Derivatives Markets Transparency and Accountability Act of 2009 - Amends the Commodity Exchange Act to prohibit the Commodity Futures Trading Commission (CFTC) from permitting a foreign board of trade to provide its U.S-located members with access to the CFTC electronic trading system and order matching system with respect to an agreement, contract, or transaction that settles against any price (including the daily or final settlement price) of one or more contracts listed for trading on a registered entity, unless such board meets requirements similar to those imposed upon U.S. exchanges.
Directs the CFTC to: (1) define and classify index traders and swap dealers for purposes of data reporting requirements; and (2) set 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, and electronic trading facilities with respect to significant price discovery contracts.
Requires the CFTC, to the extent information is available, to disaggregate and make public monthly: (1) the number of positions and total notional value of index funds and other passive, long-only and short-only positions in all markets; and (2) data on speculative positions relative to bona fide physical hedgers in those markets.
Subjects persons involved in derivative and swap transactions, as well as large traders in over-the-counter contracts, to reporting and recordkeeping requirements.
Directs the CFTC to set position limits for any one person with respect to: (1) contracts of sale for future delivery; or (2) 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.
Directs the CFTC to: (1) appoint a sufficient number of new full-time employees; (2) review prior actions to ensure compliance with this Act; and (3) review over-the-counter markets.
Directs the Government Accountability Office (GAO) to study and report to specified congressional committees on the international regime for regulating the trading of energy commodity futures and derivatives.
Directs the CFTC to assess whether certain derivative, swap, and similar agreements, contracts, or transactions that are fungible 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 have the potential to: (1) disrupt the liquidity or price discovery function on a registered entity; (2) cause a severe market disturbance in the underlying cash or futures market; or (3) 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. Authorizes the CFTC, upon a positive finding, to impose position limits.
Authorizes the CFTC to use expedited procedures to carry out this Act.
Makes specified exclusions and exemptions from the Commodity Exchange Act available only for certain transactions settled and cleared through registered derivatives clearing organizations or other regulated entities, including national banks, state member banks, insured state nonmember banks, affiliates of any of these, or corporations chartered to do foreign banking.
Treats as commodities exempt from Commodity Exchange Act coverage: (1) any allowance authorized under law to emit a greenhouse gas; and (2) any credit authorized under law toward the reduction in greenhouse gas emissions or an increase in carbon sequestration.
Directs the CFTC to enter into a memorandum of understanding with the Secretary of Agriculture which shall ensure that any procedures and protocols developed for a market-based greenhouse gas program are properly constructed and coordinated to maximize credits for carbon sequestration.
Amends the Inspector General Act of 1978 with respect to the Office of Inspector General of the CFTC.
Authorizes the CFTC to: (1) suspend trading of credit default swaps; and (2) initiate and conduct criminal litigation relating to a violation of the Commodity Exchange Act if the Attorney General has declined to do so.
[Congressional Bills 111th Congress]
[From the U.S. Government Printing Office]
[H.R. 977 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 977
To amend the Commodity Exchange Act to bring greater transparency and
accountability to commodity markets, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 11, 2009
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 concerned
_______________________________________________________________________
A BILL
To amend the Commodity Exchange Act to bring greater transparency and
accountability to commodity markets, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Derivatives Markets Transparency and
Accountability Act of 2009''.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Speculative limits and transparency of off-shore trading.
Sec. 4. Detailed reporting and disaggregation of market data.
Sec. 5. Transparency and recordkeeping authorities.
Sec. 6. Trading limits to prevent excessive speculation.
Sec. 7. CFTC Administration.
Sec. 8. Review of prior actions.
Sec. 9. Review of over-the-counter markets.
Sec. 10. Study relating to international regulation of energy commodity
markets.
Sec. 11. Over-the-counter authority.
Sec. 12. Expedited process.
Sec. 13. Certain exclusions and exemptions available only for certain
transactions settled and cleared through
registered derivatives clearing
organizations.
Sec. 14. Treatment of emission allowances and offset credits.
Sec. 15. Inspector General of the Commodity Futures Trading Commission.
Sec. 16. Authority of Commodity Futures Trading Commission to suspend
trading in credit default swaps.
Sec. 17. Authority of Commodity Futures Trading Commission to prosecute
criminal violations of the Commodity
Exchange Act.
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:
``(e) Foreign Boards of Trade.--
``(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--
``(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; and
``(B) the foreign board of trade (or the foreign
futures authority that oversees the foreign board of
trade)--
``(i) adopts position limits (including
related hedge exemption provisions) for the
agreement, contract, or transaction that are
comparable, 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;
``(ii) has the authority to require or
direct market participants to limit, reduce, or
liquidate any position the foreign board of
trade (or the foreign futures authority that
oversees the foreign board of trade) determines
to be necessary to prevent or reduce the threat
of price manipulation, excessive speculation as
described in section 4a, price distortion, or
disruption of delivery or the cash settlement
process;
``(iii) agrees to promptly notify the
Commission, with regard to the agreement,
contract, or transaction,'' of any change
regarding--
``(I) the information that the
foreign board of trade will make
publicly available;
``(II) the position limits that the
foreign board of trade or foreign
futures authority will adopt and
enforce;
``(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; and
``(IV) any other area of interest
expressed by the Commission to the
foreign board of trade or foreign
futures authority;
``(iv) provides information to the
Commission regarding large trader positions in
the agreement, contract, or transaction that is
comparable to the large trader position
information collected by the Commission for the
1 or more contracts against which the
agreement, contract, or transaction traded on
the foreign board of trade settles; and
``(v) provides the Commission 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.
``(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.''.
(b) Liability of Registered Persons Trading on a Foreign Board of
Trade.--
(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)''.
(2) Section 4 of such Act (7 U.S.C. 6) is further amended
by adding at the end the following:
``(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--
``(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--
``(A) legally organized under the laws of a foreign
country;
``(B) authorized to act as a board of trade by a
foreign futures authority; and
``(C) subject to regulation by the foreign futures
authority; and
``(2) has not been determined by the Commission to be
operating in violation of subsection (a).''.
(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:
``(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.''.
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:
``(g) Detailed Reporting and Disaggregation of Market Data.--
``(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.
``(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--
``(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; and
``(B) data on speculative positions relative to
bona fide physical hedgers in those markets to the
extent such information is available.''.
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--
(1) by inserting ``a'' before ``futures commission
merchant''; and
(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,''.
(b) Reports of Deals Equal to or in Excess of Trading Limits.--
(1) In general.--Section 4i of such Act (7 U.S.C. 6i) is
amended--
(A) in the first sentence--
(i) by inserting ``(a)'' before ``It
shall''; and
(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''; and
(B) by striking all that follows the 1st sentence
and inserting the following:
``(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).
``(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.''.
(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).
(c) Conforming Amendments.--
(1) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is
amended--
(A) by inserting ``4g(a), 4i,'' before ``5a (to'';
and
(B) by inserting ``, and the regulations of the
Commission pursuant to section 4i(b) requiring
reporting in connection with commodity option
transactions,'' before ``governs''.
(2) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended--
(A) by inserting ``4g(a), 4i,'' before ``5a (to'';
and
(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''.
(3) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)) is
amended to read as follows:
``(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;''.
(4) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)) is
amended to read as follows:
``(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;''.
SEC. 6. TRADING LIMITS TO PREVENT EXCESSIVE SPECULATION.
Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended--
(1) in subsection (a)--
(A) by inserting ``(1)'' after ``(a)''; and
(B) by adding after and below the end the
following:
``(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.
``(B)(i) For exempt commodities, the limits shall be established
within 90 days after the date of the enactment of this paragraph.
``(ii) For agricultural commodities, the limits shall be
established within 180 days after the date of the enactment of this
paragraph.
``(3) In establishing the limits required in paragraph (2), the
Commission, as appropriate, shall set limits--
``(A) on the number of positions that may be held by any
person for the spot month, each other month, and the aggregate
number of positions that may be held by any person for all
months;
``(B) to the maximum extent practicable, in its
discretion--
``(i) to diminish, eliminate, or prevent excessive
speculation as described under this section;
``(ii) to deter and prevent market manipulation,
squeezes, and corners;
``(iii) to ensure sufficient market liquidity for
bona fide hedgers; and
``(iv) to ensure that the price discovery function
of the underlying market is not disrupted; and
``(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.
``(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).
``(B) Each public hearing held pursuant to subparagraph (A) shall,
at a minimum providing there is sufficient interest, receive
recommendations from--
``(i) 7 predominantly commercial short hedgers of the actual
physical commodity for future delivery;
``(ii) 7 predominantly commercial long hedgers of the actual
physical commodity for future delivery;
``(iii) 4 non-commercial participants in markets for commodities
for future delivery; and
``(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.''; and
(2) in subsection (c)--
(A) by inserting ``(1)'' after ``(c)''; and
(B) by adding after and below the end the
following:
``(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--
``(A)(i) represents a substitute for transactions made or
to be made or positions taken or to be taken at a later time in
a physical marketing channel;
``(ii) is economically appropriate to the reduction of
risks in the conduct and management of a commercial enterprise;
and
``(iii) arises from the potential change in the value of--
``(I) assets that a person owns, produces,
manufactures, processes, or merchandises or anticipates
owning, producing, manufacturing, processing, or
merchandising;
``(II) liabilities that a person owns or
anticipates incurring; or
``(III) services that a person provides, purchases,
or anticipates providing or purchasing; or
``(B) reduces risks attendant to a position resulting from
a transaction that--
``(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; and
``(ii)(I) was executed opposite a counterparty for
which the transaction would qualify as a bona fide
hedging transaction pursuant to subparagraph (A); or
``(II) meets the requirements of subparagraph
(A).''.
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:
``(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)--
``(i) to increase the public transparency
of operations in markets;
``(ii) to improve the enforcement of this
Act in those markets;
``(iii) to enhance oversight of the
clearing of contracts, agreements, and
transactions; and
``(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.''.
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.
SEC. 9. REVIEW OF OVER-THE-COUNTER MARKETS.
(a) Study.--The Commodity Futures Trading Commission shall conduct
a study--
(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; and
(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--
(A) on designated contract markets;
(B) on derivatives transaction execution
facilities; and
(C) in reliance on such sections 2(g) and 2(h) and
of any exemption issued by the Commission by rule,
regulation or order.
(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.
(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--
(1) describes the results of the study; and
(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--
(A) any additional statutory authority that the
Commission determines to be necessary to implement the
recommendations; and
(B) a description of the resources that the
Commission considers to be necessary to implement the
recommendations.
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.
(b) Analysis.--The study shall include an analysis of, at a
minimum--
(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;
(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;
(3) variations in practices regarding the differentiation
of commercial and noncommercial trading;
(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; and
(5) agreements and practices for facilitating international
cooperation on market oversight, compliance, and enforcement.
(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--
(1) describes the results of the study;
(2) addresses whether there is excessive speculation, and
if so, the effects of any such speculation and energy price
volatility on energy futures; and
(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.
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:
``(j) Over-the-Counter Authority.--
``(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--
``(A) disrupt the liquidity or price discovery
function on a registered entity;
``(B) cause a severe market disturbance in the
underlying cash or futures market; or
``(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.
``(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.''.
(b) Conforming Amendments.--
(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''.
(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''.
(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''.
(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''.
(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''.
(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)''.
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.
SEC. 13. CERTAIN EXCLUSIONS AND EXEMPTIONS AVAILABLE ONLY FOR CERTAIN
TRANSACTIONS SETTLED AND CLEARED THROUGH REGISTERED
DERIVATIVES CLEARING ORGANIZATIONS.
(a) In General.--
(1) Exclusion of certain derivative transactions.--
(A) Section 2(d)(1) of the Commodity Exchange Act
(7 U.S.C. 2(d)(1)) is amended--
(i) by striking ``and'' at the end of
subparagraph (A);
(ii) by striking the period at the end of
subparagraph (B) and inserting ``and''; and
(iii) by adding at the end the following:
``(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.''.
(B) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2))
is amended--
(i) by striking ``and'' at the end of
subparagraph (B);
(ii) by striking the period at the end of
subparagraph (C) and inserting ``; and''; and
(iii) by adding at the end the following:
``(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.''.
(2) Exclusion for certain swap transactions.--Section 2(g)
of such Act (7 U.S.C. 2(g)) is amended--
(A) by striking ``and'' at the end of paragraph
(2);
(B) by striking the period at the end of paragraph
(3) and inserting ``; and''; and
(C) by adding at the end the following:
``(4) except as provided in section 4(h), settled and
cleared through a derivatives clearing organization registered
with the Commission.''.
(3) Exemption for certain transactions in exempt
commodities.--
(A) Section 2(h)(1) of such Act ( 7 U.S.C. 2(h)(1))
is amended--
(i) by striking ``and'' at the end of
subparagraph (A);
(ii) by striking the period at the end of
subparagraph (B) and inserting ``; and''; and
(iii) by adding at the end the following:
``(C) except as provided in section 4(h), is
settled and cleared through a derivatives clearing
organization registered with the Commission.''.
(B) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3))
is amended--
(i) by striking ``and'' at the end of
subparagraph (A);
(ii) by striking the period at the end of
subparagraph (B) and inserting ``; and''; and
(iii) by adding at the end the following:
``(C) except as provided in section 4(h), settled
and cleared through a derivatives clearing organization
registered with the Commission.''.
(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''.
(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:
``(h) Alternatives to Clearing Through Derivatives Clearing
Organizations.--
``(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.
``(2) Reporting alternative.--
``(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.
``(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.
``(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.
``(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.''.
(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:
``(O) Disclosure of general information.--The
applicant shall disclose publicly and to the Commission
information concerning--
``(i) the terms and conditions of
contracts, agreements, and transactions cleared
and settled by the applicant;
``(ii) the conventions, mechanisms, and
practices applicable to the contracts,
agreements, and transactions;
``(iii) the margin-setting methodology and
the size and composition of the financial
resource package of the applicant; and
``(iv) other information relevant to
participation in the settlement and clearing
activities of the applicant.
``(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.
``(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.''.
(d) Amendments.--
(1) Section 409 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4422) is
amended--
(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''; and
(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''.
(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''.
(3) Section 10 of the Federal Reserve Act is amended by
adding at the end the following new provision:
``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.''.
(4) Section 5b(b) of the Commodity Exchange Act (7 U.S.C.
7a-1(b)) is amended--
(A) by striking ``(b) Voluntary Registration.--A
derivatives clearing organization'' and inserting the
following:
``(b) Voluntary Registration.--
``(1) A derivatives clearing organization''; and.
(B) by adding at the end the following:
``(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.
``(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.''.
(e) Effective Date.--The amendments made by this section shall take
effect 150 days after the date of the enactment of this Act.
(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.
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''.
(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.
SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FUTURES TRADING COMMISSION.
(a) Elevation of Office.--
(1) Inclusion of cftc in definition of establishment.--
(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;''.
(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,''.
(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,''.
(b) Effective Date; Transition Rule.--
(1) Effective date.--The amendments made by this section
shall take effect 30 days after the date of the enactment of
this Act.
(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.)--
(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;
and
(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.
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:
``(h) Authority of Commission To Suspend Trading of Credit Default
Swaps.--
``(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--
``(A) summarily suspend trading in any credit
default swap; and
``(B) summarily suspend all trading on any contract
market, derivatives transaction execution facility, or
otherwise, in credit default swaps.
``(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.''.
(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:
``(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.''.
(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.
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:
``(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.''.
<all>
Introduced in House
Introduced in House
Referred to House Agriculture
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 concerned.
Referred to House Financial Services
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by Voice Vote.
Reported (Amended) by the Committee on Agriculture. H. Rept. 111-385, Part I.
Reported (Amended) by the Committee on Agriculture. H. Rept. 111-385, Part I.
Referred sequentially to the House Committee on the Judiciary for a period ending not later than Dec. 19, 2009 for consideration of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(k), rule X.
Committee on Financial Services discharged.
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Committee on Financial Services discharged.
Committee on Judiciary discharged.
Committee on Judiciary discharged.
Placed on the Union Calendar, Calendar No. 223.