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112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-391

======================================================================



 
       PROTECTING MAIN STREET END-USERS FROM EXCESSIVE REGULATION

                                _______
                                

February 8, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Lucas, from the Committee on Agriculture, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 3527]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Agriculture, to whom was referred the bill 
(H.R. 3527) to amend the Commodity Exchange Act to clarify the 
definition of swap dealer, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Protecting Main Street End-Users From 
Excessive Regulation''.

SEC. 2. CLARIFICATION OF THE DEFINITION OF SWAP DEALER.

  Section 1a(49) of the Commodity Exchange Act (7 U.S.C. 1a(49)) is 
amended to read as follows:
          ``(49) Swap dealer.--
                  ``(A) In general.--The term `swap dealer' means any 
                person who--
                          ``(i) holds itself out as a dealer in swaps;
                          ``(ii) makes a market in swaps;
                          ``(iii) regularly enters into swaps with 
                        counterparties as an ordinary course of 
                        business for its own account; or
                          ``(iv) engages in any activity causing the 
                        person to be commonly known as a dealer or 
                        market maker in swaps,
                provided however, in no event shall an insured 
                depository institution be considered to be a swap 
                dealer to the extent it offers to enter into a swap 
                with a customer in connection with originating a loan 
                to the customer.
                  ``(B) Inclusion.--A person may be designated as a 
                swap dealer for a single type or single class or 
                category of swap or activities and considered not to be 
                a swap dealer for other types, classes, or categories 
                of swaps or activities.
                  ``(C) Exceptions.--
                          ``(i) The term `swap dealer' does not include 
                        a person that enters into swaps for such 
                        person's own account, either individually or in 
                        a fiduciary capacity, but not as part of 
                        regular business activities as described in 
                        subparagraph (A).
                          ``(ii) In determining whether a person is a 
                        `swap dealer' within the meaning of 
                        subparagraph (A), any transaction entered into 
                        for a person's own account for the purpose of 
                        hedging or mitigating commercial risk shall not 
                        be considered as part of that determination.
                          ``(iii) The Commission shall by rule adopt 
                        standards distinguishing the activities 
                        described in subparagraph (A) and entering into 
                        swaps for a person's own account for the 
                        purpose of achieving one's own trading 
                        objectives as determined by the Commission.
                  ``(D) De minimis exception.--The Commission shall 
                exempt from designation as a swap dealer an entity that 
                enters into swap dealing transactions with or on behalf 
                of the person's customers if the aggregate gross 
                notional amount of the outstanding swap dealing 
                transactions entered into over the course of the 
                preceding calendar year does not exceed $3,000,000,000 
                (or such greater amount as the Commission may establish 
                as market conditions warrant), multiplied by the sum of 
                1 and the percentage (if any) by which the Consumer 
                Price Index for all Urban Customers published by the 
                Bureau of Labor Statistics of the Department of Labor 
                changed for the 12-month period ending the preceding 
                April 30.''.

SEC. 3. IMPLEMENTATION.

  The amendments made by this Act shall be implemented--
          (1) without regard to--
                  (A) chapter 35 of title 44, United States Code; and
                  (B) the notice and comment provisions of section 553 
                of title 5, United States Code; and
          (2) through the promulgation of an interim final rule.

                           Brief Explanation

    H.R. 3527 amends Section 1a(49)(C) of the Commodity 
Exchange Act (CEA) to include 2 new exceptions to the 
definition of ``swap dealer'': an exception for transactions 
entered into to hedge or mitigate an entity's commercial risk, 
and a directive for the Commodity Futures Trading Commission 
(CFTC) to establish, by rule, a standard for distinguishing 
between swap dealing activities and trading for one's own 
account for one's own trading objectives.
    In addition, H.R. 3527 requires the CFTC to exempt from 
designation as a ``swap dealer'' entities that, over the 
preceding calendar year, entered into less than $3 billion in 
aggregate gross notional swap dealing transactions with or on 
behalf of customers.

                            Purpose and Need

    A central element of Title VII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (P.L. 111-203) (the 
Dodd-Frank Act) is the registration and regulation of ``swap 
dealers.'' Registration as a swap dealer brings the most 
comprehensive new regulatory regime in Title VII: swap dealers 
are subject to clearing and execution requirements when they 
trade with counterparties other than non-financial end-users, 
reporting and recordkeeping requirements, new capital and 
margin requirements, the Section 716 ``push-out'' rule, and 
significant new business conduct standards to govern their 
sales practices and interaction with counterparties.
    Most of the derivatives activity in the U.S. is 
concentrated among several large, complex and global financial 
institutions. In fact, five banks alone collectively hold 86% 
of the credit exposure and 96% of the total notional value of 
all derivatives within the U.S. banking system. As such, 
Congress targeted the swap dealer definition to those entities 
that hold themselves out as dealers, make markets or are 
commonly known in the market as ``dealers.'' In fact, the 
Chairman of the CFTC, Gary Gensler, described the intent of 
dealer regulation:

          ``I also think we need regulation of the 
        institutions, that Congress would actually have a 
        statutory regime for derivative dealers, somewhat like 
        we have for banks, where you have capital rules which 
        address the excess leverage, have business conduct 
        rules to make sure there is not fraud and manipulation 
        in the sales practices. And then, of course, lastly and 
        very importantly, reporting rules. These dealers--there 
        is about 15 or 20 around the globe that make up 99 
        percent of the market for over-the-counter 
        derivatives.''

    The statutory definition of ``swap dealer'' requires the 
CFTC to further define the term, which they did jointly with 
the SEC in the proposal ``Further Definition of ``Swap 
Dealer'', ``Security-based Swap Dealer'', ``Major Swap 
Participant,'' ``Major Security-based Swap Participant,'' and 
``Eligible Contract Participant'' (http://www.cftc.gov/ucm/
[email protected]/documents/file/2010-
31130a.pdf). It is important to note that the statutory 
definition of ``swap dealer'' was derived from the securities 
laws and the definition of a ``dealer'' in securities. 
Distinguishing dealers from other market participants for the 
purpose of securities regulation based upon that definition has 
occurred for decades in the application and interpretation of 
the Securities Exchange Act of 1934.
    Many end-users, particularly from the energy and 
agriculture sectors, testified in the Committee's hearings that 
the CFTC's proposed definition of ``swap dealer'' is overly 
broad and vague, and that it could result in them having to 
register as swap dealers and subsequently be subject to the 
most significant and costly regulations in Title VII--
regulations that were generally designed for large financial 
institutions. For example, the proposed criteria used to 
identify swap dealing activity could describe the activities of 
many market participants that are not engaged in dealing 
activity, such as ``dealers are generally available to enter 
into swaps to facilitate other parties' interest in entering 
into those instruments,'' and ``dealers tend to accommodate 
demand for swaps.'' At the same time, registration as a swap 
dealer is a self-selecting process; in other words, entities 
will need to identify themselves as dealers based upon the 
regulation and not upon an indication from the CFTC. This 
increases the need for a clear, unambiguous rule to ensure 
entities do not go unregistered.
    Compounded by the breadth of the definition, the CFTC 
proposed a ``de minimis'' exception that is too low (less than 
$100 million notional amount annually, less than 20 swaps per 
year, and less than 15 counterparties) to achieve Congress' 
intent in providing for the exception. Congress expressly 
granted the CFTC the authority to establish an exception for 
entities that engage in only a small amount of swap dealing. 
However, the proposed threshold would result in few, if any, 
entities that would be eligible.
    H.R. 3527 clarifies the definition of swap dealer to avoid 
entities that are not swap dealers from having to register as 
such. First, it clarifies that the Commission should not 
consider swaps entered into for the purpose of hedging 
commercial risk as ``dealing.'' Second, the bill directs the 
CFTC to develop rules establishing standards by which to 
distinguish entities that are acting as dealers, and those that 
are trading for their own account to achieve their own trading 
objectives. The SEC, in applying and interpreting the 
securities ``dealer'' definition has long upheld a ``Dealer/
Trader'' distinction to permit entities that are trading for 
their own investment objectives from having to register as 
dealers. The SEC also proposes to uphold this distinction in 
the definition of ``Security-based Swap Dealer,'' but the CFTC 
does not. The second provision in H.R. 3527 directs the CFTC to 
adopt a similar standard to be applied within the ``swap 
dealer'' definition.
    These important clarifications to the swap dealer 
definition are critical to ensuring that end-users, the very 
entities Congress intended to exempt from many of the new 
regulations in Title VII, are not subject to the most 
burdensome and costly new regulatory regime in Title VII. For 
example, a recent study by the National Economic Research 
Associates estimates that for non-financial commercial energy 
firms, designation as a swap dealer would impose incremental 
costs of $388 million.
    Lastly, the bill increases the ``de minimis'' threshold to 
$3 billion average aggregate gross notional to ensure entities 
that are engaged in only a small amount of swap dealing will 
not be regulated as such. As a reference, this is less than 5/
10,000 of 1% of the notional value of the entire U.S. swaps 
market.
    On February 10, 2011, Edward Gallagher of Dairy Farmers of 
America, testified to the breadth of the definition and the 
impact it would have on farmer cooperatives, summarizing well 
the need to clarify the definition:

          ``We believe that by applying the ``interpretive 
        approach for identifying whether a person is a swap 
        dealer,'' as outlined in the proposed rule, CFTC would 
        likely capture a number of entities that were never 
        intended to be regulated as swap dealers, including 
        farmer cooperatives. This is because cooperatives 
        engage in activities that look very similar to those of 
        a dealer when they enter into swaps with farmers, local 
        elevators, and customers as they provide risk 
        mitigation services and products throughout the 
        agriculture and energy sector. If farmer cooperatives 
        were to be regulated as dealers, increased requirements 
        for posting capital and margin, complying with 
        reporting, record keeping and other regulatory 
        requirements intended for large systemically important 
        institutions could make providing those services 
        uneconomical to our members. Such action would result 
        in the unintended consequence of increasing the very 
        risk the law intends to mitigation.''

                           Section-by-Section

    Section 1 is the short title, ``Protecting Main Street End-
Users from Excessive Regulation''.
    Section 2 amends the Commodity Exchange Act to modify the 
definition of swap dealer in the Dodd-Frank Act to prohibit the 
CFTC from considering an entity's transactions entered into for 
the purpose of hedging or mitigating commercial risk. It also 
directs the commission by rule to adopt standards 
distinguishing swap dealing activities from trading of swaps.
    The amendment in section 2 (amendment to 1a(49)(D)) 
requires the CFTC to exempt from the designation of a swap 
dealer anyone who enters into swap dealing transactions with or 
on behalf of customers if the total amount of outstanding swap 
dealing transactions is less than $3 billion, indexed to 
inflation, over the last calendar year.
    Section 3 excludes the amendments made by this bill from 
the requirements of the Paperwork Reduction Act and from notice 
and comment requirements of the Administrative Procedure Act.

                        Committee Consideration


                              I. HEARINGS

    In the 112th Congress, the Committee has held seven 
hearings, four Full Committee and two General Farm Commodities 
and Risk Management Subcommittee hearings to examine the 
implementation of Title VII of the Dodd-Frank Act and one Full 
Committee hearing to examine legislative proposals related 
thereto, including a discussion draft of H.R. 3527. The 
Committee took testimony from witnesses that represented a 
broad spectrum of participants in the derivatives markets.
    In the following hearings, witnesses testified to the 
CFTC's overly broad definition of ``swap dealer'' and the 
importance of ensuring that end-users are not unnecessarily 
miscategorized as swap dealers:

Public hearing to review implementation of title VII of the Dodd-Frank 
        Wall Street Reform and Consumer Protection Act: February 10, 
        2011

Defining the Market: Entity and Product Classifications Under Title VII 
        of the Dodd-Frank Wall Street Reform and Consumer Protection 
        Act: March 31, 2011

Derivatives Reform: The View from Main Street: July 21, 2011

To review legislative proposals amending Title VII of the Dodd-Frank 
        Wall Street Reform and Consumer Protection Act: October 12, 
        2011

    For example, on July 21, 2011 the Honorable Glenn English, 
CEO of the National Rural Electric Cooperative Association 
testified:

          ``The regulators have suggested they might interpret 
        this definition broadly enough to sweep in our not-for-
        profit members. If so, such an interpretation has the 
        potential to be one of the more damaging unintended 
        consequences of the Dodd-Frank Act. If our members were 
        considered ``swap dealers,'' those cooperatives would 
        be subject to a slew of new capital-draining 
        requirements, business practices, and financial markets 
        regulations that Congress intended to impose on Wall 
        Street derivatives dealers. To put it bluntly--it would 
        be an incredible regulatory overreach for the CFTC to 
        apply the definition of ``swap dealer'' to rural 
        electric cooperatives--who are obviously not in the 
        business of derivatives dealing, but instead are not-
        for-profit end-users of nonfinancial energy derivatives 
        to hedge commercial risk and protect consumers from 
        price volatility in wholesale power markets. The rural 
        electric cooperatives' core mission is keeping the 
        lights on for farmers, families and small businesses in 
        rural America, not dealing in the global swaps markets. 
        There are no ``Wall Street derivatives dealers'' in our 
        membership.''

    Also on July 21, 2011, Mr. Randy Howard testified on behalf 
of the City of Los Angeles, Department of Water and Power and 
the Large Public Power Council stating:

          ``In particular, we are concerned that individual 
        LPPC members could be considered a ``swap dealer'' due 
        to certain transactions we use to hedge our costs. 
        LADWP and the members of LPPC do not belong within this 
        definition, as we hedge strictly to minimize commercial 
        risk and do not contribute to systemic risk of the 
        market. If our utility systems were regulated as swap 
        dealers, our ratepayers--the residents and businesses 
        which we are obligated to serve--would be swept into 
        the same regulatory regime meant to target financial 
        speculation.''

    On October 12, Mr. Scott Cordes, President of Country 
Hedging testified on behalf of the National Council of Farmer 
Cooperatives:

          ``The uncertainty created by the ``definitions'' 
        rules is NCFC's greatest concern as implementation 
        continues. As the rule was proposed, some activities of 
        cooperatives such as those previously mentioned would 
        appear to push cooperatives into the ``swap dealer'' 
        category. Regulating farmer cooperatives as dealers 
        would increase requirements for posting capital and 
        margin on swaps it uses with other dealers to offset 
        the risk of providing risk management products and 
        services to its members and customers. This 
        requirement, combined with the cost of complying with 
        other regulatory requirements intended for large 
        financial institutions, could make providing those 
        services to a cooperative's member-owners uneconomical. 
        Such action would result in the unintended consequence 
        of increasing risk in the agricultural sector.''

                           II. FULL COMMITTEE

    The Committee on Agriculture met, pursuant to notice, with 
a quorum present, on January 25, 2012, to consider H.R. 3527, 
to amend the Commodity Exchange Act to clarify the definition 
of swap dealer, and other pending business. Chairman Lucas 
offered an opening statement, as did Ranking Member Peterson 
and Hultgren.
    The bill, H.R. 3527 was placed before the Committee for 
consideration and without objection a first reading of the bill 
was waived and it was opened for amendment at any point. The 
Chairman offered an Amendment in the Nature of a Substitute to 
the bill, and counsel provided a brief explanation of the 
amendment.
    Mr. Costa was recognized to offer and explain an amendment 
that would clarify that actions undertaken to comply with state 
or local laws or regulations are specifically excluded in 
determining whether an entity is a swap dealer. Discussion 
occurred and without objection the amendment was withdrawn.
    Mr. Walz as then recognized to offer and explain an 
amendment that clarifies that clarifies that none of the 
exceptions in section (c) of the ``Protecting Main Street End-
Users from Excessive Regulation Act'' should apply to financial 
institutions. Discussion occurred and without objection the 
amendment was withdrawn.
    Mr. Peterson was recognized to offer and explain an 
amendment to expedite implementation by excluding the 
amendments made by the bill from the requirements of the 
Paperwork Reduction Act and from notice and comment 
requirements of the Administrative Procedure Act. By a voice 
vote the Peterson amendment was adopted.
    There being no further amendments, the Peterson motion to 
approve the Amendment in the Nature of a Substitute to H.R. 
3527, as amended was adopted by a voice vote.
    By a voice vote, the Peterson motion to report the bill 
favorably to the House with the recommendation that it do pass 
was adopted.
    The Committee then moved onto other pending business, where 
at the conclusion of the meeting, Chairman Lucas advised 
Members that pursuant to the rules of the House of 
Representatives that Members have 2 calendar days to file such 
views with the Committee.
    Without objection, staff was given permission to make any 
necessary clerical, technical or conforming changes to reflect 
the intent of the Committee.
    Chairman Lucas thanked all the Members and adjourned the 
meeting.

                  Reporting the Bill--Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, H.R. 3527 was reported by voice vote with a 
majority quorum present. There was no request for a recorded 
vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on Agriculture's 
oversight findings and recommendations are reflected in the 
body of this report.

           Budget Act Compliance (Sections 308, 402, and 423)

    The provisions of clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, new credit authority, 
or increased or decreased revenues or tax expenditures) are not 
considered applicable. The estimate and comparison required to 
be prepared by the Director of the Congressional Budget Office 
under clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives and sections 402 and 423 of the Congressional 
Budget Act of 1974 submitted to the Committee prior to the 
filing of this report are as follows:

                                                  February 6, 2012.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3527, Protecting 
Main Street End-Users from Excessive Regulation.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 3527--Protecting Main Street End-Users from Excessive Regulation

    H.R. 3527 would prevent the Commodity Futures Trading 
Commission (CFTC) from considering certain transactions 
undertaken by an entity when determining whether the entity 
should be considered a swap dealer. Current law defines a swap 
dealer as a person who, among other things, buys and sells 
swaps in the regular course of business to earn a profit on the 
transactions. (A swap is a contract that calls for an exchange 
of cash between two participants based on an underlying rate or 
index, or on the performance of an asset.) Under H.R. 3527, the 
CFTC would be directed to exclude swap transactions undertaken 
to mitigate business-related risk (for instance, an airline 
entering into a swap transaction to hedge the risk of rising 
fuel prices) when determining whether a person or entity would 
meet the definition of a swap dealer.
    The CFTC is developing regulations relating to swap dealers 
as the result of the enactment of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Public Law 111-203), 
however, the agency has not finalized such regulations. Based 
on information from the agency, CBO expects that incorporating 
the provisions of H.R. 3527 at this point in the regulatory 
process would not require a significant increase in the 
agency's workload. Therefore, CBO estimates that any change in 
discretionary spending to implement the legislation, which 
would be subject to the availability of appropriated funds, 
would not be significant. Enacting H.R. 3527 would not affect 
direct spending or revenues; therefore, pay-as-you-go 
procedures do not apply.
    H.R. 3527 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
amend the Commodity Exchange Act to clarify the definition of 
swap dealer.

                   Constitutional Authority Statement

    The Committee finds the Constitutional authority for this 
legislation in Article I, section 8, clause 18, that grants 
Congress the power to make all laws necessary and proper for 
carrying out the powers vested in Congress by the Constitution 
of the United States or in any department or officer thereof.

                        Committee Cost Estimate

    Pursuant to clause 3(d)(2) of rule XIII of the Rules of the 
House of Representatives, the Committee report incorporates the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to sections 402 and 423 of the 
Congressional Budget Act of 1974.

                      Advisory Committee Statement

    No advisory committee within the meaning of section 5(b) of 
the Federal Advisory Committee Act was created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

                       Federal Mandates Statement

    The Committee adopted as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

Earmark Statement Required by Clause 9 of Rule XXI of the Rules of the 
                        House of Representatives

    H.R. 3527 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(e), 9(f), or 9(g) of rule XXI of the Rules of the 
House Representatives.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                         COMMODITY EXCHANGE ACT




           *       *       *       *       *       *       *
SEC. 1A. DEFINITIONS.

  As used in this Act:
          (1) * * *

           *       *       *       *       *       *       *

          [(49) Swap dealer.--
                  [(A) In general.--The term ``swap dealer'' 
                means any person who--
                          [(i) holds itself out as a dealer in 
                        swaps;
                          [(ii) makes a market in swaps;
                          [(iii) regularly enters into swaps 
                        with counterparties as an ordinary 
                        course of business for its own account; 
                        or
                          [(iv) engages in any activity causing 
                        the person to be commonly known in the 
                        trade as a dealer or market maker in 
                        swaps,
                provided however, in no event shall an insured 
                depository institution be considered to be a 
                swap dealer to the extent it offers to enter 
                into a swap with a customer in connection with 
                originating a loan with that customer.
                  [(B) Inclusion.--A person may be designated 
                as a swap dealer for a single type or single 
                class or category of swap or activities and 
                considered not to be a swap dealer for other 
                types, classes, or categories of swaps or 
                activities.
                  [(C) Exception.--The term ``swap dealer'' 
                does not include a person that enters into 
                swaps for such person's own account, either 
                individually or in a fiduciary capacity, but 
                not as a part of a regular business.
                  [(D) De minimis exception.--The Commission 
                shall exempt from designation as a swap dealer 
                an entity that engages in a de minimis quantity 
                of swap dealing in connection with transactions 
                with or on behalf of its customers. The 
                Commission shall promulgate regulations to 
                establish factors with respect to the making of 
                this determination to exempt.]
          (49) Swap dealer.--
                  (A) In general.--The term ``swap dealer'' 
                means any person who--
                          (i) holds itself out as a dealer in 
                        swaps;
                          (ii) makes a market in swaps;
                          (iii) regularly enters into swaps 
                        with counterparties as an ordinary 
                        course of business for its own account; 
                        or
                          (iv) engages in any activity causing 
                        the person to be commonly known as a 
                        dealer or market maker in swaps,
                provided however, in no event shall an insured 
                depository institution be considered to be a 
                swap dealer to the extent it offers to enter 
                into a swap with a customer in connection with 
                originating a loan to the customer.
                  (B) Inclusion.--A person may be designated as 
                a swap dealer for a single type or single class 
                or category of swap or activities and 
                considered not to be a swap dealer for other 
                types, classes, or categories of swaps or 
                activities.
                  (C) Exceptions.--
                          (i) The term ``swap dealer'' does not 
                        include a person that enters into swaps 
                        for such person's own account, either 
                        individually or in a fiduciary 
                        capacity, but not as part of regular 
                        business activities as described in 
                        subparagraph (A).
                          (ii) In determining whether a person 
                        is a ``swap dealer'' within the meaning 
                        of subparagraph (A), any transaction 
                        entered into for a person's own account 
                        for the purpose of hedging or 
                        mitigating commercial risk shall not be 
                        considered as part of that 
                        determination.
                          (iii) The Commission shall by rule 
                        adopt standards distinguishing the 
                        activities described in subparagraph 
                        (A) and entering into swaps for a 
                        person's own account for the purpose of 
                        achieving one's own trading objectives 
                        as determined by the Commission.
                  (D) De minimis exception.--The Commission 
                shall exempt from designation as a swap dealer 
                an entity that enters into swap dealing 
                transactions with or on behalf of the person's 
                customers if the aggregate gross notional 
                amount of the outstanding swap dealing 
                transactions entered into over the course of 
                the preceding calendar year does not exceed 
                $3,000,000,000 (or such greater amount as the 
                Commission may establish as market conditions 
                warrant), multiplied by the sum of 1 and the 
                percentage (if any) by which the Consumer Price 
                Index for all Urban Customers published by the 
                Bureau of Labor Statistics of the Department of 
                Labor changed for the 12-month period ending 
                the preceding April 30.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

    For the past year, our Committee has held several hearings 
and listened to a host of stakeholders who are concerned about 
how the Dodd-Frank Act is being implemented with regard to 
improving oversight and accountability in derivative markets. 
Looking at the Dodd-Frank rules that have already been 
finalized by the CFTC, it is safe to say that, so far, the CFTC 
has done a pretty good job.
    Of all the bills considered during the mark-up on January 
25, 2012, H.R. 3527 is the one that would benefit the most from 
a delay. The CFTC is very close to finalizing the rule defining 
a swap dealer. Given their past record, it is probable that the 
CFTC will satisfactorily address the concerns represented by 
this legislation when the Commission approves this definition.
    The final rule defining swap dealer is particularly 
important considering the scope of regulation that would apply 
to such an entity. By acting too precipitously on H.R. 3527, 
Congress may unintentionally do more harm than good. While the 
final definition could raise concerns and issues for some 
market participants, it may provide a good outcome for others, 
resolving concerns to their satisfaction.
    If the CFTC does get something wrong in the final rule, we 
should work to correct it. But we should tailor our efforts 
narrowly just toward that correction. We must not jeopardize 
the certainty and security of those market participants who 
finally know they will not be considered swap dealers under the 
final rule. In a similar vein, what happens if new and unique 
issues arise out of the final rule? Moving H.R. 3527 to the 
House floor too quickly may limit the ability of the House to 
address such new issues without resorting to brand new 
legislation.
    The bill as amended and approved by the Committee is a 
reasonable compromise; neither the Majority nor Minority got 
exactly what they originally wanted. It is a good faith effort 
and allows us to move forward in a bipartisan manner.
    Still, there are lingering concerns regarding the 
legislation's use of the phrase, ``for the purpose of achieving 
one's own trading objectives.'' Companies and firms have made 
clear their concerns about the CFTC's proposed rule and how it 
distinguishes dealing from trading. As we crafted the Dodd-
Frank derivative title, we strove to distinguish the dealing 
activities of the larger banks with the trading practices of 
other market participants who may be trying to speculate or 
take a view of the market in a manner that does not create 
legal loopholes where ``dealing activity'' can squeeze into 
``trading objective'' activity. Misinterpretation of this 
language could lead to the creation of such loopholes.
    In a colloquy, the Chairman and Ranking Member agreed to 
work together to improve the bill and ensure that end users are 
not unnecessarily burdened by regulations without creating 
loopholes. That effort should and will continue.
    Finally, the Committee approved the Peterson amendment, 
which includes language that should look very familiar to Farm 
Bill veterans. It is the exact same provisions that we 
incorporate in each Farm Bill for implementation of the Title I 
commodity programs. In that context, it exempts USDA from 
provisions of the Paperwork Reduction Act and notice and 
comment provisions of the Administrative Procedures Act.
    With this change, comments can still be sent to the CFTC. 
Anyone would still be able to meet with CFTC officials to share 
their thoughts on how these bills should be implemented. Farm 
groups certainly did not have any trouble sharing their views 
on Farm Bill implementation. Given the openness the CFTC has 
already demonstrated, this provision will not hurt anyone's 
ability to provide input to the CFTC.
                                   Collin C. Peterson.
                                   Joe Courtney.
                                   James P. McGovern.
                                   Chellie Pingree.
                                   Timothy J. Walz.