[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4541 Introduced in House (IH)]
106th CONGRESS
2d Session
H. R. 4541
To reauthorize and amend the Commodity Exchange Act to promote legal
certainty, enhance competition, and reduce systemic risk in markets for
futures and over-the-counter derivatives, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 25, 2000
Mr. Ewing introduced the following bill; which was referred to the
Committee on Agriculture, and in addition to the Committees on Banking
and Financial Services, and Commerce, 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 reauthorize and amend the Commodity Exchange Act to promote legal
certainty, enhance competition, and reduce systemic risk in markets for
futures and over-the-counter derivatives, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Commodity Futures
Modernization Act of 2000''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
Sec. 4. Agreements, contracts, and transactions in foreign currency,
government securities, and certain other
commodities.
Sec. 5. Legal certainty for excluded derivative transactions.
Sec. 6. Excluded electronic trading facilities.
Sec. 7. Hybrid instruments.
Sec. 8. Futures on securities.
Sec. 9. Transactions in exempt commodities.
Sec. 10. Protection of the public interest.
Sec. 11. Prohibited transactions.
Sec. 12. Designation of boards of trade as contract markets.
Sec. 13. Derivatives transaction execution facilities.
Sec. 14. Derivatives clearing organizations.
Sec. 15. Common provisions applicable to registered entities.
Sec. 16. Exempt boards of trade.
Sec. 17. Suspension or revocation of designation as contract market.
Sec. 18. Authorization of appropriations.
Sec. 19. Preemption.
Sec. 20. Predispute resolution agreements for institutional customers.
Sec. 21. Consideration of costs and benefits and antitrust laws.
Sec. 22. Contract enforcement between eligible counterparties.
Sec. 23. Rule of construction.
Sec. 24. Technical and conforming amendments.
Sec. 25. Effective date.
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to reauthorize the Commodity Exchange Act (7 U.S.C. 1
et seq.);
(2) to streamline and eliminate unnecessary regulation for
the commodity futures exchanges and other entities regulated
under the Commodity Exchange Act;
(3) to transform the role of the Commodity Futures Trading
Commission in its oversight of the futures markets;
(4) to provide a legislative and regulatory framework for
allowing the trading of futures on securities;
(5) to provide the Commission jurisdiction over the retail
foreign exchange market and bucket shops that are not otherwise
regulated;
(6) to promote innovation for futures and derivatives and
to reduce systemic risk by enhancing legal certainty in the
markets for certain futures and derivatives transactions;
(7) to reduce systemic risk and provide greater stability
to markets during times of market disorder by allowing the
clearing of transactions in over-the-counter derivatives
through appropriately regulated clearing organizations; and
(8) to enhance the competitive position of United States
financial institutions and financial markets.
SEC. 3. DEFINITIONS.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) by redesignating paragraphs (8) through (12), (13)
through (15), and (16) as paragraphs (16) through (20), (22)
through (24), and (29), respectively;
(2) by inserting after paragraph (7) the following:
``(8) Derivatives clearing organization.--
``(A) In general.--The term `derivatives clearing
organization' means a clearinghouse, clearing
association, clearing corporation, or similar entity,
facility, system, or organization that, with respect to
a derivative agreement, contract, or transaction (other
than a security)--
``(i) enables each party to the derivative
agreement, contract, or transaction to
substitute, through novation or otherwise, the
credit of the derivatives clearing organization
for the credit of the parties;
``(ii) arranges or provides, on a
multilateral basis, for the settlement or
netting of obligations resulting from such
agreements, contracts, or transactions executed
by parties in the derivatives clearing
organization; or
``(iii) otherwise provides clearing
services or arrangements that mutualize or
transfer among parties in the derivatives
clearing organization the credit risk arising
from such agreements, contracts, or
transactions executed by the parties.
``(B) Exclusions.--The term `derivatives clearing
organization' does not include an entity, facility,
system, or organization solely because it arranges or
provides for--
``(i) settlement, netting, or novation of
obligations resulting from agreements,
contracts, or transactions, on a bilateral
basis and without a centralized counterparty;
``(ii) settlement or netting of cash
payments through an interbank payment system;
or
``(iii) settlement, netting, or novation of
obligations resulting from a sale of a
commodity in a transaction in the spot market
for the commodity.
``(9) Electronic trading facility.--The term `electronic
trading facility' means a trading facility that--
``(A) operates by means of an electronic network;
and
``(B) maintains a real-time audit trail of bids,
offers, and the matching of orders or the execution of
transactions.
``(10) Eligible contract participant.--The term `eligible
contract participant' means--
``(A) acting for its own account--
``(i) a financial institution;
``(ii) an insurance company regulated by a
State (including a subsidiary or affiliate of
such an insurance company);
``(iii) an investment company subject to
regulation under the Investment Company Act of
1940 (15 U.S.C. 80a-1 et seq.) or a foreign
person performing a similar role or function
subject as such to foreign regulation
(regardless of whether each investor in the
investment company or the foreign person is
itself an eligible contract participant);
``(iv) a commodity pool that--
``(I) has total assets exceeding
$5,000,000; and
``(II) is formed and operated by a
person subject to regulation under this
Act or a foreign person performing a
similar role or function subject as
such to foreign regulation (regardless
of whether each investor in the
commodity pool or the foreign person is
itself an eligible contract
participant);
``(v) a corporation, partnership,
proprietorship, organization, trust, or other
entity--
``(I) that has total assets
exceeding $10,000,000;
``(II) the obligations of which
under an agreement, contract, or
transaction are guaranteed or otherwise
supported by a letter of credit or
keepwell, support, or other agreement
by an entity described in subclause
(I), in clause (i), (ii), (iii), (iv),
or (vii), or in subparagraph (C); or
``(III) that--
``(aa) has a net worth
exceeding $1,000,000; and
``(bb) enters into an
agreement, contract, or
transaction in connection with
the conduct of the entity's
business or to manage the risk
associated with an asset or
liability owned or incurred or
reasonably likely to be owned
or incurred by the entity in
the conduct of the entity's
business;
``(vi) an employee benefit plan subject to
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1001 et seq.) or a foreign
person performing a similar role or function
subject as such to foreign regulation--
``(I) that has total assets
exceeding $5,000,000; or
``(II) the investment decisions of
which are made by--
``(aa) an investment
advisor or commodity trading
advisor subject to regulation
under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et
seq.) or this Act;
``(bb) a foreign person
performing a similar role or
function subject as such to
foreign regulation;
``(cc) a financial
institution; or
``(dd) an insurance company
regulated by a State (including
a subsidiary or affiliate of
such an insurance company);
``(vii)(I) a governmental entity (including
the United States, a State, or a foreign
government) or political subdivision of a
governmental entity;
``(II) a multinational or supranational
government entity; or
``(III) an instrumentality, agency, or
department of an entity described in subclause
(I) or (II);
``(viii) a broker or dealer subject to
regulation under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) or a foreign
person performing a similar role or function
subject as such to foreign regulation, except
that, if the broker or dealer or foreign person
is a natural person or proprietorship, the
broker or dealer or foreign person shall not be
considered to be an eligible contract
participant unless the broker or dealer or
foreign person also meets the requirements of
clause (v) or (xi);
``(ix) a futures commission merchant
subject to regulation under this Act or a
foreign person performing a similar role or
function subject as such to foreign regulation,
except that, if the futures commission merchant
or foreign person is a natural person or
proprietorship, the futures commission merchant
or foreign person shall not be considered to be
an eligible contract participant unless the
futures commission merchant or foreign person
also meets the requirements of clause (v) or
(xi);
``(x) a floor broker or floor trader
subject to regulation under this Act in
connection with any transaction that takes
place on or through the facilities of a
registered entity or an exempt board of trade,
or any affiliate thereof, on which such person
regularly trades; or
``(xi) a natural person with total assets
exceeding $10,000,000;
``(B)(i) a person described in any of clauses (i)
through (x) of subparagraph (A) or in subparagraph (C),
acting as broker or performing an equivalent agency function on behalf
of another person described in subparagraph (A) or (C); or
``(ii) an investment adviser subject to regulation
under the Investment Advisors Act of 1940, a commodity
trading advisor subject to regulation under this Act, a
foreign person performing a similar role or function
subject as such to foreign regulation, or a person
described in any of clauses (i) through (x) of
subparagraph (A) or in subparagraph (C), in any such
case acting as investment manager or fiduciary (but
excluding a person acting as broker or performing an
equivalent agency function) for another person
described in subparagraph (A) or (C) and who is
authorized by such person to commit such person to the
transaction;
``(C) any other person that the Commission
determines to be eligible in light of the financial or
other qualifications of the person.
``(11) Energy commodity.--The term `energy commodity' means
coal, condensates, crude oil, electricity, natural gas, or
natural gas liquids.
``(12) Excluded commodity.--The term `excluded commodity'
means any commodity other than an agricultural commodity
enumerated in paragraph (3) or an exempt commodity.
``(13) Exempt commodity.--The term `exempt commodity' means
an energy commodity or a metal commodity.
``(14) Financial commodity.--The term `financial commodity'
means--
``(A) an interest rate, exchange rate, currency,
security, security index, credit risk, debt or equity
instrument, or widely published index or measure of
inflation; or
``(B) any other rate, differential, index, or
measure of economic risk, return, or value (excluding
any rate, differential, index, or measure based on a
commodity not described in subparagraph (A) that has a
finite supply).
``(15) Financial institution.--The term `financial
institution' means--
``(A) a corporation operating under the fifth
undesignated paragraph of section 25 of the Federal
Reserve Act (12 U.S.C. 603), commonly known as `an
agreement corporation';
``(B) a corporation organized under section 25A of
the Federal Reserve Act (12 U.S.C. 611 et seq.),
commonly known as an `Edge Act corporation';
``(C) an institution that is regulated by the Farm
Credit Administration;
``(D) a Federal credit union or State credit union
(as defined in section 101 of the Federal Credit Union
Act (12 U.S.C. 1752));
``(E) a depository institution (as defined in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813));
``(F) a foreign bank or a branch or agency of a
foreign bank (each as defined in section 1(b) of the
International Banking Act of 1978 (12 U.S.C. 3101(b)));
``(G) a trust company; or
``(H) a similarly regulated subsidiary or affiliate
of an entity described in any of subparagraphs (A)
through (F).'';
(3) by inserting after paragraph (20) (as redesignated by
paragraph (1)) the following:
``(21) Hybrid instrument.--The term `hybrid instrument'
means a deposit (as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)) offered by a financial
institution, or a security, having 1 or more payments indexed
to the value, level, or rate of 1 or more commodities.'';
(4) by inserting after paragraph (24) (as redesignated by
paragraph (1)) the following:
``(25) Metal commodity.--The term `metal commodity' means
aluminum, copper, gold, palladium, platinum, or silver.
``(26) Nonexempt security.--The term `nonexempt security'
means a security that is not an exempted security under section
3 of the Securities Act of 1933 or section 3(a)(12) of the
Securities Exchange Act of 1934 (other than any municipal
security, as defined in section 3(a)(29) of the Securities
Exchange Act of 1934).
``(27) Option.--The term `option' means an agreement,
contract, or transaction that is of the character of, or is
commonly known to the trade as, an `option,' `privilege,'
`indemnity,' `bid,' `offer,' `put,' `call,' `advance guaranty,'
or `decline guaranty.'
``(28) Organized exchange.--The term `organized exchange'
means a trading facility that--
``(A) permits trading--
``(i) by or on behalf of a person that is
not an eligible contract participant; or
``(ii) by persons other than on a bona fide
principal-to-principal basis; or
``(B) has adopted (directly or through another
nongovernmental entity) rules that--
``(i) govern the conduct of participants,
other than rules that govern the submission of
orders or execution of transactions on the
trading system; or
``(ii) include disciplinary sanctions other
than the exclusion of participants from
trading.''; and
(5) by adding at the end the following:
``(30) Registered entity.--The term `registered entity'
means--
``(A) a board of trade designated as a contract
market under section 5;
``(B) a derivatives transaction execution facility
registered under section 5a; or
``(C) a derivatives clearing organization
registered under section 5b.
``(31) Security.--The term `security' has the meaning given
the term in section 3(a) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)).
``(32) Trading facility.--
``(A) In general.--The term `trading facility'
means a person or group of persons that constitutes,
maintains, or provides a physical or electronic
facility or system in which multiple participants have
the ability to execute or trade agreements, contracts,
or transactions by accepting bids and offers made by
other participants that are open to multiple
participants in the facility or system.
``(B) Exclusions.--The term `trading facility' does
not include--
``(i) a person or group of persons solely
because the person or group of persons
constitutes, maintains, or provides an
electronic facility or system that enables
participants to negotiate the terms of and
enter into bilateral transactions as a result
of communications exchanged by the parties and
not from interaction of multiple orders within
a predetermined, nondiscretionary automated
trade matching algorithm;
``(ii) a government securities dealer or
government securities broker, to the extent
that the dealer or broker executes or trades
agreements, contracts, or transactions in
government securities, or assists persons in
communicating about, negotiating, entering
into, executing, or trading an agreement,
contract, or transaction in government
securities (as the terms `government securities
dealer', `government securities broker', and
`government securities' are defined in section
3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a))); or
``(iii) facilities on which bids and
offers, and acceptances of bids and offers
effected on the facility, are not binding.''.
SEC. 4. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN CURRENCY,
GOVERNMENT SECURITIES, AND CERTAIN OTHER COMMODITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
is amended by adding at the end the following:
``(c) Agreements, Contracts, and Transactions in Foreign Currency,
Government Securities, and Certain Other Commodities.--
``(1) In general.--Except as provided in paragraph (2),
nothing in this Act (other than section 5b or 12(e)(2)(B))
governs or applies to an agreement, contract, or transaction
in--
``(A) foreign currency;
``(B) government securities;
``(C) security warrants;
``(D) security rights;
``(E) resales of installment loan contracts;
``(F) repurchase transactions in a financial
commodity; or
``(G) mortgages or mortgage purchase commitments.
``(2) Commission jurisdiction.--
``(A) Agreements, contracts, and transactions that
are futures traded on an organized exchange.--This Act
applies to, and the Commission shall have jurisdiction
over, an agreement, contract, or transaction described
in paragraph (1) that is--
``(i) a contract of sale of a commodity for
future delivery (or an option thereon), or an
option on a commodity (other than foreign
currency or a security), that is executed or
traded on an organized exchange; or
``(ii) an option on foreign currency and is
executed or traded on an organized exchange
that is not a national securities exchange.
``(B) Agreements, contracts, and transactions in
retail foreign currency.--This Act applies to, and the
Commission shall have jurisdiction over, an agreement,
contract, or transaction in foreign currency that--
``(i) is a contract of sale for future
delivery (or an option on such a contract); and
``(ii) is offered to, or entered into with,
a person that is not an eligible contract
participant, unless the counterparty, or the
person offering to be the counterparty, of the
person is--
``(I) a financial institution;
``(II) a broker or dealer
registered under section 15(b) or 15C
of the Securities Exchange Act of 1934
(15 U.S.C. 78o(b), 78o-5);
``(III) an associated person of a
broker or dealer registered under
section 15(b) or 15C of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(b),
78o-5) concerning the financial or
securities activities of which the
registered person makes and keeps
records under section 15C(b) or 17(h)
of the Securities Exchange Act of 1934
(15 U.S.C. 78o-5(b), 78q(h)) or section
4f(c)(2)(B) of this Act;
``(IV) an insurance company that is
subject to State regulation (including
a subsidiary or affiliate of such an
insurance company);
``(V) a financial holding company
(as defined in section 2 of the Bank
Holding Company Act of 1956); or
``(VI) an investment bank holding
company (as defined in section 17(i) of
the Securities Exchange Act of
1934).''.
SEC. 5. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 4) is amended by adding at the end the
following:
``(d) Excluded Derivative Transactions.--
``(1) In general.--Nothing in this Act (other than section
5b or 12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in an excluded commodity if--
``(A) the agreement, contract, or transaction is
entered into only between persons that are eligible
contract participants at the time at which the persons
enter into the agreement, contract, or transaction; and
``(B) the agreement, contract, or transaction is
not executed or traded on a trading facility.
``(2) Electronic trading facility exclusion.--Nothing in
this Act (other than section 5b or 12(e)(2)(B)) governs or
applies to an agreement, contract, or transaction in an
excluded commodity if--
``(A) the agreement, contract, or transaction is
entered into on a bona fide principal-to-principal
basis between parties trading for their own accounts or
as described in section 1a(10)(B)(ii) of this Act;
``(B) the agreement, contract, or transaction is
entered into only between persons that are eligible
contract participants (as defined in sections
1a(10)(A), (B)(ii), and (C)) at the time at which the
persons enter into the agreement, contract, or
transaction; and
``(C) the agreement, contract, or transaction is
executed or traded on an electronic trading
facility.''.
SEC. 6. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 5) is amended by adding at the end the
following:
``(e) Excluded Electronic Trading Facilities.--
``(1) In general.--Nothing in this Act (other than section
12(e)(2)(B)) governs or is applicable to an electronic trading
facility that limits transactions authorized to be conducted on
its facilities to those satisfying the requirements of sections
2(d)(2) and 2(h)(1)(B) of this Act.
``(2) Effect on authority to establish and operate.--
Nothing in this Act shall prohibit a board of trade designated
by the Commission as a contract market or derivatives
transaction execution facility, or an exempt board of trade,
from establishing and operating an excluded electronic trading
facility excluded under this Act pursuant to paragraph (1).''.
SEC. 7. HYBRID INSTRUMENTS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 6) is amended by adding at the end the
following:
``(f) Exclusion for Qualifying Hybrid Instruments.--
``(1) In general.--Nothing in this Act (other than section
12(e)(2)(B)) governs or is applicable to a hybrid instrument
that is predominantly a security or depository instrument.
``(2) Predominance.--A hybrid instrument shall be
considered to be predominantly a security or depository
instrument if--
``(A) the issuer of the hybrid instrument receives
payment in full of the purchase price of the hybrid
instrument, substantially contemporaneously with
delivery of the hybrid instrument;
``(B) the purchaser or holder of the hybrid
instrument is not required to make any payment to the
issuer in addition to the purchase price paid under
subparagraph (A), whether as margin, settlement
payment, or otherwise, during the life of the hybrid
instrument or at maturity;
``(C) the issuer of the hybrid instrument is not
subject by the terms of the instrument to mark-to-
market margining requirements; and
``(D) the hybrid instrument is not marketed as a
contract of sale for future delivery of a commodity (or
option on such a contract) subject to this Act.
``(3) Mark-to-market margining requirements.--For the
purposes of paragraph (2)(C), mark-to-market margining
requirements do not include the obligation of an issuer of a
secured debt instrument to increase the amount of collateral
held in pledge for the benefit of the purchaser of the secured
debt instrument to secure the repayment obligations of the
issuer under the secured debt instrument.''.
SEC. 8. FUTURES ON SECURITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 7) is amended by adding at the end the
following:
``(g) Notwithstanding any other provision of law:
``(1) This Act shall not apply to and the Commission shall
have no jurisdiction to designate a board of trade as a
contract market for any transaction whereby any party to the
transaction acquires a put, call, or other option on 1 or more
securities (as defined in section 2(a)(1) of the Securities Act
of 1933 or section 3(a)(10) of the Securities Exchange Act of
1934, on the date of enactment of the Futures Trading Act of
1982), including any group or index of securities and any
interest in or based on the value of securities.
``(2) Nothing in this subsection governs or applies to--
``(A) an agreement, contract, or transaction in a
commodity that is excluded under subsection (c) or (d);
or
``(B) a hybrid instrument that is covered by an
exclusion under subsection (f) or an exemption granted
by the Commission under section 4(c) (whether or not
the hybrid instrument is otherwise subject to this
Act).
``(3) Except as provided in paragraph (4) of this
subsection, or unless excluded by paragraph (2) of this
subsection, a person shall not offer to enter into, enter into,
or confirm the execution of any contract of sale (or option on
the contract) for future delivery of any security or interest
in or based on the value of a nonexempt security.
``(4)(A) Except as excluded by paragraph (2) of this
subsection, this Act shall apply to and the Commission shall
have exclusive jurisdiction with respect to accounts,
agreements (including any transaction which is of the character
of, or is commonly known to the trade as an option, privilege,
indemnity, bid, offer, put, call, advance guaranty, or decline
guaranty), and transactions involving, and may designate a
board of trade as a contract market under section 5 or register
the board of trade as a derivatives transaction execution
facility under section 5a in, contracts of sale (or options on
the contracts) for future delivery of 1 or more securities (as
defined in section 2(a)(1) of the Securities Act of 1933 or
section 3(a)(10) of the Securities Exchange Act of 1934),
including any group or index of securities and any interest in
or based on the value of securities.
``(B) The Commission shall not designate a board of trade
as a contract market under section 5 or register a board of
trade as a derivatives transaction execution facility under
section 5a with respect to any such contracts of sale (or
options on the contracts) for future delivery unless the board
of trade demonstrates and the Commission expressly finds that
the specific contract (or option on the contract) with respect
to which the application for the designation or recognition has
been made meets the following requirements:
``(i) Settlement of or delivery on the contract (or
option on the contract) shall be effected in cash or by
means other than the transfer or receipt of a nonexempt
security.
``(ii) Susceptibility to price manipulation.--
Trading in a contract (or option on such a contract)
described in subparagraph (A) shall not be readily
susceptible to--
``(I) manipulation of the price of the
contract (or option on such a contract); or
``(II) causing or being used in the
manipulation of the price of any underlying
security, option on a security, or option on a
group or index that includes a security.
``(iii) If the contract is based on a single
nonexempt security, an option on the security
underlying the contract would meet all Securities and
Exchange Commission requirements for listing on a
national securities exchange.
``(iv) If the contract is based on any group or
index of nonexempt securities comprised of fewer than 5
securities, or on an index in which a single nonexempt
security predominates, an option on each security
comprising the group or index would meet all
requirements for listing on a national securities
exchange.
``(v) The contract will be traded on a board of
trade that establishes the level of margin for futures
contracts (or options on the contracts) based on a
single nonexempt security, an index of fewer than 5
nonexempt securities, or an index in which a single
nonexempt security predominates, that are no less than
the level of margin on comparable option contracts
listed on any national securities exchange.
``(vi) The contract will be traded on a board of
trade that prohibits a person who acts as a floor
broker for any contract of sale (or options on the
contract) for future delivery of a nonexempt security,
an index based on fewer than 5 nonexempt securities, or
an index in which a single nonexempt security
predominates, from trading that contract for the
broker's own account during the same trading session.
``(vii) The contract will be traded on a board of
trade that collects, maintains, and promptly provides
to the Securities and Exchange Commission such
information as the Commission and the Securities and
Exchange Commission jointly consider necessary to
perform the enforcement responsibilities described in
paragraph (6).
``(5) The Commission shall consult with the Securities and
Exchange Commission with respect to any application submitted
by a board of trade for designation as a contract market or
derivatives transaction execution facility with respect to any
contract of sale (or option on the contract) for future
delivery of a nonexempt security or a group or index of such
securities. If, not later than 15 days after the consultation, the
Securities and Exchange Commission objects to the designation of a
board of trade as a contract market or derivatives transaction
execution facility in the contract (or option on the contract) on the
ground that any requirement of paragraph (3) is not met, the Commission
shall afford the Securities and Exchange Commission an opportunity for
an oral hearing to be transcribed before the Commission, and shall give
appropriate weight to the views of the Securities and Exchange
Commission. The oral hearing shall be held before Commission action
upon the application for the designation, and not less than 30 nor more
than 45 days after the Securities and Exchange Commission has objected.
If such an oral hearing is held, the Securities and Exchange Commission
fails to withdraw its objections, and the Commission issues an order
designating a board of trade as a contract market or recognizes the
board of trade as a derivatives transaction execution facility with
respect to any such contract (or option on the contract), the
Securities and Exchange Commission may seek judicial review of the
order in accordance with the procedural requirements set forth in
section 6(c). If, pursuant to section 6, there is a hearing on the
record with respect to an application for such designation, the
Securities and Exchange Commission may participate in that hearing as
an interested party.
``(6) Notwithstanding any other provision of this Act, the
Securities and Exchange Commission may enforce against a person
that purchases or sells any contract of sale (or option on the
contract) for future delivery of any nonexempt security, any
index comprised of fewer than 5 nonexempt securities, or any
index in which a single nonexempt security predominates to the
same extent as if the person had purchased or sold an option on
the security or index under the following provisions of the
securities laws and regulations with respect to the following
categories of conduct:
``(A) Section 10(b) and 21A of the Securities
Exchange Act of 1934 (15 U.S.C. 78j(b), 78u-1) with
respect to insider trading.
``(B) Section 16(b) of such Act (15 U.S.C. 78p(b))
with respect to unfair use of information in short
swing trading by a corporate insider.
``(C) Section 9 of such Act (15 U.S.C. 78i) with
respect to manipulation of securities prices.
``(D) Section 10(b) of such Act (15 U.S.C. 78J(b))
and section 204A of the Investment Adviser's Act of
1940 (15 U.S.C. 80b-4a) with respect to frontrunning.
``(E) Section 14 of the Securities Exchange Act of
1934 (15 U.S.C. 78n) with respect to the pricing and
integrity of tender offers.
``(F) Rule 144 of the rules of the Securities and
Exchange Commission (17 C.F.R. 230.144) with respect to
trading in restricted securities.
``(7)(A) Notwithstanding any other provision of this Act,
any contract market or derivatives transaction execution
facility in a stock or stock index futures contract (or option
thereon) shall file with the Board of Governors of the Federal
Reserve System any rule establishing or changing the levels of
margin (initial and maintenance) for the nonexempt stock or
stock index futures contract (or option on the contract).
``(B) The Board may at any time request any contract market
or derivatives transaction execution facility to set the level
of margin for any stock or stock index futures contract (or
option on the contract) at such levels as the Board in its
judgment determines are appropriate to preserve the financial
integrity of the contract market or derivatives transaction
execution facility or its clearing system or to prevent
systemic risk. If the contract market or derivatives
transaction execution facility fails to do so within the time
specified by the Board in its request, the Board may direct the
contract market or derivatives transaction execution facility
to alter or supplement the rules of the contract market or
derivatives transaction execution facility as specified in the
request.
``(C) Subject to such conditions as the Board may
determine, the Board may delegate any or all of its authority
under this paragraph to the Commission or an intermarket margin
board as provided in subparagraph (D).
``(D) Intermarket margin board.--
``(i) Establishment.--With the concurrence of the
Securities and Exchange Commission and the Commission,
the Board may establish an intermarket margin board,
consisting of representatives of any or all of the
three agencies.
``(ii) Duties.--The intermarket margin board may
set and maintain margin levels and rules pertaining to
margin for futures on a single nonexempt security, an
index of fewer than 5 nonexempt securities, or an index
in which a single nonexempt security predominates,
listed on a contract market or derivatives transaction
execution facility.
``(E) This paragraph shall not be construed to supersede or
limit the authority granted to the Commission in section 8a(9)
to direct a contract market or derivatives transaction
execution facility, on finding an emergency to exist, to raise
temporary emergency margin levels on any futures contract or
option on the contract covered by this paragraph.
``(F) Any action taken by the Board under this paragraph,
or by the Commission acting under the delegation of authority
under subparagraph (C), directing a contract market or
derivatives transaction execution facility to alter or
supplement a contract market or derivatives transaction
execution facility rule shall be subject to review only in the
United States Court of Appeals for the judicial circuit in
which the party seeking review resides or has its principal place of
business, or in the United States Court of Appeals for the District of
Columbia Circuit. The review shall be based on the examination of all
information before the Board or the Commission, as the case may be, at
the time the determination was made. The court reviewing the action of
the Board or the Commission shall not enter a stay or order of mandamus
unless the court determines, after notice and a hearing before a panel
of the court, that the agency action complained of was arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with
law.
``(8) This subsection shall not be construed to prohibit--
``(A) an agreement, contract, or transaction
excluded from this Act by paragraph (2); or
``(B) any hybrid instrument that is covered by the
terms of any exemption granted by the Commission under
section 4(c) (whether or not any such hybrid instrument
is otherwise subject to this Act).
``(9)(A) No futures commission merchant or introducing
broker shall recommend to any customer the purchase or sale of
any contract of sale for future delivery of a single nonexempt
security, an index of fewer than 5 nonexempt securities, or an
index in which a single nonexempt security predominates, unless
the futures commission merchant or introducing broker complies
with the rules described in subparagraph (B) of a registered
futures association of which such person is a member.
``(B) Within 9 months of the date of enactment of the
Commodity Futures Modernization Act of 2000 a registered
futures association shall adopt rules requiring a futures
commission merchant or an introducing broker which recommends
to any customer the purchase or sale of any contract of sale
for future delivery of a single nonexempt security, an index of
fewer than 5 nonexempt securities, or an index in which a
single nonexempt security predominates to ascertain through
reasonable due diligence that the recommendation is suitable
for that customer in light of the customer's financial position
and trading goals. The registered futures association shall
consult with the Commission and the Securities and Exchange
Commission prior to the adoption of any such rule, and shall
submit any such rule to the Commission for approval in the
manner and according to the procedures described in section
17(j) of this Act, provided, that in such case the rule shall
become effective if the Commission fails to disapprove such
rule within 90 days of submission.''.
SEC. 9. TRANSACTIONS IN EXEMPT COMMODITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 8) is amended by adding at the end the
following.
``(h) Legal Certainty for Certain Transactions in Exempt
Commodities.--
``(1) Except as provided in paragraph (2) of this
subsection, nothing in this Act shall apply to a contract,
agreement or transaction in an exempt commodity which--
``(A)(i) is entered into between persons that are
eligible contract participants at the time they enter
into the agreement, contract, or transaction; and
``(ii) is not entered into on a trading facility;
or
``(B)(i) is entered into on a bona fide principal-
to-principal basis between parties trading for their
own accounts (or as described in section 1a(10)(B)(ii)
of this Act);
``(ii) is entered into between persons that are
eligible contract participants (as defined in sections
1a(10)(A), (B)(ii) or (C) of this Act) at the time at
which the persons enter into the agreement, contract,
or transaction; and
``(iii) is executed or traded on an electronic
trading facility.
``(2) An agreement, contract, or transaction described in
paragraph (1) of this subsection shall be subject to--
``(A) sections 5b and 12(e)(2)(B) of this Act;
``(B) sections 4b and 4n of this Act and the
regulations of the Commission pursuant to section 4c(b)
of this Act proscribing fraud in connection with
commodity option transactions;
``(C) sections 6(c) and 9(a)(2) of this Act to the
extent these provisions prohibit manipulation of the
market price of any commodity in interstate commerce;
and
``(D) such rules and regulations as the Commission
may prescribe in the case of any agreement, contract,
or transaction described in paragraph (1)(B) of this
subsection, if necessary to ensure timely dissemination
by the electronic trading facility of price, trading
volume, and other trading data to the extent
appropriate to the exempt commodity and electronic
trading facility, if the Commission determines the
electronic trading facility performs a significant
price discovery function for related transactions in
the exempt commodity underlying the agreement,
contract, or transaction.''.
SEC. 10. PROTECTION OF THE PUBLIC INTEREST.
The Commodity Exchange Act is amended by striking section 3 (7
U.S.C. 5) and inserting the following:
``SEC. 3. FINDINGS AND PURPOSE.
``(a) Findings.--The futures contracts and options contracts that
are subject to this Act are entered into regularly in interstate and
international commerce and are affected with a national public interest
by providing a means for managing and assuming price risks, discovering
prices, and disseminating pricing information through trading in
liquid, fair and financially secure trading facilities.
``(b) Purpose.--It is the purpose of this Act to serve the public
interests described in subsection (a) through a system of effective
self-regulation of trading facilities, clearing systems, market
participants and market professionals under the oversight of the
Commission. To foster these public interests, it is further the purpose
of this Act to authorize the Commission to deter and prevent price
manipulation or any other disruptions to market integrity; to ensure
the financial integrity of all transactions subject to this Act and the
avoidance of systemic risk; to protect all market participants from
fraudulent or other abusive sales practices and misuses of customer
assets; and to promote responsible innovation and fair competition
among boards of trade, other markets and market participants.''.
SEC. 11. PROHIBITED TRANSACTIONS.
Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended
by striking ``Sec. 4c.'' and all that follows through subsection (a)
and inserting the following:
``SEC. 4C. PROHIBITED TRANSACTIONS.
``(a) In General.--
``(1) Prohibition.--It shall be unlawful for any person to
offer to enter into, enter into, or confirm the execution of a
transaction described in paragraph (2) involving any commodity
if the transaction is used or may be used to--
``(A) hedge any transaction in interstate commerce
in the commodity or the product or byproduct of the
commodity;
``(B) determine the price basis of any such
transaction in interstate commerce in the commodity; or
``(C) deliver any such commodity sold, shipped, or
received in interstate commerce for the execution of
the transaction.
``(2) Transaction.--A transaction referred to in paragraph
(1) is a transaction that--
``(A)(i) is, is of the character of, or is commonly
known to the trade as, a `wash sale', `cross trade', or
`accommodation trade'; or
``(ii) is a fictitious sale; or
``(B) is used to cause any price to be reported,
registered, or recorded that is not a true and bona
fide price.
``(3) Effect of subsection.--Nothing in this subsection--
``(A) makes unlawful an exchange of--
``(i) futures in connection with a cash
commodity transaction;
``(ii) futures for cash commodities;
``(iii) transfer trades or office trades;
or
``(iv) futures for swaps;
if the exchange is made in accordance with rules of the
contract market or derivatives transaction execution
facility that apply to such transactions, and those
rules have been approved by the Commission; or
``(B) makes it unlawful for a futures commission
merchant, acting as principal or agent, to enter into,
execute, or confirm the execution of a contract for the
purchase or sale of a commodity for future delivery if
the contract is entered into, executed, reported,
recorded, and cleared in accordance with the rules of a
contract market or derivatives transaction execution
facility.''.
SEC. 12. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.
The Commodity Exchange Act is amended--
(1) by redesignating section 5b (7 U.S.C. 7b) as section
5e; and
(2) by striking sections 5 and 5a (7 U.S.C. 7, 7a) and
inserting the following:
``SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.
``(a) Applications.--A board of trade applying to the Commission
for designation as a contract market shall submit an application to the
Commission that includes any relevant materials and records the
Commission may require consistent with this Act.
``(b) Criteria for Designation.--
``(1) In general.--To be designated as a contract market,
the board of trade shall demonstrate to the Commission that the
board of trade meets the criteria specified in this subsection.
``(2) Prevention of market manipulation.--The board of
trade shall have the capacity to prevent market manipulation
through market surveillance, compliance, and enforcement
practices and procedures, including methods for conducting
real-time monitoring of trading and comprehensive and accurate
trade reconstructions.
``(3) Fair and equitable trading.--The board of trade shall
establish and enforce trading rules to ensure fair and
equitable trading through the facilities of the contract
market, and the capacity to detect, investigate, and discipline
any person that violates the rules.
``(4) Trade execution facility.--The board of trade shall--
``(A) establish and enforce rules defining, or
specifications detailing, the manner of operation of
the trade execution facility maintained by the board of
trade, including rules or specifications describing the
operation of any electronic matching platform; and
``(B) demonstrate that the trading facility
operates in accordance with the rules or
specifications.
``(5) Financial integrity of transactions.--The board of
trade shall establish and enforce rules and procedures for
ensuring the financial integrity of transactions entered into
by or through the facilities of the contract market.
``(6) Disciplinary procedures.--The board of trade shall
establish and enforce disciplinary procedures that authorize
the board of trade to discipline, suspend, or expel members or
market participants that violate the rules of the board of
trade, or similar methods for performing the same functions,
including delegation of the functions to third parties.
``(7) Public access.--The board of trade shall provide the
public with access to the rules, regulations, and contract
specifications of the board of trade.
``(8) Ability to obtain information.--The board of trade
shall establish and enforce rules that will allow the board of
trade to obtain any necessary information to perform any of the
functions described in this subsection, including the capacity
to carry out such international information-sharing agreement
as the Commission may require.
``(c) Existing Contract Markets.--A board of trade that is
designated as a contract market on the effective date of the Commodity
Futures Modernization Act of 2000 shall be considered to be a
designated contract market under this section.
``(d) Core Principles for Contract Markets.--
``(1) In general.--To maintain the designation of a board
of trade as a contract market, a board of trade shall comply
with the core principles specified in this subsection.
``(2) Compliance with rules.--The board of trade shall
monitor and enforce compliance with the rules of the contract
market, including the terms and conditions of any contracts to
be traded and any limitations on access to the contract market.
``(3) Contracts not readily subject to manipulation.--The
board of trade shall list on the contract market only contracts
that are not readily susceptible to manipulation.
``(4) Monitoring of trading.--The board of trade shall
monitor trading to prevent manipulation, price distortion, and
disruptions of the delivery or cash-settlement process.
``(5) Position limitations or accountability.--To reduce
the potential threat of market manipulation or congestion,
especially during trading in the delivery month, the board of
trade shall adopt position limitations or position
accountability for speculators, where necessary and
appropriate.
``(6) Emergency authority.--The board of trade shall adopt
rules to provide for the exercise of emergency authority, in
consultation or cooperation with the Commission, where
necessary and appropriate, including the authority to--
``(A) liquidate or transfer open positions in any
contract;
``(B) suspend or curtail trading in any contract;
and
``(C) require market participants in any contract
to meet special margin requirements.
``(7) Availability of general information.--The board of
trade shall make available to market authorities, market
participants, and the public information concerning--
``(A) the terms and conditions of the contracts of
the contract market; and
``(B) the mechanisms for executing transactions on
or through the facilities of the contract market.
``(8) Daily publication of trading information.--The board
of trade shall make public daily information on settlement
prices, volume, open interest, and opening and closing ranges
for actively traded contracts on the contract market.
``(9) Execution of transactions.--The board of trade shall
provide a competitive, open, and efficient market and mechanism
for executing transactions.
``(10) Trade information.--The board of trade shall
maintain rules and procedures to provide for the recording and
safe storage of all identifying trade information in a manner
that enables the contract market to use the information for
purposes of assisting in the prevention of customer and market
abuses and providing evidence of any violations of the rules of
the contract market.
``(11) Financial integrity of contracts.--The board of
trade shall establish and enforce rules providing for the
financial integrity of any contracts traded on the contract
market, including rules to ensure the financial integrity of
any futures commission merchants and introducing brokers and
the protection of customer funds.
``(12) Protection of market participants.--The board of
trade shall establish and enforce rules to protect market
participants from any abusive practices committed by any party
acting as an agent for the participants.
``(13) Dispute resolution.--The board of trade shall
establish and enforce rules regarding and provide facilities
for alternative dispute resolution as appropriate for market
participants and any market intermediaries.
``(14) Governance fitness standards.--The board of trade
shall establish and enforce appropriate fitness standards for
directors, members of any disciplinary committee, members of
the contract market, and any other persons with direct access
to the facility (including any parties affiliated with any of
the persons described in this paragraph).
``(15) Conflicts of interest.--The board of trade shall
establish and enforce rules to minimize conflicts of interest
in the decisionmaking process of the contract market and
establish a process for resolving such conflicts of interest.
``(16) Composition of boards of mutually owned contract
markets.--In the case of a mutually owned contract market, the
board of trade shall ensure that the composition of the
governing board reflects market participants.
``(17) Recordkeeping.--The board of trade shall--
``(A) maintain full records of all activities
related to the business of the contract market in a
form and manner acceptable to the Commission for a
period of at least 5 years;
``(B) make the records readily available during at
least the first 2 years of the 5-year period and
provide the records to the Commission at the expense of
the person required to maintain the records; and
``(C) keep the records open to inspection by any
representative of the Commission or the Department of
Justice.
``(18) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the board of
trade shall endeavor to avoid--
``(A) adopting any rules or taking any actions that
result in any unreasonable restraints of trade; or
``(B) imposing any material anticompetitive burden
on trading on the contract market.''.
SEC. 13. DERIVATIVES TRANSACTION EXECUTION FACILITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5 (as amended by section 12(2)) the following:
``SEC. 5A. DERIVATIVES TRANSACTION EXECUTION FACILITIES.
``(a) In General.--In lieu of compliance with the contract market
designation requirements of section 5, a board of trade may elect to
operate as a registered derivatives transaction execution facility if
the facility is--
``(1) designated as a contract market and meets the
requirements of this section; or
``(2) registered as a derivatives transaction execution
facility under subsection (c).
``(b) Requirements for Trading Futures Contracts or Other
Derivatives Transactions.--
``(1) In general.--A registered derivatives transaction
execution facility under subsection (a) may trade any futures
contract (or option on such a contract) on a security on or
through the facility only by satisfying the requirements of
this section.
``(2) Requirements for underlying commodities.--A
registered derivatives transaction execution facility may trade
any futures contract only if--
``(A) the underlying commodity has a nearly
inexhaustible deliverable supply;
``(B) the underlying commodity has a deliverable
supply that is sufficiently large that the contract is
highly unlikely to be susceptible to the threat of
manipulation;
``(C) the underlying commodity has no cash market;
or
``(D) the Commission determines, based on the
market characteristics, surveillance history, self-
regulatory record, and capacity of the facility that
trading in the futures contract is highly unlikely to
be susceptible to the threat of manipulation.
``(3) Eligible traders.--To trade on a registered
derivatives transaction execution facility, a person shall--
``(A) be authorized by the board of trade to trade
on the facility; and
``(B)(i) be an eligible contract participant; or
``(ii) be a person trading through a futures
commission merchant that--
``(I) is registered with the Commission;
``(II) is a member of a futures self-
regulatory organization;
``(III) is a clearing member of a
derivatives clearing organization; and
``(IV) has net capital of at least
$20,000,000.
``(4) Trading by contract markets.--A board of trade that
is designated as a contract market shall, to the extent that
the contract market also operates a registered derivatives
transaction execution facility--
``(A) provide a physical location for the contract
market trading of the board of trade that is separate
from trading on the derivatives transaction execution
facility of the board of trade; or
``(B) if the board of trade uses the same
electronic trading system for trading on the contract
market and derivatives transaction execution facility
of the board of trade, identify whether the electronic
trading is taking place on the contract market or the
derivatives transaction execution facility.
``(c) Criteria for Registration.--
``(1) In general.--To be registered as a registered
derivatives transaction execution facility, the board of trade
shall demonstrate to the Commission that the board of trade
meets the criteria specified in this paragraph.
``(2) Deterrence of abuses.--The board of trade shall
establish and enforce trading rules that will deter abuses and
has the capacity to detect, investigate, and enforce those
rules, including means to--
``(A) obtain information necessary to perform the
functions required under this section; or
``(B) use technological means to--
``(i) provide market participants with
impartial access to the market; and
``(ii) capture information that may be used
in establishing whether rule violations have
occurred.
``(3) Trading procedures.--The board of trade shall
establish and enforce rules or terms and conditions defining,
or specifications detailing, trading procedures to be used in
entering and executing orders traded on the facilities of the
board of trade.
``(4) Financial integrity of transactions.--The board of
trade shall establish and enforce rules or terms and conditions
providing for the financial integrity of transactions entered
on or through the facilities of the board of trade, including
rules or terms and conditions to ensure the financial integrity
of any futures commission merchants and introducing brokers and
the protection of customer funds.
``(d) Core Principles for Registered Derivatives Transaction
Execution Facilities.--
``(1) In general.--To maintain the registration of a board
of trade as a derivatives transaction execution facility, a
board of trade shall comply with the core principles specified
in this subsection.
``(2) Compliance with rules.--The board of trade shall
monitor and enforce the rules of the facility, including any
terms and conditions of any contracts traded on or through the
facility and any limitations on access to the facility.
``(3) Monitoring of trading.--The board of trade shall
monitor trading in the contracts of the facility to ensure
orderly trading in the contract and to maintain an orderly
market while providing any necessary trading information to the
Commission to allow the Commission to discharge the
responsibilities of the Commission under the Act.
``(4) Disclosure of general information.--The board of
trade shall disclose publicly and to the Commission information
concerning--
``(A) contract terms and conditions;
``(B) trading conventions, mechanisms, and
practices;
``(C) financial integrity protections; and
``(D) other information relevant to participation
in trading on the facility.
``(5) Provision of trading information.--The board of trade
shall provide to market participants on a fair, equitable, and
timely basis--
``(A) information regarding prices, bids, and
offers; and
``(B) for actively traded contracts, daily
information on settlement prices, volume, open
interest, and opening and closing ranges.
``(6) Fitness standards.--The board of trade shall
establish and enforce appropriate fitness standards for
directors, members of any disciplinary committee, members, and
any other persons with direct access to the facility, including
any parties affiliated with any of the persons described in
this paragraph.
``(7) Conflicts of interest.--The board of trade shall
establish and enforce rules to minimize conflicts of interest
in the decisionmaking process of the derivatives transaction
execution facility and establish a process for resolving such
conflicts of interest.
``(8) Recordkeeping.--The board of trade shall--
``(A) maintain full records of all activities
related to the business of the derivatives transaction
execution facility in a form and manner acceptable to
the Commission for a period of at least 5 years;
``(B) make the records readily available during at
least the first 2 years of the 5-year period and
provide the records to the Commission at the expense of
the person required to maintain the records; and
``(C) keep the records open to inspection by any
representatives of the Commission or the Department of
Justice.
``(9) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the board of
trade shall endeavor to avoid--
``(A) adopting any rules or taking any actions that
result in any unreasonable restraint of trade; or
``(B) imposing any material anticompetitive burden
on trading on the derivatives transaction execution
facility.
``(e) Use of Broker-Dealers and Depository Institutions as
Intermediaries.--
``(1) In general.--A registered derivatives transaction
execution facility may by rule allow a broker-dealer or
depository institution that meets the requirements of paragraph
(2) to--
``(A) act as an intermediary in transactions
executed on the facility on behalf of customers of the
broker-dealer or depository institution; and
``(B) receive funds of customers to serve as margin
or security for such transactions.
``(2) Requirements.--The requirements referred to in
paragraph (1) are that--
``(A) a broker-dealer be in good standing with the
Securities and Exchange Commission and a depository
institution be in good standing with Federal bank
regulatory agencies (including the Farm Credit
Administration), as applicable; and
``(B) if a broker-dealer or depository institution
carries or holds customer accounts or funds for
transactions on the derivatives transaction execution
facility for more than 1 business day, the broker-
dealer or depository institution is registered as a
futures commission merchant and is a member of a
registered futures association.
``(3) Implementation.--The Commission shall cooperate and
coordinate with the Securities and Exchange Commission and
Federal banking regulatory agencies (including the Farm Credit
Administration) in adopting rules and taking any other appropriate
action to facilitate the implementation of this subsection.
``(f) Segregation of Customer Funds.--Not later than 180 days after
the effective date of the Commodity Futures Modernization Act of 2000,
consistent with regulations adopted by the Commission, a registered
derivatives transaction execution facility may authorize a futures
commission merchant to offer any customer of the futures commission
merchant that is an eligible contract participant the right to not
segregate the customer funds of the futures commission merchant for
purposes of trading on or through the facilities of the registered
derivatives transaction execution facility.
``(g) Election To Trade Excluded Commodities.--
``(1) In general.--A board of trade that is a registered
derivatives transaction execution facility may trade on the
facility any agreements, contracts, or transactions involving
excluded commodities that are otherwise excluded from this Act
under section 2(c) or 2(d).
``(2) Exclusive jurisdiction of the commission.--The
Commission shall have exclusive jurisdiction over agreements,
contracts, or transactions described in paragraph (1) to the
extent that the agreements, contracts, or transactions are
traded on a derivatives transaction execution facility.''.
SEC. 14. DERIVATIVES CLEARING ORGANIZATIONS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5a (as added by section 13) the following:
``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.
``(a) Application.--A derivatives clearing organization for a board
of trade that is designated as a contract market under section 5 or is
registered as a derivatives transaction execution facility under
section 5b, or for an exempt board of trade, or a derivatives clearing
organization for transactions excluded by subsection (c), (d) or (h) of
section 2, desiring to be registered with the Commission as a
registered derivatives clearing organization may submit to the
Commission an application for such registration which shall be in such
form and in accordance with such procedures as the Commission may
prescribe by regulation, and which shall contain the rules of the
derivatives clearing organization and such other information and
documents as the Commission may prescribe by regulation. An applicant
may withdraw an application submitted under this subsection by filing
with the Commission a written notice of withdrawal.
``(b) Qualifications.--The Commission shall not approve an
application submitted under subsection (a), unless the Commission
determines that--
``(1) the rules of the applicant are in accordance with
such rules as the Commission may adopt with respect to--
``(A) standards of financial responsibility,
operational capability, experience, competence, and
conduct applicable to participants in derivatives
clearing organizations;
``(B) governance of derivatives clearing
organizations;
``(C) qualifications of management of derivatives
clearing organization;
``(D) dues, fees, and other charges imposed by
derivatives clearing organizations; and
``(E) procedures for resolving disputes and
redressing grievances;
``(2) the applicant--
``(A) has sufficient financial resources, standards
for participant eligibility, and adequate risk
management policies and procedures to protect the
financial integrity of the applicant, consistent with international
standards;
``(B) has adequate operational systems and
settlement and default procedures designed to ensure
orderly settlement of contracts;
``(C) has procedures and mechanisms to ensure the
performance of obligations in the event of participant
default;
``(D) has such other resources and mechanisms as
are necessary to ensure compliance with this Act; and
``(E) meets such other requirements as the
Commission may prescribe by rule or order; and
``(3) the operation of the applicant would not be
inconsistent with the public interest protected by the
antitrust laws.
``(c) Publication of Notice of Application.--On the filing of an
application under subsection (a), the Commission shall publish notice
of the filing and afford interested persons an opportunity to submit
written data, views, and arguments concerning the application.
``(d) Disposition of Application.--
``(1) In general.--Within 90 days after the publication of
a notice under subsection (c) (or within such longer period as
the applicant may agree to), the Commission shall--
``(A) by order, approve the application; or
``(B) institute proceedings to determine whether to
disapprove the application.
``(2) Rules applicable to administrative disposition
proceedings.--
``(A) The proceedings referred to in paragraph
(1)(B) shall include notice of the grounds for
disapproval under consideration and shall provide an
opportunity for a hearing, and shall be concluded
within 180 days after the filing of the application for
registration.
``(B) At the conclusion of the proceedings, the
Commission, by order, shall approve or disapprove the
application.
``(C) The Commission shall approve the application
unless the Commission determines that the applicant
does not meet the qualifications set forth in
subsection (b).
``(3) Judicial review of application disapproval.--An
applicant whose application submitted under subsection (a) is
disapproved may appeal the disapproval to the United States
Court of Appeals for the judicial circuit in which the
applicant has its principal place of business, in accordance
with the procedural requirements set forth in section 6(b).
``(e) Revocation of Registration.--
``(1) Notice.--If the Commission makes a preliminary
determination that finds that a registered derivatives clearing
organization has ceased to exist or is operating in violation
of this Act, the Commission shall notify the registered
derivatives clearing organization in writing of the reasons for
the preliminary determination, including any data, materials,
and specific findings the Commission has relied on in reaching
the preliminary determination. The Commission shall allow the
registered derivatives clearing organization not fewer than 21
days to respond in writing to such a notice. The Commission
may, in its discretion, extend the period of time for filing
such a response.
``(2) Discussions.--After the Commission receives the
response, the Commission shall promptly initiate discussions
with the registered derivatives clearing organization to
attempt to remedy the alleged violation in a mutually
acceptable manner.
``(3) Revocation authority.--If, after a reasonable period
of time, no mutually acceptable resolution is reached, the
Commission may make a final determination to revoke the
registration of the registered derivatives clearing
organization under this section.
``(4) Judicial review.--A derivatives clearing organization
may appeal a final determination to revoke its registration
under this section to the United States Court of Appeals for
the judicial circuit in which the derivatives clearing
organization has its principal place of business, in accordance
with the procedural requirements set forth in section 6(b).
``(f) Recordkeeping and Examination.--A registered derivatives
clearing organization shall make and keep for prescribed periods such
records, furnish such copies of the records, and make and disseminate
such reports as the Commission prescribes by regulation or order.
``(g) Authority To Clear Over-The-Counter Transactions.--A
derivatives clearing organization described in subsection (a) of this
section may clear an agreement, contract, or transaction excluded from
this Act by subsection (c), (d) or (h) of section 2.
``(h) Exclusive Jurisdiction of the Commission.-- The Commission
shall have exclusive jurisdiction with respect to any registered
derivatives clearing organization.
``(i) Registered Derivatives Clearing Organization.--In this
section, the term `registered derivatives clearing organization' means
a derivatives clearing organization registered under this section.''.
SEC. 15. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5b (as added by section 14) the following:
``SEC. 5C. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.
``(a) Acceptable Business Practices Under Core Principles.--
``(1) In general.--Consistent with the purposes of this
Act, the Commission may issue interpretations, or approve
interpretations submitted to the Commission, of sections 5(d),
5a(d), and 5b(b) to describe what would constitute an
acceptable business practice under such sections.
``(2) Effect of interpretation.--An interpretation issued
under paragraph (1) shall not provide the exclusive means for
complying with such sections.
``(b) Delegation of Functions Under Core Principles.--
``(1) In general.--A contract market or derivatives
transaction execution facility may comply with any applicable
core principle through delegation of any relevant function to a
registered futures association or another registered entity.
``(2) Responsibility.--A contract market or derivatives
transaction execution facility that delegates a function under
paragraph (1) shall remain responsible for carrying out the
function.
``(c) New Contracts, New Rules, and Rule Amendments.--
``(1) In general.--Subject to paragraph (2), a registered
entity may elect to list for trading any new contract or other
instrument, or may elect to approve and implement any new rule
or rule amendment, by providing to the Commission a written
certification that the new contract, new rule, or rule
amendment complies with this Act (including regulations under
this Act).
``(2) Prior approval.--
``(A) In general.--A registered entity may request
that the Commission grant prior approval to any new
contract or other instrument, new rule, or rule
amendment.
``(B) Prior approval required.--Notwithstanding any
other provision of this section, for three years from
the effective date of the Commodity Futures Trading
Modernization Act of 2000, a designated contract market
shall submit to the Commission for prior approval each
rule amendment that materially changes the terms and
conditions in any contract of sale for future delivery
of a commodity specifically enumerated in section 1a(3)
of this Act (or any option thereon) traded through its
facilities if such rule amendment applies to contracts
and delivery months which have already been listed for
trading and have substantial open interest.
``(C) Deadline.--If prior approval is requested
under subparagraph (A), the Commission shall take final
action on the request not later than 90 days after
submission of the request, unless the person submitting
the request agrees to an extension of the time
limitation established under this subparagraph.
``(3) Approval.--The Commission shall approve any such new
contract or instrument, new rule, or rule amendment unless the
Commission finds that the new contract or instrument, new rule,
or rule amendment would violate this Act.
``(d) Violation of Core Principles.--
``(1) In general.--If the Commission has reason to believe
that a registered entity is violating any applicable provision
specified in section 5(d), 5a(d), or 5b(b), the Commission
shall notify the registered entity in writing of the reasons
for the preliminary determination by the Commission of a
violation, including any data, materials, and facts the
Commission relied on in making the preliminary determination.
``(2) Injunctive or administrative action.--The Commission
may initiate an action for an injunction under section 6c or an
administrative proceeding, to demonstrate, by the preponderance
of the evidence, that--
``(A) the registered entity is violating any
applicable provision specified in section 5(f), 5a(d),
or 5b(b); and
``(B) the Commission has recommended an appropriate
remedial action to remove the deficiency based on an
analysis of the costs and benefits of the Commission
recommendation.
``(3) Burden of proof.--In making a determination any that
a registered entity is violating any applicable provision
specified in section 5(d), 5a(d), or 5b(b), the Commission
shall have the burden of proving that the registered entity is
violating the applicable core principle.
``(e) Reservation of Emergency Authority.--Nothing in this section
shall limit or in any way affect the emergency powers of the Commission
provided in section 8a(9) of this Act.''.
SEC. 16. EXEMPT BOARDS OF TRADE.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5c (as added by section 15) the following:
``SEC. 5D. EXEMPT BOARDS OF TRADE.
``(a) In General.--Except as otherwise provided in this section, a
contract of sale (or option on such a contract) of a commodity for
future delivery traded on or through the facilities of an exempt board
of trade shall be exempt from all provisions of this Act, other than
section 2(g).
``(b) Criteria for Exemption.--To qualify for an exemption under
subsection (a), a board of trade shall limit trading on or through the
facilities of the board of trade to contracts of sale of a commodity
for future delivery (or options on such contracts)--
``(1) that have--
``(A) a nearly inexhaustible deliverable supply;
``(B) a deliverable supply that is sufficiently
large, and a cash market sufficiently liquid, to render
any contract traded on the commodity highly unlikely to
be susceptible to the threat of manipulation; or
``(C) no cash market; and
``(2) that are entered into only between persons that--
``(A) are eligible contract participants at the
time at which the persons enter into the contract; or
``(B) enter into the contract or option for the
benefit only of eligible contract participants.
``(c) Antimanipulation Requirements.--A party to a futures contract
or related option that is traded on an exempt board of trade shall be
subject to sections 4b, 4n, 6(c), and 9(a)(2), and the Commission shall
enforce those provisions with respect to any such trading.
``(d) Price Discovery.--If the Commission finds that an exempt
board of trade is a significant source of price discovery for any
underlying commodity in any transaction traded on or through the
facilities of the board of trade, the board of trade shall disseminate
publicly on a daily basis trading volume, opening and closing price
ranges, open interest, and other trading data as appropriate to the
market.
``(e) Jurisdiction.--The Commission shall have exclusive
jurisdiction over any account, agreement, or transaction involving a
contract of sale of a commodity for future delivery, or related option,
to the extent that such account, agreement, or transaction is traded on
an exempt board of trade.
``(f) Subsidiaries.--A board of trade that is designated as a
contract market or registered as a derivatives transaction execution
facility may operate an exempt board of trade by establishing a
separate subsidiary or other legal entity and otherwise satisfying the
requirements of this section.''.
SEC. 17. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.
Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as
redesignated by section 12(1)) is amended to read as follows:
``SEC. 5E. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED
ENTITY.
``The failure of a registered entity to comply with any provision
of this Act, or any regulation or order of the Commission under this
Act, shall be cause for the suspension of the registered entity for a
period not to exceed 180 days, or revocation of designation as a
registered entity in accordance with the procedures and subject to the
judicial review provided in section 6(b).''.
SEC. 18. AUTHORIZATION OF APPROPRIATIONS.
Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is
amended by striking ``2000'' and inserting ``2005''.
SEC. 19. PREEMPTION.
Section 12(e) of the Commodity Exchange Act (7 U.S.C. 16(e)) is
amended by striking paragraph (2) and inserting the following:
``(2) the application of any Federal or State law
(including any regulation) to an agreement, contract, or
transaction in or involving any commodity, product, right,
service, or interest, except that this Act shall supersede and
preempt--
``(A) in the case of any such agreement, contract,
or transaction--
``(i) that is conducted on or subject to
the rules of a registered entity or exempt
board of trade;
``(ii) that is conducted on or subject to
the rules of any board of trade, exchange, or
market located outside the United States, or
any territory or possession of the United
States (in accordance with any terms or
conditions specified by the Commission by
regulation); and
``(iii) that is subject to regulation by
the Commission under section 4c or 19; and
``(B) any State or local law that prohibits or
regulates gaming or the operation of bucket shops
(other than antifraud provisions of general
applicability) in the case of--
``(i) an electronic trading facility under
section 2(e); or
``(ii) an agreement, contract, or
transaction that is excluded or exempt under
section 2(c), 2(d), 2(f), or 2(h) or is covered
by the terms of an exemption granted by the
Commission under section 4(c) (regardless of
whether any such agreement, contract, or
transaction is otherwise subject to this Act);
or''.
SEC. 20. PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS.
Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended
by striking subsection (g) and inserting the following:
``(g) Predispute Resolution Agreements for Institutional
Customers.--Nothing in this section prohibits a registered futures
commission merchant from requiring a customer that is an eligible
contract participant, as a condition to the commission merchant's
conducting a transaction for the customer, to enter into an agreement
waiving the right to file a claim under this section.''.
SEC. 21. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.
Section 15 of the Commodity Exchange Act (7 U.S.C. 19) is amended
by striking ``Sec. 15. The Commission'' and inserting the following:
``SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.
``(a) Costs and Benefits.--
``(1) In general.--Before promulgating a regulation under
this Act or issuing an order (except as provided in paragraph
(3)), the Commission shall consider the costs and benefits of
the action of the Commission.
``(2) Considerations.--The costs and benefits of the
proposed Commission action shall be evaluated in light of--
``(A) considerations of protection of market
participants and the public;
``(B) considerations of the efficiency,
competitiveness, and financial integrity of futures
markets;
``(C) considerations of price discovery;
``(D) considerations of sound risk management
practices; and
``(E) other public interest considerations.
``(3) Applicability.--This subsection does not apply to the
following actions of the Commission:
``(A) An order that initiates, is part of, or is
the result of an adjudicatory or investigative process
of the Commission.
``(B) An emergency action.
``(C) A finding of fact regarding compliance with a
requirement of the Commission.
``(b) Antitrust Laws.--The Commission''.
SEC. 22. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.
Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is
amended by adding at the end the following:
``(4) Contract enforcement between eligible
counterparties.--No agreement, contract, or transaction between
eligible contract participants shall be void, voidable, or
unenforceable, and no such eligible contract participant shall
be entitled to rescind, or recover any payment made with
respect to, such an agreement, contract, or transaction, under
this section based solely on the failure of the agreement,
contract, or transaction to comply with the terms or conditions
of an exemption or exclusion from any provision of this Act or
regulations of the Commission.''.
SEC. 23. RULE OF CONSTRUCTION.
Except as expressly provided in this Act or an amendment made by
this Act, nothing in this Act or an amendment made by the Act
supersedes, affects, or otherwise limits or expands the scope and
applicability of laws governing the Securities and Exchange Commission.
SEC. 24. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Commodity Exchange Act.--
(1) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a)
is amended--
(A) in paragraphs (4), (5), (8), (9), (12), and
(14), by inserting ``or derivatives transaction
execution facility'' after ``contract market'' each
place it appears; and
(B) in paragraph (15)--
(i) in the paragraph heading, by striking
``contract market'' and inserting ``registered
entity''; and
(ii) by striking ``contract market'' each
place it appears and inserting ``registered
entity''.
(2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2,
2a, 4, 4a, 3) is amended--
(A) by striking ``Sec. 2. (a)(1)(A)(i) The'' and
inserting the following:
``SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF
AGENT; COMMODITY FUTURES TRADING COMMISSION; TRANSACTION
IN INTERSTATE COMMERCE.
``(a) Jurisdiction of Commission; Commodity Futures Trading
Commission.--
``(1) Jurisdiction of commission.--
``(A) In general.--The''; and
(B) in subsection (a)--
(i) in paragraph (1) (as amended by
subparagraph (A))--
(I) by striking subparagraph (B);
(II) by striking ``subparagraph (B)
of this subparagraph'' and inserting
``subsection (g)'';
(III) by striking ``contract market
designated pursuant to section 5 of
this Act'' and inserting ``contract
market designated or derivatives
transaction execution facility
registered pursuant to section 5 or
5a'';
(IV) by striking clause (ii); and
(V) in clause (iii), by striking
``(iii) The'' and inserting the
following:
``(B) Liability of principal for act of agent.--
The'';
(ii) in paragraph (7), by striking
``contract market'' and inserting ``registered
entity''; and
(iii) in paragraph (8)(B)(ii)--
(I) in the first sentence, by
striking ``designation as a contract
market'' and inserting ``designation or
registration as a contract market or
derivatives transaction execution
facility'';
(II) in the second sentence, by
striking ``designate a board of trade
as a contract market'' and inserting
``designate or register a board of
trade as a contract market or
derivatives transaction execution
facility''; and
(III) in the fourth sentence, by
striking ``designating, or refusing,
suspending, or revoking the designation
of, a board of trade as a contract
market'' and inserting ``designating,
registering, or refusing, suspending,
or revoking the designation or
registration of, a board of trade as a
contract market or derivatives
transaction execution facility''.
(3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is
amended--
(A) in subsection (a)--
(i) in paragraph (1), by striking
``designated by the Commission as a `contract
market' for'' and inserting ``designated or
registered by the Commission as a contract
market or derivatives transaction execution
facility for'';
(ii) in paragraph (2), by striking ``member
of such''; and
(iii) in paragraph (3), by inserting ``or
derivatives transaction execution facility''
after ``contract market''; and
(B) in subsection (c)--
(i) in paragraph (1)--
(I) by striking ``designated as a
contract market'' and inserting
``designated or registered as a
contract market or derivatives
transaction execution facility''; and
(II) by striking ``section
2(a)(1)(B)'' and inserting ``section
2(g)''; and
(ii) in paragraph (2)(B)(ii), by inserting
``or derivatives transaction execution
facility'' after ``contract market''.
(4) Section 4a of the Commodity Exchange Act (7 U.S.C. 6a)
is amended--
(A) in subsection (a)--
(i) in the first sentence, by inserting
``or derivatives transaction execution
facilities'' after ``contract markets''; and
(ii) in the second sentence, by inserting
``or derivatives transaction execution
facility'' after ``contract market'';
(B) in subsection (b), by inserting ``or
derivatives transaction execution facility'' after
``contract market'' each place it appears; and
(C) in subsection (e)--
(i) by striking ``contract market or'' each
place it appears and inserting ``contract
market, derivatives transaction execution
facility, or'';
(ii) by striking ``licensed or designated''
each place it appears and inserting ``licensed,
designated, or registered''; and
(iii) by striking ``contract market, or''
and inserting ``contract market or derivatives
transaction execution facility, or''.
(5) Section 4b(a) of the Commodity Exchange Act (7 U.S.C.
6b(a)) is amended by striking ``contract market'' each place it
appears and inserting ``registered entity''.
(6) Sections 4c(g), 4d, 4e, and 4f of the Commodity
Exchange Act (7 U.S.C. 6c(g), 6d, 6e, 6f) are amended by
inserting ``or derivatives transaction execution facility''
after ``contract market'' each place it appears.
(7) Section 4g of the Commodity Exchange Act (7 U.S.C. 6g)
is amended--
(A) in subsection (b), by striking ``clearinghouse
and contract market'' and inserting ``registered
entity''; and
(B) in subsection (f), by striking
``clearinghouses, contract markets, and exchanges'' and
inserting ``registered entities''.
(8) Section 4h of the Commodity Exchange Act (7 U.S.C. 6h)
is amended by striking ``contract market'' each place it
appears and inserting ``registered entity''.
(9) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i)
is amended in the first sentence by inserting ``or derivatives
transaction execution facility'' after ``contract market''.
(10) Section 4j of the Commodity Exchange Act (7 U.S.C. 6j)
is repealed.
(11) Section 4l of the Commodity Exchange Act (7 U.S.C. 6l)
is amended by inserting ``or derivatives transaction execution
facilities'' after ``contract markets'' each place it appears.
(12) Section 4p of the Commodity Exchange Act (7 U.S.C. 6p)
is amended--
(A) in the third sentence of subsection (a), by
striking ``Act or contract markets'' and inserting
``Act, contract markets, or derivatives transaction
execution facilities''; and
(B) in subsection (b), by inserting ``derivatives
transaction execution facility,'' after ``contract
market,''.
(13) The Commodity Exchange Act (as amended by paragraphs
(10), (11), and (12)) is amended by redesignating section 4k
through 4p (7 U.S.C. 6k through 6p) as sections 4j through 4o,
respectively.
(14) Section 6 of the Commodity Exchange Act (7 U.S.C. 8,
9, 9a, 9b, 13b, 15) is amended--
(A) in subsection (a)--
(i) in the first sentence--
(I) by striking ``board of trade
desiring to be designated a `contract
market' shall make application to the
Commission for such designation'' and
inserting ``person desiring to be
designated or registered as a contract
market or derivatives transaction
execution facility shall make
application to the Commission for such
designation or registration'';
(II) by striking ``above
conditions'' and inserting ``conditions
set forth in this Act''; and
(III) by striking ``above
requirements'' and inserting ``the
requirements of this Act'';
(ii) in the second sentence, by striking
``designation as a contract market within one
year'' and inserting ``designation or
registration as a contract market or
derivatives transaction execution facility
within 180 days'';
(iii) in the third sentence--
(I) by striking ``board of trade''
and inserting ``person''; and
(II) by striking ``one-year
period'' and inserting ``180-day
period''; and
(iv) in the last sentence, by striking
``designate as a `contract market' any board of
trade that has made application therefor, such
board of trade'' and inserting ``designate or
register as a contract market or derivatives
transaction execution facility any person that
has made application therefor, such person'';
(B) in subsection (b)--
(i) in the first sentence--
(I) by striking ``designation of
any board of trade as a `contract
market' upon'' and inserting
``designation or registration of any
contract market or derivatives
transaction execution facility on'';
(II) by striking ``board of trade''
each place it appears and inserting
``contract market or derivatives
transaction execution facility''; and
(III) by striking ``designation as
set forth in section 5 of this Act''
and inserting ``designation or
registration as set forth in sections 5
through 5b'';
(ii) in the second sentence--
(I) by striking ``board of trade''
the first place it appears and
inserting ``contract market or
derivatives transaction execution
facility''; and
(II) by striking ``board of trade''
the second and third places it appears
and inserting ``person''; and
(iii) in the last sentence, by striking
``board of trade'' each place it appears and
inserting ``person'';
(C) in subsection (c)--
(i) by striking ``contract market'' each
place it appears and inserting ``registered
entity'';
(ii) by striking ``contract markets'' each
place it appears and inserting ``registered
entities''; and
(iii) by striking ``trading privileges''
each place it appears and inserting
``privileges'';
(D) in subsection (d), by striking ``contract
market'' each place it appears and inserting
``registered entity''; and
(E) in subsection (e), by striking ``trading on all
contract markets'' each place it appears and inserting
``the privileges of all registered entities''.
(15) Section 6a of the Commodity Exchange Act (7 U.S.C.
10a) is amended--
(A) in the first sentence of subsection (a), by
striking ``designated as a `contract market' shall''
and inserting ``designated or registered as a contract
market or a derivatives transaction execution
facility''; and
(B) in subsection (b), by striking ``designated as
a contract market'' and inserting ``designated or
registered as a contract market or a derivatives
transaction execution facility''.
(16) Section 6b of the Commodity Exchange Act (7 U.S.C.
13a) is amended--
(A) by striking ``contract market'' each place it
appears and inserting ``registered entity'';
(B) in the first sentence, by striking
``designation as set forth in section 5 of this Act''
and inserting ``designation or registration as set
forth in sections 5 through 5c''; and
(C) in the last sentence, by striking ``the
contract market's ability'' and inserting ``the ability
of the registered entity''.
(17) Section 6c(a) of the Commodity Exchange Act (7 U.S.C.
13a-1(a)) by striking ``contract market'' and inserting
``registered entity''.
(18) Section 6d(1) of the Commodity Exchange Act (7 U.S.C.
13a-2(1)) is amended by inserting ``derivatives transaction
execution facility,'' after ``contract market,''.
(19) Section 7 of the Commodity Exchange Act (7 U.S.C. 11)
is amended--
(A) in the first sentence--
(i) by striking ``board of trade'' and
inserting ``person'';
(ii) by inserting ``or registered'' after
``designated'';
(iii) by inserting ``or registration''
after ``designation'' each place it appears;
and
(iv) by striking ``contract market'' each
place it appears and inserting ``registered
entity'';
(B) in the second sentence--
(i) by striking ``designation of such board
of trade as a contract market'' and inserting
``designation or registration of the registered
entity''; and
(ii) by striking ``contract markets'' and
inserting ``registered entities''; and
(C) in the last sentence--
(i) by striking ``board of trade'' and
inserting ``person''; and
(ii) by striking ``designated again a
contract market'' and inserting ``designated or
registered again a registered entity''.
(20) Section 8(c) of the Commodity Exchange Act (7 U.S.C.
12(c)) is amended in the first sentence by striking ``board of
trade'' and inserting ``registered entity''.
(21) Section 8a of the Commodity Exchange Act (7 U.S.C.
12a) is amended--
(A) by striking ``contract market'' each place it
appears and inserting ``registered entity''; and
(B) in paragraph (2)(F), by striking ``trading
privileges'' and inserting ``privileges''.
(22) Sections 8b and 8c(e) of the Commodity Exchange Act (7
U.S.C. 12b, 12c(e)) are amended by striking ``contract market''
each place it appears and inserting ``registered entity''.
(23) Section 8e of the Commodity Exchange Act (7 U.S.C.
12e) is amended--
(A) by striking ``contract market'' each place it
appears and inserting ``registered entity'';
(B) in subsection (a), by striking ``section
5a(b)'' and inserting ``sections 5 through 5c'';
(C) in subsection (b)--
(i) in paragraph (1), by striking ``a
contract market's trade monitoring system
implemented pursuant to section 5a(b)'' and
inserting ``the trade monitoring system of a
registered entity implemented pursuant to
sections 5 through 5c'';
(ii) by striking paragraph (3) and
inserting the following:
``(3) Remedies.--On becoming final, the Commission
deficiency order may require the registered entity to--
``(A) institute appropriate improvements in its
trade monitoring system necessary to correct the
deficiencies in the order;
``(B) satisfy stated objective performance criteria
to correct the deficiencies;
``(C) upgrade or reconfigure existing systems for
collecting or processing relevant data on trading and
trader or broker activity, including, where
appropriate, the commitment of additional resources.'';
and
(iii) in paragraph (5)--
(I) in the paragraph heading, by
striking ``Designation as contract
market'' and inserting ``Designation or
registration as registered entity'';
(II) by inserting ``or
registration'' after ``designation'';
and
(III) by striking ``board of
trade'' and inserting ``person'';
(D) in subsection (d)(2), by striking ``section
5b'' and inserting ``section 5e''; and
(E) in the paragraph heading of subsection (e)(2),
by striking ``Contract markets'' and inserting
``Registered entities''.
(24) Section 9 of the Commodity Exchange Act (7 U.S.C. 13)
is amended--
(A) by striking ``contract market'' each place it
appears and inserting ``registered entity''; and
(B) in subsection (a)(2), by striking ``section
4o(1),'' and inserting ``section 4n(1),''.
(25) Section 14 of the Commodity Exchange Act (7 U.S.C. 18)
is amended--
(A) in subsection (a)(1)(B), by striking ``contract
market'' and inserting ``registered entity''; and
(B) in subsection (f), by striking ``contract
markets'' and inserting ``registered entities''.
(26) Section 17 of the Commodity Exchange Act (7 U.S.C. 21)
is amended by striking ``contract market'' each place it
appears and inserting ``registered entity''.
(27) Section 22 of the Commodity Exchange Act (7 U.S.C. 25)
is amended--
(A) in subsection (a)--
(i) in paragraph (1)--
(I) by striking ``contract market,
clearing organization of a contract
market, licensed board of trade,'' and
inserting ``registered entity''; and
(II) in subparagraph (C)(i), by
striking ``contract market'' and
inserting ``registered entity'';
(ii) in paragraph (2), by striking
``sections 5a(11),'' and inserting ``sections
5(d)(13), 5b(b)(1)(E),''; and
(iii) in paragraph (3), by striking
``contract market'' and inserting ``registered
entity''; and
(B) in subsection (b)--
(i) in paragraph (1)--
(I) by striking ``contract market
or clearing organization of a contract
market'' and inserting ``registered
entity'';
(II) by striking ``section 5a(8)
and section 5a(9) of this Act'' and
inserting ``sections 5 through 5c'';
(III) by striking ``contract
market, clearing organization of a
contract market, or licensed board of
trade'' and inserting ``registered
entity''; and
(IV) by striking ``contract market
or licensed board of trade'' and
inserting ``registered entity'';
(ii) in paragraph (3)--
(I) by striking ``a contract
market, clearing organization, licensed
board of trade,'' and inserting
``registered entity''; and
(II) by striking ``contract market,
licensed board of trade'' and inserting
``registered entity'';
(iii) in paragraph (4), by striking
``contract market, licensed board of trade,
clearing organization,'' and inserting
``registered entity''; and
(iv) in paragraph (5), by striking
``contract market, licensed board of trade,
clearing organization,'' and inserting
``registered entity''.
(b) Federal Deposit Insurance Corporation Improvement Act of
1991.--Section 402(2) of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C. 4402(2)) is amended by striking
subparagraph (B) and inserting the following:
``(B) that is registered as a derivatives clearing
organization under section 5b of the Commodity Exchange
Act.''.
SEC. 25. EFFECTIVE DATE.
(a) In General.--Except as provided in subsection (b), this Act
takes effect on the date of enactment of this Act.
(b) Jurisdiction of Commission.--Section 8, and the amendments made
by that section, take effect 1 year after the date of enactment of this
Act.
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