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HR 977 IHCommentsClose CommentsPermalink

111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

H. R. 977CommentsClose CommentsPermalink

To amend the Commodity Exchange Act to bring greater transparency and accountability to commodity markets, and for other purposes.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

February 11, 2009CommentsClose CommentsPermalink

Mr. PETERSON introduced the following bill; which was referred to the Committee on Agriculture, and in addition to the Committee on Financial Services, 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

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A BILLCommentsClose CommentsPermalink

To amend the Commodity Exchange Act to bring greater transparency and accountability to commodity markets, and for other purposes.CommentsClose CommentsPermalink

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Derivatives Markets Transparency and Accountability Act of 2009’.CommentsClose CommentsPermalink

SEC. 2. TABLE OF CONTENTS.

The table of contents of this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title.CommentsClose CommentsPermalink





Sec. 2. Table of contents.CommentsClose CommentsPermalink





Sec. 3. Speculative limits and transparency of off-shore trading.CommentsClose CommentsPermalink





Sec. 4. Detailed reporting and disaggregation of market data.CommentsClose CommentsPermalink





Sec. 5. Transparency and recordkeeping authorities.CommentsClose CommentsPermalink





Sec. 6. Trading limits to prevent excessive speculation.CommentsClose CommentsPermalink





Sec. 7. CFTC Administration.CommentsClose CommentsPermalink





Sec. 8. Review of prior actions.CommentsClose CommentsPermalink





Sec. 9. Review of over-the-counter markets.CommentsClose CommentsPermalink





Sec. 10. Study relating to international regulation of energy commodity markets.CommentsClose CommentsPermalink





Sec. 11. Over-the-counter authority.CommentsClose CommentsPermalink





Sec. 12. Expedited process.CommentsClose CommentsPermalink





Sec. 13. Certain exclusions and exemptions available only for certain transactions settled and cleared through registered derivatives clearing organizations.CommentsClose CommentsPermalink





Sec. 14. Treatment of emission allowances and offset credits.CommentsClose CommentsPermalink





Sec. 15. Inspector General of the Commodity Futures Trading Commission.CommentsClose CommentsPermalink





Sec. 16. Authority of Commodity Futures Trading Commission to suspend trading in credit default swaps.CommentsClose CommentsPermalink





Sec. 17. Authority of Commodity Futures Trading Commission to prosecute criminal violations of the Commodity Exchange Act.CommentsClose CommentsPermalink

SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF-SHORE TRADING.

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





‘(e) Foreign Boards of Trade-CommentsClose CommentsPermalink





‘(1) IN GENERAL- The Commission may not permit a foreign board of trade to provide to the members of the foreign board of trade or other participants located in the United States direct access to the electronic trading and order matching system of the foreign board of trade with respect to an agreement, contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, unless--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, taking into consideration the relative sizes of the respective markets, 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,’ 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 for 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles.CommentsClose CommentsPermalink





‘(2) EXISTING FOREIGN BOARDS OF TRADE- Paragraph (1) shall not be effective with respect to any agreement, contract, or transaction executed on a foreign board of trade to which the Commission had 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





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





(1) Section 4(a) of such 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)’.CommentsClose CommentsPermalink





(2) Section 4 of such 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--CommentsClose CommentsPermalink





‘(1) has reason to believe the transaction and the contract is made on or subject to the rules of a board of trade that is--CommentsClose CommentsPermalink





‘(A) legally organized under the laws of a foreign country;CommentsClose CommentsPermalink





‘(B) authorized to act as a board of trade by a foreign futures authority; andCommentsClose CommentsPermalink





‘(C) subject to regulation by the foreign futures authority; andCommentsClose CommentsPermalink





‘(2) has not been determined by the Commission to be operating in violation of subsection (a).’.CommentsClose CommentsPermalink





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





‘(5) 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. 4. DETAILED REPORTING AND DISAGGREGATION OF MARKET DATA.

Section 4 of the Commodity Exchange Act (7 U.S.C. 6), as amended by section 3 of this Act, is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(g) Detailed Reporting and Disaggregation of Market Data-CommentsClose CommentsPermalink





‘(1) INDEX TRADERS AND SWAP DEALERS REPORTING- The Commission shall issue a proposed rule defining and classifying index traders and swap dealers (as those terms are defined by the Commission) for purposes of data reporting requirements and setting routine detailed reporting requirements for any positions of such entities in contracts traded on designated contract markets, derivatives transaction execution facilities, foreign boards of trade subject to section 4(e), and electronic trading facilities with respect to significant price discovery contracts not later than 120 days after the date of the enactment of this subsection, and issue a final rule within 180 days after such date of enactment.CommentsClose CommentsPermalink





‘(2) DISAGGREGATION OF INDEX FUNDS AND OTHER DATA IN MARKETS- Subject to section 8 and beginning within 60 days of the issuance of the final rule required by paragraph (1), the Commission shall disaggregate and make public monthly--CommentsClose CommentsPermalink





‘(A) the number of positions and total notional value of index funds and other passive, long-only and short-only positions (as defined by the Commission) in all markets to the extent such information is available; andCommentsClose CommentsPermalink





‘(B) data on speculative positions relative to bona fide physical hedgers in those markets to the extent such information is available.’.CommentsClose CommentsPermalink

SEC. 5. TRANSPARENCY AND RECORDKEEPING AUTHORITIES.

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





(1) by inserting ‘a’ before ‘futures commission merchant’; andCommentsClose CommentsPermalink





(2) by inserting ‘and transactions and positions traded pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued by the Commission by rule, regulation or order,’ after ‘United States or elsewhere,’.CommentsClose CommentsPermalink





(b) Reports of Deals Equal to or in Excess of Trading Limits-CommentsClose CommentsPermalink





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





(A) in the first sentence--CommentsClose CommentsPermalink





(i) by inserting ‘(a)’ before ‘It shall’; andCommentsClose CommentsPermalink





(ii) by inserting ‘in the United States or elsewhere, and of transactions and positions in any such commodity entered into pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued by the Commission by rule, regulation or order’ before ‘, and of cash or spot’; andCommentsClose CommentsPermalink





(B) by striking all that follows the 1st sentence and inserting the following:CommentsClose CommentsPermalink





‘(b) Upon special call by the Commission, any person shall provide to the Commission, in a form and manner and within the period specified in the special call, books and records of all transactions and positions traded on or subject to the rules of any board of trade or electronic trading facility in the United States or elsewhere, or pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued by the Commission by rule, regulation, or order, as the Commission may determine appropriate to deter and prevent price manipulation or any other disruption to market integrity or to diminish, eliminate, or prevent excessive speculation as described in section 4a(a).CommentsClose CommentsPermalink





‘(c) Such books and records described in subsections (a) and (b) shall show complete details concerning all such transactions, positions, inventories, and commitments, including the names and addresses of all persons having any interest therein, shall be kept for a period of 5 years, and shall be open at all times to inspection by any representative of the Commission or the Department of Justice. For the purposes of this section, the futures and cash or spot transactions and positions of any person shall include such transactions and positions of any persons directly or indirectly controlled by the person.’.CommentsClose CommentsPermalink





(2) NOTICE AND COMMENT- Within 60 days after the date of the enactment of this subsection, the Commodity Futures Trading Commission shall provide an opportunity for notice and comment on implementing the amendments made by paragraph (1).CommentsClose CommentsPermalink





(c) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended--CommentsClose CommentsPermalink





(A) by inserting ‘4g(a), 4i,’ before ‘5a (to’; andCommentsClose CommentsPermalink





(B) by inserting ‘, and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions,’ before ‘governs’.CommentsClose CommentsPermalink





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





(A) by inserting ‘4g(a), 4i,’ before ‘5a (to’; andCommentsClose CommentsPermalink





(B) by inserting ‘, and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions,’ before ‘shall apply’.CommentsClose CommentsPermalink





(3) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)) is amended to read as follows:CommentsClose CommentsPermalink





‘(A) sections 4g(a), 4i, 5b and 12(e)(2)(B), and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions;’.CommentsClose CommentsPermalink





(4) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)) is amended to read as follows:CommentsClose CommentsPermalink





‘(A) sections 4g(a), 4i, 5a (to the extent provided in section 5a(g)), 5b, 5d, and 12(e)(2)(B), and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions;’.CommentsClose CommentsPermalink

SEC. 6. TRADING LIMITS TO PREVENT EXCESSIVE SPECULATION.

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





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





(A) by inserting ‘(1)’ after ‘(a)’; andCommentsClose CommentsPermalink





(B) by adding after and below the end the following:CommentsClose CommentsPermalink





‘(2)(A) In accordance with the standards set forth in paragraph (1) of this subsection and consistent with the good faith exception cited in subsection (b)(2),with respect to physically deliverable commodities as defined by the Commission, the Commission shall by rule, regulation, or order establish limits on the amount of positions, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to contracts of sale for future delivery or with respect to options on such contracts or commodities traded on or subject to the rules of a contract market or derivatives transaction execution facility, or on an electronic trading facility as a significant price discovery contract.CommentsClose CommentsPermalink





‘(B)(i) For exempt commodities, the limits shall be established within 90 days after the date of the enactment of this paragraph.CommentsClose CommentsPermalink





‘(ii) For agricultural commodities, the limits shall be established within 180 days after the date of the enactment of this paragraph.CommentsClose CommentsPermalink





‘(3) In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits--CommentsClose CommentsPermalink





‘(A) on the number of positions that may be held by any person for the spot month, each other month, and the aggregate number of positions that may be held by any person for all months;CommentsClose CommentsPermalink





‘(B) to the maximum extent practicable, in its discretion--CommentsClose CommentsPermalink





‘(i) to diminish, eliminate, or prevent excessive speculation as described under this section;CommentsClose CommentsPermalink





‘(ii) to deter and prevent market manipulation, squeezes, and corners;CommentsClose CommentsPermalink





‘(iii) to ensure sufficient market liquidity for bona fide hedgers; andCommentsClose CommentsPermalink





‘(iv) to ensure that the price discovery function of the underlying market is not disrupted; andCommentsClose CommentsPermalink





‘(C) to the maximum extent practicable, in its discretion, take into account the total number of positions in fungible agreements, contracts, or transactions that a person can hold in other markets.CommentsClose CommentsPermalink





‘(4)(A) Not later than 150 days after the date of the enactment of this paragraph, and annually thereafter, the Commission shall hold 2 public hearings, 1 for agriculture commodities and 1 for energy commodities as such terms are defined by the Commission, in order to receive recommendations regarding the position limits to be established in paragraph (2).CommentsClose CommentsPermalink





‘(B) Each public hearing held pursuant to subparagraph (A) shall, at a minimum providing there is sufficient interest, receive recommendations from--CommentsClose CommentsPermalink





‘(i) 7 predominantly commercial short hedgers of the actual physical commodity for future delivery;CommentsClose CommentsPermalink





‘(ii) 7 predominantly commercial long hedgers of the actual physical commodity for future delivery;CommentsClose CommentsPermalink





‘(iii) 4 non-commercial participants in markets for commodities for future delivery; andCommentsClose CommentsPermalink





‘(iv) each designated contract market or derivatives transaction execution facility upon which a contract in the commodity for future delivery is traded, and each electronic trading facility that has a significant price discovery contract in the commodity.’; andCommentsClose CommentsPermalink





(2) in subsection (c)--CommentsClose CommentsPermalink





(A) by inserting ‘(1)’ after ‘(c)’; andCommentsClose CommentsPermalink





(B) by adding after and below the end the following:CommentsClose CommentsPermalink





‘(2) For the purposes of contracts of sale for future delivery and options on such contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that--CommentsClose CommentsPermalink





‘(A)(i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel;CommentsClose CommentsPermalink





‘(ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; andCommentsClose CommentsPermalink





‘(iii) arises from the potential change in the value of--CommentsClose CommentsPermalink





‘(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising;CommentsClose CommentsPermalink





‘(II) liabilities that a person owns or anticipates incurring; orCommentsClose CommentsPermalink





‘(III) services that a person provides, purchases, or anticipates providing or purchasing; orCommentsClose CommentsPermalink





‘(B) reduces risks attendant to a position resulting from a transaction that--CommentsClose CommentsPermalink





‘(i) was executed pursuant to subsection (d), (g), (h)(1), or (h)(2) of section 2, or an exemption issued by the Commission by rule, regulation or order; andCommentsClose CommentsPermalink





‘(ii)(I) was executed opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction pursuant to subparagraph (A); orCommentsClose CommentsPermalink





‘(II) meets the requirements of subparagraph (A).’.CommentsClose CommentsPermalink

SEC. 7. CFTC ADMINISTRATION.

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





‘(D) ADDITIONAL EMPLOYEES- As soon as practicable after the date of the enactment of this subparagraph, subject to appropriations, the Commission shall appoint a sufficient number of full-time employees (in addition to the employees employed by the Commission as of the date of the enactment of this subparagraph)--CommentsClose CommentsPermalink





‘(i) to increase the public transparency of operations in markets;CommentsClose CommentsPermalink





‘(ii) to improve the enforcement of this Act in those markets;CommentsClose CommentsPermalink





‘(iii) to enhance oversight of the clearing of contracts, agreements, and transactions; andCommentsClose CommentsPermalink





‘(iv) to carry out the provisions of the Derivatives Markets Transparency and Accountability Act of 2009 and such other duties as are prescribed by the Commission.’.CommentsClose CommentsPermalink

SEC. 8. REVIEW OF PRIOR ACTIONS.

Notwithstanding any other provision of the Commodity Exchange Act, the Commodity Futures Trading Commission shall review, as appropriate, all regulations, rules, exemptions, exclusions, guidance, no action letters, orders, other actions taken by or on behalf of the Commission, and any action taken pursuant to the Commodity Exchange Act by an exchange, self-regulatory organization, or any other registered entity, that are currently in effect, to ensure that such prior actions are in compliance with the provisions of this Act.CommentsClose CommentsPermalink

SEC. 9. REVIEW OF OVER-THE-COUNTER MARKETS.

(a) Study- The Commodity Futures Trading Commission shall conduct a study--CommentsClose CommentsPermalink





(1) to determine the efficacy, practicality, and consequences of establishing limits on the size of a position, other than bona fide hedge positions, that may be held by any person with respect to agreements, contracts, or transactions involving an agricultural or energy commodity, conducted in reliance on sections 2(g) and 2(h) of the Commodity Exchange Act and of any exemption issued by the Commission by rule, regulation or order, that are fungible (as defined by the Commission) with agreements, contracts, or transactions traded on or subject to the rules of any board of trade or of any electronic trading facility with respect to a significant price discovery contract, as a means to deter and prevent price manipulation or any other disruption to market integrity or to diminish, eliminate, or prevent excessive speculation as described in section 4a of such Act for physical-based agricultural or energy commodities; andCommentsClose CommentsPermalink





(2) to determine the efficacy, practicality, and consequences of establishing aggregate position limits for similar agreements, contracts, or transactions for physical-based agricultural or energy commodities traded--CommentsClose CommentsPermalink





(A) on designated contract markets;CommentsClose CommentsPermalink





(B) on derivatives transaction execution facilities; andCommentsClose CommentsPermalink





(C) in reliance on such sections 2(g) and 2(h) and of any exemption issued by the Commission by rule, regulation or order.CommentsClose CommentsPermalink





(b) Public Hearings- The Commission shall provide for not less than 2 public hearings to take testimony, on the record, as part of the fact- gathering process in preparation of the report.CommentsClose CommentsPermalink





(c) Report and Recommendations- Not less than 12 months after the date of the enactment of this section, the Commission shall provide to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that--CommentsClose CommentsPermalink





(1) describes the results of the study; andCommentsClose CommentsPermalink





(2) provides recommendations on any actions necessary to deter and prevent price manipulation or any other disruption to market integrity or to diminish, eliminate, or prevent excessive speculation as described in section 4a of the Commodity Exchange Act for physical-based commodities, including--CommentsClose CommentsPermalink





(A) any additional statutory authority that the Commission determines to be necessary to implement the recommendations; andCommentsClose CommentsPermalink





(B) a description of the resources that the Commission considers to be necessary to implement the recommendations.CommentsClose CommentsPermalink

SEC. 10. STUDY RELATING TO INTERNATIONAL REGULATION OF ENERGY COMMODITY MARKETS.

(a) In General- The Comptroller General of the United States shall conduct a study of the international regime for regulating the trading of energy commodity futures and derivatives.CommentsClose CommentsPermalink





(b) Analysis- The study shall include an analysis of, at a minimum--CommentsClose CommentsPermalink





(1) key common features and differences among countries in the regulation of energy commodity trading, including with respect to market oversight and enforcement standards and activities;CommentsClose CommentsPermalink





(2) variations among countries with respect to the use of position limits, position accountability levels, or other thresholds to detect and prevent price manipulation, excessive speculation as described in section 4a of the Commodity Exchange Act, or other unfair trading practices;CommentsClose CommentsPermalink





(3) variations in practices regarding the differentiation of commercial and noncommercial trading;CommentsClose CommentsPermalink





(4) agreements and practices for sharing market and trading data among futures authorities and between futures authorities and the entities that the futures authorities oversee; andCommentsClose CommentsPermalink





(5) agreements and practices for facilitating international cooperation on market oversight, compliance, and enforcement.CommentsClose CommentsPermalink





(c) Report- Not later than 1 year after the date of the enactment of this Act, the Comptroller General shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that--CommentsClose CommentsPermalink





(1) describes the results of the study;CommentsClose CommentsPermalink





(2) addresses whether there is excessive speculation, and if so, the effects of any such speculation and energy price volatility on energy futures; andCommentsClose CommentsPermalink





(3) provides recommendations to improve openness, transparency, and other necessary elements of a properly functioning market in a manner that protects consumers in the United States.CommentsClose CommentsPermalink

SEC. 11. OVER-THE-COUNTER AUTHORITY.

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





‘(j) Over-the-Counter Authority-CommentsClose CommentsPermalink





‘(1) Notwithstanding subsections (d), (g), (h)(1), and (h)(3) of section 2, and any exemption issued by the Commission by rule, regulation, or order, the Commission shall assess and issue a finding on whether agreements, contracts, or transactions entered into in reliance on subsection (d), (g), (h)(1), or (h)(3) of section 2 or any other exemption issued by the Commission by rule, regulation, or order, that are fungible (as defined by the Commission) with agreements, contracts, or transactions traded on or subject to the rules of any board of trade or electronic trading facility with respect to a significant price discovery contract, alone or in conjunction with other similar agreements, contracts, or transactions, have the potential to--CommentsClose CommentsPermalink





‘(A) disrupt the liquidity or price discovery function on a registered entity;CommentsClose CommentsPermalink





‘(B) cause a severe market disturbance in the underlying cash or futures market; orCommentsClose CommentsPermalink





‘(C) prevent or otherwise impair the price of a contract listed for trading on a registered entity from reflecting the forces of supply and demand in any market.CommentsClose CommentsPermalink





‘(2) If the Commission makes a finding pursuant to paragraph (1) of this subsection, the Commission may, in its discretion, utilize its authority under section 8a(9) to impose position limits (including, as appropriate and in its discretion, related hedge exemption provisions for bona fide hedging comparable to bona fide hedge provisions of section 4a(c)(2)) on agreements, contracts, or transactions involved, and take corrective actions to enforce the limits.’.CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 2(d)(1) of such Act (7 U.S.C. 2(d)(1)) is amended by inserting ‘subsection (j) of this section, and’ after ‘(other than’.CommentsClose CommentsPermalink





(2) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended by inserting ‘subsection (j) of this section, and’ after ‘(other than’.CommentsClose CommentsPermalink





(3) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended by inserting ‘subsection (j) of this section, and’ after ‘(other than’.CommentsClose CommentsPermalink





(4) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)), as amended by section 5(c)(3) of this Act, is amended by inserting ‘subsection (j) of this section and’ before ‘sections’.CommentsClose CommentsPermalink





(5) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)), as amended by section 5(c)(4) of this Act, is amended by inserting ‘subsection (j) of this section and’ before ‘sections’.CommentsClose CommentsPermalink





(6) Section 8a(9) of such Act (7 U.S.C. 12a(a)(9)) is amended by inserting after ‘of the Commission’s action’ the following: ‘, and to fix and enforce position limits to agreements, contracts, or transactions subject to section 2(j)(1) pursuant to a finding made under section 2(j)(2)’.CommentsClose CommentsPermalink

SEC. 12. EXPEDITED PROCESS.

The Commodity Futures Trading Commission may use emergency and expedited procedures (including any administrative or other procedure as appropriate) to carry out this Act if, in its discretion, it deems it necessary to do so.CommentsClose CommentsPermalink

SEC. 13. CERTAIN EXCLUSIONS AND EXEMPTIONS AVAILABLE ONLY FOR CERTAIN TRANSACTIONS SETTLED AND CLEARED THROUGH REGISTERED DERIVATIVES CLEARING ORGANIZATIONS.

(a) In General-CommentsClose CommentsPermalink





(1) EXCLUSION OF CERTAIN DERIVATIVE TRANSACTIONS-CommentsClose CommentsPermalink





(A) Section 2(d)(1) of the Commodity Exchange Act (7 U.S.C. 2(d)(1)) is amended--CommentsClose CommentsPermalink





(i) by striking ‘and’ at the end of subparagraph (A);CommentsClose CommentsPermalink





(ii) by striking the period at the end of subparagraph (B) and inserting ‘and’; andCommentsClose CommentsPermalink





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





‘(C) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a derivatives clearing organization registered with the Commission.’.CommentsClose CommentsPermalink





(B) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended--CommentsClose CommentsPermalink





(i) by striking ‘and’ at the end of subparagraph (B);CommentsClose CommentsPermalink





(ii) by striking the period at the end of subparagraph (C) and inserting ‘; and’; andCommentsClose CommentsPermalink





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





‘(D) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a derivatives clearing organization registered with the Commission.’.CommentsClose CommentsPermalink





(2) EXCLUSION FOR CERTAIN SWAP TRANSACTIONS- Section 2(g) of such Act (7 U.S.C. 2(g)) is amended--CommentsClose CommentsPermalink





(A) by striking ‘and’ at the end of paragraph (2);CommentsClose CommentsPermalink





(B) by striking the period at the end of paragraph (3) and inserting ‘; and’; andCommentsClose CommentsPermalink





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





‘(4) except as provided in section 4(h), settled and cleared through a derivatives clearing organization registered with the Commission.’.CommentsClose CommentsPermalink





(3) EXEMPTION FOR CERTAIN TRANSACTIONS IN EXEMPT COMMODITIES-CommentsClose CommentsPermalink





(A) Section 2(h)(1) of such Act ( 7 U.S.C. 2(h)(1)) is amended--CommentsClose CommentsPermalink





(i) by striking ‘and’ at the end of subparagraph (A);CommentsClose CommentsPermalink





(ii) by striking the period at the end of subparagraph (B) and inserting ‘; and’; andCommentsClose CommentsPermalink





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





‘(C) except as provided in section 4(h), is settled and cleared through a derivatives clearing organization registered with the Commission.’.CommentsClose CommentsPermalink





(B) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3)) is amended--CommentsClose CommentsPermalink





(i) by striking ‘and’ at the end of subparagraph (A);CommentsClose CommentsPermalink





(ii) by striking the period at the end of subparagraph (B) and inserting ‘; and’; andCommentsClose CommentsPermalink





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





‘(C) except as provided in section 4(h), settled and cleared through a derivatives clearing organization registered with the Commission.’.CommentsClose CommentsPermalink





(4) GENERAL EXEMPTIVE AUTHORITY- Section 4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is amended by inserting ‘the agreement, contract, or transaction, except as provided in section 4(h), will be settled and cleared through a derivatives clearing organization registered with the Commission and’ before ‘the Commission determines’.CommentsClose CommentsPermalink





(b) Alternatives to Clearing Through Derivatives Clearing Organizations- Section 4 of such Act (7 U.S.C. 6), as amended by sections 3 and 4 of this Act, is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(h) Alternatives to Clearing Through Derivatives Clearing Organizations-CommentsClose CommentsPermalink





‘(1) SETTLEMENT AND CLEARING THROUGH CERTAIN OTHER REGULATED ENTITIES- An agreement, contract, or transaction, or class thereof, relating to an excluded commodity, that would otherwise be required to be settled and cleared by section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or subsection (c)(1) of this section may be settled and cleared through an entity listed in section 409(b) of the Federal Deposit Insurance Corporation Improvement Act of 1991.CommentsClose CommentsPermalink





‘(2) REPORTING ALTERNATIVE-CommentsClose CommentsPermalink





‘(A) An agreement, contract, or transaction, or class thereof, that would otherwise be required to be settled and cleared by section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or subsection (c)(1) of this section shall be exempt from the requirement if reported to the Commission in a manner designated by the Commission, or to such other entity as the Commission deems appropriate.CommentsClose CommentsPermalink





‘(B) Parties entering into an agreement, contract, or transaction, or class thereof reported pursuant to subparagraph (A) shall demonstrate the financial integrity of the agreement, contract, or transaction and their own financial integrity, as such terms and standards are determined by the Commission.CommentsClose CommentsPermalink





‘(C) The standards established pursuant to subparagraph (B) shall include a net capital requirement that is comparable to the net capital requirement that would be associated with such a transaction were it cleared.CommentsClose CommentsPermalink





‘(i) Spot and Forward Exclusion- The settlement and clearing requirements of section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), or 4(c)(1) shall not apply to an agreement, contract, or transaction of any cash commodity for immediate or deferred shipment or delivery, as defined by the Commission.’.CommentsClose CommentsPermalink





(c) Additional Requirements Applicable to Applicants for Registration as a Derivatives Clearing Organization- Section 5b(c)(2) of such Act (7 U.S.C. 7a-1(c)(2)) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(O) DISCLOSURE OF GENERAL INFORMATION- The applicant 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 applicant;CommentsClose CommentsPermalink





‘(ii) the conventions, mechanisms, and practices applicable to the contracts, agreements, and transactions;CommentsClose CommentsPermalink





‘(iii) the margin-setting methodology and the size and composition of the financial resource package of the applicant; andCommentsClose CommentsPermalink





‘(iv) other information relevant to participation in the settlement and clearing activities of the applicant.CommentsClose CommentsPermalink





‘(P) DAILY PUBLICATION OF TRADING INFORMATION- The applicant shall make public daily information on settlement prices, volume, and open interest for contracts settled or cleared pursuant to the requirements of 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C) or 4(c)(1) of this Act by the applicant if the Commission determines that the contracts perform a significant price discovery function for transactions in the cash market for the commodity underlying the contracts.CommentsClose CommentsPermalink





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





(d) Amendments-CommentsClose CommentsPermalink





(1) Section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4422) is amended--CommentsClose CommentsPermalink





(A) in subsection (a), by inserting after ‘Federal Reserve Act’ the following: ‘, and the person is registered as a clearing agency under the Securities Exchange Act of 1934 or as a derivatives clearing organization under the Commodity Exchange Act’; andCommentsClose CommentsPermalink





(B) in subsection (b)(3), by striking ‘the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation’.CommentsClose CommentsPermalink





(2) Section 407 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27e) is amended by inserting ‘and the settlement and clearing requirements of sections 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of such Act’ after ‘the clearing of covered swap agreements’.CommentsClose CommentsPermalink





(3) Section 10 of the Federal Reserve Act is amended by adding at the end the following new provision:CommentsClose CommentsPermalink





‘The Board shall have no power to issue any rule, regulation, or order, or otherwise to establish the standards of regulation of any entity in its capacity as a multilateral clearing organization as defined in section 408 of the Federal Deposit Insurance Corporation Improvement Act of 1991.’.CommentsClose CommentsPermalink





(4) Section 5b(b) of the Commodity Exchange Act (7 U.S.C. 7a-1(b)) is amended--CommentsClose CommentsPermalink





(A) by striking ‘(b) Voluntary Registration- A derivatives clearing organization’ and inserting the following:CommentsClose CommentsPermalink





‘(b) Voluntary Registration-CommentsClose CommentsPermalink





‘(1) A derivatives clearing organization’; and.CommentsClose CommentsPermalink





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





‘(2)(A) A national bank, a State member bank, an insured State nonmember bank, an affiliate of a national bank, a State member bank, an insured State nonmember bank, or a corporation chartered under section 25A of the Federal Reserve Act may register with the Commission as a derivatives clearing organization.CommentsClose CommentsPermalink





‘(B) The Commission shall expedite the application of any institution referred to in subparagraph (A) to the extent that, as of the date of enactment of this paragraph, the institution had received the approval of the Board of Governors of the Federal Reserve System to act as a multilateral clearing organization.’.CommentsClose CommentsPermalink





(e) Effective Date- The amendments made by this section shall take effect 150 days after the date of the enactment of this Act.CommentsClose CommentsPermalink





(f) Transition Rule- Any agreement, contract, or transaction entered into before the date of the enactment of this Act or within 150 days after such date of enactment, in reliance on subsection (d), (g), (h)(1), or (h)(3) of section 2 of the Commodity Exchange Act or any other exemption issued by the Commission Futures Trading Commission by rule, regulation, or order shall, within 150 days after such date of enactment, unless settled and cleared through an entity registered with the Commission as a derivatives clearing organization or another clearing entity pursuant to section 4(h) of such Act, be reported to the Commission in a manner designated by the Commission, or to such other entity as the Commission deems appropriate.CommentsClose CommentsPermalink

SEC. 14. TREATMENT OF EMISSION ALLOWANCES AND OFFSET CREDITS.

(a) Section 1a(14) of the Commodity Exchange Act (7 U.S.C. 1a(14)) is amended by striking ‘or an agricultural commodity’ and inserting ‘, an agricultural commodity, any allowance authorized under law to emit a greenhouse gas, and any credit authorized under law toward the reduction in greenhouse gas emissions or an increase in carbon sequestration’.CommentsClose CommentsPermalink





(b) Within 180 days after the date of the enactment of this section, the Commodity Futures Trading Commission shall enter into a memorandum of understanding with the Secretary of Agriculture which shall include provisions, consistent with section 1245 of the Food Security Act of 1985, ensuring that the development of any procedures and protocols for a market-based greenhouse gas program are properly constructed and coordinated to maximize credits for carbon sequestration.CommentsClose CommentsPermalink

SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FUTURES TRADING COMMISSION.

(a) Elevation of Office-CommentsClose CommentsPermalink





(1) INCLUSION OF CFTC IN DEFINITION OF ESTABLISHMENT-CommentsClose CommentsPermalink





(A) Section 11(1) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended by striking ‘or the Federal Cochairpersons of the Commissions established under section 15301 of title 40, United States Code;’ and inserting ‘the Federal Cochairpersons of the Commissions established under section 15301 of title 40, United States Code; or the Chairman of the Commodity Futures Trading Commission;’.CommentsClose CommentsPermalink





(B) Section 11(2) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended by striking ‘or the Commissions established under section 15301 of title 40, United States Code,’ and inserting ‘the Commissions established under section 15301 of title 40, United States Code, or the Commodity Futures Trading Commission,’.CommentsClose CommentsPermalink





(2) EXCLUSION OF CFTC FROM DEFINITION OF DESIGNATED FEDERAL ENTITY- Section 8G(a)(2) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended by striking ‘the Commodity Futures Trading Commission,’.CommentsClose CommentsPermalink





(b) Effective Date; Transition Rule-CommentsClose CommentsPermalink





(1) EFFECTIVE DATE- The amendments made by this section shall take effect 30 days after the date of the enactment of this Act.CommentsClose CommentsPermalink





(2) TRANSITION RULE- An individual serving as Inspector General of the Commodity Futures Trading Commission on the effective date of this section pursuant to an appointment made under section 8G of the Inspector General Act of 1978 (5 U.S.C. App.)--CommentsClose CommentsPermalink





(A) may continue so serving until the President makes an appointment under section 3(a) of such Act consistent with the amendments made by this section; andCommentsClose CommentsPermalink





(B) shall, while serving under subparagraph (A), remain subject to the provisions of section 8G of such Act which apply with respect to the Commodity Futures Trading Commission.CommentsClose CommentsPermalink

SEC. 16. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO SUSPEND TRADING IN CREDIT DEFAULT SWAPS.

(a) In General- Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(h) Authority of Commission To Suspend Trading of Credit Default Swaps-CommentsClose CommentsPermalink





‘(1) IN GENERAL- If, in the opinion of the Commission, the public interest and the protection of investors so require, the Commission may, by order--CommentsClose CommentsPermalink





‘(A) summarily suspend trading in any credit default swap; andCommentsClose CommentsPermalink





‘(B) summarily suspend all trading on any contract market, derivatives transaction execution facility, or otherwise, in credit default swaps.CommentsClose CommentsPermalink





‘(2) LIMITATION- An action described in paragraph (1) shall not take effect unless the Commission notifies the President of its decision, and the President notifies the Commission that the President does not disapprove of the decision.’.CommentsClose CommentsPermalink





(b) Definition of Credit Default Swap- Section 1a of such Act (7 U.S.C. 1a) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(34) CREDIT DEFAULT SWAP- The term ‘credit default swap’ means a contract which insures a party to the contract against the risk that an entity may experience a loss of value as a result of an event specified in the contract, such as a default or credit downgrade. A credit default swap that is traded on or cleared by a registered entity shall be excluded from the definition of a security as defined in this Act and in section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934, except as necessary solely for purposes of enforcing prohibitions against insider trading in sections 10 and 16 of the Securities Exchange Act of 1934.’.CommentsClose CommentsPermalink





(c) Effective Date- The amendment made by subsection (b) shall be effective for credit default swaps entered into after 90 days after the date of the enactment of this section.CommentsClose CommentsPermalink

SEC. 17. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO PROSECUTE CRIMINAL VIOLATIONS OF THE COMMODITY EXCHANGE ACT.

Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(f) Notwithstanding section 516 of title 28, United States Code, the Commission may initiate and conduct criminal litigation relating to a violation of this Act, and secure evidence therefor, if the Attorney General has declined to do so.’.CommentsClose CommentsPermalink