A bill to provide for the orderly implementation of the provisions of title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Dodd-Frank Improvement Act of 
2011''.

SEC. 2. DODD-FRANK IMPROVEMENTS REGARDING REGULATION OF DERIVATIVES.

    (a) Establishment.--Section 4 of the Securities Exchange Act of 
1934 (15 U.S.C. 78d) is amended by adding at the end the following:
    ``(j) Office of Derivatives.--
            ``(1) Office established.--There is established within the 
        Commission the Office of Derivatives (referred to in this 
        subsection as the `Office')--
                    ``(A) to administer the rules of the Commission 
                with respect to security-based swaps and, as necessary, 
                to make recommendations to the Commission for new rules 
                or changes to existing rules with respect to security-
                based swaps;
                    ``(B) to coordinate oversight of the market for 
                swaps and security-based swaps, participants in that 
                market, and infrastructure providers for that market 
                with other relevant domestic and international 
                regulators; and
                    ``(C) to monitor developments in the market for 
                swaps and security-based swaps.
            ``(2) Director of the office.--The head of the Office shall 
        be the Director, who shall report to the Director of the 
        Division of Trading and Markets and the Director of Risk, 
        Strategy, and Financial Innovation.
            ``(3) Staffing.--
                    ``(A) In general.--The Office shall be staffed by 
                persons transferred in accordance with subparagraph 
                (B), including persons having knowledge of and 
                expertise in the uses for, trading in, execution of, 
                and clearing of swaps and security-based swaps.
                    ``(B) Transfers.--The Director of the Office of 
                Derivatives, the Director of the Division of Trading 
                and Markets, the Director of Risk, Strategy, and 
                Financial Innovation, and the Director of the Office of 
                Compliance, Inspections, and Examinations shall jointly 
                identify employees to be transferred from the Division 
                of Trading and Markets, the Division of Risk, Strategy, 
                and Financial Innovation, and the Office of Compliance, 
                Inspections, and Examinations, respectively, to the 
                Office of Derivatives, in numbers sufficient to carry 
                out fully the requirements of this subsection.
            ``(4) Enforcement.--The Division of Enforcement shall 
        consult with the Office before presenting a recommendation with 
        respect to security-based swaps to the Commission.
            ``(5) Inspections and examinations.--A representative of 
        the Office shall be afforded the opportunity to participate in 
        any inspection or examination of a security-based swap dealer, 
        major security-based swap participant, security-based swap data 
        repository, or clearing agency that clears security-based 
        swaps.
            ``(6) Annual report.--On or before the date that is one 
        year after the Office is established and annually thereafter, 
        the Director shall submit to the Chairman and publish on the 
        public website of the Commission a report that describes the 
        activities of the Office during the preceding year, and the 
        developments in the swaps and security-based swaps market.''
    (b) Orderly Implementation of Derivatives Provisions.--
            (1) Review of regulatory authority.--Section 712 of the 
        Dodd-Frank Wall Street Reform and Consumer Protection Act (15 
        U.S.C. 8302) is amended--
                    (A) in each of subsections (a)(3) and (e), by 
                striking ``360'' each place that term appears and 
                inserting ``720''; and
                    (B) by adding at the end the following:
    ``(g) Orderly Implementation Schedule.--
            ``(1) In general.--Not later than December 31, 2011, the 
        Commodity Futures Trading Commission, the Securities and 
        Exchange Commission, and the prudential regulators shall 
        jointly, pursuant to the notice and comment requirements 
        contained in title 5, United States Code, adopt an 
        implementation schedule for this title.
            ``(2) Schedule content.--Such implementation schedule 
        shall--
                    ``(A) set forth a schedule for the publication of 
                final rules required by this title, except that, unless 
                otherwise specifically provided by a provision of this 
                title, the rules required by subsection (d)(1) shall be 
                adopted before any other required rules;
                    ``(B) set forth a schedule for the effective dates 
                for provisions of this title, including provisions that 
                require a rulemaking and provisions that do not require 
                a rulemaking;
                    ``(C) take into consideration--
                            ``(i) a quantitative analysis of the 
                        effects of this title on United States economic 
                        growth and job creation;
                            ``(ii) the implications of this title for 
                        cross-border activity by, and international 
                        competitiveness of, United States financial 
                        institutions, companies, and investors;
                            ``(iii) whether and how the definitional, 
                        clearing, trading, reporting, recordkeeping, 
                        real-time reporting, registration, capital, 
                        margin, business conduct, position limits and 
                        other requirements of this title work together, 
                        and how they affect market depth and liquidity; 
                        and
                            ``(iv) the implications of any lack of 
                        harmonization by the Securities and Exchange 
                        Commission, the Commodity Futures Trading 
                        Commission, and the prudential regulators with 
                        respect to the timing and the substance of 
                        their rules.
    ``(h) Orderly Implementation Authority.--Notwithstanding any other 
provision of law, the Commodity Futures Trading Commission, the 
Securities and Exchange Commission and the prudential regulators, by 
rule, regulation, or order, may conditionally or unconditionally exempt 
any person, swap, security-based swap, activity, or transaction, or any 
class or classes of persons, swaps, security-based swaps, activities, 
or transactions, from any provision or provisions of this title 
administered thereby, or any rule or regulation thereunder, to the 
extent that such exemption is necessary or appropriate in the public 
interest and is in furtherance of the objectives of this title, such as 
the orderly implementation and international harmonization of the 
timing and substance of derivatives regulatory reform.''.
            (2) Effective dates.--Title VII of the Dodd-Frank Wall 
        Street Reform and Consumer Protection Act (Public Law 111-203, 
        124 Stat. 1641) is amended--
                    (A) in section 754 (7 U.S.C. 7a note), by striking 
                ``the later of'' and all that follows through the 
                period and inserting ``the dates specified in the 
                implementation schedule adopted pursuant to section 
                712(g).''; and
                    (B) in section 774 (15 U.S.C. 77b note), by 
                striking ``the later of'' and all that follows through 
                the period and inserting ``the dates specified in the 
                implementation schedule adopted pursuant to section 
                712(g).''.
    (c) Clarification of End User Status.--
            (1) End users of swaps.--
                    (A) Margin requirements.--Section 4s(e) of the 
                Commodity Exchange Act (7 U.S.C. 6s(e)), as added by 
                section 731 of the Dodd-Frank Wall Street Reform and 
                Consumer Protection Act, is amended by adding at the 
                end the following:
            ``(4) Applicability with respect to counterparties.--The 
        margin requirements of this subsection shall not apply to a 
        swap in which one of the counterparties is not--
                    ``(A) a swap dealer or major swap participant;
                    ``(B) an investment fund that--
                            ``(i) has issued securities (other than 
                        debt securities) to more than 5 unaffiliated 
                        persons;
                            ``(ii) would be an investment company (as 
                        defined in section 3 of the Investment Company 
                        Act of 1940 (15 U.S.C. 80a-3)) but for 
                        paragraph (1) or (7) of subsection (c) of that 
                        section; and
                            ``(iii) is not primarily invested in 
                        physical assets (including commercial real 
                        estate) directly or through an interest in an 
                        affiliate that owns the physical assets;
                    ``(C) a regulated entity, as defined in section 
                1303 of the Federal Housing Enterprises Financial 
                Safety and Soundness Act of 1992 (12 U.S.C. 4502); or
                    ``(D) a commodity pool that is predominantly 
                invested in any combination of commodities, commodity 
                swaps, commodity options, or commodity futures.
            ``(5) Margin transition rules.--Swaps entered into before 
        the date on which final rules under section 712(e) of the Dodd-
        Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 
        8302(e)) become effective shall be exempt from the margin 
        requirements under this subsection.''.
                    (B) Major swap participant.--Section 1a(33)(A) of 
                the Commodity Exchange Act (7 U.S.C. 1a(33)(A)) is 
                amended by striking clause (ii) and inserting the 
                following:
                            ``(ii) whose outstanding swaps create 
                        substantial net uncollateralized counterparty 
                        exposure that could have serious adverse 
                        effects on the financial stability of the 
                        United States banking system or financial 
                        markets; or''.
                    (C) Effective date.--The amendments made by 
                subsection (a) shall have the same effective date as 
                provided in section 754 of the Dodd-Frank Wall Street 
                Reform and Consumer Protection Act, as amended by 
                section 1(b) of this Act.
            (2) End users of security-based swaps.--
                    (A) Margin requirements.--Section 15F(e) of the 
                Securities Exchange Act of 1934 (15 U.S.C. 780-10(e)), 
                as added by section 764 of the Dodd-Frank Wall Street 
                Reform and Consumer Protection Act, is amended by 
                adding at the end the following:
            ``(4) Applicability with respect to counterparties.--The 
        margin requirements of this subsection shall not apply to a 
        security-based swap in which one of the counterparties is not--
                    ``(A) a security-based swap dealer or major 
                security-based swap participant;
                    ``(B) an investment fund that would be an 
                investment company (as defined in section 3 of the 
                Investment Company Act of 1940 (15 U.S.C. 80a-3)), but 
                for paragraph (1) or (7) of section 3(c) of that Act 
                (15 U.S.C. 80a-3(c)), that is not primarily invested in 
                physical assets (including commercial real estate) 
                directly or through interest in its affiliates that own 
                such assets;
                    ``(C) a regulated entity, as defined in section 
                1303 of the Federal Housing Enterprises Financial 
                Safety and Soundness Act of 1992 (12 U.S.C. 4502); or
                    ``(D) a commodity pool that is predominantly 
                invested in any combination of commodities, commodity 
                swaps, commodity options or commodity futures.
            ``(5) Margin transition rules.--Security-based swaps 
        entered into before the date on which final rules under section 
        712(e) of the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act become effective are exempt from the margin 
        requirements of this subsection.''.
                    (B) Major security-based swap participant.--Section 
                3(a)(67)(A)(ii)(II) of the Securities Exchange Act of 
                1934 (15 U.S.C. 78c(a)(67)(A)(ii)(II)), is amended to 
                read as follows:
                                    ``(II) whose outstanding security-
                                based swaps create substantial net 
                                uncollateralized counterparty exposure 
                                that could have serious adverse effects 
                                on the financial stability of the 
                                United States banking system or 
                                financial markets;''.
                    (C) Effective date.--The amendments made by this 
                paragraph shall have the same effective date as 
                provided in section 774 of the Dodd-Frank Wall Street 
                Reform and Consumer Protection Act, as amended by this 
                Act.
    (d) Treatment of Affiliate Transactions.--Title VII of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8301 et 
seq.) is amended by inserting after section 713 (15 U.S.C. the 
following new section:

``SEC. 713A. TREATMENT OF AFFILIATE TRANSACTIONS.

    ``(a) In General.--An agreement, contract, or transaction that 
would otherwise be a swap or security-based swap, and that is entered 
into by a party that is controlling, controlled by, or under common 
control with its counterparty shall not be deemed to be a `swap' or 
`security-based swap' for purposes of this Act.
    ``(b) Reporting.--All agreements, contracts, or transactions 
described in subsection (a) shall be reported to either a swap data 
repository, or, if there is no swap data repository that would accept 
such transaction reports, to the Commission pursuant to sections 729 
and 766. within such time period as the Commission may prescribe by 
rule or regulation.''.
    (e) International Competitiveness and Harmonization.--
            (1) Study on international swap regulation.--Section 
        719(c)(2) of the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act (15 U.S.C. 8307(c)(2)) is amended--
                    (A) by striking ``18'' and inserting ``30'';
                    (B) in subparagraph (C), by striking ``and'' at the 
                end;
                    (C) in subparagraph (D), by striking the period at 
                the end and inserting ``; and''; and
                    (D) by adding at the end the following:
                    ``(E) an analysis of the progress of members of the 
                Group of 20 and other countries toward implementing 
                derivatives regulatory reform, including material 
                differences in the schedule for implementation (as well 
                as material differences in definitions, clearing, 
                trading, reporting, registration, capital, margin, 
                business conduct, and position limits) and their 
                possible and likely effects on United States 
                competitiveness, market liquidity, and financial 
                stability.''.
            (2) Applicability.--The Dodd-Frank Wall Street Reform and 
        Consumer Protection Act is amended by inserting after section 
        719 the following new section:

``SEC. 719A. APPLICABILITY.

    ``(a) In General.--Subject to subsections (b) and (c), and 
notwithstanding any other provision of this title, no activities 
conducted outside of the United States between counterparties 
established under the laws of any jurisdiction outside of the United 
States (including a non-United States branch of a United States entity 
licensed and recognized under local law outside of the United States) 
shall be considered--
            ``(1) to have a direct and significant connection with 
        activities in, or effect on, commerce of the United States;
            ``(2) to constitute a business within the jurisdiction of 
        the United States; or
            ``(3) to constitute evasion of any provision of this title, 
        unless those activities contravene such rules as may be adopted 
        by the Commodity Futures Trading Commission and the Securities 
        and Exchange Commission pursuant to subsection (b).
    ``(b) Rulemaking.--After completing the report required by section 
719(c)(2), the Commodity Futures Trading Commission and the Securities 
and Exchange Commission may jointly issue such rules as are necessary 
to prohibit transactions or activities, or classes of transactions or 
activities conducted outside of the United States that the agencies 
find--
            ``(1) have no valid business purpose;
            ``(2) are structured with the sole purpose of evading the 
        requirements of this title; and
            ``(3) might reasonably be expected to have a serious 
        adverse effect on the stability of the United States financial 
        system.
    ``(c) Exception.--Subsection (a) shall not apply to any provision 
of this title prohibiting fraud or manipulation or any rule or 
regulation thereunder.''.

Summary: Dodd-Frank Improvement Act of 2011 - Amends the Securities Exchange Act of 1934 to establish the Office of Derivatives within the Securities and Exchange Commission (SEC) to: (1) administer SEC rules governing security-based swaps, (2) coordinate oversight of the market for swaps and security-based swaps with domestic and international regulators, and (3) monitor the swaps and security-based swaps market. Amends the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to: (1) extend the date of issuance for certain regulations regarding the swaps and security-based swaps market, and (2) set a deadline for the SEC, the Commodity Futures Trading Commission (CFTC), and the prudential regulators to adopt jointly an implementation schedule for the regulation of the over-the-counter-swaps market. Amends the Commodity Exchange Act, with respect to the registration and regulation of swap dealers and major swap participants, to exempt from specified margin requirements any swaps in which one of the counterparties is not: (1) a swap dealer or a major swap participant. (2) the Federal National Mortgage Association or any affiliate, the Federal Home Loan Mortgage Corporation or any affiliate, or any Federal Home Loan Bank. Or (3) a commodity pool predominantly invested in any combination of commodities, commodity swaps, commodity options, or commodity futures. Exempts from such margin requirements also an investment fund that: (1) has issued non-debt securities to more than five unaffiliated persons, (2) would be an investment company but for specified disqualifications, and (3) is not primarily invested in physical assets directly or through an interest in an affiliate that owns the physical assets. Exempts also from such requirements swaps entered into before the date on which final rules become effective. Amends the Securities Exchange Act of 1934 to exempt from the margin requirements for security-based swap dealers and major security-based swap participants any security-based swap in which one of the counterparties is not: (1) a security-based swap dealer or major security-based swap participant. (2) an investment fund that would be an investment company but for specified disqualifications, and is not primarily invested in physical assets directly or through an interest in an affiliate that owns the physical assets. (3) Fannie Mae or an affiliate, Freddie Mac or an affiliate, or a Federal Home Loan Bank. Or (4) a commodity pool predominantly invested in any combination of commodities, commodity swaps, commodity options, or commodity futures. Exempts also from such requirements security-based swaps entered into before the date on which final rules become effective. Amends Dodd-Frank to state that an agreement, contract, or transaction entered into by a party that is either controlling, controlled by, or under common control with its counterparty shall not be deemed a swap or security-based swap subject to regulation under such Act. Requires that such affiliate transactions be reported to either a swap data repository or to the SEC, if there is no swap data repository that would accept such transaction reports. Requires the CFTC and the SEC to add to a required study on the effects of position limits on trading on exchanges in the United States an analysis of the progress made by members of the Group of 20 and other countries toward implementing derivatives regulatory reform, and on possible and likely effects on United States competitiveness, market liquidity, and financial stability. Authorizes the two agencies, upon completion of a report to Congress on such study, to issue jointly any rules necessary to prohibit transactions or activities, or classes of transactions or activities conducted outside of the United States, that they find: (1) have no valid business purpose, (2) are structured with the sole purpose of evading the requirements of the Wall Street Transparency and Accountability Act of 2010, and (3) might reasonably be expected to have a serious adverse effect upon the stability of the US financial system. States that activities conducted outside of the United States between counterparties established under the laws of any jurisdiction outside of the United States shall not be considered to: (1) have a direct and significant connection with activities in, or effect upon, US commerce, (2) constitute a business within US jurisdiction. Or (3) constitute evasion of any provision of Dodd-Frank, unless those activities contravene any rules adopted by the CFTC and the Section