRANK of Massachusetts introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concernedCommentsClose CommentsPermalink

To enact the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink

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

TITLE I--IMPROVEMENTS TO REGULATION OF OVER-THE-COUNTER DERIVATIVES MARKETSCommentsClose CommentsPermalink

SECTION 101. SHORT TITLE.

This title may be cited as the ‘Over-the-Counter Derivatives Markets Act of 2009’.CommentsClose CommentsPermalink

Subtitle A--Regulation of Swap MarketsCommentsClose CommentsPermalink

SEC. 111. DEFINITIONS.

(a) Amendments to Definitions in the Commodity Exchange Act- Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--CommentsClose CommentsPermalink





(1) by redesignating paragraphs (9) through (34) as paragraphs (10) through (35), respectively;CommentsClose CommentsPermalink





(2) by adding after paragraph (8) the following:CommentsClose CommentsPermalink





‘(9) DERIVATIVE- The term ‘derivative’ means--CommentsClose CommentsPermalink





‘(A) a contract of sale of a commodity for future delivery; orCommentsClose CommentsPermalink





‘(B) a swap.’;CommentsClose CommentsPermalink





(3) by redesignating paragraph (35) (as redesignated by subsection (a)) as paragraph (36);CommentsClose CommentsPermalink





(4) by adding after paragraph (34) (as redesignated by subsection (a)) the following:CommentsClose CommentsPermalink





‘(35) SWAP-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘swap’ means any agreement, contract, or transaction that--CommentsClose CommentsPermalink





‘(i) is a put, call, cap, floor, collar, or similar option of any kind for the purchase or sale of, or based on the value of, one 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;CommentsClose CommentsPermalink





‘(ii) provides for any purchase, sale, payment, or delivery (other than a dividend on an equity security) that is dependent on the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence;CommentsClose CommentsPermalink





‘(iii) provides on an executory basis for the exchange, on a fixed or contingent basis, of one or more payments based on the value or level of one 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 an interest rate swap, a rate floor, rate cap, rate collar, cross-currency rate swap, basis swap, currency swap, total return swap, equity index swap, equity swap, debt index swap, debt swap, credit spread, credit default swap, credit swap, weather swap, energy swap, metal swap, agricultural swap, emissions swap, or commodity swap;CommentsClose CommentsPermalink





‘(iv) is an agreement, contract, or transaction that is, or in the future becomes, commonly known to the trade as a swap; orCommentsClose CommentsPermalink





‘(v) is any combination or permutation of, or option on, any agreement, contract, or transaction described in any of clauses (i) through (iv).CommentsClose CommentsPermalink





‘(B) EXCLUSIONS- The term ‘swap’ does not include:CommentsClose CommentsPermalink





‘(i) any contract of sale of a commodity for future delivery or security futures product traded on or subject to the rules of any board of trade designated as a contract market under section 5 or 5f;CommentsClose CommentsPermalink





‘(ii) any sale of a nonfinancial commodity for deferred shipment or delivery, so long as such transaction is physically settled;CommentsClose CommentsPermalink





‘(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 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.);CommentsClose CommentsPermalink





‘(iv) any put, call, straddle, option, or privilege relating to 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));CommentsClose CommentsPermalink





‘(v) any agreement, contract, or transaction providing for the purchase or sale of one or more securities on a fixed 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.);CommentsClose CommentsPermalink





‘(vi) any agreement, contract, or transaction providing for the purchase or sale of one 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 such agreement, contract, or transaction predicates such 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;CommentsClose CommentsPermalink





‘(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));CommentsClose CommentsPermalink





‘(viii) any agreement, contract, or transaction that is--CommentsClose CommentsPermalink





‘(I) based on a security; andCommentsClose CommentsPermalink





‘(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 such agreement, contract, or transaction is entered into to manage a risk associated with capital raising;CommentsClose CommentsPermalink





‘(ix) any foreign exchange swap;CommentsClose CommentsPermalink





‘(x) any foreign exchange forward;CommentsClose CommentsPermalink





‘(xi) any agreement, contract, or transaction a counterparty of which is a Federal Reserve bank or the United States Government, or an agency of the United States Government that is expressly backed by the full faith and credit of the United States; andCommentsClose CommentsPermalink





‘(xii) any security-based swap, other than a security-based swap as described in paragraph (38)(C).CommentsClose CommentsPermalink





‘(C) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS- The term ‘swap’ shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a swap only with respect to each agreement, contract, or transaction under the master agreement that is a swap pursuant to subparagraph (A).’;CommentsClose CommentsPermalink





(5) in paragraph (13) (as redesignated by subsection (a))--CommentsClose CommentsPermalink





(A) in subparagraph (A)--CommentsClose CommentsPermalink





(i) in clause (vii), by striking ‘$25,000,000’ and inserting ‘$50,000,000’; andCommentsClose CommentsPermalink





(ii) in clause (xi), by striking ‘total assets in an amount’ and inserting ‘amounts invested on a discretionary basis’; andCommentsClose CommentsPermalink





(B) in paragraph (C), by striking ‘determines’ and inserting ‘and the Securities and Exchange Commission may jointly determine’;CommentsClose CommentsPermalink





(6) in paragraph (30) (as redesignated by subsection (a)), by--CommentsClose CommentsPermalink





(A) redesignating subparagraph (E) as subparagraph (G);CommentsClose CommentsPermalink





(B) in subparagraph (D), by striking ‘and’; andCommentsClose CommentsPermalink





(C) inserting after subparagraph (D) the following:CommentsClose CommentsPermalink





‘(E) a swap execution facility registered under section 5h;CommentsClose CommentsPermalink





‘(F) a swap repository; and’;CommentsClose CommentsPermalink





(7) by adding after paragraph (36) (as redesignated by subsection (c)) the following:CommentsClose CommentsPermalink





‘(37) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.’;CommentsClose CommentsPermalink





(8) by adding after paragraph (37) the following:CommentsClose CommentsPermalink





‘(38) SECURITY-BASED SWAP-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Except as provided in subparagraph (B), the term ‘security-based swap’ means any agreement, contract, or transaction that would be a swap under paragraph (35) (without regard to paragraph (35)(B)(xii)), and that--CommentsClose CommentsPermalink





‘(i) is based on an index that is a narrow-based security index, including any interest therein or based on the value thereof;CommentsClose CommentsPermalink





‘(ii) is based on a single security or loan, including any interest therein or based on the value thereof; orCommentsClose CommentsPermalink





‘(iii) is based on the occurrence, non-occurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrow-based security index, provided that such event must directly affect the financial statements, financial condition, or financial obligations of the issuer.CommentsClose CommentsPermalink





‘(B) EXCLUSION- The term ‘security-based swap’ does not include any agreement, contract, or transaction that meets the definition of security-based swap only because it references or is based upon a government security.CommentsClose CommentsPermalink





‘(C) MIXED SWAP- The term ‘security-based swap’ includes any agreement, contract, or transaction that is as described in subparagraph (A) and also is based on the value of one 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)).CommentsClose CommentsPermalink





‘(D) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS- The term ‘security-based swap’ shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a security-based swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a security-based swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a security-based swap only with respect to each agreement, contract, or transaction under the master agreement that is a security-based swap pursuant to subparagraph (A).’;CommentsClose CommentsPermalink





(9) by adding after paragraph (38) the following:CommentsClose CommentsPermalink





‘(39) SWAP DEALER-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The term ‘swap dealer’ means any person engaged in the business of buying and selling swaps for such person’s own account, through a broker or otherwise.CommentsClose CommentsPermalink





‘(B) EXCEPTION- The term ‘swap dealer’ does not include a person that buys or sells swaps for such person’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.’;CommentsClose CommentsPermalink





(10) by adding after paragraph (39) the following:CommentsClose CommentsPermalink





‘(40) MAJOR SWAP PARTICIPANT-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The term ‘major swap participant’ means any person who is not a swap dealer and who maintains a substantial net position in outstanding swaps, excluding positions held primarily for hedging (including balance sheet hedging) or risk management purposes. A person may be designated as a major swap participant for 1 or more individual types of swaps.CommentsClose CommentsPermalink





‘(B) DEFINITION OF ‘SUBSTANTIAL NET POSITION’- The Commission and the Securities and Exchange Commission shall jointly define by rule or regulation the term ‘substantial net position’ at a threshold that the regulators determine prudent for the effective monitoring, management and oversight of the financial system. In the event that the regulators are unable to agree upon a level within 60 days of the commencement of such consultations, the Secretary of the Treasury shall make such determination, which shall be binding on and adopted by such regulators.’;CommentsClose CommentsPermalink





(11) by adding after paragraph (40) the following:CommentsClose CommentsPermalink





‘(41) MAJOR SECURITY-BASED SWAP PARTICIPANT-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The term ‘major security-based swap participant’ means any person who is not a security-based swap dealer and who maintains a substantial net position in outstanding security-based swaps, excluding positions held primarily for hedging (including balance sheet hedging) or risk management purposes. A person may be designated as a major security-based swap participant for 1 or more individual types of security-based swaps.CommentsClose CommentsPermalink





‘(B) DEFINITION OF ‘SUBSTANTIAL NET POSITION’- The Commission and the Securities and Exchange Commission shall jointly define by rule or regulation the term ‘substantial net position’ at a threshold that the regulators determine prudent for the effective monitoring, management and oversight of the financial system. In the event that the regulators are unable to agree upon a level within 60 days of the commencement of such consultations, the Secretary of the Treasury shall make such determination, which shall be binding on and adopted by such regulators.’;CommentsClose CommentsPermalink





(12) by adding after paragraph (41) the following:CommentsClose CommentsPermalink





‘(42) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).’;CommentsClose CommentsPermalink





(13) by adding after paragraph (42) the following:CommentsClose CommentsPermalink





‘(43) PRUDENTIAL REGULATOR- The term ‘Prudential Regulator’ means--CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(i) a State-chartered bank that is a member of the Federal Reserve System; orCommentsClose CommentsPermalink





‘(ii) a State-chartered branch or agency of a foreign bank;CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(i) a national bank; orCommentsClose CommentsPermalink





‘(ii) a federally chartered branch or agency of a foreign bank; andCommentsClose CommentsPermalink





‘(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 a State-chartered bank that is not a member of the Federal Reserve System.’;CommentsClose CommentsPermalink





(14) by adding after paragraph (43) the following:CommentsClose CommentsPermalink





‘(44) SECURITY-BASED SWAP DEALER-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The term ‘security-based swap dealer’ means any person engaged in the business of buying and selling security-based swaps for such person’s own account, through a broker or otherwise.CommentsClose CommentsPermalink





‘(B) EXCEPTION- The term ‘security-based swap dealer’ does not include a person that buys or sells security-based swaps for such person’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.’;CommentsClose CommentsPermalink





(15) by adding after paragraph (44) the following:CommentsClose CommentsPermalink





‘(45) GOVERNMENT SECURITY- The term ‘government security’ has the same meaning as in section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(42)).’;CommentsClose CommentsPermalink





(16) by adding after paragraph (45) the following:CommentsClose CommentsPermalink





‘(46) 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 at the inception of the contract.’;CommentsClose CommentsPermalink





(17) by adding after paragraph (46) the following:CommentsClose CommentsPermalink





‘(47) FOREIGN EXCHANGE SWAP- The term ‘foreign exchange swap’ means a transaction that solely involves the exchange of 2 different currencies on a specific date at a fixed rate agreed at the inception of the contract, and a reverse exchange of the same 2 currencies at a date further in the future and at a fixed rate agreed at the inception of the contract.’;CommentsClose CommentsPermalink





(18) by adding after paragraph (47) the following:CommentsClose CommentsPermalink





‘(48) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT- The term ‘person associated with a security-based swap dealer or major security-based swap participant’ or ‘associated person of a security-based swap dealer or major security-based swap participant’ means any partner, officer, director, or branch manager of such security-based swap dealer or major security-based swap participant (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such security-based swap dealer or major security-based swap participant, or any employee of such security-based swap dealer or major security-based swap participant, except that any person associated with a security-based swap dealer or major security-based swap participant whose functions are solely clerical or ministerial shall not be included in the meaning of such term other than for purposes of section 15F(e)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-10).’;CommentsClose CommentsPermalink





(19) by adding after paragraph (48) the following:CommentsClose CommentsPermalink





‘(49) PERSON ASSOCIATED WITH A SWAP DEALER OR MAJOR SWAP PARTICIPANT- The term ‘person associated with a swap dealer or major swap participant’ or ‘associated person of a swap dealer or major swap participant’ means any partner, officer, director, or branch manager of such swap dealer or major swap participant (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such swap dealer or major swap participant, or any employee of such swap dealer or major swap participant, except that any person associated with a swap dealer or major swap participant whose functions are solely clerical or ministerial shall not be included in the meaning of such term other than for purposes of section 4s(b)(6).’; andCommentsClose CommentsPermalink





(20) by adding after paragraph (49) the following:CommentsClose CommentsPermalink





‘(50) SWAP REPOSITORY- The term ‘swap repository’ means an entity that collects and maintains the records of the terms and conditions of swaps or security-based swaps entered into by third parties.’.CommentsClose CommentsPermalink





(b) Joint Rulemaking on Further Definition of Terms-CommentsClose CommentsPermalink





(1) IN GENERAL- The Commodity Futures Trading Commission and the Securities and Exchange Commission shall jointly adopt a rule further defining the terms ‘swap’, ‘security-based swap’, ‘swap dealer’, ‘security-based swap dealer’, ‘major swap participant’,‘major security-based swap participant’, and ‘eligible contract participant’ no later than 180 days after the effective date of this Act.CommentsClose CommentsPermalink





(2) PREVENTION OF EVASIONS- The Commodity Futures Trading Commission and the Securities and Exchange Commission may prescribe rules defining the term ‘swap’ or ‘security-based swap’ to include transactions that have been structured to evade this Act.CommentsClose CommentsPermalink





(c) Joint Rulemaking Under This Act-CommentsClose CommentsPermalink





(1) UNIFORM RULES- Rules and regulations prescribed jointly under this Act by the Commodity Futures Trading Commission and the Securities and Exchange Commission shall be uniform.CommentsClose CommentsPermalink





(2) TREASURY DEPARTMENT- In the event that the Commodity Futures Trading Commission and the Securities and Exchange Commission fail to jointly prescribe uniform rules and regulations under any provision of this Act in a timely manner, the Secretary of the Treasury, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, shall prescribe rules and regulations under such provision. A rule prescribed by the Secretary of the Treasury shall be enforced as if prescribed jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission and shall remain in effect until the Secretary rescinds the rule or until the effective date of a corresponding rule prescribed jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission in accordance with this section, whichever is later.CommentsClose CommentsPermalink





(3) DEADLINE- The Secretary of the Treasury shall adopt rules and regulations under paragraph (2) within 180 days of the time that the Commodity Futures Trading Commission and the Securities and Exchange Commission failed to adopt uniform rules and regulations.CommentsClose CommentsPermalink





(4) TREATMENT OF SIMILAR PRODUCTS- In adopting joint rules and regulations under this Act, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall prescribe requirements to treat functionally or economically similar products similarly.CommentsClose CommentsPermalink





(5) TREATMENT OF DISSIMILAR PRODUCTS- Nothing in this Act shall be construed to require the Commodity Futures Trading Commission and the Securities and Exchange Commission to adopt joint rules that treat functionally or economically different products identically.CommentsClose CommentsPermalink





(6) JOINT INTERPRETATION- Any interpretation of, or guidance regarding, a provision of this Act, shall be effective only if issued jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission if this Act requires the Commodity Futures Trading Commission and the Securities and Exchange Commission to issue joint regulations to implement the provision.CommentsClose CommentsPermalink





(d) Exemptions- Section 4(c) of the Commodity Exchange Act (7 U.S.C. 4(c)) is amended by adding at the end the following: ‘The Commission shall not have the authority to grant exemptions from the swap-related provisions of the Over-the-Counter Derivatives Markets Act of 2009, except as expressly authorized under the provisions of that Act.’.CommentsClose CommentsPermalink

SEC. 112. JURISDICTION.

(a) Exclusive Jurisdiction- The first sentence of section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is amended--CommentsClose CommentsPermalink





(1) by striking ‘(C) and (D)’ and inserting ‘(C), (D), and (G)’;CommentsClose CommentsPermalink





(2) by striking ‘subsections (c) through (i)’ and inserting ‘subsections (c) and (f)’; andCommentsClose CommentsPermalink





(3) by striking ‘involving contracts of sale’ and inserting ‘involving swaps or contracts of sale’.CommentsClose CommentsPermalink





(b) No Limitation- Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended by inserting after subparagraph (F) the following:CommentsClose CommentsPermalink





‘(G) Nothing contained in this paragraph shall supersede or limit the jurisdiction conferred on the Securities and Exchange Commission or other regulatory authority by, or otherwise restrict the authority of the Securities and Exchange Commission or other regulatory authority under, the Over-the-Counter Derivatives Markets Act of 2009, including with respect to a security-based swap as described in section 1a(38)(C) of this Act.’.CommentsClose CommentsPermalink





(c) Additions- Section 2(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(A)) is amended--CommentsClose CommentsPermalink





(1) in clause (i), by striking ‘or’ at the end;CommentsClose CommentsPermalink





(2) by redesignating clause (ii) as clause (iii); andCommentsClose CommentsPermalink





(3) by inserting after clause (i) the following:CommentsClose CommentsPermalink





‘(ii) a swap; or’.CommentsClose CommentsPermalink

SEC. 113. CLEARING.

(a) Clearing Requirement-CommentsClose CommentsPermalink





(1) Sections 2(d), 2(e), 2(g), and 2(h) of the Commodity Exchange Act (7 U.S.C. 2(d), 2(e), 2(g), and 2(h)) are repealed.CommentsClose CommentsPermalink





(2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is further amended by inserting after subsection (c) the following:CommentsClose CommentsPermalink





‘(d) Swaps- Nothing in this Act (other than subsections (a)(1)(A), (a)(1)(B), (f), and (j), sections 4a, 4b, 4b-1, 4c(a), 4c(b), 4o, 4r, 4s, 4t, 4u, 5b, 5c, 5h, 6(c), 6(d), 6c, 6d, 8, 8a, 9, 12(e)(2), 12(f), 13(a), 13(b), 21, and 22(a)(4) and such other provisions of this Act as are applicable by their terms to registered entities and Commission registrants) governs or applies to a swap.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(3) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is further amended by inserting after subsection (i) the following:CommentsClose CommentsPermalink





‘(j) Clearing of Swaps-CommentsClose CommentsPermalink





‘(1) CLEARING REQUIREMENT- The Commission shall monitor swap activity and transaction data and by rule or regulation identify specific swap contracts that it determines are required to be cleared consistent with the public interest, after taking into account the following factors:CommentsClose CommentsPermalink





‘(A) the existence of significant outstanding notional exposures, trading liquidity and adequate pricing data;CommentsClose CommentsPermalink





‘(B) the availability of one or more swap clearinghouses with the 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;CommentsClose CommentsPermalink





‘(C) the impact on the mitigation of systemic risk, taking into account the size of the market for such contract and the resources of the swap clearinghouses available to clear the contract;CommentsClose CommentsPermalink





‘(D) the impact on competition; andCommentsClose CommentsPermalink





‘(E) the existence of reasonable legal certainty in the event of the insolvency of the relevant swap clearinghouse or one or more of its clearing members with regard to the treatment of customer and swap counterparty positions, funds, and property.CommentsClose CommentsPermalink





‘(2) SCOPE OF CLEARING FUNCTIONS- The Commission shall by rule or regulation define the scope of the clearing functions that are necessary to satisfy the requirements of paragraph (1).CommentsClose CommentsPermalink





‘(3) PREVENTION OF EVASION- The Commission and the Securities and Exchange Commission shall have authority to prescribe rules under this subsection, or issue interpretations of such rules, as necessary to prevent evasions of this Act provided that any such rules or interpretations must be issued jointly to be effective.CommentsClose CommentsPermalink





‘(4) REQUIRED REPORTING-CommentsClose CommentsPermalink





‘(A) IN GENERAL- All swap transactions that are not accepted for clearing by any derivatives clearing organization shall be reported to either a swap repository described in section 21 or, if there is no repository that would accept the swap, to the Commission pursuant to section 4r within such time period as the Commission may by rule or regulation prescribe.CommentsClose CommentsPermalink





‘(B) AUTHORITY OF SWAP DEALER TO REPORT- Counterparties may agree which counterparty will report the swap transaction. In transactions where only 1 counterparty is a swap dealer, the swap dealer will report the transaction.CommentsClose CommentsPermalink





‘(5) TRANSITION RULES- Rules adopted by the Commission under this section shall provide for the reporting of data, as follows:CommentsClose CommentsPermalink





‘(A) Swaps that were entered into before the date of enactment of the Over-the-Counter Derivatives Markets Act of 2009 shall be reported to a registered swap repository or the Commission no later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink





‘(B) Swaps that were entered into on or after the date of enactment of the Over-the-Counter Derivatives Markets Act of 2009 shall be reported to a registered swap repository or the Commission no later than the later of--CommentsClose CommentsPermalink





‘(i) 90 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009; orCommentsClose CommentsPermalink





‘(ii) such other time after entering into the swap as the Commission may prescribe by rule or regulation.CommentsClose CommentsPermalink





‘(6) TRADE EXECUTION- With respect to transactions involving swaps subject to the requirement of paragraph (1) and where both counterparties are either swap dealers or major swap participants, such counterparties must either:CommentsClose CommentsPermalink





‘(A) Execute the transaction on a board of trade designated as a contract market under section 5 (in which event, such transaction shall be subject to regulation under this Act as a transaction in a contract of sale of a commodity for future delivery or commodity option, as applicable);CommentsClose CommentsPermalink





‘(B) Execute the transaction on a swap execution facility registered with the Commission;CommentsClose CommentsPermalink





‘(C) Execute the transaction on a foreign swap execution facility that is subject to regulation as such under the laws of a foreign jurisdiction; orCommentsClose CommentsPermalink





‘(D) If the transaction is not executed on an entity listed in subparagraph (A), (B), or (C), comply with any recordkeeping and end-of-day transaction reporting requirements--CommentsClose CommentsPermalink





‘(i) as may be prescribed by the Commission with respect to commodity swaps subject to the requirements of paragraph (3); orCommentsClose CommentsPermalink





‘(ii) as may be prescribed by the relevant foreign regulator in the case of commodity swaps subject to the requirements of paragraph (3) entered into by--CommentsClose CommentsPermalink





‘(I) a foreign swap dealer or a foreign swap market participant; orCommentsClose CommentsPermalink





‘(II) a U.S. swap dealer or U.S. major swap participant that is entering into the commodity swap either outside of the United States, its territories and possessions or with a foreign counterparty.CommentsClose CommentsPermalink





‘(7) EXCHANGE TRADING- In adopting rules and regulations, the Commission shall endeavor to eliminate unnecessary impediments to the trading on boards of trade designated as contract markets under section 5 of contracts, agreements or transactions that would be security-based swaps but for the trading of such contracts, agreements or transactions on such a designated contract market.CommentsClose CommentsPermalink





‘(8) EXCEPTIONS- The requirements of paragraph (1) shall not apply to a swap if--CommentsClose CommentsPermalink





‘(A) no derivatives clearing organization registered under this Act will accept the swap for clearing; orCommentsClose CommentsPermalink





‘(B) one of the counterparties to the swap is not a swap dealer or major swap participant.’.CommentsClose CommentsPermalink





(b) Derivatives Clearing Organizations-CommentsClose CommentsPermalink





(1) Subsections (a) and (b) of section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) are amended to read as follows:CommentsClose CommentsPermalink





‘(a) Registration Requirement- It shall be unlawful for a derivatives clearing organization, 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 derivatives clearing organization described in section 1a(10) of this Act with respect to--CommentsClose CommentsPermalink





‘(1) a contract of sale of a commodity for future delivery (or option on such a contract) or option on a commodity, in each case unless the contract or option is--CommentsClose CommentsPermalink





‘(A) excluded from this Act by section 2(a)(1)(C)(i), 2(c), or 2(f); orCommentsClose CommentsPermalink





‘(B) 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.); orCommentsClose CommentsPermalink





‘(2) a swap.CommentsClose CommentsPermalink





‘(b) Voluntary Registration-CommentsClose CommentsPermalink





‘(1) DERIVATIVES CLEARING ORGANIZATIONS- A person that clears agreements, contracts, or transactions that are not required to be cleared under this Act may register with the Commission as a derivatives clearing organization.CommentsClose CommentsPermalink





‘(2) CLEARING AGENCIES- A derivatives clearing organization may clear security-based swaps that are required to be cleared by a person who is registered as a clearing agency under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).’.CommentsClose CommentsPermalink





(2) Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(g) Required Registration for Banks and Clearing Agencies- A person that is required to be registered as a derivatives clearing organization under this section shall register with the Commission regardless of whether the person is also a bank or a clearing agency registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).CommentsClose CommentsPermalink





‘(h) Harmonization of Rules- Not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules governing persons that are registered as derivatives clearing organizations for swaps under this subsection and persons that are registered as clearing agencies for security-based swaps under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).CommentsClose CommentsPermalink





‘(i) Consultation- The Commission and the Securities and Exchange Commission shall consult with the appropriate Federal banking agencies prior to adopting rules under this section with respect to swaps.CommentsClose CommentsPermalink





‘(j) 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 finds that such derivatives clearing organization 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 organization’s home country.CommentsClose CommentsPermalink





‘(k) Designation of Compliance Officer-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Each derivatives clearing organization shall designate an individual to serve as a compliance officer.CommentsClose CommentsPermalink





‘(2) DUTIES- The compliance officer--CommentsClose CommentsPermalink





‘(A) shall report directly to the board or to the senior officer of the derivatives clearing organization; andCommentsClose CommentsPermalink





‘(B) shall--CommentsClose CommentsPermalink





‘(i) review compliance with the core principles in section 5b(c)(2);CommentsClose CommentsPermalink





‘(ii) in consultation with the board of the derivatives clearing organization, a body performing a function similar to that of a board, or the senior officer of the derivatives clearing organization, resolve any conflicts of interest that may arise;CommentsClose CommentsPermalink





‘(iii) be responsible for administering the policies and procedures required to be established pursuant to this section; andCommentsClose CommentsPermalink





‘(iv) ensure compliance with commodity laws and the rules and regulations issued thereunder, including rules prescribed by the Commission pursuant to this section; andCommentsClose CommentsPermalink





‘(C) shall establish procedures for remediation of noncompliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures will establish the handling, management response, remediation, retesting, and closing of noncompliant issues.CommentsClose CommentsPermalink





‘(3) ANNUAL REPORTS REQUIRED- The compliance officer shall annually prepare and sign a report on the compliance of the derivatives clearing organization with the commodity laws and its policies and procedures, including its code of ethics and conflict of interest policies, in accordance with rules prescribed by the Commission. Such compliance report shall accompany the financial reports of the derivatives clearing organization that are required to be furnished to the Commission pursuant to this section and shall include a certification that, under penalty of law, the report is accurate and complete.’.CommentsClose CommentsPermalink





(3) Section 5b(c)(2) of the Commodity Exchange Act (7 U.S.C. 7a-1(c)(2)) is amended to read as follows:CommentsClose CommentsPermalink





‘(2) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS-CommentsClose CommentsPermalink





‘(A) IN GENERAL- To be registered and to maintain registration as a derivatives clearing organization, a derivatives clearing organization shall comply with the core principles specified in this paragraph, and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). The Commission may conform the core principles to reflect evolving United States and international standards. Except where the Commission determines otherwise by rule or regulation, a derivatives clearing organization shall have reasonable discretion in establishing the manner in which it complies with the core principles.CommentsClose CommentsPermalink





‘(B) FINANCIAL RESOURCES-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall have adequate financial, operational, and managerial resources to discharge its responsibilities.CommentsClose CommentsPermalink





‘(ii) Financial resources shall at a minimum exceed the total amount that would--CommentsClose CommentsPermalink





‘(I) enable the derivatives clearing 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 derivatives clearing organization in extreme but plausible market conditions; andCommentsClose CommentsPermalink





‘(II) enable the derivatives clearing organization to cover its operating costs for a period of one year, calculated on a rolling basis.CommentsClose CommentsPermalink





‘(C) PARTICIPANT AND PRODUCT ELIGIBILITY-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall establish--CommentsClose CommentsPermalink





‘(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 organization; andCommentsClose CommentsPermalink





‘(II) appropriate standards for determining eligibility of agreements, contracts, or transactions submitted to the derivatives clearing organization for clearing.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization shall have procedures in place to verify that participation and membership requirements are met on an ongoing basis.CommentsClose CommentsPermalink





‘(iii) The derivatives clearing organization’s participation and membership requirements shall be objective, publicly disclosed, and permit fair and open access.CommentsClose CommentsPermalink





‘(iv) The rules of the derivatives clearing organization shall provide for acceptance of a standardized swap regardless of the system on which the transaction was executed.CommentsClose CommentsPermalink





‘(D) RISK MANAGEMENT-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall have the ability to manage the risks associated with discharging the responsibilities of a derivatives clearing organization through the use of appropriate tools and procedures.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization shall measure its credit exposures to its members and participants at least once each business day and shall monitor such exposures throughout the business day.CommentsClose CommentsPermalink





‘(iii) Through margin requirements and other risk control mechanisms, a derivatives clearing organization shall limit its exposures to potential losses from defaults by its members and participants so that the operations of the derivatives clearing organization would not be disrupted and nondefaulting members or participants would not be exposed to losses that they cannot anticipate or control.CommentsClose CommentsPermalink





‘(iv) Margin required from all members and participants shall be sufficient to cover potential exposures in normal market conditions.CommentsClose CommentsPermalink





‘(v) The models and parameters used in setting margin requirements shall be risk-based and reviewed regularly.CommentsClose CommentsPermalink





‘(E) SETTLEMENT PROCEDURES- The derivatives clearing organization shall--CommentsClose CommentsPermalink





‘(i) complete money settlements on a timely basis, and not less than once each business day;CommentsClose CommentsPermalink





‘(ii) employ money settlement arrangements that eliminate or strictly limit the derivatives clearing organization’s exposure to settlement bank risks, such as credit and liquidity risks from the use of banks to effect money settlements;CommentsClose CommentsPermalink





‘(iii) ensure money settlements are final when effected;CommentsClose CommentsPermalink





‘(iv) maintain an accurate record of the flow of funds associated with each money settlement;CommentsClose CommentsPermalink





‘(v) have the ability to comply with the terms and conditions of any permitted netting or offset arrangements with other clearing organizations; andCommentsClose CommentsPermalink





‘(vi) for physical settlements, establish rules that clearly state the derivatives clearing organization’s obligations with respect to physical deliveries. The risks from these obligations shall be identified and managed.CommentsClose CommentsPermalink





‘(F) TREATMENT OF FUNDS-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall have standards and procedures designed to protect and ensure the safety of member and participant funds and assets.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization shall hold member and participant funds and assets in a manner whereby risk of loss or of delay in the derivatives clearing organization’s access to the assets and funds is minimized.CommentsClose CommentsPermalink





‘(iii) Assets and funds invested by the derivatives clearing organization shall be held in instruments with minimal credit, market, and liquidity risks.CommentsClose CommentsPermalink





‘(G) DEFAULT RULES AND PROCEDURES-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall have rules and procedures designed to allow for the efficient, fair, and safe management of events when members or participants become insolvent or otherwise default on their obligations to the derivatives clearing organization.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization’s default procedures shall be clearly stated, and they shall ensure that the derivatives clearing organization can take timely action to contain losses and liquidity pressures and to continue meeting its obligations.CommentsClose CommentsPermalink





‘(iii) The default procedures shall be publicly available.CommentsClose CommentsPermalink





‘(H) RULE ENFORCEMENT- The derivatives clearing organization shall--CommentsClose CommentsPermalink





‘(i) maintain adequate arrangements and resources for the effective monitoring and enforcement of compliance with rules of the derivatives clearing organization and for resolution of disputes; andCommentsClose CommentsPermalink





‘(ii) have the authority and ability to discipline, limit, suspend, or terminate a member’s or participant’s activities for violations of rules of the derivatives clearing organization.CommentsClose CommentsPermalink





‘(I) SYSTEM SAFEGUARDS- The derivatives clearing organization shall--CommentsClose CommentsPermalink





‘(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 the development of automated systems, that are reliable, secure, and have adequate scalable capacity;CommentsClose CommentsPermalink





‘(ii) 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 derivatives clearing organization’s responsibilities and obligations; andCommentsClose CommentsPermalink





‘(iii) 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.CommentsClose CommentsPermalink





‘(J) REPORTING- The derivatives clearing organization shall provide to the Commission all information necessary for the Commission to conduct oversight of the derivatives clearing organization.CommentsClose CommentsPermalink





‘(K) RECORDKEEPING- The derivatives clearing organization shall maintain records of all activities related to the business of the derivatives clearing organization as a derivatives clearing organization in a form and manner acceptable to the Commission for a period of 5 years.CommentsClose CommentsPermalink





‘(L) PUBLIC INFORMATION-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall provide market participants with sufficient information to identify and evaluate accurately the risks and costs associated with using the derivatives clearing organization’s services.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization shall make information concerning the rules and operating procedures governing its clearing and settlement systems (including default procedures) available to market participants.CommentsClose CommentsPermalink





‘(iii) The derivatives clearing organization shall disclose publicly and to the Commission information concerning--CommentsClose CommentsPermalink





‘(I) the terms and conditions of contracts, agreements, and transactions cleared and settled by the derivatives clearing organization;CommentsClose CommentsPermalink





‘(II) clearing and other fees that the derivatives clearing organization charges its members and participants;CommentsClose CommentsPermalink





‘(III) the margin-setting methodology and the size and composition of the financial resource package of the derivatives clearing organization;CommentsClose CommentsPermalink





‘(IV) other information relevant to participation in the settlement and clearing activities of the derivatives clearing organization; andCommentsClose CommentsPermalink





‘(V) daily settlement prices, volume, and open interest for all contracts settled or cleared by it.CommentsClose CommentsPermalink





‘(M) INFORMATION-SHARING- The derivatives clearing organization shall--CommentsClose CommentsPermalink





‘(i) enter into and abide by the terms of all appropriate and applicable domestic and international information-sharing agreements; andCommentsClose CommentsPermalink





‘(ii) use relevant information obtained from the agreements in carrying out the clearing organization’s risk management program.CommentsClose CommentsPermalink





‘(N) ANTITRUST CONSIDERATIONS- Unless appropriate to achieve the purposes of this chapter, the derivatives clearing organization shall avoid--CommentsClose CommentsPermalink





‘(i) adopting any rule or taking any action that results in any unreasonable restraint of trade; orCommentsClose CommentsPermalink





‘(ii) imposing any material anticompetitive burden.CommentsClose CommentsPermalink





‘(O) GOVERNANCE FITNESS STANDARDS-CommentsClose CommentsPermalink





‘(i) The derivatives clearing organization shall establish governance arrangements that are transparent in order to fulfill public interest requirements and to support the objectives of owners and participants.CommentsClose CommentsPermalink





‘(ii) The derivatives clearing organization shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, and members of the derivatives clearing organization, and any other persons with direct access to the settlement or clearing activities of the derivatives clearing organization, including any parties affiliated with any of the persons described in this subparagraph.CommentsClose CommentsPermalink





‘(P) CONFLICTS OF INTEREST- The derivatives clearing organization shall establish and enforce rules to minimize conflicts of interest in the decisionmaking process of the derivatives clearing organization and establish a process for resolving such conflicts of interest.CommentsClose CommentsPermalink





‘(Q) COMPOSITION OF THE BOARDS- The derivatives clearing organization shall ensure that the composition of the governing board or committee includes market participants.CommentsClose CommentsPermalink





‘(R) LEGAL RISK- The derivatives clearing organization shall have a well-founded, transparent, and enforceable legal framework for each aspect of its activities.’.CommentsClose CommentsPermalink





(4) Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) is further amended by adding after subsection (k), as added by paragraph (2), the following:CommentsClose CommentsPermalink





‘(l) Reporting-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A derivatives clearing organization that clears swaps shall provide to the Commission all information determined by the Commission to be necessary to perform its responsibilities under this Act. The Commission shall adopt data collection and maintenance requirements for swaps cleared by derivatives clearing organizations that are comparable to the corresponding requirements for swaps accepted by swap repositories and swaps traded on swap execution facilities. Subject to section 8, the Commission shall share such information, upon request, with the Board, the Securities and Exchange Commission, the appropriate Federal banking agencies, the Financial Services Oversight Council, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries.CommentsClose CommentsPermalink





‘(2) PUBLIC INFORMATION- A derivatives clearing organization that clears swaps shall provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with the public reporting requirements contained in section 8(j).’.CommentsClose CommentsPermalink





(5) Section 8(e) of the Commodity Exchange Act (7 U.S.C. 12(e)) is amended in the last sentence by adding ‘central bank and ministries’ after ‘department’ each place it appears.CommentsClose CommentsPermalink





(c) Legal Certainty for Identified Banking Products-CommentsClose CommentsPermalink





(1) REPEAL- Sections 402(d), 404, 407, 408(b), and 408(c)(2) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(d), 27b, 27e, 27f(b), and 27f(c)(2)) are repealed.CommentsClose CommentsPermalink





(2) LEGAL CERTAINTY- Section 403 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27a) is amended to read as follows:CommentsClose CommentsPermalink

‘SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT.

‘(a) Exclusion- Except as provided in subsection (b), no provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.) shall apply to, and the Commodity Futures Trading Commission and the Securities and Exchange Commission shall not exercise regulatory authority under the Commodity Exchange Act with respect to, an identified banking product.CommentsClose CommentsPermalink





‘(b) Exception- An appropriate Federal banking agency may except an identified banking product from the exclusion in subsection (a) if the agency determines, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, that the product--CommentsClose CommentsPermalink





‘(1) would meet the definition of swap in section 1a(35) of the Commodity Exchange Act (7 U.S.C. 1a(35)) or security-based swap in section 1a(38) of the Commodity Exchange Act (7 U.S.C. 1a(38)); andCommentsClose CommentsPermalink





‘(2) has become known to the trade as a swap or security-based swap, or otherwise has been structured as an identified banking product for the purpose of evading the provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.), 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.).’.CommentsClose CommentsPermalink

SEC. 114. PUBLIC REPORTING OF AGGREGATE SWAP DATA.

Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is amended by adding after subsection (i) the following:CommentsClose CommentsPermalink





‘(j) Public Reporting of Aggregate Swap Data-CommentsClose CommentsPermalink





‘(1) IN GENERAL- The Commission, or a person designated by the Commission pursuant to paragraph (2), shall make available to the public, in a manner that does not disclose the business transactions and market positions of any person, aggregate data on swap trading volumes and positions from the sources set forth in paragraph (3).CommentsClose CommentsPermalink





‘(2) DESIGNEE OF THE COMMISSION- The Commission may designate a derivatives clearing organization or a swap repository to carry out the public reporting described in paragraph (1).CommentsClose CommentsPermalink





‘(3) SOURCES OF INFORMATION- The sources of the information to be publicly reported as described in paragraph (1) are--CommentsClose CommentsPermalink





‘(A) derivatives clearing organizations pursuant to section 5b(k)(2);CommentsClose CommentsPermalink





‘(B) swap repositories pursuant to section 21(c)(3); andCommentsClose CommentsPermalink





‘(C) reports received by the Commission pursuant to section 4r.’.CommentsClose CommentsPermalink

SEC. 115. SWAP REPOSITORIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 20 the following:CommentsClose CommentsPermalink

‘SEC. 21. SWAP REPOSITORIES.

‘(a) Registration Requirement-CommentsClose CommentsPermalink





‘(1) 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 repository.CommentsClose CommentsPermalink





‘(2) INSPECTION AND EXAMINATION- Registered swap repositories shall be subject to inspection and examination by any representative of the Commission.CommentsClose CommentsPermalink





‘(b) Standard Setting-CommentsClose CommentsPermalink





‘(1) DATA IDENTIFICATION- The Commission shall prescribe standards that specify the data elements for each swap that shall be collected and maintained by each registered swap repository.CommentsClose CommentsPermalink





‘(2) DATA COLLECTION AND MAINTENANCE- The Commission shall prescribe data collection and data maintenance standards for swap repositories.CommentsClose CommentsPermalink





‘(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 that clear swaps.CommentsClose CommentsPermalink





‘(c) Duties- A swap repository shall--CommentsClose CommentsPermalink





‘(1) accept data prescribed by the Commission for each swap under subsection (b);CommentsClose CommentsPermalink





‘(2) maintain such data in such form and manner and for such period as may be required by the Commission;CommentsClose CommentsPermalink





‘(3) provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with the public reporting requirements contained in section 8(j); andCommentsClose CommentsPermalink





‘(4) make available, on a confidential basis pursuant to section 8, all data obtained by the swap repository, including individual counterparty trade and position data, to the Commission, the appropriate Federal banking agencies, the Financial Services Oversight Council, the Securities and Exchange Commission, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries.CommentsClose CommentsPermalink





‘(d) Required Registration for Security-based Swap Repositories- Any person that is required to be registered as a swap repository under this section shall register with the Commission regardless of whether that person also is registered with the Securities and Exchange Commission as a security-based swap repository.CommentsClose CommentsPermalink





‘(e) Harmonization of Rules- Not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules governing persons that are registered under this section and persons that are registered as security-based swap repositories under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), including uniform rules that specify the data elements that shall be collected and maintained by each repository.CommentsClose CommentsPermalink





‘(f) Exemptions- The Commission may exempt, conditionally or unconditionally, a swap repository from the requirements of this section if the Commission finds that such swap repository 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 organization’s home country.’.CommentsClose CommentsPermalink

SEC. 116. REPORTING AND RECORDKEEPING.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4q the following:CommentsClose CommentsPermalink

‘SEC. 4r. REPORTING AND RECORDKEEPING FOR CERTAIN SWAPS.

‘(a) In General- Any person who enters into a swap and--CommentsClose CommentsPermalink





‘(1) did not clear the swap in accordance with section 2(j)(1); andCommentsClose CommentsPermalink





‘(2) did not have data regarding the swap accepted by a swap repository in accordance with rules (including time frames) adopted by the Commission under section 21,CommentsClose CommentsPermalink





shall meet the requirements in subsection (b).CommentsClose CommentsPermalink





‘(b) Reports- Any person described in subsection (a) shall--CommentsClose CommentsPermalink





‘(1) make such reports in such form and manner and for such period as the Commission shall prescribe by rule or regulation regarding the swaps held by the person; andCommentsClose CommentsPermalink





‘(2) keep books and records pertaining to the swaps held by the person in such form and manner and for such period as may be required by the Commission, which books and records shall be open to inspection by any representative of the Commission, an appropriate Federal banking agency, the Securities and Exchange Commission, the Financial Services Oversight Council, and the Department of Justice.CommentsClose CommentsPermalink





‘(c) Identical Data- In adopting rules under this section, the Commission shall require persons described in subsection (a) to report the same or a more comprehensive set of data than the Commission requires swap repositories to collect under section 21.’.CommentsClose CommentsPermalink

SEC. 117. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4r (as added by section 116) the following:CommentsClose CommentsPermalink

‘SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.

‘(a) Registration-CommentsClose CommentsPermalink





‘(1) It shall be unlawful for any person to act as a swap dealer unless such person is registered as a swap dealer with the Commission.CommentsClose CommentsPermalink





‘(2) It shall be unlawful for any person to act as a major swap participant unless such person shall have registered as a major swap participant with the Commission.CommentsClose CommentsPermalink





‘(b) Requirements-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A person shall register as a swap dealer or major swap participant by filing a registration application with the Commission.CommentsClose CommentsPermalink





‘(2) CONTENTS- The application shall be made in such form and manner as prescribed by the Commission, giving any information and facts as the Commission may deem necessary concerning the business in which the applicant is or will be engaged. Such person, when registered as a swap dealer or major swap participant, shall continue to report and furnish to the Commission such information pertaining to such person’s business as the Commission may require.CommentsClose CommentsPermalink





‘(3) EXPIRATION- Each registration shall expire at such time as the Commission may by rule or regulation prescribe.CommentsClose CommentsPermalink





‘(4) RULES- Except as provided in subsections (c), (d) and (e), the Commission may prescribe rules applicable to swap dealers and major swap participants, including rules that limit the activities of swap dealers and major swap participants.CommentsClose CommentsPermalink





‘(5) TRANSITION- Rules adopted under this section shall provide for the registration of swap dealers and major swap participants no later than one year after the effective date of the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink





‘(6) STATUTORY DISQUALIFICATION- Except to the extent otherwise specifically provided by rule, regulation, or order, it shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of such swap dealer or major swap participant, if such swap dealer or major swap participant knew, or in the exercise of reasonable care should have known, of such statutory disqualification.CommentsClose CommentsPermalink





‘(c) Dual Registration-CommentsClose CommentsPermalink





‘(1) SWAP DEALER- Any person that is required to be registered as a swap dealer under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Securities and Exchange Commission as a security-based swap dealer.CommentsClose CommentsPermalink





‘(2) MAJOR SWAP PARTICIPANT- Any person that is required to be registered as a major swap participant under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Securities and Exchange Commission as a major security-based swap participant.CommentsClose CommentsPermalink





‘(d) Joint Rules-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules for persons that are registered as swap dealers or major swap participants under this section and persons that are registered as security-based swap dealers or major security-based swap participants under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).CommentsClose CommentsPermalink





‘(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS- The Commission and the Securities and Exchange Commission shall not prescribe rules imposing prudential requirements (including activity restrictions) on swap dealers, major swap participants, security-based swap dealers, or major security-based swap participants for which there is a Prudential Regulator. This provision shall not be construed as limiting the authority of the Commission and the Securities and Exchange Commission to prescribe appropriate business conduct, reporting, and recordkeeping requirements to protect investors.CommentsClose CommentsPermalink





‘(e) Capital and Margin Requirements-CommentsClose CommentsPermalink





‘(1) IN GENERAL-CommentsClose CommentsPermalink





‘(A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Each registered swap dealer and major swap participant for which there is a Prudential Regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Prudential Regulators shall by rule or regulation jointly prescribe to help ensure the safety and soundness of the swap dealer or major swap participant.CommentsClose CommentsPermalink





‘(B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Each registered swap dealer and major swap participant for which there is not a Prudential Regulator shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission and the Securities and Exchange Commission shall by rule or regulation jointly prescribe to help ensure the safety and soundness of the swap dealer or major swap participant.CommentsClose CommentsPermalink





‘(2) JOINT RULES-CommentsClose CommentsPermalink





‘(A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Within 180 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Prudential Regulators, in consultation with the Commission and the Securities and Exchange Commission, shall jointly adopt rules imposing capital and margin requirements under this subsection for swap dealers and major swap participants.CommentsClose CommentsPermalink





‘(B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Within 180 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the Prudential Regulators, shall jointly adopt rules imposing capital and margin requirements under this subsection for swap dealers and major swap participants for which there is no Prudential Regulator.CommentsClose CommentsPermalink





‘(3) CAPITAL-CommentsClose CommentsPermalink





‘(A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- In setting capital requirements under this subsection, the Prudential Regulators shall impose:CommentsClose CommentsPermalink





‘(i) a capital requirement that is greater than zero for swaps that are cleared by a derivatives clearing organization; andCommentsClose CommentsPermalink





‘(ii) to offset the greater risk to the swap dealer or major swap participant and to the financial system arising from the use of swaps that are not centrally cleared, higher capital requirements for swaps that are not cleared by a registered derivatives clearing organization than for swaps that are centrally cleared.CommentsClose CommentsPermalink





‘(B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Capital requirements set by the Commission and the Securities and Exchange Commission under this subsection shall be as strict as or stricter than the capital requirements set by the Prudential Regulators under this subsection.CommentsClose CommentsPermalink





‘(C) BANK HOLDING COMPANIES- Capital requirements set by the Board for swaps of bank holding companies and Tier 1 financial holding companies on a consolidated basis shall be as strict as or stricter than the capital requirements set by the Prudential Regulators under this subsection.CommentsClose CommentsPermalink





‘(D) A futures commission merchant, introducing broker, broker or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which it is subject.CommentsClose CommentsPermalink





‘(4) MARGIN-CommentsClose CommentsPermalink





‘(A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- The Prudential Regulators shall impose both initial and variation margin requirements under this subsection on all swaps that are not cleared by a registered derivatives clearing organization.CommentsClose CommentsPermalink





‘(B) NON-SWAP DEALERS OR MAJOR SWAP PARTICIPANTS- The Prudential Regulators may, but are not required to, impose margin requirements with respect to swaps in which one of the counterparties is neither a swap dealer, major swap participant, security-based swap dealer nor a major security-based swap participant. Margin requirements for swaps set by the Commission and the Securities and Exchange Commission shall provide for the use of non-cash assets as collateral.CommentsClose CommentsPermalink





‘(C) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS- Margin requirements for swaps set by the Commission and the Securities and Exchange Commission under this subsection shall be as strict as or stricter than margin requirements for swaps set by the Prudential Regulators.CommentsClose CommentsPermalink





‘(f) Reporting and Recordkeeping-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Each registered swap dealer and major swap participant--CommentsClose CommentsPermalink





‘(A) shall make such reports as are prescribed by the Commission by rule or regulation regarding the transactions and positions and financial condition of such person;CommentsClose CommentsPermalink





‘(B) for which--CommentsClose CommentsPermalink





‘(i) there is a Prudential Regulator shall keep books and records of all activities related to its business as a swap dealer or major swap participant in such form and manner and for such period as may be prescribed by the Commission by rule or regulation;CommentsClose CommentsPermalink





‘(ii) there is no Prudential Regulator shall keep books and records in such form and manner and for such period as may be prescribed by the Commission by rule or regulation;CommentsClose CommentsPermalink





‘(C) shall keep such books and records open to inspection and examination by any representative of the Commission; andCommentsClose CommentsPermalink





‘(D) shall keep any such books and records relating to transactions in swaps based on one or more securities open to inspection and examination by the Securities and Exchange Commission.CommentsClose CommentsPermalink





‘(2) RULES- Within 365 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing reporting and recordkeeping for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants.CommentsClose CommentsPermalink





‘(g) Daily Trading Records-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Each registered swap dealer and major swap participant shall maintain daily trading records of its swaps and all related records (including related cash or forward transactions) and recorded communications including but not limited to electronic mail, instant messages, and recordings of telephone calls, for such period as may be prescribed by the Commission by rule or regulation.CommentsClose CommentsPermalink





‘(2) INFORMATION REQUIREMENTS- The daily trading records shall include such information as the Commission shall prescribe by rule or regulation.CommentsClose CommentsPermalink





‘(3) CUSTOMER RECORDS- Each registered swap dealer and major swap participant shall maintain daily trading records for each customer or counterparty in such manner and form as to be identifiable with each swap transaction.CommentsClose CommentsPermalink





‘(4) AUDIT TRAIL- Each registered swap dealer and major swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions.CommentsClose CommentsPermalink





‘(5) RULES- Within 365 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing daily trading records for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants.CommentsClose CommentsPermalink





‘(h) Business Conduct Standards-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Each registered swap dealer and major swap participant shall conform with business conduct standards as may be prescribed by the Commission by rule or regulation addressing--CommentsClose CommentsPermalink





‘(A) fraud, manipulation, and other abusive practices involving swaps (including swaps that are offered but not entered into);CommentsClose CommentsPermalink





‘(B) diligent supervision of its business as a swap dealer;CommentsClose CommentsPermalink





‘(C) adherence to all applicable position limits; andCommentsClose CommentsPermalink





‘(D) such other matters as the Commission shall determine to be necessary or appropriate.CommentsClose CommentsPermalink





‘(2) BUSINESS CONDUCT REQUIREMENTS- Business conduct requirements adopted by the Commission shall--CommentsClose CommentsPermalink





‘(A) establish the standard of care for a swap dealer or major swap participant to verify that any counterparty meets the eligibility standards for an eligible contract participant;CommentsClose CommentsPermalink





‘(B) require disclosure by the swap dealer or major swap participant to any counterparty to the transaction (other than a swap dealer, major swap participant, security-based swap dealer or major security-based swap participant) of--CommentsClose CommentsPermalink





‘(i) information about the material risks and characteristics of the swap;CommentsClose CommentsPermalink





‘(ii) the source and amount of any fees or other material remuneration that the swap dealer or major swap participant would directly or indirectly expect to receive in connection with the swap; andCommentsClose CommentsPermalink





‘(iii) any other material incentives or conflicts of interest that the swap dealer or major swap participant may have in connection with the swap; andCommentsClose CommentsPermalink





‘(C) establish such other standards and requirements as the Commission may determine are necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this Act.CommentsClose CommentsPermalink





‘(3) RULES- The Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly prescribe rules under this subsection governing business conduct standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants within 365 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink





‘(i) Documentation and Back Office Standards-CommentsClose CommentsPermalink





‘(1) IN GENERAL- Each registered swap dealer and major swap participant shall conform with standards, as may be prescribed by the Commission by rule or regulation, addressing timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps.CommentsClose CommentsPermalink





‘(2) RULES- Within 365 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall adopt rules governing documentation and back office standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants.CommentsClose CommentsPermalink





‘(j) Dealer Responsibilities- Each registered swap dealer and major swap participant at all times shall comply with the following requirements:CommentsClose CommentsPermalink





‘(1) MONITORING OF TRADING- The swap dealer or major swap participant shall monitor its trading in swaps to prevent violations of applicable position limits.CommentsClose CommentsPermalink





‘(2) DISCLOSURE OF GENERAL INFORMATION- The swap dealer or major swap participant shall disclose to the Commission and to the Prudential Regulator for such swap dealer or major swap participant, as applicable, information concerning--CommentsClose CommentsPermalink





‘(A) terms and conditions of its swaps;CommentsClose CommentsPermalink





‘(B) swap trading operations, mechanisms, and practices;CommentsClose CommentsPermalink





‘(C) financial integrity protections relating to swaps; andCommentsClose CommentsPermalink





‘(D) other information relevant to its trading in swaps.CommentsClose CommentsPermalink





‘(3) ABILITY TO OBTAIN INFORMATION- The swap dealer or major swap participant shall--CommentsClose CommentsPermalink





‘(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; andCommentsClose CommentsPermalink





‘(B) provide the information to the Commission and to the Prudential Regulator for such swap dealer or major swap participant, as applicable, upon request.CommentsClose CommentsPermalink





‘(4) CONFLICTS OF INTEREST- The swap dealer and major swap participant shall implement conflict-of-interest systems and procedures that--CommentsClose CommentsPermalink





‘(A) establish structural and institutional safeguards to assure 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 those whose involvement in trading or clearing activities might potentially bias their judgment or supervision; andCommentsClose CommentsPermalink





‘(B) address such other issues as the Commission determines appropriate.CommentsClose CommentsPermalink





‘(5) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the swap dealer or major swap participant shall avoid--CommentsClose CommentsPermalink





‘(A) adopting any processes or taking any actions that result in any unreasonable restraints of trade; orCommentsClose CommentsPermalink





‘(B) imposing any material anticompetitive burden on trading.CommentsClose CommentsPermalink





‘(k) Rules- The Commission, the Securities and Exchange Commission, and the Prudential Regulators shall consult with each other prior to adopting any rules under the Over-the-Counter Derivatives Markets Act of 2009.CommentsClose CommentsPermalink





‘(l) Recognition of Comparable Non-u.s. Regulation- The Commission, in consultation with the Secretary of the Treasury, the Securities and Exchange Commission and the Prudential Regulators, shall adopt rules exempting from registration and the other requirements of the Over-the-Counter Derivatives Market Act of 2009 foreign financial institutions that the Commission finds are subject to comparable regulation in the financial institution’s home country.’.CommentsClose CommentsPermalink

SEC. 118. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is further amended by inserting after section 4s the following:CommentsClose CommentsPermalink

‘SEC. 4t. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

‘(a) Cleared Swaps- A swap dealer, futures commission merchant, or derivatives clearing organization by or through which funds or other property are held as margin or collateral to secure the obligations of a counterparty under a swap to be cleared by or through a derivatives clearing organization shall segregate, maintain, and use the funds or other property for the benefit of the counterparty, in accordance with such rules and relations as the Commission or Prudential Regulator shall prescribe. Any such funds or other property shall be treated as customer property under this Act.CommentsClose CommentsPermalink





‘(b) Over-the-counter Swaps- At the request of a swap counterparty who provides funds or other property to a swap dealer as margin or collateral to secure the obligations of the counterparty under a swap between the counterparty and the swap dealer that is not submitted for clearing to a derivatives clearing organization, the swap dealer shall segregate the funds or other property for the benefit of the counterparty, and maintain the funds or other property in an account which is carried by a third-party custodian and designated as a segregated account for the counterparty, in accordance with such rules and regulations as the Commission or Prudential Regulator may prescribe. This subsection shall not be interpreted to preclude commercial arrangements regarding the investment of the segregated funds or other property and the related allocation of gains and losses resulting from any such investment.’.CommentsClose CommentsPermalink

SEC. 119. CONFLICTS OF INTEREST.

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





(1) redesignating subsection (c) as subsection (d); andCommentsClose CommentsPermalink





(2) inserting after subsection (b) the following:CommentsClose CommentsPermalink





‘(c) Conflicts of Interest- The Commission shall require that futures commission merchants and introducing brokers implement conflict-of-interest systems and procedures that--CommentsClose CommentsPermalink





‘(1) establish structural and institutional safeguards to assure 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 those whose involvement in trading or clearing activities might potentially bias their judgment or supervision; andCommentsClose CommentsPermalink





‘(2) address such other issues as the Commission determines appropriate.’.CommentsClose CommentsPermalink

SEC. 120. SWAP EXECUTION FACILITIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 5g the following:CommentsClose CommentsPermalink

‘SEC. 5h. SWAP EXECUTION FACILITIES.

‘(a) Registration-CommentsClose CommentsPermalink





‘(1) IN GENERAL- No person may operate a facility for the trading of swaps unless the facility is registered as a swap execution facility under this section.CommentsClose CommentsPermalink





‘(2) DUAL REGISTRATION- Any person that is required to be registered as a swap execution facility under this section shall register with the Commission regardless of whether that person also is registered with the Securities and Exchange Commission as a swap execution facility.CommentsClose CommentsPermalink





‘(b) Requirements for Trading- A swap execution facility that is registered under subsection (a) may trade any swap.CommentsClose CommentsPermalink





‘(c) Trading 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 trading on the contract market and the swap execution facility, identify whether the electronic trading is taking place on the contract market or the swap execution facility.CommentsClose CommentsPermalink





‘(d) Criteria for Registration-CommentsClose CommentsPermalink





‘(1) IN GENERAL- To be registered as a swap execution facility, the facility shall be required to demonstrate to the Commission that it meets the criteria specified herein.CommentsClose CommentsPermalink





‘(2) DETERRENCE OF ABUSES- The swap execution facility shall establish and enforce trading and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means to--CommentsClose CommentsPermalink





‘(A) obtain information necessary to perform the functions required under this section; orCommentsClose CommentsPermalink





‘(B) use means to--CommentsClose CommentsPermalink





‘(i) provide market participants with impartial access to the market; andCommentsClose CommentsPermalink





‘(ii) capture information that may be used in establishing whether rule violations have occurred.CommentsClose CommentsPermalink





‘(3) TRADING PROCEDURES- The swap execution facility shall establish and enforce rules or terms and conditions defining, or specifications detailing, trading procedures to be used in entering and executing orders traded on or through its facilities.CommentsClose CommentsPermalink





‘(4) 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 its facilities, including the clearance and settlement of the swaps pursuant to section 2(j)(1).CommentsClose CommentsPermalink





‘(e) Core Principles for Swap Execution Facilities-CommentsClose CommentsPermalink





‘(1) IN GENERAL- To maintain its registration as a swap execution facility, the facility shall comply with the core principles specified in this subsection and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). Except where the Commission determines otherwise by rule or regulation, the facility shall have reasonable discretion in establishing the manner in which it complies with these core principles.CommentsClose CommentsPermalink





‘(2) COMPLIANCE WITH RULES- The swap execution facility shall monitor and enforce compliance with any of the rules of the facility, including the terms and conditions of the swaps traded on or through the facility and any limitations on access to the facility.CommentsClose CommentsPermalink





‘(3) SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION- The swap execution facility shall permit trading only in swaps that are not readily susceptible to manipulation.CommentsClose CommentsPermalink





‘(4) MONITORING OF TRADING- The swap execution facility shall 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.CommentsClose CommentsPermalink





‘(5) ABILITY TO OBTAIN INFORMATION- The swap execution facility shall--CommentsClose CommentsPermalink





‘(A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection;CommentsClose CommentsPermalink





‘(B) provide the information to the Commission upon request; andCommentsClose CommentsPermalink





‘(C) have the capacity to carry out such international information-sharing agreements as the Commission may require.CommentsClose CommentsPermalink





‘(6) EMERGENCY AUTHORITY- The swap execution 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 liquidate or transfer open positions in any swap or to suspend or curtail trading in a swap.CommentsClose CommentsPermalink





‘(7) TIMELY PUBLICATION OF TRADING INFORMATION- 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.CommentsClose CommentsPermalink





‘(8) RECORDKEEPING AND REPORTING- The swap execution facility shall maintain records of all activities related 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, and report to the Commission all information determined by the Commission to be necessary or appropriate for the Commission to perform its responsibilities under this Act in a form and manner acceptable to the Commission. 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 repositories.CommentsClose CommentsPermalink





‘(9) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the swap execution facility shall avoid--CommentsClose CommentsPermalink





‘(A) adopting any rules or taking any actions that result in any unreasonable restraints of trade; orCommentsClose CommentsPermalink





‘(B) imposing any material anticompetitive burden on trading on the swap execution facility.CommentsClose CommentsPermalink





‘(10) CONFLICTS OF INTEREST- The swap execution facility shall--CommentsClose CommentsPermalink





‘(A) establish and enforce rules to minimize conflicts of interest in its decisionmaking process; andCommentsClose CommentsPermalink





‘(B) establish a process for resolving the conflicts of interest.CommentsClose CommentsPermalink





‘(11) DESIGNATION OF COMPLIANCE OFFICER-CommentsClose CommentsPermalink





‘(A) IN GENERAL- Each swap execution facility shall designate an individual to serve as a compliance officer.CommentsClose CommentsPermalink





‘(B) DUTIES- The compliance officer shall--CommentsClose CommentsPermalink





‘(i) report directly to the board or to the senior officer of the facility; andCommentsClose CommentsPermalink





‘(ii) shall--CommentsClose CommentsPermalink





‘(I) review compliance with the core principles in this subsection;CommentsClose CommentsPermalink





‘(II) 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;CommentsClose CommentsPermalink





‘(III) be responsible for administering the policies and procedures required to be established pursuant to this section; andCommentsClose CommentsPermalink





‘(IV) ensure compliance with commodity laws and the rules and regulations issued thereunder, including rules prescribed by the Commission pursuant to this section; andCommentsClose CommentsPermalink





‘(iii) establish procedures for remediation of non-compliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures will establish the handling, management response, remediation, re-testing, and closing of non-compliant issues.CommentsClose CommentsPermalink





‘(C) ANNUAL REPORTS REQUIRED- The compliance officer shall annually prepare and sign a report on the compliance of the facility with the commodity laws and its policies and procedures, including its code of ethics and conflict of interest policies, in accordance with rules prescribed by the Commission. Such compliance report shall accompany the financial reports of the facility that are required to be furnished to the Commission pursuant to this section and shall include a certification that, under penalty of law, the report is accurate and complete.CommentsClose CommentsPermalink





‘(f) Exemptions- The Commission may exempt, conditionally or unconditionally, a swap execution facility from registration under this section if the Commission finds that such 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 organization’s home country.CommentsClose CommentsPermalink





‘(g) Harmonization of Rules- Within 180 days of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly prescribe rules governing the regulation of swap execution facilities under this section and section 3B of the Securities Exchange Act of 1934 (15 U.S.C. 78c-2).’.CommentsClose CommentsPermalink

SEC. 121. DERIVATIVES TRANSACTION EXECUTION FACILITIES AND EXEMPT BOARDS OF TRADE.

Sections 5a and 5d of the Commodity Exchange Act (7 U.S.C. 7 and 7a-3) are repealed.CommentsClose CommentsPermalink

SEC. 122. DESIGNATED CONTRACT MARKETS.

(a) Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is amended by striking paragraph (9) and inserting the following:CommentsClose CommentsPermalink





‘(9) EXECUTION OF TRANSACTIONS-CommentsClose CommentsPermalink





‘(A) 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 board of trade’s centralized market.CommentsClose CommentsPermalink





‘(B) The rules may authorize, for bona fide business purposes--CommentsClose CommentsPermalink





‘(i) transfer trades or office trades;CommentsClose CommentsPermalink





‘(ii) an exchange of--CommentsClose CommentsPermalink





‘(I) futures in connection with a cash commodity transaction;CommentsClose CommentsPermalink





‘(II) futures for cash commodities; orCommentsClose CommentsPermalink





‘(III) futures for swaps; orCommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(b) Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is amended by adding after paragraph (18) the following:CommentsClose CommentsPermalink





‘(19) FINANCIAL RESOURCES- The board of trade shall demonstrate that it has adequate financial, operational, and managerial resources to discharge the responsibilities of a contract market. For the board of trade’s financial resources to be considered adequate, their value shall exceed the total amount that would enable the contract market to cover its operating costs for a period of one year, calculated on a rolling basis.CommentsClose CommentsPermalink





‘(20) SYSTEM SAFEGUARDS- The board of trade shall--CommentsClose CommentsPermalink





‘(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 give adequate scalable capacity;CommentsClose CommentsPermalink





‘(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 board of trade’s responsibilities and obligations; andCommentsClose CommentsPermalink





‘(C) periodically conduct tests to verify that back-up resources are sufficient to ensure continued order processing and trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail.’.CommentsClose CommentsPermalink

SEC. 123. MARGIN.

Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended in paragraph (7)(C), by striking ‘, excepting the setting of levels of margin’.CommentsClose CommentsPermalink

SEC. 124. POSITION LIMITS.

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





(1) inserting ‘(1)’ after ‘(a)’;CommentsClose CommentsPermalink





(2) striking ‘on electronic trading facilities with respect to a significant price discovery contract’ in the first sentence and inserting ‘swaps that perform or affect a significant price discovery function with respect to regulated markets’;CommentsClose CommentsPermalink





(3) inserting ‘, including any group or class of traders,’ in the second sentence after ‘held by any person’;CommentsClose CommentsPermalink





(4) striking ‘on an electronic trading facility with respect to a significant price discovery contract,’ in the second sentence and inserting ‘swaps that perform or affect a significant price discovery function with respect to regulated markets,’; andCommentsClose CommentsPermalink





(5) inserting at the end the following:CommentsClose CommentsPermalink





‘(2) AGGREGATE POSITION LIMITS- The Commission may, 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--CommentsClose CommentsPermalink





‘(A) contracts listed by designated contract markets;CommentsClose CommentsPermalink





‘(B) 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; andCommentsClose CommentsPermalink





‘(C) swap contracts that perform or affect a significant price discovery function with respect to regulated markets.CommentsClose CommentsPermalink





‘(3) 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:CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(4) 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, or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits.’.CommentsClose CommentsPermalink





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





(1) in paragraph (1), by striking ‘or derivatives transaction execution facility or facilities or electronic trading facility’ and inserting ‘or swap execution facility or facilities’; andCommentsClose CommentsPermalink





(2) in paragraph (2), by striking ‘or derivatives transaction execution facility or facilities or electronic trading facility’ and inserting ‘or swap execution facility’.CommentsClose CommentsPermalink

SEC. 125. ENHANCED AUTHORITY OVER REGISTERED ENTITIES.

(a) Section 5(d)(1) of the Commodity Exchange Act (7 U.S.C. 7(d)(1)) is amended by striking ‘The board of trade shall have’ and inserting ‘Except where the Commission otherwise determines by rule or regulation pursuant to section 8a(5), the board of trade shall have’.CommentsClose CommentsPermalink





(b) Section 5b(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 7a-1(c)(2)(A)) is amended by striking ‘The applicant shall have’ and inserting ‘Except where the Commission otherwise determines by rule or regulation pursuant to section 8a(5), the applicant shall have’.CommentsClose CommentsPermalink





(c) Section 5c(a) of the Commodity Exchange Act (7 U.S.C. 7a-2(a)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1), by striking ‘5a(d) and 5b(c)(2)’ and inserting ‘5b(c)(2) and 5h(e)’; andCommentsClose CommentsPermalink





(2) in paragraph (2), by striking ‘shall not’ and inserting ‘may’.CommentsClose CommentsPermalink





(d) Section 5c(c)(1) of the Commodity Exchange Act (7 U.S.C. 7a-2(c)(1)) is amended by inserting ‘(A)’ after ‘IN GENERAL- ’ and adding at the end the following:CommentsClose CommentsPermalink





‘(B) Unless section 805(e) of the Payment, Clearing, and Settlement Supervision Act of 2009 applies, the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment shall become effective, pursuant to the registered entity’s certification, 10 business days after the Commission’s receipt of the certification (or such shorter period 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).CommentsClose CommentsPermalink





‘(C) A notification by the Commission pursuant to subparagraph (B) shall stay the certification of the new contract or instrument or clearing of the new contract or instrument, new rule or new amendment for up to an additional 90 days from the date of such notification.’.CommentsClose CommentsPermalink





(e) Section 5c(d) of the Commodity Exchange Act (7 U.S.C. 7a-2(d)) is repealed.CommentsClose CommentsPermalink

SEC. 126. FOREIGN BOARDS OF TRADE.

(a) XXX- Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is amended by striking ‘No rule or regulation’ and inserting ‘Except as provided in paragraphs (1) and (2), no rule or regulation’.CommentsClose CommentsPermalink





(b) XXX- Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is further amended by inserting before ‘The Commission’ the following:CommentsClose CommentsPermalink





‘(1) 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 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.CommentsClose CommentsPermalink





‘(2) LINKED CONTRACTS- It shall be unlawful for 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--CommentsClose CommentsPermalink





‘(A) 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; andCommentsClose CommentsPermalink





‘(B) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade)--CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(I) the information that the foreign board of trade will make publicly available;CommentsClose CommentsPermalink





‘(II) the position limits that the foreign board of trade or foreign futures authority will adopt and enforce;CommentsClose CommentsPermalink





‘(III) 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; andCommentsClose CommentsPermalink





‘(IV) any other area of interest expressed by the Commission to the foreign board of trade or foreign futures authority;CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(v) provides the Commission with information 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.CommentsClose CommentsPermalink





‘(3) EXISTING FOREIGN BOARDS OF TRADE- Paragraphs (1) and (2) shall not be effective with respect to any foreign board of trade to which the Commission has granted direct access permission before the date of the enactment of this subsection until the date that is 180 days after such date of enactment.CommentsClose CommentsPermalink





‘(4) PERSONS LOCATED IN THE UNITED STATES- ’.CommentsClose CommentsPermalink





(c) Liability of Registered Persons Trading on a Foreign Board of Trade-CommentsClose CommentsPermalink





(1) Section 4(a) of the Commodity Exchange Act (7. U.S.C. 6(a)) is amended by inserting ‘or by subsection (f)’ after ‘Unless exempted by the Commission pursuant to subsection (c)’; andCommentsClose CommentsPermalink





(2) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is further amended by adding at the end the following:CommentsClose CommentsPermalink





‘(f) 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 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 has complied with subsections (b)(1) and (b)(2).’.CommentsClose CommentsPermalink





(d) Contract Enforcement for Foreign Futures Contracts- Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(5) 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.’.CommentsClose CommentsPermalink

SEC. 127. LEGAL CERTAINTY FOR SWAPS.

Section 22(a)(4) of the Commodity Exchange Act (7 U.S.C. 25(a)(4)) is amended to read as follows:CommentsClose CommentsPermalink





‘(4) CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES-CommentsClose CommentsPermalink





‘(A) No hybrid instrument sold to any investor shall be void, voidable, or unenforceable, and no party to such hybrid instrument shall be entitled to rescind, or recover any payment made with respect to, such a 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.CommentsClose CommentsPermalink





‘(B) 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 thereto shall be entitled to rescind, or recover any payment made with respect to, such 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 to meet the definition of a swap set forth in section 1a or to be cleared pursuant to section 2(j)(1).’.CommentsClose CommentsPermalink

SEC. 128. MULTILATERAL CLEARING ORGANIZATIONS.

(a) Section 408(2)(C) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is amended by striking ‘section 2(c), 2(d), 2(f), or 2(g) of such Act, or exempted under section 2(h) or 4(c) of such Act’ and inserting ‘section 2(c) or 2(f) of such Act’.CommentsClose CommentsPermalink





(b) Section 408 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421) is further amended by inserting at the end the following:CommentsClose CommentsPermalink





‘(4) The term ‘over-the-counter derivative instrument’ does not include a swap or a security-based swap as defined in sections 1a(35) and 1a(38) of the Commodity Exchange Act (7 U.S.C. 1a(35) and 1a(38)).’.CommentsClose CommentsPermalink

SEC. 129. PRIMARY ENFORCEMENT AUTHORITY.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding the following new section after section 4b:CommentsClose CommentsPermalink

‘SEC. 4b-1. PRIMARY ENFORCEMENT AUTHORITY.

‘(a) CFTC- Except as provided in subsections (b), (c), and (d), the Commission shall have primary authority to enforce the provisions of Subtitle A of the Over-the-Counter Derivatives Markets Act of 2009 with respect to any person.CommentsClose CommentsPermalink





‘(b) Prudential Regulators- The Prudential Regulators shall have exclusive authority to enforce the provisions of section 4s(e) and other prudential requirements of this Act with respect to banks, and branches or agencies of foreign banks that are swap dealers or major swap participants.CommentsClose CommentsPermalink





‘(c) Referral- If the Prudential Regulator for a swap dealer or major swap participant has cause to believe that such swap dealer or major swap participant may have engaged in conduct that constitutes a violation of the nonprudential requirements of section 4s or rules adopted by the Commission thereunder, that Prudential Regulator may recommend in writing to the Commission that the Commission initiate an enforcement proceeding as authorized under this Act. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation.CommentsClose CommentsPermalink





‘(d) Backstop Enforcement Authority- If the Commission does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the Commission receives a recommendation under subsection (c), the Prudential Regulator may initiate an enforcement proceeding as permitted under Federal law.’.CommentsClose CommentsPermalink

SEC. 130. ENFORCEMENT.

(a) Section 4b(a)(2) of the Commodity Exchange Act (7 U.S.C. 6b(a)(2)) is amended by striking ‘or other agreement, contract, or transaction subject to paragraphs (1) and (2) of section 5a(g),’ and inserting ‘or swap,’.CommentsClose CommentsPermalink





(b) Section 4b(b) of the Commodity Exchange Act (7 U.S.C. 6b(b)) is amended by striking ‘or other agreement, contract or transaction subject to paragraphs (1) and (2) of section 5a(g),’ and inserting ‘or swap,’.CommentsClose CommentsPermalink





(c) Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) is amended by inserting ‘or swap’ before ‘if the transaction is used or may be used’.CommentsClose CommentsPermalink





(d) Section 9(a)(2) of the Commodity Exchange Act (7 U.S.C. 13(a)(2)) is amended by inserting ‘or of any swap,’ before ‘or to corner’.CommentsClose CommentsPermalink





(e) Section 9(a)(4) of the Commodity Exchange Act (7 U.S.C. 13(a)(4)) is amended by inserting ‘swap repository,’ before ‘or futures association’.CommentsClose CommentsPermalink





(f) Section 9(e)(1) of the Commodity Exchange Act (7 U.S.C. 13(e)(1)) is amended by inserting ‘swap repository,’ before ‘or registered futures association’ and by inserting ‘, or swaps,’ before ‘on the basis’.CommentsClose CommentsPermalink





(g) Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)) is amended by adding the following new paragraph (6) and renumber existing paragraphs (6) through (10) as (7) through (11):CommentsClose CommentsPermalink





‘(6) This section shall apply to any swap dealer, major swap participant, security-based swap dealer, major security-based swap participant, derivatives clearing organization, swap repository or swap execution facility, whether or not it is an insured depository institution, for which the Board, the Corporation, or the Office of the Comptroller of the Currency is the appropriate Federal banking agency or Prudential Regulator for purposes of the Over-the-Counter Derivatives Markets Act of 2009.’.CommentsClose CommentsPermalink

SEC. 131. RETAIL COMMODITY TRANSACTIONS.

Section 2(c) of the Commodity Exchange Act (7 U.S.C. 2(c)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (1), by striking ‘(to the extent provided in section 5a(g), 5b, 5d, or 12(e)(2)(B))’ and inserting ‘5b, or 12(e)(2)(B))’;CommentsClose CommentsPermalink





(2) in paragraph (2), by inserting after subparagraph (C) the following:CommentsClose CommentsPermalink





‘(D) RETAIL COMMODITY TRANSACTIONS-CommentsClose CommentsPermalink





‘(i) This subparagraph shall apply to any agreement, contract, or transaction in any commodity that is--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(ii) Clause (i) shall not apply to--CommentsClose CommentsPermalink





‘(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);CommentsClose CommentsPermalink





‘(II) any security;CommentsClose CommentsPermalink





‘(III) a contract of sale that--CommentsClose CommentsPermalink

‘(aa) results in actual delivery within 28 days or such other 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; orCommentsClose CommentsPermalink

‘(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 their line of business;CommentsClose CommentsPermalink

‘(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)); orCommentsClose CommentsPermalink





‘(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)).CommentsClose CommentsPermalink





‘(iii) Sections 4(a), 4(b) and 4b shall apply to any agreement, contract or transaction described in clause (i), that is not excluded from clause (i) by clause (ii), as if the agreement, contract, or transaction were a contract of sale of a commodity for future delivery.CommentsClose CommentsPermalink





‘(iv) 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





‘(v) 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 provisions of this Act with respect to security futures products and persons effecting transactions in security futures products.CommentsClose CommentsPermalink





‘(vi) For the purposes of this subparagraph, an agricultural producer, packer, or handler shall be considered an eligible commercial entity for any agreement, contract, or transaction for a commodity in connection with its line of business.’.CommentsClose CommentsPermalink

SEC. 132. LARGE SWAP TRADER REPORTING.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding after section 4t (as added by section 118) the following:CommentsClose CommentsPermalink

‘SEC. 4u. LARGE SWAP TRADER REPORTING.

‘(a) It shall be unlawful for any person to enter into any swap that performs or affects a significant price discovery function with respect to regulated markets if--CommentsClose CommentsPermalink





‘(1) such person shall directly or indirectly enter into such swaps 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; andCommentsClose CommentsPermalink





‘(2) such person shall directly or indirectly have or obtain a position in such swaps equal to or in excess of such amount as shall be fixed from time to time by the Commission,CommentsClose CommentsPermalink





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 paragraphs (1) and (2) as the Commission may by rule or regulation require and unless, in accordance with the rules and regulations of the Commission, such person shall keep books and records of all such swaps and any transactions and positions in any related commodity traded on or subject to the rules of any board of trade, and of cash or spot transactions in, inventories of, and purchase and sale commitments of, such a commodity.CommentsClose CommentsPermalink





‘(b) Such books and records shall show complete details concerning all transactions and positions as the Commission may by rule or regulation prescribe.CommentsClose CommentsPermalink





‘(c) Such books and records shall be open at all times to inspection and examination by any representative of the Commission.CommentsClose CommentsPermalink





‘(d) For the purpose of this subsection, the swaps, 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.CommentsClose CommentsPermalink





‘(e) In making a determination whether a swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider the factors set forth in section 4a(a)(3).’.CommentsClose CommentsPermalink

SEC. 133. AUTHORITY TO BAN ABUSIVE SWAPS.

The Commodity Futures Trading Commission and the Securities and Exchange Commission may jointly, by rule or order, prohibit transactions in any swap (as defined in section 1a(35) of the Commodity Exchange Act) or security-based swap (as defined in section 1a(38) of such Act) which the Commodity Futures Trading Commission and the Securities Exchange Commission find would be detrimental to the stability of a financial market or of participants in a financial market.CommentsClose CommentsPermalink

SEC. 134. INTERNATIONAL HARMONIZATION.

In order to promote effective and consistent global regulation of swaps, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Prudential Regulators (as defined in section 1a(43) of the Commodity Exchange Act), the financial stability regulator, and the Office of Derivatives Supervision shall consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation of swaps, and may agree to such information-sharing arrangements as may be deemed to be necessary or appropriate in the public interest or for the protection of investors and swap counterparties.CommentsClose CommentsPermalink

SEC. 135. AUTHORITY TO BAN ACCESS TO THE UNITED STATES FINANCIAL SYSTEM.

The Secretary of the Treasury may prohibit any entity domiciled in a foreign country that regulates swaps (as defined in section 1a(35) of the Commodity Exchange Act) or security-based swaps (as defined in section 1a(38) of such Act) in a manner which the Secretary of the Treasury finds undermines the stability of a financial market, from participating in such financial activities in the United States as the Secretary deems appropriate.CommentsClose CommentsPermalink

SEC. 136. OTHER AUTHORITY.

Unless otherwise provided by its terms, this title does not divest any appropriate Federal banking agency, the Commission, the Securities and Exchange Commission, or other Federal or State agency, of any authority derived from any other applicable law.CommentsClose CommentsPermalink

SEC. 137. ANTITRUST.

Nothing in the amendments made by this title shall be construed to modify, impair, or supersede the operation of any of the antitrust laws. For purposes of this subtitle, the term ‘antitrust laws’ has the same meaning given such term in subsection (a) of the first section of the Clayton Act, except that such term includes section 5 of the Federal Trade Commission Act to the extent that such section 5 applies to unfair methods of competition.CommentsClose CommentsPermalink

SEC. 138. EFFECTIVE DATE.

This subtitle is effective 180 days after the date of enactment.CommentsClose CommentsPermalink

Subtitle B--Regulation of Security-Based Swap MarketsCommentsClose CommentsPermalink

SEC. 151. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.

Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (5)(A) and (B), by inserting ‘(but not security-based swaps, other than security-based swaps with or for persons that are not eligible contract participants)’ after the word ‘securities’ in each place it appears;CommentsClose CommentsPermalink





(2) in paragraph (13), by adding at the end the following: ‘For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’;CommentsClose CommentsPermalink





(3) in paragraph (14), by adding at the end the following: ‘For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.’;CommentsClose CommentsPermalink





(4) in paragraph (39)--CommentsClose CommentsPermalink





(A) by striking ‘or government securities dealer’ and adding ‘government securities dealer, security-based swap dealer or major security-based swap participant’ in its place in subparagraph (B)(i)(I);CommentsClose CommentsPermalink





(B) by adding ‘security-based swap dealer, major security-based swap participant,’ after ‘government securities dealer,’ in subparagraph (B)(i)(II);CommentsClose CommentsPermalink





(C) by striking ‘or government securities dealer’ and adding ‘government securities dealer, security-based swap dealer or major security-based swap participant’ in its place in subparagraph (C); andCommentsClose CommentsPermalink





(D) by adding ‘security-based swap dealer, major security-based swap participant,’ after ‘government securities dealer,’ in subparagraph (D); andCommentsClose CommentsPermalink





(5) by adding at the end the following:CommentsClose CommentsPermalink





‘(65) ELIGIBLE CONTRACT PARTICIPANT- The term ‘eligible contract participant’ has the same meaning as in section 1a(13) of the Commodity Exchange Act (7 U.S.C. 1a(13)).CommentsClose CommentsPermalink





‘(66) MAJOR SWAP PARTICIPANT- The term ‘major swap participant’ has the same meaning as in section 1a(40) of the Commodity Exchange Act (7 U.S.C. 1a(40)).CommentsClose CommentsPermalink





‘(67) MAJOR SECURITY-BASED SWAP PARTICIPANT- The term ‘major security-based swap participant’ has the same meaning as in section 1a(41) of the Commodity Exchange Act (7 U.S.C. 1a(41)).CommentsClose CommentsPermalink





‘(68) SECURITY-BASED SWAP- The term ‘security-based swap’ has the same meaning as in section 1a(38) of the Commodity Exchange Act (7 U.S.C. 1a(38)).CommentsClose CommentsPermalink





‘(69) SWAP- The term ‘swap’ has the same meaning as in section 1a(35) of the Commodity Exchange Act (7 U.S.C. 1a(35)).CommentsClose CommentsPermalink





‘(70) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP DEALER OR MAJOR SECURITY-BASED SWAP PARTICIPANT- The term ‘person associated with a security-based swap dealer or major security-based swap participant’ or ‘associated person of a security-based swap dealer or major security-based swap participant’ has the same meaning as in section 1a(48) of the Commodity Exchange Act (7 U.S.C. 1a(48)).CommentsClose CommentsPermalink





‘(71) SECURITY-BASED SWAP DEALER- The term ‘security-based swap dealer’ has the same meaning as in section 1a(44) of the Commodity Exchange Act (7 U.S.C. 1a(44)).CommentsClose CommentsPermalink





‘(72) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).CommentsClose CommentsPermalink





‘(73) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.CommentsClose CommentsPermalink





‘(74) PRUDENTIAL REGULATOR- The term ‘Prudential Regulator’ has the same meaning as in section 1a(43) of the Commodity Exchange Act (7 U.S.C. 1a(43)).CommentsClose CommentsPermalink





‘(75) SWAP DEALER- The term ‘swap dealer’ has the same meaning as in section 1a(39) of the Commodity Exchange Act (7 U.S.C. 1a(39)).CommentsClose CommentsPermalink





‘(76) SECURITY-BASED SWAP AGREEMENT-CommentsClose CommentsPermalink





‘(A) IN GENERAL- For purposes of sections 10, 16, 20, and 21A of this Act, and section 17 of the Securities Act of 1933 (15 U.S.C. 77q), the term ‘security-based swap agreement’ means a 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.CommentsClose CommentsPermalink





‘(B) EXCLUSIONS- The term ‘security-based swap agreement’ does not include any security-based swap.’.CommentsClose CommentsPermalink

SEC. 152. REPEAL OF PROHIBITION ON REGULATION OF SECURITY-BASED SWAPS.

(a) Repeal of Law- Section 206B of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is repealed.CommentsClose CommentsPermalink





(b) Conforming Amendments to the Securities Act of 1933-CommentsClose CommentsPermalink





(1) Section 2A(b) is amended by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that such term appears.CommentsClose CommentsPermalink





(2) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) is amended--CommentsClose CommentsPermalink





(A) in subsection (a)--CommentsClose CommentsPermalink





(i) by inserting ‘(including security-based swaps)’ after ‘securities’; andCommentsClose CommentsPermalink





(ii) by striking ‘206B of the Gramm-Leach-Bliley Act’ and inserting ‘3(a)(76) of the Securities Exchange Act of 1934’; andCommentsClose CommentsPermalink





(B) in subsection (d), by striking ‘206B of the Gramm-Leach-Bliley Act’ and inserting ‘3(a)(76) of the Securities Exchange Act of 1934’.CommentsClose CommentsPermalink





(c) Conforming Amendments to the Securities Exchange Act of 1934- The Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.) is amended as follows:CommentsClose CommentsPermalink





(1) Section 3A (15 U.S.C. 78c-1) is amended by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that the term appears.CommentsClose CommentsPermalink





(2) Section 9(a) (15 U.S.C. 78i(a)) is amended by striking paragraphs (2) through (5) and inserting:CommentsClose CommentsPermalink





‘(2) To effect, alone or with one or more other persons, a series of transactions in any security registered on a national securities exchange or in connection with any security-based swap with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.CommentsClose CommentsPermalink





‘(3) If a dealer, broker, security-based swap dealer, major security-based swap participant or other person selling or offering for sale or purchasing or offering to purchase the security to induce the purchase or sale of any security registered on a national securities exchange or any security-based swap with respect to such security by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of any one or more persons conducted for the purpose of raising or depressing the price of such security.CommentsClose CommentsPermalink





‘(4) If a dealer, broker, security-based swap dealer, major security-based swap participant or other person selling or offering for sale or purchasing or offering to purchase the security, to make, regarding any security registered on a national securities exchange or any security-based swap with respect to such security, for the purpose of inducing the purchase or sale of such security or such security-based swap, any statement which was at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, and which he knew or had reasonable ground to believe was so false or misleading.CommentsClose CommentsPermalink





‘(5) For a consideration, received directly or indirectly from a dealer, broker, security-based swap dealer, major security-based swap participant or other person selling or offering for sale or purchasing or offering to purchase the security, to induce the purchase of any security registered on a national securities exchange or any security-based swap with respect to such security by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall because of the market operations of any one or more persons conducted for the purpose of raising or depressing the price of such security.’.CommentsClose CommentsPermalink





(3) Section 10 (15 U.S.C. 78j) is amended by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ each place that the term appears.CommentsClose CommentsPermalink





(4) Section 15(c)(1) is amended--CommentsClose CommentsPermalink





(A) in subparagraph (A, by striking ‘, or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act),’; andCommentsClose CommentsPermalink





(B) in subparagraphs (B) and (C), by striking ‘agreement (as defined in section 206B of the Gramm-Leach-Bliley Act)’ in each place that the term appears.CommentsClose CommentsPermalink





(5) Section 15(i) (15 U.S.C. 78o(i), as added by section 303(f) of the Commodity Futures Modernization Act of 2000 (Public Law 106-554; 114 Stat. 2763A-455) is amended by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’.CommentsClose CommentsPermalink





(6) Section 16 (15 U.S.C. 78p) is amended--CommentsClose CommentsPermalink





(A) in subsection (a)(2)(C), by striking ‘(as defined in section 206(b) of the Gramm-Leach-Bliley Act)’;CommentsClose CommentsPermalink





(B) in subsection (b), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’ in each place that the term appears; andCommentsClose CommentsPermalink





(C) in subsection (g), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’;CommentsClose CommentsPermalink





(7) Section 20 (15 U.S.C. 78t) is amended--CommentsClose CommentsPermalink





(A) in subsection (d), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; andCommentsClose CommentsPermalink





(B) in subsection (f), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; andCommentsClose CommentsPermalink





(8) Section 21A (15 U.S.C. 78u-1) is amended--CommentsClose CommentsPermalink





(A) in subsection (a)(1), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’; andCommentsClose CommentsPermalink





(B) in subsection (g), by striking ‘(as defined in section 206B of the Gramm-Leach-Bliley Act)’.CommentsClose CommentsPermalink