[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4541 Reported in House (RH)]
Union Calendar No. 477
106th CONGRESS
2d Session
H. R. 4541
[Report No. 106-711, Parts I, II, and III]
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
June 29, 2000
Reported from the Committee on Agriculture with an amendment
[Strike out all after the enacting clause and insert the part printed
in italic]
September 6, 2000
Reported from the Committee on Banking and Financial Services with
amendments
[Strike out all after the enacting clause and insert the part printed
in boldface roman]
September 6, 2000
Additional sponsors: Mr. Barrett of Nebraska, Mr. Chambliss, and Mr.
Gutknecht
September 6, 2000
Reported from the Committee on Commerce with an amendment, committed to
the Committee of the Whole House on the State of the Union, and ordered
to be printed
[Strike out all after the enacting clause and insert the part printed
in boldface italic]
[For text of introduced bill, see copy of bill as introduced on May 25,
2000]
_______________________________________________________________________
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. Special procedures to encourage and facilitate bona fide
hedging by agricultural producers.
Sec. 24. Rule of construction.
Sec. 25. Technical and conforming amendments.
Sec. 26. Report to Congress.
Sec. 27. Effective date.
Sec. 28. International activities of the Commodity Futures Trading
Commission.
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to reauthorize the appropriation for the Commodity
Futures Trading Commission;
(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 to oversight of the futures markets;
(4) to provide a statutory and regulatory framework for
allowing the trading of futures on securities;
(5) to provide the Commission jurisdiction over certain
retail foreign exchange transactions and bucket shops that may
not be 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 (15) through (19), (21)
through (23), and (27), 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--
``(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 commercial participant.--The term `eligible
commercial participant' means a party or entity described in
paragraph (11)(A)(i), (ii), (v), or (vii) or paragraph (11)(C),
who, in connection with its business--
``(A) has a demonstrable capacity or ability,
directly or through separate contractual arrangements,
to make or take delivery of the underlying physical
commodity;
``(B) incurs risks, in addition to price risk,
related to the commodity; or
``(C) is a dealer that regularly provides hedging,
risk management, or market-making services to the
foregoing entities.
``(11) 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);
``(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; or
``(iii) a commodity trading advisor subject to
regulation under this Act, having assets under
management of not less than $25,000,000 and acting as
investment manager or fiduciary for another person and
authorized by such person to commit such person to the
transaction; or
``(C) any other person that the Commission
determines to be eligible in light of the financial or
other qualifications of the person.
``(12) Excluded commodity.--The term `excluded commodity'
means--
``(A) an interest rate, exchange rate, currency,
security, security index, credit risk or measure, debt
or equity instrument, or index or measure of inflation;
``(B) any other rate, differential, index, or
measure of economic or commercial risk, return, or
value that--
``(i) is not within the control of any
party to the relevant contract, agreement, or
transaction; or
``(ii) is not based in substantial part on
the value of a limited number of commodities
not described in subparagraph (A) that have a
finite supply; or
``(C) an occurrence, extent of an occurrence, or
contingency beyond the control of the parties to the
relevant contract, agreement, or transaction.
``(13) Exempt commodity.--The term `exempt commodity' means
a commodity that is not an excluded commodity or an
agricultural commodity.
``(14) 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 (19) (as redesignated by
paragraph (1)) the following:
``(20) 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 (23) (as redesignated by
paragraph (1)) the following:
``(24) 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).
``(25) 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'.
``(26) 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
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 facility; or
``(ii) include disciplinary sanctions other
than the exclusion of participants from
trading.''; and
(5) by adding at the end the following:
``(28) 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.
``(29) 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)) as in effect on date of the enactment of
this paragraph.
``(30) 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 an excluded
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) or
an option; 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) or a futures
commission merchant registered under
this Act;
``(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), or an affiliated person of a
futures commission merchant registered
under this Act, 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 5a, 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 principal-to-principal basis between
parties trading for their own accounts or as described
in section 1a(11)(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(11)(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)(3)(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);
``(B) an electronic trading facility that is
excluded under subsection (e); or
``(C) 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, at a level consistent
with 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 (4)(B) 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 nonexempt security 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 security 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 nonexempt security 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. In discharging these duties, the
intermarket margin board shall endeavor to make the
levels of margin for futures and options on a single
nonexempt security consistent taking into account any
material differences in such contracts, including--
``(I) the price volatility of the
contracts;
``(II) the frequency with which margin
calls are made; and
``(III) the period of time within which
margin calls must be met.
``(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, commodity trading
advisor, 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,
commodity trading advisor, or introducing broker complies with
the rules described in subparagraph (B) of a registered futures
association of which such merchant, advisor, or broker 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, a commodity trading advisor, 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.
``(10)(A) Nothing in this Act shall be construed to require
or authorize the Commission to review or approve, directly or
indirectly, any contract, rule, regulation, or action adopted
by a foreign board of trade, exchange, or market, or a
clearinghouse for such a board of trade, exchange, or market,
relating to any transaction involving a contract of sale for
future delivery (or option on such a contract) in or involving
any security, including any foreign government debt security,
or group or index of such securities, if--
``(i)(I) in the case of a contract of sale for
future delivery (or option on such a contract) in or
involving a single equity security, the United States
is not the primary trading market for the underlying
security; or
``(II) in the case of a contract of sale for future
delivery (or option on such a contract) in or involving
a group or index of equity securities, less than 25
percent of the weighting of the group or index is
derived from securities for which the United States is
the primary trading market for the securities
underlying the contract for future delivery (or option
on the contract); and
``(ii) settlement of or delivery on the contract
for future delivery (or option on such a contract) is
to be effected in cash or by means other than the
transfer or receipt of a security in the United States
other than an exempted security.
``(B) Within 90 days after the date of the enactment of
this paragraph, the Commission shall adopt such procedures as
it deems appropriate pursuant to which, consistent with this
Act, the Commission shall authorize the offer and sale in the
United States of any contract of sale for future delivery (or
option on such a contract) of a security, other than a security
of the type described in subparagraph (A)(i)(I) or a group or
index of securities of the type described in subparagraph
(A)(i)(II), traded on or subject to the rules of a foreign
board of trade, exchange, or market, or a clearinghouse for
such a board of trade, exchange, or market, except that such
procedures shall not require a foreign board of trade,
exchange, or market, or a clearinghouse for such a board of
trade, exchange, or market to apply for designation as a
contract market under this Act with respect to such a contract
for future delivery (or option on such a contract).''.
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) is entered into solely between persons that
are eligible contract participants at the time they
enter into the agreement, contract, or transaction; and
``(B) is not entered into on a 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, to the extent such
agreement, contract, or transaction is not between
eligible commercial participants and would otherwise be
subject to those provisions; and
``(C) sections 6(c) and 9(a)(2) of this Act to the
extent they prohibit manipulation of the market price
of any commodity in interstate commerce, to the extent
such agreement, contract, or transaction would
otherwise be subject to those provisions.
``(3) Except as provided in paragraph (4) of this
subsection, nothing in this Act shall apply to an agreement,
contract, or transaction in an exempt commodity (other than a
metal commodity enumerated in section 1a(3) of this Act)
which--
``(A) is entered into solely between persons that
are eligible contract participants at the time at which
the persons enter into the agreement, contract, or
transaction; and
``(B) is executed or traded on an electronic
trading facility.
``(4) An agreement, contract, or transaction described in
paragraph (3) 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 and section 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, to the extent such
agreement, contract, or transaction would otherwise be
subject to those provisions; and
``(C) such rules and regulations as the Commission
may prescribe if necessary to ensure timely
dissemination by the electronic trading facility of
price, trading volume, and other trading data to the
extent appropriate, if the Commission determines that
the electronic trading facility performs a significant
price discovery function for transactions related to
the commodity executed or traded on the electronic
trading facility.''.
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 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' 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.''.
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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the contract market or a derivatives clearing
organization.
``(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 agreements
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 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.
``(e) Current Agricultural and Metal Commodities.--
``(1) Subject to paragraph (2), a contract for purchase or
sale for future delivery of an agricultural or metal commodity
enumerated in section 1a(3) that is available for trade on a
contract market, as of the date of the enactment of this
subsection, may be traded only on a contract market designated
under this section.
``(2) In order to promote responsible economic or financial
innovation and fair competition, the Commission, on application
by any person, after notice and public comment and opportunity
for hearing, may prescribe rules and regulations to provide for
the offer and sale of contracts for future delivery or options
thereon to be conducted on a derivatives transaction execution
facility.''.
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 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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the registered derivatives transaction
execution facility or a derivatives clearing
organization.
``(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) 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 facility.
``(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, Depository Institutions, and Farm
Credit System Institutions as Intermediaries.--
``(1) In general.--A registered derivatives transaction
execution facility may by rule allow a broker-dealer,
depository institution, or institution of the Farm Credit
System 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, depository institution, or institution
of the Farm Credit System; 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) the broker-dealer be in good standing with
the Securities and Exchange Commission, or the
depository institution or institution of the Farm
Credit System be in good standing with Federal bank
regulatory agencies (including the Farm Credit
Administration), as applicable; and
``(B) if the broker-dealer, depository institution,
or institution of the Farm Credit System carries or
holds customer accounts or funds for transactions on
the derivatives transaction execution facility for more
than 1 business day, the broker-dealer, depository
institution, or institution of the Farm Credit System
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, the
Secretary of the Treasury, 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), 2(d), or 2(h).
``(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) Registration Requirement.--Except as provided in subsection
(b), it shall be unlawful for a derivatives clearing organization,
unless registered with the Commission, directly or indirectly to make
use of the mails or any means or instrumentality of interstate commerce
to perform the functions of a derivatives clearing organization
described in section 1a(8).
``(b) Exclusion of Derivatives Clearing Organizations Subject to
Other Regulatory Authorities.--A derivatives clearing organization
shall not be required to register with the Commission, and the
Commission shall have no jurisdiction with respect to the derivatives
clearing organization, if the derivatives clearing organization--
``(1)(A) is registered as a clearing agency under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
``(B) is subject to the supervisory jurisdiction of a
Federal banking agency (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813)) or the National Credit
Union Administration; or
``(C) is subject to the supervisory jurisdiction of a
foreign regulatory authority that is recognized by the
Securities and Exchange Commission, the Board of Governors of
the Federal Reserve System, the Comptroller of the Currency, or
the Commission as overseeing a system of consolidated
supervision comparable to that provided under applicable United
States law; and
``(2) does not clear a contract of sale for future
delivery, option on a contract of sale for future delivery, or
option on a commodity that is not a security (unless the
contract or option is excluded under subsection (c) or (d) of
section 2).
``(c) Voluntary Registration.--A derivatives clearing organization
that is exempt from registration under subsection (b) may register with
the Commission as a derivatives clearing organization.
``(d) Registration of Derivatives Clearing Organizations.--
``(1) Application.--A person desiring to register as a
derivatives clearing organization shall submit to the
Commission an application in such form and containing such
information as the Commission may require for the purpose of
making the determinations required for approval under paragraph
(2).
``(2) Core principles.--
``(A) In general.--To be registered and to maintain
registration as a derivatives clearing organization, an
applicant shall demonstrate to the Commission that the
applicant complies with the core principles specified
in this paragraph.
``(B) Financial resources.--The applicant shall
demonstrate that the applicant has adequate financial,
operational, and managerial resources to discharge the
responsibilities of a derivatives clearing organization
without interruption in various market conditions.
``(C) Participant and product eligibility.--The
applicant shall establish--
``(i) appropriate admission and continuing
eligibility standards (including appropriate
minimum financial requirements) for members of
and participants in the organization; and
``(ii) appropriate standards for
determining eligibility of agreements,
contracts, or transactions submitted to the
applicant.
``(D) Risk management.--The applicant shall have
the ability to manage the risks associated with
discharging the responsibilities of a derivatives
clearing organization through the use of appropriate
tools and procedures.
``(E) Settlement procedures.--The applicant shall
have the ability to--
``(i) complete settlements on a timely
basis under varying circumstances;
``(ii) maintain an adequate record of the
flow of funds associated with each transaction
that the applicant clears; and
``(iii) comply with the terms and
conditions of any permitted netting or offset
arrangements with other clearing organizations.
``(F) Treatment of funds.--The applicant shall have
standards and procedures designed to protect and ensure
the safety of member and participant funds.
``(G) Default rules and procedures.--The applicant
shall have rules and procedures designed to allow for
efficient, fair, and safe management of events when
members or participants become insolvent or otherwise
default on their obligations to the derivatives
clearing organization.
``(H) Rule enforcement.--The applicant shall--
``(i) maintain adequate arrangements and
resources for the effective monitoring and
enforcement of compliance with rules of the
applicant and for resolution of disputes; and
``(ii) have the authority and ability to
discipline, limit, suspend, or terminate a
member's or participant's activities for
violations of rules of the applicant.
``(I) System safeguards.--The applicant shall
demonstrate that the applicant--
``(i) has established and will maintain a
program of oversight and risk analysis to
ensure that the automated systems of the
applicant function properly and have adequate
capacity and security; and
``(ii) has established and will maintain
emergency procedures and a plan for disaster
recovery, and will periodically test backup
facilities sufficient to ensure daily
processing, clearing, and settlement of
transactions.
``(J) Reporting.--The applicant shall provide to
the Commission all information necessary for the
Commission to conduct the oversight function of the
applicant with respect to the activities of the
derivatives clearing organization.
``(K) Recordkeeping.--The applicant shall--
``(i) maintain full records of all
activities related to the business of the
applicant as a derivatives clearing
organization in a form and manner acceptable to
the Commission for a period of at least 5
years;
``(ii) 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
``(iii) keep the records open to inspection
by any representative of the Commission or the
Department of Justice.
``(L) Public information.--The applicant shall make
information concerning the rules and operating
procedures governing the clearing and settlement
systems (including default procedures) available to
market participants.
``(M) Information sharing.--The applicant shall--
``(i) enter into and abide by the terms of
all appropriate and applicable domestic and
international information-sharing agreements;
and
``(ii) use relevant information obtained
from the agreements in carrying out the
clearing organization's risk management
program.
``(N) Antitrust considerations.--Unless appropriate
to achieve the purposes of this Act, the derivatives
clearing organization shall avoid--
``(i) adopting any rule or taking any
action that results in any unreasonable
restraint of trade; or
``(ii) imposing any material
anticompetitive burden on trading on the
contract market.
``(3) Orders concerning competition.--A derivatives
clearing organization may request the Commission to issue an
order concerning whether a rule or practice of the applicant is
the least anticompetitive means of achieving the objectives,
purposes, and policies of this Act.
``(e) Existing Derivatives Clearing Organizations.--A derivatives
clearing organization shall be deemed to be registered under this
section to the extent that--
``(1) the derivatives clearing organization clears
agreements, contracts, or transactions for a board of trade
that has been designated by the Commission as a contract market
for such agreements, contracts, or transactions before the date
of enactment of this section; and
``(2) the Commission has reviewed and approved the rules of
the derivatives clearing organization before that date.
``(f) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
derivatives clearing organization, or if a derivatives clearing
organization withdraws from registration, the Commission, on
notice to the derivatives clearing organization, may apply to
the appropriate United States district court where the
derivatives clearing organization is located for the
appointment of a trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph (1)--
``(A) the court may take exclusive jurisdiction
over the derivatives clearing organization and the
records and assets of the derivatives clearing
organization, wherever located; and
``(B) if the court takes jurisdiction under
subparagraph (A), the court shall appoint the
Commission, or a person designated by the Commission,
as trustee with power to take possession and continue
to operate or terminate the operations of the
derivatives clearing organization in an orderly manner
for the protection of participants, subject to such
terms and conditions as the court may prescribe.
``(g) Linking of Regulated Clearing Facilities.--
``(1) In general.--The Commission shall facilitate the
linking or coordination of derivatives clearing organizations
registered under this Act with other regulated clearance
facilities for the coordinated settlement of cleared
transactions.
``(2) Coordination.--In carrying out paragraph (1), the
Commission shall coordinate with the Federal banking agencies
and the Securities and Exchange Commission.''.
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(d)(2) 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 (and the
Secretary of the Treasury, in the case of a contract of sale
for future delivery of a government security (or option
thereon) or a rule or rule amendment specifically related to
such a contract) 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, a designated contract
market shall submit to the Commission for prior
approval each rule amendment that materially changes
the terms and conditions, as determined by the
Commission, 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 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(d)(2), 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(d), 5a(d),
or 5b(d)(2); and
``(B) the Commission has recommended an appropriate
remedial action to remove the deficiency based on an
analysis of the costs and benefits in the public
interest of the Commission recommendation.
``(3) Burden of proof.--In making a determination that a
registered entity is violating any applicable provision
specified in section 5(d), 5a(d), or 5b(d)(2), 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;
``(2) that are entered into only between persons that are
eligible contract participants at the time at which the persons
enter into the contract; and
``(3) that are not contracts of sale (or options on the
contract) for future delivery of any security, including any
group or index of securities or any interest in, or interest
that is based on the value of, any security.
``(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. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
The Commodity Exchange Act, as otherwise amended by this Act, is
amended by inserting after section 4o the following:
``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
``(a) Authority.--The Commission shall consider issuing rules or
orders which--
``(1) prescribe procedures under which each contract market
is to provide for orderly delivery, including temporary storage
costs, of any agricultural commodity enumerated in section
1a(3) which is the subject of a contract for purchase or sale
for future delivery;
``(2) increase the ease with which domestic agricultural
producers may participate in contract markets, including by
addressing cost and margin requirements, so as to better enable
such producers to hedge price risk associated with their
production;
``(3) provide flexibility in the minimum quantities of such
agricultural commodities that may be the subject of a contract
for purchase or sale for future delivery that is traded on a
contract market, to better allow domestic agricultural
producers to hedge such price risk; and
``(4) encourage exchanges to provide information and
otherwise facilitate the participation of domestic agricultural
producers in contract markets.
``(b) Report.--Within 1 year after the date of enactment of this
section, the Commission shall submit to the Committee on Agriculture of
the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report on the steps it has
taken to implement this section and on the activities of contract
markets pursuant to this section.''.
SEC. 24. 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. 25. 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 paragraph (3), by inserting ``aluminum,
copper, gold, palladium, platinum, silver,'' after
``orange juice,'';
(B) in paragraphs (4), (5), (8), (9), (12), and
(14), by inserting ``or derivatives transaction
execution facility'' after ``contract market'' each
place it appears; and
(C) 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'';
(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 involving transactions for
future delivery referred to in this
clause or in considering possible
emergency action under section 8a(9) of
this Act'' 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
involving transactions for future
delivery referred to in this clause or
in considering any possible action
under this Act (including without
limitation emergency action under
section 8a(9))'', and by striking
``designation, suspension, revocation,
or emergency action'' and inserting
``designation, registration,
suspension, revocation, or action'';
and
(iv) by moving paragraphs (2) through (9) 2
ems to the right.
(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)--
(i) in paragraph (1), by inserting ``, or
derivatives transaction execution facility or
facilities,'' after ``markets''; and
(ii) in paragraph (2), by inserting ``or
derivatives transaction execution facility''
after ``contract market''; 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
``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. 26. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Commission (in this section
referred to as the ``Commission'') shall undertake and complete a study
of the Commodity Exchange Act (in this section referred to as ``the
Act'') and the Commission's rules, regulations and orders governing the
conduct of persons required to be registered under the Act, not later
than 1 year after the date of the enactment of this Act. The study
shall identify--
(1) the core principles and interpretations of acceptable
business practices that the Commission has adopted or intends
to adopt to replace the provisions of the Act and the
Commission's rules and regulations thereunder;
(2) the rules and regulations that the Commission has
determined must be retained and the reasons therefor;
(3) the extent to which the Commission believes it can
effect the changes identified in paragraph (1) of this
subsection through its exemptive authority under section 4(c)
of the Act; and
(4) the regulatory functions the Commission currently
performs that can be delegated to a registered futures
association (within the meaning of the Act) and the regulatory
functions that the Commission has determined must be retained
and the reasons therefor.
(b) In conducting the study, the Commission shall solicit the views
of the public as well as Commission registrants, registered entities,
and registered futures associations (all within the meaning of the
Act).
(c) The Commission shall transmit to the Committee on Agriculture
of the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report of the results of its
study, which shall include an analysis of comments received.
SEC. 27. 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.
SEC. 28. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING
COMMISSION.
(a) Findings.--The Congress finds that--
(1) derivatives markets serving United States industry are
increasingly global in scope;
(2) developments in data processing and communications
technologies enable users of risk management services to
analyze and compare those services on a worldwide basis;
(3) financial services regulatory policy must be flexible
to account for rapidly changing derivatives industry business
practices;
(4) regulatory impediments to the operation of global
business interests can compromise the competitiveness of United
States businesses;
(5) events that disrupt financial markets and economies are
often global in scope, require rapid regulatory response, and
coordinated regulatory effort across international
jurisdictions;
(6) through its membership in the International
Organisation of Securities Commissions, the Commodity Futures
Trading Commission has promoted beneficial communication among
market regulators and international regulatory cooperation; and
(7) the Commodity Futures Trading Commission and other
United States financial regulators and self-regulatory
organizations should continue to foster productive and
cooperative working relationships with their counterparts in
foreign jurisdictions.
(b) Sense of the Congress.--It is the sense of the Congress that,
consistent with its responsibilities under the Commodity Exchange Act,
the Commodity Futures Trading Commission should, as part of its
international activities, continue to coordinate with foreign
regulatory authorities, to participate in international regulatory
organizations and forums, and to provide technical assistance to
foreign government authorities, in order to encourage--
(1) the facilitation of cross-border transactions through
the removal or lessening of any unnecessary legal or practical
obstacles;
(2) the development of internationally accepted regulatory
standards of best practice;
(3) the enhancement of international supervisory
cooperation and emergency procedures;
(4) the strengthening of international cooperation for
customer and market protection; and
(5) improvements in the quality and timeliness of
international information sharing.
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Commodity Futures
Modernization and Financial Contract Netting Improvement Act of 2000''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--COMMODITY FUTURES MODERNIZATION
Sec. 101. Short title.
Sec. 102. Purposes.
Sec. 103. Definitions.
Sec. 104. Agreements, contracts, and transactions in foreign currency,
government securities, and certain other
commodities.
Sec. 105. Legal certainty for excluded derivative transactions.
Sec. 106. Excluded electronic trading facilities.
Sec. 107. Conformity with the Gramm-Leach-Bliley Act; hybrid
instruments.
Sec. 108. Futures on securities.
Sec. 109. Transactions in exempt commodities.
Sec. 110. Swap transactions.
Sec. 111. Application of the Commodity Exchange Act.
Sec. 112. Protection of the public interest.
Sec. 113. Prohibited transactions.
Sec. 114. Designation of boards of trade as contract markets.
Sec. 115. Derivatives transaction execution facilities.
Sec. 116. Derivatives clearing.
Sec. 117. Common provisions applicable to registered entities.
Sec. 118. Exempt boards of trade.
Sec. 119. Suspension or revocation of designation as contract market.
Sec. 120. Authorization of appropriations.
Sec. 121. Preemption.
Sec. 122. Predispute resolution agreements for institutional customers.
Sec. 123. Consideration of costs and benefits and antitrust laws.
Sec. 124. Contract enforcement.
Sec. 125. Special procedures to encourage and facilitate bona fide
hedging by agricultural producers.
Sec. 126. Rule of construction.
Sec. 127. Authority of agencies to construe the term ``contract
market''.
Sec. 128. Technical and conforming amendments.
Sec. 129. Report to Congress.
Sec. 130. Effective date.
Sec. 131. International activities of the Commodity Futures Trading
Commission.
Sec. 132. Antifraud provisions.
Sec. 133. Retail swap customer protections.
TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT
Sec. 201. Short title.
Sec. 202. Treatment of certain agreements by conservators or receivers
of insured depository institutions.
Sec. 203. Authority of the Corporation with respect to failed and
failing institutions.
Sec. 204. Amendments relating to transfers of qualified financial
contracts.
Sec. 205. Amendments relating to disaffirmance or repudiation of
qualified financial contracts.
Sec. 206. Clarifying amendment relating to master agreements.
Sec. 207. Federal Deposit Insurance Corporation Improvement Act of
1991.
Sec. 208. Bankruptcy code amendments.
Sec. 209. Recordkeeping requirements.
Sec. 210. Exemptions from contemporaneous execution requirement.
Sec. 211. Damage measure.
Sec. 212. SIPC stay.
Sec. 213. Asset-backed securitizations.
Sec. 214. Application of amendments.
TITLE I--COMMODITY FUTURES MODERNIZATION
SEC. 101. SHORT TITLE.
This title may be cited as the ``Commodity Futures Modernization
Act of 2000''.
SEC. 102. PURPOSES.
The purposes of this title are--
(1) to reauthorize the appropriation for the Commodity
Futures Trading Commission;
(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 to oversight of the futures markets;
(4) to provide a statutory and regulatory framework for
allowing the trading of futures on securities;
(5) to provide the Commission jurisdiction over certain
retail foreign exchange transactions and bucket shops that may
not be 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. 103. DEFINITIONS.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) by redesignating--
(A) paragraphs (1) through (7) as paragraphs (2)
through (8), respectively;
(B) paragraphs (8) through (12) as paragraphs (16)
through (20), respectively;
(C) paragraphs (13) through (15) as paragraphs (22)
through (24), respectively; and
(D) paragraph (16) as paragraph (28);
(2) by inserting before paragraph (2) (as so redesignated
by paragraph (1) of this section) the following new paragraph:
``(1) Banking product.--
``(A) In general.--The term `banking product' means
any agreement, contract, or transaction that is an
identified banking product (as defined in section
206(a) of the Gramm-Leach-Bliley Act).
``(B) Exclusion.--The term `banking product' does
not include a contract for the sale of a commodity for
future delivery traded on a contract market designated
under section 5 of this Act or an agreement, contract,
or transaction traded on a derivatives transaction
execution facility registered under section 5a.'';
(3) by inserting after paragraph (8) (as so redesignated by
paragraph (1) of this section) the following new paragraphs:
``(9) 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--
``(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.
``(10) 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.
``(11) Eligible commercial participant.--The term `eligible
commercial participant' means a party or entity described in
paragraph (11)(A)(i), (ii), (v), or (vii) or paragraph (11)(C),
who, in connection with its business--
``(A) has a demonstrable capacity or ability,
directly or through separate contractual arrangements,
to make or take delivery of the underlying physical
commodity;
``(B) incurs risks, in addition to price risk,
related to the commodity; or
``(C) is a dealer that regularly provides hedging,
risk management, or market-making services to the
foregoing entities.
``(12) 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) an individual who has total assets
in an amount in excess of--
``(I) $10,000,000; or
``(II) $5,000,000 and who enters
into the agreement, contract, or
transaction in order to manage the risk
associated with an asset owned or
liability incurred, or reasonably
likely to be owned or incurred, by such
individual 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);
``(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; or
``(iii) a commodity trading advisor subject to
regulation under this Act, having assets under
management of not less than $25,000,000 and acting as
investment manager or fiduciary for another person and
authorized by such person to commit such person to the
transaction; or
``(C) any other person that the Commission
determines to be eligible in light of the financial or
other qualifications of the person.
``(13) Exclusion-eligible commodity.--
``(A) In general.--The term `exclusion-eligible
commodity' means--
``(i) an interest rate, exchange rate,
currency, security, security index, credit risk
or measure, debt or equity instrument, index or
measure of inflation, or other macroeconomic
index or measure;
``(ii) any other rate, differential, index,
or measure of economic or commercial risk,
return, or value that is--
``(I) not based in substantial part
on the value of a narrow group of
commodities not described in clause
(i); or
``(II) based solely on 1 or more
commodities that have no cash market;
``(iii) any economic or commercial index
based on prices, rates, values, or levels that
are not within the control of any party to the
relevant contract, agreement, or transaction;
or
``(iv) an occurrence, extent of an
occurrence, or contingency (other than a change
in the price, rate, value, or level of a
commodity not described in clause (i)) that
is--
``(I) beyond the control of the
parties to the relevant contract,
agreement, or transaction; and
``(II) associated with a financial,
commercial, or economic consequence.
``(B) Reference to excluded commodity.--Any
reference in this Act to the term `excluded commodity'
shall be deemed to be a reference to `exclusion-
eligible commodity'.
``(14) Exempt commodity.--The term `exempt commodity' means
a commodity that is not an excluded commodity or an
agricultural commodity.
``(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) any financial holding company (as defined in
section 2 of the Bank Holding Company Act of 1956);
``(H) a trust company; or
``(I) a similarly regulated subsidiary or affiliate
of an entity described in any of subparagraphs (A)
through (H).'';
(3) by inserting after paragraph (20) (as so redesignated
by paragraph (1)) the following new paragraph:
``(21) Hybrid instrument.--
``(A) In general.--The term `hybrid instrument'
means a deposit instrument 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.
``(B) Deposit instrument defined.--The term
`deposit instrument' means an instrument representing
an interest described in paragraph (1), (2), (3), (4),
or (5) of section 3(l) of the Federal Deposit Insurance
Act, other than in subparagraph (A), (B), or (C) at the
end of paragraph (5).'';
(4) by inserting after paragraph (24) (as so redesignated
by paragraph (1)) the following new paragraphs:
``(25) 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).
``(26) 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'.
``(27) Organized exchange.--The term `organized exchange'
means a trading facility that--
``(A) permits trading by persons other than--
``(i) eligible contract participants
trading on a principal-to-principal basis; or
``(ii) eligible contract participants
described in subclause (I), (II), (III), (IV),
(V) or (VI) of section 2(c)(2)(B), acting as a
broker or performing an equivalent agency
function on behalf of eligible contract
participants; 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 facility; or
``(ii) include disciplinary sanctions other
than the exclusion of participants from
trading.''; and
(5) by adding at the end the following new paragraphs:
``(29) 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.
``(30) 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)) as in effect on date of the enactment of
this paragraph.
``(31) 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)));
``(iii) facilities on which bids and
offers, and acceptances of bids and offers
effected on the facility, are not binding; or
``(iv) a person or group of persons solely
because the person or group of persons
constitutes, maintains, or provides an
electronic facility or system that--
``(I) enables participants to enter
into bilateral transactions with other
participants; and
``(II) incorporates credit screens
or filters that prevent any participant
from executing a transaction with
another participant unless both
participants have approved the
extension of credit to the other.''.
SEC. 104. 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 an excluded
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) or
an option; 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) or a futures
commission merchant registered under
this Act;
``(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), or an affiliated person of a
futures commission merchant registered
under this Act, 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. 105. 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 104) 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 5a, 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--
``(i) entered into--
``(I) on a principal-to-principal
basis between parties trading for their
own accounts or as described in section
1a(12)(B)(ii) of this Act; and
``(II) only between eligible
contract participants (as defined in
subparagraphs (A), (B)(ii), and (C)
section 1a(12)) at the time at which
the persons enter into the agreement,
contract, or transaction; or
``(ii) entered into only between eligible
contract participants described in subclause
(I), (II), (III), (IV), (V), or (VI) of section
2(c)(2)(B)(ii) acting as a broker or performing
a similar agency function on behalf of 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
executed or traded on an electronic trading
facility.''.
SEC. 106. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 105) 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)(3)(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 electronic trading facility
excluded under this Act pursuant to paragraph (1).''.
SEC. 107. CONFORMITY WITH THE GRAMM-LEACH-BLILEY ACT; HYBRID
INSTRUMENTS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 106) 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) a banking product or security sold or
provided by an entity that is listed in any of
subclauses (I) through (VI) of section 2(c)(2)(B)(ii);
or
``(B) a hybrid instrument that is predominantly a
security or a deposit instrument.
``(2) Exception.--Paragraph (1)(A) shall not apply to any
swap agreement (as defined in section 206(b) of the Gramm-
Leach-Bliley Act) with any party who is not an eligible
contract participant unless such swap agreement is entered into
after final regulations have been prescribed under section 49
of the Federal Deposit Insurance Act.
``(3) Predominance.--A hybrid instrument shall be
considered to be predominantly a security or deposit 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.
``(4) Mark-to-market margining requirements.--For the
purposes of paragraph (3)(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. 108. FUTURES ON SECURITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 107) 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);
``(B) an electronic trading facility that is
excluded under subsection (e); or
``(C) 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)(I) In general.--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, at a
level consistent with the level of margin on comparable
option contracts listed on any national securities
exchange.
``(II) Consistency.--For the
purposes of subclause (I), a margin for
designated futures on securities and
options on securities shall be
considered to be consistent if the
margin provides a similar level of
protection against defaults by
counterparties, taking into account any
differences in--
``(aa) the price volatility
of the contracts;
``(bb) the frequency with
which margin requirements are
made; and
``(cc) the period of time
within which margin calls must
be met.
``(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 (4)(B) 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 nonexempt security 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 security 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 nonexempt security 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. In discharging these duties, the
intermarket margin board shall endeavor to make the
levels of margin for futures and options on a single
nonexempt security consistent taking into account any
material differences in such contracts, including--
``(I) the price volatility of the
contracts;
``(II) the frequency with which margin
calls are made; and
``(III) the period of time within which
margin calls must be met.
``(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, commodity trading
advisor, 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,
commodity trading advisor, or introducing broker complies with
the rules described in subparagraph (B) of a registered futures
association of which such merchant, advisor, or broker 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, a commodity trading advisor, 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.
``(10)(A) Nothing in this Act shall be construed to require
or authorize the Commission to review or approve, directly or
indirectly, any contract, rule, regulation, or action adopted
by a foreign board of trade, exchange, or market, or a
clearinghouse for such a board of trade, exchange, or market,
relating to any transaction involving a contract of sale for
future delivery (or option on such a contract) in or involving
any security, including any foreign government debt security,
or group or index of such securities, if--
``(i)(I) in the case of a contract of sale for
future delivery (or option on such a contract) in or
involving a single equity security, the United States
is not the primary trading market for the underlying
security; or
``(II) in the case of a contract of sale for future
delivery (or option on such a contract) in or involving
a group or index of equity securities, less than 25
percent of the weighting of the group or index is
derived from securities for which the United States is
the primary trading market for the securities
underlying the contract for future delivery (or option
on the contract); and
``(ii) settlement of or delivery on the contract
for future delivery (or option on such a contract) is
to be effected in cash or by means other than the
transfer or receipt of a security in the United States
other than an exempted security.
``(B) Within 90 days after the date of the enactment of
this paragraph, the Commission shall adopt such procedures as
it deems appropriate pursuant to which, consistent with this
Act, the Commission shall authorize the offer and sale in the
United States of any contract of sale for future delivery (or
option on such a contract) of a security, other than a security
of the type described in subparagraph (A)(i)(I) or a group or
index of securities of the type described in subparagraph
(A)(i)(II), traded on or subject to the rules of a foreign
board of trade, exchange, or market, or a clearinghouse for
such a board of trade, exchange, or market, except that such
procedures shall not require a foreign board of trade,
exchange, or market, or a clearinghouse for such a board of
trade, exchange, or market to apply for designation as a
contract market under this Act with respect to such a contract
for future delivery (or option on such a contract).''.
SEC. 109. TRANSACTIONS IN EXEMPT COMMODITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 108) 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) is entered into solely between persons that
are eligible contract participants at the time they
enter into the agreement, contract, or transaction; and
``(B) is not entered into on a 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, to the extent such
agreement, contract, or transaction is not between
eligible commercial participants and would otherwise be
subject to those provisions; and
``(C) sections 6(c) and 9(a)(2) of this Act to the
extent they prohibit manipulation of the market price
of any commodity in interstate commerce, to the extent
such agreement, contract, or transaction would
otherwise be subject to those provisions.
``(3) Except as provided in paragraph (4) of this
subsection, nothing in this Act shall apply to an agreement,
contract, or transaction in an exempt commodity (other than a
metal commodity enumerated in section 1a(3) of this Act)
which--
``(A) is entered into solely between persons that
are eligible contract participants at the time at which
the persons enter into the agreement, contract, or
transaction; and
``(B) is executed or traded on an electronic
trading facility.
``(4) An agreement, contract, or transaction described in
paragraph (3) 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 and section 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, to the extent such
agreement, contract, or transaction would otherwise be
subject to those provisions; and
``(C) such rules and regulations as the Commission
may prescribe if necessary to ensure timely
dissemination by the electronic trading facility of
price, trading volume, and other trading data to the
extent appropriate, if the Commission determines that
the electronic trading facility performs a significant
price discovery function for transactions related to
the commodity executed or traded on the electronic
trading facility.''.
SEC. 110. SWAP TRANSACTIONS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 109) is amended by adding at the end the
following new subsection:
``(i) Excluded Swap Transactions.--
``(1) In general.--No provision of this Act (other than
section 5b or 12(e)(2)(B)) shall apply to or govern any
agreement, contract, or transaction in a commodity other than
an agricultural commodity enumerated in section 1a(3) if--
``(A) the agreement, contract, or transaction is
entered into only between persons that are eligible
contract participants at the time they enter into the
agreement, contract, or transaction; and
``(B) the material economic terms of the agreement,
contract, or transaction are subject to individual
negotiation and are not specified by the rules terms or
conditions of a trading facility.
``(2) Exclusion.--Paragraph (1) shall not apply to--
``(A) a contract for the sale of a commodity for
future delivery traded on a contract market designated
under section 5; or
``(B) any agreement, contract, or transaction
traded on a derivatives transaction execution facility
registered under section 5a.''.
SEC. 111. APPLICATION OF THE COMMODITY EXCHANGE ACT.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 110) is amended by adding at the end the
following new subsection:
``(j) Application of the Act.--No provision of this Act shall be
construed as--
``(1) implying or creating any presumption that--
``(A) any agreement, contract, or transaction that
is eligible for an exclusion or exemption from
regulation under this Act; or
``(B) any agreement, contract, or transaction that
is not eligible for an exclusion or exemption from
regulation under this Act,
is or would otherwise be subject to this Act; or
``(2) conferring jurisdiction on the Commission with
respect to any such agreement, contract, or transaction, except
as expressly provided in section 5b.''.
SEC. 112. 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 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. 113. 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' 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.''.
SEC. 114. 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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the contract market or a derivatives clearing
organization.
``(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 agreements
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 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.
``(e) Current Agricultural and Metal Commodities.--
``(1) Subject to paragraph (2), a contract for purchase or
sale for future delivery of an agricultural or metal commodity
enumerated in section 1a(3) that is available for trade on a
contract market, as of the date of the enactment of this
subsection, may be traded only on a contract market designated
under this section.
``(2) In order to promote responsible economic or financial
innovation and fair competition, the Commission, on application
by any person, after notice and public comment and opportunity
for hearing, may prescribe rules and regulations to provide for
the offer and sale of contracts for future delivery or options
thereon to be conducted on a derivatives transaction execution
facility.''.
SEC. 115. 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 112(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 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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the registered derivatives transaction
execution facility or a derivatives clearing
organization.
``(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) 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 facility.
``(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, Depository Institutions, and Farm
Credit System Institutions as Intermediaries.--
``(1) In general.--A registered derivatives transaction
execution facility may by rule allow a broker-dealer,
depository institution, or institution of the Farm Credit
System 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, depository institution, or institution
of the Farm Credit System; 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) the broker-dealer be in good standing with
the Securities and Exchange Commission, or the
depository institution or institution of the Farm
Credit System be in good standing with Federal bank
regulatory agencies (including the Farm Credit
Administration), as applicable; and
``(B) if the broker-dealer, depository institution,
or institution of the Farm Credit System carries or
holds customer accounts or funds for transactions on
the derivatives transaction execution facility for more
than 1 business day, the broker-dealer, depository
institution, or institution of the Farm Credit System
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, the
Secretary of the Treasury, 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), 2(d), or 2(h).
``(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. 116. DERIVATIVES CLEARING.
(a) In General.--Subtitle A of title IV of the Federal Deposit
Insurance Corporation Improvement Act of 1991 is amended--
(1) by inserting before the section heading for section
401, the following new heading:
``CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING'';
(2) in section 402, by striking ``this subtitle'' and
inserting ``this chapter''; and
(3) by inserting after section 407, the following new
chapter:
``CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS
``SEC. 408. DEFINITIONS.
For purposes of this chapter, the following definitions shall
apply:
``(1) Multilateral clearing organization.--The term
`multilateral clearing organization' means a system utilized by
more than 2 participants in which the bilateral credit
exposures of participants arising from the transactions cleared
are effectively eliminated and replaced by a system of
guarantees, insurance, or mutualized risk of loss.
``(2) Over-the-counter derivative instrument.--The term
`over-the-counter derivative instrument' means--
``(A) any agreement, contract, or transaction,
including the terms and conditions incorporated by
reference in any such agreement, contract, or
transaction, which is an interest rate swap, option, or
forward agreement, including a rate floor, rate cap,
rate collar, cross-currency rate swap, basis swap, and
forward rate agreement; a spot, same day-tomorrow,
tomorrow-next, forward, or other foreign exchange or
precious metals agreement; a currency swap, option, or
forward agreement; an equity index or equity swap,
option, or forward agreement; a debt index or debt
swap, option, or forward agreement; a credit spread or
credit swap, option, or forward agreement; a commodity
index or commodity swap, option, or forward agreement;
and a weather swap, weather derivative, or weather
option;
``(B) any agreement, contract or transaction
similar to any other agreement, contract, or
transaction referred to in this clause that is
presently, or in the future becomes, regularly entered
into by parties that participate in swap transactions
(including terms and conditions incorporated by
reference in such agreement) and that is a forward,
swap, or option on 1 or more occurrences of any event,
rates, currencies, commodities, equity securities or
other equity instruments, debt securities or other debt
instruments, economic or other indices or measures of
economic or other risk or value;
``(C) any contract of sale of a commodity for
future delivery or commodity option described in
subsection (c), (d), (f), (h), or (i) of section 2 of
the Commodity Exchange Act or exempted under section
4(c) of such Act; and
``(D) any option to enter into any, or any
combination of, agreements, contracts or transactions
referred to in this subparagraph.
``(3) Other definitions.--The terms `State member bank' and
`affiliate' have the meanings given the terms in section 3 of
the Federal Deposit Insurance Act.
``SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.
``(a) In General.--Except with respect to clearing organizations
described in subsection (b), no person may operate a multilateral
clearing organization for over-the-counter derivative instruments, or
otherwise engage in activities that constitute such a multilateral
clearing organization unless the person is a national bank, State
member bank, an affiliate of a national bank or a State member bank, or
a corporation chartered under section 25A of the Federal Reserve Act.
``(b) Clearing Organizations.--Subsection (a) shall not apply to
any clearing organization that--
``(1) is registered as a clearing agency under the
Securities Exchange Act of 1934;
``(2) performs clearing functions for a contract market
designated pursuant to the Commodity Exchange Act; or
``(3) is supervised by a foreign financial regulator that
an appropriate Federal financial regulatory agency has
determined satisfies appropriate standards.''.
(b) Enforcement Powers of the Board of Governors of the Federal
Reserve System.--Section 9 of the Federal Reserve Act (12 U.S.C. 221)
is amended by adding at the end the following new paragraph:
``(24) Enforcement authority.--Section 3(u), subsections
(j) and (k) of section 7, subsections (b) through (n), (s),
(u), and (v) of section 8, and section 19 of the Federal
Deposit Insurance Act shall apply to a State member bank which
is not an insured depository institution (as defined in section
3 of the Federal Deposit Insurance Act) in the same manner and
to the same extent as such provisions apply to State member
insured banks, and any reference in such sections to an insured
depository institution shall be deemed to include a reference
to any such noninsured State member bank.''.
(c) Resolution of Clearing Banks.--The Federal Reserve Act (12
U.S.C. 221 et seq.) is amended by inserting after section 9A the
following new section:
``SEC. 9B. RESOLUTION OF CLEARING BANKS.
``(a) Conservatorship or Receivership.--
``(1) Appointment.--The Board may appoint a conservator or
receiver to take possession and control of any uninsured State
member bank which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of the Federal
Deposit Insurance Corporation Improvement Act of 1991 to the
same extent and in the same manner as the Comptroller of the
Currency may appoint a conservator or receiver for a national
bank.
``(2) Powers.--The conservator or receiver for an uninsured
State member bank referred to in paragraph (1) shall exercise
the same powers, functions, and duties, subject to the same
limitations, as a conservator or receiver for a national bank.
``(b) Board Authority.--The Board shall have the same authority
with respect to any conservator or receiver appointed under subsection
(a), and the uninsured State member bank for which the conservator or
receiver has been appointed, as the Comptroller of the Currency has
with respect to a conservator or receiver for a national bank and the
national bank for which the conservator or receiver has been appointed.
``(c) Bankruptcy Proceedings.--The Board (in the case of an
uninsured State member bank which operates, or operates as, such a
multilateral clearing organization) may direct a conservator or
receiver appointed for such bank to file a petition pursuant to title
11, United States Code, in which case, title 11, United States Code,
shall apply to such bank in lieu of otherwise applicable Federal or
State insolvency law.''.
(d) Technical and Conforming Amendments to Title 11, United States
Code.--
(1) Bankruptcy code debtors.--Section 109(b)(2) of title
11, United States Code, is amended by striking ``; or'' and
inserting the following: ``, except that an uninsured State
member bank, or a corporation organized under section 25A of
the Federal Reserve Act, which operates, or operates as, a
multilateral clearing organization pursuant to section 409 of
the Federal Deposit Insurance Corporation Improvement Act of
1991 may be a debtor if a petition is filed at the direction of
the Board of Governors of the Federal Reserve System; or''.
(2) Chapter 7 debtors.--Section 109(d) of title 11, United
States Code, is amended to read as follows:
``(d) Only a railroad, a person that may be a debtor under chapter
7 of this title (except a stockbroker or a commodity broker), and an
uninsured State member bank, or a corporation organized under section
25A of the Federal Reserve Act, which operates, or operates as, a
multilateral clearing organization pursuant to section 409 of the
Federal Deposit Insurance Corporation Improvement Act of 1991 may be a
debtor under chapter 11 of this title.''.
(3) Definition of financial institution.--Section 101(22)
of title 11, United States Code, is amended to read as follows:
``(22) the term `financial institution'--
``(A) means a Federal reserve bank or an entity
(domestic or foreign) that is a commercial or savings
bank, industrial savings bank, savings and loan
association, trust company, a bank or a corporation
organized under section 25A of the Federal Reserve Act
and, when any such bank or entity is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741, such
customer; and
``(B) includes any person described in subparagraph
(A) which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of the
Federal Deposit Insurance Corporation Improvement Act
of 1991;''.
(4) Definition of uninsured state member bank.--Section 101
of title 11, United States Code, is amended by inserting after
paragraph (54) the following new paragraph--
``(54A) the term `uninsured State member bank' means a State member
bank (as defined in section 3 of the Federal Deposit Insurance Act) the
deposits of which are not insured by the Federal Deposit Insurance
Corporation; and''.
(5) Subchapter v of chapter 7.--
(A) In general.--Section 103 of title 11, United
States Code, is amended--
(i) by redesignating subsections (e)
through (i) as subsections (f) through (j),
respectively; and
(ii) by inserting after subsection (d) the
following new subsection:
``(e) Scope of Application.--Subchapter V of chapter 7 of this
title shall apply only in a case under such chapter concerning the
liquidation of an uninsured State member bank, or a corporation
organized under section 25A of the Federal Reserve Act, which operates,
or operates as, a multilateral clearing organization pursuant to
section 409 of the Federal Deposit Insurance Corporation Improvement
Act of 1991.''.
(B) Clearing bank liquidation.--Chapter 7 of title
11, United States Code, is amended by adding at the end
the following new subchapter:
``SUBCHAPTER V--CLEARING BANK LIQUIDATION
``Sec. 781. Definitions
``For purposes of this subchapter, the following definitions shall
apply:
``(1) Board.--The term `Board' means the Board of Governors
of the Federal Reserve System.
``(2) Depository institution.--The term `depository
institution' has the same meaning as in section 3 of the
Federal Deposit Insurance Act, and includes any wholesale bank.
``(3) Clearing bank.--The term `clearing bank' means an
uninsured State member bank, or a corporation organized under
section 25A of the Federal Reserve Act, which operates, or
operates as, a multilateral clearing organization pursuant to
section 409 of the Federal Deposit Insurance Corporation
Improvement Act of 1991.
``Sec. 782. Selection of trustee
``(a) In General.--
``(1) Appointment.--Notwithstanding any other provision of
this title, the conservator or receiver who files the petition
shall be the trustee under this chapter, unless the Board
designates an alternative trustee.
``(2) Successor.--The Board may designate a successor
trustee if required.
``(b) Authority of Trustee.--Whenever the Board appoints or
designates a trustee, chapter 3 and sections 704 and 705 of this title
shall apply to the Board in the same way and to the same extent that
they apply to a United States trustee.
``Sec. 783. Additional powers of trustee
``(a) Distribution of Property Not of the Estate.--The trustee
under this subchapter has power to distribute property not of the
estate, including distributions to customers that are mandated by
subchapters III and IV of this chapter.
``(b) Disposition of Institution.--The trustee under this
subchapter may, after notice and a hearing--
``(1) sell the clearing bank to a depository institution or
consortium of depository institutions (which consortium may
agree on the allocation of the clearing bank among the consortium);
``(2) merge the clearing bank with a depository
institution;
``(3) transfer contracts to the same extent as could a
receiver for a depository institution under paragraphs (9) and
(10) of section 11(e) of the Federal Deposit Insurance Act;
``(4) transfer assets or liabilities to a depository
institution;
``(5) transfer assets and liabilities to a bridge bank as
provided in paragraphs (1), (3)(A), (5), (6), of section 11(n)
of the Federal Deposit Insurance Act, paragraphs (9) through
(13) of such section, and subparagraphs (A) through (H) and
subparagraph (K) of paragraph (4) of such section 11(n), except
that--
``(A) the bridge bank to which such assets or
liabilities are transferred shall be treated as a
clearing bank for the purpose of this subsection; and
``(B) any references in any such provision of law
to the Federal Deposit Insurance Corporation shall be
construed to be references to the appointing agency and
that references to deposit insurance shall be omitted.
``(c) Certain Transfers Included.--Any reference in this section to
transfers of liabilities includes a ratable transfer of liabilities
within a priority class.
``Sec. 784. Right to be heard
``The Board or a Federal reserve bank (in the case of a clearing
bank that is a member of that bank) may raise and may appear and be
heard on any issue in a case under this subchapter.''.
(e) Clerical Amendment.--The table of sections for chapter 7 of
title 11, United States Code, is amended by adding at the end the
following new items:
``SUBCHAPTER V--CLEARING BANK LIQUIDATION
``Sec.
``781. Definitions.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
(f) Resolution of Edge Act Corporations.--The 16th undesignated
paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 624) is
amended to read as follows:
``(16) Appointment of receiver or conservator.--
``(A) In general.--The Board may appoint a
conservator or receiver for a corporation organized
under the provisions of this section to the same extent
and in the same manner as the Comptroller of the
Currency may appoint a conservator or receiver for a
national bank, and the conservator or receiver for such
corporation shall exercise the same powers, functions,
and duties, subject to the same limitations, as a
conservator or receiver for a national bank.
``(B) Equivalent authority.--The Board shall have
the same authority with respect to any conservator or
receiver appointed for a corporation organized under
the provisions of this section under this paragraph and
any such corporation as the Comptroller of the Currency
has with respect to a conservator or receiver of a
national bank and the national bank for which a
conservator or receiver has been appointed.
``(C) Title 11 petitions.--The Board may direct the
conservator or receiver of a corporation organized
under the provisions of this section to file a petition
pursuant to title 11, United States Code, in which
case, title 11, United States Code, shall apply to the
corporation in lieu of otherwise applicable Federal or
State insolvency law.''.
(g) 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 15) the following new section:
``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.
``(a) Registration Requirement.--Except as provided in subsection
(b), it shall be unlawful for a derivatives clearing organization,
unless registered with the Commission, directly or indirectly to make
use of the mails or any means or instrumentality of interstate commerce
to perform the functions of a derivatives clearing organization
described in section 1a(8) with respect to a contract of sale of a
commodity for future delivery, option on a contract of sale of a
commodity for future delivery, or option on a commodity that is not an
exclusion-eligible commodity (unless the contract or option is
described in subsection (c), (d), (f), (h), or (i) of section 2 or
exempted under section 4(c)).
``(b) Voluntary Registration.--A derivatives clearing organization
that clears agreements, contracts, or transactions described in
subsection (c), (d), (f), (h), or (i) of section 2 or exempted under
section 4(c) may register with the Commission as a derivatives clearing
organization.
``(c) Registration of Derivatives Clearing Organizations.--
``(1) Application.--A person desiring to register as a
derivatives clearing organization shall submit to the
Commission an application in such form and containing such
information as the Commission may require for the purpose of
making the determinations required for approval under paragraph
(2).
``(2) Core principles.--
``(A) In general.--To be registered and to maintain
registration as a derivatives clearing organization, an
applicant shall demonstrate to the Commission that the
applicant complies with the core principles specified
in this paragraph.
``(B) Financial resources.--The applicant shall
demonstrate that the applicant has adequate financial,
operational, and managerial resources to discharge the
responsibilities of a derivatives clearing organization
without interruption in various market conditions.
``(C) Participant and product eligibility.--The
applicant shall establish--
``(i) appropriate admission and continuing
eligibility standards (including appropriate
minimum financial requirements) for members of
and participants in the organization; and
``(ii) appropriate standards for
determining eligibility of agreements,
contracts, or transactions submitted to the
applicant.
``(D) Risk management.--The applicant shall have
the ability to manage the risks associated with
discharging the responsibilities of a derivatives
clearing organization through the use of appropriate
tools and procedures.
``(E) Settlement procedures.--The applicant shall
have the ability to--
``(i) complete settlements on a timely
basis under varying circumstances;
``(ii) maintain an adequate record of the
flow of funds associated with each transaction
that the applicant clears; and
``(iii) comply with the terms and
conditions of any permitted netting or offset
arrangements with other clearing organizations.
``(F) Treatment of funds.--The applicant shall have
standards and procedures designed to protect and ensure
the safety of member and participant funds.
``(G) Default rules and procedures.--The applicant
shall have rules and procedures designed to allow for
efficient, fair, and safe management of events when
members or participants become insolvent or otherwise
default on their obligations to the derivatives
clearing organization.
``(H) Rule enforcement.--The applicant shall--
``(i) maintain adequate arrangements and
resources for the effective monitoring and
enforcement of compliance with rules of the
applicant and for resolution of disputes; and
``(ii) have the authority and ability to
discipline, limit, suspend, or terminate a
member's or participant's activities for
violations of rules of the applicant.
``(I) System safeguards.--The applicant shall
demonstrate that the applicant--
``(i) has established and will maintain a
program of oversight and risk analysis to
ensure that the automated systems of the
applicant function properly and have adequate
capacity and security; and
``(ii) has established and will maintain
emergency procedures and a plan for disaster
recovery, and will periodically test backup
facilities sufficient to ensure daily
processing, clearing, and settlement of
transactions.
``(J) Reporting.--The applicant shall provide to
the Commission all information necessary for the
Commission to conduct the oversight function of the
applicant with respect to the activities of the
derivatives clearing organization.
``(K) Recordkeeping.--The applicant shall--
``(i) maintain full records of all
activities related to the business of the
applicant as a derivatives clearing
organization in a form and manner acceptable to
the Commission for a period of at least 5
years;
``(ii) 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
``(iii) keep the records open to inspection
by any representative of the Commission or the
Department of Justice.
``(L) Public information.--The applicant shall make
information concerning the rules and operating
procedures governing the clearing and settlement
systems (including default procedures) available to
market participants.
``(M) Information sharing.--The applicant shall--
``(i) enter into and abide by the terms of
all appropriate and applicable domestic and
international information-sharing agreements;
and
``(ii) use relevant information obtained
from the agreements in carrying out the
clearing organization's risk management
program.
``(N) Antitrust considerations.--Unless appropriate
to achieve the purposes of this Act, the derivatives
clearing organization shall avoid--
``(i) adopting any rule or taking any
action that results in any unreasonable
restraint of trade; or
``(ii) imposing any material
anticompetitive burden on trading on the
contract market.
``(3) Orders concerning competition.--A derivatives
clearing organization may request the Commission to issue an
order concerning whether a rule or practice of the applicant is
the least anticompetitive means of achieving the objectives,
purposes, and policies of this Act.
``(d) Existing Derivatives Clearing Organizations.--A derivatives
clearing organization shall be deemed to be registered under this
section to the extent that--
``(1) the derivatives clearing organization clears
agreements, contracts, or transactions for a board of trade
that has been designated by the Commission as a contract market
for such agreements, contracts, or transactions before the date
of enactment of this section; and
``(2) the Commission has reviewed and approved the rules of
the derivatives clearing organization before that date.
``(e) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
derivatives clearing organization, or if a derivatives clearing
organization withdraws from registration, the Commission, on
notice to the derivatives clearing organization, may apply to
the appropriate United States district court where the
derivatives clearing organization is located for the
appointment of a trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph (1)--
``(A) the court may take exclusive jurisdiction
over the derivatives clearing organization and the
records and assets of the derivatives clearing
organization, wherever located; and
``(B) if the court takes jurisdiction under
subparagraph (A), the court shall appoint the
Commission, or a person designated by the Commission,
as trustee with power to take possession and continue
to operate or terminate the operations of the
derivatives clearing organization in an orderly manner
for the protection of participants, subject to such
terms and conditions as the court may prescribe.
``(f) Linking of Regulated Clearing Facilities.--
``(1) In general.--The Commission shall facilitate the
linking or coordination of derivatives clearing organizations
registered under this Act with other regulated clearance
facilities for the coordinated settlement of cleared
transactions.
``(2) Coordination.--In carrying out paragraph (1), the
Commission shall coordinate with the Federal banking agencies
and the Securities and Exchange Commission.''.
SEC. 117. 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(d)(2) 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 (and the
Secretary of the Treasury, in the case of a contract of sale
for future delivery of a government security (or option
thereon) or a rule or rule amendment specifically related to
such a contract) 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, a designated contract
market shall submit to the Commission for prior
approval each rule amendment that materially changes
the terms and conditions, as determined by the
Commission, 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 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(d)(2), 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(d), 5a(d),
or 5b(d)(2); and
``(B) the Commission has recommended an appropriate
remedial action to remove the deficiency based on an
analysis of the costs and benefits in the public
interest of the Commission recommendation.
``(3) Burden of proof.--In making a determination that a
registered entity is violating any applicable provision
specified in section 5(d), 5a(d), or 5b(d)(2), 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. 118. 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 115) 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;
``(2) that are entered into only between persons that are
eligible contract participants at the time at which the persons
enter into the contract; and
``(3) that are not contracts of sale (or options on the
contract) for future delivery of any security, including any
group or index of securities or any interest in, or interest
that is based on the value of, any security.
``(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. 119. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.
Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as
redesignated by section 112(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. 120. 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. 121. 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. 122. 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. 123. 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. 124. CONTRACT ENFORCEMENT.
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.--
``(A) In general.--No agreement, contract, or transaction
involving a party described in subclauses (I) through (VI) of
section 2(c)(2)(B)(ii) or between eligible contract
participants shall be void, voidable, or unenforceable, and no
such counterparty or 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 or any other provision of Federal or State law 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.
``(B) Exception.--This paragraph shall not apply to any
swap agreement (as defined in section 206(b) of the Gramm-
Leach-Bliley Act) with any party who is not an eligible
contract participant unless such swap agreement is entered into
after final regulations have been prescribed under section 49
of the Federal Deposit Insurance Act.
SEC. 125. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
The Commodity Exchange Act, as otherwise amended by this Act, is
amended by inserting after section 4o the following:
``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
``(a) Authority.--The Commission shall consider issuing rules or
orders which--
``(1) prescribe procedures under which each contract market
is to provide for orderly delivery, including temporary storage
costs, of any agricultural commodity enumerated in section
1a(3) which is the subject of a contract for purchase or sale
for future delivery;
``(2) increase the ease with which domestic agricultural
producers may participate in contract markets, including by
addressing cost and margin requirements, so as to better enable
such producers to hedge price risk associated with their
production;
``(3) provide flexibility in the minimum quantities of such
agricultural commodities that may be the subject of a contract
for purchase or sale for future delivery that is traded on a
contract market, to better allow domestic agricultural
producers to hedge such price risk; and
``(4) encourage exchanges to provide information and
otherwise facilitate the participation of domestic agricultural
producers in contract markets.
``(b) Report.--Within 1 year after the date of enactment of this
section, the Commission shall submit to the Committee on Agriculture of
the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report on the steps it has
taken to implement this section and on the activities of contract
markets pursuant to this section.''.
SEC. 126. RULE OF CONSTRUCTION.
Except as expressly provided in this title or an amendment made by
this title, nothing in this title or an amendment made by the title
supersedes, affects, or otherwise limits or expands the scope and
applicability of laws governing the Securities and Exchange Commission.
SEC. 127. AUTHORITY OF AGENCIES TO CONSTRUE THE TERM ``CONTRACT
MARKET''.
Each executive agency of the United States Government that has
authority to prescribe regulations under a statute that uses the term
``contract market'' may prescribe regulations construing such term as
referring to any contract market, derivatives transaction execution
facility, or derivatives clearing organization that is registered with
the Commodity Futures Trading Commission.
SEC. 128. 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 paragraph (3), by inserting ``aluminum,
copper, gold, palladium, platinum, silver,'' after
``orange juice,'';
(B) in paragraphs (4), (5), (8), (9), (12), and
(14), by inserting ``or derivatives transaction
execution facility'' after ``contract market'' each
place it appears; and
(C) 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 paragraph'' and inserting
``subsection (c), (d), (e), (f), (g),
or (i)'';
(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 redesignating subclauses
(I) and (II) as clauses (i) and (ii);
(V) by striking clause (ii); and
(VI) 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'';
(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 involving transactions for
future delivery referred to in this
clause or in considering possible
emergency action under section 8a(9) of
this Act'' 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
involving transactions for future
delivery referred to in this clause or
in considering any possible action
under this Act (including without
limitation emergency action under
section 8a(9))'', and by striking
``designation, suspension, revocation,
or emergency action'' and inserting
``designation, registration,
suspension, revocation, or action'';
and
(iv) by moving paragraphs (2) through (11)
2 ems to the right.
(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)--
(i) in paragraph (1), by inserting ``, or
derivatives transaction execution facility or
facilities,'' after ``markets''; and
(ii) in paragraph (2), by inserting ``or
derivatives transaction execution facility''
after ``contract market''; 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)
(as determined before the redesignation by paragraph (13) of
this subsection) 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 ``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. 129. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Commission (in this section
referred to as the ``Commission'') shall undertake and complete a study
of the Commodity Exchange Act (in this section referred to as ``the
Act'') and the Commission's rules, regulations and orders governing the
conduct of persons required to be registered under the Act, not later
than 1 year after the date of the enactment of this Act. The study
shall identify--
(1) the core principles and interpretations of acceptable
business practices that the Commission has adopted or intends
to adopt to replace the provisions of the Act and the
Commission's rules and regulations thereunder;
(2) the rules and regulations that the Commission has
determined must be retained and the reasons therefor;
(3) the extent to which the Commission believes it can
effect the changes identified in paragraph (1) of this
subsection through its exemptive authority under section 4(c)
of the Act; and
(4) the regulatory functions the Commission currently
performs that can be delegated to a registered futures
association (within the meaning of the Act) and the regulatory
functions that the Commission has determined must be retained
and the reasons therefor.
(b) In conducting the study, the Commission shall solicit the views
of the public as well as Commission registrants, registered entities,
and registered futures associations (all within the meaning of the
Act).
(c) The Commission shall transmit to the Committee on Agriculture
of the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report of the results of its
study, which shall include an analysis of comments received.
SEC. 130. EFFECTIVE DATE.
(a) In General.--Except as provided in subsection (b), this title
shall take effect on the date of enactment of this Act.
(b) Jurisdiction of Commission.--Section 108, and the amendments
made by that section, shall take effect 1 year after the date of
enactment of this Act.
SEC. 131. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING
COMMISSION.
(a) Findings.--The Congress finds that--
(1) derivatives markets serving United States industry are
increasingly global in scope;
(2) developments in data processing and communications
technologies enable users of risk management services to
analyze and compare those services on a worldwide basis;
(3) financial services regulatory policy must be flexible
to account for rapidly changing derivatives industry business
practices;
(4) regulatory impediments to the operation of global
business interests can compromise the competitiveness of United
States businesses;
(5) events that disrupt financial markets and economies are
often global in scope, require rapid regulatory response, and
coordinated regulatory effort across international
jurisdictions;
(6) through its membership in the International
Organisation of Securities Commissions, the Commodity Futures
Trading Commission has promoted beneficial communication among
market regulators and international regulatory cooperation; and
(7) the Commodity Futures Trading Commission and other
United States financial regulators and self-regulatory
organizations should continue to foster productive and
cooperative working relationships with their counterparts in
foreign jurisdictions.
(b) Sense of the Congress.--It is the sense of the Congress that,
consistent with its responsibilities under the Commodity Exchange Act,
the Commodity Futures Trading Commission should, as part of its
international activities, continue to coordinate with foreign
regulatory authorities, to participate in international regulatory
organizations and forums, and to provide technical assistance to
foreign government authorities, in order to encourage--
(1) the facilitation of cross-border transactions through
the removal or lessening of any unnecessary legal or practical
obstacles;
(2) the development of internationally accepted regulatory
standards of best practice;
(3) the enhancement of international supervisory
cooperation and emergency procedures;
(4) the strengthening of international cooperation for
customer and market protection; and
(5) improvements in the quality and timeliness of
international information sharing.
SEC. 132. ANTIFRAUD PROVISIONS.
(a) In General.--It shall be unlawful to commit retail derivatives
fraud by the use of any means or instruments of transportation or
communication in interstate commerce or of the mails.
(b) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Eligible contract participant.--The term ``eligible
contract participant'' has the same meaning as in section 1a of
the Commodity Exchange Act.
(2) Federal financial institution regulator.--The term
``Federal financial institution regulator'' means--
(A) any Federal functional regulator (as defined in
section 509(2) of the Gramm-Leach-Bliley Act) in the
case of any financial institution described in
paragraph (3)(A); and
(B) the Commodity Futures Trading Commission, in
the case of a financial institution described in
paragraph (3)(B).
(3) Financial institution.--The term ``financial
institution''--
(A) has the meaning given to such term in
subparagraph (A) of section 509(3) of the Gramm-Leach-
Bliley Act; and
(B) includes any person or entity described in
subparagraph (B) of such section 509(3).
(4) Retail derivatives fraud.--The term ``retail
derivatives fraud'' means any fraud perpetrated by a party on a
counterparty (other than a counterparty that is an eligible
contract participant) to any agreement, contract, transaction,
warrant, note or option (other than a contract of sale of a
commodity for future delivery or an option on such contract
(unless such contract or option has been excluded from the
Commodity Exchange Act under subsection (c), (d), (f), or (i)
of section 2 of such Act), or a security) that is based, in
whole or in part, on the value of any interest in, or a
quantitative measure relating to 1 or more commodities,
securities, currencies, interest or other rates, indices, or
other assets, or the occurrence of any event.
(5) Security.--The term ``security'' has the same meaning
as in section 3 of the Securities Exchange Act of 1934.
(c) Enforcement.--This section shall be enforced by the appropriate
Federal financial institution regulator, any appropriate State
insurance authority, and the Federal Trade Commission with respect to
financial institutions and other persons subject to the jurisdiction of
such agency or authority under applicable law, as follows:
(1) Under section 8 of the Federal Deposit Insurance Act,
in the case of--
(A) national banks, Federal branches and Federal
agencies of foreign banks, and any subsidiaries of such
entities (except brokers, dealers, futures commission
merchants, persons providing insurance, investment
companies, and investment advisers), by the office of
the Comptroller of the Currency;
(B) member banks of the Federal Reserve System
(other than national banks), branches and agencies of
foreign banks (other than Federal branches, Federal
agencies, and insured State branches of foreign banks),
commercial lending companies owned or controlled by
foreign banks, organizations operating under section 25
or 25A of the Federal Reserve Act, and bank holding
companies and their nonbank affiliates (other than
financial institutions of whom the Securities and
Exchange Commission is the federal functional
regulator), by the Board of Governors of the Federal
Reserve System;
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System), insured State branches of foreign banks, and
any subsidiaries of such entities (other than
subsidiaries of whom the Securities and Exchange
Commission is the Federal functional regulator), by the
Board of Directors of the Federal Deposit Insurance
Corporation; and
(D) savings associations the deposits of which are
insured by the Federal Deposit Insurance Corporation,
and any subsidiaries of such savings associations
(other than a subsidiary of whom the Securities and
Exchange Commission is the Federal functional
regulator), by the Director of the Office of Thrift
Supervision.
(2) Under the Federal Credit Union Act, by the Board of the
National Credit Union Administration with respect to any
federally insured credit union, and any subsidiary of any such
credit union (other than a subsidiary of whom the Securities
and Exchange Commission is the Federal functional regulator).
(3) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to--
(A) any broker, dealer, or investment bank holding
company; or
(B) any associated person of a broker or dealer,
concerning the financial or securities activities of
which the broker or dealer makes and keeps records
under section 15C(b) or 17(h) of the Securities
Exchange Act of 1934.
(4) Under the Investment Company Act of 1940, by the
Securities and Exchange Commission with respect to investment
companies.
(5) Under the Investment Advisers Act of 1940, by the
Securities and Exchange Commission with respect to investment
advisers.
(6) Under the Commodity Exchange Act, by the Commodity
Futures Trading Commission with respect to a commodity trading
adviser, commodity pool operator, or futures commission
merchant.
(7) Under State insurance law, in the case of any person
engaged in providing insurance, by the applicable State
insurance authority of the State in which the defrauded person
is domiciled.
(8) Under the Federal Trade Commission Act, by the Federal
Trade Commission for any other financial institution or other
person that is not subject to the jurisdiction of any agency or
authority under any other paragraph of this subsection.
(d) Criminal Penalties.--Any person who willfully violates
subsection (a) shall be fined not more than $1,000,000, in the case of
an individual, or $2,500,000 in the case of any person other than an
individual, or imprisoned not more than 10 years, or both.
SEC. 133. RETAIL SWAP CUSTOMER PROTECTIONS.
(a) In General.--The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by adding at the end the following new section:
``SEC. 49. RETAIL SWAP CUSTOMER PROTECTIONS.
``(a) Regulations Authorized.--The Board of Governors of the
Federal Reserve System and the Secretary of the Treasury may, in
consultation with appropriate Federal banking agencies, the Securities
and Exchange Commission, and the Commodity Futures Trading Commission,
jointly prescribe customer protection regulations that apply to sales
practices relating to swap agreements (as defined in section 206(b) of
the Gramm-Leach-Bliley Act) between financial institutions and retail
customers.
``(b) Sales Practice Regulations.--The regulations prescribed under
subsection (a) may address--
``(1) the information that financial institutions shall
obtain from retail customers in order to determine whether swap
agreements recommended by the financial institution to retail
customers are appropriate in light of the retail customer's net
worth, ability and willingness to incur losses, risk management
needs, financial goals, investment experience and history, and
other indicia of appropriateness;
``(2) information that financial institutions shall provide
to retail customers to help the retail customers understand the
economic characteristics and risks of swap agreements
recommended by financial institutions;
``(3) measures to protect retail customers against
fraudulent, deceptive, and manipulative acts and practices;
``(4) the extent to which access of retail customers to
particular classes of swap agreements should be restricted; and
``(5) such other matters as the Secretary of the Treasury
and the Board of Governors of the Federal Reserve System
determine are necessary or appropriate for the protection of
retail customers of swap agreements.
``(c) Definitions.--
``(1) Financial Institution.--The term `financial
institution' means a person described in subclause (I), (II),
(III), (IV), (V), or (VI) of section 2(c)(2)(B)(ii) of the
Commodity Exchange Act.
``(2) Retail Customer.--The term `retail customer' means a
person other than an eligible contract participant (as defined
in section 1a(11) of the Commodity Exchange Act).
``(d) Enforcement.--The regulations prescribed under subsection (a)
shall be enforced as follows:
``(1) Subject to section 45 of the Federal Deposit
Insurance Act, under section 8 of the Federal Deposit Insurance
Act, in the case of--
``(A) any national bank, Federal branch or Federal
agency of a foreign bank, or any subsidiary of a
national bank (other than any broker, dealer,
investment company or investment adviser) by the
Comptroller of the Currency;
``(B) any member bank (other than a national bank),
branch or agency of a foreign bank (other than a
Federal branch, Federal agency, or insured State branch
of a foreign bank), commercial lending company owned or
controlled by a foreign bank, organization operating
under section 25 or 25A of the Federal Reserve Act, any
subsidiary of any such entity (other than any broker,
dealer, investment company or investment adviser) and
any bank holding company and any nonbank affiliate of
any such company (other than any broker, dealer,
investment company or investment adviser) by the Board
of Governors of the Federal Reserve System;
``(C) any insured State nonmember bank, insured
State branch of a foreign bank, or any subsidiary of
any such entity (other than any broker, dealer,
investment company, or investment adviser) by the Board
of Directors of the Federal Deposit Insurance
Corporation; and
``(D) any savings association the deposits of which
are insured by the Corporation, any savings and loan
holding company, or any subsidiary of any such savings
association or holding company (other than any broker,
dealer, investment company or investment adviser) by
the Director of the Office of Thrift Supervision.
``(2) Under the Federal Credit Union Act, by the National
Credit Union Administration Board with respect to any federally
insured credit union, and any subsidiaries of such an entity.
``(3) Under the Securities Exchange Act of 1934, by the
Securities and Exchange Commission with respect to any
registered broker or dealer, or any associated person thereof
that is not otherwise regulated.
``(4) Under the Commodity Exchange Act, by the Commodity
Futures Trading Commission, with respect to any registered
futures commission merchant, or any affiliated person of any
such futures commission merchant that is not otherwise
regulated.
``(5) Under State insurance law, in the case of any person
engaged in providing insurance, or any affiliate of any such
person that is not otherwise regulated, by the applicable State
insurance authority of the State in which the person is
domiciled.''.
(b) Report.--If regulations authorized under the amendment made by
subsection (a) have not been prescribed in final form before the end of
the 1-year period beginning on the date of the enactment of this Act,
the Board of Governors of the Federal Reserve System and the Secretary
of the Treasury shall each submit a report to the Congress within 15
days after the end of such period containing an explanation of why such
regulations were not prescribed in final form by the end of such
period.
TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT
SEC. 201. SHORT TITLE.
This title may be cited as the ``Financial Contract Netting
Improvement Act of 2000''.
SEC. 202. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS
OF INSURED DEPOSITORY INSTITUTIONS.
(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order''
after ``any similar agreement that the Corporation determines by
regulation''.
(b) Definition of Securities Contract.--Section 11(e)(8)(D)(ii) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(ii)) is
amended to read as follows:
``(ii) Securities contract.--The term
`securities contract'--
``(I) means a contract for the
purchase, sale, or loan of a security,
a certificate of deposit, a mortgage
loan, or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit, or mortgage
loans or interests therein (including
any interest therein or based on the
value thereof) or any option on any of
the foregoing, including any option to
purchase or sell any such security,
certificate of deposit, loan, interest,
group or index, or option;
``(II) does not include any
purchase, sale, or repurchase
obligation under a participation in a
commercial mortgage loan unless the
Corporation determines by regulation,
resolution, or order to include any
such agreement within the meaning of
such term;
``(III) means any option entered
into on a national securities exchange
relating to foreign currencies;
``(IV) means the guarantee by or to
any securities clearing agency of any
settlement of cash, securities,
certificates of deposit, mortgage loans
or interests therein, group or index of
securities, certificates of deposit, or
mortgage loans or interests therein
(including any interest therein or
based on the value thereof) or option
on any of the foregoing, including any
option to purchase or sell any such
security, certificate of deposit, loan,
interest, group or index, or option;
``(V) means any margin loan;
``(VI) means any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) means any combination of
the agreements or transactions referred
to in this clause;
``(VIII) means any option to enter
into any agreement or transaction
referred to in this clause;
``(IX) means a master agreement
that provides for an agreement or
transaction referred to in subclause
(I), (III), (IV), (V), (VI), (VII), or
(VIII), together with all supplements
to any such master agreement, without
regard to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this clause, except that
the master agreement shall be
considered to be a securities contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (III), (IV), (V), (VI),
(VII), or (VIII); and
``(X) means any security agreement
or arrangement or other credit
enhancement related to any agreement or
transaction referred to in this
clause.''.
(c) Definition of Commodity Contract.--Section 11(e)(8)(D)(iii) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iii)) is
amended to read as follows:
``(iii) Commodity contract.--The term
`commodity contract' means--
``(I) with respect to a futures
commission merchant, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade;
``(II) with respect to a foreign
futures commission merchant, a foreign
future;
``(III) with respect to a leverage
transaction merchant, a leverage
transaction;
``(IV) with respect to a clearing
organization, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade that is cleared by such clearing
organization, or commodity option
traded on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing
organization;
``(V) with respect to a commodity
options dealer, a commodity option;
``(VI) any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) any combination of the
agreements or transactions referred to
in this clause;
``(VIII) any option to enter into
any agreement or transaction referred
to in this clause;
``(IX) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), (IV), (V), (VI),
(VII), or (VIII), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
commodity contract under this clause,
except that the master agreement shall
be considered to be a commodity
contract under this clause only with
respect to each agreement or
transaction under the master agreement
that is referred to in subclause (I),
(II), (III), (IV), (V), (VI), (VII), or
(VIII); or
``(X) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this clause.''.
(d) Definition of Forward Contract.--Section 11(e)(8)(D)(iv) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is amended
to read as follows:
``(iv) Forward contract.--The term `forward
contract' means--
``(I) a contract (other than a
commodity contract) for the purchase,
sale, or transfer of a commodity or any
similar good, article, service, right,
or interest which is presently or in
the future becomes the subject of
dealing in the forward contract trade,
or product or byproduct thereof, with a
maturity date more than 2 days after
the date the contract is entered into,
including a repurchase transaction,
reverse repurchase transaction,
consignment, lease, swap, hedge
transaction, deposit, loan, option,
allocated transaction, unallocated
transaction, or any other similar
agreement;
``(II) any combination of
agreements or transactions referred to
in subclauses (I) and (III);
``(III) any option to enter into
any agreement or transaction referred
to in subclause (I) or (II);
``(IV) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), or (III), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
forward contract under this clause,
except that the master agreement shall
be considered to be a forward contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), or (III); or
``(V) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in subclause (I), (II),
(III), or (IV).''.
(e) Definition of Repurchase Agreement.--Section 11(e)(8)(D)(v) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(v)) is
amended to read as follows:
``(v) Repurchase agreement.--The term
`repurchase agreement' (which definition also
applies to the term `reverse repurchase
agreement')--
``(I) means an agreement, including
related terms, which provides for the
transfer of 1 or more certificates of
deposit, mortgage-related securities
(as such term is defined in the
Securities Exchange Act of 1934),
mortgage loans, interests in mortgage-
related securities or mortgage loans,
eligible bankers' acceptances,
qualified foreign government securities
or securities that are direct
obligations of, or that are fully
guaranteed by, the United States or any
agency of the United States against the
transfer of funds by the transferee of
such certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests with a simultaneous
agreement by such transferee to
transfer to the transferor thereof
certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests as described above,
at a date certain not later than 1 year
after such transfers or on demand,
against the transfer of funds, or any
other similar agreement;
``(II) does not include any
repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such participation within
the meaning of such term;
``(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (IV);
``(IV) means any option to enter
into any agreement or transaction
referred to in subclause (I) or (III);
``(V) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
repurchase agreement under this clause,
except that the master agreement shall
be considered to be a repurchase
agreement under this subclause only
with respect to each agreement or
transaction under the master agreement
that is referred to in subclause (I),
(III), or (IV); and
``(VI) means any security agreement
or arrangement or other credit
enhancement related to any agreement or
transaction referred to in subclause
(I), (III), (IV), or (V).
For purposes of this clause, the term
`qualified foreign government security' means a
security that is a direct obligation of, or
that is fully guaranteed by, the central
government of a member of the Organization for
Economic Cooperation and Development (as
determined by regulation or order adopted by
the appropriate Federal banking authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi)) is amended
to read as follows:
``(vi) Swap agreement.--The term `swap
agreement' means--
``(I) any agreement, including the
terms and conditions incorporated by
reference in any such agreement, which
is an interest rate swap, option,
future, or forward agreement, including
a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis
swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other
foreign exchange or precious metals
agreement; a currency swap, option,
future, or forward agreement; an equity
index or equity swap, option, future,
or forward agreement; a debt index or
debt swap, option, future, or forward
agreement; a credit spread or credit
swap, option, future, or forward
agreement; a commodity index or
commodity swap, option, future, or
forward agreement; or a weather swap,
weather derivative, or a weather
option;
``(II) any agreement or transaction
similar to any other agreement or
transaction referred to in this clause
that is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference in
such agreement) and that is a forward,
swap, future, or option on 1 or more
rates, currencies, commodities, equity
securities or other equity instruments,
debt securities or other debt
instruments, or economic indices or
measures of economic risk or value;
``(III) any combination of
agreements or transactions referred to
in this clause;
``(IV) any option to enter into any
agreement or transaction referred to in
this clause;
``(V) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), or (IV), together
with all supplements to any such master
agreement, without regard to whether
the master agreement contains an
agreement or transaction that is not a
swap agreement under this clause,
except that the master agreement shall
be considered to be a swap agreement
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), (III), or (IV);
and
``(VI) any security agreement or
arrangement or other credit enhancement
related to any agreements or
transactions referred to in
subparagraph (I), (II), (III), (IV), or
(V).
Such term is applicable for purposes of this
title only and shall not be construed or
applied so as to challenge or affect the
characterization, definition, or treatment of
any swap agreement under any other statute,
regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of
1934, the Public Utility Holding Company Act of
1935, the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Securities Investor
Protection Act of 1970, the Commodity Exchange
Act, and the regulations promulgated by the
Securities and Exchange Commission or the
Commodity Futures Trading Commission.''.
(g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(viii)) is
amended to read as follows:
``(viii) Transfer.--The term `transfer'
means every mode, direct or indirect, absolute
or conditional, voluntary or involuntary, of
disposing of or parting with property or with
an interest in property, including retention of
title as a security interest and foreclosure of
the depository institutions's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section 11(e)(8)
of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is
amended--
(1) in subparagraph (A), by striking ``paragraph (10)'' and
inserting ``paragraphs (9) and (10)'';
(2) in subparagraph (A)(i), by striking ``to cause the
termination or liquidation'' and inserting ``such person has to
cause the termination, liquidation, or acceleration'';
(3) by amending subparagraph (A)(ii) to read as follows:
``(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);'';
and
(4) by amending subparagraph (E)(ii) to read as follows:
``(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);''.
(i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is amended by
inserting ``section 5242 of the Revised Statutes of the United States
(12 U.S.C. 91) or any other Federal or State law relating to the
avoidance of preferential or fraudulent transfers,'' before ``the
Corporation''.
SEC. 203. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND
FAILING INSTITUTIONS.
(a) In General.--Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)) is amended--
(1) in subparagraph (E), by striking ``other than paragraph
(12) of this subsection, subsection (d)(9)'' and inserting
``other than subsections (d)(9) and (e)(10)''; and
(2) by adding at the end the following new subparagraphs:
``(F) Clarification.--No provision of law shall be
construed as limiting the right or power of the
Corporation, or authorizing any court or agency to
limit or delay, in any manner, the right or power of
the Corporation to transfer any qualified financial
contract in accordance with paragraphs (9) and (10) of
this subsection or to disaffirm or repudiate any such
contract in accordance with paragraph (1).
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and (E), and
sections 403 and 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991,
no walkaway clause shall be enforceable in a
qualified financial contract of an insured
depository institution in default.
``(ii) Walkaway clause defined.--For
purposes of this subparagraph, the term
`walkaway clause' means a provision in a
qualified financial contract that, after
calculation of a value of a party's position or
an amount due to or from 1 of the parties in
accordance with its terms upon termination,
liquidation, or acceleration of the qualified
financial contract, either does not create a
payment obligation of a party or extinguishes a
payment obligation of a party in whole or in
part solely because of such party's status as a
nondefaulting party.''.
(b) Technical and Conforming Amendment.--Section 11(e)(12)(A) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(12)(A)) is amended
by inserting ``or the exercise of rights or powers'' after ``the
appointment''.
SEC. 204. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL
CONTRACTS.
(a) Transfers of Qualified Financial Contracts to Financial
Institutions.--Section 11(e)(9) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(9)) is amended to read as follows:
``(9) Transfer of qualified financial contracts.--
``(A) In general.--In making any transfer of assets
or liabilities of a depository institution in default
which includes any qualified financial contract, the
conservator or receiver for such depository institution
shall either--
``(i) transfer to 1 financial institution,
other than a financial institution for which a
conservator, receiver, trustee in bankruptcy,
or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding--
``(I) all qualified financial
contracts between any person or any
affiliate of such person and the
depository institution in default;
``(II) all claims of such person or
any affiliate of such person against
such depository institution under any
such contract (other than any claim
which, under the terms of any such
contract, is subordinated to the claims
of general unsecured creditors of such
institution);
``(III) all claims of such
depository institution against such
person or any affiliate of such person
under any such contract; and
``(IV) all property securing or any
other credit enhancement for any
contract described in subclause (I) or
any claim described in subclause (II)
or (III) under any such contract; or
``(ii) transfer none of the qualified
financial contracts, claims, property or other
credit enhancement referred to in clause (i)
(with respect to such person and any affiliate
of such person).
``(B) Transfer to foreign bank, foreign financial
institution, or branch or agency of a foreign bank or
financial institution.--In transferring any qualified
financial contracts and related claims and property
pursuant to subparagraph (A)(i), the conservator or
receiver for such depository institution shall not make
such transfer to a foreign bank, financial institution
organized under the laws of a foreign country, or a
branch or agency of a foreign bank or financial
institution unless, under the law applicable to such
bank, financial institution, branch or agency, to the
qualified financial contracts, and to any netting
contract, any security agreement or arrangement or
other credit enhancement related to 1 or more qualified
financial contracts, the contractual rights of the
parties to such qualified financial contracts, netting
contracts, security agreements or arrangements, or
other credit enhancements are enforceable substantially
to the same extent as permitted under this section.
``(C) Transfer of contracts subject to the rules of
a clearing organization.--In the event that a
conservator or receiver transfers any qualified
financial contract and related claims, property and
credit enhancements pursuant to subparagraph (A)(i) and
such contract is subject to the rules of a clearing
organization, the clearing organization shall not be
required to accept the transferee as a member by virtue
of the transfer.
``(D) Definition.--For purposes of this section,
the term `financial institution' means a broker or
dealer, a depository institution, a futures commission
merchant, or any other institution as determined by the
Corporation by regulation to be a financial
institution.''.
(b) Notice to Qualified Financial Contract Counterparties.--Section
11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(10)(A)) is amended by amending the flush material following
clause (ii) to read as follows: ``the conservator or receiver shall
notify any person who is a party to any such contract of such transfer
by 5:00 p.m. (eastern time) on the business day following the date of
the appointment of the receiver, in the case of a receivership, or the
business day following such transfer, in the case of a
conservatorship.''.
(c) Rights Against Receiver and Treatment of Bridge Banks.--Section
11(e)(10) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(10))
is further amended--
(1) by redesignating subparagraph (B) as subparagraph (D);
and
(2) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who is a
party to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(A) or section 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991 solely by reason of or incidental to
the appointment of a receiver for the
depository institution (or the insolvency or
financial condition of the depository
institution for which the receiver has been
appointed)--
``(I) until 5:00 p.m. (eastern
time) on the business day following the
date of the appointment of the
receiver; or
``(II) after the person has
received notice that the contract has
been transferred pursuant to paragraph
(9)(A).
``(ii) Conservatorship.--A person who is a
party to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(E) or section 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991, solely by reason of or incidental to
the appointment of a conservator for the
depository institution (or the insolvency or
financial condition of the depository
institution for which the conservator has been
appointed).
``(iii) Notice.--For purposes of this
subsection, the Corporation as receiver or
conservator of an insured depository
institution shall be deemed to have notified a
person who is a party to a qualified financial
contract with such depository institution if
the Corporation has taken steps reasonably
calculated to provide notice to such person by
the time specified in subparagraph (A) of this
subsection.
``(C) Treatment of bridge banks.--The following
institutions shall not be considered a financial
institution for which a conservator, receiver, trustee
in bankruptcy, or other legal custodian has been
appointed or which is otherwise the subject of a
bankruptcy or insolvency proceeding for purposes of
paragraph (9)--
``(i) a bridge bank; or
``(ii) a depository institution organized
by the Corporation, for which a conservator is
appointed either--
``(I) immediately upon the
organization of the institution; or
``(II) at the time of a purchase
and assumption transaction between such
institution and the Corporation as
receiver for a depository institution
in default.''.
SEC. 205. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF
QUALIFIED FINANCIAL CONTRACTS.
(a) In General.--Section 11(e) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)) is further amended--
(1) by redesignating paragraphs (11) through (15) as
paragraphs (12) through (16), respectively; and
(2) by inserting after paragraph (10) the following new
paragraph:
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which an insured depository
institution is a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified
financial contracts between--
``(i) any person or any affiliate of such
person; and
``(ii) the depository institution in
default; or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A)
(with respect to such person or any affiliate of such
person).''.
(b) Technical and Conforming Amendments.--Section 11(e)(8) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended in
subparagraph (C)(i), by striking ``(11)'' and inserting ``(12)''.
SEC. 206. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(vii)) is amended to read as follows:
``(vii) Treatment of master agreement as 1
agreement.--Any master agreement for any
contract or agreement described in any
preceding clause of this subparagraph (or any
master agreement for such master agreement or
agreements), together with all supplements to
such master agreement, shall be treated as a
single agreement and a single qualified
financial contract. If a master agreement
contains provisions relating to agreements or
transactions that are not themselves qualified
financial contracts, the master agreement shall
be deemed to be a qualified financial contract
only with respect to those transactions that
are themselves qualified financial
contracts.''.
SEC. 207. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF
1991.
(a) Definitions.--Section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended--
(1) in paragraph (2)--
(A) by inserting ``or exempt from such registration
pursuant to an order of the Securities and Exchange
Commission'' before the semicolon at the end of
subparagraph (A)(ii); and
(B) by inserting ``or that has been granted an
exemption pursuant to section 4(c)(1) of such Act''
before the period at the end of subparagraph (B);
(2) in paragraph (6)--
(A) by redesignating subparagraphs (B) through (D)
as subparagraphs (C) through (E), respectively;
(B) by inserting after subparagraph (A) the
following new subparagraph:
``(B) an uninsured national bank or an uninsured
State bank that is a member of the Federal Reserve
System if the national bank or State member bank is not
eligible to make application to become an insured bank
under section 5 of the Federal Deposit Insurance
Act;''; and
(C) by amending subparagraph (C) (as redesignated)
to read as follows:
``(C) a branch or agency of a foreign bank, a
foreign bank and any branch or agency of the foreign
bank, or the foreign bank that established the branch
or agency, as those terms are defined in section 1(b)
of the International Banking Act of 1978;'';
(3) in paragraph (11), by adding before the period ``and
any other clearing organization with which such clearing
organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between
two or more financial institutions, clearing
organizations, or members that provides for
netting present or future payment obligations
or payment entitlements (including liquidation
or closeout values relating to such obligations
or entitlements) among the parties to the
agreement; and''; and
(5) by adding at the end the following new paragraph:
``(15) Payment.--The term `payment' means a payment of
United States dollars, another currency, or a composite
currency, and a noncash delivery, including a payment or
delivery to liquidate an unmatured obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--Section 403 of
the Federal Deposit Insurance Corporation Improvement Act of 1991 (12
U.S.C. 4403) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act or any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment obligations and the
covered contractual payment entitlements between any two financial
institutions shall be netted in accordance with, and subject to the
conditions of, the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(f) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two financial institutions
shall be enforceable in accordance with their terms (except as provided
in section 561(b)(2) of title 11, United States Code) and shall not be
stayed, avoided, or otherwise limited by any State or Federal law
(other than paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of
the Federal Deposit Insurance Act and section 5(b)(2) of the Securities
Investor Protection Act of 1970).''.
(c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4404) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act and any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment obligations and the
covered contractual payment entitlements of a member of a clearing
organization to and from all other members of a clearing organization
shall be netted in accordance with and subject to the conditions of any
applicable netting contract (except as provided in section 561(b)(2) of
title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(h) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two members of a clearing
organization shall be enforceable in accordance with their terms
(except as provided in section 561(b)(2) of title 11, United States
Code) and shall not be stayed, avoided, or otherwise limited by any
State or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B)
of section 11(e) of the Federal Deposit Insurance Act and section
5(b)(2) of the Securities Investor Protection Act of 1970).''.
(d) Enforceability of Contracts With Uninsured National Banks and
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is
amended--
(1) by redesignating section 407 as section 407A; and
(2) by adding after section 406 the following new section:
``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND
UNINSURED FEDERAL BRANCHES AND AGENCIES.
``(a) In General.--Notwithstanding any other provision of law,
paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal
Deposit Insurance Act shall apply to an uninsured national bank or
uninsured Federal branch or Federal agency except--
``(1) any reference to the `Corporation as receiver' or
`the receiver or the Corporation' shall refer to the receiver
of an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
``(2) any reference to the `Corporation' (other than in
section 11(e)(8)(D) of such Act), the `Corporation, whether
acting as such or as conservator or receiver', a `receiver', or
a `conservator' shall refer to the receiver or conservator of
an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
and
``(3) any reference to an `insured depository institution'
or `depository institution' shall refer to an uninsured
national bank or an uninsured Federal branch or Federal agency.
``(b) Liability.--The liability of a receiver or conservator of an
uninsured national bank or uninsured Federal branch or agency shall be
determined in the same manner and subject to the same limitations that
apply to receivers and conservators of insured depository institutions
under section 11(e) of the Federal Deposit Insurance Act.
``(c) Regulatory Authority.--
``(1) In general.--The Comptroller of the Currency, in
consultation with the Federal Deposit Insurance Corporation,
may promulgate regulations to implement this section.
``(2) Specific requirement.--In promulgating regulations to
implement this section, the Comptroller of the Currency shall
ensure that the regulations generally are consistent with the
regulations and policies of the Federal Deposit Insurance
Corporation adopted pursuant to the Federal Deposit Insurance
Act.
``(d) Definitions.--For purposes of this section, the terms
`Federal branch', `Federal agency', and `foreign bank' have the same
meaning as in section 1(b) of the International Banking Act.''.
SEC. 208. BANKRUPTCY CODE AMENDMENTS.
(a) Definitions of Forward Contract, Repurchase Agreement,
Securities Clearing Agency, Swap Agreement, Commodity Contract, and
Securities Contract.--Title 11, United States Code, is amended--
(1) in section 101--
(A) in paragraph (25)--
(i) by striking ``means a contract'' and
inserting ``means--
``(A) a contract'';
(ii) by striking ``, or any combination
thereof or option thereon;'' and inserting ``,
or any other similar agreement;''; and
(iii) by adding at the end the following:
``(B) any combination of agreements or transactions
referred to in subparagraphs (A) and (C);
``(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or (B);
``(D) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), or (C), together with all supplements to any
such master agreement, without regard to whether such
master agreement provides for an agreement or
transaction that is not a forward contract under this
paragraph, except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement or
transaction under such master agreement that is
referred to in subparagraph (A), (B) or (C); or
``(E) any security agreement or arrangement, or
other credit enhancement related to any agreement or
transaction referred to in subparagraph (A), (B), (C),
or (D), but not to exceed the actual value of such
contract on the date of the filing of the petition;'';
(B) in paragraph (46), by striking ``on any day
during the period beginning 90 days before the date
of'' and replacing it with ``at any time before'';
(C) by amending paragraph (47) to read as follows:
``(47) `repurchase agreement' (which definition also
applies to a `reverse repurchase agreement')--
(A) means--
``(i) an agreement, including related
terms, which provides for the transfer of 1 or
more certificates of deposit, mortgage-related
securities (as defined in the Securities
Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or
mortgage loans, eligible bankers' acceptances,
qualified foreign government securities, or
securities that are direct obligations of, or
that are fully guaranteed by, the United States
or any agency of the United States against the
transfer of funds by the transferee of such
certificates of deposit, eligible bankers'
acceptances, securities, loans, or interests,
with a simultaneous agreement by such
transferee to transfer to the transferor
thereof certificates of deposit, eligible
bankers' acceptance, securities, loans, or
interests of the kind described above, at a
date certain not later than 1 year after such
transfer or on demand, against the transfer of
funds;
``(ii) any combination of agreements or
transactions referred to in clauses (i) and
(iii);
``(iii) an option to enter into an
agreement or transaction referred to in clause
(i) or (ii);
``(iv) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), or (iii), together with all
supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a repurchase agreement under this
paragraph, except that such master agreement
shall be considered to be a repurchase
agreement under this paragraph only with
respect to each agreement or transaction under
the master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) any security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in clause
(i), (ii), (iii), or (iv), but not to exceed
the actual value of such contract on the date
of the filing of the petition; and
``(B) does not include a repurchase obligation
under a participation in a commercial mortgage loan,
and, for purposes of this paragraph, the term `qualified
foreign government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development;'';
(D) in paragraph (48) by inserting ``or exempt from
such registration under such section pursuant to an
order of the Securities and Exchange Commission'' after
``1934''; and
(E) by amending paragraph (53B) to read as follows:
``(53B) `swap agreement'--
``(A) means--
``(i) any agreement, including the terms
and conditions incorporated by reference in
such agreement, which is an interest rate swap,
option, future, or forward agreement, including
a rate floor, rate cap, rate collar, cross-
currency rate swap, and basis swap; a spot,
same day-tomorrow, tomorrow-next, forward, or
other foreign exchange or precious metals
agreement; a currency swap, option, future, or
forward agreement; an equity index or an equity
swap, option, future, or forward agreement; a
debt index or a debt swap, option, future, or
forward agreement; a credit spread or a credit
swap, option, future, or forward agreement; a
commodity index or a commodity swap, option,
future, or forward agreement; or a weather
swap, weather derivative, or weather option;
``(ii) any agreement or transaction similar
to any other agreement or transaction referred
to in this paragraph that--
``(I) is presently, or in the
future becomes, regularly entered into
in the swap market (including terms and
conditions incorporated by reference
therein); and
``(II) is a forward, swap, future,
or option on 1 or more rates,
currencies, commodities, equity
securities, or other equity
instruments, debt securities or other
debt instruments, or economic indices
or measures of economic risk or value;
``(iii) any combination of agreements or
transactions referred to in this paragraph;
``(iv) any option to enter into an
agreement or transaction referred to in this
paragraph;
``(v) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), (iii), or (iv), together with
all supplements to any such master agreement,
and without regard to whether the master
agreement contains an agreement or transaction
that is not a swap agreement under this
paragraph, except that the master agreement
shall be considered to be a swap agreement
under this paragraph only with respect to each
agreement or transaction under the master
agreement that is referred to in clause (i),
(ii), (iii), or (iv); or
``(B) any security agreement or arrangement or
other credit enhancement related to any agreements or
transactions referred to in subparagraph (A), but not
to exceed the actual value of such contract on the date
of the filing of the petition; and
``(C) is applicable for purposes of this title only
and shall not be construed or applied so as to
challenge or affect the characterization, definition,
or treatment of any swap agreement under any other
statute, regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of 1934, the
Public Utility Holding Company Act of 1935, the Trust
Indenture Act of 1939, the Investment Company Act of
1940, the Investment Advisers Act of 1940, the
Securities Investor Protection Act of 1970, the
Commodity Exchange Act, and the regulations prescribed
by the Securities and Exchange Commission or the
Commodity Futures Trading Commission.'';
(2) by amending section 741(7) to read as follows:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase, sale, or
loan of a security, a certificate of deposit, a
mortgage loan or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit or mortgage loans or
interests therein (including an interest
therein or based on the value thereof), or
option on any of the foregoing, including an
option to purchase or sell any such security,
certificate of deposit, loan, interest, group
or index, or option;
``(ii) any option entered into on a
national securities exchange relating to
foreign currencies;
``(iii) the guarantee by or to any
securities clearing agency of a settlement of
cash, securities, certificates of deposit,
mortgage loans or interests therein, group or
index of securities, or mortgage loans or
interests therein (including any interest
therein or based on the value thereof), or
option on any of the foregoing, including an
option to purchase or sell any such security,
certificate of deposit, loan, interest, group
or index, or option;
``(iv) any margin loan;
``(v) any other agreement or transaction
that is similar to an agreement or transaction
referred to in this paragraph;
``(vi) any combination of the agreements or
transactions referred to in this paragraph;
``(vii) any option to enter into any
agreement or transaction referred to in this
paragraph;
``(viii) a master agreement that provides
for an agreement or transaction referred to in
clause (i), (ii), (iii), (iv), (v), (vi), or
(vii), together with all supplements to any
such master agreement, without regard to
whether the master agreement provides for an
agreement or transaction that is not a
securities contract under this paragraph,
except that such master agreement shall be
considered to be a securities contract under
this paragraph only with respect to each
agreement or transaction under such master
agreement that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii); or
``(ix) any security agreement or
arrangement or other credit enhancement related
to any agreement or transaction referred to in
this paragraph, but not to exceed the actual
value of such contract on the date of the
filing of the petition; and
``(B) does not include any purchase, sale, or
repurchase obligation under a participation in a
commercial mortgage loan.''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of subparagraph
(D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction that is
similar to an agreement or transaction referred to in
this paragraph;
``(G) any combination of the agreements or
transactions referred to in this paragraph;
``(H) any option to enter into an agreement or
transaction referred to in this paragraph;
``(I) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), or (H), together
with all supplements to such master agreement, without
regard to whether the master agreement provides for an
agreement or transaction that is not a commodity
contract under this paragraph, except that the master
agreement shall be considered to be a commodity
contract under this paragraph only with respect to each
agreement or transaction under the master agreement
that is referred to in subparagraph (A), (B), (C), (D),
(E), (F), (G), or (H); or
``(J) any security agreement or arrangement or
other credit enhancement related to any agreement or
transaction referred to in this paragraph, but not to
exceed the actual value of such contract on the date of
the filing of the petition;''.
(b) Definitions of Financial Participant and Forward Contract
Merchant.--Section 101 of title 11, United States Code, is amended--
(1) by inserting after paragraph (22) the following:
``(22A) `financial participant' means an entity that, at
the time it enters into a securities contract, commodity
contract or forward contract, or at the time of the filing of
the petition, has 1 or more agreements or transactions
described in paragraph (1), (2), (3), (4), (5), or (6) of
section 561(a) with the debtor or any other entity (other than
an affiliate) of a total gross dollar value of at least
$1,000,000,000 in notional or actual principal amount
outstanding on any day during the previous 15-month period, or
has gross mark-to-market positions of at least $100,000,000
(aggregated across counterparties) in 1 or more such agreement
or transaction with the debtor or any other entity (other than
an affiliate) on any day during the previous 15-month
period;''; and
(2) by amending paragraph (26) to read as follows:
``(26) `forward contract merchant' means a Federal reserve
bank, or an entity whose business consists in whole or in part
of entering into forward contracts as or with merchants or in a
commodity, as defined or in section 761, or any similar good,
article, service, right, or interest which is presently or in
the future becomes the subject of dealing or in the forward
contract trade;''.
(c) Definition of Master Netting Agreement and Master Netting
Agreement Participant.--Section 101 of title 11, United States Code, is
amended by inserting after paragraph (38) the following new paragraphs:
``(38A) `master netting agreement' means an agreement
providing for the exercise of rights, including rights of
netting, setoff, liquidation, termination, acceleration, or
closeout, under or in connection with 1 or more contracts that
are described in any 1 or more of paragraphs (1) through (5) of
section 561(a), or any security agreement or arrangement or
other credit enhancement related to 1 or more of the foregoing.
If a master netting agreement contains provisions relating to
agreements or transactions that are not contracts described in
paragraphs (1) through (5) of section 561(a), the master
netting agreement shall be deemed to be a master netting
agreement only with respect to those agreements or transactions
that are described in any 1 or more of the paragraphs (1)
through (5) of section 561(a);
``(38B) `master netting agreement participant' means an
entity that, at any time before the filing of the petition, is
a party to an outstanding master netting agreement with the
debtor;''.
(d) Swap Agreements, Securities Contracts, Commodity Contracts,
Forward Contracts, Repurchase Agreements, and Master Netting Agreements
Under the Automatic-Stay.--
(1) In general.--Section 362(b) of title 11, United States
Code, is amended--
(A) in paragraph (6), by inserting ``, pledged to
and under the control of,'' after ``held by'';
(B) in paragraph (7), by inserting ``, pledged to
and under the control of,'' after ``held by'';
(C) by amending paragraph (17) to read as follows:
``(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in connection
with 1 or more swap agreements that constitutes the setoff of a
claim against the debtor for any payment or other transfer of
property due from the debtor under or in connection with any
swap agreement against any payment due to the debtor from the
swap participant under or in connection with any swap agreement
or against cash, securities, or other property held by, pledged
to and under the control of, or due from such swap participant
to margin, guarantee, secure, or settle any swap agreement;'';
(D) in paragraph (18) by striking the period at the
end and inserting ``; or''; and
(E) by inserting after paragraph (18) the following
new paragraph:
``(19) under subsection (a), of the setoff by a master
netting agreement participant of a mutual debt and claim under
or in connection with 1 or more master netting agreements or
any contract or agreement subject to such agreements that
constitutes the setoff of a claim against the debtor for any
payment or other transfer of property due from the debtor under
or in connection with such agreements or any contract or
agreement subject to such agreements against any payment due to
the debtor from such master netting agreement participant under
or in connection with such agreements or any contract or
agreement subject to such agreements or against cash,
securities, or other property held by, pledged to and under the
control of, or due from such master netting agreement
participant to margin, guarantee, secure, or settle such
agreements or any contract or agreement subject to such
agreements, to the extent such participant is eligible to
exercise such offset rights under paragraph (6), (7), or (17)
for each individual contract covered by the master netting
agreement in issue.''.
(2) Limitation.--Section 362 of title 11, United States
Code, is amended by adding at the end the following:
``(i) Limitation.--The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7), or (17),
or (32) of subsection (b) shall not be stayed by any order of a court
or administrative agency in any proceeding under this title.''.
(e) Limitation of Avoidance Powers Under Master Netting
Agreement.--Section 546 of title 11, United States Code, is amended--
(1) in subsection (g) (as added by section 103 of Public
Law 101-311)--
(A) by striking ``under a swap agreement''; and
(B) by striking ``in connection with a swap
agreement'' and inserting ``under or in connection with
any swap agreement''; and
(2) by adding at the end the following:
``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b), the trustee may not avoid a transfer made by or to a master
netting agreement participant under or in connection with any master
netting agreement or any individual contract covered thereby that is
made before the commencement of the case, except under section
548(a)(1)(A), and except to the extent the trustee could otherwise
avoid such a transfer made under an individual contract covered by such
master netting agreement.''.
(f) Fraudulent Transfers of Master Netting Agreements.--Section
548(d)(2) of title 11, United States Code, is amended--
(1) in subparagraph (C), by striking ``and'';
(2) in subparagraph (D), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(E) a master netting agreement participant that receives
a transfer in connection with a master netting agreement or any
individual contract covered thereby takes for value to the
extent of such transfer, except, with respect to a transfer
under any individual contract covered thereby, to the extent
such master netting agreement participant otherwise did not
take (or is otherwise not deemed to have taken) such transfer
for value.''.
(g) Termination or Acceleration of Securities Contracts.--Section
555 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(i) Termination or Acceleration of Repurchase Agreements.--Section
559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(j) Liquidation, Termination, or Acceleration of Swap Agreements.--
Section 560 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement'';
(2) in the first sentence, by striking ``termination of a
swap agreement'' and inserting ``liquidation, termination, or
acceleration of 1 or more swap agreements''; and
(3) by striking ``in connection with any swap agreement''
and inserting ``in connection with the termination,
liquidation, or acceleration of 1 or more swap agreements''.
(k) Liquidation, Termination, Acceleration, or Offset Under a
Master Netting Agreement and Across Contracts.--(1) Title 11, United
States Code, is amended by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts
``(a) In General.--Subject to subsection (b), the exercise of any
contractual right, because of a condition of the kind specified in
section 365(e)(1), to cause the termination, liquidation, or
acceleration of or to offset or net termination values, payment amounts
or other transfer obligations arising under or in connection with 1 or
more (or the termination, liquidation, or acceleration of 1 or more)--
``(1) securities contracts, as defined in section 741(7);
``(2) commodity contracts, as defined in section 761(4);
``(3) forward contracts;
``(4) repurchase agreements;
``(5) swap agreements; or
``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation of any
provision of this title or by any order of a court or administrative
agency in any proceeding under this title.
``(b) Exception.--
``(1) A party may exercise a contractual right described in
subsection (a) to terminate, liquidate, or accelerate only to
the extent that such party could exercise such a right under
section 555, 556, 559, or 560 for each individual contract
covered by the master netting agreement in issue.
``(2) If a debtor is a commodity broker subject to
subchapter IV of chapter 7--
``(A) a party may not net or offset an obligation
to the debtor arising under, or in connection with, a
commodity contract against any claim arising under, or
in connection with, other instruments, contracts, or
agreements listed in subsection (a), except to the
extent the party has positive net equity in the
commodity accounts at the debtor, as calculated under
such subchapter; and
``(B) another commodity broker may not net or
offset an obligation to the debtor arising under, or in
connection with, a commodity contract entered into or
held on behalf of a customer of the debtor against any
claim arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
``(c) Rule of Application.--Subparagraphs (A) and (B) of subsection
(b)(2) shall not be construed as prohibiting the offset of claims and
obligations arising pursuant to--
``(1) a cross-margining arrangement that has been approved
by the Commodity Futures Trading Commission or that has been
submitted to such Commission pursuant to section 5a(a)(12) of
the Commodity Exchange Act and has been permitted to go into
effect; or
``(2) another netting arrangement, between a clearing
organization (as defined in section 761) and another entity,
that has been approved by the Commodity Futures Trading
Commission.
``(d) Definition.--As used in this section, the term `contractual
right' includes a right set forth in a rule or bylaw of a national
securities exchange, a national securities association, or a securities
clearing agency, a right set forth in a bylaw of a clearing
organization or contract market or in a resolution of the governing
board thereof, and a right, whether or not evidenced in writing,
arising under common law, under law merchant, or by reason of normal
business practice.''.
(2) Conforming amendment.--The table of sections of chapter 5 of
title 11, United States Code, is amended by inserting after the item
relating to section 560 the following:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across
contracts.''.
(l) Municipal Bankruptcies.--Section 901(a) of title 11, United
States Code, is amended--
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560, 561, 562,'' after ``557,''.
(m) Ancillary Proceedings.--Section 304 of title 11, United States
Code, is amended by adding at the end the following new subsection:
``(d) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements shall apply
in a case ancillary to a foreign proceeding under this section or any
other section of this title so that enforcement of contractual
provisions of such contracts and agreements in accordance with their
terms will not be stayed or otherwise limited by operation of any
provision of this title or by order of a court in any proceeding under
this title, and to limit avoidance powers to the same extent as in a
proceeding under chapter 7 or 11 (such enforcement not to be limited
based on the presence or absence of assets of the debtor in the United
States).''.
(n) Commodity Broker Liquidations.--Title 11, United States Code,
is amended by inserting after section 766 the following:
``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers, financial
institutions, financial participants, securities clearing
agencies, swap participants, repo participants, and
master netting agreement participants
``Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker,
stockbroker, financial institution, financial participant, securities
clearing agency, swap participant, repo participant, or master netting
agreement participant under this title shall not affect the priority of
any unsecured claim it may have after the exercise of such rights.''.
(o) Stockbroker Liquidations.--Title 11, United States Code, is
amended by inserting after section 752 the following:
``Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants
``Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker,
stockbroker, financial institution, securities clearing agency, swap
participant, repo participant, financial participant, or master netting
agreement participant under this title shall not affect the priority of
any unsecured claim it may have after the exercise of such rights.''.
(p) Setoff.--Section 553 of title 11, United States Code, is
amended--
(1) in subsection (a)(3)(C), by inserting ``(except for a
setoff of a kind described in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(32), 555, 556, 559, 560 or 561)'' before the
period; and
(2) in subsection (b)(1), by striking ``362(b)(14)'' and
inserting ``362(b)(17), 362(b)(32), 555, 556, 559, 560, 561''.
(q) Securities Contracts, Commodity Contracts, and Forward
Contracts.--Title 11, United States Code, is amended--
(1) in section 362(b)(6), by striking ``financial
institutions,'' each place such term appears and inserting
``financial institution, financial participant'';
(2) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(3) in section 548(d)(2)(B), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by inserting before the period at the end ``, a
right set forth in a bylaw of a clearing organization
or contract market or in a resolution of the governing
board thereof, and a right, whether or not in writing,
arising under common law, under law merchant, or by
reason of normal business practice''; and
(5) in section 556, by inserting ``, financial
participant'' after ``commodity broker''.
(r) Conforming Amendments.--Title 11, United States Code, is
amended--
(1) in the table of sections of chapter 5--
(A) by amending the items relating to sections 555
and 556 to read as follows:
``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward
contract.'';
and
(B) by amending the items relating to sections 559
and 560 to read as follows:
``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';
and
(2) in the table of sections of chapter 7--
(A) by inserting after the item relating to section
766 the following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants,
securities clearing agencies, swap
participants, repo participants, and master
netting agreement participants.'';
and
(B) by inserting after the item relating to section
752 the following:
``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants,
securities clearing agencies, swap
participants, repo participants, and master
netting agreement participants.''.
SEC. 209. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)) is amended by adding at the end the following new
subparagraph:
``(H) Recordkeeping requirements.--The Corporation,
in consultation with the appropriate Federal banking
agencies, may prescribe regulations requiring more
detailed recordkeeping with respect to qualified
financial contracts (including market valuations) by
insured depository institutions.''.
SEC. 210. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.
Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1823(e)(2)) is amended to read as follows:
``(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
``(A) deposits of, or other credit extension by, a
Federal, State, or local governmental entity, or of any
depositor referred to in section 11(a)(2), including an
agreement to provide collateral in lieu of a surety
bond;
``(B) bankruptcy estate funds pursuant to section
345(b)(2) of title 11, United States Code;
``(C) extensions of credit, including any
overdraft, from a Federal reserve bank or Federal home
loan bank; or
``(D) 1 or more qualified financial contracts, as
defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph (1)(B) solely
because such agreement was not executed contemporaneously with
the acquisition of the collateral or because of pledges,
delivery, or substitution of the collateral made in accordance
with such agreement.''.
SEC. 211. DAMAGE MEASURE.
(a) In General.--Title 11, United States Code, is amended--
(1) by inserting after section 561 the following:
``Sec. 562. Damage measure in connection with swap agreements,
securities contracts, forward contracts, commodity
contracts, repurchase agreements, or master netting
agreements
``If the trustee rejects a swap agreement, securities contract as
defined in section 741, forward contract, commodity contract (as
defined in section 761) repurchase agreement, or master netting
agreement pursuant to section 365(a), or if a forward contract
merchant, stockbroker, financial institution, securities clearing
agency, repo participant, financial participant, master netting
agreement participant, or swap participant liquidates, terminates, or
accelerates such contract or agreement, damages shall be measured as of
the earlier of--
``(1) the date of such rejection; or
``(2) the date of such liquidation, termination, or
acceleration.''; and
(2) in the table of sections of chapter 5 by inserting
after the item relating to section 561 the following:
``562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity
contracts, repurchase agreements, or master
netting agreements.''.
(b) Claims Arising From Rejection.--Section 502(g) of title 11,
United States Code, is amended--
(1) by designating the existing text as paragraph (1); and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with section 562
shall be allowed under subsection (a), (b), or (c), or disallowed under
subsection (d) or (e), as if such claim had arisen before the date of
the filing of the petition.''.
SEC. 212. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection Act of 1970
(15 U.S.C. 78eee(b)(2)) is amended by adding after subparagraph (B) the
following new subparagraph:
``(C) Exception from stay.--
``(i) Notwithstanding section 362 of title
11, United States Code, neither the filing of
an application under subsection (a)(3) nor any
order or decree obtained by the Securities
Investor Protection Corporation from the court
shall operate as a stay of any contractual
rights of a creditor to liquidate, terminate,
or accelerate a securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master netting
agreement, each as defined in title 11, United
States Code, to offset or net termination
values, payment amounts, or other transfer
obligations arising under or in connection with
1 or more of such contracts or agreements, or
to foreclose on any cash collateral pledged by
the debtor whether or not with respect to 1 or
more of such contracts or agreements.
``(ii) Notwithstanding clause (i), such
application, order, or decree may operate as a
stay of the foreclosure on or disposition of
securities collateral pledged by the debtor,
whether or not with respect to 1 or more of
such contracts or agreements, securities sold
by the debtor under a repurchase agreement or
securities lent under a securities lending
agreement.
``(iii) As used in this section, the term
`contractual right' includes a right set forth
in a rule or bylaw of a national securities
exchange, a national securities association, or
a securities clearing agency, a right set forth
in a bylaw of a clearing organization or
contract market or in a resolution of the
governing board thereof, and a right, whether
or not in writing, arising under common law,
under law merchant, or by reason of normal
business practice.''.
SEC. 213. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by striking ``or'' at the end of paragraph
(4)(B)(ii);
(B) by redesignating paragraph (5) as paragraph
(6); and
(C) by inserting after paragraph (4) the following
new paragraph:
``(5) any eligible asset (or proceeds thereof), to the
extent that such eligible asset was transferred by the debtor
before the date of commencement of the case, to an eligible
entity in connection with an asset-backed securitization,
except to the extent such asset (or proceeds or value thereof)
may be recovered by the trustee under section 550 by virtue of
avoidance under section 548(a)(1); or''; and
(2) by adding at the end the following new subsection:
``(e) For purposes of this section, the following definitions shall
apply:
``(1) the term `asset-backed securitization' means a
transaction in which eligible assets transferred to an eligible
entity are used as the source of payment on securities,
including all securities issued by governmental units, at least
1 class or tranche of which is rated investment grade by 1 or
more nationally recognized securities rating organizations,
when the securities are initially issued by an issuer;
``(2) the term `eligible asset' means--
``(A) financial assets (including interests therein
and proceeds thereof), either fixed or revolving,
whether or not such assets are in existence as of the
date of the transfer, including residential and
commercial mortgage loans, consumer receivables, trade
receivables, assets of governmental units (including
payment obligations relating to taxes, receipts, fines,
tickets, and other sources of revenue), and lease
receivables, that, by their terms, convert into cash
within a finite time period, plus any residual interest
in property subject to receivables included in such
financial assets plus any rights or other assets
designed to assure the servicing or timely distribution
of proceeds to security holders;
``(B) cash; and
``(C) securities, including all securities issued
by governmental units.
``(3) the term `eligible entity' means--
``(A) an issuer; or
``(B) a trust, corporation, partnership,
governmental unit, limited liability company (including
a single member limited liability company), or other
entity engaged exclusively in the business of acquiring
and transferring eligible assets directly or indirectly
to an issuer and taking actions ancillary thereto;
``(4) the term `issuer' means a trust, corporation,
partnership, governmental unit, limited liability company
(including a single member limited liability company), or other
entity engaged exclusively in the business of acquiring and
holding eligible assets, issuing securities backed by eligible
assets, and taking actions ancillary thereto; and
``(5) the term `transferred' means the debtor, pursuant to
a written agreement, represented and warranted that eligible
assets were sold, contributed, or otherwise conveyed with the
intention of removing them from the estate of the debtor
pursuant to subsection (b)(5) (whether or not reference is made
to this title or any section of this title), irrespective,
without limitation, of--
``(A) whether the debtor directly or indirectly
obtained or held an interest in the issuer or in any
securities issued by the issuer;
``(B) whether the debtor had an obligation to
repurchase or to service or supervise the servicing of
all or any portion of such eligible assets; or
``(C) the characterization of such sale,
contribution, or other conveyance for tax, accounting,
regulatory reporting, or other purposes.''.
SEC. 214. APPLICATION OF AMENDMENTS.
The amendments made by this title shall apply with respect to cases
commenced or appointments made under any Federal or State law after the
date of the enactment of this Act, but shall not apply with respect to
cases commenced or appointments made under any Federal or State law
before the date of the enactment of this Act.
Amend the title so as to read: ``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, to revise the banking
and bankruptcy insolvency laws with respect to the termination
and netting of financial contracts, and for other purposes.''.
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.
TITLE I--COMMODITY EXCHANGE ACT AMENDMENTS
Sec. 101. Definitions.
Sec. 102. Agreements, contracts, and transactions in foreign currency,
government securities, and certain other
commodities.
Sec. 103. Legal certainty for excluded derivative transactions.
Sec. 104. Excluded electronic trading facilities.
Sec. 105. Hybrid instruments.
Sec. 106. Futures on securities.
Sec. 107. Transactions in exempt commodities and swap transactions.
Sec. 108. Protection of the public interest.
Sec. 109. Prohibited transactions.
Sec. 110. Designation of boards of trade as contract markets.
Sec. 111. Derivatives transaction execution facilities.
Sec. 112. Derivatives clearing organizations.
Sec. 113. Common provisions applicable to registered entities.
Sec. 114. Exempt boards of trade.
Sec. 115. Suspension or revocation of designation as contract market.
Sec. 116. Authorization of appropriations.
Sec. 117. Preemption.
Sec. 118. Consideration of costs and benefits and antitrust laws.
Sec. 119. Contract enforcement between eligible counterparties.
Sec. 120. Special procedures to encourage and facilitate bona fide
hedging by agricultural producers.
Sec. 121. Rule of construction.
Sec. 122. Technical and conforming amendments.
Sec. 123. Privacy.
Sec. 124. Report to Congress.
Sec. 125. Effective date.
Sec. 126. International activities of the Commodity Futures Trading
Commission.
TITLE II--SECURITIES ACTS AMENDMENTS
Subtitle A--Amendments
Sec. 201. Definitions under the Securities Exchange Act of 1934.
Sec. 202. Regulatory relief for markets trading security future
products.
Sec. 203. Regulatory relief for intermediaries trading security future
products.
Sec. 204. Special provisions for interagency cooperation.
Sec. 205. Maintenance of market integrity for security future products.
Sec. 206. Special provisions for the trading of security future
products.
Sec. 207. Clearance and settlement.
Sec. 208. Amendments relating to registration and disclosure issues
under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Sec. 209. Amendments to the Investment Company Act of 1940 and the
Investment Advisers Act of 1940.
Sec. 210. Preemption of state gaming and and bucket shop laws.
Subtitle B--Conforming Amendments to the Commodity Exchange Act
Sec. 221. Jurisdiction of Securities and Exchange Commission; other
provisions.
Sec. 222. Application of the Commodity Exchange Act to national
securities exchanges and national
securities associations that trade security
futures.
Sec. 223. Notification of investigations and enforcement actions.
Subtitle C--Effective Date
Sec. 231. Effective date.
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to reauthorize the appropriation for the Commodity
Futures Trading Commission;
(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 to oversight of the futures markets;
(4) to provide a statutory and regulatory framework for
allowing the trading of futures on individual securities and
narrow-based securities indexes in a manner equivalent with the
treatment of other similar securities;
(5) to provide the Commission jurisdiction over certain
retail foreign exchange transactions and bucket shops that may
not be 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.
TITLE I--COMMODITY EXCHANGE ACT AMENDMENTS
SEC. 101. DEFINITIONS.
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) by redesignating paragraphs (1) through (7), (8)
through (12), (13), (14), (15), and (16) as paragraphs (2)
through (8), (16) through (20), (22), (23), (25), and (29),
respectively;
(2) by inserting before paragraph (2) (as redesignated by
paragraph (1)) the following:
``(1) Alternative trading system.--The term `alternative
trading system' means an organization, association, or group of
persons that is registered as a broker or dealer pursuant to
section 15(b) of the Securities Exchange Act of 1934 (except
paragraph (11) thereof) and that performs the functions
commonly performed by an exchange (as defined in section
3(a)(1) of such Act) but that is exempt from the definition of
the term `exchange' under such section 3(a)(1) by rule or
regulation of the Securities and Exchange Commission on terms
that require compliance with regulations of the trading
functions of such organization, association, or group of
persons.'';
(3) by inserting after paragraph (8) (as redesignated by
paragraph (1)) the following:
``(9) 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--
``(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.
``(10) 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.
``(11) Eligible commercial participant.--The term `eligible
commercial participant' means a party or entity described in
paragraph (11)(A)(i), (ii), (v), or (viii) or paragraph
(11)(C), who, in connection with its business--
``(A) has a demonstrable capacity or ability,
directly or through separate contractual arrangements,
to make or take delivery of the underlying physical
commodity;
``(B) incurs risks, in addition to price risk,
related to the commodity; or
``(C) is a dealer that regularly provides hedging,
risk management, or market-making services to the
foregoing entities.
``(12) 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 or a foreign government (including a
regulated 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 or a
foreign government (including a
regulated 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)(I) 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);
``(II) an associated person of a registered
broker or dealer 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));
``(III) an investment bank holding company
(as defined in section 17(i) of the Securities
Exchange Act of 1934 (15 U.S.C. 78q(i)));
``(ix)(I) 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); or
``(II) an affiliate of a registered futures
commission merchant concerning the financial
activities of which the registered person makes
and keeps records under section 4f(c)(2)(B) of
this Act;
``(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 clause (i), (ii),
(viii), (ix), or (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 Advisers 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 clause (i), (ii), (viii), (ix), or (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; or
``(C) any other person that the Commission
determines to be eligible in light of the financial or
other qualifications of the person;
except that entities that are eligible contract participants
under clause (v), (vi), (vii)(I) or (III), or (xi) of
subparagraph (A) or subparagraph (C) and own and invest on a
discretionary basis less than $50,000,000 in investments, shall
only be considered eligible contract participants if the
agreement, contract, or transaction is offered by, and entered
into with, an entity that is listed in any of subclauses (I)
through (VI) of section 2(c)(2)(B)(ii) of this Act.
``(13) Excluded commodity.--The term `excluded commodity'
means--
``(A) an interest rate, exchange rate, currency,
security, security index, credit risk or measure, debt
or equity instrument, or index or measure of inflation;
``(B) any other rate, differential, index, or
measure of economic or commercial risk, return, or
value that--
``(i) is not within the control of any
party to the relevant contract, agreement, or
transaction; and
``(ii) is not based in substantial part on
the value of a limited number of commodities
not described in subparagraph (A) that have a
finite supply; or
``(C) an occurrence, extent of an occurrence, or
contingency associated with commercial or economic
consequences beyond the control of the parties to the
relevant contract, agreement, or transaction.
``(14) Exempt commodity.--The term `exempt commodity' means
a commodity that is not an excluded commodity and is not an
agricultural commodity.
``(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 financial holding company (as defined in
section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841));
``(H) a trust company; or
``(I) a similarly regulated subsidiary or affiliate
of an entity described in any of subparagraphs (A)
through (H).'';
(4) 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.'';
(5) by inserting after paragraph (23) (as redesignated by
paragraph (1)) the following:
``(24)(A) Margin.--The term `margin', when used with
respect to a security future product, means the amount, type,
and form of collateral required to secure any extension or
maintenance of credit, or the amount, type, and form of
collateral required as a performance bond related to the
purchase, sale, or carrying of a security future product, and
all other uses of collateral related to the purchasing,
selling, or carrying of a security future product.
``(B) The terms `margin level' and `level of margin', when
used with respect to a security future product, mean the amount
of margin required to secure any extension or maintenance of
credit, or the amount of margin required as a performance bond
related to the purchase, sale, or carrying of a security future
product.
``(C) The terms `higher margin level' and `higher level of
margin', when used with respect to a security future product,
mean a margin level established by a contract market that is
higher than the minimum amount established by the Securities
and Exchange Commission pursuant to section 7(c)(2)(B) of the
Securities Exchange Act of 1934.'';
(6) by inserting after paragraph (25) (as redesignated by
paragraph (1)) the following:
``(26) Narrow-based security index.--The term `narrow-based
security index' means an index of securities on which contracts
for future delivery are not permitted under section 2(a)(1)(C)
of this Act, including any interest therein or based on the
value thereof.
``(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
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 facility; or
``(ii) include disciplinary sanctions other
than the exclusion of participants from
trading.''; and
(7) 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;
``(C) a derivatives clearing organization
registered under section 5b; or
``(D) a board of trade designated as a contract
market under section 5f.
``(31) Security.--The term `security' means a security as
defined in section 2(a)(1) of the Securities Act of 1933 (15
U.S.C. 77b(a)(1)) or section 3(a)(10) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).
``(32) Security future.--The term `security future' means a
contract of sale for future delivery of a single security or of
a narrow-based security index, including any interest therein
or based on the value thereof, except an exempted security
under section 3(a)(12) of the Securities Exchange Act of 1934
as in effect on the date of enactment of the Futures Trading
Act of 1982 (other than any municipal security as defined in
section 3(a)(29) of the Securities Exchange Act of 1934 as in
effect on the date of enactment of the Futures Trading Act of
1982).
``(33) Security future product.--The term `security future
product' means a security future or any put, call, straddle,
option, or privilege on any security future.
``(34) 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--
``(I) 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; or
``(II) is a derivatives clearing
organization;
``(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. 102. 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 agreements in an excluded
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 or group or index of
securities), 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
registered pursuant to section 6(a) of the
Securities Exchange Act of 1934.
``(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) or
an option; 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) or a futures
commission merchant registered under
this Act;
``(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), or an affiliated person of a
futures commission merchant registered
under this Act, 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. 103. 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 102) 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 5a, 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 principal-to-principal basis between
parties trading for their own accounts or as described
in section 1a(12)(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(12)(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. 104. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 103) 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)(3) 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. 105. HYBRID INSTRUMENTS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 104) 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. 106. FUTURES ON SECURITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 105) is amended by adding at the end the
following:
``(g) Nothing in subsection (a)(1)(C) or (a)(1)(D) governs or
applies to--
``(1) an agreement, contract, or transaction that is
excluded under subsection (c) or (d) (whether or not the
agreement, contract, or transaction is otherwise subject to
this Act);
``(2) an electronic trading facility that is excluded under
subsection (e); or
``(3) 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).''.
SEC. 107. TRANSACTIONS IN EXEMPT COMMODITIES AND SWAP TRANSACTIONS.
Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a)
(as amended by section 106) 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) is entered into solely between persons that
are eligible contract participants at the time they
enter into the agreement, contract, or transaction; and
``(B) is not entered into on a 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 4o 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, to the extent such
agreement, contract, or transaction is not between
eligible commercial participants and would otherwise be
subject to those provisions; and
``(C) sections 6(c) and 9(a)(2) of this Act to the
extent they prohibit manipulation of the market price
of any commodity in interstate commerce, to the extent
such agreement, contract, or transaction would
otherwise be subject to those provisions.
``(3) Except as provided in paragraph (4) of this
subsection, nothing in this Act shall apply to an agreement,
contract, or transaction in an exempt commodity which--
``(A) is entered into on a principal-to-principal
basis solely between persons that are eligible contract
participants at the time at which the persons enter
into the agreement, contract, or transaction;
``(B) entered into only between persons that are
eligible contract participants (as defined in sections
1a(12)(A), (B)(ii), (B)(iii), and (C) at the time at
which the persons enter into the agreement, contract,
or transaction; and
``(C) is executed or traded on an electronic
trading facility.
``(4) An agreement, contract, or transaction described in
paragraph (3) shall be subject to--
``(A) sections 5a (to the extent so provided in
section 5a(g)), 5b, and 12(e)(2)(B) of this Act;
``(B) sections 4b and 4o 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 to the extent such
agreement, contract, or transaction would otherwise be
subject to those provisions;
``(C) sections 6(c) and 9(a)(2) of this Act, to the
extent they prohibit manipulation of the market price
of any commodity in interstate commerce and to the
extent such agreement, contract, or transaction would
otherwise be subject to those provisions; and
``(D) such rules and regulations as the Commission
may prescribe if necessary to ensure timely
dissemination by the electronic trading facility of
price, trading volume, and other trading data to the
extent appropriate, if the Commission determines that
the electronic trading facility performs a significant
price discovery function for transactions in the cash
market for the commodity underlying any agreement,
contract, or transaction executed or traded on the
electronic trading facility.
``(i) Application of the Act.--Nothing in this Act shall be
construed (1) as implying or creating any presumption that (A) any
agreement, contract, or transaction that is eligible for an exclusion
or exemption from regulation under this Act or (B) any agreement,
contract, or transaction that is not eligible for an exclusion or
exemption from regulation under this Act is or would otherwise be
subject to this Act or (2) as conferring jurisdiction on the Commission
with respect to any such agreement, contract, or transaction, except as
expressly provided in section 5a (to the extent so provided in section
5a(g)) and 5b.''.
SEC. 108. 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 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. 109. 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' 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.''.
SEC. 110. 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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the contract market or a derivatives clearing
organization.
``(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 agreements
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 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 not--
``(A) adopt any rules or taking any actions that
result in any unreasonable restraints of trade; or
``(B) impose any material anticompetitive burden on
trading on the contract market.
``(e) Current Agricultural and Metal Commodities.--
``(1) Subject to paragraph (2), a contract for purchase or
sale for future delivery of an agricultural or metal commodity
enumerated in section 1a(4) that is available for trade on a
contract market, as of the date of the enactment of this
subsection, may be traded only on a contract market designated
under this section.
``(2) In order to promote responsible economic or financial
innovation and fair competition, the Commission, on application
by any person, after notice and public comment and opportunity
for hearing, may prescribe rules and regulations to provide for
the offer and sale of contracts for future delivery or options
thereon to be conducted on a derivatives transaction execution
facility.''.
SEC. 111. 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 110(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 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
not readily susceptible to manipulation;
``(C) the underlying commodity has no cash market;
or
``(D) the Commission determines, based on the
market characteristics, surveillance history, self-
regulatory record, or capacity of the facility that
trading in the futures contract is not readily
susceptible to 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.
``(5) Impermissible products.--It shall be unlawful for any
person to execute or trade a security future product or other
future involving a security, except an exempt security as
defined in section 3(a)(12) of the Securities Exchange Act of
1934 as in effect on the date of enactment of the Futures
Trading Act of 1982, on a designated 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 subsection.
``(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. Such rules may authorize--
``(A) 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; and
``(B) a futures commission merchant, acting as
principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a
commodity for future delivery if the contract is
reported, recorded, or cleared in accordance with the
rules of the registered derivatives transaction
execution facility or a derivatives clearing
organization.
``(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) 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 facility.
``(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 not--
``(A) adopt any rules or take any actions that
result in any unreasonable restraint of trade; or
``(B) impose any material anticompetitive burden on
trading on the derivatives transaction execution
facility.
``(e) Use of Broker-Dealers, Depository Institutions, and Farm
Credit System Institutions as Intermediaries.--
``(1) In general.--A registered derivatives transaction
execution facility may by rule allow a broker-dealer,
depository institution, or institution of the Farm Credit
System 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, depository institution, or institution
of the Farm Credit System; 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) the broker-dealer be in good standing with
the Securities and Exchange Commission, or the
depository institution or institution of the Farm
Credit System be in good standing with Federal bank
regulatory agencies (including the Farm Credit
Administration), as applicable; and
``(B) if the broker-dealer, depository institution,
or institution of the Farm Credit System carries or
holds customer accounts or funds for transactions on
the derivatives transaction execution facility for more
than 1 business day, the broker-dealer, depository
institution, or institution of the Farm Credit System
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, the
Secretary of the Treasury, 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 other than securities, except exempt
securities under section 3(a)(12) of the Securities Exchange
Act of 1934 as in effect on the date of enactment of the
Futures Trading Act of 1982, that are otherwise excluded or
exempt from this Act under section 2(c), 2(d), or 2(h).
Notwithstanding section 5a(b)(2), a board of trade on which
agreements, contracts, or transactions excluded or exempt from
this Act under section 2(c), 2(d), or 2(h) are traded may
elect, but shall not be required, to register as a derivatives
transaction execution facility with respect to such agreements,
contracts, or transactions, other than any agreement, contract,
or transaction in a security other than such an exempt
security.
``(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. 112. 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 111) the following:
``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.
``(a) Registration Requirement.--Except as provided in subsection
(b), it shall be unlawful for a derivatives clearing organization,
unless registered with the Commission, directly or indirectly to make
use of the mails or any means or instrumentality of interstate commerce
to perform the functions of a derivatives clearing organization
described in section 1a(9).
``(b) Exclusion of Derivatives Clearing Organizations Subject to
Other Regulatory Authorities.--A derivatives clearing organization
shall not be required to register with the Commission, and the
Commission shall have no jurisdiction with respect to the derivatives
clearing organization, if the derivatives clearing organization--
``(1)(A) is registered as a clearing agency under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
``(B) is subject to the supervisory jurisdiction of a
Federal banking agency (as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813)) or the National Credit
Union Administration; or
``(C) is subject to the supervisory jurisdiction of a
foreign regulatory authority that is recognized by the
Securities and Exchange Commission, the Board of Governors of
the Federal Reserve System, the Comptroller of the Currency, or
the Commission as overseeing a system of consolidated
supervision comparable to that provided under applicable United
States law; and
``(2) does not clear--
``(A) a contract of sale for future delivery other
than a security future product;
``(B) an option on a contract of sale for future
delivery other than a security future product; or
``(C) an option on a commodity other than a
security.
``(c) Voluntary Registration.--A derivatives clearing organization
that is not exempt from registration under subsection (b) may register
with the Commission as a derivatives clearing organization.
``(d) Registration of Derivatives Clearing Organizations.--
``(1) Application.--A person desiring to register as a
derivatives clearing organization shall submit to the
Commission an application in such form and containing such
information as the Commission may require for the purpose of
making the determinations required for approval under paragraph
(2).
``(2) Core principles.--
``(A) In general.--To be registered and to maintain
registration as a derivatives clearing organization, an
applicant shall demonstrate to the Commission that the
applicant complies with the core principles specified
in this paragraph.
``(B) Financial resources.--The applicant shall
demonstrate that the applicant has adequate financial,
operational, and managerial resources to discharge the
responsibilities of a derivatives clearing organization
without interruption in various market conditions.
``(C) Participant and product eligibility.--The
applicant shall establish--
``(i) appropriate admission and continuing
eligibility standards (including appropriate
minimum financial requirements) for members of
and participants in the organization; and
``(ii) appropriate standards for
determining eligibility of agreements,
contracts, or transactions submitted to the
applicant.
``(D) Risk management.--The applicant shall have
the ability to manage the risks associated with
discharging the responsibilities of a derivatives
clearing organization through the use of appropriate
tools and procedures.
``(E) Settlement procedures.--The applicant shall
have the ability to--
``(i) complete settlements on a timely
basis under varying circumstances;
``(ii) maintain an adequate record of the
flow of funds associated with each transaction
that the applicant clears; and
``(iii) comply with the terms and
conditions of any permitted netting or offset
arrangements with other clearing organizations.
``(F) Treatment of funds.--The applicant shall have
standards and procedures designed to protect and ensure
the safety of member and participant funds.
``(G) Default rules and procedures.--The applicant
shall have rules and procedures designed to allow for
efficient, fair, and safe management of events when
members or participants become insolvent or otherwise
default on their obligations to the derivatives
clearing organization.
``(H) Rule enforcement.--The applicant shall--
``(i) maintain adequate arrangements and
resources for the effective monitoring and
enforcement of compliance with rules of the
applicant and for resolution of disputes; and
``(ii) have the authority and ability to
discipline, limit, suspend, or terminate a
member's or participant's activities for
violations of rules of the applicant.
``(I) System safeguards.--The applicant shall
demonstrate that the applicant--
``(i) has established and will maintain a
program of oversight and risk analysis to
ensure that the automated systems of the
applicant function properly and have adequate
capacity and security; and
``(ii) has established and will maintain
emergency procedures and a plan for disaster
recovery, and will periodically test backup
facilities sufficient to ensure daily
processing, clearing, and settlement of
transactions.
``(J) Reporting.--The applicant shall provide to
the Commission all information necessary for the
Commission to conduct the oversight function of the
applicant with respect to the activities of the
derivatives clearing organization.
``(K) Recordkeeping.--The applicant shall--
``(i) maintain full records of all
activities related to the business of the
applicant as a derivatives clearing
organization in a form and manner acceptable to
the Commission for a period of at least 5
years;
``(ii) 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
``(iii) keep the records open to inspection
by any representative of the Commission or the
Department of Justice.
``(L) Public information.--The applicant shall make
information concerning the rules and operating
procedures governing the clearing and settlement
systems (including default procedures) available to
market participants.
``(M) Information sharing.--The applicant shall--
``(i) enter into and abide by the terms of
all appropriate and applicable domestic and
international information-sharing agreements;
and
``(ii) use relevant information obtained
from the agreements in carrying out the
clearing organization's risk management
program.
``(N) Antitrust considerations.--Unless necessary
or appropriate to achieve the purposes of this Act, the
derivatives clearing organization shall not--
``(i) adopt any rule or take any action
that results in any unreasonable restraint of
trade; or
``(ii) impose any material anticompetitive
burden on trading on the contract market.
``(3) Orders concerning competition.--A derivatives
clearing organization may request the Commission to issue an
order concerning whether a rule or practice of the applicant is
the least anticompetitive means of achieving the objectives,
purposes, and policies of this Act.
``(e) Existing Derivatives Clearing Organizations.--A derivatives
clearing organization shall be deemed to be registered under this
section to the extent that--
``(1) the derivatives clearing organization clears
agreements, contracts, or transactions for a board of trade
that has been designated by the Commission as a contract market
for such agreements, contracts, or transactions before the date
of enactment of this section; and
``(2) the Commission has reviewed and approved the rules of
the derivatives clearing organization before that date.
``(f) Appointment of Trustee.--
``(1) In general.--If a proceeding under section 5e results
in the suspension or revocation of the registration of a
derivatives clearing organization, or if a derivatives clearing
organization withdraws from registration, the Commission, on
notice to the derivatives clearing organization, may apply to
the appropriate United States district court where the
derivatives clearing organization is located for the
appointment of a trustee.
``(2) Assumption of jurisdiction.--If the Commission
applies for appointment of a trustee under paragraph (1)--
``(A) the court may take exclusive jurisdiction
over the derivatives clearing organization and the
records and assets of the derivatives clearing
organization, wherever located; and
``(B) if the court takes jurisdiction under
subparagraph (A), the court shall appoint the
Commission, or a person designated by the Commission,
as trustee with power to take possession and continue
to operate or terminate the operations of the
derivatives clearing organization in an orderly manner
for the protection of participants, subject to such
terms and conditions as the court may prescribe.
``(g) Linking of Regulated Clearing Facilities.--
``(1) In general.--The Commission shall facilitate the
linking or coordination of derivatives clearing organizations
registered under this Act with other regulated clearance
facilities for the coordinated settlement of cleared
transactions.
``(2) Coordination.--In carrying out paragraph (1), the
Commission shall coordinate with the Federal banking agencies
and the Securities and Exchange Commission.''.
SEC. 113. 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 112) 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(d)(2) 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.--Except as provided in sections
2(a)(1)(C) and 2(a)(1)(D), and 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 (and the Secretary of the Treasury, in the case of a
contract of sale for future delivery of a government security
(or option thereon) or a rule or rule amendment specifically
related to such a contract) 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, a designated contract
market shall submit to the Commission for prior
approval each rule amendment that materially changes
the terms and conditions, as determined by the
Commission, in any contract of sale for future delivery
of a commodity specifically enumerated in section 1a(4)
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 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) 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. 114. 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 113) 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;
``(2) that are entered into only between persons that are
eligible contract participants at the time at which the persons
enter into the contract; and
``(3) that are not contracts of sale (or options on the
contract) for future delivery of any security, including any
group or index of securities or any interest in, or interest
that is based on the value of, any security.
``(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, 4o, 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, 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. 115. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.
Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as
redesignated by section 110(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. 116. 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. 117. 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 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) any Federal or State law, other than
antifraud provisions of general applicability and the
securities laws (as defined in section 3(a)(47) of the
Securities Exchange Act of 1934), as such Federal or
State law applies to 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); or
``(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. 118. 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. 119. 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 a party to which is reasonably
believed by another party to which to be an eligible contract
participant shall be void, voidable, or unenforceable, and no such
reasonably believed 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. 120. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
The Commodity Exchange Act is amended by inserting after section 4p
the following:
``SEC. 4Q. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE
HEDGING BY AGRICULTURAL PRODUCERS.
``(a) Authority.--The Commission shall consider issuing rules or
orders which--
``(1) prescribe procedures under which each contract market
is to provide for orderly delivery, including temporary storage
costs, of any agricultural commodity enumerated in section
1a(4) which is the subject of a contract for purchase or sale
for future delivery;
``(2) increase the ease with which domestic agricultural
producers may participate in contract markets, including by
addressing cost and margin requirements, so as to better enable
such producers to hedge price risk associated with their
production;
``(3) provide flexibility in the minimum quantities of such
agricultural commodities that may be the subject of a contract
for purchase or sale for future delivery that is traded on a
contract market, to better allow domestic agricultural
producers to hedge such price risk; and
``(4) encourage exchanges to provide information and
otherwise facilitate the participation of domestic agricultural
producers in contract markets.
``(b) Report.--Within 1 year after the date of enactment of this
section, the Commission shall submit to the Committee on Agriculture of
the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report on the steps it has
taken to implement this section and on the activities of contract
markets pursuant to this section.''.
SEC. 121. RULE OF CONSTRUCTION.
Except as expressly provided in this title or an amendment made by
this title, nothing in this title or an amendment made by this title
supersedes, affects, or otherwise limits or expands the scope and
applicability of laws governing the Securities and Exchange Commission.
SEC. 122. 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 (5), (6), (16), (17), (20), and
(23) (as redesignated by section 101), by inserting
``or derivatives transaction execution facility'' after
``contract market'' each place it appears; and
(B) in paragraph (25) (as redesignated by section
101)--
(i) in the paragraph heading, by striking
``contract market'' and inserting ``registered
entity'';
(ii) by striking ``contract market'' each
place it appears and inserting ``registered
entity''; and
(iii) by inserting at the end the
following:
``A participant in an alternative trading system that is
designated as a contract market pursuant to section 5f shall be
deemed a member of such contract market for purposes of
transactions in security future products through such contract
market.''.
(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'';
(B) in subsection (a)(1)(A) (as amended by
subparagraph (A) of this paragraph)--
(i) by striking ``subparagraph (B) of this
paragraph'' and inserting ``subparagraphs (C)
and (D) of this paragraph and subsections (c),
(d), (e), (f), (g), and (h) of this section'';
(ii) 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'';
(iii) by striking clause (ii); and
(iv) in clause (iii), by striking ``(iii)
The'' and inserting the following:
``(B) Liability of principal for act of agent.--
The''; and
(C) in subsection (a)(1)(B)--
(i) by striking ``(B)'' and inserting
``(C)'';
(ii) in clause (ii)(I), by striking
``section 3 of the Securities Act of 1933 or'';
(iii) in clause (iv), by striking ``(I)''
and all that follows through ``(II)'';
(iv) in clause (v)--
(I) by striking ``section 3 of the
Securities Act of 1933 or''; and
(II) by inserting ``or subparagraph
(D)'' after ``subparagraph''; and
(v) by moving clauses (i) through (v) 4 ems
to the right;
(D) in subsection (a)(7), by striking ``contract
market'' and inserting ``registered entity'';
(E) in subsection (a)(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 involving transactions for
future delivery referred to in this clause or
in considering possible emergency action under
section 8a(9) of this Act'' 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 involving transactions for future
delivery referred to in this clause or in
considering any possible action under this Act
(including without limitation emergency action
under section 8a(9))'', and by striking
``designation, suspension, revocation, or
emergency action'' and inserting ``designation,
registration, suspension, revocation, or
action''; and
(F) in subsection (a), by moving paragraphs (2)
through (9) 2 ems to the right.
(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 ``sections
2(a)(1)(C) and 2(a)(1)(D)''; 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)--
(i) in paragraph (1), by inserting ``, or
derivatives transaction execution facility or
facilities,'' after ``markets''; and
(ii) in paragraph (2), by inserting ``or
derivatives transaction execution facility''
after ``contract market''; 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(a) of the Commodity Exchange Act (7 U.S.C.
6j(a)) is amended--
(A) in paragraph (1), by inserting ``for security
future products'' after ``contract market'';
(B) in paragraph (3)--
(i) in the matter preceding subparagraph
(A), by inserting ``, other than a designated
contract market in a security future product,''
after ``exempt a contract market''; and
(ii) in subparagraph (A), by striking
``section 5a(b)'' and inserting ``section 5'';
and
(C) in paragraph (6)(ii), by striking ``section
5b'' and inserting ``section 5e''.
(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) 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 section 5,
5a, 5b, or 5f'';
(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''.
(14) 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''.
(15) 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''.
(16) Section 6c(a) of the Commodity Exchange Act (7 U.S.C.
13a-1(a)) by striking ``contract market'' and inserting
``registered entity''.
(17) 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,''.
(18) 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''.
(19) 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''.
(20) 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''.
(21) 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''.
(22) 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
``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''.
(23) Section 9 of the Commodity Exchange Act (7 U.S.C. 13)
is amended by striking ``contract market'' each place it
appears and inserting ``registered entity''.
(24) 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''.
(25) 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''.
(26) 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 or a
derivatives clearing organization
exempt from registration pursuant to
section 5b(b)''; 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. 123. PRIVACY.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5f (as added by section 222) the following:
``SEC. 5G. PRIVACY.
``(a) Treatment as Financial Institutions.--Notwithstanding section
509(3)(B) of the Gramm-Leach-Bliley Act, any person or entity that is
subject to the jurisdiction of the Commission under this Act with
respect to any financial activity shall be treated as a financial
institution for purposes of title V of such Act with respect to such
financial activity.
``(b) Treatment of CFTC as Federal Functional Regulator.--For
purposes of title V of such Act, the Commodity Futures Trading
Commission shall be treated as a Federal functional regulator within
the meaning of section 509(2) of such Act and shall prescribe
regulations under such title within 6 months after the date of
enactment of this section.''.
SEC. 124. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Commission (in this section
referred to as the ``Commission'') shall undertake and complete a study
of the Commodity Exchange Act (in this section referred to as ``the
Act'') and the Commission's rules, regulations and orders governing the
conduct of persons required to be registered under the Act, not later
than 1 year after the date of the enactment of this Act. The study
shall identify--
(1) the core principles and interpretations of acceptable
business practices that the Commission has adopted or intends
to adopt to replace the provisions of the Act and the
Commission's rules and regulations thereunder;
(2) the rules and regulations that the Commission has
determined must be retained and the reasons therefor;
(3) the extent to which the Commission believes it can
effect the changes identified in paragraph (1) of this
subsection through its exemptive authority under section 4(c)
of the Act; and
(4) the regulatory functions the Commission currently
performs that can be delegated to a registered futures
association (within the meaning of the Act) and the regulatory
functions that the Commission has determined must be retained
and the reasons therefor.
(b) In conducting the study, the Commission shall solicit the views
of the public as well as Commission registrants, registered entities,
and registered futures associations (all within the meaning of the
Act).
(c) The Commission shall transmit to the Committee on Agriculture
of the House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a report of the results of its
study, which shall include an analysis of comments received.
SEC. 125. EFFECTIVE DATE.
This title takes effect on the date of enactment of this Act.
SEC. 126. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING
COMMISSION.
(a) Findings.--The Congress finds that--
(1) derivatives markets serving United States industry are
increasingly global in scope;
(2) developments in data processing and communications
technologies enable users of risk management services to
analyze and compare those services on a worldwide basis;
(3) financial services regulatory policy must be flexible
to account for rapidly changing derivatives industry business
practices;
(4) regulatory impediments to the operation of global
business interests can compromise the competitiveness of United
States businesses;
(5) events that disrupt financial markets and economies are
often global in scope, require rapid regulatory response, and
coordinated regulatory effort across international
jurisdictions;
(6) through its membership in the International
Organization of Securities Commissions, the Commodity Futures
Trading Commission has promoted beneficial communication among
market regulators and international regulatory cooperation; and
(7) the Commodity Futures Trading Commission and other
United States financial regulators and self-regulatory
organizations should continue to foster productive and
cooperative working relationships with their counterparts in
foreign jurisdictions.
(b) Sense of the Congress.--It is the sense of the Congress that,
consistent with its responsibilities under the Commodity Exchange Act,
the Commodity Futures Trading Commission should, as part of its
international activities, continue to coordinate with foreign
regulatory authorities, to participate in international regulatory
organizations and forums, and to provide technical assistance to
foreign government authorities, in order to encourage--
(1) the facilitation of cross-border transactions through
the removal or lessening of any unnecessary legal or practical
obstacles;
(2) the development of internationally accepted regulatory
standards of best practice;
(3) the enhancement of international supervisory
cooperation and emergency procedures;
(4) the strengthening of international cooperation for
customer and market protection; and
(5) improvements in the quality and timeliness of
international information sharing.
TITLE II--SECURITIES ACTS AMENDMENTS
Subtitle A--Amendments
SEC. 201. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)) is amended--
(1) in paragraph (10), by inserting ``security future,''
after ``treasury stock,'';
(2) by striking paragraph (11) and inserting the following:
``(11) The term `equity security' means any stock or
similar security; or any security future; or any security
convertible, with or without consideration, into such a
security, or carrying any warrant or right to subscribe to or
purchase such a security; or any such warrant or right; or any
put, call, straddle, option, or privilege on any such security;
or any other security which the Commission shall deem to be of
similar nature and consider necessary or appropriate, by such
rules and regulations as it may prescribe in the public
interest or for the protection of investors, to treat as an
equity security.'';
(3) in paragraph (13), by adding at the end the following:
``For security future products, such term includes any
contract, agreement, or transaction for future delivery.'';
(4) in paragraph (14), by adding at the end the following:
``For security future products, such term includes any
contract, agreement, or transaction for future delivery.''; and
(5) by adding at the end the following:
``(55)(A) The term `security future' means a contract of
sale for future delivery of a single security or of a narrow-
based security index, including any interest therein or based
on the value thereof, except an exempted security under section
3(a)(12) of the Securities Exchange Act of 1934 as in effect on
the date of enactment of the Futures Trading Act of 1982 (other
than any municipal security as defined in section 3(a)(29) as
in effect on the date of enactment of the Futures Trading Act
of 1982). The term `security future' does not include any
agreement, contract, or transaction excluded under subsection
(c), (d), or (f) of section 2 of the Commodity Exchange Act as
in effect on the date of enactment of the Commodity Futures
Modernization Act of 2000.
``(B) The term `narrow-based security index' means an index
of securities on which contracts for future delivery are not
permitted under section 2(a)(1)(C) of the Commodity Exchange
Act, including any interest therein or based on the value
thereof.
``(C) The term `security future product' means a security
future or any put, call, straddle, option, or privilege on any
security future.
``(56)(A) The term `margin', when used with respect to a
security future product, means the amount, type, and form of
collateral required to secure any extension or maintenance of
credit, or the amount, type, and form of collateral required as
a performance bond related to the purchase, sale, or carrying
of a security future product, and all other uses of collateral
related to the purchasing, selling, or carrying of a security
future product.
``(B) The terms `margin level' and `level of margin', when
used with respect to a security future product, mean the amount
of margin required to secure any extension or maintenance of
credit, or the amount of margin required as a performance bond
related to the purchase, sale, or carrying of a security future
product.
``(C) The terms `higher margin level' and `higher level of
margin', when used with respect to a security future product,
mean a margin level established by a national securities
exchange registered pursuant to section 6(g) that is higher
than the minimum amount established by the Commission pursuant
to section 7(c)(2)(B).''.
SEC. 202. REGULATORY RELIEF FOR MARKETS TRADING SECURITY FUTURE
PRODUCTS.
(a) Expedited Registration and Exemption.--Section 6 of the
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at
the end the following:
``(g) Notice Registration of Security Future Product Exchanges.--
``(1) Registration required.--An exchange that lists or
trades security future products may be registered as a national
securities exchange solely for the purposes of trading security
future products if--
``(A) the exchange is a board of trade, as that
term is defined by the Commodity Exchange Act (7 U.S.C.
1a(2)), that has been designated a contract market by
the Commodity Futures Trading Commission and such
designation is not suspended by order by the Commodity
Futures Trading Commission; and
``(B) such exchange does not serve as a market
place for transactions in securities other than--
``(i) security future products; or
``(ii) futures on exempted securities or
groups or indexes of securities or options
thereon that have been authorized under section
2(a)(1)(C) of the Commodity Exchange Act by
Commodity Futures Trading Commission order.
``(2) Registration by notice filing.--
``(A) Form and content.--An exchange required to
register only because such exchange lists or trades
security future products may register for purposes of
this section by filing with the Commission a written
notice in such form, and containing the rules of the
exchange and such other information and documents
concerning such exchange as the Commission, by rule,
may prescribe as necessary or appropriate in the public
interest or for the protection of investors.
``(B) Immediate effectiveness.--Such registration
shall be effective immediately upon filing of the
written notice with the Commission, except that such
registration shall not be effective if such
registration would be subject to suspension or
revocation.
``(C) Termination.--Such registration shall be
terminated immediately if any of the conditions for
registration set forth in this subsection are no longer
satisfied.
``(3) Public availability.--The Commission shall make
available to the public all notices it receives under this
subsection.
``(4) Exemption of exchanges from specified provisions.--
``(A) Transaction exemptions.--An exchange that is
registered under paragraph (1) of this subsection shall
be exempt from, and shall not be required to enforce
compliance by its members with, and its members shall
not, solely with respect to those transactions effected
on such exchange in security future products, be
required to comply with, the following provisions of
this title and the rules thereunder:
``(i) Subsections (b)(2), (b)(3), (b)(4),
(b)(7), (b)(9), (c), (d), and (e) of this
section.
``(ii) Subsection (a) of section 10.
``(iii) Section 11.
``(iv) Subsections (d), (f), and (k) of
section 17.
``(v) Subsections (a), (f), and (h) of
section 19.
``(B) Rule change exemptions.--An exchange that is
subject to the registration requirement of paragraph
(1) of this subsection shall also be exempt from
submitting proposed rule changes pursuant to section
19(b) of this title, except that--
``(i) such exchange shall file proposed
rule changes related to higher margin levels,
fraud or manipulation, recordkeeping,
reporting, listing standards, or decimal
pricing for security future products, sales
practices for security future products for
persons who effect transactions in security
future products or rules effectuating such
exchange's obligation to enforce the securities
laws pursuant to section 19(b)(7);
``(ii) such exchange shall file pursuant to
sections 19(b)(1) and 19(b)(2) proposed rule
changes related to margin, except for changes
resulting in higher margin levels; and
``(iii) such exchange shall file pursuant
to section 19(b)(1) proposed rule changes that
have been abrogated by the Commission pursuant
to section 19(b)(7)(C).
``(5) Association compliance with requirements.--No
exchange that is registered under paragraph (1) of this
subsection shall trade any security future product until a
futures association registered under section 17 of the
Commodity Exchange Act has met the requirements set forth in
section 15A(k)(2) of this title.
``(6) Trading in security future products.--It shall be
unlawful for any person to execute or trade a security future
product until the later of--
``(A) one year after the date of enactment of the
Commodity Futures Modernization Act of 2000; or
``(B) such date as the Federal income tax treatment
applicable to the security future products permitted
under this title are equivalent to the Federal income
tax treatment of equity options traded on a national
securities exchange.''.
(b) Commission Review of Proposed Rule Changes.--
(1) Expedited review.--Section 19(b) of the Securities
Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by adding at
the end the following:
``(7) Security future product rule changes.--
``(A) Filing required.--A self-regulatory
organization that is an exchange registered with the
Commission pursuant to section 6(g) of this title or
that is a national securities association registered
pursuant to section 15A(k) of this title shall file
with the Commission, in accordance with such rules as
the Commission may prescribe, copies of any proposed
rule change or any proposed change in, addition to, or
deletion from the rules of such self-regulatory
organization (hereinafter in this paragraph
collectively referred to as a `proposed rule change')
that relates to higher margin levels, fraud or
manipulation, recordkeeping, reporting, listing
standards, or decimal pricing for security future
products, sales practices for security future products
for persons who effect transactions in security future
products or rules effectuating such self-regulatory
organization's obligation to enforce the securities
laws. Such proposed rule change shall be accompanied by
a concise general statement of the basis and purpose of
such proposed rule change. The Commission shall, upon
the filing of any proposed rule change, publish notice
thereof together with the terms of substance of the
proposed rule change or a description of the subjects
and issues involved. The Commission shall give
interested persons an opportunity to submit written
data, views, and arguments concerning such proposed
rule change.
``(B) Filing with cftc.--A proposed rule change
filed with the Commission pursuant to subparagraph (A)
shall be filed concurrently with the Commodity Futures
Trading Commission. Such proposed rule change may take
effect upon filing of a written certification with the
Commodity Futures Trading Commission, upon a
determination by the Commodity Futures Trading
Commission that review of the proposed rule change is
not necessary or upon approval of the proposed rule
change by the Commodity Futures Trading Commission.
``(C) Abrogation of rule changes.--Any proposed
rule change of a self-regulatory organization that has
taken effect pursuant to subparagraph (B) may be
enforced by such self-regulatory organization to the
extent such rule is not inconsistent with the
provisions of this title, the rules and regulations
thereunder, and applicable Federal law. At any time
within 60 days of the date of the filing of a written
certification with the Commodity Futures Trading
Commission, the date the Commodity Futures Trading
Commission determines that review of such proposed rule
change is not necessary, or the date the Commodity
Futures Trading Commission approves such proposed rule
change, the Commission, after consultation with the
Commodity Futures Trading Commission, summarily may
abrogate the proposed rule change and require that the
proposed rule change be refiled in accordance with the
provisions of paragraph (1), if it appears to the
Commission that such proposed rule change unduly
burdens competition, conflicts with the securities
laws, does not promote efficiency, or is inconsistent
with the public interest and the protection of
investors. Commission action pursuant to the preceding
sentence shall not affect the validity or force of the
rule change during the period it was in effect and
shall not be reviewable under section 25 nor deemed to
be a final agency action for purposes of section 704 of
title 5, United States Code.
``(D) Review of resubmitted abrogated rules.--
``(i) Proceedings.--Within 35 days of the
date of publication of notice of the filing of
a proposed rule change that is abrogated in
accordance with subparagraph (C) and refiled in
accordance with paragraph (1), or within such
longer period as the Commission may designate
up to 90 days after such date if the Commission
finds such longer period to be appropriate and
publishes its reasons for so finding or as to
which the self-regulatory organization
consents, the Commission shall--
``(I) by order approve such
proposed rule change; or
``(II) after consultation with the
Commodity Futures Trading Commission,
institute proceedings to determine
whether the proposed rule change should
be disapproved.
Proceedings under subclause (II) shall include
notice of the grounds for disapproval under
consideration and opportunity for hearing and
be concluded within 180 days after the date of
publication of notice of the filing of the
proposed rule change. At the conclusion of such
proceedings, the Commission, by order, shall
approve or disapprove such proposed rule
change. The Commission may extend the time for
conclusion of such proceedings for up to 60
days if it finds good cause for such extension
and publishes its reasons for so finding or for
such longer period as to which the self-
regulatory organization consents.
``(ii) Grounds for approval.--The
Commission shall approve a proposed rule change
of a self-regulatory organization under this
subparagraph if it finds that such proposed
rule change promotes efficiency, does not
unduly burden competition, does not conflict
with the securities laws, and is not
inconsistent with the public interest or the
protection of investors. The Commission shall
disapprove such a proposed rule change of a
self-regulatory organization if it does not
make such finding. The Commission shall not
approve any proposed rule change prior to the
30th day after the date of publication of
notice of the filing thereof, unless the
Commission finds good cause for so doing and
publishes its reasons for so finding.''.
(2) Decimal pricing provisions.--Section 19(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended
by inserting after paragraph (7), as added by paragraph (1),
the following:
``(8) Decimal pricing.--Not later than 9 months after the
later of the dates specified in section 6(g)(5), all self-
regulatory organizations listing or trading security future
products shall file proposed rule changes necessary to
implement decimal pricing of security future products. The
Commission may not require such rules to contain equal minimum
increments in such decimal pricing.''.
(3) Consultation provisions.--Section 19(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended
by inserting after paragraph (8), as added by paragraph (2),
the following:
``(9) Consultation with cftc.--
``(A) Consultation required.--The Commission shall
consult with and consider the views of the Commodity
Futures Trading Commission prior to approving a
proposed rule change filed by a national securities
association registered pursuant to section 15A(a) or a
national securities exchange subject to the provisions
of subsection (a) that primarily concerns conduct
related to transactions in security futures products,
except where the Commission determines that an
emergency exists requiring expeditious or summary
action and publishes its reasons therefor.
``(B) Responses to cftc comments and findings.--If
the Commodity Futures Trading Commission comments in
writing to the Commission on a proposed rule that has
been published for comment, the Commission shall
respond in writing to such written comment before
approving the proposed rule. If the Commodity Futures
Trading Commission determines, and notifies the
Commission, that such rule, if implemented or as
applied, would--
``(i) adversely affect the liquidity or
efficiency of the market for security future
products; or
``(ii) impose any burden on competition not
necessary or appropriate in furtherance of the
purposes of this section,
the Commission shall, prior to approving the proposed
rule, find that such rule is necessary and appropriate
in furtherance of the purposes of this section
notwithstanding the Commodity Futures Trading
Commission's determination.
``(C) Considerations of existing regulation.--In
approving rules described in subparagraph (A), the
Commission shall consider the sufficiency and
appropriateness of then existing laws and rules
applicable to security futures products.''.
(c) Review of Disciplinary Proceedings.--Section 19(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78s(d)) is amended by adding
at the end the following:
``(3) The provisions of this subsection shall apply to an exchange
registered pursuant to section 6(g) of this title or a national
securities association registered pursuant to section 15A(k) of this
title only to the extent that such exchange or association imposes any
final disciplinary sanction for--
``(A) a violation of the federal securities laws or the
rules and regulations thereunder; or
``(B) a violation of a rule of such exchange or
association, as to which a proposed change would be required to
be filed under section 19 of this title, except that, to the
extent that the exchange or association rule violation relates
to any account, agreement, or transaction, this subsection
shall apply only to the extent such violation involves a
security future product.''.
SEC. 203. REGULATORY RELIEF FOR INTERMEDIARIES TRADING SECURITY FUTURE
PRODUCTS.
(a) Expedited Registration and Exemptions.--
(1) Amendment.--Section 15(b) of the Securities Exchange
Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the end
the following:
``(11) Broker/dealer registration with respect to
transactions in security future products.--
``(A) Notice registration.--
``(i) Contents of notice.--Notwithstanding
paragraphs (1) and (2), a broker or dealer
required to register only because it effects
transactions in security future products on an
exchange registered pursuant to section 6(g)
may register for purposes of this section by
filing with the Commission a written notice in
such form and containing such information
concerning such broker or dealer and any
persons associated with such broker or dealer
as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest
or for the protection of investors. A broker or
dealer may not register under this paragraph
unless that broker or dealer is a member of a
national securities association registered
under section 15A(k).
``(ii) Immediate effectiveness.--Such
registration shall be effective immediately
upon filing of the written notice with the
Commission, except that such registration shall
not be effective if the registration would be
subject to suspension or revocation under
paragraph (4).
``(iii) Suspension.--Such registration
shall be suspended immediately if a national
securities association registered pursuant to
section 15A(k) of this title suspends the
membership of that broker or dealer.
``(iv) Termination.--Such registration
shall be terminated immediately if any of the
above stated conditions for registration set
forth in this paragraph are no longer
satisfied.
``(B) Exemptions for registered brokers and
dealers.--A broker or dealer registered pursuant to the
requirements of subparagraph (A) shall be exempt from
the following provisions of this title and the rules
thereunder with respect to transactions in security
future products:
``(i) Section 8.
``(ii) Subsection (a) of section 10.
``(iii) Section 11.
``(iv) Subsections (c)(3) and (c)(5) of
this section.
``(v) Section 15B.
``(vi) Section 15C.
``(vii) Subsections (d), (e), (f), (g),
(h), and (i) of section 17.''.
(2) Conforming amendment.--Section 28(e) of the Securities
Exchange Act of 1934 (15 U.S.C. 78bb(e)) is amended by adding
at the end the following:
``(4) The provisions of this subsection shall not apply with regard
to securities that are security future products.''.
(b) Floor Brokers and Floor Traders.--Section 15(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by
inserting after paragraph (11), as added by subsection (a), the
following:
``(12) Exemption for security future product exchange
members.--
``(A) Registration exemption.--A natural person
shall be exempt from the registration requirements of
this section if such person--
``(i) is a member of a designated contract
market registered with the Commission as an
exchange pursuant to section 6(g);
``(ii) effects transactions only in
securities on the exchange of which such person
is a member; and
``(iii) has no direct contact with public
customers.
``(B) Other exemptions.--A natural person exempt
from registration pursuant to subparagraph (A) shall
also be exempt from the following provisions of this
title and the rules thereunder:
``(i) Section 8.
``(ii) Subsection (a) of section 10.
``(iii) Section 11.
``(iv) Subsections (c)(3), (c)(5), and (e)
of this section.
``(v) Section 15B.
``(vi) Section 15C.
``(vii) Subsections (d), (e), (f), (g),
(h), and (i) of section 17.''.
(c) Limited Purpose National Securities Association.--Section 15A
of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended by
adding at the end the following:
``(k) Limited Purpose National Securities Association.--
``(1) Regulation of members with respect to security future
products.--A futures association registered under section 17 of
the Commodity Exchange Act shall be a registered national
securities association for the limited purpose of regulating
the activities of members who are registered as brokers or
dealers in security future products pursuant to section
15(b)(11).
``(2) Requirements for registration.--Such a securities
association shall--
``(A) be so organized and have the capacity to
carry out the purposes of the securities laws
applicable to security future products and to comply,
and (subject to any rule or order of the Commission
pursuant to section 19(g)(2)) to enforce compliance by
its members and persons associated with its members,
with the provisions of the securities laws applicable
to security future products, the rules and regulations
thereunder, and its rules;
``(B) have rules that--
``(i) are designed to prevent fraudulent
and manipulative acts and practices, to promote
just and equitable principles of trade, and, in
general, to protect investors and the public
interest, including rules governing sales
practices and the advertising of security
future products comparable to those of other
national securities associations registered
pursuant to subsection (a); and
``(ii) are not designed to regulate by
virtue of any authority conferred by this title
matters not related to the purposes of this
title or the administration of the association;
``(C) have rules that provide that (subject to any
rule or order of the Commission pursuant to section
19(g)(2)) its members and persons associated with its
members shall be appropriately disciplined for
violation of any provision of the securities laws
applicable to security future products, the rules or
regulations thereunder, or the rules of the
association, by expulsion, suspension, limitation of
activities, functions, and operations, fine, censure,
being suspended or barred from being associated with a
member, or any other fitting sanction; and
``(D) have rules that ensure that members and
natural persons associated with members meet such
standards of training, experience, and competence
necessary to effect transactions in security future
products and are tested for their knowledge of
securities and security future products.
``(3) Exemption from rule change submission.--Such a
securities association shall be exempt from submitting proposed
rule changes pursuant to section 19(b) of this title, except
that--
``(A) the association shall file proposed rule
changes related to higher margin levels, fraud or
manipulation, recordkeeping, reporting, listing
standards, or decimal pricing for security future
products, sales practices, advertising of security
future products, or standards of training, experience,
competence, or other qualifications for security future
products for persons who effect transactions in
security future products or rules effectuating the
association's obligation to enforce the securities laws
pursuant to section 19(b)(7);
``(B) the association shall file pursuant to
sections 19(b)(1) and 19(b)(2) proposed rule changes
related to margin, except for changes resulting in
higher margin levels; and
``(C) the association shall file pursuant to
section 19(b)(1) proposed rule changes that have been
abrogated by the Commission pursuant to section
19(b)(7)(C).
``(4) Other exemptions.--Such a securities association
shall be exempt from and shall not be required to enforce
compliance by its members, and its members shall not, solely
with respect to their transactions effected in security future
products, be required to comply, with the following provisions
of this title and the rules thereunder:
``(A) Subsections (b)(1), (b)(3), (b)(4), (b)(5),
(b)(8), (b)(10), (b)(11), (b)(12), (b)(13), (c), (d),
(e), (f), (g), (h), and (i) of this section.
``(B) Subsections (d), (f), and (k) of section 17.
``(C) Subsections (a), (f), and (h) of section
19.''.
(d) Exemption Under the Securities Investor Protection Act of
1970.--
(1) Section 16(14) of the Securities Investor Protection
Act of 1970 (15 U.S.C. 78lll(14)) is amended by inserting ``or
any security future as that term is defined in section
3(a)(55)(A) of the Securities Exchange Act of 1934,'' after
``certificate of deposit for a security,''.
(2) Section 3(a)(2)(A) of the Securities Investor
Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)(A)) is amended--
(A) in clause (i), by striking ``and'' after the
semicolon;
(B) in clause (ii), by striking the period and
inserting ``; and'';
(C) by adding at the end the following:
``(iii) persons who are registered as a
broker or dealer pursuant to section
15(b)(11)(A) of the Securities Exchange Act of
1934.''.
(e) Other Provision.--Section 15(i)(6)(A) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(i)(6)(A)) is amended--
(1) in clause (ii), by striking ``and'' after the
semicolon;
(2) in clause (iii), by striking the period and inserting
``; and''; and
(3) by adding at the end the following:
``(iv) is not a security future product.''.
SEC. 204. SPECIAL PROVISIONS FOR INTERAGENCY COOPERATION.
Section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q)
is amended by striking subsection (b) and inserting the following:
``(b) Records Subject to Examination.--
``(1) Procedures for cooperation with other agencies.--All
records of persons described in subsection (a) are subject at
any time, or from time to time, to such reasonable periodic,
special, or other examinations by representatives of the
Commission and the appropriate regulatory agency for such
persons as the Commission or the appropriate regulatory agency
for such persons deems necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title if the Commission,
prior to conducting any such examination of a--
``(A) registered clearing agency, registered
transfer agent, or registered municipal securities
dealer for which it is not the appropriate regulatory
agency, gives notice to the appropriate regulatory
agency for such clearing agency, transfer agent, or
municipal securities dealer, of such proposed
examination and consults with the appropriate
regulatory agency concerning the feasibility and
desirability of coordinating such examinations
conducted by the appropriate regulatory agency with a
view to avoiding unnecessary regulatory duplication or
undue regulatory burdens for such clearing agency,
transfer agent, or municipal securities dealer; or
``(B) broker or dealer registered pursuant to
section 15(b)(11), exchange registered pursuant to
section 6(g), or national securities association
registered pursuant to section 15A(k) gives notice to
the Commodity Futures Trading Commission of such
proposed examination and consults with the Commodity
Futures Trading Commission concerning the feasibility
and desirability of coordinating such examination with
examinations conducted by the Commodity Futures Trading
Commission with a view to avoiding unnecessary
regulatory duplication or undue regulatory burdens for
such broker or dealer or exchange.
``(2) Furnishing data and reports to cftc.--The Commission
shall notify the Commodity Futures Trading Commission of any
examination conducted of any broker or dealer registered
pursuant to section 15(b)(11), exchange registered pursuant to
section 6(g), or national securities association registered
pursuant to section 15A(k) and, upon request, furnish to the
Commodity Futures Trading Commission any examination report and
data supplied to the Commission in connection with such
examination.
``(3) Use of cftc reports.--The Commission shall, to the
fullest extent possible, use the reports of examinations of any
broker or dealer registered pursuant to section 15(b)(11) or
exchange registered pursuant to section 6(g) made by the
Commodity Futures Trading Commission, a national securities
association registered pursuant to section 15A(k), or an
exchange registered pursuant to section 6(g).
``(4) Large trader reporting.--The Commission and the
Commodity Futures Trading Commission shall jointly prescribe
rules to require large trader reporting with respect to
security future products. Such rules shall specify a reporting
level for each security future product, a format for reporting,
and the procedures for filing such reports with the Commission
and the Commodity Futures Trading Commission.
``(5) Rule of construction.--Nothing in this subsection
shall be construed to impair or limit (other than by the
requirement of prior consultation) the power of the Commission
under this subsection to examine any clearing agency, transfer
agent, or municipal securities dealer, broker or dealer
registered pursuant to section 15(b)(11), exchange registered
pursuant to section 6(g), or national securities association
registered pursuant to section 15A(k), or to affect in any way
the power of the Commission under any other provision of this
title or otherwise to inspect, examine, or investigate any
clearing agency, transfer agent, or municipal securities
dealer, broker or dealer registered pursuant to section
15(b)(11), exchange registered pursuant to section 6(g), or
national securities association registered pursuant to section
15A(k).''.
SEC. 205. MAINTENANCE OF MARKET INTEGRITY FOR SECURITY FUTURE PRODUCTS.
(a) Addition of Security Future Products to Option-Specific
Enforcement Provisions.--
(1) Prohibition against manipulation.--Section 9(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended--
(A) in paragraph (1)--
(i) by inserting ``(A)'' after
``acquires''; and
(ii) by striking ``; or'' and inserting ``,
or (B) any security future product on the
security; or'';
(B) in paragraph (2)--
(i) by inserting ``(A)'' after ``interest
in any''; and
(ii) by striking ``; or'' and inserting ``,
or (B) such security future product delivery;
or''; and
(C) in paragraph (3)--
(i) by inserting ``(A)'' after ``interest
in any''; and
(ii) by inserting ``, or (B) such security
future product'' after ``privilege''.
(2) Manipulation in options and other derivative
products.--Section 9(g) of the Securities Exchange Act of 1934
(15 U.S.C. 78i(g)) is amended--
(A) by inserting ``(1)'' after ``(g)'';
(B) by inserting ``other than a security future
product'' after ``future delivery''; and
(C) by adding at the end following:
``(2) Notwithstanding the Commodity Exchange Act, the Commission
shall have the authority to regulate the trading of any security future
product to the extent provided in the securities laws.''.
(3) Liability of controlling persons and persons who aid
and abet violations.--Section 20(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78t(d)) is amended by striking ``or
privilege'' and inserting ``privilege, or security future
product''.
(4) Liability to contemporaneous traders for insider
trading.--Section 21A(a)(1) of the Securities Exchange Act of
1934 (15 U.S.C. 78u-1(a)(1)) is amended by striking
``standardized options, the Commission--'' and inserting
``standardized options or security future products, the
Commission--''.
(5) Enforcement consultation.--Section 21 of the Securities
Exchange Act of 1934 (15 U.S.C. 78u) is amended by adding at
the end the following:
``(i) Information to CFTC.--The Commission shall provide the
Commodity Futures Trading Commission with notice of the commencement of
any proceeding and a copy of any order entered by the Commission
against any broker or dealer registered pursuant to section 15(b)(11)
or any exchange registered pursuant to section 6(g).''.
SEC. 206. SPECIAL PROVISIONS FOR THE TRADING OF SECURITY FUTURE
PRODUCTS.
(a) Listing Standards and Conditions for Trading.--Section 6 of the
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by inserting
after subsection (g), as added by section 202, the following:
``(h) Trading in Security Future Products.--
``(1) Trading on exchange or association required.--It
shall be unlawful for any person to effect transactions in
security future products that are not listed on a national
securities exchange or a national securities association
registered pursuant to section 15A(a).
``(2) Listing standards and conditions for trading
required.--A national securities exchange or a national
securities association registered pursuant to section 15A(a)
may trade only security future products that (A) conform with
listing standards and conditions for trading that such exchange
or association files with the Commission under section 19(b),
and (B) meet the criteria specified in section 2(a)(1)(D)(i) of
the Commodity Exchange Act.
``(3) Requirements for listing standards and conditions for
trading.--Such listing standards and conditions for trading
shall--
``(A) except as otherwise provided in a rule,
regulation, or order issued pursuant to paragraph (4),
require that any security underlying the security
future, including each component security of a narrow-
based security index, be registered pursuant to section
12 of this title;
``(B) except as otherwise provided in a rule,
regulation, or order issued pursuant to paragraph (4),
require that the security future product be cash
settled;
``(C) be no less restrictive than comparable
listing standards for options traded on a national
securities exchange or a national securities
association registered pursuant to section 15A(a) of
this title;
``(D) except as otherwise provided in a rule,
regulation, or order issued pursuant to paragraph (4),
require that the security future be based upon common
stock and such other equity securities as the
Commission and the Commodity Futures Trading Commission
jointly determine appropriate;
``(E) require that the security future product is
cleared by a clearing agency that has in place
provisions for linked and coordinated clearing with
other clearing agencies that clear security future
products, which permits the security future product to
be purchased on one market and offset on any other
market on which the security future product is traded;
``(F) require that only a broker or dealer subject
to suitability rules comparable to those of a national
securities association registered pursuant to section
15A(a) effect transactions in the security future
product;
``(G) require that the security future product be
subject to the prohibition against dual trading in
section 4j of the Commodity Exchange Act (7 U.S.C. 6j)
and the rules and regulations thereunder or the
provisions of section 11(a) of this title and the rules
and regulations thereunder, except to the extent
otherwise permitted under this title and the rules and
regulations thereunder;
``(H) require that trading in the security future
product not be readily susceptible to manipulation of
the price of such security future product, nor to
causing or being used in the manipulation of the price
of any underlying security, option on such security, or
option on a group or index including such securities;
``(I) require that procedures be in place for
coordinated surveillance among the market on which the
security future product is traded, any market on which
any security underlying the security future product is
traded, and other markets on which any related security
is traded to detect manipulation and insider trading;
``(J) require that the market on which the security
future product is traded has in place audit trails
necessary or appropriate to facilitate the coordinated
surveillance required in subparagraph (I);
``(K) require that the market on which the security
future product is traded has in place procedures to
coordinate trading halts between such market and any
market on which any security underlying the security
future product is traded and other markets on which any
related security is traded; and
``(L) require that the margin requirements for a
security future product be consistent with the margin
requirements for comparable option contracts traded on
an exchange registered pursuant to section 6(a) of this
title and that initial and maintenance margin levels
for a security future product not be lower than the
levels of margin required for comparable option
contracts traded on an exchange registered pursuant to
section 6(a) of this title, except that nothing in this
subparagraph shall be construed to prevent a national
securities exchange or national securities association
from requiring higher margin levels for a security
future product when it deems such action to be
necessary or appropriate.
``(4) Authority to modify certain listing standard
requirements.--The Commission and the Commodity Futures Trading
Commission, by rule, regulation, or order, may jointly modify
the listing standard requirements specified in subparagraph
(A), (B), or (D) of paragraph (3) to the extent such
modification fosters the development of fair and orderly
markets in security future products, is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
``(5) Requirements for other persons trading security
future products.--It shall be unlawful for any person (other
than a national securities exchange or a national securities
association registered pursuant to section 15A(a)) to
constitute, maintain, or provide a marketplace or facilities
for bringing together purchasers and sellers of security future
products or to otherwise perform with respect to security
future products the functions commonly performed by a stock
exchange as that term is generally understood, unless a
national securities association registered pursuant to section
15A(a)--
``(A) has in place procedures for coordinated
surveillance among such person, the market trading the
securities underlying the security future products, and
other markets trading related securities to detect
manipulation and insider trading;
``(B) has rules to require audit trails necessary
or appropriate to facilitate the coordinated
surveillance required in subparagraph (A); and
``(C) has rules to require such person to
coordinate trading halts with markets trading the
securities underlying the security future products and
other markets trading related securities.
``(6) Deferral of options on security futures trading.--No
person shall offer to enter into, enter into, or confirm the
execution of any put, call, straddle, option, or privilege on a
security future, except that, after 3 years after the date of
enactment of this subsection, the Commission and the Commodity
Futures Trading Commission may by order jointly determine to
permit trading of puts, calls, straddles, options, or
privileges on any security future authorized to be traded under
the provisions of this Act and the Commodity Exchange Act.
Before any such determination, the Commission and the Commodity
Futures Trading Commission shall conduct a study of the effect
of the trading of security futures on the markets for futures
contracts, securities, and options and the adequacy of
protections for investors and other market participants.''.
(b) Margin.--Section 7 of the Securities Exchange Act of 1934 (15
U.S.C. 78g) is amended--
(1) in subsection (a), by inserting ``or a security future
product'' after ``exempted security'';
(2) in subsection (c)(1)(A), by inserting ``except as
provided in paragraph (2),'' after ``security),'';
(3) by redesignating paragraph (2) of subsection (c) as
paragraph (3) of such subsection; and
(4) by inserting after paragraph (1) of such subsection the
following:
``(2) Margin regulations.--
``(A) Compliance with margin rules required.--It
shall be unlawful for any broker, dealer, or member of
a national securities exchange to, directly or
indirectly, extend or maintain credit to or for, or
collect margin from any customer on, any security
future product unless such activities comply with the
rules and regulations which the Commission, after
consultation with the Commodity Futures Trading
Commission shall prescribe pursuant to subparagraph
(B).
``(B) Criteria for issuance of rules.--The
Commission shall issue such regulations to establish
margin requirements, including the establishment of
levels of margin (initial and maintenance) and use of
collateral for security future products under such
terms, and at such levels, as the Commission deems
appropriate--
``(i) to preserve the financial integrity
of markets trading security future products;
``(ii) to prevent systemic risk;
``(iii) to make consistent the margin
levels (initial and maintenance) and other
margin requirements between security future
products and comparable options contracts
traded on a national securities exchange; and
``(iv) to ensure that the margin
requirements (other than levels of margin),
including the type, form, and use of collateral
for security future products, are and remain
consistent with the requirements established by
the Federal Reserve Board, pursuant to
subparagraphs (A) and (B) of paragraph (1).''.
(c) Incorporation of Security Future Products Into the National
Market System.--Section 11A of the Securities Exchange Act of 1934 (15
U.S.C. 78k-1) is amended by adding at the end the following:
``(e) National Markets System for Security Future Products.--
``(1) Consultation and cooperation required.--With respect
to security future products, the Commission and the Commodity
Futures Trading Commission shall consult and cooperate so that,
to the maximum extent practicable, their respective regulatory
responsibilities may be fulfilled and the rules and regulations
applicable to security future products may foster a national
market system for security future products if the Commission
and the Commodity Futures Trading Commission jointly determine
that such a system would be consistent with the congressional
findings in subsection (a)(1). In accordance with this
objective, the Commission shall, at least 15 days prior to the
issuance for public comment of any proposed rule or regulation
under this section concerning security future products, consult
and request the views of the Commodity Futures Trading
Commission.
``(2) Application of rules by order of cftc.--No rule
adopted pursuant to this section shall be applied to any person
with respect to the trading of security future products on an
exchange that is registered under section 6(g) unless the
Commodity Futures Trading Commission has issued an order
directing that such rule is applicable to such persons.''.
(d) Incorporation of Security Future Products Into the National
System for Clearance and Settlement.--Section 17A(b) of the Securities
Exchange Act of 1934 (15 U.S.C. 78q-1(b)) is amended by adding at the
end the following:
``(7) A clearing agency that is regulated directly or indirectly by
the Commodity Futures Trading Commission through its association with a
designated contract market for security future products, and that
performs the functions of a clearing agency only with respect to
security future products and transactions in securities effected
pursuant to the rules of the designated contract market with which such
agency is associated, is exempted from the provisions of this section
and the rules and regulations thereunder, except that any clearing
agency that performs the functions of a clearing agency with respect to
security future products must coordinate with and develop fair and
reasonable links with any and all other clearing agencies that perform
the functions of a clearing agency with respect to security future
products, in order to permit security future products to be purchased
on a national securities exchange or national securities association
registered pursuant to section 15A(a) and offset on another national
securities exchange or national securities association registered
pursuant to section 15A(a).''.
(e) Market Emergency Powers and Circuit Breakers.--Section 12(k) of
the Securities Exchange Act of 1934 (15 U.S.C. 78l(k)) is amended--
(1) in paragraph (1), by adding at the end the following:
``If the actions described in subparagraph (A) or (B) involve a
security future product, the Commission shall consult with and
consider the views of the Commodity Futures Trading
Commission.''; and
(2) in paragraph (2)(B), by inserting after the first
sentence the following: ``If the actions described in
subparagraph (A) involve a security future product, the
Commission shall consult with and consider the views of the
Commodity Futures Trading Commission.''.
(f) Obligation to Put in Place Procedures and Adopt Rules.--Section
15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended
by inserting after subsection (k), as added by section 203, the
following new subsection:
``(l) Procedures and Rules for Security Future Products.--A
national securities association registered pursuant to subsection (a)
shall, not later than one year after the date of enactment of the
Commodity Futures Modernization Act of 2000, implement the procedures
specified in section 6(h)(5)(A) of this title and adopt the rules
specified in subparagraphs (B) and (C) of section 6(h)(5) of this
title.''.
SEC. 207. CLEARANCE AND SETTLEMENT.
Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-
1) is amended--
(1) in subsection (a)--
(A) in paragraph (1), by inserting after
subparagraph (D) the following:
``(E) The clearance and settlement of transactions in over-
the-counter derivatives through clearing agencies registered
with the Commission will reduce systemic risk and provide
stability to financial markets during times of market
disorder.''; and
(B) in paragraph (2)(A)(ii), by striking ``and
commodity options'' and inserting ``commodity options,
and over-the-counter derivatives''; and
(2) in subsection (b)--
(A) in paragraph (3)(A), by inserting ``and
derivative agreements, contracts, and transactions''
after ``prompt and accurate clearance and settlement of
securities transactions'';
(B) in paragraph (3)(F), by inserting ``and, to the
extent applicable, derivative agreements, contracts,
and transactions'' after ``designed to promote the
prompt and accurate clearance and settlement of
securities transactions''; and
(C) by inserting after paragraph (7), as added by
section 206(d), the following:
``(8) A registered clearing agency shall be permitted to provide
facilities for the clearance and settlement of any derivative
agreements, contracts, or transactions that are excluded from the
Commodity Exchange Act, subject to the requirements of this section and
to such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of this
title.''.
SEC. 208. AMENDMENTS RELATING TO REGISTRATION AND DISCLOSURE ISSUES
UNDER THE SECURITIES ACT OF 1933 AND THE SECURITIES
EXCHANGE ACT OF 1934.
(a) Amendments to the Securities Act of 1933.--
(1) Treatment of security future products.--Section 2(a) of
the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended--
(A) in paragraph (1), by inserting ``security
future,'' after ``treasury stock,'';
(B) in paragraph (3), by adding at the end the
following: ``Any offer or sale of a security future
product by or on behalf of the issuer of the securities
underlying the security future product, an affiliate of
the issuer, or an underwriter, shall constitute a
contract for sale of, sale of, offer for sale, or offer
to sell the underlying securities.''; and
(C) by adding at the end the following:
``(16) The terms `security future', `narrow-based security
index', and `security future product' have the same meanings as
provided in section 3(a)(55) of the Securities Exchange Act of
1934.''.
(2) Exemption from registration.--Section 3(a) of the
Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding
at the end the following:
``(14) Any security future product that is--
``(A) cleared by a clearing agency registered under
section 17A of the Securities Exchange Act of 1934 or
exempt from registration under subsection (b)(7) of
such section 17A; and
``(B) listed on a national securities exchange or a
national securities association registered pursuant to
section 15A(a) of the Securities Exchange Act of
1934.''.
(3) Conforming amendment.--Section 12(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77l(a)(2)) is amended by
striking ``paragraph (2)'' and inserting ``paragraphs (2) and
(14)''.
(b) Amendments to the Securities Exchange Act of 1934.--
(1) Exemption from registration.--Section 12(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78l(a)) is amended
by adding at the end the following: ``The provisions of this
subsection shall not apply in respect of a security future
product listed on a national securities exchange.''.
(2) Exemptions from reporting requirement.--Section
12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C.
78l(g)(5)) is amended by adding at the end the following: ``For
purposes of this subsection, a security future product shall
not be considered a class of equity security of the issuer of
the securities underlying the security future product.''.
(3) Transactions by corporate insiders.--Section 16 of the
Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by
adding at the end the following:
``(f) Treatment of Transactions in Security Future Products.--The
provisions of this section shall apply to ownership of and transactions
in security future products as if they were ownership of and
transactions in the underlying equity security. The Commission may
adopt such rules and regulations as it deems necessary or appropriate
in the public interest to carry out the purposes of this section.''.
SEC. 209. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940 AND THE
INVESTMENT ADVISERS ACT OF 1940.
(a) Definitions Under the Investment Company Act of 1940 and the
Investment Advisers Act of 1940.--
(1) Section 2(a)(36) of the Investment Company Act of 1940
(15 U.S.C. 80a-2(a)(36)) is amended by inserting ``security
future,'' after ``treasury stock,''.
(2) Section 202(a)(18) of the Investment Advisers Act of
1940 (15 U.S.C. 80b-2(a)(18)) is amended by inserting
``security future,'' after ``treasury stock,''.
(3) Section 2(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)) is amended by adding at the end the following:
``(52) The terms `security future' and `narrow-based
security index' have the same meanings as provided in section
3(a)(55) of the Securities Exchange Act of 1934.''.
(4) Section 202(a) of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2(a)) is amended by adding at the end the
following:
``(27) The terms `security future' and `narrow-based
security index' have the same meanings as provided in section
3(a)(55) of the Securities Exchange Act of 1934.''.
(b) Other Provision.--Section 203(b) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b-3(b)) is amended--
(1) by striking ``or'' at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting ``; or''; and
(3) by adding at the end the following:
``(6) any investment adviser that is registered with the
Commodity Futures Trading Commission as a commodity trading
advisor whose business does not consist primarily of acting as
an investment adviser, as defined in section 202(a)(11) of this
title, and that does not act as an investment adviser to (A) an
investment company registered under title I of this Act, or (B)
a company which has elected to be a business development
company pursuant to section 54 of title I of this Act and has
not withdrawn its election.''.
SEC. 210. PREEMPTION OF STATE GAMING AND BUCKET SHOP LAWS.
The last sentence of section 28(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78bb(a)) is amended--
(1) by inserting ``subject to this title'' after
``privilege, or other security''; and
(2) by striking ``any such instrument, if such instrument
is traded pursuant to rules and regulations of a self-
regulatory organization that are filed with the Commission
pursuant to section 19(b) of this Act'' and inserting ``any
such security''.
Subtitle B--Conforming Amendments to the Commodity Exchange Act
SEC. 221. JURISDICTION OF SECURITIES AND EXCHANGE COMMISSION; OTHER
PROVISIONS.
(a) Jurisdiction of Securities and Exchange Commission.--Section
2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2, 2a, 4) is amended by
adding at the end the following:
``(D)(i) Notwithstanding any other provision of
this Act, the Securities and Exchange Commission shall
have jurisdiction and authority over security futures
as defined in section 3(a)(55) of the Securities
Exchange Act of 1934, section 2(a)(16) of the
Securities Act of 1933, section 2(a)(52) of the
Investment Company Act of 1940, and section 202(a)(27)
of the Investment Advisers Act of 1940, options on
security futures, and persons effecting transactions in
security futures and options thereon, and this Act
shall apply to and the Commission shall have
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 in, a security future
product as defined in section 1a(33) of this Act:
Provided, however, That, except as provided in clause
(v) of this subparagraph, no board of trade shall be
designated as a contract market with respect to any
such contracts of sale for future delivery unless the
board of trade making such application demonstrates and
the Commission expressly finds that the specific
contract with respect to which the application has been
made, or the board of trade, meets the following
criteria:
``(I) Except as otherwise provided in a
rule, regulation, or order issued pursuant to
clause (vi) of this subparagraph, any security
underlying the security future, including each
component security of a contract of sale for
future delivery on a narrow-based security
index, is registered pursuant to section 12 of
the Securities Exchange Act of 1934.
``(II) Except as otherwise provided in a
rule, regulation, or order issued pursuant to
clause (vi) of this subparagraph, the security
future product is cash settled.
``(III) The security future product is not
traded on an exempt board of trade or a
designated transaction execution facility.
``(IV) Except as otherwise provided in a
rule, regulation, or order issued pursuant to
clause (vi) of this subparagraph, the security
future is based upon common stock and such
other equity securities as the Commission and
the Securities and Exchange Commission jointly
determine appropriate.
``(V) The security future product is
cleared by a clearing agency that has in place
provisions for linked and coordinated clearing
with other clearing agencies that clear
security future products, which permits the
security future product to be purchased on a
designated contract market, national securities
exchange registered under section 6(a) of the
Securities Exchange Act of 1934, or national
securities association registered pursuant to
section 15A(a) of the Securities Exchange Act
of 1934 and offset on any other designated
contract market, national securities exchange
registered under section 6(a) of the Securities
Exchange Act of 1934, or national securities
association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934
on which the security future product is traded.
``(VI) Only futures commission merchants,
introducing brokers, commodity trading
advisers, commodity pool operators or
associated persons subject to suitability rules
comparable to those of a national securities
association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934
solicit, accept any order for, or otherwise
deal in any transaction in or in connection
with a security future product.
``(VII) The security future product is
subject to a prohibition against dual trading
in section 4j of this Act and the rules and
regulations thereunder or the provisions of
section 11(a) of the Securities Exchange Act of
1934 and the rules and regulations thereunder,
except to the extent otherwise permitted under
the Securities Exchange Act of 1934 and the
rules and regulations thereunder.
``(VIII) Trading in the security future
product is not readily susceptible to
manipulation of the price of such security
future product, nor to causing or being used in
the manipulation of the price of any underlying
security, option on such security, or option on
a group or index including such securities.
``(IX) The board of trade on which the
security future product is traded has
procedures in place for coordinated
surveillance among such board of trade, any
market on which any security underlying the
security future product is traded, and other
markets on which any related security is traded
to detect manipulation and insider trading,
except that, if the board of trade is an
alternative trading system, a national
securities association registered pursuant to
section 15A(a) of the Securities Exchange Act
of 1934 of which such alternative trading
system is a member has in place such
procedures.
``(X) The board of trade on which the
security future product is traded has in place
audit trails necessary or appropriate to
facilitate the coordinated surveillance
required in subclause (IX), except that, if the
board of trade is an alternative trading
system, a national securities association
registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934 of which such
alternative trading system is a member has
rules to require such audit trails.
``(XI) The board of trade on which the
security future product is traded has in place
procedures to coordinate trading halts between
such board of trade and any market on which any
security underlying the security future product
is traded and other markets on which any
related security is traded, except that, if the
board of trade is an alternative trading
system, a national securities association
registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934 of which such
alternative trading system is a member has
rules to require such coordinated trading
halts.
``(XII) The margin requirements for a
security future product are consistent with the
margin requirements for comparable option
contracts traded on an exchange registered
pursuant to section 6(a) of the Securities
Exchange Act of 1934 and initial and
maintenance margin levels for a security future
product are not lower than the levels of margin
required for comparable option contracts traded
on an exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934,
except that nothing in this subclause shall be
construed to prevent a board of trade from
requiring higher margin levels for a security
future product when it deems such action to be
necessary or appropriate.
``(ii) It shall be unlawful for any person to
offer, to enter into, to execute, to confirm the
execution of, or to conduct any office or business
anywhere in the United States, its territories or
possessions, for the purpose of soliciting, or
accepting any order for, or otherwise dealing in, any
transaction in, or in connection with, a security
future product unless--
``(I) such transaction is conducted on or
subject to the rules of a board of trade which
has been designated by the Commission as a
contract market in such security future
product;
``(II) such security future product is
executed or consummated by, through, or with a
member of such contract market; and
``(III) such security future product is
evidenced by a record in writing which shows
the date, the parties to such security future
product and their addresses, the property
covered and its price: Provided, That each
contract market member shall keep such record
for a period of 3 years from the date thereof,
or for a longer period if the Commission so
directs, which record shall at all times be
open to the inspection of any representative of
the Commission, the Securities and Exchange
Commission, or the Department of Justice.
``(iii)(I) Except as provided in subclause (II) but
notwithstanding any other provision of this Act, no
person shall offer to enter into, enter into, or
confirm the execution of any option on a security
future.
``(II) After 3 years after the date of enactment of
the Commodity Futures Modernization Act of 2000, the
Commission and the Securities and Exchange Commission
may by order jointly determine to permit trading of
options on any security future authorized to be traded
under the provisions of this Act and the Securities
Exchange Act of 1934. Before any such determination,
the Commission and the Securities and Exchange
Commission shall conduct a study of the effect of the
trading of security futures on the markets for futures
contracts, securities, and options and the adequacy of
protections for investors and other market
participants.
``(iv)(I) All records of a futures commission
merchant or introducing broker registered pursuant to
section 4f(a)(2), a floor broker or floor trader exempt
from registration pursuant to section 4f(a)(3), an
associated person exempt from registration pursuant to
section 4k(6), or a board of trade designated as a
contract market in a security future product pursuant
to section 5f shall be subject at any time, or from
time to time, to such reasonable periodic, special, or
other examinations by representatives of the Commission
as the Commission deems necessary or appropriate in the
public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this title:
Provided, That the Commission, prior to conducting any
such examination, gives notice to the Securities and
Exchange Commission of such proposed examination and
consults with the Securities and Exchange Commission
concerning the feasibility and desirability of
coordinating such examination with examinations
conducted by the Securities and Exchange Commission
with a view to avoiding unnecessary regulatory
duplication or undue regulatory burdens for such
registrant or board of trade.
``(II) The Commission shall notify the Securities
and Exchange Commission of any examination conducted of
any futures commission merchant or introducing broker
registered pursuant to section 4f(a)(2), floor broker
or floor trader exempt from registration pursuant to
section 4f(a)(3), associated person exempt from
registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security
future product pursuant to section 5f, and, upon
request, furnish to the Securities and Exchange
Commission any examination report and data supplied to
the Commission in connection with such examination.
``(III) The Commission shall, to the fullest extent
possible, use the reports of examinations of any
futures commission merchant or introducing broker
registered pursuant to section 4f(a)(2), floor broker
or floor trader exempt from registration pursuant to
section 4f(a)(3), associated person exempt from
registration pursuant to section 4k(6), or board of
trade designated as a contract market in a security
future product pursuant to section 5f, made by the
Securities and Exchange Commission, a national
securities association registered pursuant to section
15A(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78o-3), or a national securities exchange
registered pursuant to section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78f(g)).
``(IV) Nothing in this subsection shall be
construed to impair or limit (other than by the
requirement of prior consultation) the power of the
Commission under this subsection to examine any futures
commission merchant or introducing broker registered
pursuant to section 4f(a)(2), floor broker or floor
trader exempt from registration pursuant to section
4f(a)(3), associated person exempt from registration
pursuant to section 4k(6), or board of trade designated
as a contract market in a security future product
pursuant to section 5f, or to affect in any way the
power of the Commission under any other provision of
this Act.
``(v) A board of trade designated as a contract
market pursuant to section 5f shall be designated as a
contract market with respect to a security future
product by providing to the Commission a written
certification that the specific contract with respect
to which the application has been made, or the board of
trade, meets the criteria specified in subclauses (I)
through (XII) of clause (i).
``(vi) The Commission and the Securities and
Exchange Commission, by rule, regulation, or order, may
jointly modify the criteria specified in subclause (I),
(II), or (IV) of clause (i) of this subparagraph to the
extent such modification fosters the development of
fair and orderly markets in security future products,
is necessary or appropriate in the public interest, and
is consistent with the protection of investors.''.
(b) Margin on Security Futures.--Section 2(a)(1)(C)(vi) of the
Commodity Exchange Act (7 U.S.C. 2a(vi)) (as redesignated by section
122) is amended--
(1) by redesignating subclause (V) as subclause (VI); and
(2) by striking ``(vi)(I)'' and all that follows through
subclause (IV) and inserting the following:
``(vi)(I) Notwithstanding any other
provision of this Act, any contract
market in a stock index futures
contract (or option thereon), other
than a security future product, 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
such stock index futures contract (or
option thereon), other than security
future products.
``(II) The Board may at any time
request any contract market to set the
margin for any stock index futures
contract (or option thereon), other
than for any security future product,
at such levels as the Board in its
judgment determines are appropriate to
preserve the financial integrity of the
contract market or its clearing system
or to prevent systemic risk. If the
contract market fails to do so within
the time specified by the Board in its
request, the Board may direct the
contract market to alter or supplement
the rules of the contract market as
specified in the request.
``(III) Subject to such conditions
as the Board may determine, the Board
may delegate any or all of its
authority, relating to margin for any
stock index futures contract (or option
thereon), other than security future
products, under this clause to the
Commission.
``(IV) Margin regulations.--It
shall be unlawful for any futures
commission merchant to, directly or
indirectly, extend or maintain credit
to or for, or collect margin from any
customer on any security future product
unless such activities comply with the
rules and regulations which the
Securities and Exchange Commission,
after consultation with the Commission,
shall prescribe pursuant to section
7(c)(2)(B) of the Securities Exchange
Act of 1934.
``(V) Nothing in this clause shall
supersede or limit the authority
granted to the Commission in section
8a(9) to direct a contract market, on
finding an emergency to exist, to raise
temporary margin levels on any futures
contract, or option on the contract
covered by this clause, or on any
security future product.''.
(c) Exemption From Registration for Investment Advisers.--Section
4m of the Commodity Exchange Act (7 U.S.C. 6m) is amended by adding at
the end the following:
``(3) The provisions of subsection (1) of this section shall not
apply to any commodity trading advisor that is registered with the
Securities and Exchange Commission as an investment adviser whose
business does not consist primarily of acting as a commodity trading
advisor, as defined in section 1a of this Act, and that does not act as
a commodity trading advisor to any investment trust, syndicate, or
similar form of enterprise that is engaged primarily in trading in any
commodity for future delivery on or subject to the rules of any
contract market.''.
(d) Exemption From Investigations of Markets in Underlying
Securities.--Section 16 of the Commodity Exchange Act (7 U.S.C. 20) is
amended by adding at the end the following:
``(e) The provisions of this section shall not apply to
investigations involving any security underlying a security future
product.''.
SEC. 222. APPLICATION OF THE COMMODITY EXCHANGE ACT TO NATIONAL
SECURITIES EXCHANGES AND NATIONAL SECURITIES ASSOCIATIONS
THAT TRADE SECURITY FUTURES.
(a) Notice Designation of National Securities Exchanges and
National Securities Associations.--The Commodity Exchange Act is
amended by inserting after section 5e (7 U.S.C. 7b), as amended by
section 115, the following:
``SEC. 5F. DESIGNATION OF SECURITIES EXCHANGES AND ASSOCIATIONS AS
CONTRACT MARKETS.
``(a) Any board of trade that is registered with the Securities and
Exchange Commission as a national securities exchange, is a national
securities association registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934, or is an alternative trading system
shall be a designated contract market in security future products if--
``(1) such national securities exchange, national
securities association, or alternative trading system lists or
trades no other contracts of sale for future delivery, except
for security future products;
``(2) such national securities exchange, national
securities association, or alternative trading system files
written notice with the Commission in such form as the
Commission, by rule, may prescribe containing such information
as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of
customers; and
``(3) the registration of such national securities
exchange, association, or alternative trading system is not
suspended pursuant to an order by the Securities and Exchange
Commission.
Such designation shall be effective immediately upon filing of the
written notice with the Commission.
``(b)(1) A national securities exchange, national securities
association, or alternative trading system that is designated as a
contract market pursuant to section 5f of this Act shall be exempt from
the following provisions of this Act and the rules thereunder:
``(A) Subsections (c), (e), and (g) of section 4c.
``(B) Subsections (a) and (d) of section 4j.
``(C) Section 5.
``(D) Section 5c.
``(E) Section 6a.
``(F) Section 8(d).
``(G) Section 8e.
``(H) Section 9(f).
``(I) Section 16.
``(J) Section 22(b).
``(2)(A) Except as provided in subparagraph (B), but
notwithstanding any other provision of this Act, the Commission, by
rule, regulation, or order, may conditionally or unconditionally exempt
any designated contract market in security futures subject to the
designation requirement of this section from any provision of this Act
or of any rule or regulation thereunder, to the extent such exemption
is necessary or appropriate in the public interest and is consistent
with the protection of investors.
``(B) The Commission shall, by rule or regulation, determine the
procedures under which an exemptive order under this section is granted
and may, in its sole discretion, decline to entertain any application
for an order of exemption under this section.''.
(b) Notice Registration of Certain Securities Broker-Dealers;
Exemption From Registration for Certain Securities Broker-Dealers.--
Section 4f(a) of the Commodity Exchange Act (7 U.S.C. 6f(a)) is
amended--
(1) by inserting ``(1)'' after ``(a)''; and
(2) by adding at the end the following:
``(2) Notwithstanding paragraph (1), and except as provided in
paragraph (3), any broker or dealer that is registered with the
Securities and Exchange Commission shall be registered as a futures
commission merchant or introducing broker, as applicable, if--
``(A) such broker or dealer limits its solicitation of
orders, acceptance of orders, or execution of orders, or
placing of orders on behalf of others involving any contracts
of sale of any commodity for future delivery, on or subject to
the rules of any contract market to security future products;
``(B) such broker or dealer files written notice with the
Commission in such form as the Commission, by rule, may
prescribe containing such information as the Commission, by
rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors;
``(C) the registration of such broker or dealer is not
suspended pursuant to an order of the Securities and Exchange
Commission; and
``(D) such broker or dealer is a member of a national
securities association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934.
Such registration shall be effective immediately upon filing of the
written notice with the Commission.
``(3) A floor broker or floor trader shall be exempt from the
registration requirements of section 4e and paragraph (1) of this
subsection if--
``(A) such floor broker or floor trader is a broker or
dealer registered with the Securities and Exchange Commission;
``(B) such floor broker or floor trader limits its
solicitation of orders, acceptance of orders, or execution of
orders, or placing of orders on behalf of others involving any
contracts of sale of any commodity for future delivery, on or
subject to the rules of any contract market to security future
products; and
``(C) the registration of such floor broker or floor trader
is not suspended pursuant to an order of the Securities and
Exchange Commission.''.
(c) Exemption for Securities Broker-Dealers.--Section 4f(a) of the
Commodity Exchange Act (7 U.S.C. 6f(a)) is amended by inserting after
paragraph (3), as added by subsection (b), the following:
``(4)(A) A broker or dealer that is registered as a futures
commission merchant or introducing broker pursuant to paragraph (2), or
that is a floor broker or floor trader exempt from registration
pursuant to paragraph (3), shall be exempt from the following
provisions of this Act and the rules thereunder:
``(i) Subsections (b), (d), (e), and (g) of section 4c.
``(ii) Sections 4d, 4e, and 4h.
``(iii) Subsections (b) and (c) of this section.
``(iv) Subsections (b) and (c) of section 4j.
``(v) Section 4k(1).
``(vi) Section 4p.
``(vii) Section 6d.
``(viii) Subsections (d) and (g) of section 8.
``(ix) Section 16.
``(x) Section 22(a).
``(B)(i) Except as provided in clause (ii), but notwithstanding any
other provision of this Act, the Commission, by rule, regulation, or
order, may conditionally or unconditionally exempt any broker or dealer
subject to the registration requirement of paragraph (2) of this
subsection, or exempt from registration pursuant to paragraph (3) of
this subsection, from any provision of this Act or of any rule or
regulation thereunder, to the extent such exemption is necessary or
appropriate in the public interest and is consistent with the
protection of investors.
``(ii) The Commission shall, by rule or regulation, determine the
procedures under which an exemptive order under this section shall be
granted and may, in its sole discretion, decline to entertain any
application for an order of exemption under this section.
``(C)(i) A broker or dealer that is registered as a futures
commission merchant or introducing broker pursuant to paragraph (2) or
an associated person thereof, or that is a floor broker or floor trader
exempt from registration pursuant to paragraph (3), shall not be
required to become a member of any futures association registered under
section 17 of this Act.
``(ii) No futures association registered under section 17 of this
Act shall limit its members from carrying an account, accepting an
order, or transacting business with a broker or dealer that is
registered as a futures commission merchant or introducing broker
pursuant to paragraph (2) or an associated person thereof, or that is a
floor broker or floor trader exempt from registration pursuant to
paragraph (3).''.
(d) Exemptions for Associated Persons of Securities Broker-
Dealers.--Section 4k of the Commodity Exchange Act (7 U.S.C. 6k) is
amended by adding at the end the following:
``(6) Any associated person of a broker or dealer that is
registered with the Securities and Exchange Commission, and who limits
its solicitation of orders, acceptance of orders, or execution of
orders, or placing of orders on behalf of others involving any
contracts of sale of any commodity for future delivery, on or subject
to the rules of any contract market to security future products, shall
be exempt from the following provisions of this Act and the rules
thereunder:
``(A) Subsections (b), (d), (e), and (g) of section 4c.
``(B) Sections 4d, 4e, and 4h.
``(C) Subsections (b) and (c) of section 4f.
``(D) Subsections (b) and (c) of section 4j.
``(E) Paragraph (1) of this section.
``(F) Section 4p.
``(G) Section 6d.
``(H) Subsections (d) and (g) of section 8.
``(I) Section 16.
``(J) Section 22(a).''.
SEC. 223. NOTIFICATION OF INVESTIGATIONS AND ENFORCEMENT ACTIONS.
(a) Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is
amended by adding at the end the following:
``(3) The Commission shall provide the Securities and Exchange
Commission with notice of the commencement of any proceeding and a copy
of any order entered by the Commission against any futures commission
merchant or introducing broker registered pursuant to section 4f(a)(2),
any floor broker or floor trader exempt from registration pursuant to
section 4f(a)(3), any associated person exempt from registration
pursuant to section 4k(6), or any board of trade designated as a
contract market pursuant to section 5f.''.
(b) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9, 9a, 9b,
13b, 15) is amended by adding at the end the following:
``(g) The Commission shall provide the Securities and Exchange
Commission with notice of the commencement of any proceeding and a copy
of any order entered by the Commission pursuant to subsections (c) and
(d) of this section against any futures commission merchant or
introducing broker registered pursuant to section 4f(a)(2), any floor
broker or floor trader exempt from registration pursuant to section
4f(a)(3), any associated person exempt from registration pursuant to
section 4k(6), or any board of trade designated as a contract market
pursuant to section 5f.''.
(c) Section 6c of the Commodity Exchange Act (7 U.S.C. 13a-1) is
amended by adding at the end the following:
``(h) The Commission shall provide the Securities and Exchange
Commission with notice of the commencement of any proceeding and a copy
of any order entered by the Commission against any futures commission
merchant or introducing broker registered pursuant to section 4f(a)(2),
any floor broker or floor trader exempt from registration pursuant to
section 4f(a)(3), any associated person exempt from registration
pursuant to section 4k(6), or any board of trade designated as a
contract market pursuant to section 5f.''.
Subtitle C--Effective Date
SEC. 231. EFFECTIVE DATE.
This title and the amendments made by this title take effect on the
date of enactment of this Act.
Union Calendar No. 477
106th CONGRESS
2d Session
H. R. 4541
[Report No. 106-711, Parts I, II, and III]
_______________________________________________________________________
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.
_______________________________________________________________________
September 6, 2000
Reported from the Committee on Banking and Financial Services with
amendments
September 6, 2000
Reported from the Committee on Commerce with an amendment, committed to
the Committee of the Whole House on the State of the Union, and ordered
to be printed