PROTECT Act

Summary: Protection from Rogue Oil Traders Engaging in Computerized Trading Act or PROTECT Act - Amends the Commodities Exchange Act to make it unlawful to engage in an activity that the Commodities Futures Trading Commission (CFTC) has defined as high frequency trading, unless the person has registered with the CFTC as a high frequency trader, and the registration has neither expired nor been suspended or revoked. Prescribes requirements governing high frequency trading.  Requires the fine for a high frequency trading violation to be based on the number of seconds, including fractions of seconds, during which the violation continued. Authorizes the CFTC to define the scope of any violation for purposes of determining the number involved in any civil case arising under this Act. Increases the civil penalties for violations of the prohibition against manipulation and false information with respect to swaps and commodities.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protection from Rogue Oil Traders 
Engaging in Computerized Trading Act'' or the ``PROTECT Act''.

SEC. 2. REQUIREMENTS APPLICABLE TO HIGH FREQUENCY TRADERS OF COMMODITY 
              FUTURES AND OPTIONS.

    (a) In General.--The Commodity Exchange Act (7 U.S.C. 1 et seq.) is 
amended by inserting after section 4t the following:

``SEC. 4U. REQUIREMENTS APPLICABLE TO HIGH FREQUENCY TRADERS.

    ``(a) Registration.--It shall be unlawful for any person to engage 
in an activity that the Commission has defined in regulations as high 
frequency trading, unless the person has registered with the Commission 
(in such form, in such manner, and providing such information as the 
Commission shall prescribe) as a high frequency trader, and the 
registration has not expired or been suspended or revoked.
    ``(b) Other Requirements.--A registered high frequency trader 
shall--
            ``(1) test all computer programs and algorithms used by the 
        trader in any high frequency trading activity and determine 
        whether the programs and algorithms are functioning properly, 
        in such manner and with such frequency as the Commission shall 
        prescribe in regulations;
            ``(2) establish and document high frequency trading system 
        safeguards reasonably designed to ensure the proper function of 
        all programs and algorithms used by the high frequency trader 
        including conditions and parameters relating to the automatic 
        termination, pausing, or cancellation of the trader's messaging 
        or trading activity, maximum message and trade execution rates 
        and order sizes, intra-day risk position limits, and market and 
        trade monitoring systems that are appropriate for ensuring 
        compliance with the system safeguards, including systems 
        designed to monitor market volatility and the trader's risk 
        position on an intra-day basis;
            ``(3) shall not simultaneously purchase and sell through 
        the same or different accounts the same commodity contract, 
        agreement, or transaction, unless the simultaneous purchases 
        and sales are of a de minimis quantity and are reported to the 
        Commission periodically, in a form and manner to be determined 
        by the Commission;
            ``(4) submit to the Commission semiannual reports on the 
        high frequency trading activities of the trader during the 
        period covered by the report, in such form, in such manner, and 
        containing such information as the Commission may require, 
        signed by the chief executive officer (or equivalent officer) 
        of the trader; and
            ``(5) conform with such business conduct standards as may 
        be prescribed by the Commission by rule or regulation that 
        relate to--
                    ``(A) fraud, manipulation, and other abusive or 
                disruptive practices, and other practices that may 
                affect market integrity involving high frequency 
                traders (including high frequency trades that are 
                offered but not entered into); and
                    ``(B) such other matters as the Commission may 
                determine are appropriate in the public interest or 
                otherwise in furtherance of the purposes of this Act, 
                including information necessary to develop a 
                classification scheme and public reports relating to 
                high frequency traders and trading activity and sub-
                categories thereto.''.
    (b) Deadline for Issuance of Rules Defining High Frequency 
Trading.--Within 9 months after the date of the enactment of this Act, 
the Commodity Futures Trading Commission shall prescribe final 
regulations defining the activities that shall be considered to be high 
frequency trading for purposes of section 4u of the Commodities 
Exchange Act.

SEC. 3. FINE FOR HIGH FREQUENCY TRADING VIOLATION REQUIRED TO BE BASED 
              ON THE DURATION OF THE VIOLATION.

    Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended by 
adding at the end the following:
    ``(f) Fine for High Frequency Trading Violation Required To Be 
Based on the Duration of the Violation.--The amount of a fine imposed 
under this Act with respect to a violation of a high frequency trading 
regulation shall be determined on the basis of the number of seconds, 
including fractions of seconds, during which the violation 
continued.''.

SEC. 4. CIVIL PENALTIES UNDER THE COMMODITY EXCHANGE ACT.

    (a) Authority of the Commodity Futures Trading Commission To Define 
Meaning of ``Each Violation''.--Section 9 of the Commodity Exchange Act 
(7 U.S.C. 13), as amended by section 3 of this Act, is amended by 
adding at the end the following:
    ``(g) Authority To Define Scope of Violation.--The Commission may 
define the scope of any violation for purposes of determining the 
number of violations involved in any case arising under this Act.''.
    (b) Enforcement Powers of the Commission.--Section 6 of such Act is 
amended--
            (1) in paragraph (10) of subsection (c) (7 U.S.C. 9), by 
        striking subparagraph (C) and inserting the following:
                    ``(C) assess such person--
                            ``(i) a civil penalty of not more than an 
                        amount equal to the greater of--
                                    ``(I) $1,000,000, in the case of a 
                                person who is an individual, for each 
                                violation;
                                    ``(II) $10,000,000, in the case of 
                                any person other than an individual, 
                                for each violation;
                                    ``(III) triple the monetary gain to 
                                the person and all other persons acting 
                                in concert with the person, for each 
                                such violation; or
                                    ``(IV) triple the total amount of 
                                losses to persons proximately caused by 
                                each such violation; or
                            ``(ii) a civil penalty of triple the 
                        maximum amount otherwise available under clause 
                        (i) if the person, within 5 years preceding the 
                        violation, has been--
                                    ``(I) found in a proceeding brought 
                                by the Commission, or by agreement of 
                                settlement to which the Commission is a 
                                party, to have recklessly or willfully 
                                violated any provision of this Act or 
                                of the rules, regulations, or orders of 
                                the Commission thereunder; or
                                    ``(II) convicted of any criminal 
                                offense that involves a violation of 
                                this Act or of the rules, regulations, 
                                or orders of the Commission thereunder; 
                                and'';
            (2) in subsection (d) (7 U.S.C. 13b)--
                    (A) by inserting ``(1)'' after ``(d)'';
                    (B) by striking ``$140,000 or triple the monetary 
                gain to such person,'' and inserting ``(A) $1,000,000, 
                in the case of a person who is an individual, for each 
                violation, (B) $10,000,000, in the case of any person 
                other than an individual, for each violation, (C) 
                triple the monetary gain to the person and all other 
                persons acting in concert with the person, for each 
                such violation, or (D) triple the total amount of 
                losses to persons proximately caused by each such 
                violation,''; and
                    (C) by striking the period and inserting ``; and''; 
                and
                    (D) by adding after and below the end the 
                following:
            ``(2)(A) A person shall be held liable for a civil penalty 
        in triple the amount otherwise available for a violation under 
        this subsection if the person, within 5 years preceding such 
        violation, has been--
                    ``(i) found in a proceeding brought by the 
                Commission, or by agreement of settlement to which the 
                Commission is a party, to have recklessly or willfully 
                violated any provision of this Act or the rules, 
                regulations, or orders of the Commission thereunder; or
                    ``(ii) convicted of any criminal offense that 
                involves violation of this Act or the rules, 
                regulations, or orders of the Commission thereunder.''.
    (c) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of such Act (7 U.S.C. 13a) is amended in the 1st sentence--
            (1) by striking ``$500,000 for each such violation, or, in 
        any case of manipulation or attempted manipulation in violation 
        of section 6(c), 6(d), or 9(a)(2), a civil penalty of not more 
        than $1,000,000 for each such violation'' and inserting ``(A) 
        $1,000,000, in the case of a person who is an individual, for 
        each violation, (B) $10,000,000, in the case of any person 
        other than an individual, for each violation, (C) triple the 
        monetary gain to the person and all other persons acting in 
        concert with the person, for each such violation, or (D) triple 
        the total amount of losses to persons proximately caused by 
        each such violation, and such civil penalty shall be assessed 
        for each violation on which a failure to enforce or other 
        violation occurs or has occurred; provided that a registered 
        entity, director, officer, agent, or employee shall be assessed 
        a civil penalty of triple the amount otherwise available if the 
        person, within 5 years of such violation, has been found in a 
        proceeding brought by the Commission, or by agreement of 
        settlement to which the Commission is a party, to have 
        recklessly or willfully violated any provision of this Act or 
        the rules, regulations, or orders of the Commission thereunder, 
        or convicted of any criminal offense that involves a violation 
        of this Act or the rules, regulations, or orders of the 
        Commission thereunder''.
    (d) Action To Enjoin or Restrain Violations.--Section 6c(d) of such 
Act (7 U.S.C. 13a-1(d)) is amended--
            (1) in paragraph (1), by inserting ``a civil penalty in the 
        amount of'' after ``violation''; and
            (2) by striking subparagraphs (A) and (B) of paragraph (1) 
        and inserting the following:
                    ``(A) not more than the greater of--
                            ``(i) ``$1,000,000, in the case of a person 
                        who is an individual, for each violation;
                            ``(ii) $10,000,000, in the case of any 
                        person other than an individual, for each 
                        violation;
                            ``(iii) triple the monetary gain to the 
                        person and all other persons acting in concert 
                        with the person, for each such violation; or
                            ``(iv) triple the total amount of losses by 
                        persons proximately caused by each such 
                        violation; or
                    ``(B) triple the maximum amount otherwise available 
                under subparagraph (A) if the person, within 5 years 
                preceding the violation, has been--
                            ``(i) found in a proceeding brought by the 
                        Commission, or by agreement of settlement to 
                        which the Commission is a party, to have 
                        recklessly or willfully violated any provision 
                        of this Act or of the rules, regulations, or 
                        orders of the Commission thereunder; or
                            ``(ii) convicted of any criminal offense 
                        that involves a violation of this Act or of the 
                        rules, regulations, or orders of the Commission 
                        thereunder.''.
    (e) Criminal Penalties.--Section 9(a) of such Act (7 U.S.C. 13(a)) 
is amended by inserting ``in the case of an individual or $10,000,000 
in the case of any person other than an individual, for each 
violation,'' after ``$1,000,000''.
    (f) Statute of Limitations.--Section 9 of such Act (7 U.S.C. 13) is 
amended by adding at the end the following:
    ``(f) Statute of Limitations.--An action, suit or proceeding for 
the enforcement of any civil fine, penalty, or forfeiture, pecuniary or 
otherwise, shall not be entertained unless commenced within 10 years 
after the date when the claim first accrued if, within the same period, 
the offender or the property is found within the United States in order 
that proper service may be made thereon.''.

SEC. 5. EFFECTIVE DATES.

    (a) Requirements Applicable to High Frequency Traders.--The 
amendment made by section 2(a) shall take effect on the date that is 9 
months after the date of the enactment of this Act.
    (b) Penalties Provisions.--The amendments made by sections 3 and 4 
shall take effect on the date that is 15 days after the date of the 
enactment of this Act.