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115th Congress    }                                   {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                   {      115-1119

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



 
             RESTORING FINANCIAL MARKET FREEDOM ACT OF 2017

                                _______
                                

January 2, 2019.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

       Mr. Hensarling, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4247]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4247) to repeal title VIII of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose and Summary

    On November 11, 2017, Rep. Ted Budd introduced the 
``Restoring Financial Market Freedom Act of 2017'', which 
repeals Title VIII of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (``Dodd-Frank'')(P.L. 111-203), which 
provides the Financial Stability Oversight Council (FSOC) the 
authority to designate certain payments and clearing 
organizations as systemically important ``financial market 
utilities'' (FMUs). The bill also retroactively repeals all 
previous FMU designations.

                  Background and Need for Legislation

    The goal of H.R. 4247 is to promote financial stability and 
restore private sector due diligence and accountability on 
Financial Market Utilities (FMUs) so that they are incentivized 
to engage in prudent risk management, clearing and settlement 
activities.
    Title VII of the Dodd-Frank Act requires that certain 
standardized over-the-counter derivatives contracts be cleared 
through central counterparties (CCPs) in order to mitigate any 
perceived systemic risk of what are known as over-the-counter 
derivatives. Although the proponents of this requirement 
believed that central clearing would promote financial 
stability by netting trades and centralizing the monitoring of 
risk, critics pointed out that CCPs instead concentrated 
systemic risk.
    This troublesome concentration of risk is compounded by the 
decision of the Dodd-Frank Act's drafters to anoint CCPs as the 
next generation of ``too big to fail'' firms. Title VIII of the 
Dodd-Frank Act authorizes the FSOC to designate CCPs and 
payment systems as ``systemically important financial market 
utilities,'' or SIFMUs, which the Dodd-Frank Act defines as 
``any person that manages or operates a multilateral system for 
the purpose of transferring, clearing, or settling payments, 
securities, or other financial transactions among financial 
institutions or between financial institutions and the 
person.'' A clearinghouse or a payment system designated by the 
FSOC as a SIFMU faces ``heightened prudential supervision'' by 
the Federal Reserve, which may prescribe risk-management 
standards for such entities and participate in examinations 
conducted by their primary federal regulator, typically the 
Securities and Exchange Commission (SEC) and/or the Commodity 
Futures Trading Commission (CFTC). Further, a designated FMU 
gains immediate access to the Federal Reserve's discount 
window.
    While experts disagree on whether increased reliance upon 
CCPs amplifies rather than mitigates systemic risk, there is 
broad agreement that designating these organizations as 
``systemically important'' and granting them immediate access 
to the Federal Reserve's discount window increases financial 
instability by creating the perception that they are ``too big 
to fail.'' As New York Times columnist Gretchen Morgenson put 
it, ``these large and systemically important financial 
utilities that together trade and clear trillions of dollars in 
transactions appear to have won the daily double--access to 
federal money, without the accountability.''
    In 2013 testimony before the Financial Services Committee, 
former FDIC Chairman Sheila Bair warned that granting FMUs 
access to the discount window ``not only gives these firms a 
real advantage over other `non' systemic competitors, it opens 
up taxpayers to potential losses and creates moral hazard.'' 
According to former Chairman Bair, rather than making the 
financial system safer, Title VIII in fact makes it less stable 
because it ``increases the likelihood of clearinghouses 
engaging in risky activity, adding an element of potential 
instability to an area where it had not previously existed.'' 
Based upon her view that ``FMUs will very likely become the new 
[Government Sponsored Enterprises],'' former Chairman Bair has 
recommended the repeal of this ``unwarranted expansion of the 
government safety net''.
    The legislative history of the Dodd-Frank Act shows that at 
least some of its proponents recognized the danger of expanding 
the federal safety net to include FMUs. Even former Chairman 
Barney Frank saw the hazards of creating a new category of 
``too big to fail'' institutions. During the Financial Services 
Committee's markup of financial reform legislation in 2009, 
Republicans offered an amendment to strike the FMU provision 
from the bill. Rather than defend the provision, Chairman Frank 
supported the Republican amendment to strike it, describing the 
attempt to expand the Fed's regulatory fiefdom as ``an example 
of overreach on the part of some for the Federal Reserve.'' But 
the FMU provision reemerged in the Senate's version of the 
financial reform bill, ultimately making it into the Dodd-Frank 
conference report that was signed into law by President Obama.
    To address the misguided effort codified in the Dodd-Frank 
Act, H.R. 4247 is premised upon a belief that firms that 
operate without the benefit of a federal safety net and reap 
the profits and suffer the losses from the risks they undertake 
should not be subject to the same form of intrusive prudential 
regulation as federally insured depository institutions whose 
risks are ultimately backstopped by the taxpayer; no such 
justification exists for firms that are not covered by that 
safety net.
    As an initial matter, proponents of imposing a bank-centric 
prudential regulatory model on U.S. capital markets should be 
required to explain how such a regime would make the financial 
system any safer, given the manifest failures of U.S. 
regulators in the run-up to the financial crisis. The 
regulators--in many cases embedded in the banks that got into 
the most severe trouble--were unable to see the crisis coming. 
This included the Federal Reserve, with its stable of 300 PhD 
economists and vast army of bank examiners.
    As noted by former SEC Commissioner Gallagher, the 
policymakers that pushed to regulate the capital markets like 
they are banks ``adhere to a false narrative of the financial 
crisis that says capital markets regulators like the SEC 
failed, and the markets and market participants overseen by 
capital markets regulators were a major cause of the financial 
crisis. Forgotten, of course, are the myriad failed banks, the 
taxpayer dollar.''
    The Dodd-Frank Act's solution to the regulatory failures 
exposed by the crisis was to double down by, among other 
measures, giving the FSOC broad license to centralize more 
power in the government's hands through SIFI designations. 
Subjecting non-bank financial companies to supervision by the 
Federal Reserve imposes a duplicative, costly, and ultimately 
ineffective layer of regulation on these institutions, given 
that the Federal Reserve does not have the expertise necessary 
to supervise non-banks. In fact, in light of the Federal 
Reserve's track record in the run-up to the financial crisis, 
it is not clear that the Federal Reserve has the expertise to 
supervise banks properly.
    Title VIII of Dodd-Frank reflects the strict view of that 
legislation's proponents that any financial firm engaged in any 
semblance of ``risky activity'' must be subject to stringent 
regulatory oversight if the preservation of financial stability 
is the only goal. By doing so, Title VIII further codified the 
``too big to fail'' doctrine and must be repealed to actually 
protect taxpayers. Fortunately, H.R. 4247 does just that.
    Finally, repealing Title VIII would not leave clearing 
agencies unregulated. The SEC oversees clearing agencies 
primarily through its Division of Trading and Markets, the 
Office of Compliance, Inspections & Examinations (OCIE), and 
the Division of Enforcement. Trading and Markets administers 
and executes the agency's programs relating to the structure 
and operations of the securities markets, which include 
regulation of clearing agencies and review of their proposed 
rule changes. OCIE examines clearing agencies to assess the 
overall safety, reliability, and efficiency of the clearing 
agency and its operations. It also examines clearing agencies 
for compliance with their own rules and applicable federal laws 
and regulations. The Enforcement Division investigates and 
prosecutes violations of securities laws. The SEC may institute 
civil actions seeking injunctive and other equitable remedies 
and/or administrative proceedings to, among other things, 
suspend or revoke registration, impose limitations upon a 
clearing agency's activities, functions, or operations, or 
impose other sanctions. Additionally, a derivatives clearing 
organization (DCO) is a clearinghouse, clearing association, 
clearing corporation, or similar entity that enables each party 
to an agreement, contract, or transaction to substitute, 
through novation or otherwise, the credit of the DCO for the 
credit of the parties; arranges or provides, on a multilateral 
basis, for the settlement or netting of obligations; or 
otherwise provides clearing services or arrangements that 
mutualize or transfer credit risk among participants. Any 
clearinghouse that seeks to provide clearing services with 
respect to futures contracts, options on futures contracts, or 
swaps must register with the CFTC as a DCO before it can begin 
to provide such services and is subject to CFTC oversight.

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 4247 on April 26, 2017 and 
April 28, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 15th 2017 and ordered H.R. 4247 to be reported 
favorably to the House without amendment by a recorded vote of 
33 yeas to 25 nays (Record vote no. FC-117), a quorum being 
present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 33 yeas to 25 nays 
(Record vote no. FC-117), a quorum being present.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 4247 
will eliminate duplicative, costly and ineffective regulations 
and eliminate any implied government backstop for certain non-
bank financial institutions by repealing Title VIII of the 
Dodd-Frank Act, which gives the FSOC the authority to designate 
FMUs as systemically important financial institutions.

   New Budget Authority, Entitlement Authority, And Tax Expenditures

    The Committee has not received an estimate of new budget 
authority contained in the cost estimate prepared by the 
Director of the Congressional Budget Office pursuant to Sec. 
402 of the Congressional Budget Act of 1974. In compliance with 
clause 3(c)(2) of rule XIII of the Rules of the House, the 
Committee opines that H.R. 4247 will not establish any new 
budget or entitlement authority or create any tax expenditures.

                 Congressional Budget Office Estimates

    The cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to Sec. 402 of the 
Congressional Budget Act of 1974 was not submitted timely to 
the Committee.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

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

                  Applicability to 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 the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4247 as the ``Restoring Financial 
Market Freedom Act of 2017.''

Section 2. Repeal of Title VIII

    This Section repeals Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, to eliminate the 
FSOC's authority to designate FMUs as systemically important 
and to retroactively repeal all previous FMU designations.

         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, and existing law in which no 
change is proposed is shown in roman):

         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 and 
existing law in which no change is proposed is shown in roman):

       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT


SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Dodd-Frank 
Wall Street Reform and Consumer Protection Act''.
  (b) Table of Contents.--The table of contents for this Act is 
as follows:

Sec. 1. Short title; table of contents.
     * * * * * * *

       [TITLE VIII--PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION

[Sec. 801. Short title.
[Sec. 802. Findings and purposes.
[Sec. 803. Definitions.
[Sec. 804. Designation of systemic importance.
[Sec. 805. Standards for systemically important financial market 
          utilities and payment, clearing, or settlement activities.
[Sec. 806. Operations of designated financial market utilities.
[Sec. 807. Examination of and enforcement actions against designated 
          financial market utilities.
[Sec. 808. Examination of and enforcement actions against financial 
          institutions subject to standards for designated activities.
[Sec. 809. Requests for information, reports, or records.
[Sec. 810. Rulemaking.
[Sec. 811. Other authority.
[Sec. 812. Consultation.
[Sec. 813. Common framework for designated clearing entity risk 
          management.
[Sec. 814. Effective date.]

           *       *       *       *       *       *       *


       [TITLE VIII--PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION

[SEC. 801. SHORT TITLE.

  [This title may be cited as the ``Payment, Clearing, and 
Settlement Supervision Act of 2010''.

[SEC. 802. FINDINGS AND PURPOSES.

  [(a) Findings.--Congress finds the following:
          [(1) The proper functioning of the financial markets 
        is dependent upon safe and efficient arrangements for 
        the clearing and settlement of payment, securities, and 
        other financial transactions.
          [(2) Financial market utilities that conduct or 
        support multilateral payment, clearing, or settlement 
        activities may reduce risks for their participants and 
        the broader financial system, but such utilities may 
        also concentrate and create new risks and thus must be 
        well designed and operated in a safe and sound manner.
          [(3) Payment, clearing, and settlement activities 
        conducted by financial institutions also present 
        important risks to the participating financial 
        institutions and to the financial system.
          [(4) Enhancements to the regulation and supervision 
        of systemically important financial market utilities 
        and the conduct of systemically important payment, 
        clearing, and settlement activities by financial 
        institutions are necessary--
                  [(A) to provide consistency;
                  [(B) to promote robust risk management and 
                safety and soundness;
                  [(C) to reduce systemic risks; and
                  [(D) to support the stability of the broader 
                financial system.
  [(b) Purpose.--The purpose of this title is to mitigate 
systemic risk in the financial system and promote financial 
stability by--
          [(1) authorizing the Board of Governors to promote 
        uniform standards for the--
                  [(A) management of risks by systemically 
                important financial market utilities; and
                  [(B) conduct of systemically important 
                payment, clearing, and settlement activities by 
                financial institutions;
          [(2) providing the Board of Governors an enhanced 
        role in the supervision of risk management standards 
        for systemically important financial market utilities;
          [(3) strengthening the liquidity of systemically 
        important financial market utilities; and
          [(4) providing the Board of Governors an enhanced 
        role in the supervision of risk management standards 
        for systemically important payment, clearing, and 
        settlement activities by financial institutions.

[SEC. 803. DEFINITIONS.

  [In this title, the following definitions shall apply:
          [(1) Appropriate financial regulator.--The term 
        ``appropriate financial regulator'' means--
                  [(A) the primary financial regulatory agency, 
                as defined in section 2 of this Act;
                  [(B) the National Credit Union 
                Administration, with respect to any insured 
                credit union under the Federal Credit Union Act 
                (12 U.S.C. 1751 et seq.); and
                  [(C) the Board of Governors, with respect to 
                organizations operating under section 25A of 
                the Federal Reserve Act (12 U.S.C. 611), and 
                any other financial institution engaged in a 
                designated activity.
          [(2) Designated activity.--The term ``designated 
        activity'' means a payment, clearing, or settlement 
        activity that the Council has designated as 
        systemically important under section 804.
          [(3) Designated clearing entity.--The term 
        ``designated clearing entity'' means a designated 
        financial market utility that is a derivatives clearing 
        organization registered under section 5b of the 
        Commodity Exchange Act (7 U.S.C. 7a-1) or a clearing 
        agency registered with the Securities and Exchange 
        Commission under section 17A of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78q-1).
          [(4) Designated financial market utility.--The term 
        ``designated financial market utility'' means a 
        financial market utility that the Council has 
        designated as systemically important under section 804.
          [(5) Financial institution.--
                  [(A) In general.--The term ``financial 
                institution'' means--
                          [(i) a depository institution, as 
                        defined in section 3 of the Federal 
                        Deposit Insurance Act (12 U.S.C. 1813);
                          [(ii) a branch or agency of a foreign 
                        bank, as defined in section 1(b) of the 
                        International Banking Act of 1978 (12 
                        U.S.C. 3101);
                          [(iii) an organization operating 
                        under section 25 or 25A of the Federal 
                        Reserve Act (12 U.S.C. 601-604a and 611 
                        through 631);
                          [(iv) a credit union, as defined in 
                        section 101 of the Federal Credit Union 
                        Act (12 U.S.C. 1752);
                          [(v) a broker or dealer, as defined 
                        in section 3 of the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78c);
                          [(vi) an investment company, as 
                        defined in section 3 of the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-3);
                          [(vii) an insurance company, as 
                        defined in section 2 of the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-2);
                          [(viii) an investment adviser, as 
                        defined in section 202 of the 
                        Investment Advisers Act of 1940 (15 
                        U.S.C. 80b-2);
                          [(ix) a futures commission merchant, 
                        commodity trading advisor, or commodity 
                        pool operator, as defined in section 1a 
                        of the Commodity Exchange Act (7 U.S.C. 
                        1a); and
                          [(x) any company engaged in 
                        activities that are financial in nature 
                        or incidental to a financial activity, 
                        as described in section 4 of the Bank 
                        Holding Company Act of 1956 (12 U.S.C. 
                        1843(k)).
                  [(B) Exclusions.--The term ``financial 
                institution'' does not include designated 
                contract markets, registered futures 
                associations, swap data repositories, and swap 
                execution facilities registered under the 
                Commodity Exchange Act (7 U.S.C. 1 et seq.), or 
                national securities exchanges, national 
                securities associations, alternative trading 
                systems, securities information processors 
                solely with respect to the activities of the 
                entity as a securities information processor, 
                security-based swap data repositories, and swap 
                execution facilities registered under the 
                Securities Exchange Act of 1934 (15 U.S.C. 78a 
                et seq.), or designated clearing entities, 
                provided that the exclusions in this 
                subparagraph apply only with respect to the 
                activities that require the entity to be so 
                registered.
          [(6) Financial market utility.--
                  [(A) Inclusion.--The term ``financial market 
                utility'' means any person that manages or 
                operates a multilateral system for the purpose 
                of transferring, clearing, or settling 
                payments, securities, or other financial 
                transactions among financial institutions or 
                between financial institutions and the person.
                  [(B) Exclusions.--The term ``financial market 
                utility'' does not include--
                          [(i) designated contract markets, 
                        registered futures associations, swap 
                        data repositories, and swap execution 
                        facilities registered under the 
                        Commodity Exchange Act (7 U.S.C. 1 et 
                        seq.), or national securities 
                        exchanges, national securities 
                        associations, alternative trading 
                        systems, security-based swap data 
                        repositories, and swap execution 
                        facilities registered under the 
                        Securities Exchange Act of 1934 (15 
                        U.S.C. 78a et seq.), solely by reason 
                        of their providing facilities for 
                        comparison of data respecting the terms 
                        of settlement of securities or futures 
                        transactions effected on such exchange 
                        or by means of any electronic system 
                        operated or controlled by such 
                        entities, provided that the exclusions 
                        in this clause apply only with respect 
                        to the activities that require the 
                        entity to be so registered; and
                          [(ii) any broker, dealer, transfer 
                        agent, or investment company, or any 
                        futures commission merchant, 
                        introducing broker, commodity trading 
                        advisor, or commodity pool operator, 
                        solely by reason of functions performed 
                        by such institution as part of 
                        brokerage, dealing, transfer agency, or 
                        investment company activities, or 
                        solely by reason of acting on behalf of 
                        a financial market utility or a 
                        participant therein in connection with 
                        the furnishing by the financial market 
                        utility of services to its participants 
                        or the use of services of the financial 
                        market utility by its participants, 
                        provided that services performed by 
                        such institution do not constitute 
                        critical risk management or processing 
                        functions of the financial market 
                        utility.
          [(7) Payment, clearing, or settlement activity.--
                  [(A) In general.--The term ``payment, 
                clearing, or settlement activity'' means an 
                activity carried out by 1 or more financial 
                institutions to facilitate the completion of 
                financial transactions, but shall not include 
                any offer or sale of a security under the 
                Securities Act of 1933 (15 U.S.C. 77a et seq.), 
                or any quotation, order entry, negotiation, or 
                other pre-trade activity or execution activity.
                  [(B) Financial transaction.--For the purposes 
                of subparagraph (A), the term ``financial 
                transaction'' includes--
                          [(i) funds transfers;
                          [(ii) securities contracts;
                          [(iii) contracts of sale of a 
                        commodity for future delivery;
                          [(iv) forward contracts;
                          [(v) repurchase agreements;
                          [(vi) swaps;
                          [(vii) security-based swaps;
                          [(viii) swap agreements;
                          [(ix) security-based swap agreements;
                          [(x) foreign exchange contracts;
                          [(xi) financial derivatives 
                        contracts; and
                          [(xii) any similar transaction that 
                        the Council determines to be a 
                        financial transaction for purposes of 
                        this title.
                  [(C) Included activities.--When conducted 
                with respect to a financial transaction, 
                payment, clearing, and settlement activities 
                may include--
                          [(i) the calculation and 
                        communication of unsettled financial 
                        transactions between counterparties;
                          [(ii) the netting of transactions;
                          [(iii) provision and maintenance of 
                        trade, contract, or instrument 
                        information;
                          [(iv) the management of risks and 
                        activities associated with continuing 
                        financial transactions;
                          [(v) transmittal and storage of 
                        payment instructions;
                          [(vi) the movement of funds;
                          [(vii) the final settlement of 
                        financial transactions; and
                          [(viii) other similar functions that 
                        the Council may determine.
                  [(D) Exclusion.--Payment, clearing, and 
                settlement activities shall not include public 
                reporting of swap transaction data under 
                section 727 or 763(i) of the Wall Street 
                Transparency and Accountability Act of 2010.
          [(8) Supervisory agency.--
                  [(A) In general.--The term ``Supervisory 
                Agency'' means the Federal agency that has 
                primary jurisdiction over a designated 
                financial market utility under Federal banking, 
                securities, or commodity futures laws, as 
                follows:
                          [(i) The Securities and Exchange 
                        Commission, with respect to a 
                        designated financial market utility 
                        that is a clearing agency registered 
                        with the Securities and Exchange 
                        Commission.
                          [(ii) The Commodity Futures Trading 
                        Commission, with respect to a 
                        designated financial market utility 
                        that is a derivatives clearing 
                        organization registered with the 
                        Commodity Futures Trading Commission.
                          [(iii) The appropriate Federal 
                        banking agency, with respect to a 
                        designated financial market utility 
                        that is an institution described in 
                        section 3(q) of the Federal Deposit 
                        Insurance Act.
                          [(iv) The Board of Governors, with 
                        respect to a designated financial 
                        market utility that is otherwise not 
                        subject to the jurisdiction of any 
                        agency listed in clauses (i), (ii), and 
                        (iii).
                  [(B) Multiple agency jurisdiction.--If a 
                designated financial market utility is subject 
                to the jurisdictional supervision of more than 
                1 agency listed in subparagraph (A), then such 
                agencies should agree on 1 agency to act as the 
                Supervisory Agency, and if such agencies cannot 
                agree on which agency has primary jurisdiction, 
                the Council shall decide which agency is the 
                Supervisory Agency for purposes of this title.
          [(9) Systemically important and systemic 
        importance.--The terms ``systemically important'' and 
        ``systemic importance'' mean a situation where the 
        failure of or a disruption to the functioning of a 
        financial market utility or the conduct of a payment, 
        clearing, or settlement activity could create, or 
        increase, the risk of significant liquidity or credit 
        problems spreading among financial institutions or 
        markets and thereby threaten the stability of the 
        financial system of the United States.

[SEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE.

  [(a) Designation.--
          [(1) Financial stability oversight council.--The 
        Council, on a nondelegable basis and by a vote of not 
        fewer than \2/3\ of members then serving, including an 
        affirmative vote by the Chairperson of the Council, 
        shall designate those financial market utilities or 
        payment, clearing, or settlement activities that the 
        Council determines are, or are likely to become, 
        systemically important.
          [(2) Considerations.--In determining whether a 
        financial market utility or payment, clearing, or 
        settlement activity is, or is likely to become, 
        systemically important, the Council shall take into 
        consideration the following:
                  [(A) The aggregate monetary value of 
                transactions processed by the financial market 
                utility or carried out through the payment, 
                clearing, or settlement activity.
                  [(B) The aggregate exposure of the financial 
                market utility or a financial institution 
                engaged in payment, clearing, or settlement 
                activities to its counterparties.
                  [(C) The relationship, interdependencies, or 
                other interactions of the financial market 
                utility or payment, clearing, or settlement 
                activity with other financial market utilities 
                or payment, clearing, or settlement activities.
                  [(D) The effect that the failure of or a 
                disruption to the financial market utility or 
                payment, clearing, or settlement activity would 
                have on critical markets, financial 
                institutions, or the broader financial system.
                  [(E) Any other factors that the Council deems 
                appropriate.
  [(b) Rescission of Designation.--
          [(1) In general.--The Council, on a nondelegable 
        basis and by a vote of not fewer than \2/3\ of members 
        then serving, including an affirmative vote by the 
        Chairperson of the Council, shall rescind a designation 
        of systemic importance for a designated financial 
        market utility or designated activity if the Council 
        determines that the utility or activity no longer meets 
        the standards for systemic importance.
          [(2) Effect of rescission.--Upon rescission, the 
        financial market utility or financial institutions 
        conducting the activity will no longer be subject to 
        the provisions of this title or any rules or orders 
        prescribed under this title.
  [(c) Consultation and Notice and Opportunity for Hearing.--
          [(1) Consultation.--Before making any determination 
        under subsection (a) or (b), the Council shall consult 
        with the relevant Supervisory Agency and the Board of 
        Governors.
          [(2) Advance notice and opportunity for hearing.--
                  [(A) In general.--Before making any 
                determination under subsection (a) or (b), the 
                Council shall provide the financial market 
                utility or, in the case of a payment, clearing, 
                or settlement activity, financial institutions 
                with advance notice of the proposed 
                determination of the Council.
                  [(B) Notice in federal register.--The Council 
                shall provide such advance notice to financial 
                institutions by publishing a notice in the 
                Federal Register.
                  [(C) Requests for hearing.--Within 30 days 
                from the date of any notice of the proposed 
                determination of the Council, the financial 
                market utility or, in the case of a payment, 
                clearing, or settlement activity, a financial 
                institution engaged in the designated activity 
                may request, in writing, an opportunity for a 
                written or oral hearing before the Council to 
                demonstrate that the proposed designation or 
                rescission of designation is not supported by 
                substantial evidence.
                  [(D) Written submissions.--Upon receipt of a 
                timely request, the Council shall fix a time, 
                not more than 30 days after receipt of the 
                request, unless extended at the request of the 
                financial market utility or financial 
                institution, and place at which the financial 
                market utility or financial institution may 
                appear, personally or through counsel, to 
                submit written materials, or, at the sole 
                discretion of the Council, oral testimony or 
                oral argument.
          [(3) Emergency exception.--
                  [(A) Waiver or modification by vote of the 
                council.--The Council may waive or modify the 
                requirements of paragraph (2) if the Council 
                determines, by an affirmative vote of not fewer 
                than \2/3\ of members then serving, including 
                an affirmative vote by the Chairperson of the 
                Council, that the waiver or modification is 
                necessary to prevent or mitigate an immediate 
                threat to the financial system posed by the 
                financial market utility or the payment, 
                clearing, or settlement activity.
                  [(B) Notice of waiver or modification.--The 
                Council shall provide notice of the waiver or 
                modification to the financial market utility 
                concerned or, in the case of a payment, 
                clearing, or settlement activity, to financial 
                institutions, as soon as practicable, which 
                shall be no later than 24 hours after the 
                waiver or modification in the case of a 
                financial market utility and 3 business days in 
                the case of financial institutions. The Council 
                shall provide the notice to financial 
                institutions by posting a notice on the website 
                of the Council and by publishing a notice in 
                the Federal Register.
  [(d) Notification of Final Determination.--
          [(1) After hearing.--Within 60 days of any hearing 
        under subsection (c)(2), the Council shall notify the 
        financial market utility or financial institutions of 
        the final determination of the Council in writing, 
        which shall include findings of fact upon which the 
        determination of the Council is based.
          [(2) When no hearing requested.--If the Council does 
        not receive a timely request for a hearing under 
        subsection (c)(2), the Council shall notify the 
        financial market utility or financial institutions of 
        the final determination of the Council in writing not 
        later than 30 days after the expiration of the date by 
        which a financial market utility or a financial 
        institution could have requested a hearing. All notices 
        to financial institutions under this subsection shall 
        be published in the Federal Register.
  [(e) Extension of Time Periods.--The Council may extend the 
time periods established in subsections (c) and (d) as the 
Council determines to be necessary or appropriate.

[SEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FINANCIAL MARKET 
                    UTILITIES AND PAYMENT, CLEARING, OR SETTLEMENT 
                    ACTIVITIES.

  [(a) Authority to Prescribe Standards.--
          [(1) Board of governors.--Except as provided in 
        paragraph (2), the Board of Governors, by rule or 
        order, and in consultation with the Council and the 
        Supervisory Agencies, shall prescribe risk management 
        standards, taking into consideration relevant 
        international standards and existing prudential 
        requirements, governing--
                  [(A) the operations related to the payment, 
                clearing, and settlement activities of 
                designated financial market utilities; and
                  [(B) the conduct of designated activities by 
                financial institutions.
          [(2) Special procedures for designated clearing 
        entities and designated activities of certain financial 
        institutions.--
                  [(A) CFTC and commission.--The Commodity 
                Futures Trading Commission and the Commission 
                may each prescribe regulations, in consultation 
                with the Council and the Board of Governors, 
                containing risk management standards, taking 
                into consideration relevant international 
                standards and existing prudential requirements, 
                for those designated clearing entities and 
                financial institutions engaged in designated 
                activities for which each is the Supervisory 
                Agency or the appropriate financial regulator, 
                governing--
                          [(i) the operations related to 
                        payment, clearing, and settlement 
                        activities of such designated clearing 
                        entities; and
                          [(ii) the conduct of designated 
                        activities by such financial 
                        institutions.
                  [(B) Review and determination.--The Board of 
                Governors may determine that existing 
                prudential requirements of the Commodity 
                Futures Trading Commission, the Commission, or 
                both (including requirements prescribed 
                pursuant to subparagraph (A)) with respect to 
                designated clearing entities and financial 
                institutions engaged in designated activities 
                for which the Commission or the Commodity 
                Futures Trading Commission is the Supervisory 
                Agency or the appropriate financial regulator 
                are insufficient to prevent or mitigate 
                significant liquidity, credit, operational, or 
                other risks to the financial markets or to the 
                financial stability of the United States.
                  [(C) Written determination.--Any 
                determination by the Board of Governors under 
                subparagraph (B) shall be provided in writing 
                to the Commodity Futures Trading Commission or 
                the Commission, as applicable, and the Council, 
                and shall explain why existing prudential 
                requirements, considered as a whole, are 
                insufficient to ensure that the operations and 
                activities of the designated clearing entities 
                or the activities of financial institutions 
                described in subparagraph (B) will not pose 
                significant liquidity, credit, operational, or 
                other risks to the financial markets or to the 
                financial stability of the United States. The 
                Board of Governors' determination shall contain 
                a detailed analysis supporting its findings and 
                identify the specific prudential requirements 
                that are insufficient.
                  [(D) CFTC and commission response.--The 
                Commodity Futures Trading Commission or the 
                Commission, as applicable, shall within 60 days 
                either object to the Board of Governors' 
                determination with a detailed analysis as to 
                why existing prudential requirements are 
                sufficient, or submit an explanation to the 
                Council and the Board of Governors describing 
                the actions to be taken in response to the 
                Board of Governors' determination.
                  [(E) Authorization.--Upon an affirmative vote 
                by not fewer than 2/3 of members then serving 
                on the Council, the Council shall either find 
                that the response submitted under subparagraph 
                (D) is sufficient, or require the Commodity 
                Futures Trading Commission, or the Commission, 
                as applicable, to prescribe such risk 
                management standards as the Council determines 
                is necessary to address the specific prudential 
                requirements that are determined to be 
                insufficient.''
  [(b) Objectives and Principles.--The objectives and 
principles for the risk management standards prescribed under 
subsection (a) shall be to--
          [(1) promote robust risk management;
          [(2) promote safety and soundness;
          [(3) reduce systemic risks; and
          [(4) support the stability of the broader financial 
        system.
  [(c) Scope.--The standards prescribed under subsection (a) 
may address areas such as--
          [(1) risk management policies and procedures;
          [(2) margin and collateral requirements;
          [(3) participant or counterparty default policies and 
        procedures;
          [(4) the ability to complete timely clearing and 
        settlement of financial transactions;
          [(5) capital and financial resource requirements for 
        designated financial market utilities; and
          [(6) other areas that are necessary to achieve the 
        objectives and principles in subsection (b).
  [(d) Limitation on Scope.--Except as provided in subsections 
(e) and (f) of section 807, nothing in this title shall be 
construed to permit the Council or the Board of Governors to 
take any action or exercise any authority granted to the 
Commodity Futures Trading Commission under section 2(h) of the 
Commodity Exchange Act or the Securities and Exchange 
Commission under section 3C(a) of the Securities Exchange Act 
of 1934, including--
          [(1) the approval of, disapproval of, or stay of the 
        clearing requirement for any group, category, type, or 
        class of swaps that a designated clearing entity may 
        accept for clearing;
          [(2) the determination that any group, category, 
        type, or class of swaps shall be subject to the 
        mandatory clearing requirement of section 2(h)(1) of 
        the Commodity Exchange Act or section 3C(a)(1) of the 
        Securities Exchange Act of 1934;
          [(3) the determination that any person is exempt from 
        the mandatory clearing requirement of section 2(h)(1) 
        of the Commodity Exchange Act or section 3C(a)(1) of 
        the Securities Exchange Act of 1934; or
          [(4) any authority granted to the Commodity Futures 
        Trading Commission or the Securities and Exchange 
        Commission with respect to transaction reporting or 
        trade execution.
  [(e) Threshold Level.--The standards prescribed under 
subsection (a) governing the conduct of designated activities 
by financial institutions shall, where appropriate, establish a 
threshold as to the level or significance of engagement in the 
activity at which a financial institution will become subject 
to the standards with respect to that activity.
  [(f) Compliance Required.--Designated financial market 
utilities and financial institutions subject to the standards 
prescribed under subsection (a) for a designated activity shall 
conduct their operations in compliance with the applicable risk 
management standards.

[SEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MARKET UTILITIES.

  [(a) Federal Reserve Account and Services.--The Board of 
Governors may authorize a Federal Reserve Bank to establish and 
maintain an account for a designated financial market utility 
and provide the services listed in section 11A(b) of the 
Federal Reserve Act (12 U.S.C. 248a(b)) and deposit accounts 
under the first undesignated paragraph of section 13 of the 
Federal Reserve Act (12 U.S.C. 342) to the designated financial 
market utility that the Federal Reserve Bank is authorized 
under the Federal Reserve Act to provide to a depository 
institution, subject to any applicable rules, orders, 
standards, or guidelines prescribed by the Board of Governors.
  [(b) Advances.--The Board of Governors may authorize a 
Federal Reserve bank under section 10B of the Federal Reserve 
Act (12 U.S.C. 347b) to provide to a designated financial 
market utility discount and borrowing privileges only in 
unusual or exigent circumstances, upon the affirmative vote of 
a majority of the Board of Governors then serving (or such 
other number in accordance with the provisions of section 
11(r)(2) of the Federal Reserve Act (12 U.S.C. 248(r)(2)) after 
consultation with the Secretary, and upon a showing by the 
designated financial market utility that it is unable to secure 
adequate credit accommodations from other banking institutions. 
All such discounts and borrowing privileges shall be subject to 
such other limitations, restrictions, and regulations as the 
Board of Governors may prescribe. Access to discount and 
borrowing privileges under section 10B of the Federal Reserve 
Act as authorized in this section does not require a designated 
financial market utility to be or become a bank or bank holding 
company.
  [(c) Earnings on Federal Reserve Balances.--A Federal Reserve 
Bank may pay earnings on balances maintained by or on behalf of 
a designated financial market utility in the same manner and to 
the same extent as the Federal Reserve Bank may pay earnings to 
a depository institution under the Federal Reserve Act, subject 
to any applicable rules, orders, standards, or guidelines 
prescribed by the Board of Governors.
  [(d) Reserve Requirements.--The Board of Governors may exempt 
a designated financial market utility from, or modify any, 
reserve requirements under section 19 of the Federal Reserve 
Act (12 U.S.C. 461) applicable to a designated financial market 
utility.
  [(e) Changes to Rules, Procedures, or Operations.--
          [(1) Advance notice.--
                  [(A) Advance notice of proposed changes 
                required.--A designated financial market 
                utility shall provide notice 60 days in advance 
                notice to its Supervisory Agency of any 
                proposed change to its rules, procedures, or 
                operations that could, as defined in rules of 
                each Supervisory Agency, materially affect, the 
                nature or level of risks presented by the 
                designated financial market utility.
                  [(B) Terms and standards prescribed by the 
                supervisory agencies.--Each Supervisory Agency, 
                in consultation with the Board of Governors, 
                shall prescribe regulations that define and 
                describe the standards for determining when 
                notice is required to be provided under 
                subparagraph (A).
                  [(C) Contents of notice.--The notice of a 
                proposed change shall describe--
                          [(i) the nature of the change and 
                        expected effects on risks to the 
                        designated financial market utility, 
                        its participants, or the market; and
                          [(ii) how the designated financial 
                        market utility plans to manage any 
                        identified risks.
                  [(D) Additional information.--The Supervisory 
                Agency may require a designated financial 
                market utility to provide any information 
                necessary to assess the effect the proposed 
                change would have on the nature or level of 
                risks associated with the designated financial 
                market utility's payment, clearing, or 
                settlement activities and the sufficiency of 
                any proposed risk management techniques.
                  [(E) Notice of objection.--The Supervisory 
                Agency shall notify the designated financial 
                market utility of any objection regarding the 
                proposed change within 60 days from the later 
                of--
                          [(i) the date that the notice of the 
                        proposed change is received; or
                          [(ii) the date any further 
                        information requested for consideration 
                        of the notice is received.
                  [(F) Change not allowed if objection.--A 
                designated financial market utility shall not 
                implement a change to which the Supervisory 
                Agency has an objection.
                  [(G) Change allowed if no objection within 60 
                days.--A designated financial market utility 
                may implement a change if it has not received 
                an objection to the proposed change within 60 
                days of the later of--
                          [(i) the date that the Supervisory 
                        Agency receives the notice of proposed 
                        change; or
                          [(ii) the date the Supervisory Agency 
                        receives any further information it 
                        requests for consideration of the 
                        notice.
                  [(H) Review extension for novel or complex 
                issues.--The Supervisory Agency may, during the 
                60-day review period, extend the review period 
                for an additional 60 days for proposed changes 
                that raise novel or complex issues, subject to 
                the Supervisory Agency providing the designated 
                financial market utility with prompt written 
                notice of the extension. Any extension under 
                this subparagraph will extend the time periods 
                under subparagraphs (E) and (G).
                  [(I) Change allowed earlier if notified of no 
                objection.--A designated financial market 
                utility may implement a change in less than 60 
                days from the date of receipt of the notice of 
                proposed change by the Supervisory Agency, or 
                the date the Supervisory Agency receives any 
                further information it requested, if the 
                Supervisory Agency notifies the designated 
                financial market utility in writing that it 
                does not object to the proposed change and 
                authorizes the designated financial market 
                utility to implement the change on an earlier 
                date, subject to any conditions imposed by the 
                Supervisory Agency.
          [(2) Emergency changes.--
                  [(A) In general.--A designated financial 
                market utility may implement a change that 
                would otherwise require advance notice under 
                this subsection if it determines that--
                          [(i) an emergency exists; and
                          [(ii) immediate implementation of the 
                        change is necessary for the designated 
                        financial market utility to continue to 
                        provide its services in a safe and 
                        sound manner.
                  [(B) Notice required within 24 hours.--The 
                designated financial market utility shall 
                provide notice of any such emergency change to 
                its Supervisory Agency, as soon as practicable, 
                which shall be no later than 24 hours after 
                implementation of the change.
                  [(C) Contents of emergency notice.--In 
                addition to the information required for 
                changes requiring advance notice, the notice of 
                an emergency change shall describe--
                          [(i) the nature of the emergency; and
                          [(ii) the reason the change was 
                        necessary for the designated financial 
                        market utility to continue to provide 
                        its services in a safe and sound 
                        manner.
                  [(D) Modification or rescission of change may 
                be required.--The Supervisory Agency may 
                require modification or rescission of the 
                change if it finds that the change is not 
                consistent with the purposes of this Act or any 
                applicable rules, orders, or standards 
                prescribed under section 805(a).
          [(3) Copying the board of governors.--The Supervisory 
        Agency shall provide the Board of Governors 
        concurrently with a complete copy of any notice, 
        request, or other information it issues, submits, or 
        receives under this subsection.
          [(4) Consultation with board of governors.--Before 
        taking any action on, or completing its review of, a 
        change proposed by a designated financial market 
        utility, the Supervisory Agency shall consult with the 
        Board of Governors.

[SEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST DESIGNATED 
                    FINANCIAL MARKET UTILITIES.

  [(a) Examination.--Notwithstanding any other provision of law 
and subject to subsection (d), the Supervisory Agency shall 
conduct examinations of a designated financial market utility 
at least once annually in order to determine the following:
          [(1) The nature of the operations of, and the risks 
        borne by, the designated financial market utility.
          [(2) The financial and operational risks presented by 
        the designated financial market utility to financial 
        institutions, critical markets, or the broader 
        financial system.
          [(3) The resources and capabilities of the designated 
        financial market utility to monitor and control such 
        risks.
          [(4) The safety and soundness of the designated 
        financial market utility.
          [(5) The designated financial market utility's 
        compliance with--
                  [(A) this title; and
                  [(B) the rules and orders prescribed under 
                this title.
  [(b) Service Providers.--Whenever a service integral to the 
operation of a designated financial market utility is performed 
for the designated financial market utility by another entity, 
whether an affiliate or non-affiliate and whether on or off the 
premises of the designated financial market utility, the 
Supervisory Agency may examine whether the provision of that 
service is in compliance with applicable law, rules, orders, 
and standards to the same extent as if the designated financial 
market utility were performing the service on its own premises.
  [(c) Enforcement.--For purposes of enforcing the provisions 
of this title, a designated financial market utility shall be 
subject to, and the appropriate Supervisory Agency shall have 
authority under the provisions of subsections (b) through (n) 
of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 
1818) in the same manner and to the same extent as if the 
designated financial market utility was an insured depository 
institution and the Supervisory Agency was the appropriate 
Federal banking agency for such insured depository institution.
  [(d) Board of Governors Involvement in Examinations.--
          [(1) Board of governors consultation on examination 
        planning.--The Supervisory Agency shall consult 
        annually with the Board of Governors regarding the 
        scope and methodology of any examination conducted 
        under subsections (a) and (b). The Supervisory Agency 
        shall lead all examinations conducted under subsections 
        (a) and (b)
          [(2) Board of governors participation in 
        examination.--The Board of Governors may, in its 
        discretion, participate in any examination led by a 
        Supervisory Agency and conducted under subsections (a) 
        and (b).
  [(e) Board of Governors Enforcement Recommendations.--
          [(1) Recommendation.--The Board of Governors may, 
        after consulting with the Council and the Supervisory 
        Agency, at any time recommend to the Supervisory Agency 
        that such agency take enforcement action against a 
        designated financial market utility in order to prevent 
        or mitigate significant liquidity, credit, operational, 
        or other risks to the financial markets or to the 
        financial stability of the United States. Any such 
        recommendation for enforcement action shall provide a 
        detailed analysis supporting the recommendation of the 
        Board of Governors.
          [(2) Consideration.--The Supervisory Agency shall 
        consider the recommendation of the Board of Governors 
        and submit a response to the Board of Governors within 
        60 days.
          [(3) Binding arbitration.--If the Supervisory Agency 
        rejects, in whole or in part, the recommendation of the 
        Board of Governors, the Board of Governors may refer 
        the recommendation to the Council for a binding 
        decision on whether an enforcement action is warranted.
          [(4) Enforcement action.--Upon an affirmative vote by 
        a majority of the Council in favor of the Board of 
        Governors' recommendation under paragraph (3), the 
        Council may require the Supervisory Agency to--
                  [(A) exercise the enforcement authority 
                referenced in subsection (c); and
                  [(B) take enforcement action against the 
                designated financial market utility.
  [(f) Emergency Enforcement Actions by the Board of 
Governors.--
          [(1) Imminent risk of substantial harm.--The Board of 
        Governors may, after consulting with the Supervisory 
        Agency and upon an affirmative vote by a majority the 
        Council, take enforcement action against a designated 
        financial market utility if the Board of Governors has 
        reasonable cause to conclude that--
                  [(A) either--
                          [(i) an action engaged in, or 
                        contemplated by, a designated financial 
                        market utility (including any change 
                        proposed by the designated financial 
                        market utility to its rules, 
                        procedures, or operations that would 
                        otherwise be subject to section 806(e)) 
                        poses an imminent risk of substantial 
                        harm to financial institutions, 
                        critical markets, or the broader 
                        financial system of the United States; 
                        or
                          [(ii) the condition of a designated 
                        financial market utility poses an 
                        imminent risk of substantial harm to 
                        financial institutions, critical 
                        markets, or the broader financial 
                        system; and
                  [(B) the imminent risk of substantial harm 
                precludes the Board of Governors' use of the 
                procedures in subsection (e).
          [(2) Enforcement authority.--For purposes of taking 
        enforcement action under paragraph (1), a designated 
        financial market utility shall be subject to, and the 
        Board of Governors shall have authority under the 
        provisions of subsections (b) through (n) of section 8 
        of the Federal Deposit Insurance Act (12 U.S.C. 1818) 
        in the same manner and to the same extent as if the 
        designated financial market utility was an insured 
        depository institution and the Board of Governors was 
        the appropriate Federal banking agency for such insured 
        depository institution.

[SEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST FINANCIAL 
                    INSTITUTIONS SUBJECT TO STANDARDS FOR DESIGNATED 
                    ACTIVITIES.

  [(a) Examination.--The appropriate financial regulator is 
authorized to examine a financial institution subject to the 
standards prescribed under section 805(a) for a designated 
activity in order to determine the following:
          [(1) The nature and scope of the designated 
        activities engaged in by the financial institution.
          [(2) The financial and operational risks the 
        designated activities engaged in by the financial 
        institution may pose to the safety and soundness of the 
        financial institution.
          [(3) The financial and operational risks the 
        designated activities engaged in by the financial 
        institution may pose to other financial institutions, 
        critical markets, or the broader financial system.
          [(4) The resources available to and the capabilities 
        of the financial institution to monitor and control the 
        risks described in paragraphs (2) and (3).
          [(5) The financial institution's compliance with this 
        title and the rules and orders prescribed under section 
        805(a).
  [(b) Enforcement.--For purposes of enforcing the provisions 
of this title, and the rules and orders prescribed under this 
section, a financial institution subject to the standards 
prescribed under section 805(a) for a designated activity shall 
be subject to, and the appropriate financial regulator shall 
have authority under the provisions of subsections (b) through 
(n) of section 8 of the Federal Deposit Insurance Act (12 
U.S.C. 1818) in the same manner and to the same extent as if 
the financial institution was an insured depository institution 
and the appropriate financial regulator was the appropriate 
Federal banking agency for such insured depository institution.
  [(c) Technical Assistance.--The Board of Governors shall 
consult with and provide such technical assistance as may be 
required by the appropriate financial regulators to ensure that 
the rules and orders prescribed under this title are 
interpreted and applied in as consistent and uniform a manner 
as practicable.
  [(d) Delegation.--
          [(1) Examination.--
                  [(A) Request to board of governors.--The 
                appropriate financial regulator may request the 
                Board of Governors to conduct or participate in 
                an examination of a financial institution 
                subject to the standards prescribed under 
                section 805(a) for a designated activity in 
                order to assess the compliance of such 
                financial institution with--
                          [(i) this title; or
                          [(ii) the rules or orders prescribed 
                        under this title.
                  [(B) Examination by board of governors.--Upon 
                receipt of an appropriate written request, the 
                Board of Governors will conduct the examination 
                under such terms and conditions to which the 
                Board of Governors and the appropriate 
                financial regulator mutually agree.
          [(2) Enforcement.--
                  [(A) Request to board of governors.--The 
                appropriate financial regulator may request the 
                Board of Governors to enforce this title or the 
                rules or orders prescribed under this title 
                against a financial institution that is subject 
                to the standards prescribed under section 
                805(a) for a designated activity.
                  [(B) Enforcement by board of governors.--Upon 
                receipt of an appropriate written request, the 
                Board of Governors shall determine whether an 
                enforcement action is warranted, and, if so, it 
                shall enforce compliance with this title or the 
                rules or orders prescribed under this title 
                and, if so, the financial institution shall be 
                subject to, and the Board of Governors shall 
                have authority under the provisions of 
                subsections (b) through (n) of section 8 of the 
                Federal Deposit Insurance Act (12 U.S.C. 1818) 
                in the same manner and to the same extent as if 
                the financial institution was an insured 
                depository institution and the Board of 
                Governors was the appropriate Federal banking 
                agency for such insured depository institution.
  [(e) Back-up Authority of the Board of Governors.--
          [(1) Examination and enforcement.--Notwithstanding 
        any other provision of law, the Board of Governors 
        may--
                  [(A) conduct an examination of the type 
                described in subsection (a) of any financial 
                institution that is subject to the standards 
                prescribed under section 805(a) for a 
                designated activity; and
                  [(B) enforce the provisions of this title or 
                any rules or orders prescribed under this title 
                against any financial institution that is 
                subject to the standards prescribed under 
                section 805(a) for a designated activity.
          [(2) Limitations.--
                  [(A) Examination.--The Board of Governors may 
                exercise the authority described in paragraph 
                (1)(A) only if the Board of Governors has--
                          [(i) reasonable cause to believe that 
                        a financial institution is not in 
                        compliance with this title or the rules 
                        or orders prescribed under this title 
                        with respect to a designated activity;
                          [(ii) notified, in writing, the 
                        appropriate financial regulator and the 
                        Council of its belief under clause (i) 
                        with supporting documentation included;
                          [(iii) requested the appropriate 
                        financial regulator to conduct a prompt 
                        examination of the financial 
                        institution;
                          [(iv) either--
                                  [(I) not been afforded a 
                                reasonable opportunity to 
                                participate in an examination 
                                of the financial institution by 
                                the appropriate financial 
                                regulator within 30 days after 
                                the date of the Board's 
                                notification under clause (ii); 
                                or
                                  [(II) reasonable cause to 
                                believe that the financial 
                                institution's noncompliance 
                                with this title or the rules or 
                                orders prescribed under this 
                                title poses a substantial risk 
                                to other financial 
                                institutions, critical markets, 
                                or the broader financial 
                                system, subject to the Board of 
                                Governors affording the 
                                appropriate financial regulator 
                                a reasonable opportunity to 
                                participate in the examination; 
                                and
                          [(v) obtained the approval of the 
                        Council upon an affirmative vote by a 
                        majority of the Council.
                  [(B) Enforcement.--The Board of Governors may 
                exercise the authority described in paragraph 
                (1)(B) only if the Board of Governors has--
                          [(i) reasonable cause to believe that 
                        a financial institution is not in 
                        compliance with this title or the rules 
                        or orders prescribed under this title 
                        with respect to a designated activity;
                          [(ii) notified, in writing, the 
                        appropriate financial regulator and the 
                        Council of its belief under clause (i) 
                        with supporting documentation included 
                        and with a recommendation that the 
                        appropriate financial regulator take 1 
                        or more specific enforcement actions 
                        against the financial institution;
                          [(iii) either--
                                  [(I) not been notified, in 
                                writing, by the appropriate 
                                financial regulator of the 
                                commencement of an enforcement 
                                action recommended by the Board 
                                of Governors against the 
                                financial institution within 60 
                                days from the date of the 
                                notification under clause (ii); 
                                or
                                  [(II) reasonable cause to 
                                believe that the financial 
                                institution's noncompliance 
                                with this title or the rules or 
                                orders prescribed under this 
                                title poses significant 
                                liquidity, credit, operational, 
                                or other risks to the financial 
                                markets or to the financial 
                                stability of the United States, 
                                subject to the Board of 
                                Governors notifying the 
                                appropriate financial regulator 
                                of the Board's enforcement 
                                action; and
                          [(iv) obtained the approval of the 
                        Council upon an affirmative vote by a 
                        majority of the Council.
          [(3) Enforcement provisions.--For purposes of taking 
        enforcement action under paragraph (1), the financial 
        institution shall be subject to, and the Board of 
        Governors shall have authority under the provisions of 
        subsections (b) through (n) of section 8 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818) in the same 
        manner and to the same extent as if the financial 
        institution was an insured depository institution and 
        the Board of Governors was the appropriate Federal 
        banking agency for such insured depository institution.

[SEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR RECORDS.

  [(a) Information To Assess Systemic Importance.--
          [(1) Financial market utilities.--The Council is 
        authorized to require any financial market utility to 
        submit such information as the Council may require for 
        the sole purpose of assessing whether that financial 
        market utility is systemically important, but only if 
        the Council has reasonable cause to believe that the 
        financial market utility meets the standards for 
        systemic importance set forth in section 804.
          [(2) Financial institutions engaged in payment, 
        clearing, or settlement activities.--The Council is 
        authorized to require any financial institution to 
        submit such information as the Council may require for 
        the sole purpose of assessing whether any payment, 
        clearing, or settlement activity engaged in or 
        supported by a financial institution is systemically 
        important, but only if the Council has reasonable cause 
        to believe that the activity meets the standards for 
        systemic importance set forth in section 804.
  [(b) Reporting After Designation.--
          [(1) Designated financial market utilities.--The 
        Board of Governors and the Council may each require a 
        designated financial market utility to submit reports 
        or data to the Board of Governors and the Council in 
        such frequency and form as deemed necessary by the 
        Board of Governors or the Council in order to assess 
        the safety and soundness of the utility and the 
        systemic risk that the utility's operations pose to the 
        financial system.
          [(2) Financial institutions subject to standards for 
        designated activities.--The Board of Governors and the 
        Council may each require 1 or more financial 
        institutions subject to the standards prescribed under 
        section 805(a) for a designated activity to submit, in 
        such frequency and form as deemed necessary by the 
        Board of Governors or the Council, reports and data to 
        the Board of Governors and the Council solely with 
        respect to the conduct of the designated activity and 
        solely to assess whether--
                  [(A) the rules, orders, or standards 
                prescribed under section 805(a) with respect to 
                the designated activity appropriately address 
                the risks to the financial system presented by 
                such activity; and
                  [(B) the financial institutions are in 
                compliance with this title and the rules and 
                orders prescribed under section 805(a) with 
                respect to the designated activity.
          [(3) Limitation.--The Board of Governors may, upon an 
        affirmative vote by a majority of the Council, 
        prescribe regulations under this section that impose a 
        recordkeeping or reporting requirement on designated 
        clearing entities or financial institutions engaged in 
        designated activities that are subject to standards 
        that have been prescribed under section 805(a)(2).
  [(c) Coordination With Appropriate Federal Supervisory 
Agency.--
          [(1) Advance coordination.--Before requesting any 
        material information from, or imposing reporting or 
        recordkeeping requirements on, any financial market 
        utility or any financial institution engaged in a 
        payment, clearing, or settlement activity, the Board of 
        Governors or the Council shall coordinate with the 
        Supervisory Agency for a financial market utility or 
        the appropriate financial regulator for a financial 
        institution to determine if the information is 
        available from or may be obtained by the agency in the 
        form, format, or detail required by the Board of 
        Governors or the Council.
          [(2) Supervisory reports.--Notwithstanding any other 
        provision of law, the Supervisory Agency, the 
        appropriate financial regulator, and the Board of 
        Governors are authorized to disclose to each other and 
        the Council copies of its examination reports or 
        similar reports regarding any financial market utility 
        or any financial institution engaged in payment, 
        clearing, or settlement activities.
  [(d) Timing of Response From Appropriate Federal Supervisory 
Agency.--If the information, report, records, or data requested 
by the Board of Governors or the Council under subsection 
(c)(1) are not provided in full by the Supervisory Agency or 
the appropriate financial regulator in less than 15 days after 
the date on which the material is requested, the Board of 
Governors or the Council may request the information or impose 
recordkeeping or reporting requirements directly on such 
persons as provided in subsections (a) and (b) with notice to 
the agency.
  [(e) Sharing of Information.--
          [(1) Material concerns.--Notwithstanding any other 
        provision of law, the Board of Governors, the Council, 
        the appropriate financial regulator, and any 
        Supervisory Agency are authorized to--
                  [(A) promptly notify each other of material 
                concerns about a designated financial market 
                utility or any financial institution engaged in 
                designated activities; and
                  [(B) share appropriate reports, information, 
                or data relating to such concerns.
          [(2) Other information.--Notwithstanding any other 
        provision of law, the Board of Governors, the Council, 
        the appropriate financial regulator, or any Supervisory 
        Agency may, under such terms and conditions as it deems 
        appropriate, provide confidential supervisory 
        information and other information obtained under this 
        title to each other, and to the Secretary, Federal 
        Reserve Banks, State financial institution supervisory 
        agencies, foreign financial supervisors, foreign 
        central banks, and foreign finance ministries, subject 
        to reasonable assurances of confidentiality, provided, 
        however, that no person or entity receiving information 
        pursuant to this section may disseminate such 
        information to entities or persons other than those 
        listed in this paragraph without complying with 
        applicable law, including section 8 of the Commodity 
        Exchange Act (7 U.S.C. 12).
  [(f) Privilege Maintained.--The Board of Governors, the 
Council, the appropriate financial regulator, and any 
Supervisory Agency providing reports or data under this section 
shall not be deemed to have waived any privilege applicable to 
those reports or data, or any portion thereof, by providing the 
reports or data to the other party or by permitting the reports 
or data, or any copies thereof, to be used by the other party.
  [(g) Disclosure Exemption.--Information obtained by the Board 
of Governors, the Supervisory Agencies, or the Council under 
this section and any materials prepared by the Board of 
Governors, the Supervisory Agencies, or the Council regarding 
their assessment of the systemic importance of financial market 
utilities or any payment, clearing, or settlement activities 
engaged in by financial institutions, and in connection with 
their supervision of designated financial market utilities and 
designated activities, shall be confidential supervisory 
information exempt from disclosure under section 552 of title 
5, United States Code. For purposes of such section 552, this 
subsection shall be considered a statute described in 
subsection (b)(3) of such section 552.

[SEC. 810. RULEMAKING.

  [The Board of Governors, the Supervisory Agencies, and the 
Council are authorized to prescribe such rules and issue such 
orders as may be necessary to administer and carry out their 
respective authorities and duties granted under this title and 
prevent evasions thereof.

[SEC. 811. OTHER AUTHORITY.

  [Unless otherwise provided by its terms, this title does not 
divest any appropriate financial regulator, any Supervisory 
Agency, or any other Federal or State agency, of any authority 
derived from any other applicable law, except that any 
standards prescribed by the Board of Governors under section 
805 shall supersede any less stringent requirements established 
under other authority to the extent of any conflict.

[SEC. 812. CONSULTATION.

  [(a) CFTC.--The Commodity Futures Trading Commission shall 
consult with the Board of Governors--
          [(1) prior to exercising its authorities under 
        sections 2(h)(2)(C), 2(h)(3)(A), 2(h)(3)(C), 
        2(h)(4)(A), and 2(h)(4)(B) of the Commodity Exchange 
        Act, as amended by the Wall Street Transparency and 
        Accountability Act of 2010;
          [(2) with respect to any rule or rule amendment of a 
        derivatives clearing organization for which a stay of 
        certification has been issued under section 745(b)(3) 
        of the Wall Street Transparency and Accountability Act 
        of 2010; and
          [(3) prior to exercising its rulemaking authorities 
        under section 728 of the Wall Street Transparency and 
        Accountability Act of 2010.
  [(b) SEC.--The Commission shall consult with the Board of 
Governors--
          [(1) prior to exercising its authorities under 
        sections 3C(a)(2)(C), 3C(a)(3)(A), 3C(a)(3)(C), 
        3C(a)(4)(A), and 3C(a)(4)(B) of the Securities Exchange 
        Act of 1934, as amended by the Wall Street Transparency 
        and Accountability Act of 2010;
          [(2) with respect to any proposed rule change of a 
        clearing agency for which an extension of the time for 
        review has been designated under section 19(b)(2) of 
        the Securities Exchange Act of 1934; and
          [(3) prior to exercising its rulemaking authorities 
        under section 13(n) of the Securities Exchange Act of 
        1934, as added by section 763(i) of the Wall Street 
        Transparency and Accountability Act of 2010.

[SEC. 813. COMMON FRAMEWORK FOR DESIGNATED CLEARING ENTITY RISK 
                    MANAGEMENT.

  [The Commodity Futures Trading Commission and the Commission 
shall coordinate with the Board of Governors to jointly develop 
risk management supervision programs for designated clearing 
entities. Not later than 1 year after the date of enactment of 
this Act, the Commodity Futures Trading Commission, the 
Commission, and the Board of Governors shall submit a joint 
report to the Committee on Banking, Housing, and Urban Affairs 
and the Committee on Agriculture, Nutrition, and Forestry of 
the Senate, and the Committee on Financial Services and the 
Committee on Agriculture of the House of Representatives 
recommendations for--
          [(1) improving consistency in the designated clearing 
        entity oversight programs of the Commission and the 
        Commodity Futures Trading Commission;
          [(2) promoting robust risk management by designated 
        clearing entities;
          [(3) promoting robust risk management oversight by 
        regulators of designated clearing entities; and
          [(4) improving regulators' ability to monitor the 
        potential effects of designated clearing entity risk 
        management on the stability of the financial system of 
        the United States.

[SEC. 814. EFFECTIVE DATE.

  [This title is effective as of the date of enactment of this 
Act.]

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 4247 is a dangerous bill that would eliminate federal 
oversight of the systems involved in completing trillions of 
dollars in U.S. financial transactions per year. Specifically, 
the bill calls for the wholesale repeal of Title VIII of the 
Dodd-Frank Act, which authorizes the Federal Reserve, in 
coordination with other federal financial regulators, to 
supervise certain financial market utilities that provide 
critical infrastructure for transferring, clearing, and 
settling financial transactions between financial institutions.
    In the years leading up to the financial crisis, Wall 
Street used the unregulated over-the-counter derivative market 
to fuel demand for subprime mortgage securitization. 
Specifically, the unrestrained sale of credit default swaps--a 
type of derivative that supposedly insures the buyer against 
investment losses--obscured risks in the mortgage-backed 
securities markets. When the mortgages underlying these 
securities began to default, swaps sellers such as AIG found 
themselves without the resources to pay out insurance claims. 
To stop the spread of devastating losses across the U.S. 
financial system, the federal government stepped in and bailed 
out AIG to the tune of $180 billion in taxpayer funds.
    In 2011, the Financial Crisis Inquiry Commission found that 
the over-the-counter derivatives market was characterized by 
``uncontrolled leverage; lack of transparency, capital, and 
collateral requirements; speculation; interconnections among 
firms; and concentrations of risk. . . .'' The Dodd-Frank Act 
was enacted to protect American taxpayers from similar 
recklessness on Wall Street. Title VII, for example, generally 
requires that swaps transactions be cleared through a central 
clearing agency. This requirement increases the transparency 
and liquidity of swap transactions and mitigates counterparty 
credit risks of the type that resulted in the taxpayer bailout 
of AIG. The new central role of clearing agencies in the U.S. 
financial system necessitates robust oversight, which is 
afforded under Title VIII.
    Title VIII of Dodd-Frank authorizes the Financial Stability 
Oversight Council (``FSOC'') to designate certain financial 
market utilities (FMUs), like swaps clearinghouses, as 
``systemically important,'' and thereby subject to enhanced 
supervision and regulation by financial regulators. 
Systemically important FMUs include systems that, if they were 
to fail, could cause other failures to spread throughout the 
financial system and thereby undermine the U.S. economy. 
Additionally, to ensure financial stability, Title VIII gives 
the Federal Reserve the discretion to provide certain 
designated FMUs, in unusual or exigent circumstances, with 
access to the discount window through a collateralized, 
margined loan. Title VIII also authorizes the Federal Reserve 
to take emergency enforcement action against a designated FMU 
if there is reason to believe that an action taken or 
contemplated by the FMU poses an imminent risk of substantial 
harm to financial institutions, critical markets, or the U.S. 
financial system.
    Since the passage of Dodd-Frank, the FSOC, by a unanimous 
vote, has designated eight FMUs as systemically important 
pursuant to Title VIII. FSOC concluded that these entities were 
systemically important based on the aggregate monetary value of 
transactions processed by the entity; the aggregate exposure of 
the entity to its counterparties; the interconnectedness of the 
entity with other FMUs; and the effect that a failure of or 
disruption to the entity would have on critical markets, 
financial institutions, and the broader financial system. 
Additionally, the Federal Reserve has used its Title VIII 
authority to establish risk-management standards and 
expectations for certain FMUs, and to work with the Securities 
and Exchange Commission and the Commodity Futures Trading 
Commission to share information and conduct examinations of 
designated FMUs.
    H.R. 4247 would do away with the entirety of Title VIII and 
would thereby eliminate any meaningful oversight of FMUs. In a 
letter to the Committee opposing H.R. 4247, Americans for 
Financial Reform explained that, ``proper operations and risk 
management at these firms are critical to trillions of dollars 
in financial transactions that occur on a daily basis, and 
failures in risk management or oversight at such firms could 
lead financial markets to be severely disrupted almost 
instantaneously.'' Public Citizen similarly opposed H.R. 4247, 
writing that ``eliminating [Title VIII] would be reckless.''
    H.R. 4247 is dangerous legislation that would weaken 
regulatory effectiveness and once again allow unchecked 
systemic risks to hurt hardworking Americans.
    For these reasons, we oppose H.R. 4247.

                                   Maxine Waters.
                                   Stephen F. Lynch.
                                   Michael E. Capuano.
                                   Carolyn B. Maloney.
                                   Al Green.
                                   Daniel T. Kildee.
                                   Gregory W. Meeks.
                                   Ruben J. Kihuen.
                                   Gwen Moore.
                                   Brad Sherman.
                                   Vicente Gonzalez.
                                   Emanuel Cleaver.

                                  [all]