49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–134 

COMMODITY END-USER RELIEF ACT 

MAY 29, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. CONAWAY, from the Committee on Agriculture, 

submitted the following 

R E P O R T 

[To accompany H.R. 2289] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Agriculture, to whom was referred the bill 

(H.R. 2289) to reauthorize the Commodity Futures Trading Commission, to better protect futures customers, to provide end-users 

with market certainty, to make basic reforms to ensure transparency and accountability at the Commission, to help farmers, 

ranchers, and end-users manage risks, to help keep consumer costs 

low, and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill 

as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Commodity End-User Relief Act’’. 

SEC. 2. TABLE OF CONTENTS. 

The table of contents of this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—CUSTOMER PROTECTIONS 

Sec. 101. Enhanced protections for futures customers. 

Sec. 102. Electronic confirmation of customer funds. 

Sec. 103. Notice and certifications providing additional customer protections. 

Sec. 104. Futures commission merchant compliance. 

Sec. 105. Certainty for futures customers and market participants. 

TITLE II—COMMODITY FUTURES TRADING COMMISSION REFORMS 

Sec. 201. Extension of operations. 

Sec. 202. Consideration by the Commodity Futures Trading Commission of the costs and benefits of its regulations and orders. 

Sec. 203. Division directors. 

Sec. 204. Office of the Chief Economist. 

Sec. 205. Procedures governing actions taken by Commission staff. 

Sec. 206. Strategic technology plan. 


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Sec. 207. Internal risk controls. 

Sec. 208. Subpoena duration and renewal. 

Sec. 209. Applicability of notice and comment requirements of the Administrative Procedure Act to guidance 

voted on by the Commission. 

Sec. 210. Judicial review of Commission rules. 

Sec. 211. GAO study on use of Commission resources. 

Sec. 212. Disclosure of required data of other registered entities. 

Sec. 213. Report on status of any application of metals exchange to register as a foreign board of trade; deadline 

for action on application. 

TITLE III—END-USER RELIEF 

Sec. 301. Relief for hedgers utilizing centralized risk management practices. 

Sec. 302. Indemnification requirements. 

Sec. 303. Transactions with utility special entities. 

Sec. 304. Utility special entity defined. 

Sec. 305. Utility operations-related swap. 

Sec. 306. End-users not treated as financial entities. 

Sec. 307. Reporting of illiquid swaps so as to not disadvantage certain non-financial end-users. 

Sec. 308. Relief for grain elevator operators, farmers, agricultural counterparties, and commercial market participants. 

Sec. 309. Relief for end-users who use physical contracts with volumetric optionality. 

Sec. 310. Commission vote required before automatic change of swap dealer de minimis level. 

Sec. 311. Capital requirements for non-bank swap dealers. 

Sec. 312. Harmonization with the Jumpstart Our Business Startups Act. 

Sec. 313. Bona fide hedge defined to protect end-user risk management needs. 

Sec. 314. Cross-border regulation of derivatives transactions. 

Sec. 315. Exemption of qualified charitable organizations from designation and regulation as commodity pool 

operators. 

Sec. 316. Small bank holding company clearing exemption. 

Sec. 317. Core principle certainty. 

Sec. 318. Treatment of Federal Home Loan Bank products. 

Sec. 319. Treatment of certain funds. 

TITLE IV—TECHNICAL CORRECTIONS 

Sec. 401. Correction of references. 

Sec. 402. Elimination of obsolete references to dealer options. 

Sec. 403. Updated trade data publication requirement. 

Sec. 404. Flexibility for registered entities. 

Sec. 405. Elimination of obsolete references to electronic trading facilities. 

Sec. 406. Elimination of obsolete reference to alternative swap execution facilities. 

Sec. 407. Elimination of redundant references to types of registered entities. 

Sec. 408. Clarification of Commission authority over swaps trading. 

Sec. 409. Elimination of obsolete reference to the Commodity Exchange Commission. 

Sec. 410. Elimination of obsolete references to derivative transaction execution facilities. 

Sec. 411. Elimination of obsolete references to exempt boards of trade. 

Sec. 412. Elimination of report due in 1986. 

Sec. 413. Compliance report flexibility. 

Sec. 414. Miscellaneous corrections. 

TITLE I—CUSTOMER PROTECTIONS 

SEC. 101. ENHANCED PROTECTIONS FOR FUTURES CUSTOMERS. 

Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is amended by adding 

at the end the following: 

‘‘(s) A registered futures association shall— 

‘‘(1) require each member of the association that is a futures commission merchant to maintain written policies and procedures regarding the maintenance 

of— 

‘‘(A) the residual interest of the member, as described in section 1.23 of 

title 17, Code of Federal Regulations, in any customer segregated funds account of the member, as identified in section 1.20 of such title, and in any 

foreign futures and foreign options customer secured amount funds account 

of the member, as identified in section 30.7 of such title; and 

‘‘(B) the residual interest of the member, as described in section 22.2(e)(4) 

of such title, in any cleared swaps customer collateral account of the member, as identified in section 22.2 of such title; and 

‘‘(2) establish rules to govern the withdrawal, transfer or disbursement by any 

member of the association, that is a futures commission merchant, of the member’s residual interest in customer segregated funds as provided in such section 

1.20, in foreign futures and foreign options customer secured amount funds, 

identified as provided in such section 30.7, and from a cleared swaps customer 

collateral, identified as provided in such section 22.2.’’. 

SEC. 102. ELECTRONIC CONFIRMATION OF CUSTOMER FUNDS. 

Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as amended by section 

101 of this Act, is amended by adding at the end the following: 

‘‘(t) A registered futures association shall require any member of the association 

that is a futures commission merchant to— 


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‘‘(1) use an electronic system or systems to report financial and operational 

information to the association or another party designated by the registered futures association, including information related to customer segregated funds, 

foreign futures and foreign options customer secured amount funds accounts, 

and cleared swaps customer collateral, in accordance with such terms, conditions, documentation standards, and regular time intervals as are established 

by the registered futures association; 

‘‘(2) instruct each depository, including any bank, trust company, derivatives 

clearing organization, or futures commission merchant, holding customer segregated funds under section 1.20 of title 17, Code of Federal Regulations, foreign futures and foreign options customer secured amount funds under section 

30.7 of such title, or cleared swap customer funds under section 22.2 of such 

title, to report balances in the futures commission merchant’s section 1.20 customer segregated funds, section 30.7 foreign futures and foreign options customer secured amount funds, and section 22.2 cleared swap customer funds, to 

the registered futures association or another party designated by the registered 

futures association, in the form, manner, and interval prescribed by the registered futures association; and 

‘‘(3) hold section 1.20 customer segregated funds, section 30.7 foreign futures 

and foreign options customer secured amount funds and section 22.2 cleared 

swaps customer funds in a depository that reports the balances in these accounts of the futures commission merchant held at the depository to the registered futures association or another party designated by the registered futures 

association in the form, manner, and interval prescribed by the registered futures association.’’. 

SEC. 103. NOTICE AND CERTIFICATIONS PROVIDING ADDITIONAL CUSTOMER PROTECTIONS. 

Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as amended by sections 

101 and 102 of this Act, is amended by adding at the end the following: 

‘‘(u) A futures commission merchant that has adjusted net capital in an amount 

less than the amount required by regulations established by the Commission or a 

self-regulatory organization of which the futures commission merchant is a member 

shall immediately notify the Commission and the self-regulatory organization of this 

occurrence. 

‘‘(v) A futures commission merchant that does not hold a sufficient amount of 

funds in segregated accounts for futures customers under section 1.20 of title 17, 

Code of Federal Regulations, in foreign futures and foreign options secured amount 

accounts for foreign futures and foreign options secured amount customers under 

section 30.7 of such title, or in segregated accounts for cleared swap customers 

under section 22.2 of such title, as required by regulations established by the Commission or a self-regulatory organization of which the futures commission merchant 

is a member, shall immediately notify the Commission and the self-regulatory organization of this occurrence. 

‘‘(w) Within such time period established by the Commission after the end of each 

fiscal year, a futures commission merchant shall file with the Commission a report 

from the chief compliance officer of the futures commission merchant containing an 

assessment of the internal compliance programs of the futures commission merchant.’’. 

SEC. 104. FUTURES COMMISSION MERCHANT COMPLIANCE. 

(a) IN GENERAL.—Section 4d(a) of the Commodity Exchange Act (7 U.S.C. 6d(a)) 

is amended— 

(1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B); 

(2) by inserting ‘‘(1)’’ before ‘‘It shall be unlawful’’; and 

(3) by adding at the end the following new paragraph: 

‘‘(2) Any rules or regulations requiring a futures commission merchant to 

maintain a residual interest in accounts held for the benefit of customers in 

amounts at least sufficient to exceed the sum of all uncollected margin deficits 

of such customers shall provide that a futures commission merchant shall meet 

its residual interest requirement as of the end of each business day calculated 

as of the close of business on the previous business day.’’. 

(b) CONFORMING AMENDMENT.—Section 4d(h) of such Act (7 U.S.C. 6d(h)) is 

amended by striking ‘‘Notwithstanding subsection (a)(2)’’ and inserting ‘‘Notwithstanding subsection (a)(1)(B)’’. 

SEC. 105. CERTAINTY FOR FUTURES CUSTOMERS AND MARKET PARTICIPANTS. 

Section 20(a) of the Commodity Exchange Act (7 U.S.C. 24(a)) is amended— 

(1) by striking ‘‘and’’ at the end of paragraph (4); 

(2) by striking the period at the end of paragraph (5) and inserting ‘‘; and’’; 

and 


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(3) by adding at the end the following: 

‘‘(6) that cash, securities, or other property of the estate of a commodity 

broker, including the trading or operating accounts of the commodity broker and 

commodities held in inventory by the commodity broker, shall be included in 

customer property, subject to any otherwise unavoidable security interest, or 

otherwise unavoidable contractual offset or netting rights of creditors (including 

rights set forth in a rule or bylaw of a derivatives clearing organization or a 

clearing agency) in respect of such property, but only to the extent that the 

property that is otherwise customer property is insufficient to satisfy the net 

equity claims of public customers (as such term may be defined by the Commission by rule or regulation) of the commodity broker.’’. 

TITLE II—COMMODITY FUTURES TRADING 

COMMISSION REFORMS 

SEC. 201. EXTENSION OF OPERATIONS. 

Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is amended by 

striking ‘‘2013’’ and inserting ‘‘2019’’. 

SEC. 202. CONSIDERATION BY THE COMMODITY FUTURES TRADING COMMISSION OF THE 

COSTS AND BENEFITS OF ITS REGULATIONS AND ORDERS. 

Section 15(a) of the Commodity Exchange Act (7 U.S.C. 19(a)) is amended— 

(1) by striking paragraphs (1) and (2) and inserting the following: 

‘‘(1) IN GENERAL.—Before promulgating a regulation under this Act or issuing 

an order (except as provided in paragraph (3)), the Commission, through the Office of the Chief Economist, shall assess and publish in the regulation or order 

the costs and benefits, both qualitative and quantitative, of the proposed regulation or order, and the proposed regulation or order shall state its statutory justification. 

‘‘(2) CONSIDERATIONS.—In making a reasoned determination of the costs and 

the benefits, the Commission shall evaluate— 

‘‘(A) considerations of protection of market participants and the public; 

‘‘(B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets; 

‘‘(C) considerations of the impact on market liquidity in the futures and 

swaps markets; 

‘‘(D) considerations of price discovery; 

‘‘(E) considerations of sound risk management practices; 

‘‘(F) available alternatives to direct regulation; 

‘‘(G) the degree and nature of the risks posed by various activities within 

the scope of its jurisdiction; 

‘‘(H) the costs of complying with the proposed regulation or order by all 

regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify); 

‘‘(I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other Federal regulations or orders; 

‘‘(J) the cost to the Commission of implementing the proposed regulation 

or order by the Commission staff, including a methodology for quantifying 

the costs; 

‘‘(K) whether, in choosing among alternative regulatory approaches, those 

approaches maximize net benefits (including potential economic and other 

benefits, distributive impacts, and equity); and 

‘‘(L) other public interest considerations.’’; and 

(2) by adding at the end the following: 

‘‘(4) JUDICIAL REVIEW.—Notwithstanding section 24(d), a court shall affirm a 

Commission assessment of costs and benefits under this subsection, unless the 

court finds the assessment to be an abuse of discretion.’’. 

SEC. 203. DIVISION DIRECTORS. 

Section 2(a)(6)(C) of the Commodity Exchange Act (7 U.S.C. 2(a)(6)(C)) is amended 

by inserting ‘‘, and the heads of the units shall serve at the pleasure of the Commission’’ before the period. 

SEC. 204. OFFICE OF THE CHIEF ECONOMIST. 

(a) IN GENERAL.—Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)) is 

amended by adding at the end the following: 

‘‘(16) OFFICE OF THE CHIEF ECONOMIST.— 


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‘‘(A) ESTABLISHMENT.—There is established in the Commission the Office 

of the Chief Economist. 

‘‘(B) HEAD.—The Office of the Chief Economist shall be headed by the 

Chief Economist, who shall be appointed by the Commission and serve at 

the pleasure of the Commission. 

‘‘(C) FUNCTIONS.—The Chief Economist shall report directly to the Commission and perform such functions and duties as the Commission may prescribe. 

‘‘(D) PROFESSIONAL STAFF.—The Commission shall appoint such other 

economists as may be necessary to assist the Chief Economist in performing 

such economic analysis, regulatory cost-benefit analysis, or research any 

member of the Commission may request.’’. 

(b) CONFORMING AMENDMENT.—Section 2(a)(6)(A) of such Act (7 U.S.C. 2(a)(6)(A)) 

is amended by striking ‘‘(4) and (5) of this subsection’’ and inserting ‘‘(4), (5), and 

(16)’’. 

SEC. 205. PROCEDURES GOVERNING ACTIONS TAKEN BY COMMISSION STAFF. 

Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C. 2(a)(12)) is amended— 

(1) by striking ‘‘(12) The’’ and inserting the following: 

‘‘(12) RULES AND REGULATIONS.— ‘‘(A) IN GENERAL.—Subject to the other provisions of this paragraph, the’’; 

and 

(2) by adding after and below the end the following new subparagraph: 

‘‘(B) NOTICE TO COMMISSIONERS.—The Commission shall develop and publish internal procedures governing the issuance by any division or office of 

the Commission of any response to a formal, written request or petition 

from any member of the public for an exemptive, a no-action, or an interpretive letter and such procedures shall provide that the commissioners be 

provided with the final version of the matter to be issued with sufficient 

notice to review the matter prior to its issuance.’’. 

SEC. 206. STRATEGIC TECHNOLOGY PLAN. 

Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)), as amended by section 204(a) of this Act, is amended by adding at the end the following: 

‘‘(17) STRATEGIC TECHNOLOGY PLAN.— ‘‘(A) IN GENERAL.—Every 5 years, the Commission shall develop and submit to the Committee on Agriculture of the House of Representatives and 

the Committee on Agriculture, Nutrition, and Forestry of the Senate a detailed plan focused on the acquisition and use of technology by the Commission. 

‘‘(B) CONTENTS.—The plan shall— 

‘‘(i) include for each related division or office a detailed technology 

strategy focused on market surveillance and risk detection, market 

data collection, aggregation, interpretation, standardization, harmonization, normalization, validation, streamlining or other data analytic 

processes, and internal management and protection of data collected by 

the Commission, including a detailed accounting of how the funds provided for technology will be used and the priorities that will apply in 

the use of the funds; and 

‘‘(ii) set forth annual goals to be accomplished and annual budgets 

needed to accomplish the goals.’’. 

SEC. 207. INTERNAL RISK CONTROLS. 

Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C. 2(a)(12)), as amended 

by section 205 of this Act, is amended by adding at the end the following: 

‘‘(C) INTERNAL RISK CONTROLS.—The Commission, in consultation with 

the Chief Economist, shall develop comprehensive internal risk control 

mechanisms to safeguard and govern the storage of all market data by the 

Commission, all market data sharing agreements of the Commission, and 

all academic research performed at the Commission using market data.’’. 

SEC. 208. SUBPOENA DURATION AND RENEWAL. 

Section 6(c)(5) of the Commodity Exchange Act (7 U.S.C. 9(5)) is amended— 

(1) by striking ‘‘(5) SUBPOENA.—For’’ and inserting the following: 

‘‘(5) SUBPOENA.— 

‘‘(A) IN GENERAL.—For’’; and 

(2) by adding after and below the end the following: 

‘‘(B) OMNIBUS ORDERS OF INVESTIGATION.— 

‘‘(i) DURATION AND RENEWAL.—An omnibus order of investigation 

shall not be for an indefinite duration and may be renewed only by 

Commission action. 


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‘‘(ii) DEFINITION.—In clause (i), the term ‘omnibus order of investigation’ means an order of the Commission authorizing 1 of more members 

of the Commission or its staff to issue subpoenas under subparagraph 

(A) to multiple persons in relation to a particular subject matter area.’’. 

SEC. 209. APPLICABILITY OF NOTICE AND COMMENT REQUIREMENTS OF THE ADMINISTRATIVE PROCEDURE ACT TO GUIDANCE VOTED ON BY THE COMMISSION. 

Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C. 2(a)(12)), as amended 

by sections 205 and 207 of this Act, is amended by adding at the end the following: 

‘‘(D) APPLICABILITY OF NOTICE AND COMMENT RULES TO GUIDANCE VOTED

ON BY THE COMMISSION.—The notice and comment requirements of section 

553 of title 5, United States Code, shall also apply with respect to any Commission statement or guidance, including interpretive rules, general statements of policy, or rules of Commission organization, procedure, or practice, 

that has the effect of implementing, interpreting or prescribing law or policy and that is voted on by the Commission.’’. 

SEC. 210. JUDICIAL REVIEW OF COMMISSION RULES. 

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding at the 

end the following: 

‘‘SEC. 24. JUDICIAL REVIEW OF COMMISSION RULES. 

‘‘(a) A person adversely affected by a rule of the Commission promulgated under 

this Act may obtain review of the rule in the United States Court of Appeals for 

the District of Columbia Circuit or the United States Court of Appeals for the circuit 

where the party resides or has the principal place of business, by filing in the court, 

within 60 days after publication in the Federal Register of the entry of the rule, a 

written petition requesting that the rule be set aside. 

‘‘(b) A copy of the petition shall be transmitted forthwith by the clerk of the court 

to an officer designated by the Commission for that purpose. Thereupon the Commission shall file in the court the record on which the rule complained of is entered, 

as provided in section 2112 of title 28, United States Code, and the Federal Rules 

of Appellate Procedure. 

‘‘(c) On the filing of the petition, the court has jurisdiction, which becomes exclusive on the filing of the record, to affirm and enforce or to set aside the rule in whole 

or in part. 

‘‘(d) The court shall affirm and enforce the rule unless the Commission’s action 

in promulgating the rule is found to be arbitrary, capricious, an abuse of discretion, 

or otherwise not in accordance with law; contrary to constitutional right, power, 

privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, 

or short of statutory right; or without observance of procedure required by law.’’. 

SEC. 211. GAO STUDY ON USE OF COMMISSION RESOURCES. 

(a) STUDY.—The Comptroller General of the United States shall conduct a study 

of the resources of the Commodity Futures Trading Commission that— 

(1) assesses whether the resources of the Commission are sufficient to enable 

the Commission to effectively carry out the duties of the Commission; 

(2) examines the expenditures of the Commission on hardware, software, and 

analytical processes designed to protect customers in the areas of— 

(A) market surveillance and risk detection; and 

(B) market data collection, aggregation, interpretation, standardization, 

harmonization, and streamlining; 

(3) analyzes the additional workload undertaken by the Commission, and ascertains where self-regulatory organizations could be more effectively utilized; 

and 

(4) examines existing and emerging post-trade risk reduction services in the 

swaps market, the notional amount of risk reduction transactions provided by 

the services, and the effects the services have on financial stability, including— 

(A) market surveillance and risk detection; 

(B) market data collection, aggregation, interpretation, standardization, 

harmonization, and streamlining; and 

(C) oversight and compliance work by market participants and regulators. 

(b) REPORT.—Not later than 180 days after the date of the enactment of this Act, 

the Comptroller General of the United States shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that contains the results of the study required by subsection (a). 

SEC. 212. DISCLOSURE OF REQUIRED DATA OF OTHER REGISTERED ENTITIES. 

Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is amended by adding at 

the end the following: 


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‘‘(j) DISCLOSURE OF REQUIRED DATA OF OTHER REGISTERED ENTITIES.— ‘‘(1) Except as provided in this subsection, the Commission may not be compelled to disclose any proprietary information provided to the Commission, except that nothing in this subsection— 

‘‘(A) authorizes the Commission to withhold information from Congress; or ‘‘(B) prevents the Commission from— 

‘‘(i) complying with a request for information from any other Federal 

department or agency, any State or political subdivision thereof, or any 

foreign government or any department, agency, or political subdivision 

thereof requesting the report or information for purposes within the 

scope of its jurisdiction, upon an agreement of confidentiality to protect 

the information in a manner consistent with this paragraph and subsection (e); or 

‘‘(ii) making a disclosure made pursuant to a court order in connection with an administrative or judicial proceeding brought under this 

Act, in any receivership proceeding involving a receiver appointed in a 

judicial proceeding brought under this Act, or in any bankruptcy proceeding in which the Commission has intervened or in which the Commission has the right to appear and be heard under title 11 of the 

United States Code. 

‘‘(2) Any proprietary information of a commodity trading advisor or commodity 

pool operator ascertained by the Commission in connection with Form CPOPQR, Form CTA-PR, and any successor forms thereto, shall be subject to the 

same limitations on public disclosure, as any facts ascertained during an investigation, as provided by subsection (a); provided, however, that the Commission 

shall not be precluded from publishing aggregate information compiled from 

such forms, to the extent such aggregate information does not identify any individual person or firm, or such person’s proprietary information. 

‘‘(3) For purposes of section 552 of title 5, United States Code, this subsection, 

and the information contemplated herein, shall be considered a statute described in subsection (b)(3)(B) of such section 552. 

‘‘(4) For purposes of the definition of proprietary information in paragraph (5), 

the records and reports of any client account or commodity pool to which a commodity trading advisor or commodity pool operator registered under this title 

provides services that are filed with the Commission on Form CPO-PQR, CTAPR, and any successor forms thereto, shall be deemed to be the records and reports of the commodity trading advisor or commodity pool operator, respectively. 

‘‘(5) For purposes of this section, proprietary information of a commodity trading advisor or commodity pool operator includes sensitive, non-public information regarding— 

‘‘(A) the commodity trading advisor, commodity pool operator or the trading strategies of the commodity trading advisor or commodity pool operator; 

‘‘(B) analytical or research methodologies of a commodity trading advisor 

or commodity pool operator; 

‘‘(C) trading data of a commodity trading advisor or commodity pool operator; and 

‘‘(D) computer hardware or software containing intellectual property of a 

commodity trading advisor or commodity pool operator;’’. 

SEC. 213. REPORT ON STATUS OF ANY APPLICATION OF METALS EXCHANGE TO REGISTER AS 

A FOREIGN BOARD OF TRADE; DEADLINE FOR ACTION ON APPLICATION. 

(a) REPORT TO CONGRESS.—Within 90 days after the date of the enactment of this 

section, the Commodity Futures Trading Commission shall submit to the Congress 

a written report on— 

(1) the status of the review by the Commission of any application submitted 

by a metals exchange to register with the Commission under section 4(b)(1) of 

the Commodity Exchange Act; and 

(2) the status of Commission negotiations with foreign regulators regarding 

aluminum warehousing. 

(b) DEADLINE FOR ACTION.—Not later than September 30, 2016, the Commission 

shall take action on any such application submitted to the Commission on or before 

August 14, 2012. 

TITLE III—END-USER RELIEF 

SEC. 301. RELIEF FOR HEDGERS UTILIZING CENTRALIZED RISK MANAGEMENT PRACTICES. 

(a) IN GENERAL.— 


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(1) COMMODITY EXCHANGE ACT AMENDMENT.—Section 2(h)(7)(D)(i) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(D)(i)) is amended to read as follows: 

‘‘(i) IN GENERAL.—An affiliate of a person that qualifies for an exception under subparagraph (A) (including an affiliate entity predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception 

only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not 

a financial entity, provided that if the hedge or mitigation of such commercial risk is addressed by entering into a swap with a swap dealer 

or major swap participant, an appropriate credit support measure or 

other mechanism must be utilized.’’. 

(b) APPLICABILITY OF CREDIT SUPPORT MEASURE REQUIREMENT.—The requirements in section 2(h)(7)(D)(i) of the Commodity Exchange Act, as amended by subsection (a), requiring that a credit support measure or other mechanism be utilized 

if the transfer of commercial risk referred to in such section is addressed by entering into a swap with a swap dealer or major swap participant shall not apply with 

respect to swaps entered into before the date of the enactment of this Act. 

SEC. 302. INDEMNIFICATION REQUIREMENTS. 

(a) DERIVATIVES CLEARING ORGANIZATIONS.—Section 5b(k)(5) of the Commodity 

Exchange Act (7 U.S.C. 7a-1(k)(5)) is amended to read as follows: 

‘‘(5) CONFIDENTIALITY AGREEMENT.—Before the Commission may share information with any entity described in paragraph (4), the Commission shall receive 

a written agreement from each entity stating that the entity shall abide by the 

confidentiality requirements described in section 8 relating to the information 

on swap transactions that is provided.’’. 

(b) SWAP DATA REPOSITORIES.—Section 21(d) of such Act (7 U.S.C. 24a(d)) is 

amended to read as follows: 

‘‘(d) CONFIDENTIALITY AGREEMENT.—Before the swap data repository may share 

information with any entity described in subsection (c)(7), the swap data repository 

shall receive a written agreement from each entity stating that the entity shall 

abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided.’’. 

SEC. 303. TRANSACTIONS WITH UTILITY SPECIAL ENTITIES. 

Section 1a(49) of the Commodity Exchange Act (7 U.S.C. 1a(49)) is amended by 

adding at the end the following: 

‘‘(E) CERTAIN TRANSACTIONS WITH A UTILITY SPECIAL ENTITY.— ‘‘(i) Transactions in utility operations-related swaps shall be reported 

pursuant to section 4r. 

‘‘(ii) In making a determination to exempt pursuant to subparagraph 

(D), the Commission shall treat a utility operations-related swap entered into with a utility special entity, as defined in section 4s(h)(2)(D), 

as if it were entered into with an entity that is not a special entity, 

as defined in section 4s(h)(2)(C).’’. 

SEC. 304. UTILITY SPECIAL ENTITY DEFINED. 

Section 4s(h)(2) of the Commodity Exchange Act (7 U.S.C. 6s(h)(2)) is amended 

by adding at the end the following: 

‘‘(D) UTILITY SPECIAL ENTITY.—For purposes of this Act, the term ‘utility 

special entity’ means a special entity, or any instrumentality, department, 

or corporation of or established by a State or political subdivision of a State, 

that— 

‘‘(i) owns or operates, or anticipates owning or operating, an electric 

or natural gas facility or an electric or natural gas operation; 

‘‘(ii) supplies, or anticipates supplying, natural gas and or electric energy to another utility special entity; 

‘‘(iii) has, or anticipates having, public service obligations under Federal, State, or local law or regulation to deliver electric energy or natural gas service to customers; or 

‘‘(iv) is a Federal power marketing agency, as defined in section 3 of 

the Federal Power Act.’’. 

SEC. 305. UTILITY OPERATIONS-RELATED SWAP. 

(a) SWAP FURTHER DEFINED.—Section 1a(47)(A)(iii) of the Commodity Exchange 

Act (7 U.S.C. 1a(47)(A)(iii)) is amended— 

(1) by striking ‘‘and’’ at the end of subclause (XXI); 

(2) by adding ‘‘and’’ at the end of subclause (XXII); and 

(3) by adding at the end the following: 

‘‘(XXIII) a utility operations-related swap;’’. 


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(b) UTILITY OPERATIONS-RELATED SWAP DEFINED.—Section 1a of such Act (7 

U.S.C. 1a) is amended by adding at the end the following: 

‘‘(52) UTILITY OPERATIONS-RELATED SWAP.—The term ‘utility operations-related swap’ means a swap that— 

‘‘(A) is entered into by a utility to hedge or mitigate a commercial risk; 

‘‘(B) is not a contract, agreement, or transaction based on, derived on, or 

referencing— 

‘‘(i) an interest rate, credit, equity, or currency asset class; 

‘‘(ii) except as used for fuel for electric energy generation, a metal, 

agricultural commodity, or crude oil or gasoline commodity of any 

grade; or 

‘‘(iii) any other commodity or category of commodities identified for 

this purpose in a rule or order adopted by the Commission in consultation with the appropriate Federal and State regulatory commissions; 

and 

‘‘(C) is associated with— 

‘‘(i) the generation, production, purchase, or sale of natural gas or 

electric energy, the supply of natural gas or electric energy to a utility, 

or the delivery of natural gas or electric energy service to utility customers; 

‘‘(ii) fuel supply for the facilities or operations of a utility; 

‘‘(iii) compliance with an electric system reliability obligation; 

‘‘(iv) compliance with an energy, energy efficiency, conservation, or 

renewable energy or environmental statute, regulation, or government 

order applicable to a utility; or 

‘‘(v) any other electric energy or natural gas swap to which a utility 

is a party.’’. 

SEC. 306. END-USERS NOT TREATED AS FINANCIAL ENTITIES. 

(a) IN GENERAL.—Section 2(h)(7)(C)(iii) of the Commodity Exchange Act (7 U.S.C. 

2(h)(7)(C)(iii)) is amended to read as follows: 

‘‘(iii) LIMITATION.—Such definition shall not include an entity— 

‘‘(I) whose primary business is providing financing, and who uses 

derivatives for the purpose of hedging underlying commercial risks 

related to interest rate and foreign currency exposures, 90 percent 

or more of which arise from financing that facilitates the purchase 

or lease of products, 90 percent or more of which are manufactured 

by the parent company or another subsidiary of the parent company; or 

‘‘(II) who is not supervised by a prudential regulator, and is not 

described in any of subclauses (I) through (VII) of clause (i), and— 

‘‘(aa) is a commercial market participant; or 

‘‘(bb) enters into swaps, contracts for future delivery, and 

other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates 

that are not so supervised or described.’’. 

(b) COMMERCIAL MARKET PARTICIPANT DEFINED.— 

(1) IN GENERAL.—Section 1a of such Act (7 U.S.C. 1a), as amended by section 

305(b) of this Act, is amended by redesignating paragraphs (8) through (52) as 

paragraphs (9) through (53), respectively, and by inserting after paragraph (6) 

the following: 

‘‘(8) COMMERCIAL MARKET PARTICIPANT.—The term ‘commercial market participant’ means any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity.’’. 

(2) CONFORMING AMENDMENTS.— 

(A) Section 1a of such Act (7 U.S.C. 1a) is amended— 

(i) in subparagraph (A) of paragraph (18) (as so redesignated by paragraph (1) of this subsection), in the matter preceding clause (i), by 

striking ‘‘(18)(A)’’ and inserting ‘‘(19)(A)’’; and 

(ii) in subparagraph (A)(vii) of paragraph (19) (as so redesignated by 

paragraph (1) of this subsection), in the matter following subclause 

(III), by striking ‘‘(17)(A)’’ and inserting ‘‘(18)(A)’’. 

(B) Section 4(c)(1)(A)(i)(I) of such Act (7 U.S.C. 6(c)(1)(A)(i)(I)) is amended 

by striking ‘‘(7), paragraph (18)(A)(vii)(III), paragraphs (23), (24), (31), (32), 

(38), (39), (41), (42), (46), (47), (48), and (49)’’ and inserting ‘‘(8), paragraph 

(19)(A)(vii)(III), paragraphs (24), (25), (32), (33), (39), (40), (42), (43), (47), 

(48), (49), and (50)’’. 


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(C) Section 4q(a)(1) of such Act (7 U.S.C. 6o-1(a)(1)) is amended by striking ‘‘1a(9)’’ and inserting ‘‘1a(10)’’. 

(D) Section 4s(f)(1)(D) of such Act (7 U.S.C. 6s(f)(1)(D)) is amended by 

striking ‘‘1a(47)(A)(v)’’ and inserting ‘‘1a(48)(A)(v)’’. 

(E) Section 4s(h)(5)(A)(i) of such Act (7 U.S.C. 6s(h)(5)(A)(i)) is amended 

by striking ‘‘1a(18)’’ and inserting ‘‘1a(19)’’. 

(F) Section 4t(b)(1)(C) of such Act (7 U.S.C. 6t(b)(1)(C)) is amended by 

striking ‘‘1a(47)(A)(v)’’ and inserting ‘‘1a(48)(A)(v)’’. 

(G) Section 5(d)(23) of such Act (7 U.S.C. 7(d)(23)) is amended by striking 

‘‘1a(47)(A)(v)’’ and inserting ‘‘1a(48)(A)(v)’’. 

(H) Section 5(e)(1) of such Act (7 U.S.C. 7(e)(1)) is amended by striking 

‘‘1a(9)’’ and inserting ‘‘1a(10)’’. 

(I) Section 5b(k)(3)(A) of such Act (7 U.S.C. 7a-1(k)(3)(A)) is amended by 

striking ‘‘1a(47)(A)(v)’’ and inserting ‘‘1a(48)(A)(v)’’. 

(J) Section 5h(f)(10)(A)(iii) of such Act (7 U.S.C. 7b-3(f)(10)(A)(iii)) is 

amended by striking ‘‘1a(47)(A)(v)’’ and inserting ‘‘1a(48)(A)(v)’’. 

(K) Section 21(f)(4)(C) of such Act (7 U.S.C. 24a(f)(4)(C)) is amended by 

striking ‘‘1a(48)’’ and inserting ‘‘1a(49)’’. 

SEC. 307. REPORTING OF ILLIQUID SWAPS SO AS TO NOT DISADVANTAGE CERTAIN NON-FINANCIAL END-USERS. 

Section 2(a)(13) of the Commodity Exchange Act (7 U.S.C. 2(a)(13)) is amended— 

(1) in subparagraph (C), by striking ‘‘The Commission’’ and inserting ‘‘Except 

as provided in subparagraph (D), the Commission’’; and 

(2) by redesignating subparagraphs (D) through (G) as subparagraphs (E) 

through (H), respectively, and inserting after subparagraph (C) the following: 

‘‘(D) REQUIREMENTS FOR SWAP TRANSACTIONS IN ILLIQUID MARKETS.—Notwithstanding subparagraph (C): 

‘‘(i) The Commission shall provide by rule for the public reporting of 

swap transactions, including price and volume data, in illiquid markets 

that are not cleared and entered into by a non-financial entity that is 

hedging or mitigating commercial risk in accordance with subsection 

(h)(7)(A). 

‘‘(ii) The Commission shall ensure that the swap transaction information referred to in clause (i) of this subparagraph is available to the 

public no sooner than 30 days after the swap transaction has been executed or at such later date as the Commission determines appropriate 

to protect the identity of participants and positions in illiquid markets 

and to prevent the elimination or reduction of market liquidity. 

‘‘(iii) In this subparagraph, the term ‘illiquid markets’ means any 

market in which the volume and frequency of trading in swaps is at 

such a level as to allow identification of individual market participants.’’. 

SEC. 308. RELIEF FOR GRAIN ELEVATOR OPERATORS, FARMERS, AGRICULTURAL COUNTERPARTIES, AND COMMERCIAL MARKET PARTICIPANTS. 

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after 

section 4t the following: 

‘‘SEC. 4u. RECORDKEEPING REQUIREMENTS APPLICABLE TO NON-REGISTERED MEMBERS OF 

CERTAIN REGISTERED ENTITIES. 

‘‘Except as provided in section 4(a)(3), a member of a designated contract market 

or a swap execution facility that is not registered with the Commission and not required to be registered with the Commission in any capacity shall satisfy the recordkeeping requirements of this Act and any recordkeeping rule, order, or regulation 

under this Act by maintaining a written record of each transaction in a contract for 

future delivery, option on a future, swap, swaption, trade option, or related cash or 

forward transaction. The written record shall be sufficient if it includes the final 

agreement between the parties and the material economic terms of the transaction.’’. 

SEC. 309. RELIEF FOR END-USERS WHO USE PHYSICAL CONTRACTS WITH VOLUMETRIC 

OPTIONALITY. 

Section 1a(48)(B)(ii) of the Commodity Exchange Act (7 U.S.C. 1a(47)(B)(ii)), as so 

redesignated by section 306(b)(1) of this Act, is amended to read as follows: 

‘‘(ii) any purchase or sale of a nonfinancial commodity or security for 

deferred shipment or delivery, so long as the transaction is intended to 

be physically settled, including any stand-alone or embedded option for 

which exercise results in a physical delivery obligation;’’. 


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SEC. 310. COMMISSION VOTE REQUIRED BEFORE AUTOMATIC CHANGE OF SWAP DEALER DE 

MINIMIS LEVEL. 

Section 1a(50)(D) of the Commodity Exchange Act (7 U.S.C. 1a(49)(D)), as so redesignated by section 306(b)(1) of this Act, is amended— 

(1) by striking all that precedes ‘‘shall exempt’’ and inserting the following: 

‘‘(D) EXCEPTION.— 

‘‘(i) IN GENERAL.—The Commission’’; and 

(2) by adding after and below the end the following new clause: 

‘‘(ii) DE MINIMIS QUANTITY.—The de minimis quantity of swap dealing 

described in clause (i) shall be set at a quantity of $8,000,000,000, and 

may be amended or changed only through a new affirmative action of 

the Commission undertaken by rule or regulation.’’. 

SEC. 311. CAPITAL REQUIREMENTS FOR NON-BANK SWAP DEALERS. 

(a) COMMODITY EXCHANGE ACT.—Section 4s(e) of the Commodity Exchange Act (7 

U.S.C. 6s(e)) is amended— 

(1) in paragraph (2)(B), by inserting ‘‘in consultation with the prudential regulators and the Securities and Exchange Commission’’ before ‘‘shall’’; and 

(2) in paragraph (3)(D)— 

(A) in clause (ii), by striking ‘‘shall, to the maximum extent practicable,’’ 

and inserting ‘‘shall’’; and 

(B) by adding at the end the following: 

‘‘(iii) FINANCIAL MODELS.—To the extent that swap dealers and major 

swap participants that are banks are permitted to use financial models 

approved by the prudential regulators or the Securities and Exchange 

Commission to calculate minimum capital requirements and minimum 

initial and variation margin requirements, including the use of noncash collateral, the Commission shall, in consultation with the prudential regulators and the Securities and Exchange Commission, permit 

the use of comparable financial models by swap dealers and major 

swap participants that are not banks.’’. 

SEC. 312. HARMONIZATION WITH THE JUMPSTART OUR BUSINESS STARTUPS ACT. 

Within 90 days after the date of the enactment of this Act, the Commodity Futures Trading Commission shall— 

(1) revise section 4.7(b) of title 17, Code of Federal Regulations, in the matter 

preceding paragraph (1), to read as follows: 

‘‘(b) Relief available to commodity pool operators. Upon filing the notice required 

by paragraph (d) of this section, and subject to compliance with the conditions specified in paragraph (d) of this section, any registered commodity pool operator who 

sells participations in a pool solely to qualified eligible persons in an offering which 

qualifies for exemption from the registration requirements of the Securities Act pursuant to section 4(2) of that Act or pursuant to Regulation S, 17 CFR 230.901 et 

seq., and any bank registered as a commodity pool operator in connection with a 

pool that is a collective trust fund whose securities are exempt from registration 

under the Securities Act pursuant to section 3(a)(2) of that Act and are sold solely 

to qualified eligible persons, may claim any or all of the following relief with respect 

to such pool:’’; and 

(2) revise section 4.13(a)(3)(i) of such title to read as follows: 

‘‘(i) Interests in the pool are exempt from registration under the Securities Act of 1933, and such interests are offered and sold pursuant 

to section 4 of the Securities Act of 1933 and the regulations thereunder;’’. 

SEC. 313. BONA FIDE HEDGE DEFINED TO PROTECT END-USER RISK MANAGEMENT NEEDS. 

Section 4a(c) of the Commodity Exchange Act (7 U.S.C. 6a(c)) is amended— 

(1) in paragraph (1)— 

(A) by striking ‘‘may’’ and inserting ‘‘shall’’; and 

(B) by striking ‘‘future for which’’ and inserting ‘‘future, to be determined 

by the Commission, for which either an appropriate swap is available or’’; 

(2) in paragraph (2)— 

(A) in the matter preceding subparagraph (A), by striking ‘‘subsection 

(a)(2)’’ and all that follows through ‘‘position as’’ and inserting ‘‘paragraphs 

(2) and (5) of subsection (a) for swaps, contracts of sale for future delivery, 

or options on the contracts or commodities, a bona fide hedging transaction 

or position is’’; and 

(B) in subparagraph (A)(ii), by striking ‘‘of risks’’ and inserting ‘‘or management of current or anticipated risks’’; and 

(3) by adding at the end the following: 


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‘‘(3) The Commission may further define, by rule or regulation, what constitutes a bona fide hedging transaction, provided that the rule or regulation 

is consistent with the requirements of subparagraphs (A) and (B) of paragraph 

(2).’’. 

SEC. 314. CROSS-BORDER REGULATION OF DERIVATIVES TRANSACTIONS. 

(a) RULEMAKING REQUIRED.—Within 1 year after the date of the enactment of this 

Act, the Commodity Futures Trading Commission shall issue a rule that addresses— 

(1) the nature of the connections to the United States that require a non-U.S. 

person to register as a swap dealer or a major swap participant under the Commodity Exchange Act and the regulations issued under such Act; 

(2) which of the United States swaps requirements apply to the swap activities of non-U.S. persons and U.S. persons and their branches, agencies, subsidiaries, and affiliates outside of the United States, and the extent to which the 

requirements apply; and 

(3) the circumstances under which a U.S. person or non-U.S. person in compliance with the swaps regulatory requirements of a foreign jurisdiction shall 

be exempt from United States swaps requirements. 

(b) CONTENT OF THE RULE.— 

(1) CRITERIA.—In the rule, the Commission shall establish criteria for determining that 1 or more categories of the swaps regulatory requirements of a foreign jurisdiction are comparable to and as comprehensive as United States 

swaps requirements. The criteria shall include— 

(A) the scope and objectives of the swaps regulatory requirements of the 

foreign jurisdiction; 

(B) the effectiveness of the supervisory compliance program administered; 

(C) the enforcement authority exercised by the foreign jurisdiction; and 

(D) such other factors as the Commission, by rule, determines to be necessary or appropriate in the public interest. 

(2) COMPARABILITY.—In the rule, the Commission shall— 

(A) provide that any non-U.S. person or any transaction between two nonU.S. persons shall be exempt from United States swaps requirements if the 

person or transaction is in compliance with the swaps regulatory requirements of a foreign jurisdiction which the Commission has determined to be 

comparable to and as comprehensive as United States swaps requirements; 

and 

(B) set forth the circumstances in which a U.S. person or a transaction 

between a U.S. person and a non-U.S. person shall be exempt from United 

States swaps requirements if the person or transaction is in compliance 

with the swaps regulatory requirements of a foreign jurisdiction which the 

Commission has determined to be comparable to and as comprehensive as 

United States swaps requirements. 

(3) OUTCOMES-BASED COMPARISON.—In developing and applying the criteria, 

the Commission shall emphasize the results and outcomes of, rather than the 

design and construction of, foreign swaps regulatory requirements. 

(4) RISK-BASED RULEMAKING.—In the rule, the Commission shall not take into 

account, for the purposes of determining the applicability of United States 

swaps requirements, the location of personnel that arrange, negotiate, or execute swaps. 

(5) No part of any rulemaking under this section shall limit the Commission’s 

antifraud or antimanipulation authority. 

(c) APPLICATION OF THE RULE.— 

(1) ASSESSMENTS OF FOREIGN JURISDICTIONS.—Beginning on the date on 

which a final rule is issued under this section, the Commission shall begin to 

assess the swaps regulatory requirements of foreign jurisdictions, in the order 

the Commission determines appropriate, in accordance with the criteria established pursuant to subsection (b)(1). Following each assessment, the Commission shall determine, by rule or by order, whether the swaps regulatory requirements of the foreign jurisdiction are comparable to and as comprehensive as 

United States swaps requirements. 

(2) SUBSTITUTED COMPLIANCE FOR UNASSESSED MAJOR MARKETS.—Beginning 

18 months after the date of enactment of this Act— 

(A) the swaps regulatory requirements of each of the 8 foreign jurisdictions with the largest swaps markets, as calculated by notional value during the 12-month period ending with such date of enactment, except those 

with respect to which a determination has been made under paragraph (1), 

shall be considered to be comparable to and as comprehensive as United 

States swaps requirements; and 


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(B) a non-U.S. person or a transaction between 2 non-U.S. persons shall 

be exempt from United States swaps requirements if the person or transaction is in compliance with the swaps regulatory requirements of any of 

such unexcepted foreign jurisdictions. 

(3) SUSPENSION OF SUBSTITUTED COMPLIANCE.—If the Commission determines, 

by rule or by order, that— 

(A) the swaps regulatory requirements of a foreign jurisdiction are not 

comparable to and as comprehensive as United States swaps requirements, 

using the categories and criteria established under subsection (b)(1); 

(B) the foreign jurisdiction does not exempt from its swaps regulatory requirements U.S. persons who are in compliance with United States swaps 

requirements; or 

(C) the foreign jurisdiction is not providing equivalent recognition of, or 

substituted compliance for, registered entities (as defined in section 1a(41) 

of the Commodity Exchange Act) domiciled in the United States, 

the Commission may suspend, in whole or in part, a determination made under 

paragraph (1) or a consideration granted under paragraph (2). 

(d) PETITION FOR REVIEW OF FOREIGN JURISDICTION PRACTICES.—A registered entity, commercial market participant (as defined in section 1a(7) of the Commodity 

Exchange Act), or Commission registrant (within the meaning of such Act) who petitions the Commission to make or change a determination under subsection (c)(1) or 

(c)(3) of this section shall be entitled to expedited consideration of the petition. A 

petition shall include any evidence or other supporting materials to justify why the 

petitioner believes the Commission should make or change the determination. Petitions under this section shall be considered by the Commission any time following 

the enactment of this Act. Within 180 days after receipt of a petition for a rulemaking under this section, the Commission shall take final action on the petition. 

Within 90 days after receipt of a petition to issue an order or change an order issued 

under this section, the Commission shall take final action on the petition. 

(e) REPORT TO CONGRESS.—If the Commission makes a determination described 

in this section through an order, the Commission shall articulate the basis for the 

determination in a written report published in the Federal Register and transmitted 

to the Committee on Agriculture of the House of Representatives and Committee on 

Agriculture, Nutrition, and Forestry of the Senate within 15 days of the determination. The determination shall not be effective until 15 days after the committees receive the report. 

(f) DEFINITIONS.—As used in this Act and for purposes of the rules issued pursuant to this Act, the following definitions apply: 

(1) U.S. PERSON.—The term ‘‘U.S. person’’— 

(A) means— 

(i) any natural person resident in the United States; 

(ii) any partnership, corporation, trust, or other legal person organized or incorporated under the laws of the United States or having its 

principal place of business in the United States; 

(iii) any account (whether discretionary or non-discretionary) of a 

U.S. person; and 

(iv) any other person as the Commission may further define to more 

effectively carry out the purposes of this section; and 

(B) does not include the International Monetary Fund, the International 

Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, 

the United Nations, their agencies or pension plans, or any other similar 

international organizations or their agencies or pension plans. 

(2) UNITED STATES SWAPS REQUIREMENTS.—The term ‘‘United States swaps requirements’’ means the provisions relating to swaps contained in the Commodity Exchange Act (7 U.S.C. 1a et seq.) that were added by title VII of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8301 

et seq.) and any rules or regulations prescribed by the Commodity Futures 

Trading Commission pursuant to such provisions. 

(3) FOREIGN JURISDICTION.—The term ‘‘foreign jurisdiction’’ means any national or supranational political entity with common rules governing swaps 

transactions. 

(4) SWAPS REGULATORY REQUIREMENTS.—The term ‘‘swaps regulatory requirements’’ means any provisions of law, and any rules or regulations pursuant to 

the provisions, governing swaps transactions or the counterparties to swaps 

transactions. 

(g) CONFORMING AMENDMENT.—Section 4(c)(1)(A) of the Commodity Exchange Act 

(7 U.S.C. 6(c)(1)(A)) is amended by inserting ‘‘or except as necessary to effectuate 

the purposes of the Commodity End-User Relief Act,’’ after ‘‘to grant exemptions,’’. 


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SEC. 315. EXEMPTION OF QUALIFIED CHARITABLE ORGANIZATIONS FROM DESIGNATION AND 

REGULATION AS COMMODITY POOL OPERATORS. 

(a) EXCLUSION FROM DEFINITION OF COMMODITY POOL.—Section 1a(11) of the 

Commodity Exchange Act (7 U.S.C. 1a(10)), as so redesignated by section 306(b)(1) 

of this Act, is amended by adding at the end the following: 

‘‘(C) EXCLUSION.—The term ‘commodity pool’ shall not include any investment trust, syndicate, or similar form of enterprise excluded from the definition of ‘investment company’ pursuant to sections 3(c)(10) or 3(c)(14) of 

the Investment Company Act of 1940.’’. 

(b) INAPPLICABILITY OF PROHIBITION ON USE OF INSTRUMENTALITIES OF INTER- STATE COMMERCE BY UNREGISTERED COMMODITY TRADING ADVISOR.—Section 4m of 

such Act (7 U.S.C. 6m) is amended— 

(1) in paragraph (1), in the 2nd sentence, by inserting ‘‘: Provided further, That the provisions of this section shall not apply to any commodity trading advisor that is: (A) a charitable organization, as defined in section 3(c)(10)(D) of 

the Investment Company Act of 1940, or a trustee, director, officer, employee, 

or volunteer of such a charitable organization acting within the scope of the employment or duties of the person with the organization, whose trading advice 

is provided only to, or with respect to, 1 or more of the following: (i) any such 

charitable organization, or (ii) an investment trust, syndicate or similar form of 

enterprise excluded from the definition of ‘investment company’ pursuant to section 3(c)(10) of the Investment Company Act of 1940; or (B) any plan, company, 

or account described in section 3(c)(14) of the Investment Company Act of 1940, 

any person or entity who establishes or maintains such a plan, company, or account, or any trustee, director, officer, employee, or volunteer for any of the foregoing plans, persons, or entities acting within the scope of the employment or 

duties of the person with the organization, whose trading advice is provided 

only to, or with respect to, any investment trust, syndicate, or similar form of 

enterprise excluded from the definition of ‘investment company’ pursuant to section 3(c)(14) of the Investment Company Act of 1940’’ before the period; and 

(2) by adding at the end the following: 

‘‘(4) DISCLOSURE CONCERNING EXCLUDED CHARITABLE ORGANIZATIONS.—The operator of or advisor to any investment trust, syndicate, or similar form of enterprise 

excluded from the definition of ‘commodity pool’ by reason of section 1a(10)(C) shall 

provide, to each donor to the fund, trust, syndicate, or similar form of enterprise, 

at the time of the donation or within 90 days after the date of the enactment of 

this subsection, whichever is later, written information describing the material 

terms of the operation of the fund, trust, syndicate, or similar form of enterprise.’’. 

SEC. 316. SMALL BANK HOLDING COMPANY CLEARING EXEMPTION. 

Section 2(h)(7)(C) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(C)) is amended by adding at the end the following: 

‘‘(iv) HOLDING COMPANIES.—A determination made by the Commission under clause (ii) shall, with respect to small banks and savings associations, also apply to their respective bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956), or savings and loan holding company (as defined in section 10 of the Home 

Owners’ Loan Act of 1933)), if the total consolidated assets of the holding company are no greater than the asset threshold set by the Commission in determining small bank and savings association eligibility 

under clause (ii).’’. 

SEC. 317. CORE PRINCIPLE CERTAINTY. 

Section 5h(f) of the Commodity Exchange Act (7 U.S.C. 7b–3(f)) is amended— 

(1) in paragraph (1)(B), by inserting ‘‘except as described in this subsection’’ 

after ‘‘Commission by rule or regulation’’; 

(2) in paragraph (2), by amending subparagraph (D) to read as follows: 

‘‘(D) have reasonable discretion in establishing and enforcing its rules related to trade practice surveillance, market surveillance, real-time marketing monitoring, and audit trail given that a swap execution facility may 

offer a trading system or platform to execute or trade swaps through any 

means of interstate commerce. A swap execution facility shall be responsible for monitoring trading in swaps only on its own facility.’’; 

(3) in paragraph (4)(B), by adding at the end the following: ‘‘A swap execution 

facility shall be responsible for monitoring trading in swaps only on its own facility.’’; 

(4) in paragraph (6)(B)— 

(A) by striking ‘‘shall—’’ and all that follows through ‘‘compliance with 

the’’ and insert ‘‘shall monitor the trading activity on its facility for compliance with any’’; and 


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(B) by adding at the end the following: ‘‘A swap execution facility shall 

be responsible for monitoring positions only on its own facility.’’; 

(5) in paragraph (8), by striking ‘‘to liquidate’’ and all that follows and inserting ‘‘to suspend or curtail trading in a swap on its own facility.’’; 

(6) in paragraph (13)(B), by striking ‘‘cover the operating costs of the swap 

execution facility for a 1-year period, as calculated on a rolling basis’’ and inserting ‘‘conduct an orderly wind-down of its operations’’; and 

(7) in paragraph (15)— 

(A) in subparagraph (A), by adding at the end the following: ‘‘The individual may also perform other responsibilities for the swap execution facility.’’; 

(B) in subparagraph (B)— 

(i) in clause (i), by inserting ‘‘, a committee of the board,’’ after ‘‘directly to the board’’; 

(ii) by striking clauses (iii) through (v) and inserting the following: 

‘‘(iii) establish and administer policies and procedures that are reasonably designed to resolve any conflicts of interest that may arise; 

‘‘(iv) establish and administer policies and procedures that reasonably 

ensure compliance with this Act and the rules and regulations issued 

under this Act, including rules prescribed by the Commission pursuant 

to this section; and’’; and 

(iii) by redesignating clause (vi) as clause (v); 

(C) in subparagraph (C), by striking ‘‘(B)(vi)’’ and inserting ‘‘(B)(v)’’; and 

(D) in subparagraph (D)— 

(i) in clause (i)— 

(I) by striking ‘‘In accordance with rules prescribed by the Commission, the’’ and inserting ‘‘The’’; and 

(II) by striking ‘‘and sign’’; and 

(ii) in clause (ii)— 

(I) in the matter preceding subclause (I), by inserting ‘‘or senior 

officer’’ after ‘‘officer’’; 

(II) by amending subclause (I) to read as follows: 

‘‘(I) submit each report described in clause (i) to the Commission; 

and’’; and 

(III) in subclause (II), by inserting ‘‘materially’’ before ‘‘accurate’’. 

SEC. 318. TREATMENT OF FEDERAL HOME LOAN BANK PRODUCTS. 

Section 1a(2) of the Commodity Exchange Act (7 U.S.C. 1a(2)) is amended— 

(1) in subparagraph (B), by striking ‘‘and’’; 

(2) in subparagraph (C), by striking the period and inserting ‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(D) is the Federal Housing Finance Agency for any Federal Home Loan 

Bank (as defined in section 2 of the Federal Home Loan Bank Act).’’. 

SEC. 319. TREATMENT OF CERTAIN FUNDS. 

(a) AMENDMENT TO THE DEFINITION OF COMMODITY POOL OPERATOR.—Section 

1a(12) of the Commodity Exchange Act (7 U.S.C. 1a(11)), as so redesignated by section 306(b)(1) of this Act, is amended by adding at the end the following: 

‘‘(C)(i) The term ‘commodity pool operator’ does not include a person who 

serves as an investment adviser to an investment company registered pursuant to section 8 of the Investment Company Act of 1940 or a subsidiary 

of such a company, if the investment company or subsidiary invests, reinvests, owns, holds, or trades in commodity interests limited to only financial 

commodity interests. 

‘‘(ii) For purposes of this subparagraph only, the term ‘financial commodity interest’ means a futures contract, an option on a futures contract, 

or a swap, involving a commodity that is not an exempt commodity or an 

agricultural commodity, including any index of financial commodity interests, whether cash settled or involving physical delivery. 

‘‘(iii) For purposes of this subparagraph only, the term ‘commodity’ does 

not include a security issued by a real estate investment trust, business development company, or issuer of asset-backed securities, including any 

index of such securities.’’. 

(b) AMENDMENT TO THE DEFINITION OF COMMODITY TRADING ADVISOR.—Section 

1a(13) of such Act (7 U.S.C. 1a(12)), as so redesignated by section 306(b)(1) of this 

Act, is amended by adding at the end the following: 

‘‘(E) The term ‘commodity trading advisor’ does not include a person who 

serves as an investment adviser to an investment company registered pursuant to section 8 of the Investment Company Act of 1940 or a subsidiary 

of such a company, if the commodity trading advice relates only to a finanVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6621 E:\HR\OC\HR134.XXX HR134

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cial commodity interest, as defined in paragraph (11)(C)(ii) of this section. 

For purposes of this subparagraph only, the term ‘commodity’ does not include a security issued by a real estate investment trust, business development company, or issuer of asset-backed securities, including any index of 

such securities.’’. 

TITLE IV—TECHNICAL CORRECTIONS 

SEC. 401. CORRECTION OF REFERENCES. 

(a) Section 2(h)(8)(A)(ii) of the Commodity Exchange Act (7 U.S.C. 2(h)(8)(A)(ii)) 

is amended by striking ‘‘5h(f) of this Act’’ and inserting ‘‘5h(g)’’. 

(b) Section 5c(c)(5)(C)(i) of such Act (7 U.S.C. 7a-2(c)(5)(C)(i)) is amended by striking ‘‘1a(2)(i))’’ and inserting ‘‘1a(19)(i))’’. 

(c) Section 23(f) of such Act (7 U.S.C. 26(f)) is amended by striking ‘‘section 7064’’ 

and inserting ‘‘section 706’’. 

SEC. 402. ELIMINATION OF OBSOLETE REFERENCES TO DEALER OPTIONS. 

(a) IN GENERAL.—Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is 

amended by striking subsections (d) and (e) and redesignating subsections (f) and 

(g) as subsections (d) and (e), respectively. 

(b) CONFORMING AMENDMENTS.— (1) Section 2(d) of such Act (7 U.S.C. 2(d)) is amended by striking ‘‘(g) of’’ and 

inserting ‘‘(e) of’’. 

(2) Section 4f(a)(4)(A)(i) of such Act (7 U.S.C. 6f(a)(4)(A)(i)) is amended by 

striking ‘‘, (d), (e), and (g)’’ and inserting ‘‘and (e)’’. 

(3) Section 4k(5)(A) of such Act (7 U.S.C. 6k(5)(A)) is amended by striking ‘‘, 

(d), (e), and (g)’’ and inserting ‘‘and (e)’’. 

(4) Section 5f(b)(1)(A) of such Act (7 U.S.C. 7b-1(b)(1)(A)) is amended by striking ‘‘, (e) and (g)’’ and inserting ‘‘and (e)’’. 

(5) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) is amended by striking 

‘‘through (e)’’ and inserting ‘‘and (c)’’. 

SEC. 403. UPDATED TRADE DATA PUBLICATION REQUIREMENT. 

Section 4g(e) of the Commodity Exchange Act (7 U.S.C. 6g(e)) is amended by striking ‘‘exchange’’ and inserting ‘‘each designated contract market and swap execution 

facility’’. 

SEC. 404. FLEXIBILITY FOR REGISTERED ENTITIES. 

Section 5c(b) of the Commodity Exchange Act (7 U.S.C. 7a-2(b)) is amended by 

striking ‘‘contract market, derivatives transaction execution facility, or electronic 

trading facility’’ each place it appears and inserting ‘‘registered entity’’. 

SEC. 405. ELIMINATION OF OBSOLETE REFERENCES TO ELECTRONIC TRADING FACILITIES. 

(a) Section 1a(19)(A)(x) of the Commodity Exchange Act (7 U.S.C. 1a(18)(A)(x)), as 

so redesignated by section 306(b)(1) of this Act, is amended by striking ‘‘(other than 

an electronic trading facility with respect to a significant price discovery contract)’’. 

(b) Section 1a(41) of such Act (7 U.S.C. 1a(40)), as so redesignated by section 

306(b)(1) of this Act, is amended— 

(1) by adding ‘‘and’’ at the end of subparagraph (D); and 

(2) by striking all that follows ‘‘section 21’’ and inserting a period. 

(c) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended— 

(1) in the 1st sentence— 

(A) by striking ‘‘or by any electronic trading facility’’; 

(B) by striking ‘‘or on an electronic trading facility’’; and 

(C) by striking ‘‘or electronic trading facility’’ each place it appears; and 

(2) in the 2nd sentence, by striking ‘‘or electronic trading facility with respect 

to a significant price discovery contract’’. 

(d) Section 4g(a) of such Act (7 U.S.C. 6g(a)) is amended by striking ‘‘any significant price discovery contract traded or executed on an electronic trading facility or’’. 

(e) Section 4i of such Act (7 U.S.C. 6i) is amended— 

(1) by striking ‘‘, or any significant price discovery contract traded or executed 

on an electronic trading facility or any agreement, contract, or transaction that 

is treated by a derivatives clearing organization, whether registered or not registered, as fungible with a significant price discovery contract’’; and 

(2) by striking ‘‘or electronic trading facility’’ 

(f) Section 6(b) of such Act (7 U.S.C. 8(b)) is amended by striking ‘‘or electronic 

trading facility’’ each place it appears. 

(g) Section 12(e)(2) of such Act (7 U.S.C. 16(e)(2)) is amended by striking ‘‘in the 

case of—’’ and all that follows and inserting ‘‘in the case of an agreement, contract, 


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or transaction that is excluded from this Act under section 2(c) or 2(f) of this Act 

or title IV of the Commodity Futures Modernization Act of 2000, or exempted under 

section 4(c) of this Act (regardless of whether any such agreement, contract, or 

transaction is otherwise subject to this Act).’’. 

SEC. 406. ELIMINATION OF OBSOLETE REFERENCE TO ALTERNATIVE SWAP EXECUTION FACILITIES. 

Section 5h(h) of the Commodity Exchange Act (7 U.S.C. 7b-3(h)) is amended by 

striking ‘‘alternative’’ before ‘‘swap’’. 

SEC. 407. ELIMINATION OF REDUNDANT REFERENCES TO TYPES OF REGISTERED ENTITIES. 

Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended in the 1st 

sentence by striking ‘‘as set forth in sections 5 through 5c’’. 

SEC. 408. CLARIFICATION OF COMMISSION AUTHORITY OVER SWAPS TRADING. 

Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended— 

(1) in paragraph (7)— 

(A) by inserting ‘‘the protection of swaps traders and to assure fair dealing in swaps, for’’ after ‘‘appropriate for’’; 

(B) in subparagraph (A), by inserting ‘‘swaps or’’ after ‘‘conditions in’’; and 

(C) in subparagraph (B), by inserting ‘‘or swaps’’ after ‘‘future delivery’’; 

and 

(2) in paragraph (9)— 

(A) by inserting ‘‘swap or’’ after ‘‘or liquidation of any’’; and 

(B) by inserting ‘‘swap or’’ after ‘‘margin levels on any’’. 

SEC. 409. ELIMINATION OF OBSOLETE REFERENCE TO THE COMMODITY EXCHANGE COMMISSION. 

Section 13(c) of the Commodity Exchange Act (7 U.S.C. 13c(c)) is amended by 

striking ‘‘or the Commission’’. 

SEC. 410. ELIMINATION OF OBSOLETE REFERENCES TO DERIVATIVE TRANSACTION EXECUTION FACILITIES. 

(a) Section 1a(13)(B)(vi) of the Commodity Exchange Act (7 U.S.C. 1a(12)(B)(vi)), 

as so redesignated by section 306(b)(1) of this Act, is amended by striking ‘‘derivatives transaction execution facility’’ and inserting ‘‘swap execution facility’’. 

(b) Section 1a(35) of such Act (7 U.S.C. 1a(34)), as so redesignated by section 

306(b)(1) of this Act, is amended by striking ‘‘or derivatives transaction execution 

facility’’ each place it appears. 

(c) Section 1a(36)(B)(iii)(I) of such Act (7 U.S.C. 1a(35)(B)(iii)(I)), as so redesignated by section 306(b)(1) of this Act, is amended by striking ‘‘or registered derivatives transaction execution facility’’. 

(d) Section 2(a)(1)(C)(ii) of such Act (7 U.S.C. 2(a)(1)(C)(ii)) is amended— 

(1) by striking ‘‘, or register a derivatives transaction execution facility that 

trades or executes,’’; 

(2) by striking ‘‘, and no derivatives transaction execution facility shall trade 

or execute such contracts of sale (or options on such contracts) for future delivery’’; and 

(3) by striking ‘‘or the derivatives transaction execution facility,’’. 

(e) Section 2(a)(1)(C)(v)(I) of such Act (7 U.S.C. 2(a)(1)(C)(v)(I)) is amended by 

striking ‘‘, or any derivatives transaction execution facility on which such contract 

or option is traded,’’. 

(f) Section 2(a)(1)(C)(v)(II) of such Act (7 U.S.C. 2(a)(1)(C)(v)(II)) is amended by 

striking ‘‘or derivatives transaction execution facility’’ each place it appears. 

(g) Section 2(a)(1)(C)(v)(V) of such Act (7 U.S.C. 2(a)(1)(C)(v)(V)) is amended by 

striking ‘‘or registered derivatives transaction execution facility’’. 

(h) Section 2(a)(1)(D)(i) of such Act (7 U.S.C. 2(a)(1)(D)(i)) is amended in the matter preceding subclause (I)— 

(1) by striking ‘‘in, or register a derivatives transaction execution facility’’; and 

(2) by striking ‘‘, or registered as a derivatives transaction execution facility 

for,’’. 

(i) Section 2(a)(1)(D)(i)(IV) of such Act (7 U.S.C. 2(a)(1)(D)(i)(IV)) is amended by 

striking ‘‘registered derivatives transaction execution facility,’’ each place it appears. 

(j) Section 2(a)(1)(D)(ii)(I) of such Act (7 U.S.C. 2(a)(1)(D)(ii)(I)) is amended to read 

as follows: 

‘‘(I) the transaction is conducted on or subject to the rules of a board of trade 

that has been designated by the Commission as a contract market in such security futures product; or’’. 

(k) Section 2(a)(1)(D)(ii)(II) of such Act (7 U.S.C. 2(a)(1)(D)(ii)(II)) is amended by 

striking ‘‘or registered derivatives transaction execution facility’’. 


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(l) Section 2(a)(1)(D)(ii)(III) of such Act (7 U.S.C. 2(a)(1)(D)(ii)(III)) is amended by 

striking ‘‘or registered derivatives transaction execution facility member’’. 

(m) Section 2(a)(9)(B)(ii) of such Act (7 U.S.C. 2(a)(9)(B)(ii)) is amended— 

(1) by striking ‘‘or registration’’ each place it appears; 

(2) by striking ‘‘or derivatives transaction execution facility’’ each place it appears; 

(3) by striking ‘‘or register’’; 

(4) by striking ‘‘, registering,’’; and 

(5) by striking ‘‘, registration,’’. 

(n) Section 2(c)(2) of such Act (7 U.S.C. 2(c)(2)) is amended by striking ‘‘or a derivatives transaction execution facility’’ each place it appears. 

(o) Section 4(a)(1) of such Act (7 U.S.C. 6(a)(1)) is amended by striking ‘‘or derivatives transaction execution facility’’. 

(p) Section 4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is amended— 

(1) by striking ‘‘or registered’’ after ‘‘designated’’; and 

(2) by striking ‘‘or derivatives transaction execution facility’’. 

(q) Section 4a(a)(1) of such Act (7 U.S.C. 6a(a)(1)) is amended— 

(1) by striking ‘‘or derivatives transaction execution facilities’’; and 

(2) by striking‘‘or derivatives transaction execution facility’’. 

(r) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended— 

(1) by striking ‘‘, derivatives transaction execution facility,’’ each place it appears; and 

(2) by striking ‘‘or derivatives transaction execution facility’’. 

(s) Section 4c(e) of such Act (7 U.S.C. 6c(g)), as so redesignated by section 402(a) 

of this Act, is amended by striking ‘‘or derivatives transaction execution facility’’ 

each place it appears. 

(t) Section 4d of such Act (7 U.S.C. 6d) is amended by striking ‘‘or derivatives 

transaction execution facility’’ each place it appears. 

(u) Section 4e of such Act (7 U.S.C. 6e) is amended by striking ‘‘or derivatives 

transaction execution facility’’. 

(v) Section 4f(b) of such Act (7 U.S.C. 6f(b)) is amended by striking ‘‘or derivatives 

transaction execution facility’’ each place it appears. 

(w) Section 4i of such Act (7 U.S.C. 6i) is amended by striking ‘‘or derivatives 

transaction execution facility’’. 

(x) Section 4j(a) of such Act (7 U.S.C. 6j(a)) is amended by striking ‘‘and registered 

derivatives transaction execution facility’’. 

(y) Section 4p(a) of such Act (7 U.S.C. 6p(a)) is amended by striking ‘‘, or derivatives transaction execution facilities’’. 

(z) Section 4p(b) of such Act (7 U.S.C. 6p(b)) is amended by striking ‘‘derivatives 

transaction execution facility,’’. 

(aa) Section 5c(f) of such Act (7 U.S.C. 7a-2(f)) is amended by striking ‘‘and registered derivatives transaction execution facility’’. 

(bb) Section 5c(f)(1) of such Act (7 U.S.C. 7a-2(f)(1)) is amended by striking ‘‘or 

registered derivatives transaction execution facility’’. 

(cc) Section 6 of such Act (7 U.S.C. 8) is amended— 

(1) by striking ‘‘or registered’’; 

(2) by striking ‘‘or derivatives transaction execution facility’’ each place it appears; and 

(3) by striking ‘‘or registration’’ each place it appears. 

(dd) Section 6a(a) of such Act (7 U.S.C. 10a(a)) is amended— 

(1) by striking ‘‘or registered’’; 

(2) by striking ‘‘or a derivatives transaction execution facility’’; and 

(3) by inserting ‘‘shall’’ before ‘‘exclude’’ the first place such term appears. 

(ee) Section 6a(b) of such Act (7 U.S.C. 10a(b)) is amended— 

(1) by striking ‘‘or registered’’; and 

(2) by striking ‘‘or a derivatives transaction execution facility’’. 

(ff) Section 6d(1) of such Act (7 U.S.C. 13a-2(1)) is amended by striking ‘‘derivatives transaction execution facility,’’. 

SEC. 411. ELIMINATION OF OBSOLETE REFERENCES TO EXEMPT BOARDS OF TRADE. 

(a) Section 1a(19)(A)(x) of the Commodity Exchange Act (7 U.S.C. 1a(18)(A)(x)), as 

so redesignated by section 306(b)(1) of this Act, is amended by striking ‘‘or an exempt board of trade’’. 

(b) Section 12(e)(1)(B)(i) of such Act (7 U.S.C. 16(e)(1)(B)(i)) is amended by striking ‘‘or exempt board of trade’’. 

SEC. 412. ELIMINATION OF REPORT DUE IN 1986. 

Section 26 of the Futures Trading Act of 1978 (7 U.S.C. 16a) is amended by striking subsection (b) and redesignating subsection (c) as subsection (b). 


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SEC. 413. COMPLIANCE REPORT FLEXIBILITY. 

Section 4s(k)(3)(B) of the Commodity Exchange Act (7 U.S.C. 6s(k)(3)(B)) is 

amended to read as follows: 

‘‘(B) REQUIREMENTS.—A compliance report under subparagraph (A) 

shall— 

‘‘(i) include a certification that, under penalty of law, the compliance 

report is materially accurate and complete; and 

‘‘(ii) be furnished at such time as the Commission determines by rule, 

regulation, or order, to be appropriate.’’. 

SEC. 414. MISCELLANEOUS CORRECTIONS. 

(a) Section 1a(13)(A)(i)(II) of the Commodity Exchange Act (7 U.S.C. 

1a(12)(A)(i)(II)), as so redesignated by section 306(b)(1) of this Act, is amended by 

adding at the end a semicolon. 

(b) Section 2(a)(1)(C)(ii)(III) of such Act (7 U.S.C. 2(a)(1)(C)(ii)(III)) is amended by 

moving the provision 2 ems to the right. 

(c) Section 2(a)(1)(C)(iii) of such Act (7 U.S.C. 2(a)(1)(C)(iii)) is amended by moving 

the provision 2 ems to the right. 

(d) Section 2(a)(1)(C)(iv) of such Act (7 U.S.C. 2(a)(1)(C)(iv)) is amended by striking ‘‘under or’’ and inserting ‘‘under’’. 

(e) Section 2(a)(1)(C)(v) of such Act (7 U.S.C. 2(a)(1)(C)(v)) is amended by moving 

the provision 2 ems to the right. 

(f) Section 2(a)(1)(C)(v)(VI) of such Act (7 U.S.C. 2(a)(1)(C)(v)(VI)) is amended by 

striking ‘‘III’’ and inserting ‘‘(III)’’. 

(g) Section 2(c)(1) of such Act (7 U.S.C. 2(c)(1)) is amended by striking the 2nd 

comma. 

(h) Section 4(c)(3)(H) of such Act (7 U.S.C. 6(c)(3)(H)) is amended by striking 

‘‘state’’ and inserting ‘‘State’’. 

(i) Section 4c(c) of such Act (7 U.S.C. 6c(c)) is amended to read as follows: 

‘‘(c) The Commission shall issue regulations to continue to permit the trading of 

options on contract markets under such terms and conditions that the Commission 

from time to time may prescribe.’’. 

(j) Section 4d(b) of such Act (7 U.S.C. 6d(b)) is amended by striking ‘‘paragraph 

(2) of this section’’ and inserting ‘‘subsection (a)(2)’’. 

(k) Section 4f(c)(3)(A) of such Act (7 U.S.C. 6f(c)(3)(A)) is amended by striking the 

1st comma. 

(l) Section 4f(c)(4)(A) of such Act (7 U.S.C. 6f(c)(4)(A)) is amended by striking ‘‘in 

developing’’ and inserting ‘‘In developing’’. 

(m) Section 4f(c)(4)(B) of such Act (7 U.S.C. 6f(c)(4)(B)) is amended by striking 

‘‘1817(a)’’ and inserting ‘‘1817(a))’’. 

(n) Section 5 of such Act (7 U.S.C. 7) is amended by redesignating subsections (c) 

through (e) as subsections (b) through (d), respectively. 

(o) Section 5b of such Act (7 U.S.C. 7a-1) is amended by redesignating subsection 

(k) as subsection (j). 

(p) Section 5f(b)(1) of such Act (7 U.S.C. 7b-1(b)(1)) is amended by striking ‘‘section 5f’’ and inserting ‘‘this section’’. 

(q) Section 6(a) of such Act (7 U.S.C. 8(a)) is amended by striking ‘‘the the’’ and 

inserting ‘‘the’’. 

(r) Section 8a of such Act (7 U.S.C. 12a) is amended in each of paragraphs (2)(E) 

and (3)(B) by striking ‘‘Investors’’ and inserting ‘‘Investor’’. 

(s) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) is amended by striking ‘‘subsection 4c’’ and inserting ‘‘section 4c’’. 

(t) Section 12(b)(4) of such Act (7 U.S.C. 16(b)(4)) is amended by moving the provision 2 ems to the left. 

(u) Section 14(a)(2) of such Act (7 U.S.C. 18(a)(2)) is amended by moving the provision 2 ems to the left. 

(v) Section 17(b)(9)(D) of such Act (7 U.S.C. 21(b)(9)(D)) is amended by striking 

the semicolon and inserting a period. 

(w) Section 17(b)(10)(C)(ii) of such Act (7 U.S.C. 21(b)(10)(C)(ii)) is amended by 

striking ‘‘and’’ at the end. 

(x) Section 17(b)(11) of such Act (7 U.S.C. 21(b)(11)) is amended by striking the 

period and inserting a semicolon. 

(y) Section 17(b)(12) of such Act (7 U.S.C. 21(b)(12)) is amended— 

(1) by striking ‘‘(A)’’; and 

(2) by striking the period and inserting ‘‘; and’’. 

(z) Section 17(b)(13) of such Act (7 U.S.C. 21(b)(13)) is amended by striking ‘‘A’’ 

and inserting ‘‘a’’. 

(aa) Section 17 of such Act (7 U.S.C. 21), as amended by sections 101 through 103 

of this Act, is amended by redesignating subsection (q), as added by section 233(5) 


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of Public Law 97–444, and subsections (s) through (w) as subsections (r) through 

(x), respectively. 

(bb) Section 22(b)(3) of such Act (7 U.S.C. 25(b)(3)) is amended by striking ‘‘of registered’’ and inserting ‘‘of a registered’’. 

(cc) Section 22(b)(4) of such Act (7 U.S.C. 25(b)(4)) is amended by inserting a 

comma after ‘‘entity’’. 

BRIEF EXPLANATION

Title I—Customer Protections 

The Commodity End-User Relief Act, H.R. 2289, will better protect farmers and ranchers who use the futures markets by cementing several new regulatory customer protections into law. Added 

protections include mandates to: • Require regulators to electronically confirm customer fund account balances held at depository institutions. This eliminates the 

flawed reporting system that allowed the management of Peregrine 

Financial Group, Inc. to use forged paper documents to steal millions of dollars of customers’ money. • Require firms that move more than a certain percentage of 

customer funds from one account to another to follow strict reporting and permission requirements before doing so. This provides a 

new safeguard to prevent a firm from moving funds from one account to another, without regulators knowing about it, as happened 

during the MF Global, Inc. (MF Global) bankruptcy. • Require firms who become undercapitalized to immediately notify regulators so they can assess the firm’s viability and act, if 

needed, to protect customer funds. • Require firms to file an annual report with regulators from the 

chief compliance officer containing an assessment of a futures commission merchant’s (FCM) internal compliance programs. • Ensure farmers, ranchers, and other futures customers have a 

full business day to send their margin payments to an FCM, which 

mitigates costs of over-funding accounts. • Provide legal clarity for futures customers that the assets of a 

bankrupt commodity broker would be used to help pay back any 

misappropriated or illegally transferred customer segregated funds. 

Title II—Commodity Futures Trading Commission Reforms 

In the past five years, the U.S. Commodity Futures Trading 

Commission (CFTC) has finalized approximately 50 rules to enforce 

the new law. In that time span, the CFTC has also issued an unprecedented 258 ‘‘no-action’’ letters, 56 exemptive letters and 43 

statements of guidance, interpretation and advice in order to delay, 

revise, or exempt the application of these regulations upon various 

market participants. This haphazard patchwork of exemptions has 

been widely used in lieu of a thorough and well-reasoned rulemaking process. H.R. 2289 reauthorizes the CFTC through 2019 

and makes reforms to CFTC operations to help ensure that all 

Commissioners’ voices are heard as a part of a more deliberative 

rulemaking process. These reforms include: 

• Modifying the Commodity Exchange Act’s (CEA’s) cost-benefit 

analysis requirements for proposed rules, to more closely track 

those set forth in Executive Order 13563. 

• Making the Commission’s division directors answerable to the 

entire Commission, not just the Chairman’s office. 


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• Creating a new Office of the Chief Economist answerable to 

the entire Commission, to provide objective economic data and 

analysis. 

• Enhancing the CFTC staff procedures governing the issuance 

of ‘‘no-action’’ letters to improve Commissioners’ oversight of the activities happening outside the official rulemaking process. 

• Requiring the CFTC to develop a strategic technology plan 

every five years focused on market surveillance and risk detection, 

which must also include a detailed accounting of how funds provided for technology will be used. 

• Requiring the Commission and the OCE to develop comprehensive internal risk control mechanisms to safeguard market data. 

• Ensuring that every Commissioner has a seat at the table in 

approving the renewal of omnibus orders of investigation that authorize the issuance of subpoenas. 

• Creating a judicial review process similar to that of the Securities and Exchange Commission’s (SEC) for rulemakings to ensure 

the two regulators charged with overseeing the derivatives markets 

have similar procedures in place to allow market participants to 

challenge Commission rules. 

• Prohibiting the Commission from issuing policy statements, 

guidance, interpretive rules, or other procedural rules that have 

the ultimate effect of law, without providing the public the notice 

and the opportunity to comment as required in the Administrative 

Procedure Act. 

• Directing the Government Accountability Office (GAO) to conduct a study on the sufficiency of CFTC resources and examine 

prior expenditures of funds on market surveillance and market 

data collection, standardization, and harmonization. The study will 

also explore areas where self-regulatory organizations could reduce 

the CFTC’s workload. 

• Requiring the Commission to review and take action on the 

London Metal Exchange’s application to register as a foreign board 

of trade in efforts to mitigate disruptive queues for aluminum and 

to promote a more efficient and transparent aluminum market. 

• Providing greater protection of Commodity Pool Operators’ 

(CPO) and Commodity Trading Advisors’ (CTA) proprietary information that is submitted to the Commission on certain mandated 

disclosure documents. 

Title III—End-User Relief 

Title III of the Commodity End-User Relief Act addresses the 

concerns shared with the Committee by many end-users over the 

past four years. These market participants are not speculators or 

risk-takers, yet they have borne the brunt of many of the consequences of our new regulations. Agricultural producers, manufacturers, electric and gas utilities, and pension plans have each testified about how their business are facing new barriers to entering 

these markets—from increased transaction costs, to increased compliance burdens, to fewer trading partners. Title III addresses the 

following concerns: 

• Companies using centralized treasury units to manage and offset the risk of their affiliates will no longer be subject to burdensome and unnecessary clearing requirements. 


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• Trusted foreign regulators should not—and often cannot—be 

required to indemnify the CFTC for costs associated with the loss 

of data from a U.S. Swap Data Repository. The legal concept of indemnification does not exist within the tort law of all foreign jurisdictions. The bill removes that unworkable provision of the CEA, 

while maintaining the requirement for written confidentiality 

agreements. • Government-owned utilities should not be deterred from entering into swaps with non-financial counterparties, such as natural 

gas producers and independent power generators, in order to hedge 

against operational risk. The bill codifies municipal utility companies’ cost-effective access to the customized, non-financial commodity swaps that utility special entities have used for years. • Commercial end-users should not be classified and treated like 

banks, and the bill corrects the definition of ‘‘financial entity’’ to ensure that they are not. • Non-financial end-users should not be disadvantaged in the 

marketplace if they use contracts that trade so infrequently that 

other market participants can identify them through the new public reporting requirements. The bill would ensure that end-users 

hedging in thinly-traded markets are provided adequate time between completing and reporting a transaction to protect their position. • Grain elevators, farmers, agriculture counterparties, and commercial market participants should not be subject to overreaching 

recordkeeping rules that require the recording of all forms of communication that may possibly lead to a trade. The bill specifies that 

keeping written records of the final material economic terms of an 

agreement will be sufficient for market participants who are only 

managing their own money. • Contracts that contain an option to change the amount of a 

commodity delivered, but result in actual physical delivery of a 

commodity should not be regulated as swaps. This impacts utilities 

that use natural gas to produce electricity, in addition to millions 

of consumers who use natural gas to heat their homes. 

• Non-bank swap dealers should not be required to hold exponentially more capital than their bank counterparts. This bill 

would ensure that swap dealers without a prudential regulator 

would be able to use workable capital requirement formulas. 

• On December 31, 2017, the de minimis exception from the 

swap dealer definition will be reduced by $5 billion because several 

years ago, the Commission arbitrarily decided it should. The bill 

will require a vote on a new regulation to change the current 

threshold, after the Commission completes a planned study on the 

issue. 

• An oversight in the JOBS Act should not prohibit funds also 

registered as commodity pool operators from soliciting certain potential new investors. The bill makes a conforming change to CFTC 

regulations to bring them in line with the JOBS Act. 

• End-users’ ability to hedge against anticipated business risks 

should not be limited by the CFTC’s arbitrary narrowing of acceptable hedging activities. The bill provides a more workable definition of bona fide hedging as it relates to position limits. 

• In 50 rulemakings, the Commission still has not set out a rule 

that defines who is subject to U.S. rules, who is not subject to U.S. 


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rules, and what to do when international rules conflict. The bill 

would require the CFTC to finally put in place a comprehensive 

plan for how to address the international nature of swaps trading 

and to determine how to share regulatory obligations over transactions that cross international boundaries. 

• Universities, churches, and other charitable organizations 

should have the full benefit of commodities investments that provide diversification, opportunities to hedge, and returns to their respective beneficiaries. The bill extends the long-standing exemptions present in securities laws to the commodities laws, to these 

charitable organizations, thus harmonizing the overarching regulatory structure and eliminating onerous registration requirements 

for these entities. 

• Mutual funds that are extensively regulated by the SEC and 

that do not invest in traditional commodity interests should not be 

subject to unnecessary and duplicative CFTC registration requirements. The bill reverses part of a recent CFTC rule change and restores exclusive SEC jurisdiction over those funds that invest only 

in financial derivatives. 

• Small banks and savings associations that manage risk 

through swaps entered into with their holding companies should 

not be subject to unnecessary clearing mandates. The bill addresses 

this by extending clearing exemptions granted to small banks and 

savings associations to the holding companies of those associations. 

• Swap Execution Facilities (SEFs) should not be subject to regulations that impose significant costs and prescribe onerous burdens 

that impede development and potentially contribute to their failure. The bill provides SEFs with more flexibility and added certainty to allow for more efficient operations. 

• Community financial institutions should be able to maintain 

affordable access to financial services that help them structure 

their products to meet the needs of the communities they serve and 

to prudently manage their balance sheets. The bill assures this 

continued access by clarifying that Federal Home Loan Bank advances should not be regulated as swaps. 

Title IV—Technical Corrections 

Working with the CFTC, House Legislative Counsel, and market 

participants, the Committee has prepared a section of technical 

edits and changes to the Commodity Exchange Act which correct 

references, remove obsolete terms, comport ambiguous text to existing practices, fix formatting errors, and remove a study due to Congress in 1986. 

PURPOSE AND NEED

Title I—Customer Protections 

When futures commission merchant (FCM) MF Global, Inc. (MF 

Global), failed in November of 2011 and Peregrine Financial Group, 

Inc. (Peregrine or PFG), followed suit in July of 2012, thousands 

of farmers, ranchers, and futures customers collectively lost more 

than a billion dollars in customer funds that were thought to be 

segregated by law apart from the funds of the FCMs. The bankruptcy of these two firms, caused by gross mismanagement or outVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00023 Fmt 6659 Sfmt 6602 E:\HR\OC\HR134.XXX HR134

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right fraud, resulted in tremendous hardship for a large segment 

of the U.S. agricultural community and created serious public 

doubts about the safety of using the futures markets to manage 

risk. After both failures, the Committee held several hearings and 

heard from numerous witnesses over the course of the 112th, 

113th, and 114th Congresses to examine why these failures occurred and how public confidence could be restored in the futures 

markets. 

As a result of the Committee’s work, Title I of H.R. 2289 is designed to better protect futures customers and restore confidence in 

the marketplace while also providing regulators with enhanced 

tools to supervise FCMs. Importantly, sections 101, 102 and 103 of 

H.R. 2289 would codify regulatory changes already implemented by 

both the National Futures Association (NFA) and the CFTC, therefore the Committee does not intend for any of these sections to require new rulemakings by the NFA or CFTC in order to implement 

the requirements of the legislation. Section 104, however, contains 

statutory changes that are in conflict with existing CFTC regulations, so the Committee would expect expedited action from the 

CFTC to conform its regulations to the legislation when enacted 

into law to provide for certainty in the marketplace. 

Section 101—Enhanced protections for futures customers 

After MF Global filed for bankruptcy, it was revealed that in the 

final days before the firm’s failure, customer segregated funds (cash 

deposits, securities, or other property of customers held by the firm 

to margin or guarantee futures trading) were used to fund the company’s liquidity needs related to aggressive and ultimately ill-advised investments in European sovereign debt securities. Section 

101 would provide the NFA and CFTC with the statutory authority 

to help supervise and prevent future mismanagement involving the 

illegal transfer of customer segregated funds. 

Accordingly, Section 101 would broadly codify regulatory changes 

proposed by the NFA, and approved by the CFTC in July 2012 

(NFA Financial Requirements Section 16), requiring FCMs to 

strengthen their controls over the treatment and monitoring of 

funds held for customers trading in the U.S. (‘‘segregated’’) and foreign (‘‘Part 30 secured’’) futures and options markets. Notable 

changes contained in the new NFA rules that would meet the statutory requirements of Section 101 include: (1) FCMs must now hold 

sufficient funds in Part 30 secured accounts to meet their total obligations to customer trading; (2) FCMs must maintain written policies and procedures governing the maintenance of excess (i.e., proprietary or residual) funds in customer segregated and Part 30 secured trading accounts; (3) any withdrawals of more than 25% of 

the excess segregated or Part 30 secured funds that are not for the 

benefit of customers must be pre-approved in writing by the FCM’s 

senior management; and (4) FCMs must file notice with the NFA 

of any withdrawal of 25% or more of the excess segregated or Part 

30 secured amount funds that are not for the benefit of customers. 

On July 25, 2012, at a hearing entitled ‘‘Oversight of the Swaps 

and Futures Markets: Recent Events and Impending Regulatory 

Reforms,’’ the following testimony was provided by witnesses with 

respect to NFA provisions incorporated in Section 101: 


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All of these rule changes promote greater transparency 

for both customers and regulators and should help prevent 

a recurrence of the type of problems we saw at MF Global. 

These rule changes, however, are only the beginning. The 

MF Global and Peregrine customer losses are a painful reminder that we must continuously improve our surveillance, audit and fraud detection techniques to keep pace 

with changing technology and an ever-more-complicated financial marketplace. 

—Mr. Daniel Roth, President, NFA 

In direct response to the MFG collapse, the ‘‘Corzine 

Rule’’ will be implemented on September 1st. The ‘‘Corzine 

Rule’’ requires the CEO or CFO of the FCM to pre-approve 

in writing any disbursement of customer segregated funds 

not made for the benefit of customers and that exceeds 

25% of the firm’s excess segregated funds. The CME (or 

other [self-regulatory organizations (SRO)] must be immediately notified of the pre-approval. 

—Mr. Terrance A. Duffy, Executive Chairman & President, CME Group Inc. (CME) 

We also recommended and supported rules adopted by 

the Chicago Mercantile Exchange and National Futures 

Association that subject all FCMs to enhanced recordkeeping and reporting obligations, including . . . requiring 

the chief financial officer or other appropriate senior officer 

to authorize in writing and promptly notify the FCM’s 

[designated self-regulatory organization (DSRO)] whenever 

an FCM seeks to withdraw more than 25 percent of its excess funds from the customer segregated account in any 

day. These changes have now been approved by the Commission. 

—Hon. Walt Lukken, President & Chief Executive Officer, 

Futures Industry Association (FIA) 

On March 14, 2013, at a hearing entitled ‘‘Examining Legislative 

Improvements to Title VII of the Dodd-Frank Act,’’ the Hon. Gary 

Gensler, Chairman, CFTC, provided the following testimony with 

respect to provisions that were ultimately included in Section 101: 

The Commission also worked closely with market participants on new customer protection rules adopted by the 

self-regulatory organization (SRO), the National Futures 

Association (NFA). These include requiring FCMs to hold 

sufficient funds for U.S. foreign futures and options customers trading on foreign contract markets (in Part 30 secured accounts). Starting last year, they must meet their 

total obligations to customers trading on foreign markets 

under the net liquidating equity method. In addition, withdrawals of 25 percent or more of excess segregated funds 

would necessitate pre-approval in writing by senior management and must be reported to the designated SRO and 

the CFTC. 

On May 21, 2013, testifying before the Committee at a hearing 

entitled ‘‘The Future of the CFTC: Market Perspectives,’’ Mr. DanVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6602 E:\HR\OC\HR134.XXX HR134

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iel Roth, President, NFA, provided the following testimony with respect to the provisions included in Section 101: 

All FCMs maintain excess segregated funds. These are 

funds deposited by the FCM into customer segregated accounts to act as a buffer in the event of customer defaults. 

Because these funds belong to the FCM, the FCM is free 

to withdraw the excess funds, but after MF Global, NFA 

and the CME adopted rules to ensure notice to regulators 

and accountability within the firm. Now all FCMs must 

provide regulators with immediate notification if they 

draw down their excess segregated funds by 25% in any 

given day. Such withdrawals must be approved by the 

CEO, CFO or a financial principal of the firm and the 

principal must certify that the firm remains in compliance 

with segregation requirements. This rule became effective 

on September 1, 2012. 

Section 102—Electronic confirmation of customer funds 

On Monday, July 9, 2012, the founder and Chairman of Peregrine, Russell R. Wasendorf Sr., unsuccessfully attempted suicide 

outside of the firm’s Cedar Falls, Iowa, headquarters. He left a note 

admitting to producing elaborate forgeries of bank documents submitted to regulators. In court filings the next day, the CFTC alleged that Peregrine and Wasendorf ‘‘committed fraud by misappropriating customer funds, violated customer fund segregation laws, 

and made false statements in financial statements filed with the 

[CFTC]’’ and that Wasendorf may have falsified certain bank 

records. According to press reports, Mr. Wasendorf’s suicide attempt, which led to the discovery of the fraud, occurred only days 

after the NFA first required Peregrine to electronically confirm customer balances directly through a third-party electronic auditing 

system with Peregrine’s banks. Prior to this requirement, self regulatory organizations such as the NFA and CME had relied on paper 

statements from an FCM’s bank. 

Section 102 would provide broad statutory authority to codify 

regulatory changes first proposed in 2012 by a special committee 

composed of futures industry SROs (including CME, NFA, InterContinental Exchange, the Kansas City Board of Trade, and the 

Minneapolis Grain Exchange) to require: (1) confirmation of the 

balances of customer segregated bank accounts for all FCMs using 

a web-based electronic confirmation process; (2) all FCMs to provide their designated-SRO with direct online access to confirm segregated and secured funds balances at the banks which hold the 

FCM’s customer segregated and secured funds; and (3) any bank 

that fails to provide electronic online access will not be considered 

an acceptable depository for holding customer segregated and secured funds. 

Notably, in light of the Peregrine fraud, Section 102 would also 

provide the statutory authority for regulations that require FCMs 

to file segregation and Part 30 secured amount computations on a 

daily basis with the NFA. Additionally, FCMs must file with the 

NFA detailed information regarding the banks holding customer 

funds and the investments made with customer funds as of the 

15th and last business day of each month. 


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On July 25, 2012, at a hearing entitled ‘‘Oversight of the Swaps 

and Futures Markets: Recent Events and Impending Regulatory 

Reforms,’’ the following testimony was provided by witnesses with 

respect to provisions the Committee decided to include in Section 

102: 

NFA intends to expand this approach, once it is implemented, to receive daily reports from all depositories for 

customer segregated accounts, including clearing FCMs. 

We will develop a program to compare these balances with 

those reported by the firms in their daily segregation reports. While there may be reconciling items due to pending 

additions and withdrawals, the system will generate an 

immediate alert for any material discrepancies. We have 

also agreed with the CME to perform an immediate confirmation of all customer segregated bank accounts for all 

of our FCM Members using the e-confirmation process I 

referred to earlier. The completion of this work within the 

next week or so should help ensure that another Peregrine 

is not lurking in the industry. 

—Mr. Daniel Roth, President, NFA 

First, FIA strongly supports providing regulators with 

the independent ability to electronically review and confirm customer segregated balances across every FCM at 

any time. Second, FIA supports the creation of an automated confirmation process for segregated funds that will 

provide regulators with timely information that customer 

funds are secure. Technology solutions can help prevent 

this type of event from occurring again. 

—Hon. Walt Lukken, President and Chief Executive Officer, FIA 

On October 2, 2013, testifying before the Committee at a hearing 

entitled ‘‘The Future of the CFTC: Perspectives on Customer Protections,’’ Mr. Daniel Roth, President, NFA, provided the following 

testimony: 

For years, NFA and other SROs confirmed FCM reports 

regarding the customer segregated funds held by the FCM 

through traditional paper confirmations mailed to the 

banks holding those funds. These confirmations were done 

as part of the annual examination process. In early 2012 

NFA began confirming bank balances electronically 

through an e-confirm process. That change led to the discovery of the fraud at PFG, but e-confirms were still done 

as part of the annual examination. We had to find a better 

way and we did. We partnered with the CME and developed a process by which NFA and the CME confirm all 

balances in all customer segregated bank accounts on a 

daily basis. FCMs file daily reports with NFA and the 

CME, reflecting the amount of customer funds the FCM is 

holding. Through a third-party vendor, NFA and CME get 

daily reports from banks for the over 2,000 customer segregated bank accounts maintained by FCMs. We then perform an automated comparison of the reports from the 

FCMs and the reports from the banks to identify any suspicious discrepancies. In short, Mr. Chairman, the process 


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by which we monitor FCMs for segregated fund compliance 

is now far ahead of where it was just one year ago. We 

have recently expanded this system to also obtain daily 

confirmations from clearing firms and will expand it again 

by the end of the year to include clearinghouses as well. 

Section 103—Notice and certifications providing additional customer protections 

On October 22, 2012, the CFTC proposed additional rules to enhance several aspects of supervision in order to better protect customers of FCMs. Just over a year later, these new rules were finalized and adopted by the CFTC. In order to codify the CFTC’s authority to increase customer protections, Section 103 would require 

that FCMs notify both the CFTC and the appropriate SRO when 

they become under-capitalized or under-segregated. By legally requiring that an FCM notify authorities as soon as the firm is faced 

with an undercapitalization scenario, regulators will have the 

power to step in and take preventative or corrective action to protect customer segregated funds. This would help prevent the same 

type of harm to customers that occurred when MF Global illegally 

transferred hundreds of millions of dollars of customer segregated 

funds to cover its trading shortfalls. 

Similarly, Section 103 requires FCMs to file a report at the end 

of each fiscal year that details an assessment of an FCM’s internal 

compliance programs so the Commission can evaluate whether the 

controls are adequate or need to be improved or modified. 

On October 2, 2013, testifying before the Committee at a hearing 

entitled ‘‘The Future of the CFTC: Perspectives on Customer Protections,’’ Mr. Daniel Roth, President, NFA, provided the following 

testimony with respect to the CFTC’s provisions included in Section 

103: 

The Commission also proposed its own changes to customer protection rules in a 107-page Federal Register release last year. Certain parts of the Commission’s proposals have provoked strong opposition both from the industry and from end-users of the markets, particularly in 

the agricultural sector. As described below, NFA shares 

many of the concerns raised by others, but we fully support many of the Commission’s proposals. For example, the 

Commission’s proposed rules would: • Require SROs to expand their testing of FCM internal 

controls and develop more sophisticated measures of the 

risks posed by each FCM; • Require that FCM certified annual financial reports 

and reports from the chief compliance officer be filed within 60 days of the firm’s fiscal year end; • Require that an FCM that is undercapitalized provide 

immediate notice to the Commission and its DSRO . . . 

Section 104—Futures Commission Merchant compliance 

In October 2013, the CFTC adopted rules regarding the posting 

of margin that it said were designed to prevent a MF Global level 

failure from recurring and to protect customers in the event of such 

a failure. The rule adopted by the CFTC requires FCMs to deposit 

their own funds into the customer segregated account to cover each 


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undermargined customer’s shortfall. This deposit is known as the 

‘‘residual interest’’ and it affects when customers must respond to 

a margin call by their FCM. 

Specifically, the CFTC has required FCMs to deposit enough of 

the firm’s money in the customer segregated account to cover any 

customer’s undermargined accounts, as calculated, by the start of 

the next business day. The rule also contained a phased-in compliance schedule through December 31, 2018, that would have temporarily allowed FCM’s to make their residual interest deposit by 

6:00 p.m. the next business day. 

While customers previously had three business days to respond 

to a margin call, market participants worried that the new rule 

would incentivize FCMs to require customers to meet all margin 

calls by 9:00 a.m. at the start of the next business day. Market participants asked the CFTC to amend the rule and permanently set 

the residual interest deadline to 6:00 PM on the day following a 

trade, eliminating the 9:00 a.m. deadline. 

On March 18, 2015, the CFTC amended its rule by removing the 

December 31, 2018 termination date of the phased-in compliance 

period. The rule effectively extends the phase-in period indefinitely, 

while still maintaining in regulation an eventual 9:00 a.m. residual 

interest deadline, pending the completion of a study by CFTC staff 

and a Commission vote. As a result, the deadline would not move 

to earlier than 6:00 pm the day of settlement, without an affirmative CFTC action and an opportunity for public comment. 

On March 25, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Market Participant Views,’’ Mr. Terrance A. Duffy, Executive Chairman & President, CME, provided the following testimony 

with respect to the provisions included in Section 104: 

CME remains fully committed to protecting Futures 

Commission Merchants (‘‘FCM’’) customers against the full 

range of wrongful FCM misconduct that may result in loss 

of customer funds. In 2012, the CFTC proposed a rule 

that, under a phased-in schedule, would have required an 

FCM to maintain at all times a sufficient amount of its 

own funds (‘‘residual interest’’) in customer-segregated accounts to equal or exceed the total amount of its customers’ margin deficiencies. As noted in prior testimony, 

no system exists to enable an FCM to continuously and accurately calculate customer margin deficiencies in real 

time. The net result would be that either FCMs would be 

forced to post their own collateral into customer accounts, 

or customers would be forced to over-collateralize their 

margin accounts at all times. Neither outcome constitutes 

an efficient use of capital and would effectively render derivatives markets prohibitively expensive and unusable for 

end-users. 

We applaud the CFTC for moving away from the ‘‘at all 

times’’ requirement and further eliminating last week the 

automatic acceleration in 2018 of the posting deadline to 

a time occurring earlier than 6:00 pm the day of settlement. This Committee codified in the Reauthorization Bill 

passed by the House last Congress a provision that would 

permanently establish the residual interest posting deadline at the end of each business day, calculated as of the 


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close of business the previous business day. CME again 

supports the inclusion of such a provision in any Reauthorization Bill considered by the Committee during the current Congress. 

In order to address the significant concerns voiced by market 

participants, regulators, and other stakeholders, the Committee directs the CFTC, in carrying out the requirements of Section 104, 

to consider an FCM in compliance with any requirements to use its 

own proprietary funds, in the form of residual interest, to satisfy 

margin deficits of the FCM’s customers if such requirements are 

met at the end of the first business day following a trade date. 

Section 105—Certainty for futures customers and market participants 

CFTC Regulation 190.08(a)(1)(ii)(J) (17 C.F.R. 190) defines customer property as including ‘‘cash, securities or other property of 

the debtor’s estate, including the debtor’s trading or operating accounts and commodities of the debtor held in inventory, but only 

to the extent that the property enumerated is insufficient to satisfy 

in full all claims of public customers.’’ The Committee’s plain reading of this CFTC regulation is that property of the debtor FCM, 

even though not held as customer property, becomes customer 

property to the extent necessary to satisfy net equity claims of 

‘‘public customers,’’ who are defined in Regulation 190.01 as all customers other than certain control persons, affiliates, and related 

parties (i.e.: non-public customers). In effect, in order to protect the 

funds of customers held in segregation, Regulation 190.08 subordinates the claims of non-public customers and non-customer creditors, other than properly perfected liens on such property of the 

debtor, to the claims of public customers with respect to the property of the FCM that was not held (and not required to be held) 

as customer property. 

However, in 2000, doubts as to the validity of Regulation 

190.08(a)(1)(ii)(J) arose after a federal bankruptcy court (In re Griffin Trading Co., 245 B.R. 291 (Bankr. N.D. Ill. 2000)) rejected an 

attempt by the trustee to use a bankrupt commodity broker’s estate 

to pay shortfalls in the customer accounts. Among the issues in the 

case, which was later settled and the court’s holding vacated therefore resulting in no binding judicial precedent, was whether the 

CFTC’s broad definition of ‘‘customer property’’ in Regulation 

190.08 would determine which assets could be used to repay customers. The court found that the CFTC exceeded its statutory authority in enacting Regulation 190.08 with a definition of customer 

property more expansive than that used in the U.S. bankruptcy 

code. Further, the court found that, ‘‘any shortfall in the customer 

property as defined in [the bankruptcy code] must be treated as a 

general unsecured claim.’’ This vacated court decision has left uncertainty about whether, in the event that customer assets are insufficient to cover all customer claims, customers can have first priority to an FCM’s general estate assets until all customer claims 

are paid in full. 

On March 24, 2015, testifying at a hearing entitled ‘‘Reauthorizing the CFTC: Market Participant Views,’’ Mr. Daniel Roth, 

President, NFA, provided the following testimony with respect to 

the need for the provisions included in Section 105: 


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The CFTC, a long time ago, had adopted a rule that provided that if an FCM was in bankruptcy, and if there was 

a shortfall in segregated funds, then customers received 

priority over all the other creditors of the FCM, and that 

was a good rule. That rule has served the industry well, 

it has served the customers well. 

Unfortunately, a few years ago a lower court opinion 

cast some doubt on the validity of that rule. The court had 

questioned the CFTC’s authority to adopt the rule that it 

had adopted. Last year’s bill contained language to clarify 

that point, and to make clear that the Commission did 

have the authority to adopt that rule. We supported that 

rule—that provision then, we support it now. We hope it 

is in the bill that comes out of this Committee this year. 

In order to provide clarity for the marketplace and make clear 

that the CFTC did not exceed its authority to promulgate Regulation 190.08 under Section 20(a) of the CEA, the Committee intends 

for Section 105 to provide for the broad use of the assets of a commodity broker’s estate, other than secured property (such as property held at a clearinghouse, including offset or netting rights of 

creditors with respect to such type of property), to satisfy shortfalls 

in customer property beyond what was held in customer segregated 

accounts at the time of a firm’s failure. 

Title 2—Commodity Futures Trading Commission Reforms 

Section 201—Extension of operations 

The most recent reauthorization for CFTC budgetary appropriations was approved in 2008 as a part of the Food, Conservation and 

Energy Act (P.L. 110–246), prior to the financial crisis of 2008 and 

the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111–203) (Dodd-Frank Act). That statutory authorization expired September 30, 2013. Although the CFTC 

relied on unauthorized appropriations between 2005 and 2008, successful legislative reauthorizations occurred in 1978, 1983, 1986, 

1992, 1995, and 2000. Section 201 would reauthorize the Commission to receive budgetary appropriations through 2019. 

Section 202—Consideration by the Commodity Futures Trading 

Commission of the costs and benefits of its regulations and orders 

Section 15(a) of the Commodity Exchange Act sets forth requirements for the CFTC to consider the costs and benefits of the Commission’s actions. In its proposed rules, however, the CFTC identifies the limitations of Section 15(a) in requiring cost-benefit analysis, stating ‘‘[b]y its terms, Section 15(a) does not require the 

Commission to quantify the costs and benefits of an order to determine whether the benefits of the order outweigh its costs; rather, 

it requires that the Commission ‘consider’ the costs and benefits of 

its actions.’’ 

Consequently, the CFTC’s Office of Inspector General (OIG) 

issued an investigative report in April of 2011 that examined the 

cost-benefit analysis performed by the Commission in connection 

with the Dodd-Frank Act rulemakings. In that report, the OIG 

stated ‘‘[I]t is clear that the Commission staff viewed section 15(a) 


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compliance to constitute a legal issue more than an economic one, 

and the views of the Office of General Counsel therefore trumped 

those expressed by the Office of the Chief Economist . . . [w]e do 

not believe this approach enhanced the economic analysis performed. . . .’’ 

On January 18, 2011, President Obama issued Executive Order 

No. 13563, which requires non-independent executive branch agencies to conduct cost-benefit analyses to ensure that both the quantitative and qualitative costs and benefits of proposed rulemakings 

are taken into account. The Executive Order also requires that regulations be accessible, consistent, written in plain language, and 

easy to understand. Because the CFTC is an independent agency, 

it was not required to abide by the order for any of its Dodd-Frank 

Act rulemakings. 

As the CFTC continues to advance new rules that govern a large 

sector of the derivatives marketplace for the first time, this section 

raises the legal standard for cost-benefit analysis and evaluation. 

Further, the legislation is intended to operate consistently with Executive Order 13563. However, so as to not disrupt the regulatory 

process, this legislation is not retroactive in nature and would not 

impact previously proposed or finalized rules promulgated by the 

CFTC. 

On March, 14, 2013, at a hearing entitled ‘‘Examining Legislative 

Improvements to Title VII of the Dodd-Frank Act,’’ the following 

testimony was provided with respect to provisions included in Section 202: 

SIFMA has encouraged regulators to conduct comprehensive cost-benefit analysis for all Dodd-Frank Rules. 

This is consistent with the Obama Administration’s efforts 

to promote better cost benefit analysis for Federal agencies 

through Executive Order 13563, which requires all agencies proposing or adopting regulations to include cost-benefit analyses in an attempt to minimize burdens, maximize 

net benefits and specify performance objectives. The President also stated that regulations should be subject to 

meaningful public comment, be harmonized across agencies, ensure objectivity and be subject to periodic review. 

In 2012, in testimony before the House Committee on Government Reform, SEC Chairman Schapiro stated ‘‘I continue to be committed to ensuring that the Commission engages in sound, robust economic analysis in its rulemaking, in furtherance of the Commission’s statutory mission, and will continue to work to enhance both the process 

and substance of that analysis.’’ Congressman Conaway 

has introduced legislation (H.R. 1003) that would require 

the CFTC’s cost-benefit analysis to be both quantitative 

and qualitative and specifies in greater detail the costs 

and benefits that the CFTC must take into account as part 

of their cost-benefit analyses. 

—Hon. Kenneth E. Bentsen, Acting President and CEO, 

the Securities Industry and Financial Markets Association 

(SIFMA) 

Finally, because of our experience with the $25 million 

sub-threshold, we are intrigued by another bipartisan bill 


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recently introduced in the House. The legislation, H.R. 

1003, would require the CFTC to quantify the costs and 

benefits of future regulations and orders. Sadly, the legislation is prospective, but we believe that had such an analysis been made, it could have prevented the turmoil currently being caused by the $25 million special entity subthreshold. 

—Mr. Terrance P. Naulty, General Manager and CEO, 

Owensboro Municipal Utilities (Owensboro, KY) 

On May 21, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Market Perspectives,’’ Mr. Stephen O’Connor, the then-Chairman, 

International Swaps and Derivatives Association, Inc. (ISDA), provided the following testimony with respect to provisions included in 

Section 202: 

An appropriate cost-benefit analysis was both required 

and desirable prior to finalization of rules; however in a 

number of instances the CFTC’s analysis did not comply 

with the regulatory standard. As the Jun. 2012 report by 

the CFTC Inspector General stated: ‘‘Generally speaking, 

it appears CFTC employees did not consider quantifying 

costs when conducting cost-benefit analyses for the definitions rule. As indicated in the rule’s preamble, the costs 

and benefits associated with coverage under the various 

definitions (in light of the various regulatory burdens that 

could eventually be associated with coverage) were not addressed . . .’’ The lack of an appropriate cost-benefit analysis makes it especially important that the application and 

implementation of the final rules be phased in a flexible 

manner. Doing so would help ensure that rules achieve the 

purposes for which they are intended and do not impose 

burdensome costs on the financial system. It would also 

help regulators to identify and avoid unintended consequences of their actions. And it would encourage regulators to properly allocate limited resources. 

Section 203—Division Directors 

In order to ensure Division Directors are responsive to the entire 

Commission, this section requires that the heads of each of the 

units of the Commission serve at the pleasure of the Commission. 

Given this language is modeled after identical language currently 

in the CEA applicable to the General Counsel and the Executive 

Director, the Committee expects this section to be implemented in 

a similar manner to those two positions. 

Section 204—Office of the Chief Economist 

In order to enhance the legitimacy of economic analysis of rules 

promulgated by the Commission, this section establishes an Office 

of the Chief Economist with structure and power mirroring that of 

the Office of General Counsel. Again, to prevent the Chief Economist from serving solely at the pleasure of the Chairman, this section establishes that the Chief Economist will be appointed by the 

Commission, report directly to the Commission, and perform functions at the request of Commissioners in a manner similar to the 

General Counsel and the Executive Director. 


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Section 205—Procedures governing actions taken by commission 

staff 

As of April 9, 2015, CFTC staff issued 258 no-action letters, 56 

exemptive letters and 43 statements of guidance, interpretation 

and advice to implement the Dodd-Frank Act mandates. At least 

24 of these no-action letters are self-described as permanent. At 

times, ‘‘no-action’’ letters provide market participants with guidance on how the Enforcement Division staff of the CFTC would act 

in the event of market emergencies or would interpret recently proposed rules, at least in the short term. However, it appears that 

over the past three years, staff ‘‘no-action’’ letters have become 

commonplace to revise the implementation of key regulations of the 

Dodd-Frank Act, and as such do not require a vote of the Commission. Additionally, regardless of a designation as permanent, ‘‘noaction’’ letters are still non-binding in the legal sense that CFTC 

staff could decide to withdraw the letter at any time or the Commission could take a different position and overrule the letter. 

On July 23, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Commission Perspectives,’’ CFTC Commissioner Scott O’Malia provided the following testimony with respect to problems with this 

approach: 

[I]nstead of undertaking Commission action to amend 

problematic rules, CFTC staff has issued an unprecedented number of no-action letters, some of which are indefinite and have no expiration. So far, CTFC staff has 

issued over 100 no-action letters granting relief from its 

new regulations under Dodd-Frank, and I won’t be surprised if this number continues to grow. No-action letters 

are not voted on by the Commission and are not published 

in the Federal Register. They do not include comment periods and many impose conditions on affected parties. This 

process is at odds with basic principles of the APA, like 

public participation and the opportunity to be heard. It 

also goes against President Obama’s Executive Orders 

Nos. 13563 and 13579, mandating that administrative 

agencies ‘‘create an unprecedented level of openness in 

Government’’ and ‘‘establish a system of transparency, 

public participation, and collaboration.’’ 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ CFTC Commissioner Chris Giancarlo 

provided the following testimony with respect to the provisions included in Section 205: 

Congressman, I think you have put your finger on it. 

The problem with the abuse of the no-action letter process 

is it erodes the public’s confidence in the agency’s undertaking of its responsibilities, and secondly, it thwarts our 

ability—it stymies our ability as an agency to inculcate a 

compliance culture in the companies that we oversee. It 

really hurts our own reputation and it makes it harder for 

us to do our job in terms of the companies we regulate. 

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sion or office of the Commission issuing a response to a formal, 

written petition for an exemptive, no-action or interpretive letter. 

The Committee would view any attempt to needlessly delay providing notice to the Commission until a regulatory deadline, or 

until need for no-action relief is imminent (so as to avoid the statutorily required sufficient notice review period) as a violation of the 

requirements contained in Section 205. 

Section 206—Strategic technology plan 

On July 23, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Commission Perspectives,’’ Commissioner O’Malia provided the following testimony with respect to the need for provisions the Committee included in Section 206: 

A critically important component to any solution for the 

Commission’s approach to its greatly expanded mission is 

the use of technology in order to accept, sort, aggregate, 

and analyze the new sources of market information provided for under the Dodd-Frank Act. I’d like to highlight 

two major challenges in data and technology: (1) problems 

faced by market participants in the swap data reporting 

rules and (2) problems faced by the Commission in understanding the massive data flows as a result of our enhanced oversight of the swaps and futures markets . . . 

[g]iven the Commission’s expanded regulatory responsibilities, it is imperative for the Commission to develop a technology plan that can assist the Commission with meeting 

its regulatory objective. I believe the Commission must develop a five-year strategic plan that is focused on technology, with annual milestones and budgets. To keep up to 

speed with the challenges of enhanced regulatory oversight, this technology plan would require each CFTC division to develop a technology budget that reflects the regulatory needs and responsibilities of that particular division. 

In order to solve the problems enumerated by Commissioner 

O’Malia, Section 206 requires the Commission to develop and file 

a strategic technology plan every 5 years with the House and Senate Agriculture Committees. The plan shall include a detailed technology strategy focused on market surveillance and risk detection, 

market data collection, aggregation, interpretation, normalization, 

standardization, harmonization, streamlining, and internal management and protection of data collected by the Commission. The 

report must also include a detailed accounting of how appropriated 

funds provided for technology will be used, and set annual goals to 

be accomplished along with the annual budgets necessary to accomplish those goals. 

Section 207—Internal risk controls 

On December 14, 2012, it was widely reported that CME wrote 

a letter to the CFTC expressing concern that confidential and sensitive market data had been shared with non-CFTC employees who 

then used the data to write academic papers. CME attorneys 

claimed that the use of the data for the preparation of non-Commission sponsored publications was a violation of federal law 


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meant to protect trade secrets. At least two academic papers written on the subject of high-frequency trading were either co-written 

or advised by Andrei Kirilenko during his time as the CFTC Chief 

Economist. Upon leaving the CFTC in late 2012, Kirilenko took a 

position at MIT. As a result of the CME letter and corresponding 

internal investigation, the CFTC halted the research program 

which allowed outside academic researchers and economists almost 

unlimited access to proprietary trading information across various 

markets, and the CFTC OIG launched an internal investigation. 

On July 23, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Commission Perspectives,’’ Commissioner O’Malia provided the following testimony: 

Currently, the Commission’s Inspector General is investigating whether or not market data was properly controlled by the Office of the Chief Economist when visiting 

scholars/contractors were assisting the Office of the Chief 

Economist in research efforts. While I support collaborative study programs that bring in new and innovative 

thinking, it is vital that the Commission has policies and 

procedures in place to protect against the illegal release of 

market data. 

On March 21, 2014, a heavily redacted version of the CFTC’s 

OIG report was released to the public. In this report, the OIG 

found that: 

The administrative review revealed that there had been 

poor recordkeeping with regard to the so-called ‘‘on-boarding’’ process for OCE economists. The deficiencies included 

inadequate documentation of security clearances, issues regarding nondisclosure agreements, and non-submission of 

employment data to the National Finance Center, as well 

as incomplete personnel forms, one contract lacking the 

contractor’s signature, and other administrative errors. 

There were no indications of fraud by OCE economists, or 

that OCE economists were not actually appointed by the 

Chief Economist, just a number of administrative errors 

pertaining to the Agency’s so-called on-boarding process. 

The review also uncovered information security concerns. 

Specifically, personally owned external hard drives and 

thumb drives were found in close vicinity to the computers 

that served the OCE economists. In addition, badges for 

former CFTC OCE economists were located in the Chief 

Economist’s desk. 

With respect to the potentially harmful data breaches that occurred at the CFTC and the need to correct them to ensure integrity of the marketplace, the OIG’s report concluded that: 

We agree that the physical and information technology 

concerns exist; however, they are Agency-wide, and are 

currently being addressed at least in part in connection 

with an OIG audit of CFTC’s Fiscal Year 2013 implementation of the Federal Information Security Management 

Act. The absence of controls is significant: lacking a reliable way to determine whether confidential information 

was improperly taken from the CFTC, we will not jump to 


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the conclusion that misconduct did or did not occur based 

on contradictory opinions of Agency employees. We can 

make no finding. 

To guard against these sorts of leaks, this section requires the 

Commission, led by the Chief Economist, to develop internal risk 

control mechanisms to safeguard the storage and privacy of market 

data by the Commission. Special attention should be given to market data sharing agreements and academic research performed at 

the Commission using market data. 

Section 208—Subpoena duration and renewal 

On July 23, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Commission Perspectives,’’ Commissioner O’Malia provided the following testimony with respect to his concerns on the operation of 

the Commission’s omnibus orders of investigation: 

CFTC regulations ensure that the Commission is made 

accountable for all enforcement matters by requiring a 

Commission order to initiate investigations by the Division 

of Enforcement. Just recently, I dissented on an enforcement matter that involved a radical procedural shift in the 

authorization of investigations for potential violations of 

the CEA. What I found troubling is that the Division of 

Enforcement sought to circumvent the powers of the Commission by proposing to bring investigations on a summary 

basis through the use of an ‘‘absent objection’’ process. I 

was surprised to be advised by the Commission’s Office of 

General Counsel that the Commission cannot block a staffinitiated absent objection circulation because this process 

is not a Commission ‘‘vote.’’ To ensure fairness in terms of 

true separation of functions, Congress gave power to the 

members of the Commission to reconsider CFTC staff recommendations by independently assessing facts and legal 

justifications for initiating various actions. In other words, 

Congress intended that any decision to bring an investigation by the CFTC is reflective of a shared opinion of the 

majority of the Commissioners, rather than a unilateral 

assessment by the Division of Enforcement’s staff. The 

new absent objection process described by the Office of 

General Counsel is a clear abrogation of the Commission’s 

powers and a violation of Commission rules relating to investigations. 

In order to ensure continuing investigations by the Commission’s 

Division of Enforcement are warranted and properly reviewed by 

the Commission, Section 208 provides that Commission omnibus 

orders of investigation shall be for a finite period and renewed only 

by Commission vote. 

Section 209—Applicability of notice and comment requirements of 

the Administrative Procedure Act to guidance voted on by the 

Commission 

As the Committee learned from numerous witnesses through testimony and saw firsthand through press reports and letters from 

foreign financial regulators, the Commission voted on guidance to 

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Frank Act instead of conducting rulemaking under the Administrative Procedure Act (APA). The Commission now has a set of guidelines to govern the cross-border application of the Dodd-Frank Act, 

setting up probable legal conflicts between the CFTC’s guidance 

and the SEC’s proposed cross border rule that followed all requirements of the law and allowed for extensive public comment. Concerns about ‘‘guidance’’ that has the practical effect of an official 

rulemaking was described in testimony before the Committee on 

March 14, 2013, by the Hon. Kenneth E. Bentsen, Acting President 

and CEO, SIFMA, when he stated that: 

[E]qually significant, the CFTC has issued its proposed 

cross-border release as ‘‘guidance’’ rather than as formal 

rulemaking process subject to the Administrative Procedure Act. By doing so, the CFTC avoids the need to conduct a cost-benefit analysis, which is critical for ensuring 

that the CFTC appropriately weighs any costs imposed on 

market participants as a result of implementing an overly 

broad and complex U.S. person definition against perceived benefits. 

On July 23, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

Commission Perspectives,’’ Commissioner O’Malia voiced additional 

concerns in testimony about the approach taken by the Commission: 

I believe that putting the label of ‘‘guidance’’ on this document did not change its content or consequences. The 

courts have held that when agency action has the practical 

effect of binding parties within its scope, it has the force 

and effect of law, regardless of the name it is given. Legally binding regulations that impose new obligations on 

affected parties—‘‘legislative rules’’—must conform to the 

APA. As a threshold matter, the cross-border swaps guidance rests on thin statutory authority, because Congress 

limited the extraterritorial application of U.S. swap regulations, and therefore the CFTC’s jurisdiction, to foreign activities that have a ‘‘direct and significant’’ impact on the 

U.S. economy. Despite the statutory limitation, the crossborder swaps guidance sets out standards that it applies 

to virtually all cross-border activities in the swaps markets, in a broad manner similar to the application of the 

swap dealer definition to market participants. For practical reasons, market participants cannot afford to ignore 

detailed regulations imposed upon their activities that may 

result in enforcement or other penalizing action. Accordingly, I believe that the cross-border swaps guidance has 

a practical binding effect on market participants and it 

should have been promulgated as a legislative rule under 

the APA. Similarly, I cannot support any future interpretive guidance that would be more properly issued as a notice-and-comment rulemaking. 

In an attempt to address concerns highlighted above, Section 209 

applies the notice and comment provisions of the APA to any future 

guidance, statements and interpretive rules, general statements of 

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tice, that implement, interpret or prescribe law or policy that are 

voted on by the Commission. Importantly, to ensure responsiveness 

to the regulated marketplace, the Committee does not intend for 

Section 209 to apply to any guidance provided by Commission staff 

in response to inquiries from the public. 

Section 210—Judicial Review of Commission Rules 

In order to address concerns from stakeholders regarding the 

process by which to fairly and efficiently challenge CFTC final 

rules in court, Section 210 aligns the CFTC judicial review process 

with that of the SEC set forth in section 25(b) of the Securities Exchange Act of 1934. As such, the Committee intends for Section 210 

to allow for the review of a CFTC final rule in the United States 

Court of Appeals for the District of Columbia Circuit or the U.S. 

Court of Appeals for the circuit where the adversely affected party 

resides or situates its principal place of business. Section 210 also 

provides that a court may affirm and enforce or set aside a rule in 

whole or in part. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ Mr. Andrew Soto, Senior Managing Counsel, Regulatory Affairs, American Gas Association (AGA), provided 

the following testimony with respect to the need for provisions included in Section 210: 

First, AGA recommends that Congress amend the Commodity Exchange Act (CEA) to provide clear and defined 

procedures for challenging CFTC rules and orders in court. 

Although the CEA currently contains provisions allowing 

for judicial review by a U.S. Court of Appeals of certain 

agency actions, the provisions are very limited and provide 

no defined avenue for challenging CFTC rules and orders 

generally. A broad judicial review provision allowing for 

the direct challenge of CFTC rules and orders would have 

both a rehabilitative effect on the current process and a 

prophylactic effect on future agency action. Specific judicial 

review provisions would allow interested parties to challenge particular agency actions that are unreasonable and 

hold the CFTC accountable for its decisions. In addition, 

judicial review would have an important prophylactic effect by requiring the agency to think through its decisions 

before they are made to ensure that they are sustainable 

in court, thus enabling the agency to be a more conscientious and prudent regulator. In the absence of specific judicial review provisions, the general review provisions of the 

Administrative Procedure Act (APA) would apply, requiring parties seeking to challenge CFTC rules to file a claim 

before a U.S. District Court, move for summary judgment 

(as a hearing would likely be unnecessary), obtain a ruling 

and then, if necessary, seek further judicial review before 

a U.S. Court of Appeals. In the recent litigation over the 

CFTC’s position limits rule, which followed the review provisions of the APA, the CFTC’s General Counsel acknowledged the efficiency and desirability of direct review by the 

U.S. Court of Appeals of agency rules, and stated that the 

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sions allowing for direct review by a U.S. Court of Appeals 

of rules and orders of the CFTC would enable both the industry and the agency to benefit from the administrative 

economy, procedural efficiency and certainty of having a 

dedicated forum in which agency decisions are reviewed. 

Section 211—GAO study on use of Commission resources 

In each of the hearings held this Congress related to the CFTC, 

Members of the Committee and witnesses alike have raised concerns about the CFTC’s budget. Some have questioned whether the 

CFTC has the resources available to fulfill its oversight obligation. 

Others have asked if the CFTC’s regulatory approach over the last 

five years has led to unnecessary burdens on the agency as it seeks 

to centralize functions that had previously been handled at SelfRegulatory Organizations. 

Although Chairman Massad expressed his view that a larger 

budget was necessary to fulfill his regulatory obligations, others 

who have testified before the Committee have noted that the 

CFTC’s approach to regulation has imposed significant internal 

work to the CFTC that could be better done in other ways. This 

additional work load comes at a cost to the Commission in manpower, time, and other resources. 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Mr. Doug Christie, President, Cargill Cotton, on behalf of the Commodity Markets Council (CMC), testified 

that the CFTC’s current proscriptive regulatory approach, specifically when it comes to new mandates proposed by the position limits rule, can pose burdens on the Commission that were higher 

than the more collaborative approach the Commission has historically utilized: 

I think it is obviously difficult to set an absolute level of 

what funding should be, but one comment I would make 

on that is that historically, when we have looked at regulatory issues or position limits in particular, it has been 

more of a collaborative relationship between the CFTC, 

market participants, the exchanges, and even industry associations involved in that process. And I think that 

brought some efficiency and some clarity and—to that 

process that a lot recordkeeping maybe doesn’t necessarily 

do as effective a job as having a more of a conversational 

approach. So I think to the extent that it is driven by recordkeeping and reporting, that may carry a cost burden 

that is higher than when it is more collaborative and more 

shared across all market participants. 

On March 25, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Market Participant Views,’’ witnesses testified to the additional burdens to be potentially placed on the CFTC by the proposed changes to how bona fide hedge exemptions are granted: 

To add another—when it goes to the interpretation of 

what is the role of the CTFC, especially in granting hedge 

exemptions for non-enumerated commodities, in the proposed rules, now the CFTC would take that responsibility 

away from the exchanges, like mine, and from Mr. Duffy’s 

exchange. I think the—in the comments that I made up 


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front, the decades of experience it takes in working and 

interfacing with each one of our commodity market participants to understand the nuances of each one of those, it 

is a big undertaking that the CFTC would need to undertake to ensure that they are not disrupting a commercial 

entity’s ability to hedge in a timely manner by taking on 

that responsibility. And, by doing that, they are going to 

need more funds, and substantially more staff, if that is 

the way this lands, as opposed to the way it works today. 

—Benjamin Jackson, President and COO, ICE Futures 

U.S. 

[W]e have to have a DSRO to do the risk management. 

So even if you gave it to somebody else, you will duplicate 

the cost, because we are going to do it just for the risk 

management needs. So there is certain proposals that Congress, or a Government agency, may think of that they— 

that somebody else should do, and not us, that adds a burden of cost to the Government that doesn’t need to happen—that has not happened. Second of all, on the position 

limits regime is a great example. We have the expertise— 

these position limits—it goes back to your earlier question. 

The credibility of our institutions are out there, and everybody—for everybody to see. We need to make sure that we 

continue to manage this position limits issue, and do it in 

an effective way that takes the burden away from the Government, and the cost away from the taxpayer. 

—Mr. Terrance A. Duffy, Executive Chairman & President, CME 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ all three Commissioners expressed 

divergent opinions on the CFTC’s budget. Notably, Commissioner 

Giancarlo said: 

As a longstanding consistent supporter of the DoddFrank reforms, I believe we absolutely must have the resources to do a job that has been greatly expanded. However, I am also sensitive to the fact that our budget has 

increased 123 percent since 2008. I support the current 

funding levels, and about—in question of going above 

those levels really turns on whether, I think as you put it, 

the job we need to do. And I have some questions as to 

whether in some cases we are doing the job we need to do, 

or we are doing other jobs. I have, in my White Paper, outlined ways in which I think our swaps transaction reforms 

are overly complex, do not accord with the Dodd-Frank reforms. I am also concerned that our position limits proposal creates an enormous amount of make-work for the 

Commission that could be done in other ways at less taxpayer expense. 

To obtain an impartial view on whether the CFTC has enough 

resources and whether its new regulatory approaches have unnecessarily burdened the agency, the Committee charges the Government Accountability Office (GAO) to conduct a study to look into 

these questions. The Committee expects GAO, as part of its study, 

to closely examine and report on whether the CFTC has efficiently 


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used its resources related to hiring and firing practices within the 

Commission, especially related to positions that are duplicative, 

outdated in their purpose, or underutilized. As well, the GAO 

should closely examine and report on whether the CFTC is efficiently using its resources related to the implementation of rules, 

regulations, and processes, especially related to regulations that 

are duplicative (both inside and outside of the Commission), outdated in their purpose, or underutilized. The efficient expenditure 

of funds related to computer programs, technology upgrades, consultants, and other noteworthy usages of Commission funds should 

also be closely examined. 

Section 212—Disclosure of required data of other registered entities 

The Dodd Frank Act allowed members of the Financial Stability 

Oversight Council (‘‘FSOC’’), including the CFTC, to collect sensitive and confidential data for the purpose of assessing financial 

stability, and also included important provisions directing FSOC 

members to maintain the confidentiality of such data. The DoddFrank Act specifically amended the Investment Advisers Act of 

1940 to protect the confidentiality of reports that the SEC requires 

for SEC-registered investment advisers, but no corresponding 

amendments were made to the CEA for CFTC reports. Similar 

amendments to the CEA are appropriate to ensure that consistent 

confidentiality protections would extend to the reports, documents, 

records and sensitive and proprietary information of CPOs, CTAs, 

and their clients, collected through CFTC Form CPO–PQR or Form 

CTA–PR. 

The current inconsistency between the confidentiality protections 

afforded to reports by investment advisers as opposed to reports by 

CPOs and CTAs creates two potential difficulties. First, it may expose data from CFTC-regulated entities to greater risk of public 

disclosure. Firms invest significant research, time and resources 

into developing proprietary information and there are both commercial and policy reasons to protect the confidentiality of such information. Second, it creates a potential unlevel regulatory playing 

field, disadvantaging the CFTC in its efforts to collect, analyze, and 

share data. This provision will simply harmonize between the SEC 

and the CFTC, the protections extended to that that valuable information. 

Working within the existing framework of the CEA, Section 212 

amends section 8 of the Commodity Exchange Act to provide clear 

circumstances under which the CFTC can disclose proprietary information submitted on Form CPO–PQR and Form CTA–PR. In 

order to protect this proprietary information, the provision requires 

that the Commission only disclose this information to a foreign government, Federal department, agency or State, upon an agreement 

of confidentiality. The language also makes clear that the CFTC 

may disclose information pursuant to a court order, including a 

bankruptcy proceeding under title 11 of the United States Code. 

The provision makes no changes to existing requirements that the 

Commission disclose such information to Congress upon request. 

This section also defines the scope of proprietary information 

that is subject to confidential protection, including trading strategies, analytical or research methodologies, trading data, computer 

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ditional information the Commission determines to be proprietary. 

Such information will also be exempt from requests made under 

the Freedom of Information Act (FOIA). 

This section imposes no restriction on Congress or this Committee’s ability to perform oversight of the CFTC, commodities markets or those who participate in those markets, and it imposes no 

burdens on the disclosure of information to Congress upon request. 

However, the Committee recognizes the importance of strong data 

security procedures and protecting all proprietary information that 

it may obtain. To that end, the Committee is committed to reviewing its current procedures and practices and establishing any additional internal procedures and practices to maintain the confidentiality of proprietary information that it may obtain. 

Section 213—Report on status of any application of metals exchange 

to register as a foreign board of trade; deadline for action on 

application 

The Committee is well aware of the persistence of long queues 

for delivery of aluminum at warehouses in the United States licensed by the London Metals Exchange (LME). Such queues have 

attracted considerable regulatory and Congressional oversight and 

potential regulatory enforcement inquiries. Queues are also problematic in non-U.S. warehouses licensed by the LME. The Committee is encouraged that as part of their review of LME’s foreign 

board of trade application, the Agency has deferred action until further review and stated that it will continue to monitor and analyze 

progress toward eliminating disruptive queues. The Committee recognizes and encourages the efforts of the CFTC to continue to review the relationship of long queues for delivery of aluminum at 

warehouses to the pricing of aluminum, and how those issues impact market integrity and market participants. Given the continuing interest of the Committee in seeing this commodity market 

act as a place of transparent price discovery, we urge the CFTC to 

continue working domestically and with foreign regulators toward 

eliminating persistent and disruptive market queues. The Committee also recognizes the overseas regulators’ oversight responsibility to ensure warehousing arrangements are operating in a way 

that enables regulators to satisfy their regulatory obligations, including the obligation to ensure that markets operate in an orderly 

manner. Given the continuing interest of the Committee, as expressed in the legislation, it is the intent of the legislation to exercise appropriate Congressional oversight and support the CFTC in 

its important review. The legislation requires an action by the 

CFTC on LME’s FBOT application no later than September 30, 

2016. 

Title 3—End-User Relief 

Section 301—Relief for hedgers utilizing centralized risk management practices 

‘‘Inter-affiliate’’ swaps are contracts executed between entities 

under common corporate ownership. Section 301 would amend the 

CEA to provide an exemption for inter-affiliate swaps from the 

clearing and execution requirements of the Dodd-Frank Act so long 

as the swap transaction hedges or mitigates the commercial risk of 


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an entity that is not a financial entity. The section also requires 

that an ‘‘appropriate credit support measure or other mechanism’’ 

be utilized between the entity seeking to hedge against commercial 

risk if it transacts with a swap dealer or major swap participant, 

but the credit support measure requirement is effective prospectively from the date H.R. 2289 is enacted into law. 

Importantly, with respect to Section 301’s use of the phrase 

‘‘credit support measure or other mechanism,’’ the Committee unequivocally does not intend for the CFTC to interpret this statutory 

language as a mandate to require initial or variation margin for 

swap transactions. The Committee intends for the CFTC to recognize that credit support measures and other mechanisms have been 

in use between counterparties and affiliates engaged in swap transactions for many years in different formats, and therefore, there is 

no need to engage in a rulemaking to define such broad terminology. 

Section 301 originated from the need to provide relief for a parent company that has multiple affiliates within a single corporate 

group. Individually, these affiliates may seek to offset their business risks through swaps. However, rather than having each affiliate separately go to the market to engage in a swap with a dealer 

counterparty, many companies will employ a business model in 

which only a single or limited number of entities, such as a treasury hedging center, face swap dealers. These designated external 

facing entities will then allocate the transaction and its risk mitigating benefits to the affiliate seeking to mitigate its underlying 

risk. 

Companies that use this business model argue that it reduces 

the overall credit risk a corporate group poses to the market because they can net their positions across affiliates, reducing the 

number of external facing transactions overall. In addition, it permits a company to enhance its efficiency by centralizing its risk 

management expertise in a single or limited number of affiliates. 

Should these inter-affiliate transactions be treated as all other 

swaps, they could be subject to clearing, execution and margin requirements. Companies that use inter-affiliate swaps are concerned 

that this could substantially increase their costs, without any real 

reduction in risk in light of the fact that these swaps are purely 

for internal use. For example, these swaps could be ‘‘double-margined’’—when the centralized entity faces an external swap dealer, 

and then again when the same transaction is allocated internally 

to the affiliate that sought to hedge the risk. 

The uncertainty that exists regarding the treatment of inter-affiliate swaps spans multiple rulemakings that have been proposed or 

that will be proposed pursuant to the Dodd-Frank Act. Section 301 

provides certainty and clarity as to what inter-affiliate transactions 

are and how they are not to be regulated as swaps when the parties to the transaction are under common control. 

On March 14, 2013, at a hearing entitled ‘‘Examining Legislative 

Improvements to Title VII of the Dodd-Frank Act,’’ the following 

testimony was provided with respect to efforts to address the problem with inter-affiliate swaps: 

[I]nter-affiliate swaps provide important benefits to corporate groups by enabling centralized management of market, liquidity, capital and other risks inherent in their 


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businesses and allowing these groups to realize hedging efficiencies. Since the swaps are between affiliates, rather 

than with external counterparties, they pose no systemic 

risk and therefore there are no significant gains to be 

achieved by requiring them to be cleared or subjecting 

them to margin posting requirements. In addition, these 

swaps are not market transactions and, as a result, requiring market participants to report them or trade them on 

an exchange or swap execution facility provides no transparency benefits to the market—if anything, it would introduce useless noise that would make Dodd-Frank’s 

transparency rules less helpful. 

—Hon. Kenneth E. Bentsen, Acting President and CEO, 

SIFMA 

This legislation would ensure that inter-affiliate derivatives trades, which take place between affiliated entities 

within a corporate group, do not face the same demanding 

regulatory requirements as market-facing swaps. The legislation would also ensure that end-users are not penalized 

for using central hedging centers to manage their commercial risk. There are two serious problems facing end-users 

that need addressing. First, under the CFTC’s proposed 

inter-affiliate swap rule, financial end-users would have to 

clear purely internal trades between affiliates unless they 

posted variation margin between the affiliates or met specific requirements for an exception . . . [i]f these end-users 

have to post variation margin, there is little point to exempting inter-affiliate trades from clearing requirements, 

as the costs could be similar. And let’s not forget the larger 

point—internal end-user trades do not create systemic risk 

and, hence, should not be regulated the same as those 

trades that do. Second, many end-users—approximately 

one-quarter of those we surveyed—execute swaps through 

an affiliate. This of course makes sense, as many companies find it more efficient to manage their risk centrally, 

to have one affiliate trading in the open market, instead 

of dozens or hundreds of affiliates making trades in an uncoordinated fashion. Using this type of hedging unit centralizes expertise, allows companies to reduce the number 

of trades with the street and improves pricing. These advantages led me to centralize the treasury function at 

Westinghouse while I was there. However, the regulators’ 

interpretation of the Dodd-Frank Act confronts nonfinancial end-users with a choice: either dismantle their 

central hedging centers and find a new way to manage 

risk, or clear all of their trades. Stated another way, this 

problem threatens to deny the end-user clearing exception 

to those end-users who have chosen to hedge their risk in 

an efficient, highly-effective and risk-reducing way. It is 

difficult to believe that this is the result Congress hoped 

to achieve. 

—Ms. Marie N. Hollein, C.T.P., President and CEO, Financial Executives International, on behalf of the Coalition 

for Derivatives End-Users 


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On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Mr. Lael Campbell, Director, Excelon Corporation (Excelon), on behalf of Edison Electric Institute (EEI), provided the following testimony with respect to the provisions included in Section 301: 

In the absence of a more expansive clearing exemption 

for inter-affiliate trades, the costs of clearing likely would 

deter most market participants from entering into inter-affiliate transactions. For example, without an exemption, 

additional affiliates in a corporate family would need to become clearing members or open accounts with a Futures 

Commission Merchant, and all affiliates would need to develop and implement redundant risk management procedures and trade processing services. 

On January 14, 2015, the House of Representatives passed H.R. 

37, the Promoting Job Creation and Reducing Small Business Burdens Act by a vote of 271–154. H.R. 37 contained identical language to Section 301. Additionally, in the 113th Congress, effectively identical language to Section 301 passed the House by voice 

vote when offered as a stand-alone bill, H.R. 5471. 

Section 302—Indemnification requirements 

Section 302 strikes the indemnification requirements found in 

Sections 725 and 728 of the Dodd-Frank Act related to swap data 

gathered by swap data repositories (SDRs) and derivatives clearing 

organizations (DCOs). The section does maintain, however, that before an SDR, DCO, or the CFTC shares information with domestic 

or international regulators, they have to receive a written agreement stating that the regulator will abide by certain confidentiality 

agreements. 

Swap data repositories serve as electronic warehouses for data 

and information regarding swap transactions. Historically, SDRs 

have regularly shared information with foreign regulators as a 

means to cooperate, exchange views and share information related 

to OTC derivatives CCPs and trade repositories. Prior to the DoddFrank Act, international guidelines required regulators to maintain 

the confidentiality of information obtained from SDRs, which facilitated global information sharing that is critical to international 

regulators’ ability to monitor for systemic risk. 

Under Sections 725 and 728 of the Dodd-Frank Act, when a foreign regulator requests information from a U.S. registered SDR or 

DCO, the SDR or DCO is required to receive a written agreement 

from the foreign regulator stating that it will abide by certain confidentiality requirements and will ‘‘indemnify’’ the Commissions for 

any expenses arising from litigation relating to the request for information. In short, the concept of ‘‘indemnification’’—requiring a 

party to contractually agree to pay for another party’s possible litigation expenses— is only well established in U.S. tort law, and 

does not exist in practice or in legal concept in foreign jurisdictions. 

These indemnification provisions—which were not included in 

the financial reform bill passed by the House of Representatives in 

December 2009—threaten to make data sharing arrangements with 

foreign regulators unworkable. Foreign regulators will most likely 

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change for access to data. As a result, foreign regulators may establish their own data repositories and clearing organizations to ensure they have access to data they need to perform their supervisory duties. This would lead to the creation of multiple databases, 

needlessly duplicative data collection efforts, and the possibility of 

inconsistent or incomplete data being collected and maintained 

across multiple jurisdictions. 

In testimony before the House Committee on Financial Services 

in March of 2012, the then-Director of International Affairs for the 

SEC, Mr. Ethiopis Tafara, endorsed a legislative solution to the 

problem, stating that: 

The SEC recommends that Congress consider removing 

the indemnification requirement added by the Dodd-Frank 

Act . . . the indemnification requirement interferes with 

access to essential information, including information 

about the cross-border OTC derivatives markets. In removing the indemnification requirement, Congress would assist the SEC, as well as other U.S. regulators, in securing 

the access it needs to data held in global trade repositories. Removing the indemnification requirement would 

address a significant issue of contention with our foreign 

counterparts . . . 

At the same hearing, the then-General Counsel for the CFTC, 

Mr. Dan Berkovitz, acknowledged that they too have received growing concerns from foreign regulators, but that they intend to issue 

interpretive guidance, stating that ‘‘access to swap data reported to 

a trade repository that is registered with the CFTC will not be subject to the indemnification provisions of the Commodity Exchange 

Act if such trade repository is regulated pursuant to foreign law 

and the applicable requested data is reported to the trade repository pursuant to foreign law.’’ 

To provide clarity to the marketplace and remove any legal barriers to swap data being easily shared with various domestic and 

foreign regulatory agencies, this section would remove the indemnification requirements found in Sections 725 and 728 of the DoddFrank Act related to swap data gathered by SDRs and DCOs. 

On March 14, 2013, at a hearing entitled ‘‘Examining Legislative 

Improvements to Title VII of the Dodd-Frank Act,’’ Mr. Larry 

Thompson, Managing Director and General Counsel, Depository 

Trust and Clearing Corporation, provided the following testimony 

with respect to provisions of H.R. 742, which were included in Section 302: 

The Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013 would make U.S. law consistent with existing international standards by removing 

the indemnification provisions from sections 728 and 763 

of Dodd-Frank. DTCC strongly supports this legislation, 

which we believe represents the only viable solution to the 

unintended consequences of indemnification. H.R. 742 is 

necessary because the statutory language in Dodd-Frank 

leaves little room for regulators to act without U.S. Congressional intervention. This point was reinforced in the 

CFTC/SEC January 2012 Joint Report on International 

Swap Regulation, which noted that the Commissions ‘‘are 


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working to develop solutions that provide access to foreign 

regulators in a manner consistent with the DFA and to ensure access to foreign-based information.’’ It indicates legislation is needed, saying that ‘‘Congress may determine 

that a legislative amendment to the indemnification provision is appropriate.’’ H.R. 742 would send a clear message 

to the international community that the United States is 

strongly committed to global data sharing and determined 

to avoid fragmenting the current global data set for overthe-counter (OTC) derivatives. By amending and passing 

this legislation to ensure that technical corrections to indemnification are addressed, Congress will help create the 

proper environment for the development of a global trade 

repository system to support systemic risk management 

and oversight. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Giancarlo provided the 

following testimony with respect to the provisions included in Section 302: 

Under Sections 725, 728 and 763 of the Dodd-Frank Act, 

when a foreign regulator requests information from a U.S. 

registered swap data repository (SDR) or derivatives clearing organization (DCO), the SDR or DCO is required to receive a written agreement from the foreign regulator stating that it will abide by certain confidentiality requirements and will ‘‘indemnify’’ the CFTC for any expenses 

arising from litigation relating to the request for information. In short, the concept of ‘‘indemnification’’—requiring 

a party to contractually agree to pay for another party’s 

possible litigation expenses—is only well established in 

U.S. tort law, and does not exist in practice or in legal concept in many foreign jurisdictions, thereby introducing 

complications to data-sharing arrangements with foreign 

governments and raising the possibility of data fragmentation at the international level. 

Correcting this unworkable framework in the DoddFrank Act is not controversial, and Congress should absolutely provide a legislative fix to this issue, just as the Securities and Exchange Commission (SEC) has endorsed in 

testimony before Congressional Committees in the 112th 

Congress. Similarly, in the 113th Congress, H.R. 742 was 

introduced to provide a narrow fix on this issue and passed 

the House on June 12, 2013, by a vote of 420–2. The same 

provision should be included in any CFTC reauthorization 

legislation introduced by this Congress. 

In the 113th Congress, the House of Representatives passed H.R. 

742, the Swap Data Repository and Clearinghouse Indemnification 

Act, by a vote of 420–2, which contained language identical to Section 302. 


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Sections 303, 304, 305—Transactions with the utility special entities; utility special entity defined; utility operations-related 

swap 

Sections 303, 304, and 305 of H.R. 2289 would preserve the ability of government-owned utilities, classified in the bill as ‘‘utility 

special entities,’’ to have uninterrupted and cost-effective access to 

the customized, non-financial commodity swaps that utility special 

entities have used for years. In effect, the counterparties of utility 

special entities would now be subject to the much higher $8 billion 

de minimis swap dealer registration threshold. Importantly, the 

legislation does not include an exemption for interest rate, credit, 

equities, currency asset classes, or agriculture commodities, other 

than commodities used for electric energy or natural gas production 

or generation. Instead, H.R. 2289 creates a new category of swap 

known as the ‘‘utility operations-related swap’’ and provides relief 

to counterparties of utility special entities only when those specific 

types of swaps are used. To ensure transparency, the bill still requires all special entity swap transactions to be reported to the 

CFTC. 

On May 23, 2012, the CFTC published a rule further defining 

who is considered a ‘‘swap dealer’’ under the Dodd-Frank Act, 

which directly impacted many swap counterparties of governmentowned non-profit utilities. The rule became effective on July 23, 

2012, with registration as a swap dealer not being required until 

on or after October 12, 2012. The CFTC’s swap dealer rule includes 

an exception for entities from having to register as a swap dealer 

if their outstanding annual gross notional swap positions do not exceed either of the two following thresholds: 1. $3 billion (subject to an initial three year phase-in level of $8 

billion), referred to as the ‘‘general de minimis threshold’’; and 2. $25 million with regard to swaps where an entity’s 

counterparty is a ‘‘special entity’’ as defined in Section 731 of the 

Dodd-Frank Act, referred to as the ‘‘special entity de minimis 

threshold.’’ 

On October 12, 2012, after several public power groups petitioned 

the CFTC to relieve their counterparties from compliance with the 

much lower registration threshold, CFTC staff issued a non-binding 

‘‘no-action relief’’ letter instead, which increased the ‘‘special entity 

sub-threshold’’ to $800 million from $25 million. 

As mentioned above, a ‘‘special entity’’ is broadly defined in Section 731 of the Dodd-Frank Act to include any government-owned 

enterprise, such as public school boards, state governments, and 

any publicly-owned producer or supplier of electricity or natural 

gas. Casting such a broad net in defining ‘‘special entity’’ was a policy decision made by the drafters of the Dodd-Frank Act which 

sought to protect taxpayers from the use of complex financial 

swaps by their municipality. For example, the use of fixed-for-floating interest rate swaps tied to municipal bonds issued by Jefferson 

County, Alabama, contributed to the county’s multi-billion dollar 

debt that rapidly expanded during the 2008 financial crisis, later 

resulting in what was at the time the largest municipal bankruptcy 

filing in U.S. history. 

Prior to enactment of the Dodd-Frank Act, however, many publicly-owned utilities relied on their non-financial counterparties, 

such as natural gas producers, independent power generators, and 


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investor-owned utility companies to enter into swaps in order to 

hedge against operational risks. Many of these utilities have heard 

from numerous counterparties who are evaluating their future 

business plans in light of the final CFTC rules. These counterparties are strictly limiting their business, or completely cutting all 

ties with utility special entities given the special entity sub-threshold and uncertainty surrounding the new regulatory regime for the 

swaps marketplace. 

Unless counterparties can determine with certainty that their 

swap activities with special entities will not result in them being 

classified as a ‘‘swap dealer’’ under the Dodd-Frank Act, it appears 

that numerous counterparties may avoid doing business with them 

altogether. This ultimately limits competition and forces special entities to do business with financial institutions or large swap dealers, which concentrates risk and may raise costs for many utility 

special entities eventually leading to increased costs for ratepayers. 

The Committee recognizes that on March 21, 2014, the Commission 

staff provided a ‘‘no-action letter’’ to utility special entities so they 

are not subjected to the $25 million de minimis threshold. However, permanent statutory relief that would be provided in Sections 

303, 304, and 305 is still needed due to the questionable legal certainty contained in this—and all—CFTC no-action letters, which 

state that ‘‘[a]s with all no-action letters, the Division retains the 

authority, in its discretion, to further condition, modify, suspend, 

terminate or otherwise restrict the terms of the no-action relief provided herein.’’ 

On September 26, 2014, the CFTC issued a final rule to correct 

the missteps that would be remedied by Sections 303, 304, and 305. 

While the regulatory change is welcomed by the Committee, statutory certainty can provide millions of consumers across the country 

with greater certainty that their utility rates will not increase due 

to the Dodd-Frank Act. 

On March 14, 2013, at a hearing entitled ‘‘Examining Legislative 

Improvements to Title VII of the Dodd-Frank Act,’’ Mr. Terrance P. 

Naulty, General Manager and CEO, Owensboro Municipal Utilities, provided the following testimony with respect to the provisions 

included in Sections 303, 304, and 305: 

Government-owned utilities depend on nonfinancial commodity transactions, trade options, and ‘‘swaps,’’ as well as 

the futures markets, to hedge commercial risks that arise 

from their utility facilities, operations, and public service 

obligations. Together, nonfinancial commodity markets 

play a central role in the ability of government-owned utilities to secure electric energy, fuel for generation, and natural gas supplies for delivery to consumers at reasonable 

and stable prices . . . [t]he CFTC has said that it retained 

the $25 million threshold in light of the special protections 

that the Dodd-Frank Act affords to special entities. However, the statute does not require—even mention—special 

protections for special entities in regard to the swap dealer 

definition. As noted above, the law imposes requirements 

on swap dealers and major swap participants advising or 

entering into swaps with special entities. Nowhere does 

the law mention deeming a participant to be a swap dealer 

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owned entities. Government-owned utilities understand 

the operations-related swap transactions they use to manage their commercial risks and do not need the special protections provided by the $25 million sub-threshold. In fact, 

and ironically, these ‘‘protections’’ are likely to limit the 

ability of these utilities to hedge operational and price 

risks rather than to protect these utilities and their customers from risk. On July 12, 2012, APPA, the Large Public Power Council (LPPC), the American Public Gas Association (APGA), the Transmission Access Policy Study 

Group (TAPS), and the Bonneville Power Administration 

(BPA), filed with the CFTC a ‘‘Petition for Rulemaking to 

Amend CFTC Regulation 1.3(ggg)(4).’’ . . . The legislation 

[H.R. 1038] largely mirrors the intent and effect of the 

NFP EEU petition to the CFTC, providing narrowly targeted relief for operations-related swaps for governmentowned utilities. Specifically, the legislation would provide 

that the CFTC, in making a determination to exempt a 

swap dealer under the de minimis exception, shall treat a 

utility operations-related swap with a utility special entity 

the same as a utility operations-related swaps with any 

entity that is not a special entity. . . . [t]he legislation 

carefully defines which entities would qualify as a ‘‘utility 

special entity.’’ It also specifically defines the types of 

swaps that could and could not be considered a ‘‘utility operations-related swap.’’ For example, the legislation specifically prohibits interest, credit, equity, and currency swaps 

from being considered as a utility operations-related swap. 

Likewise, except in relation to their use as a fuel, commodity swaps in metal, agricultural, crude oil, or gasoline 

would not qualify either. Finally, the legislation also confirms that utility operations-related swaps are fully subject 

to swap reporting requirements. When implemented, this 

legislation should provide the certainty to nonfinancial entities that they can enter into swap transactions with government-owned utilities without fear of being deemed a 

swap dealer. It truly levels the playing field. And, it does 

nothing to otherwise alter the CFTC’s implementation of 

the Dodd-Frank Act. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Giancarlo provided the 

following testimony with respect to the provisions included in Sections 303, 304 and 305: 

The Dodd-Frank Act requires that American towns and 

municipalities be labeled as ‘‘special entities’’ when they 

enter into swaps transactions. The purpose was to provide 

specific protections for municipalities who used complex financial swaps of the type that ensnared Jefferson County, 

Alabama, and led it to file what—at the time—was the 

largest municipal bankruptcy in U.S. history. Congress 

never intended, however, and Dodd-Frank does not include 

requirements to limit the ability of our not-for-profit utilities to manage ordinary risks associated with generating 

electricity or producing natural gas. 


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Unfortunately, the CFTC’s first shot at the ‘‘special entity’’ rule contained onerous restrictions on ordinary risk 

management activities by America’s not-for-profit taxpayer-owned utilities. It generated an enormous amount of 

public comment. Many commenters asserted that the rule 

would cause trading counterparties to avoid dealing with 

special entity utilities due to the increased regulatory compliance and registration burdens of being labeled as a 

swap dealer. That meant that these utilities would have 

had far fewer tools to control fluctuations in operational 

costs or supply and demand, resulting in increased electricity and other energy costs for American consumers. 

The CFTC’s original special entity proposal also led to 

two identical pieces of legislation to correct the CFTC’s action in Congress, one passed the House unanimously, and 

the other was introduced in the Senate with 14 co-sponsors 

evenly split between both political parties. 

Fortunately, in September of last year, the Commission 

finalized a rule change that recognized Congressional concern. It provided the relief that our not-for-profit taxpayerowned utilities need to manage risks in the production of 

natural gas and electricity. Without the rule change, a regulatory action inspired by the Dodd-Frank Act would have 

increased utility rates for millions of Americans. In times 

of economic uncertainty, that would have been an unacceptable result. The legislative solutions offered during the 

last Congress, however, would still provide added certainty 

to the marketplace, and I support making the CFTC’s regulatory changes permanent in statute. 

In the 113th Congress, the House of Representatives passed H.R. 

1038, the Public Power Risk Management Act, by a vote of 423– 

0, which contained substantially similar language to sections 303, 

304, and 305. 

Section 306—End-Users not treated as financial entities 

Section 306 is intended to remove non-financial end-users that 

were unintentionally captured in the definition of ‘‘financial entity’’ 

in Section 2(h)(7)(C) of the Commodity Exchange Act due to a 

cross-reference to Section 4(k) of the Bank Holding Company Act 

of 1956. By defining ‘‘commercial market participants’’ using longstanding CFTC terminology found in the Joint CFTC–SEC Rule 

Defining Swap (CFTC Reference: 77 FR 48207) and current CFTC 

Regulations governing Trade Options (CFTC Regulations Part 

32.3(a)(1)(ii)), the Committee seeks to provide narrow relief to entities not supervised by a prudential regulator and that are commercial market participants or enter into swaps, futures and other derivatives on behalf of, or to hedge the commercial risk of, non-financial affiliates. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ Mr. Richard F. McMahon, Jr., Vice President, EEI, provided the following testimony with respect to the 

need for the provisions included in Section 306: 

The Dodd-Frank Act defines the term ‘‘financial entity’’, 

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tivities that are in the business of banking, or in activities 

that are financial in nature, as defined in section 4(k) of 

the Bank Holding Company Act of 1956.’’ Incorporating 

banking concepts into a definition that also applies to commercial commodity market participants has had unintended consequences. Unlike our members, banks and 

bank holding companies generally cannot take or make delivery of physical commodities. However, banks and bank 

holding companies can invest and trade in certain commodity derivatives. As a result, the definition of ‘‘financial 

in nature’’ includes investing and trading in futures and 

swaps as well as other physical transactions that are settled by instantaneous transfer of title of the physical commodity. An entity that falls under the definition of a ‘‘financial entity’’ is generally not entitled to the end-user exemption-an exemption that Congress included to benefit 

commercial commodity market participants—and can 

therefore be subject to many of the requirements placed 

upon swap dealers and major swap participants. In addition, the CFTC has used financial entity as a material 

term in numerous rules, no-action relief, and guidance, including, most recently, its cross-border guidance. The 

Dodd-Frank Act allows affiliates or subsidiaries of an enduser to rely on the end-user exception when entering into 

the swap on behalf of the end-user. However, swaps entered into by end-user hedging affiliates who fall under the 

definition of ‘‘financial entity’’ cannot take advantage of 

the end-user exemption, despite the fact that the transactions are entered into on behalf of the end-user. Many 

energy companies structure their businesses so that a single legal entity within the corporate family acts as a central hedging, trading and marketing entity—allowing companies to centralize functions such as credit and risk management. However, when the banking law definitions are 

applied in this context, these types of central entities may 

be viewed as engaging in activity that is ‘‘financial in nature,’’ even with respect to physical transactions. Hence, 

some energy companies may be precluded from electing 

the end-user clearing exception for swaps used to hedge 

their commercial risks and be subject to additional regulations applicable to financial entities. Importantly, two 

similar energy companies may be treated differently if, for 

example, one entity uses a central affiliate to conduct 

these activities and another conducts the same activity in 

an entity that also owns physical assets or that has subsidiaries that own physical assets. Accordingly, Congress 

should amend the definition of ‘‘financial entity’’ to ensure 

that commercial end-users are not inadvertently regulated 

as ‘‘financial entities.’’ 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Mr. Lael Campbell, Director, Excelon, on 

behalf of EEI, provided the following testimony with respect to the 

provisions included in Section 306: 


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Many energy companies structure their business so that 

a single legal entity within the corporate family acts as a 

central hedging, trading and marketing entity—allowing 

companies to centralize functions such as credit and risk 

management. However, when the banking law definitions 

are applied in this context, these types of central entities 

may be viewed as engaging in activity that is ‘‘financial in 

nature,’’ even with respect to physical transactions. Hence, 

some energy companies may be precluded from electing 

the end-user clearing exception for swaps used to hedge 

their commercial risks and be subject to additional regulations applicable to financial entities. Importantly, two 

similar energy companies may be treated differently if, for 

example, one entity uses a central affiliate to conduct 

these activities and another conducts the same activity in 

an entity that also owns physical assets or that has subsidiaries that own physical assets. 

Section 307—Reporting of illiquid swaps so as not to disadvantage 

certain non-financial end-users 

Real-time public reporting of swap transactions as required by 

the CFTC may ultimately lead to more efficient prices for commercial end-users. However, based on the fact that liquidity diminishes 

for longer-dated contracts further out in time, there is a point 

where the benefits derived from public reporting do not outweigh 

the detriment to those who are trading in illiquid markets. While 

transparency is helpful in establishing a price between buyers and 

sellers, if market participants become easier to identify in certain 

sparsely traded swaps, other market participants will be able to 

take advantage of their positions and increase their cost of doing 

business for future trades. These sparsely traded swaps are used 

by a handful of companies with excellent credit ratings to provide 

long-term protection against price fluctuations for commodities 

such as oil and jet fuel. 

While the goal of increasing market transparency was well intended, the CFTCs final rule on reporting requirements does not 

differentiate between the appropriate times needed for reporting 

between different types of swaps contracts. Instead, this rule has 

led to a change in market behavior that affects long-established 

business models which traditionally allowed companies to protect 

against commodity price increases. Effective risk management 

helped these companies keep prices low for consumers. Southwest 

Airlines Co. (Southwest Airlines) offers a prime example of how 

this new CFTC regulation has impacted its business and its customers. Following enactment of the CFTC’s reporting requirements, 

Southwest Airlines’ exact market positions became known by competitors due to near instantaneous reporting of market positions. 

As a result, Southwest Airlines was forced to pay more in order to 

protect against the fluctuating cost of fuel. 

There is precedent in CFTC policy in recognizing the sensitivity 

around transaction counterparty identities in public data reporting. 

The Commission has for years issued publicly a weekly ‘‘Commitment of Traders Report’’ (COT). In describing the issuance of this 

report, the Commission states: ‘‘The [COT] reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or 


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more traders hold positions equal to or above the reporting levels 

established by the CFTC.’’ In other words, when the number of 

market participants in a reportable contract drops below a certain 

level, the Commission has recognized there can be damage to 

counterparty anonymity when there are a limited number of participants in a given market, and therefore does not issue a report 

for that contract. Because the Committee believes that the number 

of participants and transactions in a given market diminishes for 

longer-dated contracts, the Commission shall create a standard for 

reporting all swap asset classes based off of when liquidity in a 

contract lowers to the level of being able to easily identify market 

participants. 

As such, Section 307 would correct the unintended consequences 

of the new CFTC reporting regime while still maintaining the goal 

of increasing market transparency. This section preserves the realtime reporting of these sparsely traded swaps directly to the CFTC 

to ensure that government regulators have the information they 

need to police the markets. By simply making a technical change 

to the timeframe in which end-users are required to release their 

trading information to the general public, Section 307 achieves 

market transparency in a manner that does not harm long-standing business models and that helps keep costs low for millions of 

Americans. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ Mr. Chris Monroe, Treasurer, Southwest 

Airlines, provided the following testimony with respect to the need 

for provisions included in Section 307: 

One key to our unparalleled success has been our ability 

to hedge fuel through legitimate end-user derivatives purchased in the futures markets. Hedging at Southwest is 

enterprise risk management—essential in our view given 

our $6 billion annual fuel bill. To hedge, we commonly 

enter into transactions many months or years in advance 

of needing the physical product. Trading in these illiquid 

markets allows us to manage our fuel costs, which in turn 

helps us to keep fares low and maintain large jet (Boeing 

737) flights in the communities we serve. I am here today 

to highlight a few issues that have begun to impact these 

important markets that companies such as Southwest 

relay on to manage risk. One area where we are seeing a 

negative commercial impact is the Commodity Futures 

Trading Commission’s (‘‘CFTC’s’’) Real-Time Public Reporting of Swap Transaction Data Rule (‘‘Real-Time Reporting 

Rule’’) . . . [i]mportantly, trades between a legitimate commercial end-user and a dealer must be reported within the 

dealer’s shorter time limit. Given that the vast majority of 

bilateral trades entered into by commercial end-users are 

transacted with a dealer, this means nearly all commercial 

end-user trades are reported on the accelerated time limit. 

The dealer time delays may be sufficient for liquid markets, but the timeframes are not sufficient for illiquid markets, which, as I said before, is where Southwest commonly trades. Only a few market participants trade that 

far out the curve, which makes the contracts highly illiquid, even in contracts that may be liquid in the front 


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months such as crude oil. Additionally, Southwest has a 

particularly identifiable trading strategy, a hedging ‘‘DNA’’ 

if you will, which makes us quite visible in a market with 

few participants. This is particularly harmful. When a 

dealer has to report illiquid trades to the market quickly, 

the dealer is less likely to be able to lay off the risk of that 

trade in the prescribed time. If the dealer is still holding 

a large amount of the risk when the trade is shown to the 

public, the dealer can be front-run and, as a result, take 

a loss on the trade. That increased risk to the dealer will 

either curtail trades or materially increase the costs of the 

trade to the end-users. If an end-user like Southwest can 

no longer access the markets to hedge fuel it would be contrary to the purposes of the legislation and in our view 

hostile to Congressional intent. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ witnesses provided the following testimony with respect to the provisions included in Section 307: 

As I mentioned, liquidity in the swaps market is very 

different. There are a number of very important market 

participants, such as Southwest Airlines, that are engaged 

in transactions that just can’t settle in a day, 2 days, 3 

days, and it may take longer, and our rules need to be 

much open to that. It should not be an exception to our 

rule that there are transactions like that. Our rule framework should accommodate transactions like that. And market participants shouldn’t have to come cap in hand to the 

CFTC with a question that says, Mother, may I, to engage 

in a transaction that is just part of their everyday business 

of serving their customers. We—our rule framework should 

allow for that because that is the nature of the swaps market. It is very different than futures; it is the nature of the 

swaps market. 

—Commissioner Giancarlo 

I think you are referring to the relief on the real-time reporting obligation that—and there was relief given to 

Southwest Air. I think we should try and deal with issues 

like that on more of a broad basis than an individualized 

basis, and if there is, in fact, an unintended effect of liquidity based on reporting, it does stand to reason that it 

could be impactful for other market participants as well. 

So it does make you wonder, well, does something need to 

be addressed in the timing of the reporting of those particularly long-dated swaps. So I think it is something we 

should revisit. . . . And incidentally, Congressman, I expect we will probably get requests, and you might have 

that on your mind when you asked that question, but I 

wouldn’t be surprised if we get requests from others. 

—Commissioner Wetjen 

In November 2014, the Commission granted time-limited no-action relief to Southwest Airlines and its counterparties to allow additional time to comply with their reporting obligation for transactions in long-dated Brent and WTI crude oil swaps and 


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swaptions. Section 307 extends this relief to similarly situated market participants. 

Section 308—Relief for grain elevator operators, farmers, agricultural counterparties, and commercial market participants 

As a service to their customers, farmer-owned cooperative FCMs 

have a network of branch operations embedded in locations such as 

grain elevators, whose primary business is handling the cash grain 

volume of their farmer customers. As a branch office of a cooperatively-owned FCM, these commercial grain elevators have chosen to 

provide brokerage services as a means of providing access to risk 

management tools for their farmer customers who want to hedge 

their production volume through futures and/or options. 

In response to the Dodd-Frank Act, the CFTC greatly expanded 

record keeping requirements by making it necessary for brokers to 

retain all forms of written and oral communication that might 

‘‘lead to the execution of a transaction in a commodity interest.’’ 

Given the infrequent and low volume of futures/options transactions handled by ‘‘branches’’ associated with those FCMs, complying with the recording requirements under this vague regulation 

would not be economically feasible. The necessary investment to 

put in place and maintain a system to record every form of communication that might ‘‘lead to the execution of a transaction’’ would 

exceed not only any profits, but in many cases the total revenues 

of those FCM branches. Local branches could no longer provide brokerage services resulting in reduced risk management options, and 

their use, by farmers and ranchers. 

Section 308 does not eliminate a grain elevator’s record keeping 

responsibilities, but merely relieves them from purchasing and 

maintaining costly technology to record and save all incoming communication that may lead to a transaction in a commodity interest. 

Grain elevators and other end-users will still be required to maintain a written record of such transactions that include all of the 

transactions’ material economic terms. Without Section 308, the 

vague, sweeping language of the CFTC’s current regulation will result in significant time and financial costs to commercial grain elevators attempting to comply with the rule. Rather than facilitating 

the collection of useful transaction records, the rule is likely to result in grain elevators’ no longer providing useful brokerage services to their customers. As a result, countless farmers and ranchers 

will lose access to valuable risk management tools that allow them 

to hedge their production volume. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ the following witnesses provided testimony 

with respect to provisions included in Section 308: 

A significant and concerning expansion of current data 

requirements beyond the scope of Dodd-Frank is related to 

record-keeping requirements in Part 1 of Commission regulations. In accordance with Dodd-Frank, the CFTC expanded the futures record-keeping requirements that existed for certain markets participants to swaps. However, 

they also significantly expanded the written requirements, 

as well as created a new requirement to record oral conversations. Compliance costs have already been incredibly 

substantial now that compliance with the written requireVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00057 Fmt 6659 Sfmt 6602 E:\HR\OC\HR134.XXX HR134

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ments is mandatory and will only increase once compliance 

with the oral recording requirement comes into effect later 

this year. Again, the market is searching for a reason for 

and measurable benefit of all of this new information that 

must be maintained and archived in a particular way. In 

addition, the rule is vague as to which communications 

must be retained, so in an abundance of caution, market 

participants are effectively saving every e-mail, news article, or any other piece of information that might ‘‘lead to 

the execution of a transaction’’ and soon will have to begin 

recording every phone call that might ‘‘lead to the execution of a transaction.’’ This vague ‘‘lead to . . .’’ language 

appears nowhere in any prior iteration of Rule 1.35 or in 

any prior CFTC Advisory relating to the rule, and operates 

to expand substantially the scope and burdens of the rule. 

Also, the application of the requirements to members of an 

exchange seems to have no regulatory rationale and only 

serves as a disincentive to be an exchange member. Finally, the cost figures contained in the cost-benefit analysis in the final rule are not justified. Compliance costs are 

exponentially higher than they estimate, and in some 

cases the technology is not even available to market participants. Requests for clarification have not yet been answered, and CMC will be submitting a written request 

soon in a continued effort to clarify and hopefully narrow 

the scope of what must be retained and, therefore, reduce 

what we view as unnecessary compliance costs. 

—Mr. Lance Kotschwar, Senior Compliance Attorney, The 

Gavilon Group, LLC (Gavilon), on behalf of the CMC 

Given the infrequent and low volume of futures/options 

transactions handled by ‘‘branches’’ associated with those 

FCMs, complying with the oral recording requirements (recording of all phone calls) under this regulation would not 

be economically feasible. The necessary investment to put 

in place and maintain a system to comply with the regulations would exceed not only any profits, but in many cases 

the total revenues of those FCM branches—to the point 

that those local branches could no longer provide brokerage services. The effect would be reduced risk management 

options, and their use, by farmers and ranchers. 

—Mr. Scott Cordes, President, CHS Hedging, Inc. (CHS 

Hedging), on behalf of the National Council of Farmer Cooperatives (NCFC) 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ the following witnesses provided testimony with respect to provisions included in Section 308: 

[A]lthough unregistered members of a designated contract market (DCM) or swap execution facility (SEF) are 

now exempted from the requirement to retain text messages, unregistered members must still retain written and 

electronic records of pre-trade communications. As a result 

of these unnecessary burdens, end-users may opt not to become members of a DCM or SEF, despite the policy goal 

of the Dodd-Frank Act to encourage more on-exchange acVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00058 Fmt 6659 Sfmt 6602 E:\HR\OC\HR134.XXX HR134

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tivity. For this same reason end-users may also forgo a direct clearing membership arrangement, despite growing 

global concerns with rising costs of clearing that a direct 

clearing membership would help mitigate. 

—Mr. Lael Campbell, Director, Excelon, on behalf of EEI 

If further relief and clarification is not provided, [the 

CFTC’s recordkeeping requirements] will discourage membership in DCMs and SEFs, which will in effect reduce 

transparency in the marketplace, limit the ability of commercial firms to utilize modern and efficient means of communication, and lead to legal and regulatory uncertainty 

for end-users and customers. 

—Mr. Doug Christie, President, Cargill Cotton, on behalf 

of the CMC 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Wetjen provided the 

following testimony with respect to the provisions included in Section 308: 

There are two key points, I think, for me. The first is, 

if you are an entity that has not triggered registration because you are not engaged in the sort of activities that 

would require that, or if you have consciously chosen to 

change your activities in a way so that you don’t have to 

register with the CFTC, and you are an end-user, that is 

meaningful to me. The second thing that I am looking at 

very carefully is, regardless of how we finalize this rule, it 

should be not—it should not be done in a way that unnecessarily or unintentionally impedes access by an end-user 

to a particular marketplace. 

Section 309—Relief for end-users who use physical contracts with 

volumetric optionality 

Forward contracts that result in the physical delivery of commodities are expressly exempted from the definition of a ‘‘swap’’ under 

the CEA. Section 309 would clarify the application of this exemption in order to prevent unnecessary and costly regulations on companies that enter into transactions to ensure the efficient physical 

delivery of commodities necessary to conduct their core business 

operations. Without clarification, the CFTC could impose costly 

regulations on risk management transactions, which increase companies’ operating costs and ultimately result in increased costs to 

consumers across the nation. 

Risk management contracts that allow for an adjustment of the 

quantity of a commodity delivered do not pose a threat to the stability of financial markets and should not be regulated the same as 

financial derivatives. These contracts do provide companies with an 

efficient and cost effective means of acquiring the commodities they 

need to conduct their daily business, such as providing affordable 

sources of energy to millions of American households. The misguided regulation of these harmless transactions will actually have 

the effect of increasing companies’ costs of doing business, will consolidate risk in the marketplace because some businesses will be 

forced out of the market, and will ultimately raise costs for everyday American consumers. Such costly and unnecessary regulation 


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defies the intent of Congress and needlessly subjects a large segment of the energy marketplace to burdensome regulation under 

the Dodd-Frank Act. 

The Dodd-Frank Act, passed to reform the U.S. financial system, 

should not result in increased utility rates for consumers of natural 

gas, electricity, and other forms of energy used to heat homes, run 

factories, and power the American economy. Without relief, many 

utilities and energy companies will not be able to effectively manage risk—which will only increase their costs and possibly lead to 

higher energy rates for millions of Americans—an unacceptable result during a period of tremendous economic uncertainty. 

As such, Section 309 would exempt forward contracts between 

end-users that allow for deferred delivery or shipment of a non-financial commodity, so long as the contract results in an actual 

physical settlement obligation. The Committee notes that 

optionality includes both allowing a counterparty to reduce the 

amount of commodity delivered and allowing a counterparty to increase the amount of commodity delivered. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ the following witnesses provided testimony 

with respect to provisions included in Section 309: 

Because gas consumption to residential and commercial 

customers is largely weather driven (consumption increases as the weather gets colder) and predicting the 

weather is not an exact science, gas supply contracts with 

delivery flexibility help AGA members make sure gas supplies are, or can be made, available when the customers 

actually need the gas without having to pay excessively 

higher prices at the actual time of need and/or other fees 

associated with pipeline imbalance penalties. There remain disagreements and confusion within the natural gas 

industry as to which types of gas supply transactions, if 

any, will be subject to CFTC regulation. These transactions are normal commercial merchandising transactions 

that parties use to buy and sell natural gas for ultimate 

delivery to end-use customers. They would not normally be 

considered speculative, financial transactions as the parties contemplate physical delivery of the commodity. Nevertheless, transactions that contain some option or choice 

for one or the other counterparty, raise questions for some 

as to whether they would be considered commodity options 

regulated as swaps, meet a three part test and a sevenpart test to be excluded as options embedded in forward 

contracts, be viewed as trade options subject to a lessened 

reporting burden, or be considered facility use agreements 

that meet a three-part test and then a five-part test and 

not subject to regulation at all. 

—Andrew K. Soto, Senior Managing Counsel, Regulatory 

Affairs, AGA 

Recently, however, in light of the CFTC’s seven-part interpretation in the rule, some NCFC members have raised 

concerns over the appropriate treatment of forward contracts commonly used in physical supply arrangements 

that contain volumetric optionality. If the CFTC were to 


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take a narrow view of the seven-part interpretation, it may 

view as options many other routine physical supply contracts in which the predominant feature is delivery. Such 

an interpretation would require those common commercial 

forward contracts to come under the regulations intended 

for swaps such as reporting and position limits. The uncertainty of the CFTC interpretation of these types of contracts, all previously covered under the forward contracting exclusion, will require NCFC members to expend 

significant labor and costs to review hundreds of sales 

transactions to determine if they continue to meet the forward contract exclusion. Again, this is an unnecessary resource and cost burden on end-users that should be avoided. We hope CFTC will interpret this exclusion consistently with its historical understanding and prior guidance. 

—Mr. Scott Cordes, President, CHS Hedging, on behalf of 

the NCFC 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Lael Campbell, Director, Excelon, on behalf of EEI, testified with respect to provisions included in Section 

309: 

Trade options and physically delivered forward transactions with embedded optionality serve the purpose of 

providing the option holder flexibility to respond to changing supply and demand circumstances, such as ensuring 

delivery of fuel to a generation plant when fuel is needed. 

EEI members create a physical supply portfolio designed 

so that they can provide electric service to their retail consumers at low rates. Contracts for physical delivery of 

commodities such as electricity or natural gas are vital to 

the business of EEI members. Treating every-day transactions that are used to manage operational and physical 

supply risks as swaps’ has significantly, and unnecessarily, 

increased end-user regulatory and compliance costs associated with these transactions, with no recognizable offsetting public benefit. 

Section 310—Commission vote required before automatic change of 

swap dealer de minimis level 

Section 310 would simply require the CFTC Commissioners to 

vote before changing the current $8 billion swap dealer de minimis 

exemption from registering as a swap dealer. Without Section 310, 

a CFTC rule will automatically set the de minimis exemption at $3 

billion, potentially requiring dozens of end-users to register with 

the Commission in the coming years as ‘‘swap dealers’’ and imposing costly new regulations on public utilities, energy companies, 

and other end-users that played no part in the financial crisis. 

As the regulations currently stand, if a company does more than 

$8 billion worth of swap business per year (known as the de minimis level of swap dealing), it must register with the CFTC as a 

‘‘swap dealer.’’ The CFTC’s regulations will arbitrarily lower the 

registration threshold to $3 billion starting five years from October 

of 2012 (and possibly sooner) with no Commission vote, despite 


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rules requiring a Commission ‘‘study’’ to determine if the swap 

dealer registration threshold is appropriately set at $8 billion. 

An arbitrary 60% decline in the swap dealer registration threshold from $8 billion to $3 billion creates significant uncertainty for 

non-financial companies that engage in relatively small levels of 

swap dealing to manage business risk for themselves and their customers. Lowering the swap dealer registration threshold below its 

current level of $8 billion could drive many non-financial companies out of the business of offering their customers risk management products, which will limit risk management options for endusers, and ultimately consolidate marketplace risk in only a few 

large swap dealers. This consolidation runs counter to the goals of 

the Dodd-Frank Act to reduce systemic risk in the marketplace. 

CFTC regulations should not arbitrarily change the swap dealer 

registration de minimis level without a formal rulemaking process. 

The regulations themselves require a formal study by the Commission to determine if the current $8 billion level is appropriate. 

However, the study is completely irrelevant because the de minimis 

level is moved to $3 billion in five years regardless of the study’s 

findings. Because provisions embedded deep within CFTC regulations failed to mandate that the Commission must vote to determine what policy is best for future market conditions, the markets 

could be forced to adhere to outdated policies for years to come. 

Further, as demonstrated in the context of utility special entities, 

a de minimis exception threshold that is too low can significantly 

disrupt markets, hinder competition, and leave non-financial businesses with limited ways to manage their economic and operational 

risks. Section 310 would result in a Commission review of whether 

lowering the de minimis exception threshold would drive participants out of the swap market, limit competition and potentially 

harm end-users. In particular, pursuant to Section 310, the Committee expects that the Commission would periodically review the 

de minimis exception threshold to consider whether, in light of 

changes in prices and market structure, the de minimis exception 

threshold should also be increased to greater than $8 billion to ensure non-financial end-users are able to obtain risk management 

solutions from a broad range of counterparties. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ the following witnesses provided testimony 

with respect to the need for the provisions included in Section 310: 

Current regulations have arbitrarily established a de 

minimis level, the breach of which requires registration as 

a swap dealer, at $8 billion with a drop to $3 billion following an unpredictable CFTC decision making process. 

The only certainty in the process is that a lack of action 

will result in the de minimis level declining in 5 years. 

This $3 billion level is also arbitrary and would significantly affect the number of firms defined and regulated as 

swap dealers. Changes should not be made through such 

a long and ill-defined process, which includes several unpredictable and difficult to follow steps for market participants. We need a more predictable process. 

—Mr. Lance Kotschwar, Senior Compliance Attorney, 

Gavilon, on behalf of the CMC 


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A new category of market participants, swap dealers, 

was created by the Dodd-Frank Act. These swap dealers 

must register with the CFTC and are subject to extensive 

record-keeping, reporting, business conduct standards, 

clearing, and—in the future—regulatory capital and margin requirements. However, the Act directed the CFTC to 

exempt from designation as a swap dealer entities that engage in a de minimis quantity of swap dealing. The CFTC 

issued a proposed rule on the de minimis threshold for 

comment in early 2011. After review of hundreds of comments, a series of Congressional hearings and after dozens 

of meetings with market participants, the CFTC set this 

de minimis threshold at $8 billion. However, it will then 

be reduced automatically to $3 billion in 2018 absent 

CFTC action. We oppose such a dramatic reduction in the 

de minimis threshold without deliberate CFTC action. Inaction is always easier than action, and inaction should 

not be the default justification for such a major regulatory 

action. In addition, we believe the CFTC should not have 

the authority to change the de minimis level without a formal rulemaking process that allows stakeholders to provide input on what the appropriate threshold should be. 

Absent these procedural changes, we are concerned a deep 

reduction in the de minimis level could result in commercial end-users being misclassified as swap dealers, hindering end-users’ ability to hedge market risk while imposing unnecessary costs that eventually will be borne by consumers. 

—Mr. Richard F. McMahon, Jr., Vice President, EEI 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Mr. Doug Christie, President, Cargill Cotton, on behalf of the CMC, testified with respect to provisions included in Section 310: 

CMC members are concerned that a lower swap dealer 

de minimis level will cause companies to exit the swap 

business because the extra costs of swap dealer registration are not sustainable for most non-financial companies. 

This in turn would lead to fewer counterparties available 

to offer end users risk management solutions. A lower 

swap dealer de minimis level would lead to further consolidation of the swap business toward only a hand-full of registered swap dealers, mostly Wall Street banks. This 

threat is not purely hypothetical: when the CFTC initially 

proposed a lower dealing threshold for counterparties of 

municipal utilities, those utilities found that liquidity rapidly disappeared and the number of available counterparties diminished. Eventually the CFTC was forced to retreat and increase the de minimis level for energy swaps 

with municipal utilities to $8 billion dollars. It is likely 

that a lower de minimis level would have the same effect, 

not only for utilities but all companies that use swaps to 

manage risk. 


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Section 311—Capital requirements for non-bank swap dealers 

Under currently-proposed CFTC regulations for capital and margin, non-bank swap dealers would be forced by the CFTC to adhere 

to an inflexible capital requirement standard (based partially on 

the capital requirements from the soon-to-be outdated Basel II Accords first proposed in 2004, which have since been eclipsed by the 

Basel III Accords proposed in 2011). According to testimony received from Mr. William J. Dunaway, CFO, INTL FCStone, Inc., 

before the Committee on May 21, 2013, under the CFTC’s proposal, 

a firm could be assessed a capital charge beyond their net position 

in a contract, especially in relation to commodity swaps. Furthermore, the CFTC’s capital requirements stand in stark contrast to 

the SEC’s capital requirements for security-based swap dealing due 

to the SEC’s allowance for dealers to utilize pre-approved internal 

capital models. As a result, the Committee learned that, under a 

worst case scenario, ‘‘the same derivatives portfolio that would require a bank-affiliated Swap Dealer to hold $10 Million in regulatory capital using standard internal models would require us to 

set aside up to $1 Billion in capital. . . .’’ 

On March 25, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Market Participant Views,’’ Mr. Mark Maurer, CEO, INTL 

FCStone Markets LLC (IFM), provided the following testimony 

with respect to the provisions included in Section 311: 

[T]he competitive advantage given to bank-affiliated 

Swap Dealers under proposed rules is extraordinary. IFM 

will be required to hold regulatory capital potentially hundreds of times more than that required for a bank-affiliated Swap Dealer for the same portfolio of positions. This 

disparate treatment to non-bank Swap Dealers like IFM is 

in part because the proposed rules allow bank-affiliated 

Swap Dealers to use internal models to calculate risk associated with customer positions, while IFM and other nonbanks cannot use their internal models. These models are 

in some cases the very same models used by the banks. 

The use of internal models is important because internal 

models generally provide for more sophisticated netting of 

commodity positions to determine applicable market risk 

capital charges. As a result of limited netting under the 

CFTC’s ‘‘standardized approach,’’ a non-bank Swap Dealer 

will have to hold market risk capital against economically 

offsetting commodity swap positions, resulting in a higher 

capital requirement overall relative to the capital requirement for a bank-affiliated Swap Dealer using an internal 

model. This increased capital requirement would have the 

perverse effect of actually incentivizing a non-bank affiliated Swap Dealer to not fully offset the risk of a customer 

OTC transaction and thus incurring potentially unlimited 

market risk. 

Under the ‘‘standardized approach’’ proposed by the 

CFTC to calculate Swap Dealer capital requirements . . . 

many of the commodity derivatives that we make available 

to our agricultural customers are subject to higher capital 

requirements than any other derivatives asset class. Agricultural products are at the heart and soul of the U.S. and 


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global infrastructure, and requiring more capital for derivatives in agricultural products is counterproductive to 

the hedging needs of America’s agricultural businesses. We 

will have to hold more capital for agricultural products 

than interest rate swaps, because the rules treat ‘‘commodities’’ disparately from other asset classes, and in addition, 

as a non-bank Swap Dealer, we will not be allowed to use 

our internal models, simply because we are not affiliated 

with a bank. 

Taken in conjunction, the same derivatives portfolio that 

would require a bank-affiliated Swap Dealer to hold $10 

Million in regulatory capital using standard internal models would require us to set aside up to $1 Billion in capital 

in a worst case scenario. Regulatory capital requirements 

of this magnitude are . . . not economically feasible for a 

company of any size. 

. . . 

As other non-banks register [as Swap Dealers], particularly those in the agricultural and energy space, additional 

market participants will be caught in this position and either squeezed out of the market, or at least seriously disadvantaged relative to the bank-affiliated dealers. 

Obviously, this regulatory capital disparity is not a 

small hurdle for the already disadvantaged independent 

dealers to overcome. If left unchanged, these capital rules 

will eventually cause nonbank Swap Dealers to exit the 

business. The direct result will be higher costs for endusers, and then for consumers. Increasing concentration in 

the industry until only the big banks are left will leave 

many customers with no place to go. Serving farmers, 

ranchers and grain elevators has not been a focus or a 

profitable business model for the large dealers. 

Even larger customers who might be able to access to 

OTC hedging tools through bank affiliated dealers will still 

face higher costs as the big bank dealers will be able to 

take advantage of decreased market competition. A larger 

percentage of customers carried through a handful of 

large, bank affiliated Swap Dealers will increase systemic 

risk. 

Because this potential disparity in capital charges for non-bank 

versus bank-affiliated swap dealers could harm more than one 

market participant, Section 311 would require that the CFTC 

amend its proposed rule and, in close consultation with the SEC 

and prudential financial regulators, allow non-bank swap dealers 

to use capital requirements comparable to those used by bank-affiliated swap dealers. 

Section 312—Harmonization with the jumpstart our business 

startups act 

In letters to the CFTC, stakeholders representing a wide variety 

of market participants, such as SIFMA, the Managed Funds Association (MFA), and the Financial Services Roundtable requested 

that the Commission harmonize its ‘‘private offering’’ requirements 


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in CFTC Regulations 4.7 and 4.13(a)(3) with the broadened scope 

of solicitation permitted by the SEC after it proposed amendments 

to Rule 506 of Regulation D and Rule 144A under the Securities 

Act of 1933. The SEC’s proposed changes to the solicitation rules 

for securities offerings came about after the Jumpstart Our Business Startups Act (JOBS Act) (P.L. 112–106) was signed into law 

in April of 2012, which allows for solicitation of accredited investors 

for private securities offerings in order to raise needed capital for 

companies to expand and create jobs. 

While the JOBS Act mandates consistent treatment of Regulation D, Rule 506 offerings across the federal securities laws, it unintentionally omitted harmonizing changes to the CFTC’s regulations, which creates an inconsistency between the SEC’s rules and 

the CFTC’s rules governing solicitation. Accordingly, because the 

relief is needed quickly as to not impede use of the JOBS Act by 

the marketplace, Section 312 would directly amend CFTC regulations (which would obviate the need for a Commission rulemaking) 

to provide an exemption for any registered commodity pool operator 

to engage in the general solicitation for the sale of commodity pools 

parallel to the exemption provided for general solicitation of securities under the JOBS Act. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Giancarlo provided the 

following testimony with respect to the provisions included in Section 312: 

Because relief was needed quickly so as to not impede 

use of the JOBS Act by the marketplace, I welcomed CFTC 

staff letter 14–116 issued on September 9, 2014, to provide 

relief to market participants from certain provisions of 

CFTC Regulations 4.7(b) and 4.13(a)(3) restricting marketing to the public. However, because permanent changes 

to our regulations via statutory language provides the 

most certainty to the marketplace, I support the inclusion 

of the language from H.R. 4413 and H.R. 4392 from the 

last Congress which would provide an exemption for any 

registered commodity pool operator parallel to the exemption provided for general solicitation of securities under 

the JOBS Act. 

Section 313—bona fide hedge defined to protect end-user risk management needs 

In 2010, the Dodd-Frank Act instructed the CFTC on how to define what constitutes a bona fide hedging transaction (i.e., nonspeculative trading) or position so those trades would not count towards any positions limits. The statutory definition states that the 

reduction of risk inherent to a commercial enterprise is a component in determining what qualifies as a bona fide hedging transaction. However, in a change from prior practice, the CFTC’s approach in both the originally proposed 2011 position limits rule 

(which was overturned by a federal district court for the District 

of Columbia in September 2012) and the position limits rule proposed in November of 2013 was to limit the availability of the bona 

fide hedge exemption to a limited set of transactions, unless the 

CFTC gave specific approval to a particular form of transaction. 


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In the most-recently proposed position limits rule, instead of providing a clear bona fide exemption from position limits to allow 

end-users of physical commodities to properly hedge their commercial risk, many risk-reducing practices commonly used in the futures markets today were excluded from the list of bona fide hedging transactions prescribed in CFTC Rule 151.5(a)(2). This concern 

was confirmed by Mr. Jeffrey Sprecher, CEO of 

IntercontinentalExchange, Inc., in testimony before the Committee 

on May 21, 2013, when he stated that ‘‘[t]he narrow definition of 

bona fide hedge will likely hurt commercial end-users that these 

markets are intended to serve, and thus support the bona fide 

hedge exemption relied upon historically would bring greater certainty to end-users in executing their risk management operations.’’ 

The CFTC’s limitation of bona fide hedges to only a handful of 

transaction types places significant limitations on many end-users’ 

ability to hedge risk efficiently. As such, the Committee formulated 

Section 313 to provide for a workable hedge exemption. The bona 

fide hedge provisions in Section 4a(c) of the CEA are intended to 

provide market participants with certain relief from position limits 

and therefore give end-users the flexibility necessary to hedge their 

legitimate anticipated business risks. 

One of the main purposes of Section 313 is to make clear that 

the statutory requirements with respect to what constitutes a bona 

fide hedge transaction must be reflected in the CFTC’s further definition of that term. Specifically, changing ‘‘may’’ to ‘‘shall’’ in Section 4a(c)(1) reflects the intent of the Committee that the CFTC is 

not authorized to promulgate a further definition of ‘‘bona fide 

hedge transaction’’ that is narrower or more restrictive than what 

is described in the CEA. In addition, Section 313 is intended to 

clarify that the CFTC’s further definition of ‘‘bona fide hedge transaction’’ must include hedges of legitimate anticipated business 

needs. 

Section 313 is also intended to provide more flexibility to market 

participants as hedging practices evolve. It is Congress’ intent that 

the CFTC provide bona fide hedge status to all legitimate risk 

management practices now and in the future. A narrow definition 

of what constitutes bona fide hedging that is limited to an enumerated list of transactions will place significant limitations on many 

end-users’ ability to hedge risk properly and efficiently. In further 

defining what constitutes a bona fide hedging transaction, the 

CFTC should provide flexibility such that changes and advances in 

hedging practices can easily be incorporated into the bona fide 

hedging regime in an efficient and timely manner, without further 

Commission rulemakings that would add uncertainty to the marketplace. 

On July 24, 2013, at a hearing entitled ‘‘The Future of the CFTC: 

End-User Perspectives,’’ the following witnesses provided testimony 

with respect to the need for provisions included in Section 313: 

Congress provided a definition of a bona fide hedge within Dodd-Frank that the CFTC has unnecessarily narrowed, 

including related to anticipatory hedging, and has created 

at least five different definitions in various rules of what 

constitutes a bona fide hedge. This is nonsensical and creates unnecessary confusion, while disrupting legitimate 


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risk mitigation practices. We are committed to working 

with Congress to set clearer direction on bona fide hedges 

so that transactions that limit economic risks are viewed 

as bona fide hedges by the CFTC. 

—Mr. Lance Kotschwar, Senior Compliance Attorney, 

Gavilon, on behalf of the CMC 

On September 28, 2012, the U.S. District Court for the 

District of Columbia vacated final CFTC rules regarding 

position limits. These vacated rules defined the term bona 

fide hedging. As written in the CFTC’s rule that was vacated, the definition was unnecessarily narrow and would 

have discouraged a significant amount of important and 

beneficial risk management activity. Specifically, the rule 

narrowed the existing definition considerably by providing 

that a transaction or position that would otherwise qualify 

as a bona fide hedge also must fall within one of eight categories of enumerated hedging transactions, a definitional 

change neither supported in nor required by the DoddFrank Act. This restrictive definition of bona fide hedging 

transactions could disrupt the commodity markets, make 

hedging more difficult and costly, and may increase systemic risk by encouraging end-users to leave a relatively 

large portion of their portfolios un-hedged. 

—Mr. Richard F. McMahon, Jr., Vice President, EEI 

On March 24, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: End-User Views,’’ Mr. Doug Christie, President, Cargill Cotton, on behalf of the CMC testified with respect to provisions included in Section 313: 

The fundamental principle is this: price risk is far more 

complex than just fixed-price risk, but may include volatility and similar non-linear risks associated with prices, 

and a transaction to hedge any of these risks in connection 

with a commercial business should receive bona fide hedging treatment. Regulators should not condition bona fide 

hedging treatment as available only when risk crystalizes 

by virtue of a firm holding a physical position or by entering into a contract. Commercial market practices would be 

severely impacted if hedging transactions were not deemed 

bona fide hedges. 

. . . 

By narrowly defining bona fide hedging, the traditional 

hedger will be compromised and thus will not be able to 

effectively manage its risks. If this happens, risk premiums are going to rise throughout the business, which 

will be passed along the supply chain. Bid/offer spreads 

will widen and liquidity will be substantially reduced. This 

narrow view of hedging, if adopted, will mean that producer prices will decline and the cost to the consumer will 

increase. 


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. . . 

Within Title VII of Dodd-Frank and in the Commodity 

Exchange Act (CEA), Congress explicitly referred to anticipatory and merchandising hedging as bona fide hedging 

methods because they are crucial to the risk management 

functions of commercial and end-user firms. Anticipatory 

hedging allows commercial firms to mitigate commercial 

risk that can reasonably be ascertained to occur in the future as part of normal risk management practices. 

On March 25, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Market Participant Views,’’ the following witnesses provided 

testimony with respect to provisions included in Section 313: 

There is no evidence that Congress intended for the 

Agency to make it more difficult through position limits 

rules for farmers, ranchers, and other commercial endusers to hedge their price risks. By limiting the exemption 

to a rigid and narrow list of enumerated hedges, the Agency’s proposal threatens to inject considerable risk into commercial operations.’’ 

—Mr. Terrance A. Duffy, Executive Chairman & President, CME 

[The CFTC’s] prohibitions or limitations on anticipatory 

hedging are likely to greatly constrain the risk management practices of energy and agricultural firms. 

—Benjamin Jackson, President and COO, ICE Futures 

U.S. 

Section 314—Cross-border regulation of derivatives transactions 

As the global financial system has evolved, U.S. institutions have 

expanded their derivatives operations overseas to provide services 

to both U.S. and non-U.S. customers. At the same time, foreign institutions have established subsidiaries and branches in the U.S. to 

offer derivatives directly to U.S. customers. The growth of this 

cross-border activity makes questions regarding the application of 

the Dodd-Frank Act to activities that occur outside the U.S. (known 

as ‘‘extraterritorial’’) complex and critical. 

Section 722(d) of Title VII sets forth that provisions of the DoddFrank Act shall not apply to activities outside the United States 

unless those activities: (1) have a direct and significant connection 

with activities in, or effect on, commerce of the United States, or 

(2) contravene such rules or regulations as the CFTC prescribes are 

necessary to prevent evasion of the Dodd-Frank Act. This is consistent with historical practice by both the CFTC and the prudential regulators in their treatment of foreign entities with operations 

in the U.S. or of U.S. entities with regard to their operations in foreign jurisdictions. Generally, the U.S. regulatory agencies have deferred to foreign regulatory authorities for the supervision of entities located abroad if the agencies found that those entities were 

subject to a regulatory regime comparable to that imposed by the 

U.S. 

However, in April of 2012, the prudential regulators proposed a 

rule for the application of margin requirements as required by Title 

VII for Major Swap Participants and Swap Dealers. Under the pruVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00069 Fmt 6659 Sfmt 6602 E:\HR\OC\HR134.XXX HR134

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dential regulators’ proposal, margin requirements would apply to 

all transactions of U.S. financial institutions—whether they involve 

their U.S. or non-U.S. customers. For example, a foreign subsidiary 

of a U.S. bank in Europe would be subject to the Dodd-Frank Act’s 

margin rules even when dealing with European customers. 

On June 29, 2012, the CFTC issued proposed ‘‘interpretive guidance’’ for the cross-border application of Title VII of the DoddFrank Act. The proposal of this guidance, approved by all five commissioners, was done without the concurrent release of similar 

guidance from the SEC for security-based swaps and, as it was not 

in the form of a proposed rule, did not include a cost-benefit analysis. When the proposed guidance was released, then-CFTC Commissioner Jill Sommers stated that ‘[CFTC] staff had been guided 

by what could only be called the Intergalactic Commerce Clause’ of 

the United States Constitution, in that every single swap a U.S. 

person enters into, no matter what the swap or where it was transacted, was stated to have a direct and significant connection with 

activities in, or effect on, commerce of the United States. This statutory and constitutional analysis of the extraterritorial application 

of U.S. law was, in my view, nothing short of extra-statutory and 

extra-constitutional.’’ 

On December 13, 2012, the Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management 

held a hearing where Commissioners Sommers and Chilton testified alongside top regulators from Japan and the European Commission. Combined, the three regulatory jurisdictions testifying at 

the hearing represented an overwhelming majority of the global derivatives marketplace. Based on testimony the subcommittee received, there appeared to be a serious lack of coordination between 

both foreign and domestic regulators. 

For example, Mr. Masamichi Kono with the Financial Services 

Agency of Japan (who at the time was Chairman of the International Organization of Securities Commissions (IOSCO)) testified 

during the hearing that ‘‘much needs to be done’’ by the CFTC and 

that ‘‘it is important that the details of the applicable laws and regulations are made clear as much as possible before their implementation in order to minimize regulatory uncertainty.’’ Further, with 

respect to minimizing risk in the marketplace—a goal central to 

the creation of the Dodd-Frank Act—Mr. Kono testified that: 

[S]uch risks need not be addressed by extraterritorial 

application of the U.S. laws and regulations; rather, the 

U.S. authorities could rely on foreign regulators upon establishing of course that the foreign regulators have the 

required authority and competence to exercise appropriate 

regulation and oversight over those entities and activities. 

This is what we consider as the most efficient and effective 

approach, in line with the principles of international comity between sovereign jurisdictions. 

At the same hearing, Mr. Patrick Pearson with the European 

Commission testified before the Committee about regulatory conflicts between the United States and 27 member nations of the European Union. With respect to the risk posed to global markets if 

international regulators do not properly coordinate the regulation 

of the markets, he stated that: 


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[T]rades will not be able to be cleared. If they can’t be 

cleared, they won’t take place. This means that firms and 

users will not hedge their risks, or firms will hedge their 

risks but they will only take place within one jurisdiction, 

which means that risk will be concentrated in one jurisdiction on the planet. That could be the United States. If your 

firms can’t hedge their risks outside of the United States, 

they’ll have to hedge them here. The consequences of that 

is obviously a fragmented market and a significant concentration of financial risk in the U.S. system, and this is 

exactly what we tried to prevent with our global regulatory 

reform. 

In the 113th Congress, on March 14, 2013, at a Committee hearing entitled ‘‘Examining Legislative Improvements to Title VII of 

the Dodd-Frank Act,’’ the Hon. Kenneth E. Bentsen, Acting President and CEO, SIFMA, provided the following testimony that informed the drafting of Section 314: 

Though Title VII was signed into law 21⁄2 years ago, we 

still do not know which swaps activities will be subject to 

U.S. regulation and which will be subject to foreign regulation. Section 722 of the Dodd-Frank Act limits the CFTC’s 

jurisdiction over swap transactions outside of the United 

States to those that ‘‘have a direct and significant connection with activities in, or effect on, commerce of the U.S.’’ 

or are meant to evade Dodd-Frank. Section 772 limits the 

SEC’s jurisdiction over security based swap transactions 

outside of the United States to those meant to evade DoddFrank. However, the CFTC and SEC have not yet finalized 

(or, in the SEC’s case, proposed) rules clarifying their interpretation of these statutory provisions. The result has 

been significant uncertainty in the international marketplace and, due to the aggressive position being taken by 

the CFTC as described below, a reluctance of foreign market participants to trade with U.S. financial institutions 

until that uncertainty is resolved. While the CFTC has 

proposed guidance on the cross-border impact of their 

swaps rules, that guidance inappropriately recasts the restriction that Congress placed on CFTC jurisdiction over 

swap transactions outside the United States into a grant 

of authority to regulate cross-border trades. The CFTC primarily does so with a very broad definition of ‘‘U.S. Person,’’ which it applies to persons with even a minimal jurisdictional nexus to the United States. In addition, the 

CFTC has released several differing interim and proposed 

definitions of ‘‘U.S. Person’’ for varying purposes, resulting 

in a great deal of ambiguity and confusion for market participants. SIFMA supports a final definition of U.S. Person 

that focuses on real, rather than nominal, connections to 

the United States and that is simple, objective and determinable so a person can determine its status and the status of its counterparties. 

On April 18, 2013, the finance ministers of the European Commission, France, Germany, United Kingdom, Japan, Switzerland, 

Russia, South Africa and Brazil wrote to Treasury Secretary Jacob 


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Lew stating that ‘‘[w]e are already starting to see evidence of fragmentation in this vitally important financial market as a result of 

lack of regulatory coordination’’ and ‘‘[w]e are concerned that, without clear direction from global policymakers and regulators, derivatives markets will recede into localised and less efficient structures, 

impairing the ability of business across the globe to manage risk.’’ 

On May 21, 2013, testifying before the Committee at a hearing 

entitled ‘‘The Future of the CFTC: Market Perspectives,’’ Mr. Jeffery Sprecher, Founder, Chairman, and CEO, 

IntercontinentalExchange, Inc., testified with respect to provisions 

included in Section 314: 

If regulators fail to harmonize, the effects of uncertainty 

and the prospect for regulatory arbitrage will be damaging. Because markets are global and capital flows across 

borders, no single country or regulatory regime oversees 

the derivatives market. In order to make long-term business decisions, market participants require certainty that 

their transactions will not be judged on conflicting standards. The derivatives markets are international: the majority of companies that operate globally use derivatives to 

manage price risks, and they conduct these transactions 

with both U.S. and non-U.S. counterparties. The likely outcome will be that regulators deem other countries’ financial regulatory systems as ‘‘nonequivalent’’, which would 

lead to those countries erecting barriers to its financial 

markets. It is crucial to understand that if countries erect 

these barriers, WE markets and market participants will 

be damaged. Currently, the U.S. derivatives markets are 

home to vital global benchmark contracts in agriculture, 

energy, financial asset classes. These have become benchmark contracts because Asian and European market participants have direct access to U.S. markets. Importantly, 

the long-standing global nature of the derivatives markets 

and the resulting international competition has led to advances in transparency, risk management, and historically, 

regulatory cooperation. Over the past year, ICE has been 

delivering this message to domestic and international regulators, yet regulations continue to diverge, particularly in 

the U.S. and Europe. We ask the Committee, in its oversight role, to impress upon the Commodity Futures Trading Commission the importance of working with European 

and Asian counterparts to harmonize regulation and avoid 

creating unintended, unpredictable impacts on financial 

markets and their users. The time for agreement is closing. 

His testimony was echoed by Mr. Stephen O’Conner, the thenChairman of ISDA, in his remarks: 

ISDA and our members believe that a globally harmonized approach to cross-border regulation is of paramount importance. What they face now is considerable uncertainty. Uncertainty is never a good thing in financial 

markets, as there are typically only two things to do in 

face of that uncertainty. One response is to pull back and 

wait until such time as greater certainty is provided. On 


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a firm level, that means missed opportunity. On a market 

level, that translates to less efficient, less liquid and more 

volatile markets, material harm to financing and investing 

activities and a drag on the economy in general. . . . Harmonization of regulatory approaches, particularly on issues 

with systemic risk implications, and a concerted program 

of mutual recognition of regulatory regimes by global regulators are essential parts of the solution to ET. 

In the 114th Congress, the Subcommittee on Commodity Exchanges, Energy, and Credit held three separate hearings specifically on issues surrounding the reauthorization of the CFTC in 

which concerns about the Commission’s approach to cross-border 

issues have been raised. On March 24, 2015, the subcommittee 

held a hearing entitled ‘‘Reauthorizing the CFTC: End-User Views’’ 

in which market participants testified to the uncertainty and damaging impact the CFTC’s current cross-border guidance is having 

on their ability to manage risks. At that hearing, Mr. Mark 

Maurer, Chairman, INTLFCStone Markets, LLC, shared his concerns about the CFTC Cross-Border guidance: 

The CFTC’s cross-border guidance proved to be overly 

complex, resulting in industry challenges and culminating 

in litigation. We support recognition of non-U.S. regulators’ interest in regulating their own markets, with deference to regulators that have comparable regulatory regimes. Better foreign relations are needed going forward to 

have a cohesive, global swap market. 

At that same hearing, in response to a question about areas in 

which the CFTC could improve, Ms. Lisa Cavallari, Director of 

Fixed Income Derivatives at Russell Investments said: 

I think—again, when it comes back to the implementation of these particular regulations, the CFTC is critically 

important in terms of how we go forward, and the intersection of so many rules, not just the—that the CFTC makes, 

but that has been emphasized in terms of cross-border, 

these—we need to keep liquid markets and those market 

participants active. And each one of us at . . . this table 

actually represents a different end-use, and . . . we need 

to preserve, and the CFTC can help this, the liquidity of 

these marketplaces. 

On March 25, 2015, the subcommittee held a similar hearing 

with other market participants, entitled ‘‘Reauthorizing the CFTC: 

Market Participant Views.’’ At that hearing, Mr. Benjamin Jackson, President and COO, ICE Futures U.S., testified about the historical importance of working with foreign regulators to accomplish 

comprehensive global financial regulations: 

Before financial reform, these conflicts in regulation 

were the exception, not the norm, because financial regulation was based on a common set of regulatory principles. 

For example, since 1984, Section 4(b) of the Commodity 

Exchange Act expressly excluded foreign transactions from 

CFTC jurisdiction. The CFTC relied on foreign regulators 

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kets should adopt. Likewise, European regulators took a 

similar approach to U.S. markets. This approach was very 

successful, as it led to greater harmonization of regulation, 

yet allowed foreign regulators to oversee their institutions. 

We strongly encourage a return to this approach. 

On April 14, 2015, the subcommittee held a hearing entitled ‘‘Reauthorizing the CFTC: Commissioners’ Perspectives’’ in which 

Commissioners Bowen, Giancarlo, and Wetjen were invited to provided testimony to the Committee on issues facing the CFTC. During that hearing, Commissioner Giancarlo said: 

Unfortunately, fragmentation of global swaps markets 

between U.S. persons and non-U.S. persons means smaller 

and disconnected liquidity pools and less efficient and 

more volatile pricing for market participants and their 

end-user customers. It also means greater risk of market 

failure in the event of economic crisis. By Balkanizing 

global swaps liquidity, the CFTC’s Interpretive Guidance 

is actually increasing the systemic risk that it was predicated on reducing. Like Smoot-Hawley, the CFTC’s Interpretive Guidance is ill-suited to its ostensible purpose of 

systemic risk reduction. It is, however, wreaking havoc 

and forcing U.S. financial institutions to retreat from what 

were once global markets. We simply cannot allow uncoordinated regulatory reforms to permanently divide global 

swaps markets between U.S. and non-U.S. persons. 

The CFTC must replace its cross-border Interpretive 

Guidance with a formal rulemaking that recognizes outcomes-based substituted compliance for competent nonU.S. regulatory regimes. I support the withdrawal of the 

CFTC staff’s November 2013 Advisory that fails not only 

the letter and spirit of the ‘‘Path Forward,’’ but also contradicts the conceptual underpinnings of the CFTC’s Interpretive Guidance. 

As of writing this report, global regulators have yet to harmonize 

their approach to global derivatives regulation. In order to address 

the serious concerns voiced by both international and domestic regulators, and numerous witnesses who have testified before the 

Committee over the past three years, Section 314 requires the 

CFTC to propose and finalize a rule on how U.S. swaps requirements apply to swaps transactions that are not wholly transacted 

within the United States or between two U.S. Persons. The Committee reminds the Commission of the commitments agreed to by 

the G–20 Leaders in the Leaders’ Declaration agreed to at the 2013 

St. Petersburg Summit: 

We also welcome the recent set of understandings by key 

regulators on cross-border issues related to OTC derivatives reforms, as a major constructive step forward for resolving remaining conflicts, inconsistencies, gaps and duplicative requirements globally, and look forward to speedy 

implementation of these understandings once regimes are 

in force and available for assessment. We agree that jurisdictions and regulators should be able to defer to each 

other when it is justified by the quality of their respective 


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regulatory and enforcement regimes, based on similar outcomes, in a non-discriminatory way, paying due respect to 

home country regulation regimes. 

The intent of the Committee is that the CFTC must develop a 

workable system to evaluate the swaps requirements of foreign jurisdictions to determine if such foreign jurisdictions are comparable 

to and as comprehensive as U.S. swaps requirements. The Committee firmly agrees with the 2013 G–20 Leaders’ Declaration that 

international swaps regulation is best served by domestic regulators having comparable regimes and deference to regulators in 

their home jurisdiction, both here in the United States and around 

the world. The legislation lays out a two-step process to achieve 

this goal. 

First, in Sections (a) and (b), the Committee requires the CFTC 

to write a rule defining who is a U.S. person and subject to the full 

weight of the U.S. rules, what criteria will be used to evaluate each 

category of swaps requirements to determine a foreign jurisdiction’s 

comparability to the United States, and when a U.S. person will be 

exempted from complying with U.S. rules, because they are in compliance with equivalent foreign rules. 

As the Commission undertakes this effort, Sections (b)(3) and 

(b)(4) provide additional direction for the rulemaking. Section (b)(3) 

instructs the CFTC to compare regulatory outcomes, as opposed to 

the actual mechanics of the rule. The Committee agrees with the 

understanding reached by the OTC Derivatives Regulators Group 

regarding equivalence and substituted compliance and put forth in 

their November 2014 report to G–20 leaders: 

[A] flexible, outcomes-based approach should form the 

basis of final assessments regarding equivalence and substituted compliance. The final assessments of a foreign regime for equivalence or substituted compliance should be 

based on regulatory outcomes of that foreign regime, taking into account the different frameworks, local market 

practices and characteristics across jurisdictions. An 

equivalence or substituted compliance assessment also 

should be based on an understanding that similar regulatory outcomes may be achieved through the implementation of detailed rules or an applicable supervisory framework, or both. Such assessments may be made on a broad 

category-by-category basis, rather than on the foreign regime as a whole. An equivalence or substituted compliance 

assessment should fully take into account international 

standards, where they are appropriate, regulatory arbitrage, investor protection, risk importation, prudential and 

other relevant considerations. 

Section (b)(4) directs the CFTC to consider risks to the U.S. financial markets when developing its rulemaking on who is a U.S. 

Person and how U.S. Swaps rules apply to market participants. As 

expressed in our hearing on April 14, 2015, the Committee is concerned about the issuance of the Cross-Border interpretive guidance and the staff interpretations of the guidance that have dramatically altered the scope of its application. Section (b)(4) requires 

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place that meet the direct and significant test put forward in Section 722 of the Dodd-Frank Act: 

The provisions of this Act relating to swaps . . . shall 

not apply to activities outside the United States unless 

those activities . . . have a direct and significant connection with activities in, or effect on, commerce of the United 

States . . . 

This direction is in line with the testimony provided by Commissioner Bowen at the April 14, 2015 hearing, when Mr. Emmer of 

Minnesota asked ‘‘does the location of the individual negotiating a 

trade have a direct and significant impact on U.S. commerce, if the 

trade occurs between foreign counterparties in a foreign jurisdiction?’’ Commissioner Bowen replied: 

I would suggest that we should follow where the risks 

actually lie. And so whether the person is located in New 

York versus London, in some respects, may not be indicative as to where the real risk is. And so we have global 

markets, the concept of a U.S. person, frankly, may be irrelevant because transactions will be taking place in cyberspace. 

Second, Section (c) requires the Commission to utilize the criteria 

established in the rulemaking to evaluate foreign jurisdictions and 

determine if the rules they have imposed are, in fact, comparable 

to and as comprehensive as U.S. swaps rules. The legislation provides the Commission the authority to make these determinations 

by rule or by order, to ensure the Commission has the flexibility 

needed to make determinations in a timely fashion. It is the Committee’s expectation that the Commission will use the rulemaking 

process, with notice and comment, for determinations that are 

more controversial, more complex, or more disruptive to market 

participants. 

The legislation contemplates the eventual completion of swaps 

rules by other major financial regulators. It provides for recognition 

as comparable for the rules in the jurisdictions encompassing the 

eight largest swaps markets by notional value 18 months after the 

enactment of this Act. It is the Committee’s expectation that substituted compliance for the rules of other sophisticated market regulators who are implementing similar reforms be achieved. However, the Committee also recognizes that certain regulators may 

not complete their rules in a timely manner or may not offer reciprocal recognition to U.S. swaps rules. To that end, subsection (c)(3) 

provides the Commission with an important option to suspend that 

recognition. 

The subsection provides the Commission with three explicit determinations it can make under which any grant of substituted 

compliance can be suspended, including: if the foreign jurisdiction’s 

swaps rules are not comparable to and as comprehensive as U.S. 

swaps rules, if the foreign jurisdiction is not exempting U.S. persons in compliance with U.S. rules from foreign rules, or if the foreign jurisdiction is not providing equivalent recognition or substituted compliance for U.S. registered entities. 

These three determinations are intended to support the CFTC 

Chairman as he is negotiating with his foreign counterparts on 


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similar cross-border issues and to enable the Commission to hold 

foreign regulators accountable if they are not negotiating in good 

faith and also working towards an outcomes-based substituted compliance regime. 

In the subcommittee’s March 24, 2015 hearing, we heard testimony from two witnesses on the importance of the current crossborder negotiations over CCP recognition. Mr. Terrence Duffy, Executive Chairman and President, CME, said: 

Among the most critical issues facing the Commission 

today is the potential for the United States to be denied 

status as a country whose regulations are equivalent to 

Europe’s . . . Historically, both the U.S. and EU have mutually recognized each other’s regulatory regimes to promote cross-border access. 

Recently, however, the European Commission has taken 

a different approach. Under European law, U.S. clearinghouses and exchanges—like CME—must first be recognized by European regulators in order to be treated the 

same as EU clearinghouses and exchanges. The European 

Commission is conditioning its recognition of U.S. derivatives laws as equivalent to European law on demands for 

harmful regulatory changes by the U.S. that would impose 

competitive burdens on U.S., but not EU, clearinghouses 

and exchanges, and would harm both U.S. and EU market 

participants. 

After more than two years of negotiation and delay, the 

EU still has refused to grant U.S. equivalence. . . . By 

contrast, the European Commission recently granted 

‘‘equivalent’’ status to several jurisdictions in Asia, including Singapore, which has the same margin regime as the 

U.S. . . . The European Commission’s discriminatory approach to U.S. access to EU markets is creating significant 

competitive disadvantages for U.S. markets and the participants that use those markets. Without an EU recognition of equivalence, U.S. clearinghouses will not be able to 

clear EU-mandated derivatives . . . 

Make no mistake that a continued decrease in participation in U.S. futures products will harm both EU and U.S. 

market participants, reducing liquidity and impeding the 

ability of farmers, ranchers and other U.S. and EU businesses to conduct prudent risk management. 

Similarly, Mr. Gerald Corcoran, Chairman of the Board, FIA testified: 

We operate in global markets and to assume otherwise 

is very dangerous given that market participants are best 

served with deep liquidity. If global regulations are not 

well coordinated the markets will fragment within regulatory jurisdictions and become far less liquid, to the detriment of the ultimate end-users. To date, much of the 

public regulatory scrutiny has focused on the cross-border 

regulation of trade execution parties, both the client and 

the swap dealers, but there are also cross-border challenges within the regulation of the infrastructure that is 

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ple, the ‘‘Dodd-Frank Act’’ specifically provides the CFTC 

with the ability to exempt comparably regulated foreign 

clearinghouses from registration with the U.S. regulator 

yet the CFTC has never established a means by which 

clearinghouses, also known as central counterparties 

(CCPs), might seek such exemptions. Thus any foreign 

CCP clearing swaps for U.S. entities must register with 

the CFTC, as well as their home country regulator. U.S. 

based CCPs who are registered with the CFTC and do 

business with European participants are required under 

EU law to be ‘‘recognized’’ by having equivalent regulations to those in Europe. Assuming that each regulatory 

jurisdiction is unlikely to prescribe identical requirements, 

the practicality of such dual registration or recognition 

hinges upon the various jurisdictions’ ability to acknowledge regulatory differences and rely upon each other as 

front line regulators. I would like to highlight one specific 

example of a current regulatory coordination challenge we 

are facing: Europe and the U.S. have developed differing 

requirements relative to margin methodologies that CCPs 

must apply. As clearing members of CCPs in each country, 

we are perplexed by recent suggestions that the competing 

methodologies should be run simultaneously. As such, 

clearing members and their clients would be subjected to 

the model resulting in the highest margin requirement on 

any given day. This overly-complex and operationally risky 

policy seems to overlook the implication to those who post 

margin—the client and the clearing member. There has 

been very little transparency or involvement of the clearing members to date in the discussion between the CFTC 

and EU authorities. 

The Committee does not intend Section 314 to offer relief for 

market participants from all swaps regulatory obligations. It is the 

Committee’s expectation that market participants with a direct and 

significant impact on the United States should comply with U.S. 

Rules or another set of rules that has been deemed to be comparable to and as comprehensive as U.S. rules. However, the Committee firmly believes that no market participant should be subject 

to multiple sets of regulations that are incompatible with one another and would require a participant to break one rule to meet another. 

In the 113th Congress, the House of Representatives passed H.R. 

1256, the Swap Jurisdiction Certainty Act, by a vote of 301–124, 

which contained similar requirements to Section 314. 

Section 315—Exemption of qualified charitable organizations from 

designation and regulation as commodity pool operators 

As a result of the Dodd-Frank Act’s addition of swaps to the commodity pool definition, certain colleges and universities currently 

face uncertainty as to whether the practices of universities managing their endowment funds together with funds of affiliated organizations (such as university newspapers, clubs, charitable remainder trusts and other organizations within the university community) and entering into swaps in the ordinary course of managing 

their investment exposure and operational risk (e.g., interest rates 


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or energy prices) would cause university endowments to be commodity pools and universities themselves to be CPOs or CTAs, subject to CFTC regulation. 

Many colleges, universities and other charitable organizations 

faced similar uncertainty with respect to the Investment Advisors 

Act of 1940, and this uncertainty was addressed by the Philanthropy Protection Act of 1995 (‘‘PPA’’). Since that time, university 

endowments have relied on the changes made by the PPA to provide an exemption from SEC registration in recognition of the special status of these funds. 

Similarly, church benefits boards often use investment managers 

or advisers that engage in commodities transactions. Church benefits boards also have the ability to pool plan assets with other 

funds for the benefit of the church (‘‘church plan-related accounts’’), 

purely for investment management purposes. While securities laws 

clearly exempt church plans and church plan-related accounts from 

SEC registration requirements. The CEA and CFTC rules are not 

so clear. 

Section 315 will harmonize the exemptions between securities 

laws and the CEA and CFTC regulations. It will prevent university 

endowments, church pension plans and church plan-related accounts from having to be registered as commodity pools. Likewise, 

Section 315 will prevent the universities and church benefits 

boards from having to register as CPOs or CTAs. These exemptions 

would reduce the cost to churches, universities and charitable organizations, and would also ensure they have the full benefit of commodities investments that provide diversification, opportunities to 

hedge, and returns to their respective beneficiaries. 

Section 316—Small bank holding company clearing exemption 

Under the Dodd-Frank Act, end-users that are not considered a 

‘‘financial entity’’ are exempt from the Act’s swaps clearing mandate. The Act directed the CFTC to determine whether to exempt 

small banks and savings associations with assets less than $10 billion from the definition of ‘‘financial entity,’’ thereby making them 

eligible for the end-user exemption from the swaps clearing mandate. In July 2012, the CFTC issued a final rule exempting ‘‘small 

financial institutions’’ with total assets of $10 billion or less from 

classification as a ‘‘financial entity.’’ 

Most banks are structured under a holding company. The holding 

companies use swaps to manage risk across the small banks and 

savings associations that they own. Entering into swaps with the 

holding company is commonplace, with many small banks and savings associations entering into swaps exclusively with the holding 

company. These non-speculative swaps between holding companies 

and their small banks and savings associations pose minimal risk 

to the marketplace. Having to clear these swaps would impose significant costs on the small banks and savings associations. If the 

holding companies are not exempted from the Act’s swaps clearing 

mandate, small banks and savings associations may have to either 

forgo the use of swaps at the holding company, or undertake tremendous operational expense for the ability to enter into as little 

as one swap. Section 316 extends the Commission’s exemption for 

small banks and savings associations to the holding companies that 

own them. 


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Section 317—Core principle certainty 

The Dodd-Frank Act required that cleared swaps must be executed through a swap execution facility (SEF). SEFs are facilities, 

trading systems or platforms in which multiple participants have 

the ability to execute or trade swaps by accepting bids and offers 

made by multiple participants in the facility or system. The DoddFrank Act’s swaps clearing mandate is predicated on the vibrant 

operation of SEFs. Regulations that impose significant costs and 

prescribe onerous burdens on SEFs thereby impeding their development and potentially contributing to their failure should be discouraged. 

The Dodd-Frank Act provided a core principles-based framework 

for SEFs. SEF Core Principle 4 requires SEFs to monitor trading 

in swaps to prevent manipulation, price distortion and disruptions 

of the delivery or cash settlement process, among other things. Certain rules promulgated under Core Principle 4 require a SEF to 

look beyond its own market to gain the information necessary to 

perform these functions. For example, a SEF that executes a credit 

default swap on a Ford Motor Company bond must also monitor 

trading in the underlying Ford Motor Company bonds to prevent 

manipulation, price distortion and disruption in its market. While 

a SEF has the ability to monitor trades it executes, asking it to 

monitor manipulation in another marketplace in which it may provide no execution services is an undue, unfair and unwarranted 

burden. As the CFTC admits on its website, only it can perform 

cross-market surveillance. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Giancarlo provided the 

following testimony with respect to the provisions included in Section 317: 

Congress should clarify SEF Core Principle 4 to make 

clear that a SEF is not required to monitor markets beyond its own. . . . The CFTC should also revise its rules 

to this effect. 

Similarly, SEF Core Principle 6 requires a SEF to ‘‘adopt for 

each of the contracts of the facility, as necessary and appropriate, 

position or accountability for speculators.’’ As with a SEF’s ability 

to monitor trades, a SEF’s ability to monitor positions held by market participants is limited. A SEF can only know about the transactions completed at its own facility and has no way of knowing 

what the portfolio of swaps a market participant may hold. Mr. 

Shawn Bernardo, testifying on behalf of the Wholesale Market Brokers Association, Americas, explained: 

Position limits or accountability levels apply marketwide to an entity’s overall position in a given swap, commodity, or instrument subject to limits and ownership and 

control provisions. To monitor an entity’s positions and 

take action to enforce such a market-wide requirement, a 

SEF would need to have access to information about an 

entity’s overall positions in the swap and underlying instrument or commodity, which it does not have. 

Section 317 would require a SEF ‘‘be responsible for monitoring 

positions only on its own facility.’’ 


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SEF Core Principle 13 requires a SEF to have ‘‘financial resources [in an amount that] exceeds the total amount that would 

enable the [SEF] to cover the operating costs of the [SEF] for a 1- 

year period, as calculated on a rolling basis.’’ This is the same financial resources requirement imposed on designated contract markets (DCM). However, the market impact of a SEF failure is not 

nearly comparable to the effect of a DCM failure. A SEF failure 

will not likely create a liquidity crisis because participants can easily move their trading to another SEF. This is in contrast with the 

futures market where a DCM owns the products traded on it. The 

failure of one DCM will likely harm liquidity absent regulatory action to transfer those products and corresponding open interest to 

another DCM. Further, a failed SEF would likely be able to winddown its business in far less than one year. Accordingly, forcing a 

SEF to retain capital to cover one year of operating expenses is unwarranted. 

On April 14, 2015, at a hearing entitled ‘‘Reauthorizing the 

CFTC: Commissioner Views,’’ Commissioner Giancarlo provided the 

following testimony with respect to the provisions included in Section 317: 

Congress should reexamine this core principle and only 

require a SEF to hold enough capital to conduct an orderly 

wind-down of its operations. It would not take a SEF one 

year to terminate employees and contracts and conduct an 

orderly wind-down of its operations. It would not be unreasonable to expect a SEF to conduct such a wind-down in 

three months. This approach would release significant capital back to the SEF for innovation, lower barriers to 

entry, reduce costs and increase competition. 

The Dodd-Frank Act narrowly prescribed the extensive duties 

and responsibilities of a SEF’s chief compliance officer without consideration for a SEF’s potential limited resources. Because SEFs 

maintain relatively small corporate structures, certain duties and 

responsibilities of their chief compliance officers have proven to be 

unduly burdensome. For these reasons, SEF chief compliance officers require greater flexibility to fulfil their obligations under the 

Dodd-Frank Act. 

Section 317 provides a swap execution facility SEF with flexibility in developing and implementing its surveillance and monitoring rules, narrows SEF’s monitoring responsibility to swaps 

trading only on its own facility, replaces the requirement that a 

SEF hold funds to cover its operating costs for 1 year with a requirement that it hold funds to conduct an orderly wind-down of 

its operations, and provides flexibility for SEF chief compliance officers and procedures for SEF annual reports to the CFTC. 

Section 318—Treatment of Federal Home Loan Bank products 

The 12 regional Federal Home Loan Banks (FHLBanks), created 

by Congress in 1932, are member-owned cooperative institutions 

regulated by the Federal Housing Finance Agency (FHFA). 

FHLBank members include banks, credit unions, insurance companies and community development financial institutions. The mission of the FHLBanks is to provide their members with reliable 

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munity development, and economic growth. The FHLBanks’ lending to their member financial institutions have been critical to the 

flow of credit, including residential mortgage credit, particularly 

through the financial crisis. 

The Dodd-Frank Act generally exempts ‘‘identified banking products’’ (including loans) from regulation as ‘‘swaps,’’ or derivatives, 

even if these loans contain features such as caps, floors or options 

that are sometimes included in derivatives. FHLBanks are not included as ‘‘banks’’ for purposes of this exemption and the FHFA is 

not included as an appropriate federal regulator for the purposes 

of the exemption. Regardless, FHLBank loans to its members (advances) have been afforded a similar exemption as commercial 

bank loans through CFTC regulatory guidance due to the cooperative nature and regulatory structure of the FHLBank System. 

However, the scope of the FHLBanks’ exemption is unclear. In 

its regulatory guidance, the CFTC exempted certain loans entered 

into by FHLBanks. The CFTC also exempted a number of loans 

embedded with derivative-like features subject to certain limitations, but it didn’t specifically impose those limitations on the 

FHLBanks’ use of those loans. Therefore, it’s unclear whether 

FHLBanks’ loans are subject to those limitations. Subjecting 

FHLBank advances to the multitude of the Dodd-Frank Act requirements could increase the cost of funds to lenders nationwide. 

Section 318 resolves any ambiguities by adding language to the 

CEA definitively categorizing FHLBank advances as ‘‘identified 

banking products’’ and, in so doing, assuring that FHLBank advances are not considered swaps under the Dodd-Frank Act. Section 318 ensures that community financial institutions will keep affordable access to financial services that help them to structure 

their products to meet the needs of the communities they serve and 

to prudently manage their balance sheets. 

Section 319—Treatment of certain funds 

From 1985 until 2012, CFTC Regulation 4.5 excluded ‘‘otherwise 

regulated entities’’—registered funds, insurance company separate 

accounts, bank trust and custodial accounts, and retirement plans 

subject to the Employee Retirement Income Security Act of 1974 

(ERISA)—from CPO regulation because they were already regulated by the SEC. As a part of a 2012 rulemaking, the CFTC significantly broadened the reach of its oversight of registered funds. 

As a result, more than 70 fund companies managing over 5,000 

mutual funds have had to register with the CFTC as CPOs, resulting in increased costs for registered funds and the Americans who 

invest in them. 

Additional regulation by the CFTC is unnecessary, particularly 

for those funds that do not resemble or compete with traditional 

commodity pools. Registered funds and their advisers are comprehensively regulated by the SEC, including regulations that govern the funds’ derivatives holdings. 

In a statement submitted for the March 24, 2015 ‘‘Reauthorizing 

the CFTC: End-User Views’’ hearing record, the Investment Company Institute addressed its concerns regarding Regulation 4.5: 

In February 2012, the CFTC voted to significantly narrow the exclusion from CPO regulation in Rule 4.5 under 

the CEA as it relates to registered funds and rescind an 


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exemption from CPO registration that previously was 

available to sponsors of private investment funds. During 

the public comment period, ICI and many other stakeholders warned the agency that its proposals were 

overbroad, and offered a myriad of recommendations for 

tailoring the rules to achieve the CFTC’s stated regulatory 

objectives without placing undue burdens on registered 

and private funds and their sponsors/advisers, as well as 

on the CFTC’s limited resources. Unfortunately, the CFTC 

proceeded to adopt the rules largely as proposed. As anticipated by commenters, these rule changes have had significant implications for many asset management firms—in 

addition to the many new obligations imposed on these 

firms by the Dodd-Frank Act. Indeed, we understand that 

over 700 additional firms, which collectively operate thousands of registered and private funds, have now registered 

as CPOs. Many more firms may be required to register in 

the future. Unfortunately, most of the costs imposed by 

this additional regulation will be indirectly borne by fund 

shareholders. 

The timing of these rule changes was unfortunate and 

unnecessary. The changes were not mandated by the 

Dodd-Frank Act, although the CFTC attempted to link 

them to the Act by describing them as being ‘‘consistent 

with the tenor’’ of that Act. Their promulgation has required ICI members and other stakeholders to expend significant time and resources on complying with the amended Rule 4.5 exclusion or, if they were unable to rely on the 

exclusion, registering as a CPO and complying with the 

applicable requirements. 

ICI, both individually and jointly with other trade associations, has submitted more than 20 requests to the 

CFTC and NFA for clarification, confirmation, and interpretive or no-action relief necessary to facilitate compliance as a result of the amended rule. Many of these requests remain unanswered, months or even years after 

their submission. The registered fund industry is characterized by a strong culture of compliance, and the uncertainty created by these outstanding requests has made it 

unnecessarily challenging and costly for registered funds 

and their advisers to navigate their compliance obligations 

under CFTC regulations. These efforts have come at a 

time when ICI, its members and other stakeholders are devoting time and resources to understanding and complying 

with the many significant new rules that were required by 

the Dodd-Frank Act. 

Section 319 exempts registered funds already subject to SEC regulation from having to register with the CFTC as CPOs if their 

funds’ only investment in commodity interests is limited to ‘‘financial commodities’’ (e.g., S&P 500 swaps). It reduces the unnecessary 

regulation and costs created by the Rule 4.5 amendments without 

undermining investor protection. Section 319 allows the CFTC to 

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tional commodity pools, while restoring exclusive SEC jurisdiction 

over those funds that invest only in financial derivatives. 

Title IV—Technical Corrections 

Committee staff, CFTC staff, and House Legislative Counsel staff 

worked together to develop Title IV and fix a number of statutory 

oversights and drafting errors. 

Section 401—Correction of references 

Section 5h(f) refers to SEF core principles, whereas section 5h(g) 

is the intended provision under which a SEF can be exempt from 

registration due to being ‘‘subject to comparable, comprehensive supervision and regulation.’’ 

Section 1a(2)(i) does not exist, and the provision is meant to reference the definition of ‘‘excluded commodity’’ in section 1a(19)(i). 

This amendment corrects a typographical error in the cross-reference to the Administrative Procedure Act. 

Section 402—Elimination of obsolete references to dealer options 

The provisions refer to activity that occurred prior to 1978. Dealer options are no longer traded, and the Commission deleted the 

corresponding regulation (32.23) as part of its commodity options 

rulemaking. 

Section 403—Updated trade data publication requirement 

The term ‘‘exchange’’ is not a defined term in the CEA, and this 

updated language reflects the current trade data publication requirements under the CEA. 

Section 404—Flexibility for registered entities 

This amendment allows all registered entities to delegate functions under core principles to a third-party service provider. For 

consistency in regulation SEFs, DCOs and SDRs should be allowed 

to delegate these functions as DCMs are currently able to do. 

Section 405—Elimination of obsolete references to electronic trading 

facilities 

The CFMA added the term ‘‘electronic trading facility’’ to support 

two forms of trading that were abolished by the Dodd-Frank Act. 

There is no longer a need for this term in the CEA. 

Section 406—Elimination of obsolete reference to alternative swap 

execution facilities 

Initially, the Dodd-Frank Act referred to SEFs as ‘‘alternative 

swap execution facilities’’. ‘‘Alternative’’ was dropped in later 

versions of the legislation. 

Section 407—Elimination of redundant references to types of registered entities 

The reference to registered entities is sufficient. The deleted language is unnecessary. 


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Section 408—Clarification of Commission authority over swaps 

trading 

These amendments clarify the Commission’s authority under 

Section 8a over swaps trading. 

Section 409—Elimination of obsolete reference to the Commodity 

Exchange Commission 

This strikes an obsolete reference to the Commodity Exchange 

Commission. 

Section 410—Elimination of obsolete references to derivative transaction execution facilities 

Derivatives Transaction Execution Facility (DTEF) was a type of 

registered entity created by the CFMA in 2000. It was abolished 

by the Dodd-Frank Act in 2010. 

Section 411—Elimination of obsolete references to exempt boards of 

trade 

Exempt Boards of Trade (EBOTs) were abolished by the DoddFrank Act in 2010. 

Section 412—Elimination of report due in 1986 

Section 16a of the CEA requires the CFTC to submit a study to 

the Congressional Agriculture Committees on the function of the 

National Futures Association. This section would eliminate this 

language. 

Section 413—Compliance report flexibility 

The timing requirement under current Section 4s(k)(3)(B)(i) has 

proven to be unworkable. This amendment gives the Commission 

administrative flexibility over timing. 

Section 414—Miscellaneous corrections 

Section 414 is a collection of additional miscellaneous statutory 

corrections that fix drafting errors from prior legislation. 

COMMITTEE CONSIDERATION 

I. HEARINGS

The Committee on Agriculture and Subcommittee on Commodity 

Exchanges, Energy and Credit held four hearings during the 114th 

Congress in anticipation of legislation to reauthorize the Commodity Futures Trading Commission (CFTC). 

On March 12, 2015, the Full Committee on Agriculture held a 

hearing entitled, ‘‘To Review the 2015 Agenda for the Commodity 

Futures Trading Commission’’ where the Committee heard from 

CFTC Chairman Timothy Massad. 

On March 24, 2015, the Subcommittee head a hearing entitled, 

‘‘Reauthorizing the CFTC: End-User Views’’ where the following 

witnesses testified on matters included in H.R. 2289: 

• Mr. Douglas Christie, President, Cargill Cotton, Cordova, TN; 

on behalf of the Commodity Markets Council 

• Mr. Lael E. Campbell, Director Regulatory & Government Affairs, Constellation, an Exelon Company, Washington, D.C.; on behalf of the Edison Electric Institute 


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• Ms. Lisa A. Cavallari, Director, Fixed Income Derivatives, Russell Investments, Seattle, WA; on behalf of the American Benefits 

Council 

• Mr. Mark Maurer, Chief Executive Officer, INTL FCStone 

Markets, LLC, Chicago, IL 

• Mr. Howard Peterson, Jr., President & Owner, Peterson Oil 

Service, Worcester, MA; on behalf of the New England Fuel Institute 

On March 25, 2015, the Subcommittee on Commodity Exchanges, 

Energy, and Credit held a hearing entitled, ‘‘Reauthorizing the 

CFTC: Market Participant Views’’ where the following witnesses 

testified on matters included in H.R. 2289: 

• Mr. Terrence A. Duffy, Executive Chairman & President, CME 

Group, Chicago, IL 

• Mr. Benjamin Jackson, President and Chief Operating Officer, 

ICE Futures U.S., New York, NY 

• Mr. Daniel J. Roth, President and CEO, National Futures Association, Chicago, IL 

• Mr. Gerald F. Corcoran, Chairman of the Board & Chief Executive Officer, R.J. O’Brien & Associates, LLC, Chicago, IL; on behalf of the Futures Industry Association 

• Mr. Shawn Bernardo, Chief Executive Officer, tpSEF—Tullett 

Prebon, Jersey City, NJ; on behalf of the Wholesale Market Brokers Association, Americas 

On April 14, 2015, the Subcommittee on Commodity Exchanges, 

Energy, and Credit held a hearing entitled, ‘‘Reauthorizing the 

CFTC: Commissioners’ Perspectives’’ where the following witnesses 

testified on matters included in H.R. 2289: 

• The Honorable Sharon Y. Bowen, Commissioner, Commodity 

Futures Trading Commission, Washington, D.C. 

• The Honorable J. Christopher Giancarlo, Commissioner, Commodity Futures Trading Commission, Washington, D.C. 

• The Honorable Mark P. Wetjen, Commissioner, Commodity Futures Trading Commission, Washington, D.C. 

In addition to the Committee’s work in the 114th Congress outlined above, during the 113th Congress, the Committee held four 

hearings to gather input regarding the reauthorization of the CFTC 

from CFTC Commissioners, end-users, and a variety of market participants. The Committee also held a legislative hearing to examine 

seven legislative proposals to improve Title VII of the Dodd-Frank 

Act. Two of those measures were eventually signed into law and 

the remaining five were individually passed by the House with bipartisan support, and/or were included in H.R. 4413, the Customer 

Protection and End-User Relief Act, and ultimately in this legislation where noted under Purpose and Need. 

In the 112th Congress, the Committee also considered a variety 

of bills addressing concerns similar to those addressed in the Commodity End-User Relief Act of 2015. The Committee was the first 

to hear testimony from Jon Corzine following the collapse of MF 

Global, and later heard the views of foreign regulators regarding 

the cross-border application of U.S. swaps rules. The Committee 

held an additional 10 hearings regarding derivatives markets, endusers, and the implementation of Title VII of the Dodd-Frank Act. 


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II. FULL COMMITTEE

On May 14, 2015, the Committee on Agriculture met pursuant 

to notice, with a quorum present to consider H.R. 2289. Chairman 

Conaway made an opening statement as did Ranking Member 

Peterson, Subcommittee Chairman Austin Scott, and Subcommittee 

Ranking Member David Scott. 

Chairman Conaway placed H.R. 2289 before the Committee and, 

without objection a first reading of the bill was waived and it was 

open to amendment by title. 

Chairman Conaway recognized Mr. Peterson to offer and explain 

his amendment to strike most of the text of the base bill and substitute a version of the bill that included only certain sections of 

the base bill. Discussion occurred and by a voice vote, the amendment failed. 

Mr. Lucas offered an amendment to clarify when the CFTC can 

disclose proprietary information submitted to the Commission on 

forms CPO–PQR and Form CTA–PR. The amendment was adopted 

by voice vote. 

Ms. Delbene offered an amendment to clarify that the Commission’s assessment of costs and benefits regarding rules and orders 

will be affirmed by a court unless that assessment is found to be 

an abuse of discretion. The amendment was adopted by voice vote. 

Mr. Goodlatte offered an amendment that directs the CFTC to 

report to Congress within 90 days of enactment the status of ongoing review of Foreign Board of Trade applications and the status 

of the CFTC’s negotiations with foreign regulators regarding aluminum warehousing. The amendment also requires the CFTC to 

take final action on any such application by September 30, 2016. 

The amendment was adopted by a voice vote. 

Mr. Davis offered an amendment to address recent changes to 

CFTC Rule 4.5 and restore exclusive jurisdiction over those funds 

that invest only in financial derivatives to the U.S. Securities and 

Exchange Commission, while allowing the CFTC to continue to regulate funds that resemble or compete with traditional commodity 

pools. The amendment was adopted by a voice vote. 

Ms. Kuster offered an amendment to amend section 1 a(10) of 

the Commodity Exchange Act by removing commodity pool operator 

registration requirements for investment trusts, syndicates, or 

similar forms of enterprises that are already exempt from the definition of investment company in the Investment Company Act of 

1940. The amendment was adopted by a voice vote. 

Mr. Emmer offered an amendment to amend section 2(h)(7)(C) of 

the Commodity Exchange Act by clarifying that the CFTC’s decisions to exempt small banks and savings associations from classification as a financial entity will also be extended to similarly-sized 

holding companies of those associations. The amendment was 

adopted by a voice vote. 

Mr. Austin Scott offered an amendment to amend section 5h(f) 

of the Commodity Exchange Act to narrow a Swap Execution Facility’s (SEF) monitoring responsibility over ‘‘trading in swaps’’ to 

swaps trading ‘‘only on its own facility.’’ It also replaces the requirement that a SEF hold funds to cover its operating costs for 

one year with the requirement that it hold funds to conduct an orderly wind-down of operations. It further modifies the duties of a 


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SEF chief compliance officer and the procedures for SEF annual reports to the CFTC. The amendment was adopted by a voice vote. 

Mr. Lucas offered an amendment to clarify that for the purposes 

of any Federal Home Loan Bank, the Federal Housing Finance 

Agency is an ‘‘appropriate Federal banking agency.’’ The amendment was adopted by a voice vote. 

Mr. Bost offered an amendment to allow the CFTC to suspend 

a determination that a foreign jurisdiction’s swaps requirements 

are comparable to or as comprehensive as the U.S. swaps requirements when a foreign jurisdiction has not provided equivalent recognition or substituted compliance for registered entities domiciled 

in the United States. The amendment was adopted by a voice vote. 

There being no further amendments, Mr. David Scott moved that 

H.R. 2289, as amended, be adopted and reported favorably to the 

House with the recommendation that it do pass. By a voice vote, 

the bill was adopted. 

At the conclusion of the meeting, Chairman Conaway advised 

Members that pursuant to the rules of the House of Representatives Members had until May 18, 2015, to file any supplemental, 

minority, additional, or dissenting views with the Committee. 

Without objection, staff was given permission to make any necessary clerical, technical or conforming changes to reflect the intent 

of the Committee. Chairman Conaway thanked all the Members 

and adjourned the meeting. 

COMMITTEE VOTES

In compliance with clause 3(b) of rule XIII of the House of Representatives, H.R. 2289 was reported by voice vote with a majority 

quorum present. There was no request for a recorded vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of Rule XIII of the Rules of the House 

of Representatives, the Committee on Agriculture’s oversight findings and recommendations are reflected in the body of this report. 

BUDGET ACT COMPLIANCE (SECTIONS 308, 402, AND 423) 

The provisions of clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives and section 308(a)(1) of the Congressional 

Budget Act of 1974 (relating to estimates of new budget authority, 

new spending authority, new credit authority, or increased or decreased revenues or tax expenditures) are not considered applicable. The estimate and comparison required to be prepared by the 

Director of the Congressional Budget Office under clause 3(c)(3) of 

rule XIII of the Rules of the House of Representatives and sections 

402 and 423 of the Congressional Budget Act of 1974 submitted to 

the Committee prior to the filing of this report are as follows: 


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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, May 28, 2015. 

Hon. K. MICHAEL CONAWAY, 

Chairman, Committee on Agriculture, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2289, the Commodity 

End-User Relief Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

H.R. 2289—Commodity End-User Relief Act 

Summary: H.R. 2289 would authorize appropriations to operate 

the Commodity Futures Trading Commission (CFTC) through 2019 

and to make changes in some of the agency’s operating procedures. 

The bill also would amend the Commodity Exchange Act to provide 

greater protections for customer funds held by entities that broker 

transactions in commodity futures and to relax requirements on 

certain participants in swap transactions. (A swap is a contract 

that calls for an exchange of cash between two participants, based 

on an underlying rate or index or on the performance of an asset.) 

CBO estimates that implementing H.R. 2289 would cost $1.1 billion over the 2016–2020 period, assuming appropriation of the necessary amounts. CBO expects that enacting H.R. 2289 would affect 

direct spending; therefore, pay-as-you-go procedures apply. However, CBO estimates that those effects would not be significant. Enacting H.R. 2289 would not affect revenues. 

H.R. 2289 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 2289 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2016– 

2020 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

CFTC Reauthorization: 

Estimated Authorization Level ................................. 256 263 270 278 0 1,067 

Estimated Outlays ................................................... 228 263 264 272 25 1,052 

Other Provisions: 

Estimated Authorization Level ................................. 15 7 7 8 8 45 

Estimated Outlays ................................................... 13 8 7 7 8 44 

Total Changes: 

Estimated Authorization Level ........................ 271 270 277 286 8 1,112 

Estimated Outlays .......................................... 241 271 271 279 33 1,096 

Notes: Components may not sum to totals because of rounding. 

CFTC = Commodity Futures Trading Commission. 

Basis of estimate: For this estimate, CBO assumes that the bill 

will be enacted near the end of fiscal year 2015, the necessary 

amounts will be appropriated near the beginning of each fiscal 


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year, and outlays will follow spending patterns for similar activities 

at the CFTC. 

Spending subject to appropriation 

CFTC reauthorization: H.R. 2289 would authorize appropriations 

for CFTC operations through 2019; for 2015, the CFTC received an 

appropriation of $250 million. Based on the agency’s current budget 

and adjusting for anticipated inflation, CBO estimates that extending the authorization of appropriations for the current functions of 

the CFTC through 2019 would cost about $1.1 billion over the 

2015–2020 period, assuming those amounts are appropriated each 

year. 

Other provisions: H.R. 2289 also would direct the CFTC to: • Change certain procedures in its rulemaking process and 

to improve safeguards of market data in the agency’s control; • Report price and volume data for swap transactions when 

the volume of trading is at a level that individual market participants could be identified (known as ‘‘illiquid markets’’); and • Issue rules that define the application of United States 

regulations to swap transactions undertaken between a U.S. 

entity and a foreign entity. 

Based on information from the CFTC, CBO estimates that the 

agency would require 30 additional personnel annually to handle 

the increased workload under these provisions, an increase of about 

4 percent over the agency’s 2014 staffing level. We estimate that 

salaries, benefits, and overhead for those additional staff, as well 

as new administrative expenses, would cost $44 million over the 

2015–2020 period, assuming appropriation of the necessary 

amounts. 

Direct spending and revenues 

H.R. 2289 would affect federally owned utilities by changing the 

way CFTC regulates certain electric and natural gas utility contracts. CBO estimates that the net effect on direct spending as a 

result of those changes would not be significant over the 2015–2025 

period. Enacting H.R. 2289 would not affect revenues. 

Pay–As–You–Go considerations: The Statutory Pay-As-You-Go 

Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. Enacting 

H.R. 2289 would affect direct spending; however, CBO estimates 

that those effects would not be significant. 

Intergovernmental and private-sector impact: H.R. 2289 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would impose no costs on state, local, or tribal governments. 

Estimate prepared by: Federal Costs: Susan Willie; Impact on 

State, Local, and Tribal Governments: J’nell Blanco Suchy; Impact 

on the Private Sector: Logan Smith. 

Estimate approved by: Theresa Gullo, Assistant Director for 

Budget Analysis. 

PERFORMANCE GOALS AND OBJECTIVES

With respect to the requirement of clause 3(c)(4) of rule XIII of 

the Rules of the House of Representatives, the performance goals 

and objectives of this legislation are to reauthorize the Commodity 


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Futures Trading Commission, to better protect futures customers, 

to provide end users with market certainty, to make basic reforms 

to ensure transparency and accountability at the Commission, to 

help farmers, ranchers, and end users manage risks, to help keep 

consumer costs low, and for other purposes. 

COMMITTEE COST ESTIMATE

Pursuant to clause 3(d)(2) of rule XIII of the Rules of the House 

of Representatives, the Committee report incorporates the cost estimate prepared by the Director of the Congressional Budget Office 

pursuant to sections 402 and 423 of the Congressional Budget Act 

of 1974. 

ADVISORY COMMITTEE STATEMENT

No advisory committee within the meaning of section 5(b) of the 

Federal Advisory Committee Act was created by this legislation. 

APPLICABILITY TO THE LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act (Public Law 104–1). 

FEDERAL MANDATES STATEMENT

The Committee adopted as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act 

(Public Law 104–4). 

EARMARK STATEMENT REQUIRED BY CLAUSE 9 OF RULE XXI OF THE

RULES OF HOUSE OF REPRESENTATIVES

H.R. 2289 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9(e), 9(f), 

or 9(g) of rule XXI of the Rules of the House Representatives. 

DUPLICATION OF FEDERAL PROGRAMS

This bill does not establish or reauthorize a program of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from the Government Accountability Office to Congress pursuant to section 21 of 

Public Law 111–139, or a program related to a program identified 

in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULE MAKINGS

The Committee estimates that H.R. 2289 specifically directs 

CFTC to conduct one rule making proceedings within the meaning 

of 5 U.S.C. 551. 

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 omitVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00091 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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ted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

COMMODITY EXCHANGE ACT 

* * * * * * * 

SEC. 1a. DEFINITIONS. 

As used in this Act: 

(1) ALTERNATIVE TRADING SYSTEM.—The term ‘‘alternative 

trading system’’ means an organization, association, or group 

of persons that— 

(A) is registered as a broker or dealer pursuant to section 15(b) of the Securities Exchange Act of 1934 (except 

paragraph (11) thereof); 

(B) performs the functions commonly performed by an 

exchange (as defined in section 3(a)(1) of the Securities Exchange Act of 1934); 

(C) does not— 

(i) set rules governing the conduct of subscribers 

other than the conduct of such subscribers’ trading on 

the alternative trading system; or 

(ii) discipline subscribers other than by exclusion 

from trading; and 

(D) is exempt from the definition of the term ‘‘exchange’’ 

under such section 3(a)(1) by rule or regulation of the Securities and Exchange Commission on terms that require 

compliance with regulations of its trading functions. 

(2) APPROPRIATE FEDERAL BANKING AGENCY.—The term ‘‘appropriate Federal banking agency’’— 

(A) has the meaning given the term in section 3 of the 

Federal Deposit Insurance Act (12 U.S.C. 1813); 

(B) means the Board in the case of a noninsured State 

bank; øand¿ 

(C) is the Farm Credit Administration for farm credit 

system institutionsø.¿; and 

(D) is the Federal Housing Finance Agency for any Federal Home Loan Bank (as defined in section 2 of the Federal Home Loan Bank Act). 

(3) ASSOCIATED PERSON OF A SECURITY-BASED SWAP DEALER

OR MAJOR SECURITY-BASED SWAP PARTICIPANT.—The term ‘‘associated person of a security-based swap dealer or major security-based swap participant’’ has the meaning given the term 

in section 3(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)). 

(4) ASSOCIATED PERSON OF A SWAP DEALER OR MAJOR SWAP

PARTICIPANT.— 

(A) IN GENERAL.—The term ‘‘associated person of a swap 

dealer or major swap participant’’ means a person who is 

associated with a swap dealer or major swap participant 

as a partner, officer, employee, or agent (or any person occupying a similar status or performing similar functions), 

in any capacity that involves— 

(i) the solicitation or acceptance of swaps; or 


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(ii) the supervision of any person or persons so engaged. 

(B) EXCLUSION.—Other than for purposes of section 

4s(b)(6), the term ‘‘associated person of a swap dealer or 

major swap participant’’ does not include any person associated with a swap dealer or major swap participant the 

functions of which are solely clerical or ministerial. 

(5) BOARD.—The term ‘‘Board’’ means the Board of Governors 

of the Federal Reserve System. 

(6) BOARD OF TRADE.—The term ‘‘board of trade’’ means any 

organized exchange or other trading facility. 

(7) CLEARED SWAP.—The term ‘‘cleared swap’’ means any 

swap that is, directly or indirectly, submitted to and cleared by 

a derivatives clearing organization registered with the Commission. 

(8) COMMERCIAL MARKET PARTICIPANT.—The term ‘‘commercial market participant’’ means any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity. 

ø(8)¿ (9) COMMISSION.—The term ‘‘Commission’’ means the 

Commodity Futures Trading Commission established under 

section 2(a)(2). 

ø(9)¿ (10) COMMODITY.—The term ‘‘commodity’’ means 

wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, 

cottonseed oil, peanut oil, soybean oil, and all other fats and 

oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean 

meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as 

provided by the first section of Public Law 85–839 (7 U.S.C. 

13–1)) and motion picture box office receipts (or any index, 

measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or 

in the future dealt in. 

ø(10)¿ (11) COMMODITY POOL.— 

(A) IN GENERAL.—The term ‘‘commodity pool’’ means any 

investment trust, syndicate, or similar form of enterprise 

operated for the purpose of trading in commodity interests, 

including any— 

(i) commodity for future delivery, security futures 

product, or swap; 

(ii) agreement, contract, or transaction described in 

section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

(iii) commodity option authorized under section 4c; 

or 

(iv) leverage transaction authorized under section 

19. 

(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘commodity pool’’ any investment trust, syndicate, or similar form of enterprise if the Commission determines that 


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the rule or regulation will effectuate the purposes of this 

Act. 

(C) EXCLUSION.—The term ‘‘commodity pool’’ shall not include any investment trust, syndicate, or similar form of 

enterprise excluded from the definition of ‘‘investment company’’ pursuant to sections 3(c)(10) or 3(c)(14) of the Investment Company Act of 1940. 

ø(11)¿ (12) COMMODITY POOL OPERATOR.— (A) IN GENERAL.—The term ‘‘commodity pool operator’’ 

means any person— 

(i) engaged in a business that is of the nature of a 

commodity pool, investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, 

securities, or property, either directly or through capital contributions, the sale of stock or other forms of 

securities, or otherwise, for the purpose of trading in 

commodity interests, including any— 

(I) commodity for future delivery, security futures product, or swap; 

(II) agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 

2(c)(2)(D)(i); 

(III) commodity option authorized under section 

4c; or 

(IV) leverage transaction authorized under section 19; or 

(ii) who is registered with the Commission as a commodity pool operator. 

(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘commodity pool operator’’ any person engaged in a business that is of the nature of a commodity pool, investment 

trust, syndicate, or similar form of enterprise if the Commission determines that the rule or regulation will effectuate the purposes of this Act. 

(C)(i) The term ‘‘commodity pool operator’’ does not include a person who serves as an investment adviser to an 

investment company registered pursuant to section 8 of the 

Investment Company Act of 1940 or a subsidiary of such a 

company, if the investment company or subsidiary invests, 

reinvests, owns, holds, or trades in commodity interests 

limited to only financial commodity interests. 

(ii) For purposes of this subparagraph only, the term ‘‘financial commodity interest’’ means a futures contract, an 

option on a futures contract, or a swap, involving a commodity that is not an exempt commodity or an agricultural 

commodity, including any index of financial commodity interests, whether cash settled or involving physical delivery. 

(iii) For purposes of this subparagraph only, the term 

‘‘commodity’’ does not include a security issued by a real estate investment trust, business development company, or 

issuer of asset-backed securities, including any index of 

such securities. 

ø(12)¿ (13) COMMODITY TRADING ADVISOR.— 


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(A) IN GENERAL.—Except as otherwise provided in this 

paragraph, the term ‘‘commodity trading advisor’’ means 

any person who— 

(i) for compensation or profit, engages in the business of advising others, either directly or through publications, writings, or electronic media, as to the value 

of or the advisability of trading in— 

(I) any contract of sale of a commodity for future 

delivery, security futures product, or swap; 

(II) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 

2(c)(2)(D)(i); 

(III) any commodity option authorized under 

section 4c; or 

(IV) any leverage transaction authorized under 

section 19; 

(ii) for compensation or profit, and as part of a regular business, issues or promulgates analyses or reports concerning any of the activities referred to in 

clause (i); 

(iii) is registered with the Commission as a commodity trading advisor; or 

(iv) the Commission, by rule or regulation, may include if the Commission determines that the rule or 

regulation will effectuate the purposes of this Act. 

(B) EXCLUSIONS.—Subject to subparagraph (C), the term 

‘‘commodity trading advisor’’ does not include— 

(i) any bank or trust company or any person acting 

as an employee thereof; 

(ii) any news reporter, news columnist, or news editor of the print or electronic media, or any lawyer, accountant, or teacher; 

(iii) any floor broker or futures commission merchant; 

(iv) the publisher or producer of any print or electronic data of general and regular dissemination, including its employees; 

(v) the fiduciary of any defined benefit plan that is 

subject to the Employee Retirement Income Security 

Act of 1974 (29 U.S.C. 1001 et seq.); 

(vi) any contract market or øderivatives transaction 

execution facility¿ swap execution facility; and 

(vii) such other persons not within the intent of this 

paragraph as the Commission may specify by rule, 

regulation, or order. 

(C) INCIDENTAL SERVICES.—Subparagraph (B) shall 

apply only if the furnishing of such services by persons referred to in subparagraph (B) is solely incidental to the 

conduct of their business or profession. 

(D) ADVISORS.—The Commission, by rule or regulation, 

may include within the term ‘‘commodity trading advisor’’, 

any person advising as to the value of commodities or 

issuing reports or analyses concerning commodities if the 

Commission determines that the rule or regulation will effectuate the purposes of this paragraph. 


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(E) The term ‘‘commodity trading advisor’’ does not include a person who serves as an investment adviser to an 

investment company registered pursuant to section 8 of the 

Investment Company Act of 1940 or a subsidiary of such a 

company, if the commodity trading advice relates only to a 

financial commodity interest, as defined in paragraph 

(11)(C)(ii) of this section. For purposes of this subparagraph only, the term ‘‘commodity’’ does not include a security issued by a real estate investment trust, business development company, or issuer of asset-backed securities, including any index of such securities. 

ø(13)¿ (14) CONTRACT OF SALE.—The term ‘‘contract of sale’’ 

includes sales, agreements of sale, and agreements to sell. 

ø(14)¿ (15) COOPERATIVE ASSOCIATION OF PRODUCERS.—The 

term ‘‘cooperative association of producers’’ means any cooperative association, corporate, or otherwise, not less than 75 percent in good faith owned or controlled, directly or indirectly, by 

producers of agricultural products and otherwise complying 

with the Act of February 18, 1922 (42 Stat. 388, chapter 57; 

7 U.S.C. 291 and 292), including any organization acting for a 

group of such associations and owned or controlled by such associations, except that business done for or with the United 

States, or any agency thereof, shall not be considered either 

member or nonmember business in determining the compliance 

of any such association with this Act. 

ø(15)¿ (16) DERIVATIVES CLEARING ORGANIZATION.— 

(A) IN GENERAL.—The term ‘‘derivatives clearing organization’’ means a clearinghouse, clearing association, clearing corporation, or similar entity, facility, system, or organization that, with respect to an agreement, contract, or 

transaction— 

(i) enables each party to the agreement, contract, or 

transaction to substitute, through novation or otherwise, the credit of the derivatives clearing organization for the credit of the parties; 

(ii) arranges or provides, on a multilateral basis, for 

the settlement or netting of obligations resulting from 

such agreements, contracts, or transactions executed 

by participants in the derivatives clearing organization; or 

(iii) otherwise provides clearing services or arrangements that mutualize or transfer among participants 

in the derivatives clearing organization the credit risk 

arising from such agreements, contracts, or transactions executed by the participants. 

(B) EXCLUSIONS.—The term ‘‘derivatives clearing organization’’ does not include an entity, facility, system, or organization solely because it arranges or provides for— 

(i) settlement, netting, or novation of obligations resulting from agreements, contracts, or transactions, on 

a bilateral basis and without a central counterparty; 

(ii) settlement or netting of cash payments through 

an interbank payment system; or 


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(iii) settlement, netting, or novation of obligations 

resulting from a sale of a commodity in a transaction 

in the spot market for the commodity. 

ø(16)¿ (17) ELECTRONIC TRADING FACILITY.—The term ‘‘electronic trading facility’’ means a trading facility that— 

(A) operates by means of an electronic or telecommunications network; and 

(B) maintains an automated audit trail of bids, offers, 

and the matching of orders or the execution of transactions 

on the facility. 

ø(17)¿ (18) ELIGIBLE COMMERCIAL ENTITY.—The term ‘‘eligible commercial entity’’ means, with respect to an agreement, 

contract or transaction in a commodity— 

(A) an eligible contract participant described in clause 

(i), (ii), (v), (vii), (viii), or (ix) of paragraph ø(18)(A)¿ (19)(A) 

that, in connection with its business— 

(i) has a demonstrable ability, directly or through 

separate contractual arrangements, to make or take 

delivery of the underlying commodity; 

(ii) incurs risks, in addition to price risk, related to 

the commodity; or 

(iii) is a dealer that regularly provides risk management or hedging services to, or engages in marketmaking activities with, the foregoing entities involving 

transactions to purchase or sell the commodity or derivative agreements, contracts, or transactions in the 

commodity; 

(B) an eligible contract participant, other than a natural 

person or an instrumentality, department, or agency of a 

State or local governmental entity, that— 

(i) regularly enters into transactions to purchase or 

sell the commodity or derivative agreements, contracts, or transactions in the commodity; and 

(ii) either— 

(I) in the case of a collective investment vehicle 

whose participants include persons other than— 

(aa) qualified eligible persons, as defined in 

Commission rule 4.7(a) (17 CFR 4.7(a)); 

(bb) accredited investors, as defined in Regulation D of the Securities and Exchange 

Commission under the Securities Act of 1933 

(17 CFR 230.501(a)), with total assets of 

$2,000,000; or 

(cc) qualified purchasers, as defined in section 2(a)(51)(A) of the Investment Company 

Act of 1940; 

in each case as in effect on the date of the enactment of the Commodity Futures Modernization 

Act of 2000, has, or is one of a group of vehicles 

under common control or management having in 

the aggregate, $1,000,000,000 in total assets; or 

(II) in the case of other persons, has, or is one 

of a group of persons under common control or 

management having in the aggregate, 

$100,000,000 in total assets; or 


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(C) such other persons as the Commission shall determine appropriate and shall designate by rule, regulation, 

or order. 

ø(18)¿ (19) ELIGIBLE CONTRACT PARTICIPANT.—The term ‘‘eligible contract participant’’ means— 

(A) acting for its own account— 

(i) a financial institution; 

(ii) an insurance company that is regulated by a 

State, or that is regulated by a foreign government 

and is subject to comparable regulation as determined 

by the Commission, including a regulated subsidiary 

or affiliate of such an insurance company; 

(iii) an investment company subject to regulation 

under the Investment Company Act of 1940 (15 U.S.C. 

80a–1 et seq.) or a foreign person performing a similar 

role or function subject as such to foreign regulation 

(regardless of whether each investor in the investment 

company or the foreign person is itself an eligible contract participant); 

(iv) a commodity pool that— 

(I) has total assets exceeding $5,000,000; and 

(II) is formed and operated by a person subject 

to regulation under this Act or a foreign person 

performing a similar role or function subject as 

such to foreign regulation (regardless of whether 

each investor in the commodity pool or the foreign 

person is itself an eligible contract participant) 

provided, however, that for purposes of section 

2(c)(2)(B)(vi) and section 2(c)(2)(C)(vii), the term 

‘‘eligible contract participant’’ shall not include a 

commodity pool in which any participant is not 

otherwise an eligible contract participant; 

(v) a corporation, partnership, proprietorship, organization, trust, or other entity— 

(I) that has total assets exceeding $10,000,000; 

(II) the obligations of which under an agreement, contract, or transaction are guaranteed or 

otherwise supported by a letter of credit or 

keepwell, support, or other agreement by an entity described in subclause (I), in clause (i), (ii), (iii), 

(iv), or (vii), or in subparagraph (C); or 

(III) that— 

(aa) has a net worth exceeding $1,000,000; 

and 

(bb) enters into an agreement, contract, or 

transaction in connection with the conduct of 

the entity’s business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred by the entity in the conduct of the entity’s business; 

(vi) an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1001 et seq.), a governmental employee benefit 


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plan, or a foreign person performing a similar role or 

function subject as such to foreign regulation— (I) that has total assets exceeding $5,000,000; or 

(II) the investment decisions of which are made 

by— 

(aa) an investment adviser or commodity 

trading advisor subject to regulation under 

the Investment Advisers Act of 1940 (15 

U.S.C. 80b–1 et seq.) or this Act; 

(bb) a foreign person performing a similar 

role or function subject as such to foreign regulation; 

(cc) a financial institution; or 

(dd) an insurance company described in 

clause (ii), or a regulated subsidiary or affiliate of such an insurance company; 

(vii)(I) a governmental entity (including the United 

States, a State, or a foreign government) or political 

subdivision of a governmental entity; 

(II) a multinational or supranational government entity; or 

(III) an instrumentality, agency, or department of 

an entity described in subclause (I) or (II); 

except that such term does not include an entity, instrumentality, agency, or department referred to in 

subclause (I) or (III) of this clause unless (aa) the entity, instrumentality, agency, or department is a person 

described in clause (i), (ii), or (iii) of paragraph 

ø(17)(A)¿ (18)(A); (bb) the entity, instrumentality, 

agency, or department owns and invests on a discretionary basis $50,000,000 or more in investments; or 

(cc) the agreement, contract, or transaction is offered 

by, and entered into with, an entity that is listed in 

any of subclauses (I) through (VI) of section 

2(c)(2)(B)(ii); 

(viii)(I) a broker or dealer subject to regulation 

under the Securities Exchange Act of 1934 (15 U.S.C. 

78a et seq.) or a foreign person performing a similar 

role or function subject as such to foreign regulation, 

except that, if the broker or dealer or foreign person 

is a natural person or proprietorship, the broker or 

dealer or foreign person shall not be considered to be 

an eligible contract participant unless the broker or 

dealer or foreign person also meets the requirements 

of clause (v) or (xi); 

(II) an associated person of a registered broker or 

dealer concerning the financial or securities activities 

of which the registered person makes and keeps 

records under section 15C(b) or 17(h) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78o–5(b), 78q(h)); 

(III) an investment bank holding company (as defined in section 17(i) of the Securities Exchange Act of 

1934 (15 U.S.C. 78q(i)); 

(ix) a futures commission merchant subject to regulation under this Act or a foreign person performing a 


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similar role or function subject as such to foreign regulation, except that, if the futures commission merchant 

or foreign person is a natural person or proprietorship, 

the futures commission merchant or foreign person 

shall not be considered to be an eligible contract participant unless the futures commission merchant or 

foreign person also meets the requirements of clause 

(v) or (xi); 

(x) a floor broker or floor trader subject to regulation 

under this Act in connection with any transaction that 

takes place on or through the facilities of a registered 

entity ø(other than an electronic trading facility with 

respect to a significant price discovery contract) or an 

exempt board of trade¿, or any affiliate thereof, on 

which such person regularly trades; or 

(xi) an individual who has amounts invested on a 

discretionary basis, the aggregate of which is in excess 

of— 

(I) $10,000,000; or 

(II) $5,000,000 and who enters into the agreement, contract, or transaction in order to manage 

the risk associated with an asset owned or liability incurred, or reasonably likely to be owned or 

incurred, by the individual; 

(B)(i) a person described in clause (i), (ii), (iv), (v), (viii), 

(ix), or (x) of subparagraph (A) or in subparagraph (C), acting as broker or performing an equivalent agency function 

on behalf of another person described in subparagraph (A) 

or (C); or 

(ii) an investment adviser subject to regulation under 

the Investment Advisers Act of 1940, a commodity trading 

advisor subject to regulation under this Act, a foreign person performing a similar role or function subject as such 

to foreign regulation, or a person described in clause (i), 

(ii), (iv), (v), (viii), (ix), or (x) of subparagraph (A) or in subparagraph (C), in any such case acting as investment manager or fiduciary (but excluding a person acting as broker 

or performing an equivalent agency function) for another 

person described in subparagraph (A) or (C) and who is authorized by such person to commit such person to the 

transaction; or 

(C) any other person that the Commission determines to 

be eligible in light of the financial or other qualifications 

of the person. 

ø(19)¿ (20) EXCLUDED COMMODITY.—The term ‘‘excluded commodity’’ means— 

(i) an interest rate, exchange rate, currency, security, security index, credit risk or measure, debt or equity instrument, index or measure of inflation, or 

other macroeconomic index or measure; 

(ii) any other rate, differential, index, or measure of 

economic or commercial risk, return, or value that is— 

(I) not based in substantial part on the value of 

a narrow group of commodities not described in 

clause (i); or 


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(II) based solely on one or more commodities 

that have no cash market; 

(iii) any economic or commercial index based on 

prices, rates, values, or levels that are not within the 

control of any party to the relevant contract, agreement, or transaction; or 

(iv) an occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, 

or level of a commodity not described in clause (i)) that 

is— 

(I) beyond the control of the parties to the relevant contract, agreement, or transaction; and 

(II) associated with a financial, commercial, or 

economic consequence. 

ø(20)¿ (21) EXEMPT COMMODITY.—The term ‘‘exempt commodity’’ means a commodity that is not an excluded commodity 

or an agricultural commodity. 

ø(21)¿ (22) FINANCIAL INSTITUTION.—The term ‘‘financial institution’’ means— 

(A) a corporation operating under the fifth undesignated 

paragraph of section 25 of the Federal Reserve Act (12 

U.S.C. 603), commonly known as ‘‘an agreement corporation’’; 

(B) a corporation organized under section 25A of the 

Federal Reserve Act (12 U.S.C. 611 et seq.), commonly 

known as an ‘‘Edge Act corporation’’; 

(C) an institution that is regulated by the Farm Credit 

Administration; 

(D) a Federal credit union or State credit union (as defined in section 101 of the Federal Credit Union Act (12 

U.S.C. 1752)); 

(E) a depository institution (as defined in section 3 of the 

Federal Deposit Insurance Act (12 U.S.C. 1813)); 

(F) a foreign bank or a branch or agency of a foreign 

bank (each as defined in section 1(b) of the International 

Banking Act of 1978 (12 U.S.C. 3101(b))); 

(G) any financial holding company (as defined in section 

2 of the Bank Holding Company Act of 1956); 

(H) a trust company; or 

(I) a similarly regulated subsidiary or affiliate of an entity described in any of subparagraphs (A) through (H). 

ø(22)¿ (23) FLOOR BROKER.— 

(A) IN GENERAL.—The term ‘‘floor broker’’ means any 

person— 

(i) who, in or surrounding any pit, ring, post, or 

other place provided by a contract market for the 

meeting of persons similarly engaged, shall purchase 

or sell for any other person— 

(I) any commodity for future delivery, security 

futures product, or swap; or 

(II) any commodity option authorized under section 4c; or 

(ii) who is registered with the Commission as a floor 

broker. 


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(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘floor broker’’ any person in or surrounding any pit, ring, 

post, or other place provided by a contract market for the 

meeting of persons similarly engaged who trades for any 

other person if the Commission determines that the rule 

or regulation will effectuate the purposes of this Act. 

ø(23)¿ (24) FLOOR TRADER.— (A) IN GENERAL.—The term ‘‘floor trader’’ means any 

person— 

(i) who, in or surrounding any pit, ring, post, or 

other place provided by a contract market for the 

meeting of persons similarly engaged, purchases, or 

sells solely for such person’s own account— 

(I) any commodity for future delivery, security 

futures product, or swap; or 

(II) any commodity option authorized under section 4c; or 

(ii) who is registered with the Commission as a floor 

trader. 

(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘floor trader’’ any person in or surrounding any pit, ring, 

post, or other place provided by a contract market for the 

meeting of persons similarly engaged who trades solely for 

such person’s own account if the Commission determines 

that the rule or regulation will effectuate the purposes of 

this Act. 

ø(24)¿ (25) FOREIGN EXCHANGE FORWARD.—The term ‘‘foreign 

exchange forward’’ means a transaction that solely involves the 

exchange of 2 different currencies on a specific future date at 

a fixed rate agreed upon on the inception of the contract covering the exchange. 

ø(25)¿ (26) FOREIGN EXCHANGE SWAP.—The term ‘‘foreign exchange swap’’ means a transaction that solely involves— 

(A) an exchange of 2 different currencies on a specific 

date at a fixed rate that is agreed upon on the inception 

of the contract covering the exchange; and 

(B) a reverse exchange of the 2 currencies described in 

subparagraph (A) at a later date and at a fixed rate that 

is agreed upon on the inception of the contract covering 

the exchange. 

ø(26)¿ (27) FOREIGN FUTURES AUTHORITY.—The term ‘‘foreign 

futures authority’’ means any foreign government, or any department, agency, governmental body, or regulatory organization empowered by a foreign government to administer or enforce a law, rule, or regulation as it relates to a futures or options matter, or any department or agency of a political subdivision of a foreign government empowered to administer or 

enforce a law, rule, or regulation as it relates to a futures or 

options matter. 

ø(27)¿ (28) FUTURE DELIVERY.—The term ‘‘future delivery’’ 

does not include any sale of any cash commodity for deferred 

shipment or delivery. 

ø(28)¿ (29) FUTURES COMMISSION MERCHANT.— 


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(A) IN GENERAL.—The term ‘‘futures commission merchant’’ means an individual, association, partnership, corporation, or trust— 

(i) that— 

(I) is— 

(aa) engaged in soliciting or in accepting orders for— 

(AA) the purchase or sale of a commodity for future delivery; 

(BB) a security futures product; 

(CC) a swap; 

(DD) any agreement, contract, or transaction described in section 2(c)(2)(C)(i) or 

section 2(c)(2)(D)(i); 

(EE) any commodity option authorized 

under section 4c; or 

(FF) any leverage transaction authorized under section 19; or 

(bb) acting as a counterparty in any agreement, contract, or transaction described in 

section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); and 

(II) in or in connection with the activities described in items (aa) or (bb) of subclause (I), accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, 

or secure any trades or contracts that result or 

may result therefrom; or 

(ii) that is registered with the Commission as a futures commission merchant. 

(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘futures commission merchant’’ any person who engages in 

soliciting or accepting orders for, or acting as a 

counterparty in, any agreement, contract, or transaction 

subject to this Act, and who accepts any money, securities, 

or property (or extends credit in lieu thereof) to margin, 

guarantee, or secure any trades or contracts that result or 

may result therefrom, if the Commission determines that 

the rule or regulation will effectuate the purposes of this 

Act. 

ø(29)¿ (30) HYBRID INSTRUMENT.—The term ‘‘hybrid instrument’’ means a security having one or more payments indexed 

to the value, level, or rate of, or providing for the delivery of, 

one or more commodities. 

ø(30)¿ (31) INTERSTATE COMMERCE.—The term ‘‘interstate 

commerce’’ means commerce— 

(A) between any State, territory, or possession, or the 

District of Columbia, and any place outside thereof; or 

(B) between points within the same State, territory, or 

possession, or the District of Columbia, but through any 

place outside thereof, or within any territory or possession, 

or the District of Columbia. 

ø(31)¿ (32) INTRODUCING BROKER.— 

(A) IN GENERAL.—The term ‘‘introducing broker’’ means 

any person (except an individual who elects to be and is 


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registered as an associated person of a futures commission 

merchant)— 

(i) who— 

(I) is engaged in soliciting or in accepting orders 

for— 

(aa) the purchase or sale of any commodity 

for future delivery, security futures product, 

or swap; 

(bb) any agreement, contract, or transaction 

described in section 2(c)(2)(C)(i) or section 

2(c)(2)(D)(i); 

(cc) any commodity option authorized under 

section 4c; or 

(dd) any leverage transaction authorized 

under section 19; and 

(II) does not accept any money, securities, or 

property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts 

that result or may result therefrom; or 

(ii) who is registered with the Commission as an introducing broker. 

(B) FURTHER DEFINITION.—The Commission, by rule or 

regulation, may include within, or exclude from, the term 

‘‘introducing broker’’ any person who engages in soliciting 

or accepting orders for any agreement, contract, or transaction subject to this Act, and who does not accept any 

money, securities, or property (or extend credit in lieu 

thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom, if the Commission determines that the rule or regulation will effectuate 

the purposes of this Act. 

ø(32)¿ (33) MAJOR SECURITY-BASED SWAP PARTICIPANT.—The 

term ‘‘major security-based swap participant’’ has the meaning 

given the term in section 3(a) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)). 

ø(33)¿ (34) MAJOR SWAP PARTICIPANT.— 

(A) IN GENERAL.—The term ‘‘major swap participant’’ 

means any person who is not a swap dealer, and— 

(i) maintains a substantial position in swaps for any 

of the major swap categories as determined by the 

Commission, excluding— 

(I) positions held for hedging or mitigating commercial risk; and 

(II) positions maintained by any employee benefit plan (or any contract held by such a plan) as 

defined in paragraphs (3) and (32) of section 3 of 

the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002) for the primary purpose of 

hedging or mitigating any risk directly associated 

with the operation of the plan; 

(ii) whose outstanding swaps create substantial 

counterparty exposure that could have serious adverse 

effects on the financial stability of the United States 

banking system or financial markets; or 


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(iii)(I) is a financial entity that is highly leveraged 

relative to the amount of capital it holds and that is 

not subject to capital requirements established by an 

appropriate Federal banking agency; and 

(II) maintains a substantial position in outstanding 

swaps in any major swap category as determined by 

the Commission. 

(B) DEFINITION OF SUBSTANTIAL POSITION.—For purposes 

of subparagraph (A), the Commission shall define by rule 

or regulation the term ‘‘substantial position’’ at the threshold that the Commission determines to be prudent for the 

effective monitoring, management, and oversight of entities that are systemically important or can significantly 

impact the financial system of the United States. In setting the definition under this subparagraph, the Commission shall consider the person’s relative position in 

uncleared as opposed to cleared swaps and may take into 

consideration the value and quality of collateral held 

against counterparty exposures. 

(C) SCOPE OF DESIGNATION.—For purposes of subparagraph (A), a person may be designated as a major swap 

participant for 1 or more categories of swaps without being 

classified as a major swap participant for all classes of 

swaps. 

(D) EXCLUSIONS.—The definition under this paragraph 

shall not include an entity whose primary business is providing financing, and uses derivatives for the purpose of 

hedging underlying commercial risks related to interest 

rate and foreign currency exposures, 90 percent or more of 

which arise from financing that facilitates the purchase or 

lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of 

the parent company. 

ø(34)¿ (35) MEMBER OF A REGISTERED ENTITY; MEMBER OF A

DERIVATIVES TRANSACTION EXECUTION FACILITY.—The term 

‘‘member’’ means, with respect to a registered entity øor derivatives transaction execution facility¿, an individual, association, partnership, corporation, or trust— 

(A) owning or holding membership in, or admitted to 

membership representation on, the registered entity øor 

derivatives transaction execution facility¿; or 

(B) having trading privileges on the registered entity øor 

derivatives transaction execution facility¿. 

A participant in an alternative trading system that is designated as a contract market pursuant to section 5f is deemed 

a member of the contract market for purposes of transactions 

in security futures products through the contract market. 

ø(35)¿ (36) NARROW-BASED SECURITY INDEX.— 

(A) The term ‘‘narrow-based security index’’ means an 

index— 

(i) that has 9 or fewer component securities; 

(ii) in which a component security comprises more 

than 30 percent of the index’s weighting; 


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(iii) in which the five highest weighted component 

securities in the aggregate comprise more than 60 percent of the index’s weighting; or 

(iv) in which the lowest weighted component securities comprising, in the aggregate, 25 percent of the 

index’s weighting have an aggregate dollar value of 

average daily trading volume of less than $50,000,000 

(or in the case of an index with 15 or more component 

securities, $30,000,000), except that if there are two or 

more securities with equal weighting that could be included in the calculation of the lowest weighted component securities comprising, in the aggregate, 25 percent of the index’s weighting, such securities shall be 

ranked from lowest to highest dollar value of average 

daily trading volume and shall be included in the calculation based on their ranking starting with the lowest ranked security. 

(B) Notwithstanding subparagraph (A), an index is not 

a narrow-based security index if— 

(i)(I) it has at least 9 component securities; 

(II) no component security comprises more than 30 

percent of the index’s weighting; and 

(III) each component security is— 

(aa) registered pursuant to section 12 of the Securities Exchange Act of 1934; 

(bb) one of 750 securities with the largest market capitalization; and 

(cc) one of 675 securities with the largest dollar 

value of average daily trading volume; 

(ii) a board of trade was designated as a contract 

market by the Commodity Futures Trading Commission with respect to a contract of sale for future delivery on the index, before the date of the enactment of 

the Commodity Futures Modernization Act of 2000; 

(iii)(I) a contract of sale for future delivery on the 

index traded on a designated contract market øor registered derivatives transaction execution facility¿ for 

at least 30 days as a contract of sale for future delivery on an index that was not a narrow-based security 

index; and 

(II) it has been a narrow-based security index for no 

more than 45 business days over 3 consecutive calendar months; 

(iv) a contract of sale for future delivery on the 

index is traded on or subject to the rules of a foreign 

board of trade and meets such requirements as are 

jointly established by rule or regulation by the Commission and the Securities and Exchange Commission; 

(v) no more than 18 months have passed since the 

date of the enactment of the Commodity Futures Modernization Act of 2000 and— 

(I) it is traded on or subject to the rules of a foreign board of trade; 

(II) the offer and sale in the United States of a 

contract of sale for future delivery on the index 


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was authorized before the date of the enactment 

of the Commodity Futures Modernization Act of 

2000; and 

(III) the conditions of such authorization continue to be met; or 

(vi) a contract of sale for future delivery on the 

index is traded on or subject to the rules of a board 

of trade and meets such requirements as are jointly 

established by rule, regulation, or order by the Commission and the Securities and Exchange Commission. 

(C) Within 1 year after the date of the enactment of the 

Commodity Futures Modernization Act of 2000, the Commission and the Securities and Exchange Commission 

jointly shall adopt rules or regulations that set forth the 

requirements under subparagraph (B)(iv). 

(D) An index that is a narrow-based security index solely 

because it was a narrow-based security index for more 

than 45 business days over 3 consecutive calendar months 

pursuant to clause (iii) of subparagraph (B) shall not be a 

narrow-based security index for the 3 following calendar 

months. 

(E) For purposes of subparagraphs (A) and (B)— 

(i) the dollar value of average daily trading volume 

and the market capitalization shall be calculated as of 

the preceding 6 full calendar months; and 

(ii) the Commission and the Securities and Exchange Commission shall, by rule or regulation, jointly 

specify the method to be used to determine market 

capitalization and dollar value of average daily trading 

volume. 

ø(36)¿ (37) OPTION.—The term ‘‘option’’ means an agreement, 

contract, or transaction that is of the character of, or is commonly known to the trade as, an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’. 

ø(37)¿ (38) ORGANIZED EXCHANGE.—The term ‘‘organized exchange’’ means a trading facility that— 

(A) permits trading— 

(i) by or on behalf of a person that is not an eligible 

contract participant; or 

(ii) by persons other than on a principal-to-principal 

basis; or 

(B) has adopted (directly or through another nongovernmental entity) rules that— 

(i) govern the conduct of participants, other than 

rules that govern the submission of orders or execution of transactions on the trading facility; and 

(ii) include disciplinary sanctions other than the exclusion of participants from trading. 

ø(38)¿ (39) PERSON.—The term ‘‘person’’ imports the plural 

or singular, and includes individuals, associations, partnerships, corporations, and trusts. 

ø(39)¿ (40) PRUDENTIAL REGULATOR.—The term ‘‘prudential 

regulator’’ means— 


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(A) the Board in the case of a swap dealer, major swap 

participant, security-based swap dealer, or major securitybased swap participant that is— 

(i) a State-chartered bank that is a member of the 

Federal Reserve System; 

(ii) a State-chartered branch or agency of a foreign 

bank; 

(iii) any foreign bank which does not operate an insured branch; 

(iv) any organization operating under section 25A of 

the Federal Reserve Act or having an agreement with 

the Board under section 225 of the Federal Reserve 

Act; 

(v) any bank holding company (as defined in section 

2 of the Bank Holding Company Act of 1965 (12 U.S.C. 

1841)), any foreign bank (as defined in section 1(b)(7) 

of the International Banking Act of 1978 (12 U.S.C. 

3101(b)(7)) that is treated as a bank holding company 

under section 8(a) of the International Banking Act of 

1978 (12 U.S.C. 3106(a)), and any subsidiary of such 

a company or foreign bank (other than a subsidiary 

that is described in subparagraph (A) or (B) or that is 

required to be registered with the Commission as a 

swap dealer or major swap participant under this Act 

or with the Securities and Exchange Commission as a 

security-based swap dealer or major security-based 

swap participant); 

(vi) after the transfer date (as defined in section 311 

of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act), any savings and loan holding company 

(as defined in section 10 of the Home Owners’ Loan 

Act (12 U.S.C. 1467a)) and any subsidiary of such 

company (other than a subsidiary that is described in 

subparagraph (A) or (B) or that is required to be registered as a swap dealer or major swap participant 

with the Commission under this Act or with the Securities and Exchange Commission as a security-based 

swap dealer or major security-based swap participant); 

or 

(vii) any organization operating under section 25A of 

the Federal Reserve Act (12U.S.C. 611 et seq.) or having an agreement with the Board under section 25 of 

the Federal Reserve Act (12 U.S.C. 601 et seq.); 

(B) the Office of the Comptroller of the Currency in the 

case of a swap dealer, major swap participant, securitybased swap dealer, or major security-based swap participant that is— 

(i) a national bank; 

(ii) a federally chartered branch or agency of a foreign bank; or 

(iii) any Federal savings association; 

(C) the Federal Deposit Insurance Corporation in the 

case of a swap dealer, major swap participant, securitybased swap dealer, or major security-based swap participant that is— 


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(i) a State-chartered bank that is not a member of 

the Federal Reserve System; or 

(ii) any State savings association; 

(D) the Farm Credit Administration, in the case of a 

swap dealer, major swap participant, security-based swap 

dealer, or major security-based swap participant that is an 

institution chartered under the Farm Credit Act of 1971 

(12 U.S.C. 2001 et seq.); and 

(E) the Federal Housing Finance Agency in the case of 

a swap dealer, major swap participant, security-based 

swap dealer, or major security-based swap participant that 

is a regulated entity (as such term is defined in section 

1303 of the Federal Housing Enterprises Financial Safety 

and Soundness Act of 1992). 

ø(40)¿ (41) REGISTERED ENTITY.—The term ‘‘registered entity’’ means— 

(A) a board of trade designated as a contract market 

under section 5; 

(B) a derivatives clearing organization registered under 

section 5b; 

(C) a board of trade designated as a contract market 

under section 5f; 

(D) a swap execution facility registered under section 5h; 

and 

(E) a swap data repository registered under section 21ø; 

and¿. 

ø(F) with respect to a contract that the Commission determines is a significant price discovery contract, any electronic trading facility on which the contract is executed or 

traded.¿ 

ø(41)¿ (42) SECURITY.—The term ‘‘security’’ means a security 

as defined in section 2(a)(1) of the Securities Act of 1933 (15 

U.S.C. 77b(a)(1)) or section 3(a)(10) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(10)). 

ø(42)¿ (43) SECURITY-BASED SWAP.—The term ‘‘security-based 

swap’’ has the meaning given the term in section 3(a) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

ø(43)¿ (44) SECURITY-BASED SWAP DEALER.—The term ‘‘security-based swap dealer’’ has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 

78c(a)). 

ø(44)¿ (45) SECURITY FUTURE.—The term ‘‘security future’’ 

means a contract of sale for future delivery of a single security 

or of a narrow-based security index, including any interest 

therein or based on the value thereof, except an exempted security under section 3(a)(12) of the Securities Exchange Act of 

1934 as in effect on the date of the enactment of the Futures 

Trading Act of 1982 (other than any municipal security as defined in section 3(a)(29) of the Securities Exchange Act of 1934 

as in effect on the date of the enactment of the Futures Trading Act of 1982). The term ‘‘security future’’ does not include 

any agreement, contract, or transaction excluded from this Act 

under section 2(c), 2(d), 2(f), or 2(g) of this Act (as in effect on 

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ernization Act of 2000) or title IV of the Commodity Futures 

Modernization Act of 2000. 

ø(45)¿ (46) SECURITY FUTURES PRODUCT.—The term ‘‘security 

futures product’’ means a security future or any put, call, 

straddle, option, or privilege on any security future. 

ø(46)¿ (47) SIGNIFICANT PRICE DISCOVERY CONTRACT.—The 

term ‘‘significant price discovery contract’’ means an agreement, contract, or transaction subject to section 2(h)(5). 

ø(47)¿ (48) SWAP.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), the term ‘‘swap’’ means any agreement, contract, or 

transaction— 

(i) that is a put, call, cap, floor, collar, or similar option of any kind that is for the purchase or sale, or 

based on the value, of 1 or more interest or other 

rates, currencies, commodities, securities, instruments 

of indebtedness, indices, quantitative measures, or 

other financial or economic interests or property of 

any kind; 

(ii) that provides for any purchase, sale, payment, or 

delivery (other than a dividend on an equity security) 

that is dependent on the occurrence, nonoccurrence, or 

the extent of the occurrence of an event or contingency 

associated with a potential financial, economic, or commercial consequence; 

(iii) that provides on an executory basis for the exchange, on a fixed or contingent basis, of 1 or more 

payments based on the value or level of 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative 

measures, or other financial or economic interests or 

property of any kind, or any interest therein or based 

on the value thereof, and that transfers, as between 

the parties to the transaction, in whole or in part, the 

financial risk associated with a future change in any 

such value or level without also conveying a current or 

future direct or indirect ownership interest in an asset 

(including any enterprise or investment pool) or liability that incorporates the financial risk so transferred, 

including any agreement, contract, or transaction commonly known as— 

(I) an interest rate swap; 

(II) a rate floor; 

(III) a rate cap; 

(IV) a rate collar; 

(V) a cross-currency rate swap; 

(VI) a basis swap; 

(VII) a currency swap; 

(VIII) a foreign exchange swap; 

(IX) a total return swap; 

(X) an equity index swap; 

(XI) an equity swap; 

(XII) a debt index swap; 

(XIII) a debt swap; 

(XIV) a credit spread; 


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(XV) a credit default swap; 

(XVI) a credit swap; 

(XVII) a weather swap; 

(XVIII) an energy swap; 

(XIX) a metal swap; 

(XX) an agricultural swap; 

(XXI) an emissions swap; øand¿ 

(XXII) a commodity swap; and 

(XXIII) a utility operations-related swap; 

(iv) that is an agreement, contract, or transaction 

that is, or in the future becomes, commonly known to 

the trade as a swap; 

(v) including any security-based swap agreement 

which meets the definition of ‘‘swap agreement’’ as defined in section 206A of the Gramm-Leach-Bliley Act 

(15 U.S.C. 78c note) of which a material term is based 

on the price, yield, value, or volatility of any security 

or any group or index of securities, or any interest 

therein; or 

(vi) that is any combination or permutation of, or option on, any agreement, contract, or transaction described in any of clauses (i) through (v). 

(B) EXCLUSIONS.—The term ‘‘swap’’ does not include— 

(i) any contract of sale of a commodity for future delivery (or option on such a contract), leverage contract 

authorized under section 19, security futures product, 

or agreement, contract, or transaction described in section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); 

ø(ii) any sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the 

transaction is intended to be physically settled;¿ 

(ii) any purchase or sale of a nonfinancial commodity or security for deferred shipment or delivery, so 

long as the transaction is intended to be physically settled, including any stand-alone or embedded option for 

which exercise results in a physical delivery obligation; 

(iii) any put, call, straddle, option, or privilege on 

any security, certificate of deposit, or group or index of 

securities, including any interest therein or based on 

the value thereof, that is subject to— 

(I) the Securities Act of 1933 (15 U.S.C. 77a et 

seq.); and 

(II) the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.); 

(iv) any put, call, straddle, option, or privilege relating to a foreign currency entered into on a national securities exchange registered pursuant to section 6(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); 

(v) any agreement, contract, or transaction providing 

for the purchase or sale of 1 or more securities on a 

fixed basis that is subject to— 

(I) the Securities Act of 1933 (15 U.S.C. 77a et 

seq.); and 

(II) the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.); 


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(vi) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities 

on a contingent basis that is subject to the Securities 

Act of 1933 (15 U.S.C. 77a et seq.) and the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.), unless 

the agreement, contract, or transaction predicates the 

purchase or sale on the occurrence of a bona fide contingency that might reasonably be expected to affect or 

be affected by the creditworthiness of a party other 

than a party to the agreement, contract, or transaction; 

(vii) any note, bond, or evidence of indebtedness that 

is a security, as defined in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)); 

(viii) any agreement, contract, or transaction that 

is— 

(I) based on a security; and 

(II) entered into directly or through an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933 (15 U.S.C. 77b(a)(11)) by the 

issuer of such security for the purposes of raising 

capital, unless the agreement, contract, or transaction is entered into to manage a risk associated 

with capital raising; 

(ix) any agreement, contract, or transaction a 

counterparty of which is a Federal Reserve bank, the 

Federal Government, or a Federal agency that is expressly backed by the full faith and credit of the 

United States; and 

(x) any security-based swap, other than a securitybased swap as described in subparagraph (D). 

(C) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

the term ‘‘swap’’ includes a master agreement that 

provides for an agreement, contract, or transaction 

that is a swap under subparagraph (A), together with 

each supplement to any master agreement, without regard to whether the master agreement contains an 

agreement, contract, or transaction that is not a swap 

pursuant to subparagraph (A). 

(ii) EXCEPTION.—For purposes of clause (i), the master agreement shall be considered to be a swap only 

with respect to each agreement, contract, or transaction covered by the master agreement that is a swap 

pursuant to subparagraph (A). 

(D) MIXED SWAP.—The term ‘‘security-based swap’’ includes any agreement, contract, or transaction that is as 

described in section 3(a)(68)(A) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and also is based on 

the value of 1 or more interest or other rates, currencies, 

commodities, instruments of indebtedness, indices, quantitative measures, other financial or economic interest or 

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rence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or 

commercial consequence (other than an event described in 

subparagraph (A)(iii)). 

(E) TREATMENT OF FOREIGN EXCHANGE SWAPS AND FOR- WARDS.— 

(i) IN GENERAL.—Foreign exchange swaps and foreign exchange forwards shall be considered swaps 

under this paragraph unless the Secretary makes a 

written determination under section 1b that either foreign exchange swaps or foreign exchange forwards or 

both— 

(I) should be not be regulated as swaps under 

this Act; and 

(II) are not structured to evade the Dodd-Frank 

Wall Street Reform and Consumer Protection Act 

in violation of any rule promulgated by the Commission pursuant to section 721(c) of that Act. 

(ii) CONGRESSIONAL NOTICE; EFFECTIVENESS.—The 

Secretary shall submit any written determination 

under clause (i) to the appropriate committees of Congress, including the Committee on Agriculture, Nutrition, and Forestry of the Senate and the Committee on 

Agriculture of the House of Representatives. Any such 

written determination by the Secretary shall not be effective until it is submitted to the appropriate committees of Congress. 

(iii) REPORTING.—Notwithstanding a written determination by the Secretary under clause (i), all foreign 

exchange swaps and foreign exchange forwards shall 

be reported to either a swap data repository, or, if 

there is no swap data repository that would accept 

such swaps or forwards, to the Commission pursuant 

to section 4r within such time period as the Commission may by rule or regulation prescribe. 

(iv) BUSINESS STANDARDS.—Notwithstanding a written determination by the Secretary pursuant to clause 

(i), any party to a foreign exchange swap or forward 

that is a swap dealer or major swap participant shall 

conform to the business conduct standards contained 

in section 4s(h). 

(v) SECRETARY.—For purposes of this subparagraph, 

the term ‘‘Secretary’’ means the Secretary of the 

Treasury. 

(F) EXCEPTION FOR CERTAIN FOREIGN EXCHANGE SWAPS

AND FORWARDS.— 

(i) REGISTERED ENTITIES.—Any foreign exchange 

swap and any foreign exchange forward that is listed 

and traded on or subject to the rules of a designated 

contract market or a swap execution facility, or that is 

cleared by a derivatives clearing organization, shall 

not be exempt from any provision of this Act or 

amendments made by the Wall Street Transparency 

and Accountability Act of 2010 prohibiting fraud or 

manipulation. 


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(ii) RETAIL TRANSACTIONS.—Nothing in subparagraph (E) shall affect, or be construed to affect, the applicability of this Act or the jurisdiction of the Commission with respect to agreements, contracts, or 

transactions in foreign currency pursuant to section 

2(c)(2). 

ø(48)¿ (49) SWAP DATA REPOSITORY.—The term ‘‘swap data 

repository’’ means any person that collects and maintains information or records with respect to transactions or positions 

in, or the terms and conditions of, swaps entered into by third 

parties for the purpose of providing a centralized recordkeeping 

facility for swaps. 

ø(49)¿ (50) SWAP DEALER.— 

(A) IN GENERAL.—The term ‘‘swap dealer’’ means any 

person who— 

(i) holds itself out as a dealer in swaps; 

(ii) makes a market in swaps; 

(iii) regularly enters into swaps with counterparties 

as an ordinary course of business for its own account; 

or 

(iv) engages in any activity causing the person to be 

commonly known in the trade as a dealer or market 

maker in swaps, 

provided however, in no event shall an insured depository 

institution be considered to be a swap dealer to the extent 

it offers to enter into a swap with a customer in connection 

with originating a loan with that customer. 

(B) INCLUSION.—A person may be designated as a swap 

dealer for a single type or single class or category of swap 

or activities and considered not to be a swap dealer for 

other types, classes, or categories of swaps or activities. 

(C) EXCEPTION.—The term ‘‘swap dealer’’ does not include a person that enters into swaps for such person’s 

own account, either individually or in a fiduciary capacity, 

but not as a part of a regular business. 

ø(D) DE MINIMIS EXCEPTION.—The Commission¿ 

(D) EXCEPTION.— (i) IN GENERAL.—The Commission shall exempt from 

designation as a swap dealer an entity that engages in 

a de minimis quantity of swap dealing in connection 

with transactions with or on behalf of its customers. 

The Commission shall promulgate regulations to establish factors with respect to the making of this determination to exempt. 

(ii) DE MINIMIS QUANTITY.—The de minimis quantity 

of swap dealing described in clause (i) shall be set at 

a quantity of $8,000,000,000, and may be amended or 

changed only through a new affirmative action of the 

Commission undertaken by rule or regulation. 

(E) CERTAIN TRANSACTIONS WITH A UTILITY SPECIAL ENTI- TY.— (i) Transactions in utility operations-related swaps 

shall be reported pursuant to section 4r. 

(ii) In making a determination to exempt pursuant to 

subparagraph (D), the Commission shall treat a utility 


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operations-related swap entered into with a utility special entity, as defined in section 4s(h)(2)(D), as if it 

were entered into with an entity that is not a special 

entity, as defined in section 4s(h)(2)(C). 

ø(50)¿ (51) SWAP EXECUTION FACILITY.—The term ‘‘swap execution facility’’ means a trading system or platform in which 

multiple participants have the ability to execute or trade 

swaps by accepting bids and offers made by multiple participants in the facility or system, through any means of interstate 

commerce, including any trading facility, that— 

(A) facilitates the execution of swaps between persons; 

and 

(B) is not a designated contract market. 

ø(51)¿ (52) TRADING FACILITY.— 

(A) IN GENERAL.—The term ‘‘trading facility’’ means a 

person or group of persons that constitutes, maintains, or 

provides a physical or electronic facility or system in which 

multiple participants have the ability to execute or trade 

agreements, contracts, or transactions— 

(i) by accepting bids or offers made by other participants that are open to multiple partipants in the facility or system; or 

(ii) through the interaction of multiple bids or multiple offers within a system with a pre-determined 

non-discretionary automated trade matching and execution algorithm. 

(B) EXCLUSIONS.—The term ‘‘trading facility’’ does not 

include— 

(i) a person or group of persons solely because the 

person or group of persons constitutes, maintains, or 

provides an electronic facility or system that enables 

participants to negotiate the terms of and enter into 

bilateral transactions as a result of communications 

exchanged by the parties and not from interaction of 

multiple bids and multiple offers within a predetermined, nondiscretionary automated trade matching 

and execution algorithm; 

(ii) a government securities dealer or government securities broker, to the extent that the dealer or broker 

executes or trades agreements, contracts, or transactions in government securities, or assists persons in 

communicating about, negotiating, entering into, executing, or trading an agreement, contract, or transaction in government securities (as the terms ‘‘government securities dealer’’, ‘‘government securities 

broker’’, and ‘‘government securities’’ are defined in 

section 3(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a))); or 

(iii) facilities on which bids and offers, and acceptances of bids and offers effected on the facility, are not 

binding. 

Any person, group of persons, dealer, broker, or facility described in clause (i) or (ii) is excluded from the meaning of 

the term ‘‘trading facility’’ for the purposes of this Act 


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without any prior specific approval, certification, or other 

action by the Commission. 

(C) SPECIAL RULE.—A person or group of persons that 

would not otherwise constitute a trading facility shall not 

be considered to be a trading facility solely as a result of 

the submission to a derivatives clearing organization of 

transactions executed on or through the person or group of 

persons. 

(53) UTILITY OPERATIONS-RELATED SWAP.—The term ‘‘utility 

operations-related swap’’ means a swap that— 

(A) is entered into by a utility to hedge or mitigate a commercial risk; 

(B) is not a contract, agreement, or transaction based on, 

derived on, or referencing— 

(i) an interest rate, credit, equity, or currency asset 

class; 

(ii) except as used for fuel for electric energy generation, a metal, agricultural commodity, or crude oil or 

gasoline commodity of any grade; or 

(iii) any other commodity or category of commodities 

identified for this purpose in a rule or order adopted 

by the Commission in consultation with the appropriate Federal and State regulatory commissions; and 

(C) is associated with— 

(i) the generation, production, purchase, or sale of 

natural gas or electric energy, the supply of natural gas 

or electric energy to a utility, or the delivery of natural 

gas or electric energy service to utility customers; 

(ii) fuel supply for the facilities or operations of a 

utility; 

(iii) compliance with an electric system reliability obligation; 

(iv) compliance with an energy, energy efficiency, 

conservation, or renewable energy or environmental 

statute, regulation, or government order applicable to a 

utility; or 

(v) any other electric energy or natural gas swap to 

which a utility is a party. 

* * * * * * * 

SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR 

ACT OF AGENT; COMMODITY FUTURES TRADING COMMISSION; TRANSACTION IN INTERSTATE COMMERCE. 

(a) JURISDICTION OF COMMISSION; COMMODITY FUTURES TRADING

COMMISSION.— (1) JURISDICTION OF COMMISSION.— (A) IN GENERAL.—The Commission shall have exclusive 

jurisdiction, except to the extent otherwise provided in the 

Wall Street Transparency and Accountability Act of 2010 

(including an amendment made by that Act) and subparagraphs (C), (D), and (I) of this paragraph and subsections 

(c) and (f), with respect to accounts, agreements (including 

any transaction which is of the character of, or is commonly known to the trade as, an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, 

or ‘‘decline guaranty’’), and transactions involving swaps or 


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contracts of sale of a commodity for future delivery (including significant price discovery contracts), traded or executed on a contract market designated pursuant to section 

5 or a swap execution facility pursuant to section 5h or 

any other board of trade, exchange, or market, and transactions subject to regulation by the Commission pursuant 

to section 19 of this Act. Except as hereinabove provided, 

nothing contained in this section shall (I) supersede or 

limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any 

State, or (II) restrict the Securities and Exchange Commission and such other authorities from carrying out their duties and responsibilities in accordance with such laws. 

Nothing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or any 

State. 

(B) LIABILITY OF PRINCIPAL FOR ACT OF AGENT.—The act, 

omission, or failure of any official, agent, or other person 

acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office 

shall be deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust, as 

well as of such official, agent, or other person. 

(C) Notwithstanding any other provision of law— 

(i)(I) Except as provided in subclause (II), this Act shall not 

apply to and the Commission shall have no jurisdiction to designate a board of trade as a contract market for any transaction whereby any party to such transaction acquires any put, 

call, or other option on one or more securities (as defined in 

section 2(1) of the Securities Act of 1933 or section 3(a)(10) of 

the Securities Exchange Act of 1934 on the date of enactment 

of the Futures Trading Act of 1982), including any group or 

index of such securities, or any interest therein or based on the 

value thereof. 

(II) This Act shall apply to and the Commission shall 

have jurisdiction with respect to accounts, agreements, and 

transactions involving, and may permit the listing for trading pursuant to section 5c(c) of, a put, call, or other option 

on 1 or more securities (as defined in section 2(a)(1) of the 

Securities Act of 1933 or section 3(a)(10) of the Securities 

Exchange Act of 1934 on the date of enactment of the Futures Trading Act of 1982), including any group or index 

of such securities, or any interest therein or based on the 

value thereof, that is exempted by the Securities and Exchange Commission pursuant to section 36(a)(1) of the Securities Exchange Act of 1934 with the condition that the 

Commission exercise concurrent jurisdiction over such put, 

call, or other option; provided, however, that nothing in 

this paragraph shall be construed to affect the jurisdiction 

and authority of the Securities and Exchange Commission 

over such put, call, or other option. 

(ii) This Act shall apply to and the Commission shall have 

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monly known to the trade as, an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’) and transactions involving, and may designate 

a board of trade as a contract market inø, or register a derivatives transaction execution facility that trades or executes,¿ 

contracts of sale (or options on such contracts) for future delivery of a group or index of securities (or any interest therein or 

based upon the value thereof): Provided, however, That no 

board of trade shall be designated as a contract market with 

respect to any such contracts of sale (or options on such contracts) for future deliveryø, and no derivatives transaction execution facility shall trade or execute such contracts of sale (or 

options on such contracts) for future delivery¿, unless the 

board of trade øor the derivatives transaction execution facility,¿ and the applicable contract, meet the following minimum 

requirements: 

(I) Settlement of or delivery on such contract (or option 

on such contract) shall be effected in cash or by means 

other than the transfer or receipt of any security, except 

an exempted security under section 3 of the Securities Act 

of 1933 or section 3(a)(12) of the Securities Exchange Act 

of 1934 as in effect on the date of enactment of the Futures Trading Act of 1982 (other than any municipal security, as defined in section 3(a)(29) of the Securities Exchange Act of 1934 on the date of enactment of the Futures Trading Act of 1982); 

(II) Trading in such contract (or option on such contract) 

shall not be readily susceptible to manipulation of the 

price of such contract (or option on such contract), nor to 

causing or being used in the manipulation of the price of 

any underlying security, option on such security or option 

on a group or index including such securities; and 

(III) Such group or index of securities shall not constitute a narrow-based security index. 

(iii) If, in its discretion, the Commission determines that 

a stock index futures contract, notwithstanding its conformance with the requirements in clause (ii) of this subparagraph, can reasonably be used as a surrogate for trading a security (including a security futures product), it 

may, by order, require such contract and any option thereon be traded and regulated as security futures products as 

defined in section 3(a)(56) of the Securities Exchange Act 

of 1934 and section 1a of this Act subject to all rules and 

regulations applicable to security futures products under 

this Act and the securities laws as defined in section 

3(a)(47) of the Securities Exchange Act of 1934. 

(iv) No person shall offer to enter into, enter into, or confirm 

the execution of any contract of sale (or option on such contract) for future delivery of any security, or interest therein or 

based on the value thereof, except an exempted security 

øunder or¿ under section 3(a)(12) of the Securities Exchange 

Act of 1934 as in effect on the date of enactment of the Futures 

Trading Act of 1982 (other than any municipal security as defined in section 3(a)(29) of the Securities Exchange Act of 1934 

on the date of enactment of the Futures Trading Act of 1982), 


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or except as provided in clause (ii) of this subparagraph or subparagraph (D), any group or index of such securities or any interest therein or based on the value thereof. 

(v)(I) Notwithstanding any other provision of this Act, 

any contract market in a stock index futures contract (or 

option thereon) other than a security futures productø, or 

any derivatives transaction execution facility on which 

such contract or option is traded,¿ shall file with the Board 

of Governors of the Federal Reserve System any rule establishing or changing the levels of margin (initial and 

maintenance) for such stock index futures contract (or option thereon) other than security futures products. 

(II) The Board may at any time request any contract 

market øor derivatives transaction execution facility¿ to 

set the margin for any stock index futures contract (or option thereon), other than for any security futures product, 

at such levels as the Board in its judgment determines are 

appropriate to preserve the financial integrity of the contract market øor derivatives transaction execution facility¿, or its clearing system, or to prevent systemic risk. If 

the contract market øor derivatives transaction execution 

facility¿ fails to do so within the time specified by the 

Board in its request, the Board may direct the contract 

market øor derivatives transaction execution facility¿ to 

alter or supplement the rules of the contract market øor 

derivatives transaction execution facility¿ as specified in 

the request. 

(III) Subject to such conditions as the Board may determine, the Board may delegate any or all of its authority, 

relating to margin for any stock index futures contract (or 

option thereon), other than security futures products, 

under this clause to the Commission. 

(IV) It shall be unlawful for any futures commission 

merchant to, directly or indirectly, extend or maintain 

credit to or for, or collect margin from any customer on 

any security futures product unless such activities comply 

with the regulations prescribed pursuant to section 

7(c)(2)(B) of the Securities Exchange Act of 1934. 

(V) Nothing in this clause shall supersede or limit the 

authority granted to the Commission in section 8a(9) to direct a contract market øor registered derivatives transaction execution facility¿, on finding an emergency to exist, 

to raise temporary margin levels on any futures contract, 

or option on the contract covered by this clause, or on any 

security futures product. 

(VI) Any action taken by the Board, or by the Commission acting under the delegation of authority under subclause øIII¿ (III), under this clause directing a contract 

market to alter or supplement a contract market rule shall 

be subject to review only in the Court of Appeals where 

the party seeking review resides or has its principal place 

of business, or in the United States Court of Appeals for 

the District of Columbia Circuit. The review shall be based 

on the examination of all information before the Board or 

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mination was made. The court reviewing the action of the 

Board or the Commission shall not enter a stay or order 

of mandamus unless the court has determined, after notice 

and a hearing before a panel of the court, that the agency 

action complained of was arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law. 

(D)(i) Notwithstanding any other provision of this Act, the Securities and Exchange Commission shall have jurisdiction and authority over security futures as defined in section 3(a)(55) of the Securities Exchange Act of 1934, section 2(a)(16) of the Securities Act 

of 1933, section 2(a)(52) of the Investment Company Act of 1940, 

and section 202(a)(27) of the Investment Advisers Act of 1940, options on security futures, and persons effecting transactions in security futures and options thereon, and this Act shall apply to and 

the Commission shall have jurisdiction with respect to accounts, 

agreements (including any transaction which is of the character of, 

or is commonly known to the trade as, an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’), contracts, and transactions involving, and may 

designate a board of trade as a contract market øin, or register a 

derivatives transaction execution facility¿ that trades or executes, 

a security futures product as defined in section 1a of this Act: Provided, however, That, except as provided in clause (vi) of this subparagraph, no board of trade shall be designated as a contract market with respect toø, or registered as a derivatives transaction execution facility for,¿ any such contracts of sale for future delivery 

unless the board of trade and the applicable contract meet the following criteria: 

(I) Except as otherwise provided in a rule, regulation, or 

order issued pursuant to clause (v) of this subparagraph, any 

security underlying the security future, including each component security of a narrow-based security index, is registered 

pursuant to section 12 of the Securities Exchange Act of 1934. 

(II) If the security futures product is not cash settled, the 

board of trade on which the security futures product is traded 

has arrangements in place with a clearing agency registered 

pursuant to section 17A of the Securities Exchange Act of 1934 

for the payment and delivery of the securities underlying the 

security futures product. 

(III) Except as otherwise provided in a rule, regulation, or 

order issued pursuant to clause (v) of this subparagraph, the 

security future is based upon common stock and such other equity securities as the Commission and the Securities and Exchange Commission jointly determine appropriate. 

(IV) The security futures product is cleared by a clearing 

agency that has in place provisions for linked and coordinated 

clearing with other clearing agencies that clear security futures 

products, which permits the security futures product to be purchased on a designated contract market, øregistered derivatives transaction execution facility,¿ national securities exchange registered under section 6(a) of the Securities Exchange 

Act of 1934, or national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 

and offset on another designated contract market, øregistered 

derivatives transaction execution facility,¿ national securities 


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exchange registered under section 6(a) of the Securities Exchange Act of 1934, or national securities association registered pursuant to section 15A(a) of the Securities Exchange 

Act of 1934. 

(V) Only futures commission merchants, introducing brokers, 

commodity trading advisors, commodity pool operators or associated persons subject to suitability rules comparable to those 

of a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 solicit, accept any order for, or otherwise deal in any transaction in or 

in connection with the security futures product. 

(VI) The security futures product is subject to a prohibition 

against dual trading in section 4j of this Act and the rules and 

regulations thereunder or the provisions of section 11(a) of the 

Securities Exchange Act of 1934 and the rules and regulations 

thereunder, except to the extent otherwise permitted under the 

Securities Exchange Act of 1934 and the rules and regulations 

thereunder. 

(VII) Trading in the security futures product is not readily 

susceptible to manipulation of the price of such security futures product, nor to causing or being used in the manipulation 

of the price of any underlying security, option on such security, 

or option on a group or index including such securities; 

(VIII) The board of trade on which the security futures product is traded has procedures in place for coordinated surveillance among such board of trade, any market on which any security underlying the security futures product is traded, and 

other markets on which any related security is traded to detect 

manipulation and insider trading, except that, if the board of 

trade is an alternative trading system, a national securities association registered pursuant to section 15A(a) of the Securities 

Exchange Act of 1934 or national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act 

of 1934 of which such alternative trading system is a member 

has in place such procedures. 

(IX) The board of trade on which the security futures product 

is traded has in place audit trails necessary or appropriate to 

facilitate the coordinated surveillance required in subclause 

(VIII), except that, if the board of trade is an alternative trading system, a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 or 

national securities exchange registered pursuant to section 6(a) 

of the Securities Exchange Act of 1934 of which such alternative trading system is a member has rules to require such 

audit trails. 

(X) The board of trade on which the security futures product 

is traded has in place procedures to coordinate trading halts 

between such board of trade and markets on which any security underlying the security futures product is traded and other 

markets on which any related security is traded, except that, 

if the board of trade is an alternative trading system, a national securities association registered pursuant to section 

15A(a) of the Securities Exchange Act of 1934 or national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 of which such alternative trading 


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system is a member has rules to require such coordinated trading halts. 

(XI) The margin requirements for a security futures product 

comply with the regulations prescribed pursuant to section 

7(c)(2)(B) of the Securities Exchange Act of 1934, except that 

nothing in this subclause shall be construed to prevent a board 

of trade from requiring higher margin levels for a security futures product when it deems such action to be necessary or appropriate. 

(ii) It shall be unlawful for any person to offer, to enter into, to 

execute, to confirm the execution of, or to conduct any office or 

business anywhere in the United States, its territories or possessions, for the purpose of soliciting, or accepting any order for, or 

otherwise dealing in, any transaction in, or in connection with, a 

security futures product unless— 

ø(I) the transaction is conducted on or subject to the rules of 

a board of trade that— 

ø(aa) has been designated by the Commission as a contract market in such security futures product; or 

ø(bb) is a registered derivatives transaction execution facility for the security futures product that has provided a 

certification with respect to the security futures product 

pursuant to clause (vii);¿ 

(I) the transaction is conducted on or subject to the rules of 

a board of trade that has been designated by the Commission 

as a contract market in such security futures product; or 

(II) the contract is executed or consummated by, through, or 

with a member of the contract market øor registered derivatives transaction execution facility¿; and 

(III) the security futures product is evidenced by a record in 

writing which shows the date, the parties to such security futures product and their addresses, the property covered, and 

its price, and each contract market member øor registered derivatives transaction execution facility member¿ shall keep the 

record for a period of 3 years from the date of the transaction, 

or for a longer period if the Commission so directs, which 

record shall at all times be open to the inspection of any duly 

authorized representative of the Commission. 

(iii)(I) Except as provided in subclause (II) but notwithstanding 

any other provision of this Act, no person shall offer to enter into, 

enter into, or confirm the execution of any option on a security future. 

(II) After 3 years after the date of the enactment of the Commodity Futures Modernization Act of 2000, the Commission and 

the Securities and Exchange Commission may by order jointly determine to permit trading of options on any security future authorized to be traded under the provisions of this Act and the Securities 

Exchange Act of 1934. 

(iv)(I) All relevant records of a futures commission merchant or 

introducing broker registered pursuant to section 4f(a)(2), floor 

broker or floor trader exempt from registration pursuant to section 

4f(a)(3), associated person exempt from registration pursuant to 

section 4k(6), or board of trade designated as a contract market in 

a security futures product pursuant to section 5f shall be subject 

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tives of the Commission as the Commission deems necessary or appropriate in the public interest, for the protection of investors, or 

otherwise in furtherance of the purposes of this Act, and the Commission, before conducting any such examination, shall give notice 

to the Securities and Exchange Commission of the proposed examination and consult with the Securities and Exchange Commission 

concerning the feasibility and desirability of coordinating the examination with examinations conducted by the Securities and Exchange Commission in order to avoid unnecessary regulatory duplication or undue regulatory burdens for the registrant or board of 

trade. 

(II) The Commission shall notify the Securities and Exchange 

Commission of any examination conducted of any futures commission merchant or introducing broker registered pursuant to section 

4f(a)(2), floor broker or floor trader exempt from registration pursuant to section 4f(a)(3), associated person exempt from registration 

pursuant to section 4k(6), or board of trade designated as a contract market in a security futures product pursuant to section 5f, 

and, upon request, furnish to the Securities and Exchange Commission any examination report and data supplied to or prepared by 

the Commission in connection with the examination. 

(III) Before conducting an examination under subclause (I), the 

Commission shall use the reports of examinations, unless the information sought is unavailable in the reports, of any futures commission merchant or introducing broker registered pursuant to section 

4f(a)(2), floor broker or floor trader exempt from registration pursuant to section 4f(a)(3), associated person exempt from registration 

pursuant to section 4k(6), or board of trade designated as a contract market in a security futures product pursuant to section 5f 

that is made by the Securities and Exchange Commission, a national securities association registered pursuant to section 15A(a) 

of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3(a)), or a 

national securities exchange registered pursuant to section 6(a) of 

the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)). 

(IV) Any records required under this subsection for a futures 

commission merchant or introducing broker registered pursuant to 

section 4f(a)(2), floor broker or floor trader exempt from registration pursuant to section 4f(a)(3), associated person exempt from 

registration pursuant to section 4k(6), or board of trade designated 

as a contract market in a security futures product pursuant to section 5f, shall be limited to records with respect to accounts, agreements, contracts, and transactions involving security futures products. 

(v)(I) The Commission and the Securities and Exchange Commission, by rule, regulation, or order, may jointly modify the criteria 

specified in subclause (I) or (III) of clause (i), including the trading 

of security futures based on securities other than equity securities, 

to the extent such modification fosters the development of fair and 

orderly markets in security futures products, is necessary or appropriate in the public interest, and is consistent with the protection 

of investors. 

(II) The Commission and the Securities and Exchange Commission, by order, may jointly exempt any person from compliance 

with the criterion specified in clause (i)(IV) to the extent such exemption fosters the development of fair and orderly markets in seVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00123 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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curity futures products, is necessary or appropriate in the public 

interest, and is consistent with the protection of investors. 

(vi)(I) Notwithstanding clauses (i) and (vii), until the compliance 

date, a board of trade shall not be required to meet the criterion 

specified in clause (i)(IV). 

(II) The Commission and the Securities and Exchange Commission shall jointly publish in the Federal Register a notice of the 

compliance date no later than 165 days before the compliance date. 

(III) For purposes of this clause, the term ‘‘compliance date’’ 

means the later of— 

(aa) 180 days after the end of the first full calendar month 

period in which the average aggregate comparable share volume for all security futures products based on single equity securities traded on all designated contract markets and registered derivatives transaction execution facilities equals or exceeds 10 percent of the average aggregate comparable share 

volume of options on single equity securities traded on all national securities exchanges registered pursuant to section 6(a) 

of the Securities Exchange Act of 1934 and any national securities associations registered pursuant to section 15A(a) of such 

Act; or 

(bb) 2 years after the date on which trading in any security 

futures product commences under this Act. 

(vii) It shall be unlawful for a board of trade to trade or execute 

a security futures product unless the board of trade has provided 

the Commission with a certification that the specific security futures product and the board of trade, as applicable, meet the criteria specified in subclauses (I) through (XI) of clause (i), except as 

otherwise provided in clause (vi). 

(E)(i) To the extent necessary or appropriate in the public interest, to promote fair competition, and consistent with promotion of 

market efficiency, innovation, and expansion of investment opportunities, the protection of investors, and the maintenance of fair 

and orderly markets, the Commission and the Securities and Exchange Commission shall jointly issue such rules, regulations, or 

orders as are necessary and appropriate to permit the offer and 

sale of a security futures product traded on or subject to the rules 

of a foreign board of trade to United States persons. 

(ii) The rules, regulations, or orders adopted under clause (i) 

shall take into account, as appropriate, the nature and size of the 

markets that the securities underlying the security futures product 

reflects. 

(F)(i) Nothing in this Act is intended to prohibit a futures commission merchant from carrying security futures products traded 

on or subject to the rules of a foreign board of trade in the accounts 

of persons located outside of the United States. 

(ii) Nothing in this Act is intended to prohibit any eligible contract participant located in the United States from purchasing or 

carrying securities futures products traded on or subject to the 

rules of a foreign board of trade, exchange, or market to the same 

extent such person may be authorized to purchase or carry other 

securities traded on a foreign board of trade, exchange, or market 

so long as any underlying security for such security futures products is traded principally on, by, or through any exchange or market located outside the United States. 


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(G)(i) Nothing in this paragraph shall limit the jurisdiction conferred on the Securities and Exchange Commission 

by the Wall Street Transparency and Accountability Act of 

2010 with regard to security-based swap agreements as defined pursuant to section 3(a)(78) of the Securities Exchange Act of 1934, and security-based swaps. 

(ii) In addition to the authority of the Securities and Exchange Commission described in clause (i), nothing in this 

subparagraph shall limit or affect any statutory authority 

of the Commission with respect to an agreement, contract, 

or transaction described in clause (i). 

(H) Notwithstanding any other provision of law, the 

Wall Street Transparency and Accountability Act of 2010 

shall not apply to, and the Commodity Futures Trading 

Commission shall have no jurisdiction under such Act (or 

any amendments to the Commodity Exchange Act made by 

such Act) with respect to, any security other than a security-based swap. 

(I)(i) Nothing in this Act shall limit or affect any statutory authority of the Federal Energy Regulatory Commission or a State regulatory authority (as defined in section 

3(21) of the Federal Power Act (16 U.S.C. 796(21)) with respect to an agreement, contract, or transaction that is entered into pursuant to a tariff or rate schedule approved 

by the Federal Energy Regulatory Commission or a State 

regulatory authority and is— 

(I) not executed, traded, or cleared on a registered 

entity or trading facility; or 

(II) executed, traded, or cleared on a registered entity or trading facility owned or operated by a regional 

transmission organization or independent system operator. 

(ii) In addition to the authority of the Federal Energy 

Regulatory Commission or a State regulatory authority described in clause (i), nothing in this subparagraph shall 

limit or affect— 

(I) any statutory authority of the Commission with 

respect to an agreement, contract, or transaction described in clause (i); or 

(II) the jurisdiction of the Commission under subparagraph (A) with respect to an agreement, contract, 

or transaction that is executed, traded, or cleared on 

a registered entity or trading facility that is not owned 

or operated by a regional transmission organization or 

independent system operator (as defined by sections 

3(27) and (28) of the Federal Power Act (16 U.S.C. 

796(27), 796(28)). 

(2)(A) There is hereby established, as an independent agency 

of the United States Government, a Commodity Futures Trading Commission. The Commission shall be composed of five 

Commissioners who shall be appointed by the President, by 

and with the advice and consent of the Senate. In nominating 

persons for appointment, the President shall— 

(i) select persons who shall each have demonstrated 

knowledge in futures trading or its regulation, or the proVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00125 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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duction, merchandising, processing or distribution of one 

or more of the commodities or other goods and articles, 

services, rights, and interests covered by this Act; and 

(ii) seek to ensure that the demonstrated knowledge of 

the Commissioners is balanced with respect to such areas. 

Not more than three of the members of the Commission shall 

be members of the same political party. Each Commissioner 

shall hold office for a term of five years and until his successor 

is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, 

and except (i) any Commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of 

such term, and (ii) the terms of office of the Commissioners 

first taking office after the enactment of this paragraph shall 

expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, 

one at the end of three years, one at the end of four years, and 

one at the end of five years. 

(B) The President shall appoint, by and with the advice and 

consent of the Senate, a member of the Commission as Chairman, who shall serve as Chairman at the pleasure of the President. An individual may be appointed as Chairman at the 

same time that person is appointed as a Commissioner. The 

Chairman shall be the chief administrative officer of the Commission and shall preside at hearings before the Commission. 

At any time, the President may appoint, by and with the advice and consent of the Senate, a different Chairman, and the 

Commissioner previously appointed as Chairman may complete 

that Commissioner’s term as a Commissioner. 

(3) A vacancy in the Commission shall not impair the right 

of the remaining Commissioners to exercise all the powers of 

the Commission. 

(4) The Commission shall have a General Counsel, who shall 

be appointed by the Commission and serve at the pleasure of 

the Commission. The General Counsel shall report directly to 

the Commission and serve as its legal advisor. The Commission shall appoint such other attorneys as may be necessary, 

in the opinion of the Commission, to assist the General Counsel, represent the Commission in all disciplinary proceedings 

pending before it, represent the Commission in courts of law 

whenever appropriate, assist the Department of Justice in handling litigation concerning the Commission in courts of law, 

and perform such other legal duties and functions as the Commission may direct. 

(5) The Commission shall have an Executive Director, who 

shall be appointed by the Commission and serve at the pleasure of the Commission. The Executive Director shall report directly to the Commission and perform such functions and duties as the Commission may prescribe. 

(6)(A) Except as otherwise provided in this paragraph and in 

paragraphs ø(4) and (5) of this subsection ¿ (4), (5), and (16), 

the executive and administrative functions of the Commission, 

including functions of the Commission with respect to the apVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00126 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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pointment and supervision of personnel employed under the 

Commission, the distribution of business among such personnel 

and among administrative units of the Commission, and the 

use and expenditure of funds, according to budget categories, 

plans, programs, and priorities established and approved by 

the Commission, shall be exercised solely by the Chairman. 

(B) In carrying out any of his functions under the provisions 

of this paragraph, the Chairman shall be governed by general 

policies, plans, priorities, and budgets approved by the Commission and by such regulatory decisions, findings, and determinations as the Commission may by law be authorized to 

make. 

(C) The appointment by the Chairman of the heads of major 

administrative units under the Commission shall be subject to 

the approval of the Commission, and the heads of the units 

shall serve at the pleasure of the Commission. 

(D) Personnel employed regularly and full time in the immediate offices of Commissioners other than the Chairman shall 

not be affected by the provisions of this paragraph. 

(E) There are hereby reserved to the Commission its functions with respect to revising budget estimates and with respect to determining the distribution of appropriated funds according to major programs and purposes. 

(F) The Chairman may from time to time make such provisions as he shall deem appropriate authorizing the performance by any officer, employee, or administrative unit under his 

jurisdiction of any functions of the Chairman under this paragraph. 

(7) APPOINTMENT AND COMPENSATION.— 

(A) IN GENERAL.—The Commission may appoint and fix 

the compensation of such officers, attorneys, economists, 

examiners, and other employees as may be necessary for 

carrying out the functions of the Commission under this 

Act. 

(B) RATES OF PAY.—Rates of basic pay for all employees 

of the Commission may be set and adjusted by the Commission without regard to chapter 51 or subchapter III of 

chapter 53 of title 5, United States Code. 

(C) COMPARABILITY.— 

(i) IN GENERAL.—The Commission may provide additional compensation and benefits to employees of the 

Commission if the same type of compensation or benefits are provided by any agency referred to in section 

1206(a) of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989 (12 U.S.C. 1833b(a)) or 

could be provided by such an agency under applicable 

provisions of law (including rules and regulations). 

(ii) CONSULTATION.—In setting and adjusting the 

total amount of compensation and benefits for employees, the Commission shall consult with, and seek to 

maintain comparability with, the agencies referred to 

in section 1206(a) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 

1833b(a)). 


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(8) No Commissioner or employee of the Commission shall 

accept employment or compensation from any person, exchange, or clearinghouse subject to regulation by the Commission under this Act during his term of office, nor shall he participate, directly or indirectly, in any registered entity operations or transactions of a character subject to regulation by 

the Commission. 

(9)(A) The Commission shall, in cooperation with the Secretary of Agriculture, maintain a liaison between the Commission and the Department of Agriculture. The Secretary shall 

take such steps as may be necessary to enable the Commission 

to obtain information and utilize such services and facilities of 

the Department of Agriculture as may be necessary in order to 

maintain effectively such liaison. In addition, the Secretary 

shall appoint a liaison officer, who shall be an employee of the 

Office of the Secretary, for the purpose of maintaining a liaison 

between the Department of Agriculture and the Commission. 

The Commission shall furnish such liaison officer appropriate 

office space within the offices of the Commission and shall 

allow such liaison officer to attend and observe all deliberations and proceedings of the Commission. 

(B)(i) The Commission shall maintain communications with 

the Department of the Treasury, the Board of Governors of the 

Federal Reserve System, and the Securities and Exchange 

Commission for the purpose of keeping such agencies fully informed of Commission activities that relate to the responsibilities of those agencies, for the purpose of seeking the views of 

those agencies on such activities, and for considering the relationships between the volume and nature of investment and 

trading in contracts of sale of a commodity for future delivery 

and in securities and financial instruments under the jurisdiction of such agencies. 

(ii) When a board of trade applies for designation øor registration¿ as a contract market øor derivatives transaction execution facility¿ involving transactions for future delivery of any 

security issued or guaranteed by the United States or any 

agency thereof, the Commission shall promptly deliver a copy 

of such application to the Department of the Treasury and the 

Board of Governors of the Federal Reserve System. The Commission may not designate øor register¿ a board of trade as a 

contract market øor derivatives transaction execution facility¿ 

based on such application until forty-five days after the date 

the Commission delivers the application to such agencies or 

until the Commission receives comments from each of such 

agencies on the application, whichever period is shorter. Any 

comments received by the Commission from such agencies 

shall be included as part of the public record of the Commission’s designation proceeding. In designatingø, registering,¿ or 

refusing, suspending, or revoking the designation øor registration¿ of, a board of trade as a contract market øor derivatives 

transaction execution facility¿ involving transactions for future 

delivery referred to in this clause or in considering any possible action under this Act (including without limitation emergency action under section 8a(9)) with respect to such transactions, the Commission shall take into consideration all comVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00128 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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ments it receives from the Department of the Treasury and the 

Board of Governors of the Federal Reserve System and shall 

consider the effect that any such designationø, registration,¿ 

suspension, revocation, or action may have on the debt financing requirements of the United States Government and the 

continued efficiency and integrity of the underlying market for 

government securities. 

(iii) The provisions of this subparagraph shall not create any 

rights, liabilities, or obligations upon which actions may be 

brought against the Commission. 

(10)(A) Whenever the Commission submits any budget estimate or request to the President or the Office of Management 

and Budget, it shall concurrently transmit copies of that estimate or request to the House and Senate Appropriations Committees and the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry. 

(B) Whenever the Commission transmits any legislative recommendations, or testimony, or comments on legislation to the 

President or the Office of Management and Budget, it shall 

concurrently transmit copies thereof to the House Committee 

on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry. No officer or agency of the United States 

shall have any authority to require the Commission to submit 

its legislative recommendations, or testimony, or comments on 

legislation to any officer or agency of the United States for approval, comments, or review, prior to the submission of such 

recommendations, testimony, or comments to the Congress. In 

instances in which the Commission voluntarily seeks to obtain 

the comments or review of any officer or agency of the United 

States, the Commission shall include a description of such actions in its legislative recommendations, testimony, or comments on legislation which it transmits to the Congress. 

(C) Whenever the Commission issues for official publication 

any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any 

dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination. 

(11) The Commission shall have an official seal, which shall be 

judicially noticed. 

ø(12) The¿ 

(12) RULES AND REGULATIONS.— 

(A) IN GENERAL.—Subject to the other provisions of this paragraph, the Commission is authorized to promulgate such rules 

and regulations as it deems necessary to govern the operating 

procedures and conduct of the business of the Commission. 

(B) NOTICE TO COMMISSIONERS.—The Commission shall develop and publish internal procedures governing the issuance 

by any division or office of the Commission of any response to 

a formal, written request or petition from any member of the 

public for an exemptive, a no-action, or an interpretive letter 

and such procedures shall provide that the commissioners be 

provided with the final version of the matter to be issued with 

sufficient notice to review the matter prior to its issuance. 


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(C) INTERNAL RISK CONTROLS.—The Commission, in consultation with the Chief Economist, shall develop comprehensive internal risk control mechanisms to safeguard and govern the 

storage of all market data by the Commission, all market data 

sharing agreements of the Commission, and all academic research performed at the Commission using market data. 

(D) APPLICABILITY OF NOTICE AND COMMENT RULES TO GUID- ANCE VOTED ON BY THE COMMISSION.—The notice and comment 

requirements of section 553 of title 5, United States Code, shall 

also apply with respect to any Commission statement or guidance, including interpretive rules, general statements of policy, 

or rules of Commission organization, procedure, or practice, 

that has the effect of implementing, interpreting or prescribing 

law or policy and that is voted on by the Commission. 

(13) PUBLIC AVAILABILITY OF SWAP TRANSACTION DATA.— 

(A) DEFINITION OF REAL-TIME PUBLIC REPORTING.—In 

this paragraph, the term ‘‘real-time public reporting’’ 

means to report data relating to a swap transaction, including price and volume, as soon as technologically practicable after the time at which the swap transaction has 

been executed. 

(B) PURPOSE.—The purpose of this section is to authorize 

the Commission to make swap transaction and pricing 

data available to the public in such form and at such times 

as the Commission determines appropriate to enhance 

price discovery. 

(C) GENERAL RULE.— øThe Commission¿ Except as provided in subparagraph (D), the Commission is authorized 

and required to provide by rule for the public availability 

of swap transaction and pricing data as follows: 

(i) With respect to those swaps that are subject to 

the mandatory clearing requirement described in subsection (h)(1) (including those swaps that are excepted 

from the requirement pursuant to subsection (h)(7)), 

the Commission shall require real-time public reporting for such transactions. 

(ii) With respect to those swaps that are not subject 

to the mandatory clearing requirement described in 

subsection (h)(1), but are cleared at a registered derivatives clearing organization, the Commission shall 

require real-time public reporting for such transactions. 

(iii) With respect to swaps that are not cleared at a 

registered derivatives clearing organization and which 

are reported to a swap data repository or the Commission under subsection (h)(6), the Commission shall require real-time public reporting for such transactions, 

in a manner that does not disclose the business transactions and market positions of any person. 

(iv) With respect to swaps that are determined to be 

required to be cleared under subsection (h)(2) but are 

not cleared, the Commission shall require real-time 

public reporting for such transactions. 

(D) REQUIREMENTS FOR SWAP TRANSACTIONS IN ILLIQUID

MARKETS.—Notwithstanding subparagraph (C): 


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(i) The Commission shall provide by rule for the public reporting of swap transactions, including price and 

volume data, in illiquid markets that are not cleared 

and entered into by a non-financial entity that is hedging or mitigating commercial risk in accordance with 

subsection (h)(7)(A). 

(ii) The Commission shall ensure that the swap 

transaction information referred to in clause (i) of this 

subparagraph is available to the public no sooner than 

30 days after the swap transaction has been executed 

or at such later date as the Commission determines appropriate to protect the identity of participants and positions in illiquid markets and to prevent the elimination or reduction of market liquidity. 

(iii) In this subparagraph, the term ‘‘illiquid markets’’ means any market in which the volume and frequency of trading in swaps is at such a level as to 

allow identification of individual market participants. 

ø(D)¿ (E) REGISTERED ENTITIES AND PUBLIC REPORTING.—The Commission may require registered entities to 

publicly disseminate the swap transaction and pricing data 

required to be reported under this paragraph. 

ø(E)¿ (F) RULEMAKING REQUIRED.—With respect to the 

rule providing for the public availability of transaction and 

pricing data for swaps described in clauses (i) and (ii) of 

subparagraph (C), the rule promulgated by the Commission shall contain provisions— 

(i) to ensure such information does not identify the 

participants; 

(ii) to specify the criteria for determining what constitutes a large notional swap transaction (block trade) 

for particular markets and contracts; 

(iii) to specify the appropriate time delay for reporting large notional swap transactions (block trades) to 

the public; and 

(iv) that take into account whether the public disclosure will materially reduce market liquidity. 

ø(F)¿ (G) TIMELINESS OF REPORTING.—Parties to a swap 

(including agents of the parties to a swap) shall be responsible for reporting swap transaction information to the appropriate registered entity in a timely manner as may be 

prescribed by the Commission. 

ø(G)¿ (H) REPORTING OF SWAPS TO REGISTERED SWAP

DATA REPOSITORIES.—Each swap (whether cleared or 

uncleared) shall be reported to a registered swap data repository. 

(14) SEMIANNUAL AND ANNUAL PUBLIC REPORTING OF AGGREGATE SWAP DATA.— 

(A) IN GENERAL.—In accordance with subparagraph (B), 

the Commission shall issue a written report on a semiannual and annual basis to make available to the public 

information relating to— 

(i) the trading and clearing in the major swap categories; and 


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(ii) the market participants and developments in 

new products. 

(B) USE; CONSULTATION.—In preparing a report under 

subparagraph (A), the Commission shall— 

(i) use information from swap data repositories and 

derivatives clearing organizations; and 

(ii) consult with the Office of the Comptroller of the 

Currency, the Bank for International Settlements, and 

such other regulatory bodies as may be necessary. 

(C) AUTHORITY OF THE COMMISSION.—The Commission 

may, by rule, regulation, or order, delegate the public reporting responsibilities of the Commission under this paragraph in accordance with such terms and conditions as the 

Commission determines to be appropriate and in the public interest. 

(15) ENERGY AND ENVIRONMENTAL MARKETS ADVISORY COMMITTEE.— 

(A) ESTABLISHMENT.— (i) IN GENERAL.—An Energy and Environmental 

Markets Advisory Committee is hereby established. 

(ii) MEMBERSHIP.—The Committee shall have 9 

members. 

(iii) ACTIVITIES.—The Committee’s objectives and 

scope of activities shall be— 

(I) to conduct public meetings; 

(II) to submit reports and recommendations to 

the Commission (including dissenting or minority 

views, if any); and 

(III) otherwise to serve as a vehicle for discussion and communication on matters of concern to 

exchanges, firms, end users, and regulators regarding energy and environmental markets and 

their regulation by the Commission. 

(B) REQUIREMENTS.— 

(i) IN GENERAL.—The Committee shall hold public 

meetings at such intervals as are necessary to carry 

out the functions of the Committee, but not less frequently than 2 times per year. 

(ii) MEMBERS.—Members shall be appointed to 3- 

year terms, but may be removed for cause by vote of 

the Commission. 

(C) APPOINTMENT.—The Commission shall appoint members with a wide diversity of opinion and who represent a 

broad spectrum of interests, including hedgers and consumers. 

(D) REIMBURSEMENT.—Members shall be entitled to per 

diem and travel expense reimbursement by the Commission. 

(E) FACA.—The Committee shall not be subject to the 

Federal Advisory Committee Act (5 U.S.C. App.). 

(16) OFFICE OF THE CHIEF ECONOMIST.— (A) ESTABLISHMENT.—There is established in the Commission the Office of the Chief Economist. 

(B) HEAD.—The Office of the Chief Economist shall be 

headed by the Chief Economist, who shall be appointed by 


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the Commission and serve at the pleasure of the Commission. 

(C) FUNCTIONS.—The Chief Economist shall report directly to the Commission and perform such functions and 

duties as the Commission may prescribe. 

(D) PROFESSIONAL STAFF.—The Commission shall appoint such other economists as may be necessary to assist 

the Chief Economist in performing such economic analysis, 

regulatory cost-benefit analysis, or research any member of 

the Commission may request. 

(17) STRATEGIC TECHNOLOGY PLAN.— (A) IN GENERAL.—Every 5 years, the Commission shall 

develop and submit to the Committee on Agriculture of the 

House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a detailed 

plan focused on the acquisition and use of technology by 

the Commission. 

(B) CONTENTS.—The plan shall— 

(i) include for each related division or office a detailed technology strategy focused on market surveillance and risk detection, market data collection, aggregation, interpretation, standardization, harmonization, 

normalization, validation, streamlining or other data 

analytic processes, and internal management and protection of data collected by the Commission, including 

a detailed accounting of how the funds provided for 

technology will be used and the priorities that will 

apply in the use of the funds; and 

(ii) set forth annual goals to be accomplished and 

annual budgets needed to accomplish the goals. 

(b) For the purposes of this Act (but not in any wise limiting the 

foregoing definition of interstate commerce) a transaction in respect 

to any article shall be considered to be in interstate commerce if 

such article is part of that current of commerce usual in the commodity trade whereby commodities and commodity products and 

by-products thereof are sent from one State with the expectation 

that they will end their transit, after purchase, in another, including, in addition to cases within the above general description, all 

cases where purchase or sale is either for shipment to another 

State, or for manufacture within the State and the shipment outside the State of the products resulting from such manufacture. Articles normally in such current of commerce shall not be considered 

out of such commerce through resort being had to any means or device intended to remove transactions in respect thereto from the 

provisions of this Act. For the purpose of this paragraph the word 

‘‘State’’ includes Territory, the District of Columbia, possession of 

the United States, and foreign nation. 

(c) AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN

CURRENCY, GOVERNMENT SECURITIES, AND CERTAIN OTHER COM- MODITIES.— (1) IN GENERAL.—Except as provided in paragraph (2), nothing in this Act (other than sectionø,¿ 5b, or 12(e)(2)(B)) governs 

or applies to an agreement, contract, or transaction in— 

(A) foreign currency; 

(B) government securities; 


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(C) security warrants; 

(D) security rights; 

(E) resales of installment loan contracts; 

(F) repurchase transactions in an excluded commodity; 

or 

(G) mortgages or mortgage purchase commitments. 

(2) COMMISSION JURISDICTION.— (A) AGREEMENTS, CONTRACTS, AND TRANSACTIONS TRAD- ED ON AN ORGANIZED EXCHANGE.—This Act applies to, and 

the Commission shall have jurisdiction over, an agreement, contract, or transaction described in paragraph (1) 

that is— 

(i) a contract of sale of a commodity for future delivery (or an option on such a contract), or an option on 

a commodity (other than foreign currency or a security 

or a group or index of securities), that is executed or 

traded on an organized exchange; 

(ii) a swap; or 

(iii) an option on foreign currency executed or traded 

on an organized exchange that is not a national securities exchange registered pursuant to section 6(a) of the 

Securities Exchange Act of 1934. 

(B) AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN RE- TAIL FOREIGN CURRENCY.— (i) This Act applies to, and the Commission shall 

have jurisdiction over, an agreement, contract, or 

transaction in foreign currency that— 

(I) is a contract of sale of a commodity for future 

delivery (or an option on such a contract) or an option (other than an option executed or traded on 

a national securities exchange registered pursuant 

to section 6(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78f(a))); and 

(II) is offered to, or entered into with, a person 

that is not an eligible contract participant, unless 

the counterparty, or the person offering to be the 

counterparty, of the person is— 

(aa) a United States financial institution; 

(bb)(AA) a broker or dealer registered under 

section 15(b) (except paragraph (11) thereof) 

or 15C of the Securities Exchange Act of 1934 

(15 U.S.C. 78o(b), 78o–5); or 

(BB) an associated person of a broker or 

dealer registered under section 15(b) (except 

paragraph (11) thereof) or 15C of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b), 

78o–5) concerning the financial or securities 

activities of which the broker or dealer makes 

and keeps records under section 15C(b) or 

17(h) of the Securities Exchange Act of 1934 

(15 U.S.C. 78o–5(b), 78q(h)); 

(cc)(AA) a futures commission merchant 

that is primarily or substantially engaged in 

the business activities described in section 1a 

of this Act, is registered under this Act, is not 


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a person described in item (bb) of this subclause, and maintains adjusted net capital 

equal to or in excess of the dollar amount that 

applies for purposes of clause (ii) of this subparagraph; or 

(BB) an affiliated person of a futures commission merchant that is primarily or substantially engaged in the business activities 

described in section 1a of this Act, is registered under this Act, and is not a person described in item (bb) of this subclause, if the 

affiliated person maintains adjusted net capital equal to or in excess of the dollar amount 

that applies for purposes of clause (ii) of this 

subparagraph and is not a person described in 

such item (bb), and the futures commission 

merchant makes and keeps records under section 4f(c)(2)(B) of this Act concerning the futures and other financial activities of the affiliated person; 

(dd) a financial holding company (as defined 

in section 2 of the Bank Holding Company Act 

of 1956); or 

(ff) a retail foreign exchange dealer that 

maintains adjusted net capital equal to or in 

excess of the dollar amount that applies for 

purposes of clause (ii) of this subparagraph 

and is registered in such capacity with the 

Commission, subject to such terms and conditions as the Commission shall prescribe, and 

is a member of a futures association registered under section 17. 

(ii) The dollar amount that applies for purposes of 

this clause is— 

(I) $10,000,000, beginning 120 days after the 

date of the enactment of this clause; 

(II) $15,000,000, beginning 240 days after such 

date of enactment; and 

(III) $20,000,000, beginning 360 days after such 

date of enactment. 

(iii) Notwithstanding items (cc) and (gg) of clause 

(i)(II) of this subparagraph, agreements, contracts, or 

transactions described in clause (i) of this subparagraph, and accounts or pooled investment vehicles described in clause (vi), shall be subject to subsection 

(a)(1)(B) of this section and sections 4(b), 4b, 4c(b), 4o, 

6(c) and 6(d) (except to the extent that sections 6(c) 

and 6(d) prohibit manipulation of the market price of 

any commodity in interstate commerce, or for future 

delivery on or subject to the rules of any market), 6c, 

6d, 8(a), 13(a), and 13(b) if the agreements, contracts, 

or transactions are offered, or entered into, by a person that is registered as a futures commission merchant or retail foreign exchange dealer, or an affiliated 

person of a futures commission merchant registered 


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under this Act that is not also a person described in 

any of item (aa), (bb), (ee), or (ff) of clause (i)(II) of this 

subparagraph. 

(iv)(I) Notwithstanding items (cc) and (gg) of clause 

(i)(II), a person, unless registered in such capacity as 

the Commission by rule, regulation, or order shall determine and a member of a futures association registered under section 17, shall not— 

(aa) solicit or accept orders from any person 

that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) entered into with or 

to be entered into with a person who is not described in item (aa), (bb), (ee), or (ff) of clause 

(i)(II); 

(bb) exercise discretionary trading authority or 

obtain written authorization to exercise discretionary trading authority over any account for or 

on behalf of any person that is not an eligible contract participant in connection with agreements, 

contracts, or transactions described in clause (i) 

entered into with or to be entered into with a person who is not described in item (aa), (bb), (ee), or 

(ff) of clause (i)(II); or 

(cc) operate or solicit funds, securities, or property for any pooled investment vehicle that is not 

an eligible contract participant in connection with 

agreements, contracts, or transactions described 

in clause (i) entered into with or to be entered into 

with a person who is not described in item (aa), 

(bb), (ee), or (ff) of clause (i)(II). 

(II) Subclause (I) of this clause shall not apply to— 

(aa) any person described in any of item (aa), 

(bb), (ee), or (ff) of clause (i)(II); 

(bb) any such person’s associated persons; or 

(cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject 

to the rules of a contract market øor a derivatives 

transaction execution facility¿. 

(III) Notwithstanding items (cc) and (gg) of clause 

(i)(II), the Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of 

the Commission, are reasonably necessary to effectuate any of the provisions of, or to accomplish any of 

the purposes of, this Act in connection with the activities of persons subject to subclause (I). 

(IV) Subclause (III) of this clause shall not apply 

to— 

(aa) any person described in any of item (aa) 

through (ff) of clause (i)(II); 

(bb) any such person’s associated persons; or 

(cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject 


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to the rules of a contract market øor a derivatives 

transaction execution facility¿. (v) Notwithstanding items (cc) and (gg) of clause 

(i)(II), the Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of 

the Commission, are reasonably necessary to effectuate any of the provisions of, or to accomplish any of 

the purposes of, this Act in connection with agreements, contracts, or transactions described in clause 

(i) which are offered, or entered into, by a person described in item (cc) or (gg) of clause (i)(II). 

(vi) This Act applies to, and the Commission shall 

have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, 

or that trades, any agreement, contract, or transaction 

in foreign currency described in clause (i). 

(C)(i)(I) This subparagraph shall apply to any agreement, contract, or transaction in foreign currency that is— 

(aa) offered to, or entered into with, a person 

that is not an eligible contract participant (except 

that this subparagraph shall not apply if the 

counterparty, or the person offering to be the 

counterparty, of the person that is not an eligible 

contract participant is a person described in any 

of item (aa), (bb), (ee), or (ff) of subparagraph 

(B)(i)(II)); and 

(bb) offered, or entered into, on a leveraged or 

margined basis, or financed by the offeror, the 

counterparty, or a person acting in concert with 

the offeror or counterparty on a similar basis. 

(II) Subclause (I) of this clause shall not apply to— 

(aa) a security that is not a security futures product; 

or 

(bb) a contract of sale that— 

(AA) results in actual delivery within 2 days; or 

(BB) creates an enforceable obligation to deliver 

between a seller and buyer that have the ability 

to deliver and accept delivery, respectively, in connection with their line of business. 

(ii)(I) Agreements, contracts, or transactions described in 

clause (i) of this subparagraph, and accounts or pooled investment vehicles described in clause (vii), shall be subject 

to subsection (a)(1)(B) of this section and sections 4(b), 4b, 

4c(b), 4o, 6(c) and 6(d) (except to the extent that sections 

6(c) and 6(d) prohibit manipulation of the market price of 

any commodity in interstate commerce, or for future delivery on or subject to the rules of any market), 6c, 6d, 8(a), 

13(a), and 13(b). 

(II) Subclause (I) of this clause shall not apply to— 

(aa) any person described in any of item (aa), (bb), 

(ee), or (ff) of subparagraph (B)(i)(II); or 

(bb) any such person’s associated persons. 

(III) The Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the 

Commission, are reasonably necessary to effectuate any of 


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the provisions of or to accomplish any of the purposes of 

this Act in connection with agreements, contracts, or 

transactions described in clause (i) of this subparagraph if 

the agreements, contracts, or transactions are offered, or 

entered into, by a person that is not described in item (aa) 

through (ff) of subparagraph (B)(i)(II). 

(iii)(I) A person, unless registered in such capacity as the 

Commission by rule, regulation, or order shall determine 

and a member of a futures association registered under 

section 17, shall not— 

(aa) solicit or accept orders from any person that is 

not an eligible contract participant in connection with 

agreements, contracts, or transactions described in 

clause (i) of this subparagraph entered into with or to 

be entered into with a person who is not described in 

item (aa), (bb), (ee), or (ff) of subparagraph (B)(i)(II); 

(bb) exercise discretionary trading authority or obtain written authorization to exercise written trading 

authority over any account for or on behalf of any person that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) of this subparagraph entered into 

with or to be entered into with a person who is not described in item (aa), (bb), (ee), or (ff) of subparagraph 

(B)(i)(II); or 

(cc) operate or solicit funds, securities, or property 

for any pooled investment vehicle that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause 

(i) of this subparagraph entered into with or to be entered into with a person who is not described in item 

(aa), (bb), (ee), or (ff) of subparagraph (B)(i)(II). 

(II) Subclause (I) of this clause shall not apply to— 

(aa) any person described in item (aa), (bb), (ee), or 

(ff) of subparagraph (B)(i)(II); 

(bb) any such person’s associated persons; or 

(cc) any person who would be exempt from registration if engaging in the same activities in connection 

with transactions conducted on or subject to the rules 

of a contract market øor a derivatives transaction execution facility¿. 

(III) The Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the 

Commission, are reasonably necessary to effectuate any of 

the provisions of, or to accomplish any of the purposes of, 

this Act in connection with the activities of persons subject 

to subclause (I). 

(IV) Subclause (III) of this clause shall not apply to— 

(aa) any person described in item (aa) through (ff) of 

subparagraph (B)(i)(II); 

(bb) any such person’s associated persons; or 

(cc) any person who would be exempt from registration if engaging in the same activities in connection 

with transactions conducted on or subject to the rules 


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of a contract market øor a derivatives transaction execution facility¿. (iv) Sections 4(b) and 4b shall apply to any agreement, 

contract, or transaction described in clause (i) of this subparagraph as if the agreement, contract, or transaction 

were a contract of sale of a commodity for future delivery. 

(v) This subparagraph shall not be construed to limit 

any jurisdiction that the Commission may otherwise have 

under any other provision of this Act over an agreement, 

contract, or transaction that is a contract of sale of a commodity for future delivery. 

(vi) This subparagraph shall not be construed to limit 

any jurisdiction that the Commission or the Securities and 

Exchange Commission may otherwise have under any 

other provision of this Act with respect to security futures 

products and persons effecting transactions in security futures products. 

(vii) This Act applies to, and the Commission shall 

have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, 

or that trades, any agreement, contract, or transaction 

in foreign currency described in clause (i). 

(D) RETAIL COMMODITY TRANSACTIONS.— (i) APPLICABILITY.—Except as provided in clause (ii), 

this subparagraph shall apply to any agreement, contract, or transaction in any commodity that is— 

(I) entered into with, or offered to (even if not 

entered into with), a person that is not an eligible 

contract participant or eligible commercial entity; 

and 

(II) entered into, or offered (even if not entered 

into), on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or 

counterparty on a similar basis. 

(ii) EXCEPTIONS.—This subparagraph shall not apply 

to— 

(I) an agreement, contract, or transaction described in paragraph (1) or subparagraphs (A), 

(B), or (C), including any agreement, contract, or 

transaction specifically excluded from subparagraph (A), (B), or (C); 

(II) any security; 

(III) a contract of sale that— 

(aa) results in actual delivery within 28 

days or such other longer period as the Commission may determine by rule or regulation 

based upon the typical commercial practice in 

cash or spot markets for the commodity involved; or 

(bb) creates an enforceable obligation to deliver between a seller and a buyer that have 

the ability to deliver and accept delivery, respectively, in connection with the line of business of the seller and buyer; or 


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(IV) an agreement, contract, or transaction that 

is listed on a national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or 

(V) an identified banking product, as defined in 

section 402(b) of the Legal Certainty for Bank 

Products Act of 2000 (7 U.S.C.27(b)). 

(iii) ENFORCEMENT.—Sections 4(a), 4(b), and 4b 

apply to any agreement, contract, or transaction described in clause (i), as if the agreement, contract, or 

transaction was a contract of sale of a commodity for 

future delivery. 

(iv) ELIGIBLE COMMERCIAL ENTITY.—For purposes of 

this subparagraph, an agricultural producer, packer, 

or handler shall be considered to be an eligible commercial entity for any agreement, contract, or transaction for a commodity in connection with the line of 

business of the agricultural producer, packer, or handler. 

(E) PROHIBITION.— 

(i) DEFINITION OF FEDERAL REGULATORY AGENCY.— In this subparagraph, the term ‘‘Federal regulatory 

agency’’ means— 

(I) the Commission; 

(II) the Securities and Exchange Commission; 

(III) an appropriate Federal banking agency; 

(IV) the National Credit Union Association; and 

(V) the Farm Credit Administration. 

(ii) PROHIBITION.— 

(I) IN GENERAL.—Except as provided in subclause (II), a person described in subparagraph 

(B)(i)(II) for which there is a Federal regulatory 

agency shall not offer to, or enter into with, a person that is not an eligible contract participant, 

any agreement, contract, or transaction in foreign 

currency described in subparagraph (B)(i)(I) except pursuant to a rule or regulation of a Federal 

regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe. 

(II) EFFECTIVE DATE.—With regard to persons 

described in subparagraph (B)(i)(II) for which a 

Federal regulatory agency has issued a proposed 

rule concerning agreements, contracts, or transactions in foreign currency described in subparagraph (B)(i)(I) prior to the date of enactment of 

this subclause, subclause (I) shall take effect 90 

days after the date of enactment of this subclause. 

(iii) REQUIREMENTS OF RULES AND REGULATIONS.— (I) IN GENERAL.—The rules and regulations described in clause (ii) shall prescribe appropriate 

requirements with respect to— 

(aa) disclosure; 

(bb) recordkeeping; 


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(cc) capital and margin; 

(dd) reporting; 

(ee) business conduct; 

(ff) documentation; and 

(gg) such other standards or requirements 

as the Federal regulatory agency shall determine to be necessary. 

(II) TREATMENT.—The rules or regulations described in clause (ii) shall treat all agreements, 

contracts, and transactions in foreign currency described in subparagraph (B)(i)(I), and all agreements, contracts, and transactions in foreign currency that are functionally or economically similar 

to agreements, contracts, or transactions described 

in subparagraph (B)(i)(I), similarly. 

(d) SWAPS.—Nothing in this Act (other than subparagraphs (A), 

(B), (C), (D), (G), and (H) of subsection (a)(1), subsections (f) and 

(g), sections 1a, 2(a)(13), 2(c)(2)(A)(ii), 2(e), 2(h), 4(c), 4a, 4b, and 

4b–1, subsections (a), (b), and ø(g) of¿ (e) of section 4c, sections 4d, 

4e, 4f, 4g, 4h, 4i, 4j, 4k, 4l, 4m, 4n, 4o, 4p, 4r, 4s, 4t, 5, 5b, 5c, 5e, 

and 5h, subsections (c) and (d) of section 6, sections 6c, 6d, 8, 8a, 

and 9, subsections (e)(2), (f), and (h) of section 12, subsections (a) 

and (b) of section 13, sections 17, 20, 21, and 22(a)(4), and any 

other provision of this Act that is applicable to registered entities 

or Commission registrants) governs or applies to a swap. 

(e) LIMITATION ON PARTICIPATION.—It shall be unlawful for any 

person, other than an eligible contract participant, to enter into a 

swap unless the swap is entered into on, or subject to the rules of, 

a board of trade designated as a contract market under section 5. 

(f) EXCLUSION FOR QUALIFYING HYBRID INSTRUMENTS.— 

(1) IN GENERAL.—Nothing in this Act (other than section 

12(e)(2)(B)) governs or is applicable to a hybrid instrument 

that is predominantly a security. 

(2) PREDOMINANCE.—A hybrid instrument shall be considered to be predominantly a security if— 

(A) the issuer of the hybrid instrument receives payment 

in full of the purchase price of the hybrid instrument, substantially contemporaneously with delivery of the hybrid 

instrument; 

(B) the purchaser or holder of the hybrid instrument is 

not required to make any payment to the issuer in addition to the purchase price paid under subparagraph (A), 

whether as margin, settlement payment, or otherwise, during the life of the hybrid instrument or at maturity; 

(C) the issuer of the hybrid instrument is not subject by 

the terms of the instrument to mark-to-market margining 

requirements; and 

(D) the hybrid instrument is not marketed as a contract 

of sale of a commodity for future delivery (or option on 

such a contract) subject to this Act. 

(3) MARK-TO-MARKET MARGINING REQUIREMENTS.—For the 

purposes of paragraph (2)(C), mark-to-market margining requirements do not include the obligation of an issuer of a secured debt instrument to increase the amount of collateral held 

in pledge for the benefit of the purchaser of the secured debt 


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instrument to secure the repayment obligations of the issuer 

under the secured debt instrument. 

(g) APPLICATION OF COMMODITY FUTURES LAWS.— (1) No provision of this Act shall be construed as implying 

or creating any presumption that— 

(A) any agreement, contract, or transaction that is excluded from this Act under section 2(c), 2(d), 2(e), 2(f), or 

2(g) of this Act or title IV of the Commodity Futures Modernization Act of 2000, or exempted under section 2(h) or 

4(c) of this Act; or 

(B) any agreement, contract, or transaction, not otherwise subject to this Act, that is not so excluded or exempted, 

is or would otherwise be subject to this Act. 

(2) No provision of, or amendment made by, the Commodity 

Futures Modernization Act of 2000 shall be construed as conferring jurisdiction on the Commission with respect to any 

such agreement, contract, or transaction, except as expressly 

provided in section 5b of this Act. 

(h) CLEARING REQUIREMENT.— 

(1) IN GENERAL.— (A) STANDARD FOR CLEARING.—It shall be unlawful for 

any person to engage in a swap unless that person submits 

such swap for clearing to a derivatives clearing organization that is registered under this Act or a derivatives clearing organization that is exempt from registration under 

this Act if the swap is required to be cleared. 

(B) OPEN ACCESS.—The rules of a derivatives clearing organization described in subparagraph (A) shall— 

(i) prescribe that all swaps (but not contracts of sale 

of a commodity for future delivery or options on such 

contracts) submitted to the derivatives clearing organization with the same terms and conditions are economically equivalent within the derivatives clearing 

organization and may be offset with each other within 

the derivatives clearing organization; and 

(ii) provide for non-discriminatory clearing of a swap 

(but not a contract of sale of a commodity for future 

delivery or option on such contract) executed bilaterally or on or through the rules of an unaffiliated designated contract market or swap execution facility. 

(2) COMMISSION REVIEW.— 

(A) COMMISSION-INITIATED REVIEW.— 

(i) The Commission on an ongoing basis shall review 

each swap, or any group, category, type, or class of 

swaps to make a determination as to whether the 

swap or group, category, type, or class of swaps should 

be required to be cleared. 

(ii) The Commission shall provide at least a 30-day 

public comment period regarding any determination 

made under clause (i). 

(B) SWAP SUBMISSIONS.— (i) A derivatives clearing organization shall submit 

to the Commission each swap, or any group, category, 

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ing, and provide notice to its members (in a manner 

to be determined by the Commission) of the submission. 

(ii) Any swap or group, category, type, or class of 

swaps listed for clearing by a derivative clearing organization as of the date of enactment of this subsection 

shall be considered submitted to the Commission. 

(iii) The Commission shall— 

(I) make available to the public submissions received under clauses (i) and (ii); 

(II) review each submission made under clauses 

(i) and (ii), and determine whether the swap, or 

group, category, type, or class of swaps described 

in the submission is required to be cleared; and 

(III) provide at least a 30-day public comment 

period regarding its determination as to whether 

the clearing requirement under paragraph (1)(A) 

shall apply to the submission. 

(C) DEADLINE.—The Commission shall make its determination under subparagraph (B)(iii) not later than 90 

days after receiving a submission made under subparagraphs (B)(i) and (B)(ii), unless the submitting derivatives 

clearing organization agrees to an extension for the time 

limitation established under this subparagraph. 

(D) DETERMINATION.— 

(i) In reviewing a submission made under subparagraph (B), the Commission shall review whether the 

submission is consistent with section 5b(c)(2). 

(ii) In reviewing a swap, group of swaps, or class of 

swaps pursuant to subparagraph (A) or a submission 

made under subparagraph (B), the Commission shall 

take into account the following factors: 

(I) The existence of significant outstanding notional exposures, trading liquidity, and adequate 

pricing data. 

(II) The availability of rule framework, capacity, 

operational expertise and resources, and credit 

support infrastructure to clear the contract on 

terms that are consistent with the material terms 

and trading conventions on which the contract is 

then traded. 

(III) The effect on the mitigation of systemic 

risk, taking into account the size of the market for 

such contract and the resources of the derivatives 

clearing organization available to clear the contract. 

(IV) The effect on competition, including appropriate fees and charges applied to clearing. 

(V) The existence of reasonable legal certainty 

in the event of the insolvency of the relevant derivatives clearing organization or 1 or more of its 

clearing members with regard to the treatment of 

customer and swap counterparty positions, funds, 

and property. 


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(iii) In making a determination under subparagraph 

(A) or (B)(iii) that the clearing requirement shall 

apply, the Commission may require such terms and 

conditions to the requirement as the Commission determines to be appropriate. 

(E) RULES.—Not later than 1 year after the date of the 

enactment of this subsection, the Commission shall adopt 

rules for a derivatives clearing organization’s submission 

for review, pursuant to this paragraph, of a swap, or a 

group, category, type, or class of swaps, that it seeks to accept for clearing. Nothing in this subparagraph limits the 

Commission from making a determination under subparagraph (B)(iii) for swaps described in subparagraph (B)(ii). 

(3) STAY OF CLEARING REQUIREMENT.— 

(A) IN GENERAL.—After making a determination pursuant to paragraph (2)(B), the Commission, on application of 

a counterparty to a swap or on its own initiative, may stay 

the clearing requirement of paragraph (1) until the Commission completes a review of the terms of the swap (or 

the group, category, type, or class of swaps) and the clearing arrangement. 

(B) DEADLINE.—The Commission shall complete a review 

undertaken pursuant to subparagraph (A) not later than 

90 days after issuance of the stay, unless the derivatives 

clearing organization that clears the swap, or group, category, type, or class of swaps agrees to an extension of the 

time limitation established under this subparagraph. 

(C) DETERMINATION.—Upon completion of the review undertaken pursuant to subparagraph (A), the Commission 

may— 

(i) determine, unconditionally or subject to such 

terms and conditions as the Commission determines to 

be appropriate, that the swap, or group, category, 

type, or class of swaps must be cleared pursuant to 

this subsection if it finds that such clearing is consistent with paragraph (2)(D); or 

(ii) determine that the clearing requirement of paragraph (1) shall not apply to the swap, or group, category, type, or class of swaps. 

(D) RULES.—Not later than 1 year after the date of the 

enactment of the Wall Street Transparency and Accountability Act of 2010, the Commission shall adopt rules for 

reviewing, pursuant to this paragraph, a derivatives clearing organization’s clearing of a swap, or a group, category, 

type, or class of swaps, that it has accepted for clearing. 

(4) PREVENTION OF EVASION.— 

(A) IN GENERAL.—The Commission shall prescribe rules 

under this subsection (and issue interpretations of rules 

prescribed under this subsection) as determined by the 

Commission to be necessary to prevent evasions of the 

mandatory clearing requirements under this Act. 

(B) DUTY OF COMMISSION TO INVESTIGATE AND TAKE CER- TAIN ACTIONS.—To the extent the Commission finds that a 

particular swap, group, category, type, or class of swaps 

would otherwise be subject to mandatory clearing but no 


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derivatives clearing organization has listed the swap, 

group, category, type, or class of swaps for clearing, the 

Commission shall— 

(i) investigate the relevant facts and circumstances; 

(ii) within 30 days issue a public report containing 

the results of the investigation; and 

(iii) take such actions as the Commission determines 

to be necessary and in the public interest, which may 

include requiring the retaining of adequate margin or 

capital by parties to the swap, group, category, type, 

or class of swaps. 

(C) EFFECT ON AUTHORITY.—Nothing in this paragraph— 

(i) authorizes the Commission to adopt rules requiring a derivatives clearing organization to list for clearing a swap, group, category, type, or class of swaps if 

the clearing of the swap, group, category, type, or class 

of swaps would threaten the financial integrity of the 

derivatives clearing organization; and 

(ii) affects the authority of the Commission to enforce the open access provisions of paragraph (1)(B) 

with respect to a swap, group, category, type, or class 

of swaps that is listed for clearing by a derivatives 

clearing organization. 

(5) REPORTING TRANSITION RULES.—Rules adopted by the 

Commission under this section shall provide for the reporting 

of data, as follows: 

(A) Swaps entered into before the date of the enactment 

of this subsection shall be reported to a registered swap 

data repository or the Commission no later than 180 days 

after the effective date of this subsection. 

(B) Swaps entered into on or after such date of enactment shall be reported to a registered swap data repository or the Commission no later than the later of— 

(i) 90 days after such effective date; or 

(ii) such other time after entering into the swap as 

the Commission may prescribe by rule or regulation. 

(6) CLEARING TRANSITION RULES.— 

(A) Swaps entered into before the date of the enactment 

of this subsection are exempt from the clearing requirements of this subsection if reported pursuant to paragraph 

(5)(A). 

(B) Swaps entered into before application of the clearing 

requirement pursuant to this subsection are exempt from 

the clearing requirements of this subsection if reported 

pursuant to paragraph (5)(B). 

(7) EXCEPTIONS.— 

(A) IN GENERAL.—The requirements of paragraph (1)(A) 

shall not apply to a swap if 1 of the counterparties to the 

swap— 

(i) is not a financial entity; 

(ii) is using swaps to hedge or mitigate commercial 

risk; and 

(iii) notifies the Commission, in a manner set forth 

by the Commission, how it generally meets its finanVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00145 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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cial obligations associated with entering into noncleared swaps. 

(B) OPTION TO CLEAR.—The application of the clearing 

exception in subparagraph (A) is solely at the discretion of 

the counterparty to the swap that meets the conditions of 

clauses (i) through (iii) of subparagraph (A). 

(C) FINANCIAL ENTITY DEFINITION.— 

(i) IN GENERAL.—For the purposes of this paragraph, 

the term ‘‘financial entity’’ means— 

(I) a swap dealer; 

(II) a security-based swap dealer; 

(III) a major swap participant; 

(IV) a major security-based swap participant; 

(V) a commodity pool; 

(VI) a private fund as defined in section 202(a) 

of the Investment Advisers Act of 1940 (15 U.S.C. 

80-b-2(a)); 

(VII) an employee benefit plan as defined in 

paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1002); 

(VIII) a person predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, as defined in 

section 4(k) of the Bank Holding Company Act of 

1956. 

(ii) EXCLUSION.—The Commission shall consider 

whether to exempt small banks, savings associations, 

farm credit system institutions, and credit unions, including— 

(I) depository institutions with total assets of 

$10,000,000,000 or less; 

(II) farm credit system institutions with total 

assets of $10,000,000,000 or less; or 

(III) credit unions with total assets of 

$10,000,000,000 or less. 

ø(iii) LIMITATION.—Such definition shall not include 

an entity whose primary business is providing financing, and uses derivatives for the purpose of hedging 

underlying commercial risks related to interest rate 

and foreign currency exposures, 90 percent or more of 

which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which 

are manufactured by the parent company or another 

subsidiary of the parent company.¿ 

(iii) LIMITATION.—Such definition shall not include 

an entity— 

(I) whose primary business is providing financing, and who uses derivatives for the purpose of 

hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the 


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parent company or another subsidiary of the parent company; or 

(II) who is not supervised by a prudential regulator, and is not described in any of subclauses (I) 

through (VII) of clause (i), and— 

(aa) is a commercial market participant; or 

(bb) enters into swaps, contracts for future 

delivery, and other derivatives on behalf of, or 

to hedge or mitigate the commercial risk of, 

whether directly or in the aggregate, affiliates 

that are not so supervised or described. 

(iv) HOLDING COMPANIES.—A determination made by 

the Commission under clause (ii) shall, with respect to 

small banks and savings associations, also apply to 

their respective bank holding company (as defined in 

section 2 of the Bank Holding Company Act of 1956), 

or savings and loan holding company (as defined in 

section 10 of the Home Owners’ Loan Act of 1933)), if 

the total consolidated assets of the holding company 

are no greater than the asset threshold set by the Commission in determining small bank and savings association eligibility under clause (ii). 

(D) TREATMENT OF AFFILIATES.— ø(i) IN GENERAL.—An affiliate of a person that qualifies for an exception under subparagraph (A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise 

or manufactured goods of the person) may qualify for 

the exception only if the affiliate, acting on behalf of 

the person and as an agent, uses the swap to hedge 

or mitigate the commercial risk of the person or other 

affiliate of the person that is not a financial entity.¿ 

(i) IN GENERAL.—An affiliate of a person that qualifies for an exception under subparagraph (A) (including an affiliate entity predominantly engaged in providing financing for the purchase of the merchandise 

or manufactured goods of the person) may qualify for 

the exception only if the affiliate enters into the swap 

to hedge or mitigate the commercial risk of the person 

or other affiliate of the person that is not a financial 

entity, provided that if the hedge or mitigation of such 

commercial risk is addressed by entering into a swap 

with a swap dealer or major swap participant, an appropriate credit support measure or other mechanism 

must be utilized. 

(ii) PROHIBITION RELATING TO CERTAIN AFFILIATES.— 

The exception in clause (i) shall not apply if the affiliate is— 

(I) a swap dealer; 

(II) a security-based swap dealer; 

(III) a major swap participant; 

(IV) a major security-based swap participant; 

(V) an issuer 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 


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paragraph (1) or (7) of subsection (c) of that Act 

(15 U.S.C. 80a–3(c)); 

(VI) a commodity pool; or 

(VII) a bank holding company with over 

$50,000,000,000 in consolidated assets. 

(iii) TRANSITION RULE FOR AFFILIATES.—An affiliate, 

subsidiary, or a wholly owned entity of a person that 

qualifies for an exception under subparagraph (A) and 

is predominantly engaged in providing financing for 

the purchase or lease of merchandise or manufactured 

goods of the person shall be exempt from the margin 

requirement described in section 4s(e) and the clearing 

requirement described in paragraph (1) with regard to 

swaps entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on the date of enactment of this clause. 

(E) ELECTION OF COUNTERPARTY.— 

(i) SWAPS REQUIRED TO BE CLEARED.—With respect 

to any swap that is subject to the mandatory clearing 

requirement under this subsection and entered into by 

a swap dealer or a major swap participant with a 

counterparty that is not a swap dealer, major swap 

participant, security-based swap dealer, or major security-based swap participant, the counterparty shall 

have the sole right to select the derivatives clearing 

organization at which the swap will be cleared. 

(ii) SWAPS NOT REQUIRED TO BE CLEARED.—With respect to any swap that is not subject to the mandatory 

clearing requirement under this subsection and entered into by a swap dealer or a major swap participant with a counterparty that is not a swap dealer, 

major swap participant, security-based swap dealer, or 

major security-based swap participant, the 

counterparty— 

(I) may elect to require clearing of the swap; 

and 

(II) shall have the sole right to select the derivatives clearing organization at which the swap will 

be cleared. 

(F) ABUSE OF EXCEPTION.—The Commission may prescribe such rules or issue interpretations of the rules as 

the Commission determines to be necessary to prevent 

abuse of the exceptions described in this paragraph. The 

Commission may also request information from those persons claiming the clearing exception as necessary to prevent abuse of the exceptions described in this paragraph. 

(8) TRADE EXECUTION.— 

(A) IN GENERAL.—With respect to transactions involving 

swaps subject to the clearing requirement of paragraph (1), 

counterparties shall— 

(i) execute the transaction on a board of trade designated as a contract market under section 5; or 

(ii) execute the transaction on a swap execution facility registered under 5h or a swap execution facility 


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that is exempt from registration under section ø5h(f) 

of this Act¿ 5h(g). 

(B) EXCEPTION.—The requirements of clauses (i) and (ii) 

of subparagraph (A) shall not apply if no board of trade or 

swap execution facility makes the swap available to trade 

or for swap transactions subject to the clearing exception 

under paragraph (7). 

(i) APPLICABILITY.—The provisions of this Act relating to swaps 

that were enacted by the Wall Street Transparency and Accountability Act of 2010 (including any rule prescribed or regulation promulgated under that Act), shall not apply to activities outside the 

United States unless those activities— 

(1) have a direct and significant connection with activities in, 

or effect on, commerce of the United States; or 

(2) contravene such rules or regulations as the Commission 

may prescribe or promulgate as are necessary or appropriate 

to prevent the evasion of any provision of this Act that was enacted by the Wall Street Transparency and Accountability Act 

of 2010. 

(j) COMMITTEE APPROVAL BY BOARD.—Exemptions from the requirements of subsection (h)(1) to clear a swap and subsection 

(h)(8) to execute a swap through a board of trade or swap execution 

facility shall be available to a counterparty that is an issuer of securities that are registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l) or that is required to file reports 

pursuant to section 15(d) of the Securities Exchange Act of 1934 

(15 U.S.C. 78o) only if an appropriate committee of the issuer’s 

board or governing body has reviewed and approved its decision to 

enter into swaps that are subject to such exemptions. 

* * * * * * * 

SEC. 4. (a) Unless exempted by the Commission pursuant to subsection (c) or by subsection (e), it shall be unlawful for any person 

to offer to enter into, to enter into, to execute, to confirm the execution of, or to conduct any office or business anywhere in the United 

States, its territories or possessions, for the purpose of soliciting, 

or accepting any order for, or otherwise dealing in, any transaction 

in, or in connection with, a contract for the purchase or sale of a 

commodity for future delivery (other than a contract which is made 

on or subject to the rules of a board of trade, exchange, or market 

located outside the United States, its territories or possessions) unless— 

(1) such transaction is conducted on or subject to the rules 

of a board of trade which has been designated or registered by 

the Commission as a contract market øor derivatives transaction execution facility¿ for such commodity; 

(2) such contract is executed or consummated by or through 

a contract market; and 

(3) such contract is evidenced by a record in writing which 

shows the date, the parties to such contract and their addresses, the property covered and its price, and the terms of delivery: Provided, That each contract market or derivatives transaction execution facility member shall keep such record for a 

period of three years from the date thereof, or for a longer period if the Commission shall so direct, which record shall at all 


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times be open to the inspection of any representative of the 

Commission or the Department of Justice. 

(b) 

(1) FOREIGN BOARDS OF TRADE.— (A) REGISTRATION.—The Commission may adopt rules 

and regulations requiring registration with the Commission for a foreign board of trade that provides the members 

of the foreign board of trade or other participants located 

in the United States with direct access to the electronic 

trading and order matching system of the foreign board of 

trade, including rules and regulations prescribing procedures and requirements applicable to the registration of 

such foreign boards of trade. For purposes of this paragraph, ‘‘direct access’’ refers to an explicit grant of authority by a foreign board of trade to an identified member or 

other participant located in the United States to enter 

trades directly into the trade matching system of the foreign board of trade. In adopting such rules and regulations, the commission shall consider— 

(i) whether any such foreign board of trade is subject to comparable, comprehensive supervision and 

regulation by the appropriate governmental authorities in the foreign board of trade’s home country; and 

(ii) any previous commission findings that the foreign board of trade is subject to comparable comprehensive supervision and regulation by the appropriate government authorities in the foreign board of 

trade’s home country. 

(B) LINKED CONTRACTS.—The Commission may not permit a foreign board of trade to provide to the members of 

the foreign board of trade or other participants located in 

the United States direct access to the electronic trading 

and order-matching system of the foreign board of trade 

with respect to an agreement, contract, or transaction that 

settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on 

a registered entity, unless the Commission determines 

that— 

(i) the foreign board of trade makes public daily 

trading information regarding the agreement, contract, or transaction that is comparable to the daily 

trading information published by the registered entity 

for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign 

board of trade settles; and 

(ii) the foreign board of trade (or the foreign futures 

authority that oversees the foreign board of trade)— 

(I) adopts position limits (including related 

hedge exemption provisions) for the agreement, 

contract, or transaction that are comparable to the 

position limits (including related hedge exemption 

provisions) adopted by the registered entity for 

the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; 


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(II) has the authority to require or direct market participants to limit, reduce, or liquidate any 

position the foreign board of trade (or the foreign 

futures authority that oversees the foreign board 

of trade) determines to be necessary to prevent or 

reduce the threat of price manipulation, excessive 

speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; 

(III) agrees to promptly notify the Commission, 

with regard to the agreement, contract, or transaction that settles against any price (including the 

daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, of 

any change regarding— 

(aa) the information that the foreign board 

of trade will make publicly available; 

(bb) the position limits that the foreign 

board of trade or foreign futures authority 

will adopt and enforce; 

(cc) the position reductions required to prevent manipulation, excessive speculation as 

described in section 4a, price distortion, or 

disruption of delivery or the cash settlement 

process; and 

(dd) any other area of interest expressed by 

the Commission to the foreign board of trade 

or foreign futures authority; 

(IV) provides information to the Commission regarding large trader positions in the agreement, 

contract, or transaction that is comparable to the 

large trader position information collected by the 

Commission for the 1 or more contracts against 

which the agreement, contract, or transaction 

traded on the foreign board of trade settles; and 

(V) provides the Commission such information 

as is necessary to publish reports on aggregate 

trader positions for the agreement, contract, or 

transaction traded on the foreign board of trade 

that are comparable to such reports on aggregate 

trader positions for the 1 or more contracts 

against which the agreement, contract, or transaction traded on the foreign board of trade settles. 

(C) EXISTING FOREIGN BOARDS OF TRADE.—Subparagraphs (A) and (B) shall not be effective with respect to 

any foreign board of trade to which, prior to the date of enactment of this paragraph, the Commission granted direct 

access permission until the date that is 180 days after that 

date of enactment. 

(2) PERSONS LOCATED IN THE UNITED STATES.— (A) IN GENERAL.—The Commission may adopt rules and 

regulations proscribing fraud and requiring minimum financial standards, the disclosure of risk, the filing of reports, the keeping of books and records, the safeguarding 

of customers’ funds, and registration with the Commission 


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by any person located in the United States, its territories 

or possessions, who engages in the offer or sale of any contract of sale of a commodity for future delivery that is 

made or to be made on or subject to the rules of a board 

of trade, exchange, or market located outside the United 

States, its territories or possessions. 

(B) DIFFERENT REQUIREMENTS.—Rules and regulations 

described in subparagraph (A) may impose different requirements for such persons depending upon the particular 

foreign board of trade, exchange, or market involved. 

(C) PROHIBITION.—Except as provided in paragraphs (1) 

and (2), no rule or regulation may be adopted by the Commission under this subsection that— 

(i) requires Commission approval of any contract, 

rule, regulation, or action of any foreign board of 

trade, exchange, or market, or clearinghouse for such 

board of trade, exchange, or market; or 

(ii) governs in any way any rule or contract term or 

action of any foreign board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market. 

(c)(1) In order to promote responsible economic or financial innovation and fair competition, the Commission by rule, regulation, or 

order, after notice and opportunity for hearing, may (on its own initiative or on application of any person, including any board of trade 

designated øor registered¿ as a contract market øor derivatives 

transaction execution facility¿ for transactions for future delivery 

in any commodity under section 5 of this Act) exempt any agreement, contract, or transaction (or class thereof) that is otherwise 

subject to subsection (a) (including any person or class of persons 

offering, entering into, rendering advice or rendering other services 

with respect to, the agreement, contract, or transaction), either unconditionally or on stated terms or conditions or for stated periods 

and either retroactively or prospectively, or both, from any of the 

requirements of subsection (a), or from any other provision of this 

Act (except subparagraphs (C)(ii) and (D) of section 2(a)(1), except 

that— 

(A) unless the Commission is expressly authorized by any 

provision described in this subparagraph to grant exemptions, 

or except as necessary to effectuate the purposes of the Commodity End-User Relief Act, with respect to amendments made 

by subtitle A of the Wall Street Transparency and Accountability Act of 2010— 

(i) with respect to— 

(I) paragraphs (2), (3), (4), (5), and ø(7), paragraph 

(18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), 

(39), (41), (42), (46), (47), (48), and (49)¿ (8), paragraph 

(19)(A)(vii)(III), paragraphs (24), (25), (32), (33), (39), 

(40), (42), (43), (47), (48), (49), and (50) of section 1a, 

and sections 2(a)(13), 2(c)(1)(D), 4a(a), 4a(b), 4d(c), 

4d(d), 4r, 4s, 5b(a), 5b(b), 5(d), 5(g), 5(h), 5b(c), 5b(i), 

8e, and 21; and 

(II) section 206(e) of the Gramm-Leach-Bliley Act 

(Public Law 106–102; 15 U.S.C. 78c note); and 


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(ii) in sections 721(c) and 742 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act; and 

(B) the Commission and the Securities and Exchange Commission may by rule, regulation, or order jointly exclude any 

agreement, contract, or transaction from section 2(a)(1)(D)) if 

the Commissions determine that the exemption would be consistent with the public interest. 

(2) The Commission shall not grant any exemption under paragraph (1) from any of the requirements of subsection (a) unless the 

Commission determines that— 

(A) the requirement should not be applied to the agreement, 

contract, or transaction for which the exemption is sought and 

that the exemption would be consistent with the public interest 

and the purposes of this Act; and 

(B) the agreement, contract, or transaction— 

(i) will be entered into solely between appropriate persons; and 

(ii) will not have a material adverse effect on the ability 

of the Commission or any contract market or derivatives 

transaction execution facility to discharge its regulatory or 

self-regulatory duties under this Act. 

(3) For purposes of this subsection, the term ‘‘appropriate person’’ 

shall be limited to the following persons or classes thereof: 

(A) A bank or trust company (acting in an individual or fiduciary capacity). 

(B) A savings association. 

(C) An insurance company. 

(D) An investment company subject to regulation under the 

Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.). 

(E) A commodity pool formed or operated by a person subject 

to regulation under this Act. 

(F) A corporation, partnership, proprietorship, organization, 

trust, or other business entity with a net worth exceeding 

$1,000,000 or total assets exceeding $5,000,000, or the obligations of which under the agreement, contract or transaction are 

guaranteed or otherwise supported by a letter of credit or 

keepwell, support, or other agreement by any such entity or by 

an entity referred to in subparagraph (A), (B), (C), (H), (I), or 

(K) of this paragraph. 

(G) An employee benefit plan with assets exceeding 

$1,000,000, or whose investment decisions are made by a bank, 

trust company, insurance company, investment adviser registered under the Investment Advisers Act of 1940 (15 U.S.C. 

80a–1 et seq.), or a commodity trading advisor subject to regulation under this Act. 

(H) Any governmental entity (including the United States, 

any østate¿ State, or any foreign government) or political subdivision thereof, or any multinational or supranational entity 

or any instrumentality, agency, or department of any of the 

foregoing. 

(I) A broker-dealer subject to regulation under the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et seq.) acting on its own 

behalf or on behalf of another appropriate person. 


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(J) A futures commission merchant, floor broker, or floor 

trader subject to regulation under this Act acting on its own 

behalf or on behalf of another appropriate person. 

(K) Such other persons that the Commission determines to 

be appropriate in light of their financial or other qualifications, 

or the applicability of appropriate regulatory protections. 

(4) During the pendency of an application for an order granting 

an exemption under paragraph (1), the Commission may limit the 

public availability of any information received from the applicant 

if the applicant submits a written request to limit disclosure contemporaneous with the application, and the Commission determines that— 

(A) the information sought to be restricted constitutes a 

trade secret; or 

(B) public disclosure of the information would result in material competitive harm to the applicant. 

(5) The Commission may— 

(A) promptly following the enactment of this subsection, or 

upon application by any person, exercise the exemptive authority granted under paragraph (1) with respect to classes of hybrid instruments that are predominantly securities or depository instruments, to the extent that such instruments may be 

regarded as subject to the provisions of this Act; or 

(B) promptly following the enactment of this subsection, or 

upon application by any person, exercise the exemptive authority granted under paragraph (1) effective as of October 23, 

1974, with respect to classes of swap agreements (as defined in 

section 101 of title 11, United States Code) that are not part 

of a fungible class of agreements that are standardized as to 

their material economic terms, to the extent that such agreements may be regarded as subject to the provisions of this Act. 

Any exemption pursuant to this paragraph shall be subject to such 

terms and conditions as the Commission shall determine to be appropriate pursuant to paragraph (1). 

(6) If the Commission determines that the exemption would 

be consistent with the public interest and the purposes of this 

Act, the Commission shall, in accordance with paragraphs (1) 

and (2), exempt from the requirements of this Act an agreement, contract, or transaction that is entered into— 

(A) pursuant to a tariff or rate schedule approved or permitted to take effect by the Federal Energy Regulatory 

Commission; 

(B) pursuant to a tariff or rate schedule establishing 

rates or charges for, or protocols governing, the sale of 

electric energy approved or permitted to take effect by the 

regulatory authority of the State or municipality having 

jurisdiction to regulate rates and charges for the sale of 

electric energy within the State or municipality; or 

(C) between entities described in section 201(f) of the 

Federal Power Act (16 U.S.C. 824(f)). 

(d) The granting of an exemption under this section shall not affect the authority of the Commission under any other provision of 

this Act to conduct investigations in order to determine compliance 

with the requirements or conditions of such exemption or to take 

enforcement action for any violation of any provision of this Act or 


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any rule, regulation or order thereunder caused by the failure to 

comply with or satisfy such conditions or requirements. 

(e) LIABILITY OF REGISTERED PERSONS TRADING ON A FOREIGN

BOARD OF TRADE.— (1) IN GENERAL.—A person registered with the Commission, 

or exempt from registration by the Commission, under this Act 

may not be found to have violated subsection (a) with respect 

to a transaction in, or in connection with, a contract of sale of 

a commodity for future delivery if the person— 

(A) has reason to believe that the transaction and the 

contract is made on or subject to the rules of a foreign 

board of trade that is— 

(i) legally organized under the laws of a foreign 

country; 

(ii) authorized to act as a board of trade by a foreign 

futures authority; and 

(iii) subject to regulation by the foreign futures authority; and 

(B) has not been determined by the Commission to be 

operating in violation of subsection (a). 

(2) RULE OF CONSTRUCTION.—Nothing in this subsection 

shall be construed as implying or creating any presumption 

that a board of trade, exchange, or market is located outside 

the United States, or its territories or possessions, for purposes 

of subsection (a). 

SEC. 4a. (a) 

(1) IN GENERAL.—Excessive speculation in any commodity 

under contracts of sale of such commodity for future delivery 

made on or subject to the rules of contract markets øor derivatives transaction execution facilities¿, or swaps that perform or 

affect a significant price discovery function with respect to registered entities causing sudden or unreasonable fluctuations or 

unwarranted changes in the price of such commodity, is an 

undue and unnecessary burden on interstate commerce in such 

commodity. For the purpose of diminishing, eliminating, or 

preventing such burden, the Commission shall, from time to 

time, after due notice and opportunity for hearing, by rule, regulation, or order, proclaim and fix such limits on the amounts 

of trading which may be done or positions which may be held 

by any person, including any group or class of traders, under 

contracts of sale of such commodity for future delivery on or 

subject to the rules of any contract market øor derivatives 

transaction execution facility¿, swaps traded on or subject to 

the rules of a designated contract market or a swap execution 

facility, or swaps not traded on or subject to the rules of a designated contract market or a swap execution facility that performs a significant price discovery function with respect to a 

registered entity, as the Commission finds are necessary to diminish, eliminate, or prevent such burden. In determining 

whether any person has exceeded such limits, the positions 

held and trading done by any persons directly or indirectly controlled by such person shall be included with the positions held 

and trading done by such person; and further, such limits upon 

positions and trading shall apply to positions held by, and 

trading done by, two or more persons acting pursuant to an exVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00155 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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pressed or implied agreement or understanding, the same as if 

the positions were held by, or the trading were done by, a single person. Nothing in this section shall be construed to prohibit the Commission from fixing different trading or position 

limits for different commodities, markets, futures, or delivery 

months, or for different number of days remaining until the 

last day of trading in a contract, or different trading limits for 

buying and selling operations, or different limits for the purposes of paragraphs (1) and (2) of subsection (b) of this section, 

or from exempting transactions normally known to the trade as 

‘‘spreads’’ or ‘‘straddles’’ or ‘‘arbitrage’’ or from fixing limits applying to such transactions or positions different from limits 

fixed for other transactions or positions. The word ‘‘arbitrage’’ 

in domestic markets shall be defined to mean the same as a 

‘‘spread’’ or ‘‘straddle’’. The Commission is authorized to define 

the term ‘‘international arbitrage’’. 

(2) ESTABLISHMENT OF LIMITATIONS.— 

(A) IN GENERAL.—In accordance with the standards set 

forth in paragraph (1) of this subsection and consistent 

with the good faith exception cited in subsection (b)(2), 

with respect to physical commodities other than excluded 

commodities as defined by the Commission, the Commission shall by rule, regulation, or order establish limits on 

the amount of positions, as appropriate, other than bona 

fide hedge positions, that may be held by any person with 

respect to contracts of sale for future delivery or with respect to options on the contracts or commodities traded on 

or subject to the rules of a designated contract market. 

(B) TIMING.— 

(i) EXEMPT COMMODITIES.—For exempt commodities, 

the limits required under subparagraph (A) shall be 

established within 180 days after the date of the enactment of this paragraph. 

(ii) AGRICULTURAL COMMODITIES.—For agricultural 

commodities, the limits required under subparagraph 

(A) shall be established within 270 days after the date 

of the enactment of this paragraph. 

(C) GOAL.—In establishing the limits required under 

subparagraph (A), the Commission shall strive to ensure 

that trading on foreign boards of trade in the same commodity will be subject to comparable limits and that any 

limits to be imposed by the Commission will not cause 

price discovery in the commodity to shift to trading on the 

foreign boards of trade. 

(3) SPECIFIC LIMITATIONS.—In establishing the limits required in paragraph (2), the Commission, as appropriate, shall 

set limits— 

(A) on the number of positions that may be held by any 

person for the spot month, each other month, and the aggregate number of positions that may be held by any person for all months; and 

(B) to the maximum extent practicable, in its discretion— 

(i) to diminish, eliminate, or prevent excessive speculation as described under this section; 


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(ii) to deter and prevent market manipulation, 

squeezes, and corners; 

(iii) to ensure sufficient market liquidity for bona 

fide hedgers; and 

(iv) to ensure that the price discovery function of the 

underlying market is not disrupted. 

(4) SIGNIFICANT PRICE DISCOVERY FUNCTION.—In making a 

determination whether a swap performs or affects a significant 

price discovery function with respect to regulated markets, the 

Commission shall consider, as appropriate: 

(A) PRICE LINKAGE.—The extent to which the swap uses 

or otherwise relies on a daily or final settlement price, or 

other major price parameter, of another contract traded on 

a regulated market based upon the same underlying commodity, to value a position, transfer or convert a position, 

financially settle a position, or close out a position. 

(B) ARBITRAGE.—The extent to which the price for the 

swap is sufficiently related to the price of another contract 

traded on a regulated market based upon the same underlying commodity so as to permit market participants to effectively arbitrage between the markets by simultaneously 

maintaining positions or executing trades in the swaps on 

a frequent and recurring basis. 

(C) MATERIAL PRICE REFERENCE.—The extent to which, 

on a frequent and recurring basis, bids, offers, or transactions in a contract traded on a regulated market are directly based on, or are determined by referencing, the price 

generated by the swap. 

(D) MATERIAL LIQUIDITY.—The extent to which the volume of swaps being traded in the commodity is sufficient 

to have a material effect on another contract traded on a 

regulated market. 

(E) OTHER MATERIAL FACTORS.—Such other material factors as the Commission specifies by rule or regulation as 

relevant to determine whether a swap serves a significant 

price discovery function with respect to a regulated market. 

(5) ECONOMICALLY EQUIVALENT CONTRACTS.— 

(A) Notwithstanding any other provision of this section, 

the Commission shall establish limits on the amount of positions, including aggregate position limits, as appropriate, 

other than bona fide hedge positions, that may be held by 

any person with respect to swaps that are economically 

equivalent to contracts of sale for future delivery or to options on the contracts or commodities traded on or subject 

to the rules of a designated contract market subject to 

paragraph (2). 

(B) In establishing limits pursuant to subparagraph (A), 

the Commission shall— 

(i) develop the limits concurrently with limits established under paragraph (2), and the limits shall have 

similar requirements as under paragraph (3)(B); and 

(ii) establish the limits simultaneously with limits 

established under paragraph (2). 


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(6) AGGREGATE POSITION LIMITS.—The Commission shall, by 

rule or regulation, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions in contracts based upon the same underlying commodity (as defined by the Commission) that may be held by 

any person, including any group or class of traders, for each 

month across— 

(A) contracts listed by designated contract markets; 

(B) with respect to an agreement contract, or transaction 

that settles against any price (including the daily or final 

settlement price) of 1 or more contracts listed for trading 

on a registered entity, contracts traded on a foreign board 

of trade that provides members or other participants located in the United States with direct access to its electronic trading and order matching system; and 

(C) swap contracts that perform or affect a significant 

price discovery function with respect to regulated entities. 

(7) EXEMPTIONS.—The Commission, by rule, regulation, or 

order, may exempt, conditionally or unconditionally, any person or class of persons, any swap or class of swaps, any contract of sale of a commodity for future delivery or class of such 

contracts, any option or class of options, or any transaction or 

class of transactions from any requirement it may establish 

under this section with respect to position limits. 

(b) The Commission shall, in such rule, regulation, or order, fix 

a reasonable time (not to exceed ten days) after the promulgation 

of the rule, regulation, or order; after which, and until such rule, 

regulation, or order is suspended, modified, or revoked, it shall be 

unlawful for any person— 

(1) directly or indirectly to buy or sell, or agree to buy or sell, 

under contracts of sale of such commodity for future delivery 

on or subject to the rules of the contract market or markets, 

or swap execution facility or facilities with respect to a significant price discovery contract, to which the rule, regulation, or 

order applies, any amount of such commodity during any one 

business day in excess of any trading limit fixed for one business day by the Commission in such rule, regulation, or order 

for or with respect to such commodity; or 

(2) directly or indirectly to hold or control a net long or a net 

short position in any commodity for future delivery on or subject to the rules of any contract market or swap execution facility with respect to a significant price discovery contract in excess of any position limit fixed by the Commission for or with 

respect to such commodity: Provided, That such position limit 

shall not apply to a position acquired in good faith prior to the 

effective date of such rule, regulation, or order. 

(c)(1) No rule, regulation, or order issued under subsection (a) of 

this section shall apply to transactions or positions which are 

shown to be bona fide hedging transactions or positions, as such 

terms shall be defined by the Commission by rule, regulation, or 

order consistent with the purposes of this Act. Such terms ømay¿ 

shall be defined to permit producers, purchasers, sellers, middlemen, and users of a commodity or a product derived therefrom to 

hedge their legitimate anticipated business needs for that period of 

time into the øfuture for which¿ future, to be determined by the 


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Commission, for which either an appropriate swap is available or 

an appropriate futures contract is open and available on an exchange. To determine the adequacy of this Act and the powers of 

the Commission acting thereunder to prevent unwarranted price 

pressures by large hedgers, the Commission shall monitor and analyze the trading activities of the largest hedgers, as determined by 

the Commission, operating in the cattle, hog, or pork belly markets 

and shall report its findings and recommendations to the Senate 

Committee on Agriculture, Nutrition, and Forestry and the House 

Committee on Agriculture in its annual reports for at least two 

years following the date of enactment of the Futures Trading Act 

of 1982. 

(2) For the purposes of implementation of øsubsection (a)(2) 

for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as¿ paragraphs (2) and (5) of subsection (a) for swaps, contracts of sale 

for future delivery, or options on the contracts or commodities, 

a bona fide hedging transaction or position is a transaction or 

position that— 

(A)(i) represents a substitute for transactions made or to 

be made or positions taken or to be taken at a later time 

in a physical marketing channel; 

(ii) is economically appropriate to the reduction øof 

risks¿ or management of current or anticipated risks in the 

conduct and management of a commercial enterprise; and 

(iii) arises from the potential change in the value of— 

(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising; 

(II) liabilities that a person owns or anticipates incurring; or 

(III) services that a person provides, purchases, or 

anticipates providing or purchasing; or 

(B) reduces risks attendant to a position resulting from 

a swap that— 

(i) was executed opposite a counterparty for which 

the transaction would qualify as a bona fide hedging 

transaction pursuant to subparagraph (A); or 

(ii) meets the requirements of subparagraph (A). 

(3) The Commission may further define, by rule or regulation, 

what constitutes a bona fide hedging transaction, provided that 

the rule or regulation is consistent with the requirements of subparagraphs (A) and (B) of paragraph (2). 

(d) This section shall apply to a person that is registered as a futures commission merchant, an introducing broker, or a floor 

broker under authority of this Act only to the extent that transactions made by such person are made on behalf of or for the account or benefit of such person. This section shall not apply to 

transactions made by, or on behalf of, or at the direction of, the 

United States, or a duly authorized agency thereof. 

(e) Nothing in this section shall prohibit or impair the adoption 

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istered by the Commission øor by any electronic trading facility¿ 

of any bylaw, rule, regulation, or resolution fixing limits on the 

amount of trading which may be done or positions which may be 

held by any person under contracts of sale of any commodity for 

future delivery traded on or subject to the rules of such contract 

market øor derivatives transaction execution facility¿ øor on an 

electronic trading facility¿, or under options on such contracts or 

commodities traded on or subject to the rules of such contract 

marketø, derivatives transaction execution facility,¿øor electronic 

trading facility¿ or such board of trade: Provided, That if the Commission shall have fixed limits under this section for any contract 

or under section 4c of this Act for any commodity option, then the 

limits fixed by the bylaws, rules, regulations, and resolutions 

adopted by such contract marketø, derivatives transaction execution facility,¿øor electronic trading facility¿ or such board of trade 

shall not be higher than the limits fixed by the Commission. It 

shall be a violation of this Act for any person to violate any bylaw, 

rule, regulation, or resolution of any contract marketø, derivatives 

transaction execution facility,¿ or other board of trade licensed, 

designated, or registered by the Commission øor electronic trading 

facility with respect to a significant price discovery contract¿ fixing 

limits on the amount of trading which may be done or positions 

which may be held by any person under contracts of sale of any 

commodity for future delivery or under options on such contracts 

or commodities, if such bylaw, rule, regulation, or resolution has 

been approved by the Commission or certified by a registered entity 

pursuant to section 5c(c)(1): Provided, That the provisions of section 9(a)(5) of this Act shall apply only to those who knowingly violate such limits. 

* * * * * * * 

SEC. 4c. PROHIBITED TRANSACTIONS. 

(a) IN GENERAL.— (1) PROHIBITION.—It shall be unlawful for any person to offer 

to enter into, enter into, or confirm the execution of a transaction described in paragraph (2) involving the purchase or 

sale of any commodity for future delivery (or any option on 

such a transaction or option on a commodity) or swap if the 

transaction is used or may be used to— 

(A) hedge any transaction in interstate commerce in the 

commodity or the product or byproduct of the commodity; 

(B) determine the price basis of any such transaction in 

interstate commerce in the commodity; or 

(C) deliver any such commodity sold, shipped, or received in interstate commerce for the execution of the 

transaction. 

(2) TRANSACTION.—A transaction referred to in paragraph (1) 

is a transaction that— 

(A)(i) is, of the character of, or is commonly known to the 

trade as, a ‘‘wash sale’’ or ‘‘accommodation trade’’; or 

(ii) is a fictitious sale; or 

(B) is used to cause any price to be reported, registered, 

or recorded that is not a true and bona fide price. 

(3) CONTRACT OF SALE.—It shall be unlawful for any employee or agent of any department or agency of the Federal 


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Government or any Member of Congress or employee of Congress (as such terms are defined under section 2 of the STOCK 

Act) or any judicial officer or judicial employee (as such terms 

are defined, respectively, under section 2 of the STOCK Act) 

who, by virtue of the employment or position of the Member, 

officer, employee or agent, acquires information that may affect 

or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency 

of the Federal Government holding or creating the information 

or by Congress or by the judiciary in a manner which makes 

it generally available to the trading public, or disclosed in a 

criminal, civil, or administrative hearing, or in a congressional, 

administrative, or Government Accountability Office report, 

hearing, audit, or investigation, to use the information in his 

personal capacity and for personal gain to enter into, or offer 

to enter into— 

(A) a contract of sale of a commodity for future delivery 

(or option on such a contract); 

(B) an option (other than an option executed or traded 

on a national securities exchange registered pursuant to 

section 6(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78f(a)); or 

(C) a swap. 

(4) NONPUBLIC INFORMATION.— (A) IMPARTING OF NONPUBLIC INFORMATION.—It shall be 

unlawful for any employee or agent of any department or 

agency of the Federal Government or any Member of Congress or employee of Congress or any judicial officer or judicial employee who, by virtue of the employment or position of the Member, officer, employee or agent, acquires information that may affect or tend to affect the price of any 

commodity in interstate commerce, or for future delivery, 

or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or 

by the judiciary in a manner which makes it generally 

available to the trading public, or disclosed in a criminal, 

civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, 

hearing, audit, or investigation, to impart the information 

in his personal capacity and for personal gain with intent 

to assist another person, directly or indirectly, to use the 

information to enter into, or offer to enter into— 

(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78f(a)); or 

(iii) a swap. 

(B) KNOWING USE.—It shall be unlawful for any person 

who receives information imparted by any employee or 

agent of any department or agency of the Federal Government or any Member of Congress or employee of Congress 


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or any judicial officer or judicial employee as described in 

subparagraph (A) to knowingly use such information to 

enter into, or offer to enter into— 

(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78f(a)); or 

(iii) a swap. 

(C) THEFT OF NONPUBLIC INFORMATION.—It shall be unlawful for any person to steal, convert, or misappropriate, 

by any means whatsoever, information held or created by 

any department or agency of the Federal Government or 

by Congress or by the judiciary that may affect or tend to 

affect the price of any commodity in interstate commerce, 

or for future delivery, or any swap, where such person 

knows, or acts in reckless disregard of the fact, that such 

information has not been disseminated by the department 

or agency of the Federal Government holding or creating 

the information or by Congress or by the judiciary in a 

manner which makes it generally available to the trading 

public, or disclosed in a criminal, civil, or administrative 

hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to use such information, or to impart such information with the intent to assist another person, directly 

or indirectly, to use such information to enter into, or offer 

to enter into— 

(i) a contract of sale of a commodity for future delivery (or option on such a contract); 

(ii) an option (other than an option executed or traded on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78f(a)); or 

(iii) a swap, provided, however, that nothing in this 

subparagraph shall preclude a person that has provided information concerning, or generated by, the 

person, its operations or activities, to any employee or 

agent of any department or agency of the Federal Government, to Congress, any Member of Congress, any 

employee of Congress, any judicial officer, or any judicial employee, voluntarily or as required by law, from 

using such information to enter into, or offer to enter 

into, a contract of sale, option, or swap described in 

clauses (i), (ii), or (iii). 

(5) DISRUPTIVE PRACTICES.—It shall be unlawful for any person to engage in any trading, practice, or conduct on or subject 

to the rules of a registered entity that— 

(A) violates bids or offers; 

(B) demonstrates intentional or reckless disregard for 

the orderly execution of transactions during the closing period; or 


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(C) is, is of the character of, or is commonly known to 

the trade as, ‘‘spoofing’’ (bidding or offering with the intent 

to cancel the bid or offer before execution). 

(6) RULEMAKING AUTHORITY.—The Commission may make 

and promulgate such rules and regulations as, in the judgment 

of the Commission, are reasonably necessary to prohibit the 

trading practices described in paragraph (5) and any other 

trading practice that is disruptive of fair and equitable trading. 

(7) USE OF SWAPS TO DEFRAUD.—It shall be unlawful for any 

person to enter into a swap knowing, or acting in reckless disregard of the fact, that its counterparty will use the swap as 

part of a device, scheme, or artifice to defraud any third party. 

(b) No person shall offer to enter into, enter into or confirm the 

execution of, any transaction involving any commodity regulated 

under this Act which is of the character of, or is commonly known 

to the trade as, an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, 

‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’, contrary to 

any rule, regulation, or order of the Commission prohibiting any 

such transaction or allowing any such transaction under such 

terms and conditions as the Commission shall prescribe. Any such 

order, rule, or regulation may be made only after notice and opportunity for hearing, and the Commission may set different terms 

and conditions for different markets. 

ø(c) Not later than 90 days after the date of the enactment of the 

Futures Trading Act of 1986, the Commission shall issue regulations— 

ø(1) to eliminate the pilot status of its program for commodity option transactions involving the trading of options on 

contract markets, including any numerical restrictions on the 

number of commodities or option contracts for which a contract 

market may be designated; and 

ø(2) otherwise to continue to permit the trading of such commodity options under such terms and conditions that the Commission from time to time may prescribe. 

ø(d) Notwithstanding the provisions of subsection (c) of this section— 

ø(1) any person domiciled in the United States who on May 

1, 1978, was in the business of granting an option on a physical commodity, other than a commodity specifically set forth 

in section 2(a) of this Act prior to enactment of the Commodity 

Futures Trading Commission Act of 1974, and was in the business of buying, selling, producing, or otherwise using that commodity, may continue to grant or issue options on that commodity in accordance with Commission regulations in effect on 

August 17, 1978, until thirty days after the effective date of 

regulations issued by the Commission under clause (2) of this 

subsection: Provided, That if such person files an application 

for registration under the regulations issued under clause (2) 

of this subsection within thirty days after the effective date of 

such regulations, that person may continue to grant or issue 

options pending a final determination by the Commission on 

the application; and 

ø(2) the Commission shall issue regulations that permit 

grantors and futures commission merchants to offer to enter 

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tion transaction on a physical commodity subject to the provisions of subsection (b) of this section, other than a commodity 

specifically set forth in section 2(a) of this Act prior to enactment of the Commodity Futures Trading Commission Act of 

1974, if— 

ø(A) the grantor is a person domiciled in the United 

States who— 

ø(i) is in the business of buying, selling, producing, 

or otherwise using the underlying commodity; 

ø(ii) at all times has a net worth of at least 

$5,000,000 certified annually by an independent public 

accountant using generally accepted accounting principles; 

ø(iii) notifies the Commission and every futures 

commission merchant offering the grantor’s option if 

the grantor knows or has reason to believe that the 

grantor’s net worth has fallen below $5,000,000; 

ø(iv) segregates daily, exclusively for the benefit of 

purchasers, money, exempted securities (within the 

meaning of section 3(a)(12) of the Securities Exchange 

Act of 1934 (15 U.S.C. 78c(a)(12)), commercial paper, 

bankers’ acceptances, commercial bills, or 

unencumbered warehouse receipts, equal to an 

amount by which the value of each transaction exceeds the amount received or to be received by the 

grantor for such transaction; 

ø(v) provides an identification number for each 

transaction; and 

ø(vi) provides confirmation of all orders for such 

transactions executed, including the execution price 

and a transaction identification number; 

ø(B) the futures commission merchant is a person who— 

ø(i) has evidence that the grantor meets the requirements specified in subclause (A) of this clause; 

ø(ii) treats and deals with all money, securities, or 

property received from its customers as payment of 

the purchase price in connection with such transactions, as belonging to such customers until the expiration of the term of the option, or, if the customer exercises the option, until all rights of the customer 

under the commodity option transaction have been fulfilled; 

ø(iii) records each transaction in its customer’s name 

by the transaction identification number provided by 

the grantor; 

ø(iv) provides a disclosure statement to its customers, under regulations of the Commission, that discloses, among other things, all costs, including any 

markups or commissions involved in such transaction; 

and 

ø(C) the grantor and futures commission merchant comply with any additional uniform and reasonable terms and 

conditions the Commission may prescribe, including registration with the Commission. 


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The Commission may permit persons not domiciled in the United 

States to grant options under this subsection, other than options on 

a commodity specifically set forth in section 2(a) of this Act prior 

to enactment of the Commodity Futures Trading Commission Act 

of 1974, under such additional rules, regulations, and orders as the 

Commission may adopt to provide protection to purchasers that are 

substantially the equivalent of those applicable to grantors domiciled in the United States. The Commission may terminate the 

right of any person to grant, offer, or sell options under this subsection only after a hearing, including a finding that the continuation of such right is contrary to the public interest: Provided, That 

pending the completion of such termination proceedings, the Commission may suspend the right to grant, offer, or sell options of any 

person whose activities in the Commission’s judgment present a 

substantial risk to the public interest. 

ø(e) The Commission may adopt rules and regulations, after public notice and opportunity for a hearing on the record, prohibiting 

the granting, issuance, or sale of options permitted under subsection (d) of this section if the Commission determines that such 

options are contrary to the public interest.¿ 

(c) The Commission shall issue regulations to continue to permit 

the trading of options on contract markets under such terms and 

conditions that the Commission from time to time may prescribe. 

ø(f)¿ (d) Nothing in this Act shall be deemed to govern or in any 

way be applicable to any transaction in an option on foreign currency traded on a national securities exchange. 

ø(g)¿ (e) The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders 

for execution on the floor or subject to the rules of each contract 

market øor derivatives transaction execution facility¿ placed by a 

member of the contract market øor derivatives transaction execution facility¿ who is present on the floor at the time such order is 

placed. 

SEC. 4d. (a) (1) It shall be unlawful for any person to be a futures 

commission merchant unless— 

ø(1)¿ (A) such person shall have registered, under this 

Act, with the Commission as such futures commission merchant and such registration shall not have expired nor 

been suspended nor revoked; and 

ø(2)¿ (B) such person shall, whether a member or nonmember of a contract market øor derivatives transaction 

execution facility¿, treat and deal with all money, securities, and property received by such person to margin, guarantee, or secure the trades or contracts of any customer of 

such person, or accruing to such customer as the result of 

such trades or contracts, as belonging to such customer. 

Such money, securities, and property shall be separately 

accounted for and shall not be commingled with the funds 

of such commission merchant or be used to margin or 

guarantee the trades or contracts, or to secure or extend 

the credit, of any customer or person other than the one 

for whom the same are held: Provided, however, That such 

money, securities, and property of the customers of such 

futures commission merchant may, for convenience, be 

commingled and deposited in the same account or accounts 


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with any bank or trust company or with the clearing house 

organization of such contract market øor derivatives transaction execution facility¿, and that such share thereof as 

in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle the contracts or trades of such customers, or resulting market positions, with the clearing-house organization of such contract market øor derivatives transaction execution facility¿ 

or with any member of such contract market øor derivatives transaction execution facility¿, may be withdrawn 

and applied to such purposes, including the payment of 

commissions, brokerage, interest, taxes, storage, and other 

charges, lawfully accruing in connection with such contracts and trades: Provided further, That in accordance 

with such terms and conditions as the Commission may 

prescribe by rule, regulation, or order, such money, securities, and property of the customers of such futures commission merchant may be commingled and deposited as provided in this section with any other money, securities, and 

property received by such futures commission merchant 

and required by the Commission to be separately accounted for and treated and dealt with as belonging to the 

customers of such futures commission merchant: Provided 

further, That such money may be invested in obligations of 

the United States, in general obligations of any State or of 

any political subdivision thereof, and in obligations fully 

guaranteed as to principal and interest by the United 

States, such investments to be made in accordance with 

such rules and regulations and subject to such conditions 

as the Commission may prescribe. 

(2) Any rules or regulations requiring a futures commission 

merchant to maintain a residual interest in accounts held for 

the benefit of customers in amounts at least sufficient to exceed 

the sum of all uncollected margin deficits of such customers 

shall provide that a futures commission merchant shall meet its 

residual interest requirement as of the end of each business day 

calculated as of the close of business on the previous business 

day. 

(b) It shall be unlawful for any person, including but not limited 

to any clearing agency of a contract market øor derivatives transaction execution facility¿ and any depository, that has received any 

money, securities, or property for deposit in a separate account as 

provided in øparagraph (2) of this section¿ subsection (a)(2), to 

hold, dispose of, or use any such money, securities, or property as 

belonging to the depositing futures commission merchant or any 

person other than the customers of such futures commission merchant. 

(c) CONFLICTS OF INTEREST.—The Commission shall require that 

futures commission merchants and introducing brokers implement 

conflict-of-interest systems and procedures that— 

(1) establish structural and institutional safeguards to ensure that the activities of any person within the firm relating 

to research or analysis of the price or market for any commodity are separated by appropriate informational partitions 

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sons whose involvement in trading or clearing activities might 

potentially bias the judgment or supervision of the persons; 

and 

(2) address such other issues as the Commission determines 

to be appropriate. 

(d) DESIGNATION OF CHIEF COMPLIANCE OFFICER.—Each futures 

commission merchant shall designate an individual to serve as its 

Chief Compliance Officer and perform such duties and responsibilities as shall be set forth in regulations to be adopted by the Commission or rules to be adopted by a futures association registered 

under section 17. 

(e) Consistent with this Act, the Commission, in consultation 

with the Securities and Exchange Commission, shall issue such 

rules, regulations, or orders as are necessary to avoid duplicative 

or conflicting regulations applicable to any futures commission 

merchant registered with the Commission pursuant to section 4f(a) 

(except paragraph (2) thereof), that is also registered with the Securities and Exchange Commission pursuant to section 15(b) of the 

Securities Exchange Act (except paragraph (11) thereof), involving 

the application of— 

(1) section 8, section 15(c)(3), and section 17 of the Securities 

Exchange Act of 1934 and the rules and regulations thereunder related to the treatment of customer funds, securities, or 

property, maintenance of books and records, financial reporting 

or other financial responsibility rules (as defined in section 

3(a)(40) of the Securities Exchange Act of 1934), involving security futures products; and 

(2) similar provisions of this Act and the rules and regulations thereunder involving security futures products. 

(f) SWAPS.— 

(1) REGISTRATION REQUIREMENT.—It shall be unlawful for 

any person to accept any money, securities, or property (or to 

extend any credit in lieu of money, securities, or property) 

from, for, or on behalf of a swaps customer to margin, guarantee, or secure a swap cleared by or through a derivatives 

clearing organization (including money, securities, or property 

accruing to the customer as the result of such a swap), unless 

the person shall have registered under this Act with the Commission as a futures commission merchant, and the registration shall not have expired nor been suspended nor revoked. 

(2) CLEARED SWAPS.— 

(A) SEGREGATION REQUIRED.—A futures commission merchant shall treat and deal with all money, securities, and 

property of any swaps customer received to margin, guarantee, or secure a swap cleared by or though a derivatives 

clearing organization (including money, securities, or property accruing to the swaps customer as the result of such 

a swap) as belonging to the swaps customer. 

(B) COMMINGLING PROHIBITED.—Money, securities, and 

property of a swaps customer described in subparagraph 

(A) shall be separately accounted for and shall not be commingled with the funds of the futures commission merchant or be used to margin, secure, or guarantee any 

trades or contracts of any swaps customer or person other 

than the person for whom the same are held. 


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(3) EXCEPTIONS.— (A) USE OF FUNDS.— (i) IN GENERAL.—Notwithstanding paragraph (2), 

money, securities, and property of swap customers of 

a futures commission merchant described in paragraph (2) may, for convenience, be commingled and deposited in the same account or accounts with any bank 

or trust company or with a derivatives clearing organization. 

(ii) WITHDRAWAL.—Notwithstanding paragraph (2), 

such share of the money, securities, and property described in clause (i) as in the normal course of business shall be necessary to margin, guarantee, secure, 

transfer, adjust, or settle a cleared swap with a derivatives clearing organization, or with any member of 

the derivatives clearing organization, may be withdrawn and applied to such purposes, including the 

payment of commissions, brokerage, interest, taxes, 

storage, and other charges, lawfully accruing in connection with the cleared swap. 

(B) COMMISSION ACTION.—Notwithstanding paragraph 

(2), in accordance with such terms and conditions as the 

Commission may prescribe by rule, regulation, or order, 

any money, securities, or property of the swaps customers 

of a futures commission merchant described in paragraph 

(2) may be commingled and deposited in customer accounts 

with any other money, securities, or property received by 

the futures commission merchant and required by the 

Commission to be separately accounted for and treated 

and dealt with as belonging to the swaps customer of the 

futures commission merchant. 

(4) PERMITTED INVESTMENTS.—Money described in paragraph 

(2) may be invested in obligations of the United States, in general obligations of any State or of any political subdivision of 

a State, and in obligations fully guaranteed as to principal and 

interest by the United States, or in any other investment that 

the Commission may by rule or regulation prescribe, and such 

investments shall be made in accordance with such rules and 

regulations and subject to such conditions as the Commission 

may prescribe. 

(5) COMMODITY CONTRACT.—A swap cleared by or through a 

derivatives clearing organization shall be considered to be a 

commodity contract as such term is defined in section 761 of 

title 11, United States Code, with regard to all money, securities, and property of any swaps customer received by a futures 

commission merchant or a derivatives clearing organization to 

margin, guarantee, or secure the swap (including money, securities, or property accruing to the customer as the result of the 

swap). 

(6) PROHIBITION.—It shall be unlawful for any person, including any derivatives clearing organization and any depository institution, that has received any money, securities, or 

property for deposit in a separate account or accounts as provided in paragraph (2) to hold, dispose of, or use any such 

money, securities, or property as belonging to the depositing 


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futures commission merchant or any person other than the 

swaps customer of the futures commission merchant. 

(g) It shall be unlawful for any person to be an introducing 

broker unless such person shall have registered under this Act 

with the Commission as an introducing broker and such registration shall not have expired nor been suspended nor revoked. 

(h) øNotwithstanding subsection (a)(2)¿ Notwithstanding subsection (a)(1)(B) or the rules and regulations thereunder, and pursuant to an exemption granted by the Commission under section 

4(c) of this Act or pursuant to a rule or regulation, a futures commission merchant that is registered pursuant to section 4f(a)(1) of 

this Act and also registered as a broker or dealer pursuant to section 15(b)(1) of the Securities Exchange Act of 1934 may, pursuant 

to a portfolio margining program approved by the Securities and 

Exchange Commission pursuant to section 19(b) of the Securities 

Exchange Act of 1934, hold in a portfolio margining account carried 

as a securities account subject to section 15(c)(3) of the Securities 

Exchange Act of 1934 and the rules and regulations thereunder, a 

contract for the purchase or sale of a commodity for future delivery 

or an option on such a contract, and any money, securities or other 

property received from a customer to margin, guarantee or secure 

such a contract, or accruing to a customer as the result of such a 

contract. The Commission shall consult with the Securities and Exchange Commission to adopt rules to ensure that such transactions 

and accounts are subject to comparable requirements to the extent 

practical for similar products. 

SEC. 4e. It shall be unlawful for any person to act as floor trader 

in executing purchases and sales, or as floor broker in executing 

any orders for the purchase or sale, of any commodity for future 

delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market øor 

derivatives transaction execution facility¿ unless such person shall 

have registered, under this Act, with the Commission as such floor 

trader or floor broker and such registration shall not have expired 

nor been suspended nor revoked. 

SEC. 4f. (a)(1) Any person desiring to register as a futures commission merchant, introducing broker, floor broker, or floor trader 

hereunder shall be registered upon application to the Commission. 

The application shall be made in such form and manner as prescribed by the Commission, giving such information and facts as 

the Commission may deem necessary concerning the business in 

which the applicant is or will be engaged, including in the case of 

an application of a futures commission merchant or an introducing 

broker, the names and addresses of the managers of all branch offices, and the names of such officers and partners, if a partnership, 

and of such officers, directors, and stockholders, if a corporation, as 

the Commission may direct. Such person, when registered hereunder, shall likewise continue to report and furnish to the Commission the above-mentioned information and such other information 

pertaining to such person’s business as the Commission may require. Each registration shall expire on December 31 of the year for 

which issued or at such other time, not less than one year from the 

date of issuance, as the Commission may by rule, regulation, or 

order prescribe, and shall be renewed upon application therefor unless the registration has been suspended (and the period of such 


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suspension has not expired) or revoked pursuant to the provisions 

of this Act. 

(2) Notwithstanding paragraph (1), and except as provided in 

paragraph (3), any broker or dealer that is registered with the Securities and Exchange Commission shall be registered as a futures 

commission merchant or introducing broker, as applicable, if— 

(A) the broker or dealer limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders 

on behalf of others involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or registered derivatives transaction execution facility to security futures products; 

(B) the broker or dealer files written notice with the Commission in such form as the Commission, by rule, may prescribe containing such information as the Commission, by rule, 

may prescribe as necessary or appropriate in the public interest or for the protection of investors; 

(C) the registration of the broker or dealer is not suspended 

pursuant to an order of the Securities and Exchange Commission; and 

(D) the broker or dealer is a member of a national securities 

association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934. 

The registration shall be effective contemporaneously with the submission of notice, in written or electronic form, to the Commission. 

(3) A floor broker or floor trader shall be exempt from the registration requirements of section 4e and paragraph (1) of this subsection if— 

(A) the floor broker or floor trader is a broker or dealer registered with the Securities and Exchange Commission; 

(B) the floor broker or floor trader limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of 

orders on behalf of others involving any contracts of sale of any 

commodity for future delivery, on or subject to the rules of any 

contract market to security futures products; and 

(C) the registration of the floor broker or floor trader is not 

suspended pursuant to an order of the Securities and Exchange Commission. 

(4)(A) A broker or dealer that is registered as a futures commission merchant or introducing broker pursuant to paragraph (2), or 

that is a floor broker or floor trader exempt from registration pursuant to paragraph (3), shall be exempt from the following provisions of this Act and the rules thereunder: 

(i) Subsections (b)ø, (d), (e), and (g)¿ and (e) of section 4c. 

(ii) Sections 4d, 4e, and 4h. 

(iii) Subsections (b) and (c) of this section. 

(iv) Section 4j. 

(v) Section 4k(1). 

(vi) Section 4p. 

(vii) Section 6d. 

(viii) Subsections (d) and (g) of section 8. 

(ix) Section 16. 

(B)(i) Except as provided in clause (ii) of this subparagraph, but 

notwithstanding any other provision of this Act, the Commission, 

by rule, regulation, or order, may conditionally or unconditionally 


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exempt any broker or dealer subject to the registration requirement 

of paragraph (2), or any broker or dealer exempt from registration 

pursuant to paragraph (3), from any provision of this Act or of any 

rule or regulation thereunder, to the extent the exemption is necessary or appropriate in the public interest and is consistent with 

the protection of investors. 

(ii) The Commission shall, by rule or regulation, determine the 

procedures under which an exemptive order under this section 

shall be granted and may, in its sole discretion, decline to entertain 

any application for an order of exemption under this section. 

(C)(i) A broker or dealer that is registered as a futures commission merchant or introducing broker pursuant to paragraph (2) or 

an associated person thereof, or that is a floor broker or floor trader exempt from registration pursuant to paragraph (3), shall not be 

required to become a member of any futures association registered 

under section 17. 

(ii) No futures association registered under section 17 shall limit 

its members from carrying an account, accepting an order, or 

transacting business with a broker or dealer that is registered as 

a futures commission merchant or introducing broker pursuant to 

paragraph (2) or an associated person thereof, or that is a floor 

broker or floor trader exempt from registration pursuant to paragraph (3). 

(b) Notwithstanding any other provisions of this Act, no person 

desiring to register as futures commission merchant or as introducing broker shall be so registered unless he meets such minimum financial requirements as the Commission may by regulation 

prescribe as necessary to insure his meeting his obligations as a 

registrant, and each person so registered shall at all times continue 

to meet such prescribed minimum financial requirements: Provided, That such minimum financial requirements will be considered met if the applicant for registration or registrant is a member 

of a contract market øor derivatives transaction execution facility¿ 

and conforms to minimum financial standards and related reporting requirements set by such contract market øor derivatives transaction execution facility¿ in its bylaws, rules, regulations, or resolutions and approved by the Commission as adequate to effectuate 

the purposes of this subsection. 

(c)(1) As used in this subsection: 

(i) The term ‘‘affiliated person’’ means any person directly or 

indirectly controlling, controlled by, or under common control 

with a futures commission merchant, as the Commission, by 

rule or regulation, may determine will effectuate the purposes 

of this subsection. 

(ii) The term ‘‘Federal banking agency’’ shall have the same 

meaning as the term ‘‘appropriate Federal banking agency’’ in 

section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 

1813(q)). 

(2)(A) Each registered futures commission merchant shall obtain 

such information and make and keep such records as the Commission, by rule or regulation, prescribes concerning the registered futures commission merchant’s policies, procedures, or systems for 

monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons, other 

than a natural person. 


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(B) The records required under subparagraph (A) shall describe, 

in the aggregate, each of the futures and other financial activities 

conducted by, and the customary sources of capital and funding of, 

those of its affiliated persons whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant, including its 

adjusted net capital, its liquidity, or its ability to conduct or finance 

its operations. 

(C) The Commission, by rule or regulation, may require summary 

reports of such information to be filed by the futures commission 

merchant with the Commission no more frequently than quarterly. 

(3)(A) ø,¿ If, as a result of adverse market conditions or based 

on reports provided to the Commission pursuant to paragraph (2) 

or other available information, the Commission reasonably concludes that the Commission has concerns regarding the financial or 

operational condition of any registered futures commission merchant, the Commission may require the futures commission merchant to make reports concerning the futures and other financial 

activities of any of such person’s affiliated persons, other than a 

natural person, whose business activities are reasonably likely to 

have a material impact on the financial or operational condition of 

the futures commission merchant. 

(B) The Commission, in requiring reports pursuant to this paragraph, shall specify the information required, the period for which 

it is required, the time and date on which the information must be 

furnished, and whether the information is to be furnished directly 

to the Commission or to a contract market or derivatives transaction execution facility or other self-regulatory organization with 

primary responsibility for examining the registered futures commission merchant’s financial and operational condition. 

(4)(A) øin developing¿ In developing and implementing reporting 

requirements pursuant to paragraph (2) with respect to affiliated 

persons subject to examination by or reporting requirements of a 

Federal banking agency, the Commission shall consult with and 

consider the views of each such Federal banking agency. If a Federal banking agency comments in writing on a proposed rule of the 

Commission under this subsection that has been published for comment, the Commission shall respond in writing to the written comment before adopting the proposed rule. The Commission shall, at 

the request of the Federal banking agency, publish the comment 

and response in the Federal Register at the time of publishing the 

adopted rule. 

(B)(i) Except as provided in clause (ii), a registered futures commission merchant shall be considered to have complied with a recordkeeping or reporting requirement adopted pursuant to paragraph (2) concerning an affiliated person that is subject to examination by, or reporting requirements of, a Federal banking agency 

if the futures commission merchant utilizes for the recordkeeping 

or reporting requirement copies of reports filed by the affiliated 

person with the Federal banking agency pursuant to section 5211 

of the Revised Statutes (12 U.S.C. 161), section 9 of the Federal Reserve Act (12 U.S.C. 321 et seq.), section 7(a) of the Federal Deposit 

Insurance Act (12 U.S.C. ø1817(a)¿ 1817(a)), section 10(b) of the 

Home Owners’ Loan Act (12 U.S.C. 1467a(b)), or section 5 of the 

Bank Holding Company Act of 1956 (12 U.S.C. 1844). 


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(ii) The Commission may, by rule adopted pursuant to paragraph 

(2), require any futures commission merchant filing the reports 

with the Commission to obtain, maintain, or report supplemental 

information if the Commission makes an explicit finding that the 

supplemental information is necessary to inform the Commission 

regarding potential risks to the futures commission merchant. 

Prior to requiring any such supplemental information, the Commission shall first request the Federal banking agency to expand its 

reporting requirements to include the information. 

(5) Prior to making a request pursuant to paragraph (3) for information with respect to an affiliated person that is subject to examination by or reporting requirements of a Federal banking agency, 

the Commission shall— 

(A) notify the agency of the information required with respect to the affiliated person; and 

(B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the Commission determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the futures commission merchant or the stability or integrity of the futures 

markets. 

(6) Nothing in this subsection shall be construed to permit the 

Commission to require any futures commission merchant to obtain, 

maintain, or furnish any examination report of any Federal banking agency or any supervisory recommendations or analysis contained in the report. 

(7) No information provided to or obtained by the Commission 

from any Federal banking agency pursuant to a request under 

paragraph (5) regarding any affiliated person that is subject to examination by or reporting requirements of a Federal banking agency may be disclosed to any other person (other than as provided in 

section 8 or section 8a(6)), without the prior written approval of the 

Federal banking agency. 

(8) The Commission shall notify a Federal banking agency of any 

concerns of the Commission regarding significant financial or operational risks resulting from the activities of any futures commission merchant to any affiliated person thereof that is subject to examination by or reporting requirements of the Federal banking 

agency. 

(9) The Commission, by rule, regulation, or order, may exempt 

any person or class of persons under such terms and conditions and 

for such periods as the Commission shall provide in the rule, regulation, or order, from this subsection and the rules and regulations 

issued under this subsection. In granting the exemption, the Commission shall consider, among other factors— 

(A) whether information of the type required under this subsection is available from a supervisory agency (as defined in 

section 1101(7) of the Right to Financial Privacy Act of 1978 

(12 U.S.C. 3401(7))), a State insurance commission or similar 

State agency, the Securities and Exchange Commission, or a 

similar foreign regulator; 

(B) the primary business of any affiliated person; 

(C) the nature and extent of domestic or foreign regulation 

of the affiliated person’s activities; 


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(D) the nature and extent of the registered futures commission merchant’s commodity futures and options activities; and 

(E) with respect to the registered futures commission merchant and its affiliated persons, on a consolidated basis, the 

amount and proportion of assets devoted to, and revenues derived from activities in the United States futures markets. 

(10) Information required to be provided pursuant to this subsection shall be subject to section 8. Except as specifically provided 

in section 8 and notwithstanding any other provision of law, the 

Commission shall not be compelled to disclose any information required to be reported under this subsection, or any information 

supplied to the Commission by any domestic or foreign regulatory 

agency that relates to the financial or operational condition of any 

affiliated person of a registered futures commission merchant. 

(11) Nothing in paragraphs (1) through (10) shall be construed to 

supersede or to limit in any way the authority or powers of the 

Commission pursuant to any other provision of this Act or regulations issued under this Act. 

SEC. 4g. (a) Every person registered hereunder as futures commission merchant, introducing broker, floor broker, or floor trader 

shall make such reports as are required by the Commission regarding the transactions and positions of such person, and the transactions and positions of the customer thereof, in commodities for 

future delivery on any board of trade in the United States or elsewhere, and in øany significant price discovery contract traded or 

executed on an electronic trading facility or¿ any agreement, contract, or transaction that is treated by a derivatives clearing organization, whether registered or not registered, as fungible with a 

significant price discovery contract; shall keep books and records 

pertaining to such transactions and positions in such form and 

manner and for such period as may be required by the Commission; and shall keep such books and records open to inspection by 

any representative of the Commission or the United States Department of Justice. 

(b) Every registered entity shall maintain daily trading records. 

The daily trading records shall include such information as the 

Commission shall prescribe by rule. 

(c) Floor brokers, introducing brokers, and futures commission 

merchants shall maintain daily trading records for each customer 

in such manner and form as to be identifiable with the trades referred to in subsection (b). 

(d) Daily trading records shall be maintained in a form suitable 

to the Commission for such period as may be required by the Commission. Reports shall be made from the records maintained at 

such times and at such places and in such form as the Commission 

may prescribe by rule, order, or regulation in order to protect the 

public interest and the interest of persons trading in commodity futures. 

(e) Before the beginning of trading each day, the øexchange¿ 

each designated contract market and swap execution facility shall, 

insofar as is practicable and under terms and conditions specified 

by the Commission, make public the volume of trading on each 

type of contract for the previous day and such other information as 

the Commission deems necessary in the public interest and prescribes by rule, order, or regulation. 


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(f) Nothing contained in this section shall be construed to prohibit the Commission from making separate determinations for different registered entities when such determinations are warranted 

in the judgment of the Commission. 

* * * * * * * 

SEC. 4i. It shall be unlawful for any person to make any contract 

for the purchase or sale of any commodity for future delivery on or 

subject to the rules of any contract market øor derivatives transaction execution facility, or any significant price discovery contract 

traded or executed on an electronic trading facility or any agreement, contract, or transaction that is treated by a derivatives clearing organization, whether registered or not registered, as fungible 

with a significant price discovery contract¿— 

(1) if such person shall directly or indirectly make such contracts with respect to any commodity or any future of such 

commodity during any one day in an amount equal to or in excess of such amount as shall be fixed from time to time by the 

Commission, and 

(2) if such person shall directly or indirectly have or obtain 

a long or short position in any commodity or any future of such 

commodity equal to or in excess of such amount as shall be 

fixed from time to time by the Commission, 

unless such person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in clauses (1) and (2) hereof as the 

Commission may by rule or regulation require and unless, in accordance with rules and regulations of the Commission, such person shall keep books and records of all such transactions and positions and transactions and positions in any such commodity traded 

on or subject to the rules of any other board of trade øor electronic 

trading facility¿, and of cash or spot transactions in, and inventories and purchase and sale commitments of such commodity. 

Such books and records shall show complete details concerning all 

such transactions, positions, inventories, and commitments, including the names and addresses of all persons having any interest 

therein, and shall be open at all times to inspection by any representative of the Commission or the Department of Justice. For 

the purposes of this section, the futures and cash or spot transactions and positions of any person shall include such transactions 

and positions of any persons directly or indirectly controlled by 

such person. 

SEC. 4j. RESTRICTIONS ON DUAL TRADING IN SECURITY FUTURES 

PRODUCTS ON DESIGNATED CONTRACT MARKETS AND 

REGISTERED DERIVATIVES TRANSACTION EXECUTION 

FACILITIES. 

(a) The Commission shall issue regulations to prohibit the privilege of dual trading in security futures products on each contract 

market øand registered derivatives transaction execution facility¿. 

The regulations issued by the Commission under this section— 

(1) shall provide that the prohibition of dual trading thereunder shall take effect upon issuance of the regulations; and 

(2) shall provide exceptions, as the Commission determines 

appropriate, to ensure fairness and orderly trading in security 

futures product markets, including— 


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(A) exceptions for spread transactions and the correction 

of trading errors; 

(B) allowance for a customer to designate in writing not 

less than once annually a named floor broker to execute 

orders for such customer, notwithstanding the regulations 

to prohibit the privilege of dual trading required under 

this section; and 

(C) other measures reasonably designed to accommodate 

unique or special characteristics of individual boards of 

trade or contract markets, to address emergency or unusual market conditions, or otherwise to further the public 

interest consistent with the promotion of market efficiency, 

innovation, and expansion of investment opportunities, the 

protection of investors, and with the purposes of this section. 

(b) As used in this section, the term ‘‘dual trading’’ means the 

execution of customer orders by a floor broker during the same 

trading session in which the floor broker executes any trade in the 

same contract market or registered derivatives transaction execution facility for— 

(1) the account of such floor broker; 

(2) an account for which such floor broker has trading discretion; or 

(3) an account controlled by a person with whom such floor 

broker has a relationship through membership in a broker association. 

(c) As used in this section, the term ‘‘broker association’’ shall include two or more contract market members or registered derivatives transaction execution facility members with floor trading 

privileges of whom at least one is acting as a floor broker, who— 

(1) engage in floor brokerage activity on behalf of the same 

employer, 

(2) have an employer and employee relationship which relates to floor brokerage activity, 

(3) share profits and losses associated with their brokerage 

or trading activity, or 

(4) regularly share a deck of orders. 

SEC. 4k. (1) It shall be unlawful for any person to be associated 

with a futures commission merchant as a partner, officer, or employee, or to be associated with an introducing broker as a partner, 

officer, employee, or agent (or any person occupying a similar status or performing similar functions), in any capacity that involves 

(i) the solicitation or acceptance of customers’ orders (other than in 

a clerical capacity) or (ii) the supervision of any person or persons 

so engaged, unless such person is registered with the Commission 

under this Act as an associated person of such futures commission 

merchant or of such introducing broker and such registration shall 

not have expired, been suspended (and the period of suspension 

has not expired), or been revoked. It shall be unlawful for a futures 

commission merchant or introducing broker to permit such a person to become or remain associated with the futures commission 

merchant or introducing broker in any such capacity if such futures 

commission merchant or introducing broker knew or should have 

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sion has not expired), or been revoked. Any individual who is registered as a floor broker, futures commission merchant, or introducing broker (and such registration is not suspended or revoked) 

need not also register under this subsection. 

(2) It shall be unlawful for any person to be associated with a 

commodity pool operator as a partner, officer, employee, consultant, 

or agent (or any person occupying a similar status or performing 

similar functions), in any capacity that involves (i) the solicitation 

of funds, securities, or property for a participation in a commodity 

pool or (ii) the supervision of any person or persons so engaged, unless such person is registered with the Commission under this Act 

as an associated person of such commodity pool operator and such 

registration shall not have expired, been suspended (and the period 

of suspension has not expired), or been revoked. It shall be unlawful for a commodity pool operator to permit such a person to become or remain associated with the commodity pool operator in any 

such capacity if the commodity pool operator knew or should have 

known that such person was not so registered or that such registration had expired, been suspended (and the period of suspension has not expired), or been revoked. Any individual who is registered as a floor broker, futures commission merchant, introducing 

broker, commodity pool operator, or as an associated person of another category of registrant under this section (and such registration is not suspended or revoked) need not also register under this 

subsection. The Commission may exempt any person or class of 

persons from having to register under this subsection by rule, regulation, or order. 

(3) It shall be unlawful for any person to be associated with a 

commodity trading advisor as a partner, officer, employee, consultant, or agent (or any person occupying a similar status or performing similar functions), in any capacity which involves (i) the 

solicitation of a client’s or prospective client’s discretionary account 

or (ii) the supervision of any person or persons so engaged, unless 

such person is registered with the Commission under this Act as 

an associated person of such commodity trading advisor and such 

registration shall not have expired, been suspended (and the period 

of suspension has not expired), or been revoked. It shall be unlawful for a commodity trading advisor to permit such a person to become or remain associated with the commodity trading advisor in 

any such capacity if the commodity trading advisor knew or should 

have known that such person was not so registered or that such 

registration had expired, been suspended (and the period of suspension has not expired), or been revoked. Any individual who is registered as a floor broker, futures commission merchant, introducing 

broker, commodity trading advisor, or as an associated person of 

another category of registrant under this section (and such registration is not suspended or revoked) need not also register under 

this subsection. The Commission may exempt any person or class 

of persons from having to register under this subsection by rule, 

regulation, or order. 

(4) Any person desiring to be registered as an associated person 

of a futures commission merchant, of an introducing broker, of a 

commodity pool operator, or of a commodity trading advisor shall 

make application to the Commission in the form and manner prescribed by the Commission, giving such information and facts as 


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the Commission may deem necessary concerning the applicant. 

Such person, when registered hereunder, shall likewise continue to 

report and furnish to the Commission such information as the 

Commission may require. Such registration shall expire at such 

time as the Commission may by rule, regulation, or order prescribe. 

(5) Any associated person of a broker or dealer that is registered 

with the Securities and Exchange Commission, and who limits its 

solicitation of orders, acceptance of orders, or execution of orders, 

or placing of orders on behalf of others involving any contracts of 

sale of any commodity for future delivery or any option on such a 

contract, on or subject to the rules of any contract market or registered derivatives transaction execution facility to security futures 

products, shall be exempt from the following provisions of this Act 

and the rules thereunder: 

(A) Subsections (b)ø, (d), (e), and (g)¿ and (e) of section 4c. 

(B) Sections 4d, 4e, and 4h. 

(C) Subsections (b) and (c) of section 4f. 

(D) Section 4j. 

(E) Paragraph (1) of this section. 

(F) Section 4p. 

(G) Section 6d. 

(H) Subsections (d) and (g) of section 8. 

(I) Section 16. 

(6) It shall be unlawful for any registrant to permit a person to 

become or remain an associated person of such registrant, if the 

registrant knew or should have known of facts regarding such associated person that are set forth as statutory disqualifications in 

section 8a(2) of this Act, unless such registrant has notified the 

Commission of such facts and the Commission has determined that 

such person should be registered or temporarily licensed. 

* * * * * * * 

SEC. 4m. (1) It shall be unlawful for any commodity trading advisor or commodity pool operator, unless registered under this Act, 

to make use of the mails or any means or instrumentality of interstate commerce in connection with his business as such commodity 

trading advisor or commodity pool operator: Provided, That the 

provisions of this section shall not apply to any commodity trading 

advisor who, during the course of the preceding twelve months, has 

not furnished commodity trading advice to more than fifteen persons and who does not hold himself out generally to the public as 

a commodity trading advisor. The provisions of this section shall 

not apply to any commodity trading advisor who is a (1) dealer, 

processor, broker, or seller in cash market transactions of any commodity specifically set forth in section 2(a) of this Act prior to the 

enactment of the Commodity Futures Trading Commission Act of 

1974 (or products thereof) or (2) nonprofit, voluntary membership, 

general farm organization, who provides advice on the sale or purchase of any commodity specifically set forth in section 2(a) of this 

Act prior to the enactment of the Commodity Futures Trading 

Commission Act of 1974; if the advice by the person described in 

clause (1) or (2) of this sentence as a commodity trading advisor is 

solely incidental to the conduct of that person’s business: Provided, 

That such person shall be subject to proceedings under section 14 

of this Act: Provided further, That the provisions of this section 

shall not apply to any commodity trading advisor that is: (A) a 


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charitable organization, as defined in section 3(c)(10)(D) of the Investment Company Act of 1940, or a trustee, director, officer, employee, or volunteer of such a charitable organization acting within 

the scope of the employment or duties of the person with the organization, whose trading advice is provided only to, or with respect to, 

1 or more of the following: (i) any such charitable organization, or 

(ii) an investment trust, syndicate or similar form of enterprise excluded from the definition of ‘‘investment company’’ pursuant to section 3(c)(10) of the Investment Company Act of 1940; or (B) any 

plan, company, or account described in section 3(c)(14) of the Investment Company Act of 1940, any person or entity who establishes or 

maintains such a plan, company, or account, or any trustee, director, officer, employee, or volunteer for any of the foregoing plans, 

persons, or entities acting within the scope of the employment or duties of the person with the organization, whose trading advice is 

provided only to, or with respect to, any investment trust, syndicate, 

or similar form of enterprise excluded from the definition of ‘‘investment company’’ pursuant to section 3(c)(14) of the Investment Company Act of 1940. (2) Nothing in this Act shall relieve any person of any obligation 

or duty, or affect the availability of any right or remedy available 

to the Securities and Exchange Commission or any private party 

arising under the Securities Act of 1933 or the Securities Exchange 

Act of 1934 governing the issuance, offer, purchase, or sale of securities of a commodity pool, or of persons engaged in transactions 

with respect to such securities, or reporting by a commodity pool. 

(3) EXCEPTION.— (A) IN GENERAL.—Paragraph (1) shall not apply to any commodity trading advisor that is registered with the Securities 

and Exchange Commission as an investment adviser whose 

business does not consist primarily of acting as a commodity 

trading advisor, as defined in section 1a, and that does not act 

as a commodity trading advisor to any commodity pool that is 

engaged primarily in trading commodity interests. 

(B) ENGAGED PRIMARILY.—For purposes of subparagraph (A), 

a commodity trading advisor or a commodity pool shall be considered to be ‘‘engaged primarily’’ in the business of being a 

commodity trading advisor or commodity pool if it is or holds 

itself out to the public as being engaged primarily, or proposes 

to engage primarily, in the business of advising on commodity 

interests or investing, reinvesting, owning, holding, or trading 

in commodity interests, respectively. 

(C) COMMODITY INTERESTS.—For purposes of this paragraph, 

commodity interests shall include contracts of sale of a commodity for future delivery, options on such contracts, security 

futures, swaps, leverage contracts, foreign exchange, spot and 

forward contracts on physical commodities, and any monies 

held in an account used for trading commodity interests. 

(4) DISCLOSURE CONCERNING EXCLUDED CHARITABLE ORGANIZA- TIONS.—The operator of or advisor to any investment trust, syndicate, or similar form of enterprise excluded from the definition of 

‘‘commodity pool’’ by reason of section 1a(10)(C) shall provide, to 

each donor to the fund, trust, syndicate, or similar form of enterprise, at the time of the donation or within 90 days after the date 

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mation describing the material terms of the operation of the fund, 

trust, syndicate, or similar form of enterprise. 

* * * * * * * 

SEC. 4p. (a) The Commission may specify by rules and regulations appropriate standards with respect to training, experience, 

and such other qualifications as the Commission finds necessary or 

desirable to insure the fitness of persons required to be registered 

with the Commission. In connection therewith, the Commission 

may prescribe by rules and regulations the adoption of written proficiency examinations to be given to applicants for registration and 

the establishment of reasonable fees to be charged to such applicants to cover the administration of such examinations. The Commission may further prescribe by rules and regulations that, in lieu 

of examinations administered by the Commission, futures associations registered under section 17 of this Act, contract marketsø, or 

derivatives transaction execution facilities¿ may adopt written proficiency examinations to be given to applicants for registration and 

charge reasonable fees to such applicants to cover the administration of such examinations. Notwithstanding any other provision of 

this section, the Commission may specify by rules and regulations 

such terms and conditions as it deems appropriate to protect the 

public interest wherein exception to any written proficiency examination shall be made with respect to individuals who have demonstrated, through training and experience, the degree of proficiency and skill necessary to protect the interests of customers, 

clients, pool participants, or other members of the public with 

whom such individuals deal. 

(b) The Commission shall issue regulations to require new registrants, within six months after receiving such registration, to attend a training session, and all other registrants to attend periodic 

training sessions, to ensure that registrants understand their responsibilities to the public under this Act, including responsibilities 

to observe just and equitable principles of trade, any rule or regulation of the Commission, any rule of any appropriate contract market, øderivatives transaction execution facility,¿ registered futures 

association, or other self-regulatory organization, or any other applicable Federal or state law, rule or regulation. 

SEC. 4q. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE 

BONA FIDE HEDGING BY AGRICULTURAL PRODUCERS. 

(a) AUTHORITY.—The Commission shall consider issuing rules or 

orders which— 

(1) prescribe procedures under which each contract market is 

to provide for orderly delivery, including temporary storage 

costs, of any agricultural commodity enumerated in section 

ø1a(9)¿ 1a(10) which is the subject of a contract for purchase 

or sale for future delivery; 

(2) increase the ease with which domestic agricultural producers may participate in contract markets, including by addressing cost and margin requirements, so as to better enable 

the producers to hedge price risk associated with their production; 

(3) provide flexibility in the minimum quantities of such agricultural commodities that may be the subject of a contract for 

purchase or sale for future delivery that is traded on a contract 


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market, to better allow domestic agricultural producers to 

hedge such price risk; and 

(4) encourage contract markets to provide information and 

otherwise facilitate the participation of domestic agricultural 

producers in contract markets. 

(b) REPORT.—Within 1 year after the date of the enactment of 

this section, the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on 

Agriculture, Nutrition, and Forestry of the Senate a report on the 

steps it has taken to implement this section and on the activities 

of contract markets pursuant to this section. 

* * * * * * * 

SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS. 

(a) REGISTRATION.— 

(1) SWAP DEALERS.—It shall be unlawful for any person to 

act as a swap dealer unless the person is registered as a swap 

dealer with the Commission. 

(2) MAJOR SWAP PARTICIPANTS.—It shall be unlawful for any 

person to act as a major swap participant unless the person is 

registered as a major swap participant with the Commission. 

(b) REQUIREMENTS.— (1) IN GENERAL.—A person shall register as a swap dealer or 

major swap participant by filing a registration application with 

the Commission. 

(2) CONTENTS.— (A) IN GENERAL.—The application shall be made in such 

form and manner as prescribed by the Commission, and 

shall contain such information, as the Commission considers necessary concerning the business in which the applicant is or will be engaged. 

(B) CONTINUAL REPORTING.—A person that is registered 

as a swap dealer or major swap participant shall continue 

to submit to the Commission reports that contain such information pertaining to the business of the person as the 

Commission may require. 

(3) EXPIRATION.—Each registration under this section shall 

expire at such time as the Commission may prescribe by rule 

or regulation. 

(4) RULES.—Except as provided in subsections (d) and (e), 

the Commission may prescribe rules applicable to swap dealers 

and major swap participants, including rules that limit the activities of swap dealers and major swap participants. 

(5) TRANSITION.—Rules under this section shall provide for 

the registration of swap dealers and major swap participants 

not later than 1 year after the date of enactment of the Wall 

Street Transparency and Accountability Act of 2010. 

(6) STATUTORY DISQUALIFICATION.—Except to the extent otherwise specifically provided by rule, regulation, or order, it 

shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a 

major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of 

the swap dealer or major swap participant, if the swap dealer 


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or major swap participant knew, or in the exercise of reasonable care should have known, of the statutory disqualification. 

(c) DUAL REGISTRATION.— 

(1) SWAP DEALER.—Any person that is required to be registered as a swap dealer under this section shall register with 

the Commission regardless of whether the person also is a depository institution or is registered with the Securities and Exchange Commission as a security-based swap dealer. 

(2) MAJOR SWAP PARTICIPANT.—Any person that is required 

to be registered as a major swap participant under this section 

shall register with the Commission regardless of whether the 

person also is a depository institution or is registered with the 

Securities and Exchange Commission as a major security-based 

swap participant. 

(d) RULEMAKINGS.— 

(1) IN GENERAL.—The Commission shall adopt rules for persons that are registered as swap dealers or major swap participants under this section. 

(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.— 

(A) IN GENERAL.—The Commission may not prescribe 

rules imposing prudential requirements on swap dealers or 

major swap participants for which there is a prudential 

regulator. 

(B) APPLICABILITY.—Subparagraph (A) does not limit the 

authority of the Commission to prescribe rules as directed 

under this section. 

(e) CAPITAL AND MARGIN REQUIREMENTS.— 

(1) IN GENERAL.— 

(A) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT

ARE BANKS.—Each registered swap dealer and major swap 

participant for which there is a prudential regulator shall 

meet such minimum capital requirements and minimum 

initial and variation margin requirements as the prudential regulator shall by rule or regulation prescribe under 

paragraph (2)(A). 

(B) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT

ARE NOT BANKS.—Each registered swap dealer and major 

swap participant for which there is not a prudential regulator shall meet such minimum capital requirements and 

minimum initial and variation margin requirements as the 

Commission shall by rule or regulation prescribe under 

paragraph (2)(B). 

(2) RULES.— 

(A) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT

ARE BANKS.—The prudential regulators, in consultation 

with the Commission and the Securities and Exchange 

Commission, shall jointly adopt rules for swap dealers and 

major swap participants, with respect to their activities as 

a swap dealer or major swap participant, for which there 

is a prudential regulator imposing— 

(i) capital requirements; and 

(ii) both initial and variation margin requirements 

on all swaps that are not cleared by a registered derivatives clearing organization. 


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(B) SWAP DEALERS AND MAJOR SWAP PARTICIPANTS THAT

ARE NOT BANKS.—The Commission in consultation with the 

prudential regulators and the Securities and Exchange 

Commission shall adopt rules for swap dealers and major 

swap participants, with respect to their activities as a 

swap dealer or major swap participant, for which there is 

not a prudential regulator imposing— 

(i) capital requirements; and 

(ii) both initial and variation margin requirements 

on all swaps that are not cleared by a registered derivatives clearing organization. 

(C) CAPITAL.—In setting capital requirements for a person that is designated as a swap dealer or a major swap 

participant for a single type or single class or category of 

swap or activities, the prudential regulator and the Commission shall take into account the risks associated with 

other types of swaps or classes of swaps or categories of 

swaps engaged in and the other activities conducted by 

that person that are not otherwise subject to regulation 

applicable to that person by virtue of the status of the person as a swap dealer or a major swap participant. 

(3) STANDARDS FOR CAPITAL AND MARGIN.— (A) IN GENERAL.—To offset the greater risk to the swap 

dealer or major swap participant and the financial system 

arising from the use of swaps that are not cleared, the requirements imposed under paragraph (2) shall— 

(i) help ensure the safety and soundness of the swap 

dealer or major swap participant; and 

(ii) be appropriate for the risk associated with the 

non-cleared swaps held as a swap dealer or major 

swap participant. 

(B) RULE OF CONSTRUCTION.— 

(i) IN GENERAL.—Nothing in this section shall limit, 

or be construed to limit, the authority— 

(I) of the Commission to set financial responsibility rules for a futures commission merchant or 

introducing broker registered pursuant to section 

4f(a) (except for section 4f(a)(3)) in accordance 

with section 4f(b); or 

(II) of the Securities and Exchange Commission 

to set financial responsibility rules for a broker or 

dealer registered pursuant to section 15(b) of the 

Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) 

(except for section 15(b)(11) of that Act (15 U.S.C. 

78o(b)(11)) in accordance with section 15(c)(3) of 

the Securities Exchange Act of 1934 (15 U.S.C. 

78o(c)(3)). 

(ii) FUTURES COMMISSION MERCHANTS AND OTHER

DEALERS.—A futures commission merchant, introducing broker, broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such futures commission merchant, introducing broker, broker, or dealer is subject to under this Act or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). 


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(C) MARGIN REQUIREMENTS.—In prescribing margin requirements under this subsection, the prudential regulator 

with respect to swap dealers and major swap participants 

for which it is the prudential regulator and the Commission with respect to swap dealers and major swap participants for which there is no prudential regulator shall permit the use of noncash collateral, as the regulator or the 

Commission determines to be consistent with— 

(i) preserving the financial integrity of markets trading swaps; and 

(ii) preserving the stability of the United States financial system. 

(D) COMPARABILITY OF CAPITAL AND MARGIN REQUIREMENTS.— 

(i) IN GENERAL.—The prudential regulators, the 

Commission, and the Securities and Exchange Commission shall periodically (but not less frequently than 

annually) consult on minimum capital requirements 

and minimum initial and variation margin requirements. 

(ii) COMPARABILITY.—The entities described in 

clause (i) øshall, to the maximum extent practicable,¿ 

shall establish and maintain comparable minimum 

capital requirements and minimum initial and variation margin requirements, including the use of non 

cash collateral, for— 

(I) swap dealers; and 

(II) major swap participants. 

(iii) FINANCIAL MODELS.—To the extent that swap 

dealers and major swap participants that are banks 

are permitted to use financial models approved by the 

prudential regulators or the Securities and Exchange 

Commission to calculate minimum capital requirements and minimum initial and variation margin requirements, including the use of non-cash collateral, 

the Commission shall, in consultation with the prudential regulators and the Securities and Exchange Commission, permit the use of comparable financial models 

by swap dealers and major swap participants that are 

not banks. 

(4) APPLICABILITY WITH RESPECT TO COUNTERPARTIES.—The 

requirements of paragraphs (2)(A)(ii) and (2)(B)(ii), including 

the initial and variation margin requirements imposed by rules 

adopted pursuant to paragraphs (2)(A)(ii) and (2)(B)(ii), shall 

not apply to a swap in which a counterparty qualifies for an 

exception under section 2(h)(7)(A), or an exemption issued 

under section 4(c)(1) from the requirements of section 

2(h)(1)(A) for cooperative entities as defined in such exemption, 

or satisfies the criteria in section 2(h)(7)(D). 

(f) REPORTING AND RECORDKEEPING.— 

(1) IN GENERAL.—Each registered swap dealer and major 

swap participant— 

(A) shall make such reports as are required by the Commission by rule or regulation regarding the transactions 


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and positions and financial condition of the registered 

swap dealer or major swap participant; 

(B)(i) for which there is a prudential regulator, shall 

keep books and records of all activities related to the business as a swap dealer or major swap participant in such 

form and manner and for such period as may be prescribed 

by the Commission by rule or regulation; and 

(ii) for which there is no prudential regulator, shall keep 

books and records in such form and manner and for such 

period as may be prescribed by the Commission by rule or 

regulation; 

(C) shall keep books and records described in subparagraph (B) open to inspection and examination by any representative of the Commission; and 

(D) shall keep any such books and records relating to 

swaps defined in section ø1a(47)(A)(v)¿ 1a(48)(A)(v) open 

to inspection and examination by the Securities and Exchange Commission. 

(2) RULES.—The Commission shall adopt rules governing reporting and recordkeeping for swap dealers and major swap 

participants. 

(g) DAILY TRADING RECORDS.— (1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall maintain daily trading records of the 

swaps of the registered swap dealer and major swap participant and all related records (including related cash or forward 

transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone 

calls, for such period as may be required by the Commission 

by rule or regulation. 

(2) INFORMATION REQUIREMENTS.—The daily trading records 

shall include such information as the Commission shall require 

by rule or regulation. 

(3) COUNTERPARTY RECORDS.—Each registered swap dealer 

and major swap participant shall maintain daily trading 

records for each counterparty in a manner and form that is 

identifiable with each swap transaction. 

(4) AUDIT TRAIL.—Each registered swap dealer and major 

swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions. 

(5) RULES.—The Commission shall adopt rules governing 

daily trading records for swap dealers and major swap participants. 

(h) BUSINESS CONDUCT STANDARDS.— 

(1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall conform with such business conduct 

standards as prescribed in paragraph (3) and as may be prescribed by the Commission by rule or regulation that relate 

to— 

(A) fraud, manipulation, and other abusive practices involving swaps (including swaps that are offered but not entered into); 

(B) diligent supervision of the business of the registered 

swap dealer and major swap participant; 

(C) adherence to all applicable position limits; and 


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(D) such other matters as the Commission determines to 

be appropriate. 

(2) RESPONSIBILITIES WITH RESPECT TO SPECIAL ENTITIES.— 

(A) ADVISING SPECIAL ENTITIES.—A swap dealer or major 

swap participant that acts as an advisor to a special entity 

regarding a swap shall comply with the requirements of 

subparagraph (4) with respect to such Special Entity. 

(B) ENTERING OF SWAPS WITH RESPECT TO SPECIAL ENTITIES.—A swap dealer that enters into or offers to enter 

into swap with a Special Entity shall comply with the requirements of subparagraph (5) with respect to such Special Entity. 

(C) SPECIAL ENTITY DEFINED.—For purposes of this subsection, the term ‘‘special entity’’ means— 

(i) a Federal agency; 

(ii) a State, State agency, city, county, municipality, 

or other political subdivision of a State; 

(iii) any employee benefit plan, as defined in section 

3 of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002); 

(iv) any governmental plan, as defined in section 3 

of the Employee Retirement Income Security Act of 

1974 (29 U.S.C. 1002); or 

(v) any endowment, including an endowment that is 

an organization described in section 501(c)(3) of the 

Internal Revenue Code of 1986. 

(D) UTILITY SPECIAL ENTITY.—For purposes of this Act, 

the term ‘‘utility special entity’’ means a special entity, or 

any instrumentality, department, or corporation of or established by a State or political subdivision of a State, that— 

(i) owns or operates, or anticipates owning or operating, an electric or natural gas facility or an electric 

or natural gas operation; 

(ii) supplies, or anticipates supplying, natural gas 

and or electric energy to another utility special entity; 

(iii) has, or anticipates having, public service obligations under Federal, State, or local law or regulation 

to deliver electric energy or natural gas service to customers; or 

(iv) is a Federal power marketing agency, as defined 

in section 3 of the Federal Power Act. 

(3) BUSINESS CONDUCT REQUIREMENTS.—Business conduct requirements adopted by the Commission shall— 

(A) establish a duty for a swap dealer or major swap 

participant to verify that any counterparty meets the eligibility standards for an eligible contract participant; 

(B) require disclosure by the swap dealer or major swap 

participant to any counterparty to the transaction (other 

than a swap dealer, major swap participant, security-based 

swap dealer, or major security-based swap participant) 

of— 

(i) information about the material risks and characteristics of the swap; 


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(ii) any material incentives or conflicts of interest 

that the swap dealer or major swap participant may 

have in connection with the swap; and 

(iii)(I) for cleared swaps, upon the request of the 

counterparty, receipt of the daily mark of the transaction from the appropriate derivatives clearing organization; and 

(II) for uncleared swaps, receipt of the daily mark of 

the transaction from the swap dealer or the major 

swap participant; 

(C) establish a duty for a swap dealer or major swap 

participant to communicate in a fair and balanced manner 

based on principles of fair dealing and good faith; and 

(D) establish such other standards and requirements as 

the Commission may determine are appropriate in the 

public interest, for the protection of investors, or otherwise 

in furtherance of the purposes of this Act. 

(4) SPECIAL REQUIREMENTS FOR SWAP DEALERS ACTING AS ADVISORS.— 

(A) IN GENERAL.—It shall be unlawful for a swap dealer 

or major swap participant— 

(i) to employ any device, scheme, or artifice to defraud any Special Entity or prospective customer who 

is a Special Entity; 

(ii) to engage in any transaction, practice, or course 

of business that operates as a fraud or deceit on any 

Special Entity or prospective customer who is a Special Entity; or 

(iii) to engage in any act, practice, or course of business that is fraudulent, deceptive or manipulative. 

(B) DUTY.—Any swap dealer that acts as an advisor to 

a Special Entity shall have a duty to act in the best interests of the Special Entity. 

(C) REASONABLE EFFORTS.—Any swap dealer that acts as 

an advisor to a Special Entity shall make reasonable efforts to obtain such information as is necessary to make a 

reasonable determination that any swap recommended by 

the swap dealer is in the best interests of the Special Entity, including information relating to— 

(i) the financial status of the Special Entity; 

(ii) the tax status of the Special Entity; 

(iii) the investment or financing objectives of the 

Special Entity; and 

(iv) any other information that the Commission may 

prescribe by rule or regulation. 

(5) SPECIAL REQUIREMENTS FOR SWAP DEALERS AS COUNTERPARTIES TO SPECIAL ENTITIES.— 

(A) Any swap dealer or major swap participant that offers to enter or enters into a swap with a Special Entity 

shall— 

(i) comply with any duty established by the Commission for a swap dealer or major swap participant, with 

respect to a counterparty that is an eligible contract 

participant within the meaning of subclause (I) or (II) 

of clause (vii) of section ø1a(18)¿ 1a(19) of this Act, 


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that requires the swap dealer or major swap participant to have a reasonable basis to believe that the 

counterparty that is a Special Entity has an independent representative that— 

(I) has sufficient knowledge to evaluate the 

transaction and risks; 

(II) is not subject to a statutory disqualification; 

(III) is independent of the swap dealer or major 

swap participant; 

(IV) undertakes a duty to act in the best interests of the counterparty it represents; 

(V) makes appropriate disclosures; 

(VI) will provide written representations to the 

Special Entity regarding fair pricing and the appropriateness of the transaction; and 

(VII) in the case of employee benefit plans subject to the Employee Retirement Income Security 

act of 1974, is a fiduciary as defined in section 3 

of that Act (29 U.S.C. 1002); and 

(ii) before the initiation of the transaction, disclose 

to the Special Entity in writing the capacity in which 

the swap dealer is acting; and 

(B) the Commission may establish such other standards 

and requirements as the Commission may determine are 

appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this 

Act. 

(6) RULES.—The Commission shall prescribe rules under this 

subsection governing business conduct standards for swap 

dealers and major swap participants. 

(7) APPLICABILITY.—This section shall not apply with respect 

to a transaction that is— 

(A) initiated by a Special Entity on an exchange or swap 

execution facility; and 

(B) one in which the swap dealer or major swap participant does not know the identity of the counterparty to the 

transaction. 

(i) DOCUMENTATION STANDARDS.— (1) IN GENERAL.—Each registered swap dealer and major 

swap participant shall conform with such standards as may be 

prescribed by the Commission by rule or regulation that relate 

to timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps. 

(2) RULES.—The Commission shall adopt rules governing 

documentation standards for swap dealers and major swap 

participants. 

(j) DUTIES.—Each registered swap dealer and major swap participant at all times shall comply with the following requirements: 

(1) MONITORING OF TRADING.—The swap dealer or major 

swap participant shall monitor its trading in swaps to prevent 

violations of applicable position limits. 

(2) RISK MANAGEMENT PROCEDURES.—The swap dealer or 

major swap participant shall establish robust and professional 

risk management systems adequate for managing the day-today business of the swap dealer or major swap participant. 


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(3) DISCLOSURE OF GENERAL INFORMATION.—The swap dealer 

or major swap participant shall disclose to the Commission and 

to the prudential regulator for the swap dealer or major swap 

participant, as applicable, information concerning— 

(A) terms and conditions of its swaps; 

(B) swap trading operations, mechanisms, and practices; 

(C) financial integrity protections relating to swaps; and 

(D) other information relevant to its trading in swaps. 

(4) ABILITY TO OBTAIN INFORMATION.—The swap dealer or 

major swap participant shall— 

(A) establish and enforce internal systems and procedures to obtain any necessary information to perform any 

of the functions described in this section; and 

(B) provide the information to the Commission and to 

the prudential regulator for the swap dealer or major swap 

participant, as applicable, on request. 

(5) CONFLICTS OF INTEREST.—The swap dealer and major 

swap participant shall implement conflict-of-interest systems 

and procedures that— 

(A) establish structural and institutional safeguards to 

ensure that the activities of any person within the firm relating to research or analysis of the price or market for 

any commodity or swap or acting in a role of providing 

clearing activities or making determinations as to accepting clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of persons whose involvement in pricing, 

trading, or clearing activities might potentially bias their 

judgment or supervision and contravene the core principles 

of open access and the business conduct standards described in this Act; and 

(B) address such other issues as the Commission determines to be appropriate. 

(6) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, a swap dealer or 

major swap participant shall not— 

(A) adopt any process or take any action that results in 

any unreasonable restraint of trade; or 

(B) impose any material anticompetitive burden on trading or clearing. 

(7) RULES.—The Commission shall prescribe rules under this 

subsection governing duties of swap dealers and major swap 

participants. 

(k) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

(1) IN GENERAL.—Each swap dealer and major swap participant shall designate an individual to serve as a chief compliance officer. 

(2) DUTIES.—The chief compliance officer shall— 

(A) report directly to the board or to the senior officer of 

the swap dealer or major swap participant; 

(B) review the compliance of the swap dealer or major 

swap participant with respect to the swap dealer and 

major swap participant requirements described in this section; 


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(C) in consultation with the board of directors, a body 

performing a function similar to the board, or the senior 

officer of the organization, resolve any conflicts of interest 

that may arise; 

(D) be responsible for administering each policy and procedure that is required to be established pursuant to this 

section; 

(E) ensure compliance with this Act (including regulations) relating to swaps, including each rule prescribed by 

the Commission under this section; 

(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer 

through any— 

(i) compliance office review; 

(ii) look-back; 

(iii) internal or external audit finding; 

(iv) self-reported error; or 

(v) validated complaint; and 

(G) establish and follow appropriate procedures for the 

handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

(3) ANNUAL REPORTS.— (A) IN GENERAL.—In accordance with rules prescribed by 

the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

(i) the compliance of the swap dealer or major swap 

participant with respect to this Act (including regulations); and 

(ii) each policy and procedure of the swap dealer or 

major swap participant of the chief compliance officer 

(including the code of ethics and conflict of interest 

policies). 

ø(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

ø(i) accompany each appropriate financial report of 

the swap dealer or major swap participant that is required to be furnished to the Commission pursuant to 

this section; and 

ø(ii) include a certification that, under penalty of 

law, the compliance report is accurate and complete.¿ 

(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

(i) include a certification that, under penalty of law, 

the compliance report is materially accurate and complete; and 

(ii) be furnished at such time as the Commission determines by rule, regulation, or order, to be appropriate. 

(l) SEGREGATION REQUIREMENTS.— (1) SEGREGATION OF ASSETS HELD AS COLLATERAL IN

UNCLEARED SWAP TRANSACTIONS.— (A) NOTIFICATION.—A swap dealer or major swap participant shall be required to notify the counterparty of the 

swap dealer or major swap participant at the beginning of 


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a swap transaction that the counterparty has the right to 

require segregation of the funds or other property supplied 

to margin, guarantee, or secure the obligations of the 

counterparty. 

(B) SEGREGATION AND MAINTENANCE OF FUNDS.—At the 

request of a counterparty to a swap that provides funds or 

other property to a swap dealer or major swap participant 

to margin, guarantee, or secure the obligations of the 

counterparty, the swap dealer or major swap participant 

shall— 

(i) segregate the funds or other property for the benefit of the counterparty; and 

(ii) in accordance with such rules and regulations as 

the Commission may promulgate, maintain the funds 

or other property in a segregated account separate 

from the assets and other interests of the swap dealer 

or major swap participant. 

(2) APPLICABILITY.—The requirements described in paragraph (1) shall— 

(A) apply only to a swap between a counterparty and a 

swap dealer or major swap participant that is not submitted for clearing to a derivatives clearing organization; 

and 

(B)(i) not apply to variation margin payments; or 

(ii) not preclude any commercial arrangement regarding— 

(I) the investment of segregated funds or other property that may only be invested in such investments as 

the Commission may permit by rule or regulation; and 

(II) the related allocation of gains and losses resulting from any investment of the segregated funds or 

other property. 

(3) USE OF INDEPENDENT THIRD-PARTY CUSTODIANS.—The 

segregated account described in paragraph (1) shall be— 

(A) carried by an independent third-party custodian; and 

(B) designated as a segregated account for and on behalf 

of the counterparty. 

(4) REPORTING REQUIREMENT.—If the counterparty does not 

choose to require segregation of the funds or other property 

supplied to margin, guarantee, or secure the obligations of the 

counterparty, the swap dealer or major swap participant shall 

report to the counterparty of the swap dealer or major swap 

participant on a quarterly basis that the back office procedures 

of the swap dealer or major swap participant relating to margin and collateral requirements are in compliance with the 

agreement of the counterparties. 

SEC. 4t. LARGE SWAP TRADER REPORTING. 

(a) PROHIBITION.— 

(1) IN GENERAL.—Except as provided in paragraph (2), it 

shall be unlawful for any person to enter into any swap that 

the Commission determines to perform a significant price discovery function with respect to registered entities if— 

(A) the person directly or indirectly enters into the swap 

during any 1 day in an amount equal to or in excess of 


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such amount as shall be established periodically by the 

Commission; and 

(B) the person directly or indirectly has or obtains a position in the swap equal to or in excess of such amount as 

shall be established periodically by the Commission. 

(2) EXCEPTION.—Paragraph (1) shall not apply if— 

(A) the person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in subparagraphs (A) and (B) of paragraph (1) as the Commission 

may require by rule or regulation; and 

(B) in accordance with the rules and regulations of the 

Commission, the person keeps books and records of all 

such swaps and any transactions and positions in any related commodity traded on or subject to the rules of any 

designated contract market or swap execution facility, and 

of cash or spot transactions in, inventories of, and purchase and sale commitments of, such a commodity. 

(b) REQUIREMENTS.— (1) IN GENERAL.—Books and records described in subsection 

(a)(2)(B) shall— 

(A) show such complete details concerning all transactions and positions as the Commission may prescribe by 

rule or regulation; 

(B) be open at all times to inspection and examination 

by any representative of the Commission; and 

(C) be open at all times to inspection and examination 

by the Securities and Exchange Commission, to the extent 

such books and records relate to transactions in swaps (as 

that term is defined in section ø1a(47)(A)(v)¿ 1a(48)(A)(v)), 

and consistent with the confidentiality and disclosure requirements of section 8. 

(2) JURISDICTION.—Nothing in paragraph (1) shall affect the 

exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for large swap traders 

under this section. 

(c) APPLICABILITY.—For purposes of this section, the swaps, futures, and cash or spot transactions and positions of any person 

shall include the swaps, futures, and cash or spot transactions and 

positions of any persons directly or indirectly controlled by the person. 

(d) SIGNIFICANT PRICE DISCOVERY FUNCTION.—In making a determination as to whether a swap performs or affects a significant 

price discovery function with respect to registered entities, the 

Commission shall consider the factors described in section 4a(a)(3). 

SEC. 4u. RECORDKEEPING REQUIREMENTS APPLICABLE TO NON-REGISTERED MEMBERS OF CERTAIN REGISTERED ENTITIES. 

Except as provided in section 4(a)(3), a member of a designated 

contract market or a swap execution facility that is not registered 

with the Commission and not required to be registered with the 

Commission in any capacity shall satisfy the recordkeeping requirements of this Act and any recordkeeping rule, order, or regulation 

under this Act by maintaining a written record of each transaction 

in a contract for future delivery, option on a future, swap, swaption, 

trade option, or related cash or forward transaction. The written 


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record shall be sufficient if it includes the final agreement between 

the parties and the material economic terms of the transaction. 

SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS. 

(a) APPLICATIONS.—A board of trade applying to the Commission 

for designation as a contract market shall submit an application to 

the Commission that includes any relevant materials and records 

the Commission may require consistent with this Act. 

ø(c)¿ (b) EXISTING CONTRACT MARKETS.—A board of trade that is 

designated as a contract market on the date of the enactment of 

the Commodity Futures Modernization Act of 2000 shall be considered to be a designated contract market under this section. 

ø(d)¿ (c) CORE PRINCIPLES FOR CONTRACT MARKETS.— (1) DESIGNATION AS CONTRACT MARKET.— (A) IN GENERAL.—To be designated, and maintain a designation, as a contract market, a board of trade shall comply with— 

(i) any core principle described in this subsection; 

and 

(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

(B) REASONABLE DISCRETION OF CONTRACT MARKET.—Unless otherwise determined by the Commission by rule or 

regulation, a board of trade described in subparagraph (A) 

shall have reasonable discretion in establishing the manner in which the board of trade complies with the core 

principles described in this subsection. 

(2) COMPLIANCE WITH RULES.— (A) IN GENERAL.—The board of trade shall establish, 

monitor, and enforce compliance with the rules of the contract market, including— 

(i) access requirements; 

(ii) the terms and conditions of any contracts to be 

traded on the contract market; and 

(iii) rules prohibiting abusive trade practices on the 

contract market. 

(B) CAPACITY OF CONTRACT MARKET.—The board of trade 

shall have the capacity to detect, investigate, and apply 

appropriate sanctions to any person that violates any rule 

of the contract market. 

(C) REQUIREMENT OF RULES.—The rules of the contract 

market shall provide the board of trade with the ability 

and authority to obtain any necessary information to perform any function described in this subsection, including 

the capacity to carry out such international informationsharing agreements as the Commission may require. 

(3) CONTRACTS NOT READILY SUBJECT TO MANIPULATION.— 

The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation. 

(4) PREVENTION OF MARKET DISRUPTION.—The board of trade 

shall have the capacity and responsibility to prevent manipulation, price distortion, and disruptions of the delivery or cashsettlement process through market surveillance, compliance, 

and enforcement practices and procedures, including— 

(A) methods for conducting real-time monitoring of trading; and 


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(B) comprehensive and accurate trade reconstructions. 

(5) POSITION LIMITATIONS OR ACCOUNTABILITY.— (A) IN GENERAL.—To reduce the potential threat of market manipulation or congestion (especially during trading 

in the delivery month), the board of trade shall adopt for 

each contract of the board of trade, as is necessary and appropriate, position limitations or position accountability for 

speculators. 

(B) MAXIMUM ALLOWABLE POSITION LIMITATION.—For 

any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the 

board of trade shall set the position limitation of the board 

of trade at a level not higher than the position limitation 

established by the Commission. 

(6) EMERGENCY AUTHORITY.—The board of trade, in consultation or cooperation with the Commission, shall adopt rules to 

provide for the exercise of emergency authority, as is necessary 

and appropriate, including the authority— 

(A) to liquidate or transfer open positions in any contract; 

(B) to suspend or curtail trading in any contract; and 

(C) to require market participants in any contract to 

meet special margin requirements. 

(7) AVAILABILITY OF GENERAL INFORMATION.—The board of 

trade shall make available to market authorities, market participants, and the public accurate information concerning— 

(A) the terms and conditions of the contracts of the contract market; and 

(B)(i) the rules, regulations, and mechanisms for executing transactions on or through the facilities of the contract market; and 

(ii) the rules and specifications describing the operation 

of the contract market’s— 

(I) electronic matching platform; or 

(II) trade execution facility. 

(8) DAILY PUBLICATION OF TRADING INFORMATION.—The 

board of trade shall make public daily information on settlement prices, volume, open interest, and opening and closing 

ranges for actively traded contracts on the contract market. 

(9) EXECUTION OF TRANSACTIONS.— 

(A) IN GENERAL.—The board of trade shall provide a 

competitive, open, and efficient market and mechanism for 

executing transactions that protects the price discovery 

process of trading in the centralized market of the board 

of trade. 

(B) RULES.—The rules of the board of trade may authorize, for bona fide business purposes— 

(i) transfer trades or office trades; 

(ii) an exchange of— 

(I) futures in connection with a cash commodity 

transaction; 

(II) futures for cash commodities; or 

(III) futures for swaps; or 

(iii) a futures commission merchant, acting as principal or agent, to enter into or confirm the execution 


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of a contract for the purchase or sale of a commodity 

for future delivery if the contract is reported, recorded, 

or cleared in accordance with the rules of the contract 

market or a derivatives clearing organization. 

(10) TRADE INFORMATION.—The board of trade shall maintain 

rules and procedures to provide for the recording and safe storage of all identifying trade information in a manner that enables the contract market to use the information— 

(A) to assist in the prevention of customer and market 

abuses; and 

(B) to provide evidence of any violations of the rules of 

the contract market. 

(11) FINANCIAL INTEGRITY OF TRANSACTIONS.—The board of 

trade shall establish and enforce— 

(A) rules and procedures for ensuring the financial integrity of transactions entered into on or through the facilities 

of the contract market (including the clearance and settlement of the transactions with a derivatives clearing organization); and 

(B) rules to ensure— 

(i) the financial integrity of any— 

(I) futures commission merchant; and 

(II) introducing broker; and 

(ii) the protection of customer funds. 

(12) PROTECTION OF MARKETS AND MARKET PARTICIPANTS.— 

The board of trade shall establish and enforce rules— 

(A) to protect markets and market participants from 

abusive practices committed by any party, including abusive practices committed by a party acting as an agent for 

a participant; and 

(B) to promote fair and equitable trading on the contract 

market. 

(13) DISCIPLINARY PROCEDURES.—The board of trade shall establish and enforce disciplinary procedures that authorize the 

board of trade to discipline, suspend, or expel members or market participants that violate the rules of the board of trade, or 

similar methods for performing the same functions, including 

delegation of the functions to third parties. 

(14) DISPUTE RESOLUTION.—The board of trade shall establish and enforce rules regarding, and provide facilities for alternative dispute resolution as appropriate for, market participants and any market intermediaries. 

(15) GOVERNANCE FITNESS STANDARDS.—The board of trade 

shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, members of 

the contract market, and any other person with direct access 

to the facility (including any party affiliated with any person 

described in this paragraph). 

(16) CONFLICTS OF INTEREST.—The board of trade shall establish and enforce rules— 

(A) to minimize conflicts of interest in the decision-making process of the contract market; and 

(B) to establish a process for resolving conflicts of interest described in subparagraph (A). 


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(17) COMPOSITION OF GOVERNING BOARDS OF CONTRACT MAR- KETS.—The governance arrangements of the board of trade 

shall be designed to permit consideration of the views of market participants. 

(18) RECORDKEEPING.—The board of trade shall maintain 

records of all activities relating to the business of the contract 

market— 

(A) in a form and manner that is acceptable to the Commission; and 

(B) for a period of at least 5 years. 

(19) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, the board of trade 

shall not— 

(A) adopt any rule or taking any action that results in 

any unreasonable restraint of trade; or 

(B) impose any material anticompetitive burden on trading on the contract market. 

(20) SYSTEM SAFEGUARDS.—The board of trade shall— 

(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and the development of automated 

systems, that are reliable, secure, and have adequate scalable capacity; 

(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allow for the timely recovery and resumption of operations 

and the fulfillment of the responsibilities and obligations 

of the board of trade; and 

(C) periodically conduct tests to verify that backup resources are sufficient to ensure continued order processing 

and trade matching, price reporting, market surveillance, 

and maintenance of a comprehensive and accurate audit 

trail. 

(21) FINANCIAL RESOURCES.— (A) IN GENERAL.—The board of trade shall have adequate financial, operational, and managerial resources to 

discharge each responsibility of the board of trade. 

(B) DETERMINATION OF ADEQUACY.—The financial resources of the board of trade shall be considered to be adequate if the value of the financial resources exceeds the 

total amount that would enable the contract market to 

cover the operating costs of the contract market for a 1- 

year period, as calculated on a rolling basis. 

(22) DIVERSITY OF BOARD OF DIRECTORS.—The board of trade, 

if a publicly traded company, shall endeavor to recruit individuals to serve on the board of directors and the other decisionmaking bodies (as determined by the Commission) of the board 

of trade from among, and to have the composition of the bodies 

reflect, a broad and culturally diverse pool of qualified candidates. 

(23) SECURITIES AND EXCHANGE COMMISSION.—The board of 

trade shall keep any such records relating to swaps defined in 

section ø1a(47)(A)(v)¿ 1a(48)(A)(v) open to inspection and examination by the Securities and Exchange Commission. 


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ø(e)¿ (d) CURRENT AGRICULTURAL COMMODITIES.— (1) Subject to paragraph (2) of this subsection, a contract for 

purchase or sale for future delivery of an agricultural commodity enumerated in section ø1a(9)¿ 1a(10) that is available 

for trade on a contract market, as of the date of the enactment 

of this subsection, may be traded only on a contract market 

designated under this section. 

(2) In order to promote responsible economic or financial innovation and fair competition, the Commission, on application 

by any person, after notice and public comment and opportunity for hearing, may prescribe rules and regulations to provide for the offer and sale of contracts for future delivery or options on such contracts to be conducted on a derivatives transaction execution facility. 

SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS. 

(a) REGISTRATION REQUIREMENT.— (1) IN GENERAL.—Except as provided in paragraph (2), it 

shall be unlawful for a derivatives clearing organization, directly or indirectly, to make use of the mails or any means or 

instrumentality of interstate commerce to perform the functions of a derivatives clearing organization with respect to— 

(A) a contract of sale of a commodity for future delivery 

(or an option on the contract of sale) or option on a commodity, in each case, unless the contract or option is— 

(i) excluded from this Act by subsection (a)(1)(C)(i), 

(c), or (f) of section 2; or 

(ii) a security futures product cleared by a clearing 

agency registered with the Securities and Exchange 

Commission under the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.); or 

(B) a swap. 

(2) EXCEPTION.—Paragraph (1) shall not apply to a derivatives clearing organization that is registered with the Commission. 

(b) VOLUNTARY REGISTRATION.—A person that clears 1 or more 

agreements, contracts, or transactions that are not required to be 

cleared under this Act may register with the Commission as a derivatives clearing organization. 

(c) REGISTRATION OF DERIVATIVES CLEARING ORGANIZATIONS.— (1) APPLICATION.—A person desiring to register as a derivatives clearing organization shall submit to the Commission an 

application in such form and containing such information as 

the Commission may require for the purpose of making the determinations required for approval under paragraph (2). 

(2) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS.— 

(A) COMPLIANCE.— 

(i) IN GENERAL.—To be registered and to maintain 

registration as a derivatives clearing organization, a 

derivatives clearing organization shall comply with 

each core principle described in this paragraph and 

any requirement that the Commission may impose by 

rule or regulation pursuant to section 8a(5). 

(ii) DISCRETION OF DERIVATIVES CLEARING ORGANIZATION.—Subject to any rule or regulation prescribed by 


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the Commission, a derivatives clearing organization 

shall have reasonable discretion in establishing the 

manner by which the derivatives clearing organization 

complies with each core principle described in this 

paragraph. 

(B) FINANCIAL RESOURCES.— (i) IN GENERAL.—Each derivatives clearing organization shall have adequate financial, operational, and 

managerial resources, as determined by the Commission, to discharge each responsibility of the derivatives 

clearing organization. 

(ii) MINIMUM AMOUNT OF FINANCIAL RESOURCES.— 

Each derivatives clearing organization shall possess financial resources that, at a minimum, exceed the total 

amount that would— 

(I) enable the organization to meet its financial 

obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for 

that organization in extreme but plausible market 

conditions; and 

(II) enable the derivatives clearing organization 

to cover the operating costs of the derivatives 

clearing organization for a period of 1 year (as calculated on a rolling basis). 

(C) PARTICIPANT AND PRODUCT ELIGIBILITY.— (i) IN GENERAL.—Each derivatives clearing organization shall establish— 

(I) appropriate admission and continuing eligibility standards (including sufficient financial resources and operational capacity to meet obligations arising from participation in the derivatives 

clearing organization) for members of, and participants in, the derivatives clearing organization; 

and 

(II) appropriate standards for determining the 

eligibility of agreements, contracts, or transactions 

submitted to the derivatives clearing organization 

for clearing. 

(ii) REQUIRED PROCEDURES.—Each derivatives clearing organization shall establish and implement procedures to verify, on an ongoing basis, the compliance of 

each participation and membership requirement of the 

derivatives clearing organization. 

(iii) REQUIREMENTS.—The participation and membership requirements of each derivatives clearing organization shall— 

(I) be objective; 

(II) be publicly disclosed; and 

(III) permit fair and open access. 

(D) RISK MANAGEMENT.— (i) IN GENERAL.—Each derivatives clearing organization shall ensure that the derivatives clearing organization possesses the ability to manage the risks associated with discharging the responsibilities of the deVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00198 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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rivatives clearing organization through the use of appropriate tools and procedures. 

(ii) MEASUREMENT OF CREDIT EXPOSURE.—Each derivatives clearing organization shall— 

(I) not less than once during each business day 

of the derivatives clearing organization, measure 

the credit exposures of the derivatives clearing organization to each member and participant of the 

derivatives clearing organization; and 

(II) monitor each exposure described in subclause (I) periodically during the business day of 

the derivatives clearing organization. 

(iii) LIMITATION OF EXPOSURE TO POTENTIAL LOSSES

FROM DEFAULTS.—Each derivatives clearing organization, through margin requirements and other risk control mechanisms, shall limit the exposure of the derivatives clearing organization to potential losses from 

defaults by members and participants of the derivatives clearing organization to ensure that— 

(I) the operations of the derivatives clearing organization would not be disrupted; and 

(II) nondefaulting members or participants 

would not be exposed to losses that nondefaulting 

members or participants cannot anticipate or control. 

(iv) MARGIN REQUIREMENTS.—The margin required 

from each member and participant of a derivatives 

clearing organization shall be sufficient to cover potential exposures in normal market conditions. 

(v) REQUIREMENTS REGARDING MODELS AND PARAMETERS.—Each model and parameter used in setting 

margin requirements under clause (iv) shall be— 

(I) risk-based; and 

(II) reviewed on a regular basis. 

(E) SETTLEMENT PROCEDURES.—Each derivatives clearing organization shall— 

(i) complete money settlements on a timely basis 

(but not less frequently than once each business day); 

(ii) employ money settlement arrangements to eliminate or strictly limit the exposure of the derivatives 

clearing organization to settlement bank risks (including credit and liquidity risks from the use of banks to 

effect money settlements); 

(iii) ensure that money settlements are final when 

effected; 

(iv) maintain an accurate record of the flow of funds 

associated with each money settlement; 

(v) possess the ability to comply with each term and 

condition of any permitted netting or offset arrangement with any other clearing organization; 

(vi) regarding physical settlements, establish rules 

that clearly state each obligation of the derivatives 

clearing organization with respect to physical deliveries; and 


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(vii) ensure that each risk arising from an obligation 

described in clause (vi) is identified and managed. 

(F) TREATMENT OF FUNDS.— (i) REQUIRED STANDARDS AND PROCEDURES.—Each 

derivatives clearing organization shall establish standards and procedures that are designed to protect and 

ensure the safety of member and participant funds 

and assets. 

(ii) HOLDING OF FUNDS AND ASSETS.—Each derivatives clearing organization shall hold member and participant funds and assets in a manner by which to 

minimize the risk of loss or of delay in the access by 

the derivatives clearing organization to the assets and 

funds. 

(iii) PERMISSIBLE INVESTMENTS.—Funds and assets 

invested by a derivatives clearing organization shall 

be held in instruments with minimal credit, market, 

and liquidity risks. 

(G) DEFAULT RULES AND PROCEDURES.— 

(i) IN GENERAL.—Each derivatives clearing organization shall have rules and procedures designed to allow 

for the efficient, fair, and safe management of events 

during which members or participants— 

(I) become insolvent; or 

(II) otherwise default on the obligations of the 

members or participants to the derivatives clearing organization. 

(ii) DEFAULT PROCEDURES.—Each derivatives clearing organization shall— 

(I) clearly state the default procedures of the derivatives clearing organization; 

(II) make publicly available the default rules of 

the derivatives clearing organization; and 

(III) ensure that the derivatives clearing organization may take timely action— 

(aa) to contain losses and liquidity pressures; and 

(bb) to continue meeting each obligation of 

the derivatives clearing organization. 

(H) RULE ENFORCEMENT.—Each derivatives clearing organization shall— 

(i) maintain adequate arrangements and resources 

for— 

(I) the effective monitoring and enforcement of 

compliance with the rules of the derivatives clearing organization; and 

(II) the resolution of disputes; 

(ii) have the authority and ability to discipline, 

limit, suspend, or terminate the activities of a member 

or participant due to a violation by the member or participant of any rule of the derivatives clearing organization; and 

(iii) report to the Commission regarding rule enforcement activities and sanctions imposed against 

members and participants as provided in clause (ii). 


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(I) SYSTEM SAFEGUARDS.—Each derivatives clearing organization shall— 

(i) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk through the development of appropriate 

controls and procedures, and automated systems, that 

are reliable, secure, and have adequate scalable capacity; 

(ii) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allows for— 

(I) the timely recovery and resumption of operations of the derivatives clearing organization; 

and 

(II) the fulfillment of each obligation and responsibility of the derivatives clearing organization; and 

(iii) periodically conduct tests to verify that the 

backup resources of the derivatives clearing organization are sufficient to ensure daily processing, clearing, 

and settlement. 

(J) REPORTING.—Each derivatives clearing organization 

shall provide to the Commission all information that the 

Commission determines to be necessary to conduct oversight of the derivatives clearing organization. 

(K) RECORDKEEPING.—Each derivatives clearing organization shall maintain records of all activities related to the 

business of the derivatives clearing organization as a derivatives clearing organization— 

(i) in a form and manner that is acceptable to the 

Commission; and 

(ii) for a period of not less than 5 years. 

(L) PUBLIC INFORMATION.— (i) IN GENERAL.—Each derivatives clearing organization shall provide to market participants sufficient information to enable the market participants to identify 

and evaluate accurately the risks and costs associated 

with using the services of the derivatives clearing organization. 

(ii) AVAILABILITY OF INFORMATION.—Each derivatives clearing organization shall make information 

concerning the rules and operating and default procedures governing the clearing and settlement systems 

of the derivatives clearing organization available to 

market participants. 

(iii) PUBLIC DISCLOSURE.—Each derivatives clearing 

organization shall disclose publicly and to the Commission information concerning— 

(I) the terms and conditions of each contract, 

agreement, and transaction cleared and settled by 

the derivatives clearing organization; 

(II) each clearing and other fee that the derivatives clearing organization charges the members 

and participants of the derivatives clearing organization; 


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(III) the margin-setting methodology, and the 

size and composition, of the financial resource 

package of the derivatives clearing organization; 

(IV) daily settlement prices, volume, and open 

interest for each contract settled or cleared by the 

derivatives clearing organization; and 

(V) any other matter relevant to participation in 

the settlement and clearing activities of the derivatives clearing organization. 

(M) INFORMATION-SHARING.—Each derivatives clearing 

organization shall— 

(i) enter into, and abide by the terms of, each appropriate and applicable domestic and international information-sharing agreement; and 

(ii) use relevant information obtained from each 

agreement described in clause (i) in carrying out the 

risk management program of the derivatives clearing 

organization. 

(N) ANTITRUST CONSIDERATIONS.—Unless necessary or 

appropriate to achieve the purposes of this Act, a derivatives clearing organization shall not— 

(i) adopt any rule or take any action that results in 

any unreasonable restraint of trade; or 

(ii) impose any material anticompetitive burden. 

(O) GOVERNANCE FITNESS STANDARDS.— 

(i) GOVERNANCE ARRANGEMENTS.—Each derivatives 

clearing organization shall establish governance arrangements that are transparent— 

(I) to fulfill public interest requirements; and 

(II) to permit the consideration of the views of 

owners and participants. 

(ii) FITNESS STANDARDS.—Each derivatives clearing 

organization shall establish and enforce appropriate 

fitness standards for— 

(I) directors; 

(II) members of any disciplinary committee; 

(III) members of the derivatives clearing organization; 

(IV) any other individual or entity with direct 

access to the settlement or clearing activities of 

the derivatives clearing organization; and 

(V) any party affiliated with any individual or 

entity described in this clause. 

(P) CONFLICTS OF INTEREST.—Each derivatives clearing 

organization shall— 

(i) establish and enforce rules to minimize conflicts 

of interest in the decision-making process of the derivatives clearing organization; and 

(ii) establish a process for resolving conflicts of interest described in clause (i). 

(Q) COMPOSITION OF GOVERNING BOARDS.—Each derivatives clearing organization shall ensure that the composition of the governing board or committee of the derivatives 

clearing organization includes market participants. 


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(R) LEGAL RISK.—Each derivatives clearing organization 

shall have a well-founded, transparent, and enforceable 

legal framework for each aspect of the activities of the derivatives clearing organization.’’. 

(3) ORDERS CONCERNING COMPETITION.—A derivatives clearing organization may request the Commission to issue an order 

concerning whether a rule or practice of the applicant is the 

least anticompetitive means of achieving the objectives, purposes, and policies of this Act. 

(d) EXISTING DERIVATIVES CLEARING ORGANIZATIONS.—A derivatives clearing organization shall be deemed to be registered under 

this section to the extent that the derivatives clearing organization 

clears agreements, contracts, or transactions for a board of trade 

that has been designated by the Commission as a contract market 

for such agreements, contracts, or transactions before the date of 

the enactment of this section. 

(e) APPOINTMENT OF TRUSTEE.— 

(1) IN GENERAL.—If a proceeding under section 5e results in 

the suspension or revocation of the registration of a derivatives 

clearing organization, or if a derivatives clearing organization 

withdraws from registration, the Commission, on notice to the 

derivatives clearing organization, may apply to the appropriate 

United States district court where the derivatives clearing organization is located for the appointment of a trustee. 

(2) ASSUMPTION OF JURISDICTION.—If the Commission applies for appointment of a trustee under paragraph (1)— 

(A) the court may take exclusive jurisdiction over the derivatives clearing organization and the records and assets 

of the derivatives clearing organization, wherever located; 

and 

(B) if the court takes jurisdiction under subparagraph 

(A), the court shall appoint the Commission, or a person 

designated by the Commission, as trustee with power to 

take possession and continue to operate or terminate the 

operations of the derivatives clearing organization in an 

orderly manner for the protection of participants, subject 

to such terms and conditions as the court may prescribe. 

(f) LINKING OF REGULATED CLEARING FACILITIES.— (1) IN GENERAL.—The Commission shall facilitate the linking 

or coordination of derivatives clearing organizations registered 

under this Act with other regulated clearance facilities for the 

coordinated settlement of cleared transactions. In order to minimize systemic risk, under no circumstances shall a derivatives 

clearing organization be compelled to accept the counterparty 

credit risk of another clearing organization. 

(2) COORDINATION.—In carrying out paragraph (1), the Commission shall coordinate with the Federal banking agencies 

and the Securities and Exchange Commission. 

(g) EXISTING DEPOSITORY INSTITUTIONS AND CLEARING AGEN- CIES.— (1) IN GENERAL.—A depository institution or clearing agency 

registered with the Securities and Exchange Commission 

under the Securities Exchange Act of 1934 (15 U.S.C. 78a et 

seq.) that is required to be registered as a derivatives clearing 

organization under this section is deemed to be registered 


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under this section to the extent that, before the date of enactment of this subsection— 

(A) the depository institution cleared swaps as a multilateral clearing organization; or 

(B) the clearing agency cleared swaps. 

(2) CONVERSION OF DEPOSITORY INSTITUTIONS.—A depository 

institution to which this subsection applies may, by the vote of 

the shareholders owning not less than 51 percent of the voting 

interests of the depository institution, be converted into a State 

corporation, partnership, limited liability company, or similar 

legal form pursuant to a plan of conversion, if the conversion 

is not in contravention of applicable State law. 

(3) SHARING OF INFORMATION.—The Securities and Exchange 

Commission shall make available to the Commission, upon request, all information determined to be relevant by the Securities and Exchange Commission regarding a clearing agency 

deemed to be registered with the Commission under paragraph 

(1). 

(h) EXEMPTIONS.—The Commission may exempt, conditionally or 

unconditionally, a derivatives clearing organization from registration under this section for the clearing of swaps if the Commission 

determines that the derivatives clearing organization is subject to 

comparable, comprehensive supervision and regulation by the Securities and Exchange Commission or the appropriate government 

authorities in the home country of the organization. Such conditions may include, but are not limited to, requiring that the derivatives clearing organization be available for inspection by the Commission and make available all information requested by the Commission. 

(i) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

(1) IN GENERAL.—Each derivatives clearing organization 

shall designate an individual to serve as a chief compliance officer. 

(2) DUTIES.—The chief compliance officer shall— 

(A) report directly to the board or to the senior officer of 

the derivatives clearing organization; 

(B) review the compliance of the derivatives clearing organization with respect to the core principles described in 

subsection (c)(2); 

(C) in consultation with the board of the derivatives 

clearing organization, a body performing a function similar 

to the board of the derivatives clearing organization, or the 

senior officer of the derivatives clearing organization, resolve any conflicts of interest that may arise; 

(D) be responsible for administering each policy and procedure that is required to be established pursuant to this 

section; 

(E) ensure compliance with this Act (including regulations) relating to agreements, contracts, or transactions, 

including each rule prescribed by the Commission under 

this section; 

(F) establish procedures for the remediation of noncompliance issues identified by the compliance officer 

through any— 

(i) compliance office review; 


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(ii) look-back; 

(iii) internal or external audit finding; 

(iv) self-reported error; or 

(v) validated complaint; and 

(G) establish and follow appropriate procedures for the 

handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

(3) ANNUAL REPORTS.— 

(A) IN GENERAL.—In accordance with rules prescribed by 

the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

(i) the compliance of the derivatives clearing organization of the compliance officer with respect to this Act 

(including regulations); and 

(ii) each policy and procedure of the derivatives 

clearing organization of the compliance officer (including the code of ethics and conflict of interest policies 

of the derivatives clearing organization). 

(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

(i) accompany each appropriate financial report of 

the derivatives clearing organization that is required 

to be furnished to the Commission pursuant to this 

section; and 

(ii) include a certification that, under penalty of law, 

the compliance report is accurate and complete. 

ø(k)¿ (j) REPORTING REQUIREMENTS.— 

(1) DUTY OF DERIVATIVES CLEARING ORGANIZATIONS.—Each 

derivatives clearing organization that clears swaps shall provide to the Commission all information that is determined by 

the Commission to be necessary to perform each responsibility 

of the Commission under this Act. 

(2) DATA COLLECTION AND MAINTENANCE REQUIREMENTS.— 

The Commission shall adopt data collection and maintenance 

requirements for swaps cleared by derivatives clearing organizations that are comparable to the corresponding requirements 

for— 

(A) swaps data reported to swap data repositories; and 

(B) swaps traded on swap execution facilities. 

(3) REPORTS ON SECURITY-BASED SWAP AGREEMENTS TO BE

SHARED WITH THE SECURITIES AND EXCHANGE COMMISSION.— 

(A) IN GENERAL.—A derivatives clearing organization 

that clears security-based swap agreements (as defined in 

section ø1a(47)(A)(v)¿ 1a(48)(A)(v)) shall, upon request, 

open to inspection and examination to the Securities and 

Exchange Commission all books and records relating to 

such security-based swap agreements, consistent with the 

confidentiality and disclosure requirements of section 8. 

(B) JURISDICTION.—Nothing in this paragraph shall affect the exclusive jurisdiction of the Commission to prescribe recordkeeping and reporting requirements for a derivatives clearing organization that is registered with the 

Commission. 


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(4) INFORMATION SHARING.—Subject to section 8, and upon 

request, the Commission shall share information collected 

under paragraph (2) with— 

(A) the Board; 

(B) the Securities and Exchange Commission; 

(C) each appropriate prudential regulator; 

(D) the Financial Stability Oversight Council; 

(E) the Department of Justice; and 

(F) any other person that the Commission determines to 

be appropriate, including— 

(i) foreign financial supervisors (including foreign futures authorities); 

(ii) foreign central banks; and 

(iii) foreign ministries. 

ø(5) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT.— Before the Commission may share information with any entity 

described in paragraph (4)— 

ø(A) the Commission shall receive a written agreement 

from each entity stating that the entity shall abide by the 

confidentiality requirements described in section 8 relating 

to the information on swap transactions that is provided; 

and 

ø(B) each entity shall agree to indemnify the Commission for any expenses arising from litigation relating to the 

information provided under section 8.¿ 

(5) CONFIDENTIALITY AGREEMENT.—Before the Commission 

may share information with any entity described in paragraph 

(4), the Commission shall receive a written agreement from each 

entity stating that the entity shall abide by the confidentiality 

requirements described in section 8 relating to the information 

on swap transactions that is provided. 

(6) PUBLIC INFORMATION.—Each derivatives clearing organization that clears swaps shall provide to the Commission (including any designee of the Commission) information under 

paragraph (2) in such form and at such frequency as is required by the Commission to comply with the public reporting 

requirements contained in section 2(a)(13). 

SEC. 5c. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES. 

(a) ACCEPTABLE BUSINESS PRACTICES UNDER CORE PRINCIPLES.— 

(1) IN GENERAL.—Consistent with the purposes of this Act, 

the Commission may issue interpretations, or approve interpretations submitted to the Commission, of sections 5(d) and 

5b(c)(2), to describe what would constitute an acceptable business practice under such sections. 

(2) EFFECT OF INTERPRETATION.—An interpretation issued 

under paragraph (1) may provide the exclusive means for complying with each section described in paragraph (1). 

(b) DELEGATION OF FUNCTIONS UNDER CORE PRINCIPLES.— 

(1) IN GENERAL.—A øcontract market, derivatives transaction 

execution facility, or electronic trading facility¿ registered entity with respect to a significant price discovery contract may 

comply with any applicable core principle through delegation of 

any relevant function to a registered futures association or a 

registered entity that is not an electronic trading facility. 


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(2) RESPONSIBILITY.—A øcontract market, derivatives transaction execution facility, or electronic trading facility¿ registered entity that delegates a function under paragraph (1) 

shall remain responsible for carrying out the function. 

(3) NONCOMPLIANCE.—If a øcontract market, derivatives 

transaction execution facility, or electronic trading facility¿ 

registered entity that delegates a function under paragraph (1) 

becomes aware that a delegated function is not being performed as required under this Act, the øcontract market, derivatives transaction execution facility, or electronic trading facility¿ registered entity shall promptly take steps to address the 

noncompliance. 

(c) NEW CONTRACTS, NEW RULES, AND RULE AMENDMENTS.— 

(1) IN GENERAL.—A registered entity may elect to list for 

trading or accept for clearing any new contract, or other instrument, or may elect to approve and implement any new rule or 

rule amendment, by providing to the Commission (and the Secretary of the Treasury, in the case of a contract of sale of a 

government security for future delivery (or option on such a 

contract) or a rule or rule amendment specifically related to 

such a contract) a written certification that the new contract 

or instrument or clearing of the new contract or instrument, 

new rule, or rule amendment complies with this Act (including 

regulations under this Act). 

(2) RULE REVIEW.—The new rule or rule amendment described in paragraph (1) shall become effective, pursuant to the 

certification of the registered entity and notice of such certification to its members (in a manner to be determined by the 

Commission), on the date that is 10 business days after the 

date on which the Commission receives the certification (or 

such shorter period as determined by the Commission by rule 

or regulation) unless the Commission notifies the registered 

entity within such time that it is staying the certification because there exist novel or complex issues that require additional time to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this 

Act (including regulations under this Act). 

(3) STAY OF CERTIFICATION FOR RULES.— (A) A notification by the Commission pursuant to paragraph (2) shall stay the certification of the new rule or rule 

amendment for up to an additional 90 days from the date 

of the notification. 

(B) A rule or rule amendment subject to a stay pursuant 

to subparagraph (A) shall become effective, pursuant to 

the certification of the registered entity, at the expiration 

of the period described in subparagraph (A) unless the 

Commission— 

(i) withdraws the stay prior to that time; or 

(ii) notifies the registered entity during such period 

that it objects to the proposed certification on the 

grounds that it is inconsistent with this Act (including 

regulations under this Act). 

(C) The Commission shall provide a not less than 30-day 

public comment period, within the 90-day period in which 

the stay is in effect as described in subparagraph (A), 


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whenever the Commission reviews a rule or rule amendment pursuant to a notification by the Commission under 

this paragraph. 

(4) PRIOR APPROVAL.— 

(A) IN GENERAL.—A registered entity may request that 

the Commission grant prior approval to any new contract 

or other instrument, new rule, or rule amendment. 

(B) PRIOR APPROVAL REQUIRED.—Notwithstanding any 

other provision of this section, a designated contract market shall submit to the Commission for prior approval each 

rule amendment that materially changes the terms and 

conditions, as determined by the Commission, in any contract of sale for future delivery of a commodity specifically 

enumerated in section 1a(10) (or any option thereon) traded through its facilities if the rule amendment applies to 

contracts and delivery months which have already been 

listed for trading and have open interest. 

(C) DEADLINE.—If prior approval is requested under subparagraph (A), the Commission shall take final action on 

the request not later than 90 days after submission of the 

request, unless the person submitting the request agrees 

to an extension of the time limitation established under 

this subparagraph. 

(5) APPROVAL.— 

(A) RULES.—The Commission shall approve a new rule, 

or rule amendment, of a registered entity unless the Commission finds that the new rule, or rule amendment, is inconsistent with this subtitle (including regulations). 

(B) CONTRACTS AND INSTRUMENTS.—The Commission 

shall approve a new contract or other instrument unless 

the Commission finds that the new contract or other instrument would violate this Act (including regulations). 

(C) SPECIAL RULE FOR REVIEW AND APPROVAL OF EVENT

CONTRACTS AND SWAPS CONTRACTS.— 

(i) EVENT CONTRACTS.—In connection with the listing of agreements, contracts, transactions, or swaps in 

excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other 

than a change in the price, rate, value, or levels of a 

commodity described in section ø1a(2)(i))¿ 1a(19)(i)), 

by a designated contract market or swap execution facility, the Commission may determine that such agreements, contracts, or transactions are contrary to the 

public interest if the agreements, contracts, or transactions involve— 

(I) activity that is unlawful under any Federal 

or State law; 

(II) terrorism; 

(III) assassination; 

(IV) war; 

(V) gaming; or 

(VI) other similar activity determined by the 

Commission, by rule or regulation, to be contrary 

to the public interest. 


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(ii) PROHIBITION.—No agreement, contract, or transaction determined by the Commission to be contrary to 

the public interest under clause (i) may be listed or 

made available for clearing or trading on or through 

a registered entity. 

(iii) SWAPS CONTRACTS.— 

(I) IN GENERAL.—In connection with the listing 

of a swap for clearing by a derivatives clearing organization, the Commission shall determine, upon 

request or on its own motion, the initial eligibility, 

or the continuing qualification, of a derivatives 

clearing organization to clear such a swap under 

those criteria, conditions, or rules that the Commission, in its discretion, determines. 

(II) REQUIREMENTS.—Any such criteria, conditions, or rules shall consider— 

(aa) the financial integrity of the derivatives clearing organization; and 

(bb) any other factors which the Commission determines may be appropriate. 

(iv) DEADLINE.—The Commission shall take final action under clauses (i) and (ii) in not later than 90 days 

from the commencement of its review unless the party 

seeking to offer the contract or swap agrees to an extension of this time limitation. 

(e) RESERVATION OF EMERGENCY AUTHORITY.—Nothing in this 

section shall limit or in any way affect the emergency powers of the 

Commission provided in section 8a(9). 

(f) Consistent with this Act, each designated contract market 

øand registered derivatives transaction execution facility¿ shall 

issue such rules as are necessary to avoid duplicative or conflicting 

rules applicable to any futures commission merchant registered 

with the Commission pursuant to section 4f(a) of this Act (except 

paragraph (2) thereof), that is also registered with the Securities 

and Exchange Commission pursuant to section 15(b) of the Securities Exchange Act of 1934 (except paragraph (11) thereof) with respect to the application of— 

(1) rules of such designated contract market øor registered 

derivatives transaction execution facility¿ of the type specified 

in section 4d(e) involving security futures products; and 

(2) similar rules of national securities associations registered 

pursuant to section 15A(a) of the Securities Exchange Act of 

1934 and national securities exchanges registered pursuant to 

section 6(g) of such Act involving security futures products. 

* * * * * * * 

SEC. 5f. DESIGNATION OF SECURITIES EXCHANGES AND ASSOCIATIONS AS CONTRACT MARKETS. 

(a) Any board of trade that is registered with the Securities and 

Exchange Commission as a national securities exchange, is a national securities association registered pursuant to section 15A(a) 

of the Securities Exchange Act of 1934, or is an alternative trading 

system shall be a designated contract market in security futures 

products if— 


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(1) such national securities exchange, national securities association, or alternative trading system lists or trades no other 

contracts of sale for future delivery, except for security futures 

products; 

(2) such national securities exchange, national securities association, or alternative trading system files written notice 

with the Commission in such form as the Commission, by rule, 

may prescribe containing such information as the Commission, 

by rule, may prescribe as necessary or appropriate in the public interest or for the protection of customers; and 

(3) the registration of such national securities exchange, national securities association, or alternative trading system is 

not suspended pursuant to an order by the Securities and Exchange Commission. 

Such designation shall be effective contemporaneously with the 

submission of notice, in written or electronic form, to the Commission. 

(b)(1) A national securities exchange, national securities association, or alternative trading system that is designated as a contract 

market pursuant to øsection 5f¿ this section shall be exempt from 

the following provisions of this Act and the rules thereunder: 

(A) Subsections (c)ø, (e), and (g)¿ and (e) of section 4c. 

(B) Section 4j. 

(C) Section 5. 

(D) Section 5c. 

(E) Section 6a. 

(F) Section 8(d). 

(G) Section 9(f). 

(H) Section 16. 

(2) An alternative trading system that is a designated contract 

market under this section shall be required to be a member of a 

futures association registered under section 17 and shall be exempt 

from any provision of this Act that would require such alternative 

trading system to— 

(A) set rules governing the conduct of subscribers other than 

the conduct of such subscribers’ trading on such alternative 

trading system; or 

(B) discipline subscribers other than by exclusion from trading. 

(3) To the extent that an alternative trading system is exempt 

from any provision of this Act pursuant to paragraph (2) of this 

subsection, the futures association registered under section 17 of 

which the alternative trading system is a member shall set rules 

governing the conduct of subscribers to the alternative trading system and discipline the subscribers. 

(4)(A) Except as provided in subparagraph (B), but notwithstanding any other provision of this Act, the Commission, by rule, 

regulation, or order, may conditionally or unconditionally exempt 

any designated contract market in security futures subject to the 

designation requirement of this section from any provision of this 

Act or of any rule or regulation thereunder, to the extent such exemption is necessary or appropriate in the public interest and is 

consistent with the protection of investors. 

(B) The Commission shall, by rule or regulation, determine the 

procedures under which an exemptive order under this section is 


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granted and may, in its sole discretion, decline to entertain any application for an order of exemption under this section. 

(C) An alternative trading system shall not be deemed to be an 

exchange for any purpose as a result of the designation of such alternative trading system as a contract market under this section. 

* * * * * * * 

SEC. 5h. SWAP EXECUTION FACILITIES. 

(a) REGISTRATION.— (1) IN GENERAL.—No person may operate a facility for the 

trading or processing of swaps unless the facility is registered 

as a swap execution facility or as a designated contract market 

under this section. 

(2) DUAL REGISTRATION.—Any person that is registered as a 

swap execution facility under this section shall register with 

the Commission regardless of whether the person also is registered with the Securities and Exchange Commission as a 

swap execution facility. 

(b) TRADING AND TRADE PROCESSING.— 

(1) IN GENERAL.—Except as specified in paragraph (2), a 

swap execution facility that is registered under subsection (a) 

may— 

(A) make available for trading any swap; and 

(B) facilitate trade processing of any swap. 

(2) AGRICULTURAL SWAPS.—A swap execution facility may not 

list for trading or confirm the execution of any swap in an agricultural commodity (as defined by the Commission) except pursuant to a rule or regulation of the Commission allowing the 

swap under such terms and conditions as the Commission shall 

prescribe. 

(c) IDENTIFICATION OF FACILITY USED TO TRADE SWAPS BY CONTRACT MARKETS.—A board of trade that operates a contract market 

shall, to the extent that the board of trade also operates a swap 

execution facility and uses the same electronic trade execution system for listing and executing trades of swaps on or through the 

contract market and the swap execution facility, identify whether 

the electronic trading of such swaps is taking place on or through 

the contract market or the swap execution facility. 

(d) RULE-WRITING.— (1) The Securities and Exchange Commission and Commodity Futures Trading Commission may promulgate rules defining the universe of swaps that can be executed on a swap 

execution facility. These rules shall take into account the price 

and nonprice requirements of the counterparties to a swap and 

the goal of this section as set forth in subsection (e). 

(2) For all swaps that are not required to be executed 

through a swap execution facility as defined in paragraph (1), 

such trades may be executed through any other available 

means of interstate commerce. 

(3) The Securities and Exchange Commission and Commodity Futures Trading Commission shall update these rules 

as necessary to account for technological and other innovation. 

(e) RULE OF CONSTRUCTION.—The goal of this section is to promote the trading of swaps on swap execution facilities and to promote pre-trade price transparency in the swaps market. 


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(f) CORE PRINCIPLES FOR SWAP EXECUTION FACILITIES.— 

(1) COMPLIANCE WITH CORE PRINCIPLES.— 

(A) IN GENERAL.—To be registered, and maintain registration, as a swap execution facility, the swap execution 

facility shall comply with— 

(i) the core principles described in this subsection; 

and 

(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

(B) REASONABLE DISCRETION OF SWAP EXECUTION FACILITY.—Unless otherwise determined by the Commission by 

rule or regulation except as described in this subsection, a 

swap execution facility described in subparagraph (A) shall 

have reasonable discretion in establishing the manner in 

which the swap execution facility complies with the core 

principles described in this subsection. 

(2) COMPLIANCE WITH RULES.—A swap execution facility 

shall— 

(A) establish and enforce compliance with any rule of the 

swap execution facility, including— 

(i) the terms and conditions of the swaps traded or 

processed on or through the swap execution facility; 

and 

(ii) any limitation on access to the swap execution 

facility; 

(B) establish and enforce trading, trade processing, and 

participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means— 

(i) to provide market participants with impartial access to the market; and 

(ii) to capture information that may be used in establishing whether rule violations have occurred; 

(C) establish rules governing the operation of the facility, including rules specifying trading procedures to be 

used in entering and executing orders traded or posted on 

the facility, including block trades; and 

ø(D) provide by its rules that when a swap dealer or 

major swap participant enters into or facilitates a swap 

that is subject to the mandatory clearing requirement of 

section 2(h), the swap dealer or major swap participant 

shall be responsible for compliance with the mandatory 

trading requirement under section 2(h)(8).¿ 

(D) have reasonable discretion in establishing and enforcing its rules related to trade practice surveillance, market 

surveillance, real-time marketing monitoring, and audit 

trail given that a swap execution facility may offer a trading system or platform to execute or trade swaps through 

any means of interstate commerce. A swap execution facility 

shall be responsible for monitoring trading in swaps only 

on its own facility. 

(3) SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION.—The 

swap execution facility shall permit trading only in swaps that 

are not readily susceptible to manipulation. 


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(4) MONITORING OF TRADING AND TRADE PROCESSING.—The 

swap execution facility shall— 

(A) establish and enforce rules or terms and conditions 

defining, or specifications detailing— 

(i) trading procedures to be used in entering and 

executing orders traded on or through the facilities of 

the swap execution facility; and 

(ii) procedures for trade processing of swaps on or 

through the facilities of the swap execution facility; 

and 

(B) monitor trading in swaps to prevent manipulation, 

price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for 

conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. A swap execution 

facility shall be responsible for monitoring trading in 

swaps only on its own facility. 

(5) ABILITY TO OBTAIN INFORMATION.—The swap execution facility shall— 

(A) establish and enforce rules that will allow the facility 

to obtain any necessary information to perform any of the 

functions described in this section; 

(B) provide the information to the Commission on request; and 

(C) have the capacity to carry out such international information-sharing agreements as the Commission may require. 

(6) POSITION LIMITS OR ACCOUNTABILITY.— 

(A) IN GENERAL.—To reduce the potential threat of market manipulation or congestion, especially during trading 

in the delivery month, a swap execution facility that is a 

trading facility shall adopt for each of the contracts of the 

facility, as is necessary and appropriate, position limitations or position accountability for speculators. 

(B) POSITION LIMITS.—For any contract that is subject to 

a position limitation established by the Commission pursuant to section 4a(a), the swap execution facility øshall—¿ 

ø(i) set its position limitation at a level no higher 

than the Commission limitation; and¿ 

ø(ii) monitor positions established on or through the 

swap execution facility for compliance with the¿ shall 

monitor the trading activity on its facility for compliance with any limit set by the Commission and the 

limit, if any, set by the swap execution facility. A swap 

execution facility shall be responsible for monitoring 

positions only on its own facility. 

(7) FINANCIAL INTEGRITY OF TRANSACTIONS.—The swap execution facility shall establish and enforce rules and procedures 

for ensuring the financial integrity of swaps entered on or 

through the facilities of the swap execution facility, including 

the clearance and settlement of the swaps pursuant to section 

2(h)(1). 

(8) EMERGENCY AUTHORITY.—The swap execution facility 

shall adopt rules to provide for the exercise of emergency auVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00213 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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thority, in consultation or cooperation with the Commission, as 

is necessary and appropriate, including the authority øto liquidate or transfer open positions in any swap or to suspend or 

curtail trading in a swap.¿ to suspend or curtail trading in a 

swap on its own facility. 

(9) TIMELY PUBLICATION OF TRADING INFORMATION.— (A) IN GENERAL.—The swap execution facility shall make 

public timely information on price, trading volume, and 

other trading data on swaps to the extent prescribed by 

the Commission. 

(B) CAPACITY OF SWAP EXECUTION FACILITY.—The swap 

execution facility shall be required to have the capacity to 

electronically capture and transmit trade information with 

respect to transactions executed on the facility. 

(10) RECORDKEEPING AND REPORTING.— 

(A) IN GENERAL.—A swap execution facility shall— 

(i) maintain records of all activities relating to the 

business of the facility, including a complete audit 

trail, in a form and manner acceptable to the Commission for a period of 5 years; 

(ii) report to the Commission, in a form and manner 

acceptable to the Commission, such information as the 

Commission determines to be necessary or appropriate 

for the Commission to perform the duties of the Commission under this Act; and 

(iii) shall keep any such records relating to swaps 

defined in section ø1a(47)(A)(v)¿ 1a(48)(A)(v) open to 

inspection and examination by the Securities and Exchange Commission.’’ 

(B) REQUIREMENTS.—The Commission shall adopt data 

collection and reporting requirements for swap execution 

facilities that are comparable to corresponding requirements for derivatives clearing organizations and swap data 

repositories. 

(11) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, the swap execution facility shall not— 

(A) adopt any rules or taking any actions that result in 

any unreasonable restraint of trade; or 

(B) impose any material anticompetitive burden on trading or clearing. 

(12) CONFLICTS OF INTEREST.—The swap execution facility 

shall— 

(A) establish and enforce rules to minimize conflicts of 

interest in its decision-making process; and 

(B) establish a process for resolving the conflicts of interest. 

(13) FINANCIAL RESOURCES.— 

(A) IN GENERAL.—The swap execution facility shall have 

adequate financial, operational, and managerial resources 

to discharge each responsibility of the swap execution facility. 

(B) DETERMINATION OF RESOURCE ADEQUACY.—The financial resources of a swap execution facility shall be considered to be adequate if the value of the financial reVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00214 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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sources exceeds the total amount that would enable the 

swap execution facility to øcover the operating costs of the 

swap execution facility for a 1-year period, as calculated on 

a rolling basis¿ conduct an orderly wind-down of its operations. (14) SYSTEM SAFEGUARDS.—The swap execution facility 

shall— 

(A) establish and maintain a program of risk analysis 

and oversight to identify and minimize sources of operational risk, through the development of appropriate controls and procedures, and automated systems, that— 

(i) are reliable and secure; and 

(ii) have adequate scalable capacity; 

(B) establish and maintain emergency procedures, 

backup facilities, and a plan for disaster recovery that 

allow for— 

(i) the timely recovery and resumption of operations; 

and 

(ii) the fulfillment of the responsibilities and obligations of the swap execution facility; and 

(C) periodically conduct tests to verify that the backup 

resources of the swap execution facility are sufficient to ensure continued— 

(i) order processing and trade matching; 

(ii) price reporting; 

(iii) market surveillance and 

(iv) maintenance of a comprehensive and accurate 

audit trail. 

(15) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

(A) IN GENERAL.—Each swap execution facility shall designate an individual to serve as a chief compliance officer. 

The individual may also perform other responsibilities for 

the swap execution facility. 

(B) DUTIES.—The chief compliance officer shall— 

(i) report directly to the board, a committee of the 

board, or to the senior officer of the facility; 

(ii) review compliance with the core principles in 

this subsection; 

ø(iii) in consultation with the board of the facility, a 

body performing a function similar to that of a board, 

or the senior officer of the facility, resolve any conflicts 

of interest that may arise; 

ø(iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section; 

ø(v) ensure compliance with this Act and the rules 

and regulations issued under this Act, including rules 

prescribed by the Commission pursuant to this section; and¿ 

(iii) establish and administer policies and procedures 

that are reasonably designed to resolve any conflicts of 

interest that may arise; 

(iv) establish and administer policies and procedures 

that reasonably ensure compliance with this Act and 

the rules and regulations issued under this Act, includVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00215 Fmt 6659 Sfmt 6603 E:\HR\OC\HR134.XXX HR134

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ing rules prescribed by the Commission pursuant to 

this section; and 

ø(vi)¿ (v) establish procedures for the remediation of 

noncompliance issues found during compliance office 

reviews, look backs, internal or external audit findings, self-reported errors, or through validated complaints. 

(C) REQUIREMENTS FOR PROCEDURES.—In establishing 

procedures under subparagraph ø(B)(vi)¿ (B)(v), the chief 

compliance officer shall design the procedures to establish 

the handling, management response, remediation, retesting, and closing of noncompliance issues. 

(D) ANNUAL REPORTS.— 

(i) IN GENERAL.— øIn accordance with rules prescribed by the Commission, the¿ The chief compliance 

officer shall annually prepare øand sign¿ a report that 

contains a description of— 

(I) the compliance of the swap execution facility 

with this Act; and 

(II) the policies and procedures, including the 

code of ethics and conflict of interest policies, of 

the swap execution facility. 

(ii) REQUIREMENTS.—The chief compliance officer or 

senior officer shall— 

ø(I) submit each report described in clause (i) 

with the appropriate financial report of the swap 

execution facility that is required to be submitted 

to the Commission pursuant to this section; and¿ 

(I) submit each report described in clause (i) to 

the Commission; and 

(II) include in the report a certification that, 

under penalty of law, the report is materially accurate and complete. 

(g) EXEMPTIONS.—The Commission may exempt, conditionally or 

unconditionally, a swap execution facility from registration under 

this section if the Commission finds that the facility is subject to 

comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, a prudential regulator, or the appropriate governmental authorities in 

the home country of the facility. 

(h) RULES.—The Commission shall prescribe rules governing the 

regulation of øalternative¿ swap execution facilities under this section. 

SEC. 6. (a) Any person desiring to be designated øor registered¿ 

as a contract market øor derivatives transaction execution facility¿ 

shall make application to the Commission for the designation øor 

registration¿ and accompany the same with a showing that it complies with the conditions set forth in this Act, and with a sufficient 

assurance that it will continue to comply with øthe the¿ the requirements of this Act. The Commission shall approve or deny an 

application for designation øor registration¿ as a contract market 

øor derivatives transaction execution facility¿ within 180 days of 

the filing of the application. If the Commission notifies the person 

that its application is materially incomplete and specifies the deficiencies in the application, the running of the 180-day period shall 


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be stayed from the time of such notification until the application 

is resubmitted in completed form: Provided, That the Commission 

shall have not less than sixty days to approve or deny the application from the time the application is resubmitted in completed 

form. If the Commission denies an application, it shall specify the 

grounds for the denial. In the event of a refusal to designate or register as a contract market øor derivatives transaction execution facility¿ any person that has made application therefor, the person 

shall be afforded an opportunity for a hearing on the record before 

the Commission, with the right to appeal an adverse decision after 

such hearing to the court of appeals as provided for in other cases 

in subsection (b) of this section. 

(b) The Commission is authorized to suspend for a period not to 

exceed 6 months or to revoke the designation øor registration¿ of 

any contract market øor derivatives transaction execution facility¿ 

on a showing that the contract market øor derivatives transaction 

execution facility¿ is not enforcing or has not enforced its rules of 

government, made a condition of its designation øor registration¿ 

as set forth in sections 5 through 5b or section 5f, or that the contract market øor derivatives transaction execution facility¿ øor 

electronic trading facility¿, or any director, officer, agent, or employee thereof, otherwise is violating or has violated any of the provisions of this Act or any of the rules, regulations, or orders of the 

Commission thereunder. Such suspension or revocation shall only 

be made after a notice to the officers of the contract market øor derivatives transaction execution facility¿ øor electronic trading facility¿ affected and upon a hearing on the record: Provided, That such 

suspension or revocation shall be final and conclusive, unless within fifteen days after such suspension or revocation by the Commission such person appeals to the court of appeals for the circuit in 

which it has its principal place of business, by filing with the clerk 

of such court a written petition praying that the order of the Commission be set aside or modified in the manner stated in the petition, together with a bond in such sum as the court may determine, 

conditioned that such person will pay the costs of the proceedings 

if the court so directs. The clerk of the court in which such a petition is filed shall immediately cause a copy thereof to be delivered 

to the Commission and file in the court the record in such proceedings, as provided in section 2112 of title 28, United States 

Code. The testimony and evidence taken or submitted before the 

Commission, duly filed as aforesaid as a part of the record, shall 

be considered by the court of appeals as the evidence in the case. 

Such a court may affirm or set aside the order of the Commission 

or may direct it to modify its order. No such order of the Commission shall be modified or set aside by the court of appeals unless 

it is shown by the person that the order is unsupported by the 

weight of the evidence or was issued without due notice and a reasonable opportunity having been afforded to such person for a hearing, or infringes the Constitution of the United States, or is beyond 

the jurisdiction of the Commission. 

(c) PROHIBITION REGARDING MANIPULATION AND FALSE INFORMA- TION.— 

(1) PROHIBITION AGAINST MANIPULATION.—It shall be unlawful for any person, directly or indirectly, to use or employ, or 

attempt to use or employ, in connection with any swap, or a 


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contract of sale of any commodity in interstate commerce, or 

for future delivery on or subject to the rules of any registered 

entity, any manipulative or deceptive device or contrivance, in 

contravention of such rules and regulations as the Commission 

shall promulgate by not later than 1 year after the date of enactment of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, provided no rule or regulation promulgated by 

the Commission shall require any person to disclose to another 

person nonpublic information that may be material to the market price, rate, or level of the commodity transaction, except as 

necessary to make any statement made to the other person in 

or in connection with the transaction not misleading in any 

material respect. 

(A) SPECIAL PROVISION FOR MANIPULATION BY FALSE REPORTING.—Unlawful manipulation for purposes of this 

paragraph shall include, but not be limited to, delivering, 

or causing to be delivered for transmission through the 

mails or interstate commerce, by any means of communication whatsoever, a false or misleading or inaccurate report concerning crop or market information or conditions 

that affect or tend to affect the price of any commodity in 

interstate commerce, knowing, or acting in reckless disregard of the fact that such report is false, misleading or 

inaccurate. 

(B) EFFECT ON OTHER LAW.—Nothing in this paragraph 

shall affect, or be construed to affect, the applicability of 

section 9(a)(2). 

(C) GOOD FAITH MISTAKES.—Mistakenly transmitting, in 

good faith, false or misleading or inaccurate information to 

a price reporting service would not be sufficient to violate 

subsection (c)(1)(A). 

(2) PROHIBITION REGARDING FALSE INFORMATION.—It shall be 

unlawful for any person to make any false or misleading statement of a material fact to the Commission, including in any 

registration application or any report filed with the Commission under this Act, or any other information relating to a 

swap, or a contract of sale of a commodity, in interstate commerce, or for future delivery on or subject to the rules of any 

registered entity, or to omit to state in any such statement any 

material fact that is necessary to make any statement of a material fact made not misleading in any material respect, if the 

person knew, or reasonably should have known, the statement 

to be false or misleading. 

(3) OTHER MANIPULATION.—In addition to the prohibition in 

paragraph (1), it shall be unlawful for any person, directly or 

indirectly, to manipulate or attempt to manipulate the price of 

any swap, or of any commodity in interstate commerce, or for 

future delivery on or subject to the rules of any registered entity. 

(4) ENFORCEMENT.— (A) AUTHORITY OF COMMISSION.—If the Commission has 

reason to believe that any person (other than a registered 

entity) is violating or has violated this subsection, or any 

other provision of this Act (including any rule, regulation, 

or order of the Commission promulgated in accordance 


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with this subsection or any other provision of this Act), the 

Commission may serve upon the person a complaint. 

(B) CONTENTS OF COMPLAINT.—A complaint under subparagraph (A) shall— 

(i) contain a description of the charges against the 

person that is the subject of the complaint; and 

(ii) have attached or contain a notice of hearing that 

specifies the date and location of the hearing regarding the complaint. 

(C) HEARING.—A hearing described in subparagraph 

(B)(ii)— 

(i) shall be held not later than 3 days after service 

of the complaint described in subparagraph (A); 

(ii) shall require the person to show cause regarding 

why— 

(I) an order should not be made— 

(aa) to prohibit the person from trading on, 

or subject to the rules of, any registered entity; and 

(bb) to direct all registered entities to refuse 

all privileges to the person until further notice of the Commission; and 

(II) the registration of the person, if registered 

with the Commission in any capacity, should not 

be suspended or revoked; and 

(iii) may be held before— 

(I) the Commission; or 

(II) an administrative law judge designated by 

the Commission, under which the administrative 

law judge shall ensure that all evidence is recorded in written form and submitted to the Commission. 

ø(5) SUBPOENA.—For¿ 

(5) SUBPOENA.— 

(A) IN GENERAL.—For the purpose of securing effective 

enforcement of the provisions of this Act, for the purpose 

of any investigation or proceeding under this Act, and for 

the purpose of any action taken under section 12(f), any 

member of the Commission or any Administrative Law 

Judge or other officer designated by the Commission (except as provided in paragraph (7)) may administer oaths 

and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any 

books, papers, correspondence, memoranda, or other 

records that the Commission deems relevant or material to 

the inquiry. 

(B) OMNIBUS ORDERS OF INVESTIGATION.— 

(i) DURATION AND RENEWAL.—An omnibus order of 

investigation shall not be for an indefinite duration 

and may be renewed only by Commission action. 

(ii) DEFINITION.—In clause (i), the term ‘‘omnibus 

order of investigation’’ means an order of the Commission authorizing 1 of more members of the Commission 

or its staff to issue subpoenas under subparagraph (A) 


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to multiple persons in relation to a particular subject 

matter area. 

(6) WITNESSES.—The attendance of witnesses and the production of any such records may be required from any place in 

the United States, any State, or any foreign country or jurisdiction at any designated place of hearing. 

(7) SERVICE.—A subpoena issued under this section may be 

served upon any person who is not to be found within the territorial jurisdiction of any court of the United States in such 

manner as the Federal Rules of Civil Procedure prescribe for 

service of process in a foreign country, except that a subpoena 

to be served on a person who is not to be found within the territorial jurisdiction of any court of the United States may be 

issued only on the prior approval of the Commission. 

(8) REFUSAL TO OBEY.—In case of contumacy by, or refusal 

to obey a subpoena issued to, any person, the Commission may 

invoke the aid of any court of the United States within the jurisdiction in which the investigation or proceeding is conducted, or where such person resides or transacts business, in 

requiring the attendance and testimony of witnesses and the 

production of books, papers, correspondence, memoranda, and 

other records. Such court may issue an order requiring such 

person to appear before the Commission or member or Administrative Law Judge or other officer designated by the Commission, there to produce records, if so ordered, or to give testimony touching the matter under investigation or in question. 

(9) FAILURE TO OBEY.—Any failure to obey such order of the 

court may be punished by the court as a contempt thereof. All 

process in any such case may be served in the judicial district 

wherein such person is an inhabitant or transacts business or 

wherever such person may be found. 

(10) EVIDENCE.—On the receipt of evidence under paragraph 

(4)(C)(iii), the Commission may— 

(A) prohibit the person that is the subject of the hearing 

from trading on, or subject to the rules of, any registered 

entity and require all registered entities to refuse the person all privileges on the registered entities for such period 

as the Commission may require in the order; 

(B) if the person is registered with the Commission in 

any capacity, suspend, for a period not to exceed 180 days, 

or revoke, the registration of the person; 

(C) assess such person— 

(i) a civil penalty of not more than an amount equal 

to the greater of— 

(I) $140,000; or 

(II) triple the monetary gain to such person for 

each such violation; or 

(ii) in any case of manipulation or attempted manipulation in violation of this subsection or section 

9(a)(2), a civil penalty of not more than an amount 

equal to the greater of— 

(I) $1,000,000; or 

(II) triple the monetary gain to the person for 

each such violation; and 


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(D) require restitution to customers of damages proximately caused by violations of the person. 

(11) ORDERS.— (A) NOTICE.—The Commission shall provide to a person 

described in paragraph (10) and the appropriate governing 

board of the registered entity notice of the order described 

in paragraph (10) by— 

(i) registered mail; 

(ii) certified mail; or 

(iii) personal delivery. 

(B) REVIEW.— (i) IN GENERAL.—A person described in paragraph 

(10) may obtain a review of the order or such other equitable relief as determined to be appropriate by a 

court described in clause (ii). 

(ii) PETITION.—To obtain a review or other relief 

under clause (i), a person may, not later than 15 days 

after notice is given to the person under clause (i), file 

a written petition to set aside the order with the 

United States Court of Appeals— 

(I) for the circuit in which the petitioner carries 

out the business of the petitioner; or 

(II) in the case of an order denying registration, 

the circuit in which the principal place of business 

of the petitioner is located, as listed on the application for registration of the petitioner. 

(C) PROCEDURE.— (i) DUTY OF CLERK OF APPROPRIATE COURT.—The 

clerk of the appropriate court under subparagraph 

(B)(ii) shall transmit to the Commission a copy of a petition filed under subparagraph (B)(ii). 

(ii) DUTY OF COMMISSION.—In accordance with section 2112 of title 28, United States Code, the Commission shall file in the appropriate court described in 

subparagraph (B)(ii) the record theretofore made. 

(iii) JURISDICTION OF APPROPRIATE COURT.—Upon 

the filing of a petition under subparagraph (B)(ii), the 

appropriate court described in subparagraph (B)(ii) 

may affirm, set aside, or modify the order of the Commission. 

(d) If any person (other than a registered entity), is violating or 

has violated subsection (c) or any other provisions of this Act or of 

the rules, regulations, or orders of the Commission thereunder, the 

Commission may, upon notice and hearing, and subject to appeal 

as in other cases provided for in subsection (c), make and enter an 

order directing that such person shall cease and desist therefrom 

and, if such person thereafter and after the lapse of the period allowed for appeal of such order or after the affirmance of such order, 

shall knowingly fail or refuse to obey or comply with such order, 

such person, upon conviction thereof, shall be fined not more than 

the higher of $140,000 or triple the monetary gain to such person, 

or imprisoned for not more than 1 year, or both, except that if such 

knowing failure or refusal to obey or comply with such order involves any offense within subsection (a) or (b) of section 9, such 

person, upon conviction thereof, shall be subject to the penalties of 


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said subsection (a) or (b): Provided, That any such cease and desist 

order under this subsection against any respondent in any case of 

manipulation shall be issued only in conjunction with an order 

issued against such respondent under subsection (c). 

(e)(1) In determining the amount of the money penalty assessed 

under subsection (c), the Commission shall consider the appropriateness of such penalty to the gravity of the violation. 

(2) Unless the person against whom a money penalty is assessed 

under subsection (c) shows to the satisfaction of the Commission 

within fifteen days from the expiration of the period allowed for 

payment of such penalty that either an appeal as authorized by 

subsection (c) has been taken or payment of the full amount of the 

penalty then due has been made, at the end of such fifteen-day period and until such person shows to the satisfaction of the Commission that payment of such amount with interest thereon to date of 

payment has been made— 

(A) such person shall be prohibited automatically from the 

privileges of all registered entities; and 

(B) if such person is registered with the Commission, such 

registration shall be suspended automatically. 

(3) If a person against whom a money penalty is assessed under 

subsection (c) takes an appeal and if the Commission prevails or 

the appeal is dismissed, unless such person shows to the satisfaction of the Commission that payment of the full amount of the penalty then due has been made by the end of thirty days from the 

date of entry of judgment on the appeal— 

(A) such person shall be prohibited automatically from the 

privileges of all registered entities; and 

(B) if such person is registered with the Commission, such 

registration shall be suspended automatically. 

If the person against whom the money penalty is assessed fails to 

pay such penalty after the lapse of the period allowed for appeal 

or after the affirmance of such penalty, the Commission may refer 

the matter to the Attorney General who shall recover such penalty 

by action in the appropriate United States district court. 

(4) Any designated clearing organization that knowingly or 

recklessly evades or participates in or facilitates an evasion of 

the requirements of section 2(h) shall be liable for a civil 

money penalty in twice the amount otherwise available for a 

violation of section 2(h). 

(5) Any swap dealer or major swap participant that knowingly or recklessly evades or participates in or facilitates an 

evasion of the requirements of section 2(h) shall be liable for 

a civil money penalty in twice the amount otherwise available 

for a violation of section 2(h). 

(f)(1) Except as provided in paragraph (2), not later than six 

months after the effective date of rules promulgated by the Federal 

Trade Commission under section 3(a) of the Telemarketing and 

Consumer Fraud and Abuse Prevention Act, the Commission shall 

promulgate, or require each registered futures association to promulgate, rules substantially similar to such rules to prohibit deceptive and other abusive telemarketing acts or practices by any person registered or exempt from registration under this Act in connection with such person’s business as a futures commission merchant, introducing broker, commodity trading advisor, commodity 


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pool operator, leverage transaction merchant, floor broker, or floor 

trader, or a person associated with any such person. 

(2) The Commission is not required to promulgate rules under 

paragraph (1) if it determines that— 

(A) rules adopted by the Commission under this Act provide 

protection from deceptive and abusive telemarketing by persons described under paragraph (1) substantially similar to 

that provided by rules promulgated by the Federal Trade Commission under section 3(a) of the Telemarketing and Consumer 

Fraud and Abuse Prevention Act; or 

(B) such a rule promulgated by the Commission is not necessary or appropriate in the public interest, or for the protection of customers in the futures and options markets, or 

would be inconsistent with the maintenance of fair and orderly 

markets. 

If the Commission determines that an exception described in subparagraph (A) or (B) applies, the Commission shall publish in the 

Federal Register its determination with the reasons for it. 

(g) The Commission shall provide the Securities and Exchange 

Commission with notice of the commencement of any proceeding 

and a copy of any order entered by the Commission pursuant to 

subsections (c) and (d) of this section against any futures commission merchant or introducing broker registered pursuant to section 

4f(a)(2), any floor broker or floor trader exempt from registration 

pursuant to section 4f(a)(3), any associated person exempt from 

registration pursuant to section 4k(6), or any board of trade designated as a contract market pursuant to section 5f. 

SEC. 6a. (a) No board of trade which has been designated øor registered¿ as a contract market øor a derivatives transaction execution facility¿ shall exclude from membership in, and all privileges 

on, such board of trade, any association or corporation engaged in 

cash commodity business having adequate financial responsibility 

which is organized under the cooperative laws of any State, or 

which has been recognized as a cooperative association of producers 

by the United States Government or by any agency thereof, if such 

association or corporation complies and agrees to comply with such 

terms and conditions as are or may be imposed lawfully upon other 

members of such board, and as are or may be imposed lawfully 

upon a cooperative association of producers engaged in cash commodity business, unless such board of trade is authorized by the 

Commission to exclude such association or corporation from membership and privileges after hearing held upon at least three days’ 

notice subsequent to the filing of complaint by the board of trade: 

Provided, however, That if any such association or corporation shall 

fail to meet its obligations with any established clearing house or 

clearing agency of any contract market, such association or corporation shall be ipso facto debarred from further trading on such 

contract market, except such trading as may be necessary to close 

open trades and to discharge existing contracts in accordance with 

the rules of such contract market applicable in such cases. Such 

Commission may prescribe that such association or corporation 

shall have and retain membership and privileges, with or without 

imposing conditions, or it may permit such board of trade immediately to bar such association or corporation from membership and 

privileges. Any order of said Commission entered hereunder shall 


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be reviewable by the court of appeals for the circuit in which such 

association or corporation, or such board of trade, has its principal 

place of business, on written petition either of such association or 

corporation, or of such board of trade, under the procedure provided in section 6(b) of this Act, but such order shall not be stayed 

by the court pending review. 

(b) No rule of any board of trade designated øor registered¿ as 

a contract market øor a derivatives transaction execution facility¿ 

shall forbid or be construed to forbid the payment of compensation 

on a commodity-unit basis, or otherwise, by any federated cooperative association to its regional member-associations for services 

rendered or to be rendered in connection with any organization 

work, educational activity, or procurement of patronage, provided 

no part of any such compensation is returned to patrons (whether 

members or nonmembers) of such cooperative association, or of its 

regional or local member-associations, otherwise than as a dividend 

on capital stock or as a patronage dividend out of the net earnings 

or surplus of such federated cooperative association. 

SEC. 6b. If any registered entity is not enforcing or has not enforced its rules of government made a condition of its designation 

or registration øas set forth in sections 5 through 5c¿, or if any registered entity, or any director, officer, agent, or employee of any 

registered entity otherwise is violating or has violated any of the 

provisions of this Act or any of the rules, regulations, or orders of 

the Commission thereunder, the Commission may, upon notice and 

hearing on the record and subject to appeal as in other cases provided for in section 6(b) of this Act, make and enter an order directing that such registered entity, director, officer, agent, or employee 

shall cease and desist from such violation, and assess a civil penalty of not more than $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. If such registered entity, director, officer, agent, or employee, after the entry of such a cease and 

desist order and the lapse of the period allowed for appeal of such 

order or after the affirmance of such order, shall fail or refuse to 

obey or comply with such order, such registered entity, director, officer, agent, or employee shall be guilty of a misdemeanor and, 

upon conviction thereof, shall be fined not more than $500,000 or 

imprisoned for not less than six months nor more than one year, 

or both, except that if the failure or refusal to obey or comply with 

the order involved any offense under section 9(a)(2), the registered 

entity, director, officer, agent, or employee shall be guilty of a felony and, on conviction, shall be subject to penalties under section 

9(a)(2). Each day during which such failure or refusal to obey such 

cease and desist order continues shall be deemed a separate offense. If the offending registered entity or other person upon whom 

such penalty is imposed, after the lapse of the period allowed for 

appeal or after the affirmance of such penalty, shall fail to pay 

such penalty, the Commission shall refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court. In determining the amount of 

the money penalty assessed under this section, the Commission 

shall consider the gravity of the offense, and in the case of a registered entity shall further consider whether the amount of the 


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penalty will materially impair the ability of the registered entity to 

carry on its operations and duties. 

* * * * * * * 

SEC. 6d. (1) Whenever it shall appear to the attorney general of 

any State, the administrator of the securities laws of any State, or 

such other official as a State may designate, that the interests of 

the residents of that State have been, are being, or may be threatened or adversely affected because any person (other than a contract market, øderivatives transaction execution facility,¿ clearinghouse, floor broker, or floor trader) has engaged in, is engaging or 

is about to engage in, any act or practice constituting a violation 

of any provision of this Act or any rule, regulation, or order of the 

Commission thereunder, the State may bring a suit in equity or an 

action at law on behalf of its residents to enjoin such act or practice, to enforce compliance with this Act, or any rule, regulation, or 

order of the Commission thereunder, to obtain damages on behalf 

of their residents, or to obtain such further and other relief as the 

court may deem appropriate. 

(2) The district courts of the United States, the United States 

courts of any territory, and the District Court of the United States 

for the District of Columbia, shall have jurisdiction of all suits in 

equity and actions at law brought under this section to enforce any 

liability or duty created by this Act or any rule, regulation, or order 

of the Commission thereunder, or to obtain damages or other relief 

with respect thereto. Upon proper application, such courts shall 

also have jurisdiction to issue writs of mandamus, or orders affording like relief, commanding the defendant to comply with the provisions of this Act, or any rule, regulation, or order of the Commission thereunder, including the requirement that the defendant take 

such action as is necessary to remove the danger of violation of this 

Act or of any such rule, regulation, or order. Upon a proper showing, a permanent or temporary injunction or restraining order shall 

be granted without bond. 

(3) Immediately upon instituting any such suit or action, the 

State shall serve written notice thereof upon the Commission and 

provide the Commission with a copy of its complaint, and the Commission shall have the right to (A) intervene in the suit or action 

and, upon doing so, shall be heard on all matters arising therein, 

and (B) file petitions for appeal. 

(4) Any suit or action brought under this section in a district 

court of the United States may be brought in the district wherein 

the defendant is found or is an inhabitant or transacts business or 

wherein the act or practice occurred, is occurring, or is about to 

occur, and process in such cases may be served in any district in 

which the defendant is an inhabitant or wherever the defendant 

may be found. 

(5) For purposes of bringing any suit or action under this section, 

nothing in this Act shall prevent the attorney general, the administrator of the State securities laws, or other duly authorized State 

officials from exercising the powers conferred on them by the laws 

of such State to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence. 


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(6) For purposes of this section ‘‘State’’ means any State of the 

United States, the District of Columbia, the Commonwealth of 

Puerto Rico, or any territory or possession of the United States. 

(7) Nothing contained in this section shall prohibit an authorized 

State official from proceeding in State court on the basis of an alleged violation of any general civil or criminal antifraud statute of 

such State. 

(8)(A) Nothing in this Act shall prohibit an authorized State official from proceeding in a State court against any person registered 

under this Act (other than a floor broker, floor trader, or registered 

futures association) for an alleged violation of any antifraud provision of this Act or any antifraud rule, regulation, or order issued 

pursuant to the Act. 

(B) The State shall give the Commission prior written notice of 

its intent to proceed before instituting a proceeding in State court 

as described in this subsection and shall furnish the Commission 

with a copy of its complaint immediately upon instituting any such 

proceeding. The Commission shall have the right to (i) intervene in 

the proceeding and, upon doing so, shall be heard on all matters 

arising therein, and (ii) file a petition for appeal. The Commission 

or the defendant may remove such proceeding to the district court 

of the United States for the proper district by following the procedure for removal otherwise provided by law, except that the petition for removal shall be filed within sixty days after service of the 

summons and complaint upon the defendant. The Commission 

shall have the right to appear as amicus curiae in any such proceeding. 

* * * * * * * 

SEC. 8. (a)(1) For the efficient execution of the provisions of this 

Act, and in order to provide information for the use of Congress, 

the Commission may make such investigations as it deems necessary to ascertain the facts regarding the operations of boards of 

trade and other persons subject to the provisions of this Act. The 

Commission may publish from time to time the results of any such 

investigation and such general statistical information gathered 

therefrom as it deems of interest to the public: Provided, That except as otherwise specifically authorized in this Act, the Commission may not publish data and information that would separately 

disclose the business transactions or market positions of any person and trade secrets or names of customers: Provided further, 

That the Commission may withhold from public disclosure any 

data or information concerning or obtained in connection with any 

pending investigation of any person. The Commission shall not be 

compelled to disclose any information or data obtained from a foreign futures authority if— 

(A) the foreign futures authority has in good faith determined and represented to the Commission that disclosure of 

such information or data by that foreign futures authority 

would violate the laws applicable to that foreign futures authority; and 

(B) the Commission obtains such information pursuant to— 

(i) such procedure as the Commission may authorize for 

use in connection with the administration or enforcement 

of this Act; or 


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(ii) a memorandum of understanding with that foreign 

futures authority; 

except that nothing in this subsection shall prevent the Commission from disclosing publicly any information or data obtained by the Commission from a foreign futures authority 

when such disclosure is made in connection with a congressional proceeding, an administrative or judicial proceeding 

commenced by the United States or the Commission, in any receivership proceeding involving a receiver appointed in a judicial proceeding commenced by the United States or the Commission, or in any proceeding under title 11 of the United 

States Code in which the Commission has intervened or in 

which the Commission has the right to appear and be heard. 

Nothing in this subsection shall be construed to authorize the 

Commission to withhold information or data from Congress. 

For purposes of section 552 of title 5, United States Code, this 

subsection shall be considered a statute described in subsection 

(b)(3)(B) of section 552. 

(2) In conducting investigations authorized under this subsection 

or any other provision of this Act, the Commission shall continue, 

as the Commission determines necessary, to request the assistance 

of and cooperate with the appropriate Federal agencies in the conduct of such investigations, including undercover operations by 

such agencies. The Commission and the Department of Justice 

shall assess the effectiveness of such undercover operations and, 

within two years of the date of enactment of the Futures Trading 

Practices Act of 1992, shall recommend to Congress any additional 

undercover or other authority for the Commission that the Commission or the Department of Justice believes to be necessary. 

(3) The Commission shall provide the Securities and Exchange 

Commission with notice of the commencement of any proceeding 

and a copy of any order entered by the Commission against any futures commission merchant or introducing broker registered pursuant to section 4f(a)(2), any floor broker or floor trader exempt from 

registration pursuant to section 4f(a)(3), any associated person exempt from registration pursuant to section 4k(6), or any board of 

trade designated as a contract market pursuant to section 5f. 

(b) The Commission may disclose publicly any data or information that would separately disclose the market positions, business 

transactions, trade secrets, or names of customers of any person 

when such disclosure is made in connection with a congressional 

proceeding, in an administrative or judicial proceeding brought 

under this Act, in any receivership proceeding involving a receiver 

appointed in a judicial proceeding brought under this Act, or in any 

bankruptcy proceeding in which the Commission has intervened or 

in which the Commission has the right to appear and be heard 

under title 11 of the United States Code. This subsection shall not 

apply to the disclosure of data or information obtained by the Commission from a foreign futures authority. 

(c) The Commission may make or issue such reports as it deems 

necessary, or such opinions or orders as may be required under 

other provisions of law, relative to the conduct of any registered entity or to the transactions of any person found guilty of violating 

the provisions of this Act or the rules, regulations, or orders of the 

Commission thereunder in proceedings brought under section 6 of 


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this Act. In any such report or opinion, the Commission may set 

forth the facts as to any actual transaction or any information referred to in subsection (b) of this section, if such facts or information have previously been disclosed publicly in connection with a 

congressional proceeding, or in an administrative or judicial proceeding brought under this Act. 

(d) The Commission, upon its own initiative or in cooperation 

with existing governmental agencies, shall investigate the marketing conditions of commodities and commodity products and byproducts, including supply and demand for these commodities, cost 

to the consumer, and handling and transportation charges. It shall 

also compile and furnish to producers, consumers, and distributors, 

by means of regular or special reports, or by such other methods 

as it deems most effective, information respecting the commodity 

markets, together with information on supply, demand, prices, and 

other conditions in this and other countries that affect the markets. 

(e) The Commission may disclose and make public, where such 

information has previously been disclosed publicly in accordance 

with the provisions of this section, the names and addresses of all 

traders on the boards of trade on the commodity markets with respect to whom the Commission has information, and any other information in the possession of the Commission relating to the 

amount of commodities purchased or sold by each such trader. 

Upon the request of any committee of either House of Congress, 

acting within the scope of its jurisdiction, the Commission shall 

furnish to such committee the names and addresses of all traders 

on such boards of trade with respect to whom the Commission has 

information, and any other information in the possession of the 

Commission relating to the amount of any commodity purchased or 

sold by each such trader. Upon the request of any department or 

agency of the Government of the United States, acting within the 

scope of its jurisdiction, the Commission may furnish to such department or agency any information in the possession of the Commission obtained in connection with the administration of this Act. 

However, any information furnished under this subsection to any 

Federal department or agency shall not be disclosed by such department or agency except in any action or proceeding under the 

laws of the United States to which it, the Commission, or the 

United States is a party. Upon the request of any department or 

agency of any State or any political subdivision thereof, acting 

within the scope of its jurisdiction, any foreign futures authority, 

or any department or agency of any foreign government or any political subdivision thereof, acting within the scope of its jurisdiction, the Commission may furnish to such foreign futures authority, department or agency any information in the possession of the 

Commission obtained in connection with the administration of this 

Act. Any information furnished to any department or agency of any 

State or political subdivision thereof shall not be disclosed by such 

department or agency except in connection with an adjudicatory action or proceeding brought under this Act or the laws of such State 

or political subdivision to which such State or political subdivision 

or any department or agency thereof is a party. The Commission 

shall not furnish any information to a foreign futures authority or 

to a department, central bank and ministries, or agency of a foreign government or political subdivision thereof unless the ComVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00228 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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mission is satisfied that the information will not be disclosed by 

such foreign futures authority, department, central bank and ministries, or agency except in connection with an adjudicatory action 

or proceeding brought under the laws of such foreign government 

or political subdivision to which such foreign government or political subdivision or any department or agency thereof, or foreign futures authority is a party. 

(f) The Commission shall disclose information in its possession 

pursuant to a subpoena or summons only if— 

(1) a copy of the subpoena or summons has been mailed to 

the last known home or business address of the person who 

submitted the information that is the subject of the subpoena 

or summons, if the address is known to the Commission, or, if 

such mailing would be unduly burdensome, the Commission 

provides other appropriate notice of the subpoena or summons 

to such person, and 

(2) at least fourteen days have expired from the date of such 

mailing of the subpoena or summons, or such other notice. 

This subsection shall not apply to congressional subpoenas or congressional requests for information. 

(g) The Commission shall provide any registration information 

maintained by the Commission on any registrant upon reasonable 

request made by any department or agency of any State or any political subdivision thereof. Whenever the Commission determines 

that such information may be appropriate for use by any department or agency of a State or political subdivision thereof, the Commission shall provide such information without request. 

(h) The Commission shall submit to Congress a written report 

within one hundred and twenty days after the end of each fiscal 

year detailing the operations of the Commission during such fiscal 

year. The Commission shall include in such report such information, data, and legislative recommendations as it deems advisable 

with respect to the administration of this Act and its powers and 

functions under this Act. 

(i) The Comptroller General of the United States shall conduct 

reviews and audits of the Commission and make reports thereon. 

For the purpose of conducting such reviews and audits, the Comptroller General shall be furnished such information regarding the 

powers, duties, organizations, transactions, operations, and activities of the Commission as the Comptroller General may require 

and the Comptroller General and the duly authorized representatives of the Comptroller General shall, for the purpose of securing 

such information, have access to and the right to examine any 

books, documents, papers, or records of the Commission, except 

that in reports the Comptroller General shall not include data and 

information that would separately disclose the business transactions of any person and trade secrets or names of customers, although such data shall be provided upon request by any committee 

of either House of Congress acting within the scope of its jurisdiction. 

(j) DISCLOSURE OF REQUIRED DATA OF OTHER REGISTERED ENTITIES.— 

(1) Except as provided in this subsection, the Commission 

may not be compelled to disclose any proprietary information 


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provided to the Commission, except that nothing in this subsection— 

(A) authorizes the Commission to withhold information 

from Congress; or 

(B) prevents the Commission from— 

(i) complying with a request for information from 

any other Federal department or agency, any State or 

political subdivision thereof, or any foreign government 

or any department, agency, or political subdivision 

thereof requesting the report or information for purposes within the scope of its jurisdiction, upon an 

agreement of confidentiality to protect the information 

in a manner consistent with this paragraph and subsection (e); or 

(ii) making a disclosure made pursuant to a court 

order in connection with an administrative or judicial 

proceeding brought under this Act, in any receivership 

proceeding involving a receiver appointed in a judicial 

proceeding brought under this Act, or in any bankruptcy proceeding in which the Commission has intervened or in which the Commission has the right to appear and be heard under title 11 of the United States 

Code. 

(2) Any proprietary information of a commodity trading advisor or commodity pool operator ascertained by the Commission 

in connection with Form CPO-PQR, Form CTA-PR, and any 

successor forms thereto, shall be subject to the same limitations 

on public disclosure, as any facts ascertained during an investigation, as provided by subsection (a); provided, however, that 

the Commission shall not be precluded from publishing aggregate information compiled from such forms, to the extent such 

aggregate information does not identify any individual person 

or firm, or such person’s proprietary information. 

(3) For purposes of section 552 of title 5, United States Code, 

this subsection, and the information contemplated herein, shall 

be considered a statute described in subsection (b)(3)(B) of such 

section 552. 

(4) For purposes of the definition of proprietary information 

in paragraph (5), the records and reports of any client account 

or commodity pool to which a commodity trading advisor or 

commodity pool operator registered under this title provides 

services that are filed with the Commission on Form CPO-PQR, 

CTA-PR, and any successor forms thereto, shall be deemed to 

be the records and reports of the commodity trading advisor or 

commodity pool operator, respectively. 

(5) For purposes of this section, proprietary information of a 

commodity trading advisor or commodity pool operator includes 

sensitive, non-public information regarding— 

(A) the commodity trading advisor, commodity pool operator or the trading strategies of the commodity trading advisor or commodity pool operator; 

(B) analytical or research methodologies of a commodity 

trading advisor or commodity pool operator; 

(C) trading data of a commodity trading advisor or commodity pool operator; and 


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(D) computer hardware or software containing intellectual property of a commodity trading advisor or commodity 

pool operator; 

SEC. 8a. The Commission is authorized— 

(1) to register futures commission merchants, associated persons of futures commission merchants, introducing brokers, associated persons of introducing brokers, commodity trading advisors, associated persons of commodity trading advisors, commodity pool operators, associated persons of commodity pool 

operators, floor brokers, and floor traders upon application in 

accordance with rules and regulations and in the form and 

manner to be prescribed by the Commission, which may require the applicant, and such persons associated with the applicant as the Commission may specify, to be fingerprinted and 

to submit, or cause to be submitted, such fingerprints to the 

Attorney General for identification and appropriate processing, 

and in connection therewith to fix and establish from time to 

time reasonable fees and charges for registrations and renewals thereof: Provided, That notwithstanding any provision of 

this Act, the Commission may grant a temporary license to any 

applicant for registration with the Commission pursuant to 

such rules, regulations, or orders as the Commission may 

adopt, except that the term of any such temporary license shall 

not exceed six months from the date of its issuance; 

(2) upon notice, but without a hearing and pursuant to such 

rules, regulations, or orders as the Commission may adopt, to 

refuse to register, to register conditionally, or to suspend or 

place restrictions upon the registration of, any person and with 

such a hearing as may be appropriate to revoke the registration of any person— 

(A) if a prior registration of such person in any capacity 

has been suspended (and the period of such suspension 

has not expired) or has been revoked; 

(B) if registration of such person in any capacity has 

been refused under the provisions of paragraph (3) of this 

section within five years preceding the filing of the application for registration or at any time thereafter; 

(C) if such person is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction (except that registration may not be revoked solely on the basis of such temporary order, judgment, or decree), including an order entered pursuant to 

an agreement of settlement to which the Commission or 

any Federal or State agency or other governmental body is 

a party, from (i) acting as a futures commission merchant, 

introducing broker, floor broker, floor trader, commodity 

trading advisor, commodity pool operator, associated person of any registrant under this Act, securities broker, securities dealer, municipal securities broker, municipal securities dealer, transfer agent, clearing agency, securities 

information processor, investment adviser, investment 

company, or affiliated person or employee of any of the 

foregoing or (ii) engaging in or continuing any activity 

where such activity involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of 


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funds, securities or property, forgery, counterfeiting, false 

pretenses, bribery, gambling, or any transaction in or advice concerning contracts of sale of a commodity for future 

delivery, concerning matters subject to Commission regulation under section 4c or 19, or concerning securities; 

(D) if such person has been convicted within ten years 

preceding the filing of the application for registration or at 

any time thereafter of any felony that (i) involves any 

transactions or advice concerning any contract of sale of a 

commodity for future delivery, or any activity subject to 

Commission regulation under section 4c or 19 of this Act, 

or concerning a security, (ii) arises out of the conduct of 

the business of a futures commission merchant, introducing broker, floor broker, floor trader, commodity trading advisor, commodity pool operator, associated person of 

any registrant under this Act, securities broker, securities 

dealer, municipal securities broker, municipal securities 

dealer, transfer agent, clearing agency, securities information processor, investment adviser, investment company, 

or an affiliated person or employee of any of the foregoing, 

(iii) involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or 

property, forgery, counterfeiting, false pretenses, bribery, 

or gambling, or (iv) involves the violation of section 152, 

1001, 1341, 1342, 1343, 1503, 1623, 1961, 1962, 1963, or 

2314, or chapter 25, 47, 95, or 96 of title 18, United States 

Code, or section 7201 or 7206 of the Internal Revenue 

Code of 1986; 

(E) if such person, within ten years preceding the filing 

of the application or at any time thereafter, has been 

found in a proceeding brought by the Commission or any 

Federal or State agency or other governmental body, or by 

agreement of settlement to which the Commission or any 

Federal or State agency or other governmental body is a 

party, (i) to have violated any provision of this Act, the Securities Act of 1933, the Securities Exchange Act of 1934, 

the Public Utility Holding Company Act of 1935, the Trust 

Indenture Act of 1939, the Investment Advisers Act of 

1940, the Investment Company Act of 1940, the Securities 

øInvestors¿ Investor Protection Act of 1970, the Foreign 

Corrupt Practices Act of 1977, chapter 96 of title 18 of the 

United States Code, or any similar statute of a State or 

foreign jurisdiction, or any rule, regulation, or order under 

any such statutes, or the rules of the Municipal Securities 

Rulemaking Board where such violation involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, 

counterfeiting, false pretenses, bribery, or gambling, or (ii) 

to have willfully aided, abetted, counseled, commanded, induced, or procured such violation by any other person; 

(F) if such person is subject to an outstanding order of 

the Commission denying privileges on any registered entity to such person, denying, suspending, or revoking such 

person’s membership in any registered entity or registered 

futures association, or barring or suspending such person 


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from being associated with a registrant under this Act or 

with a member of a registered entity or with a member of 

a registered futures association; 

(G) if, as to any of the matters set forth in this paragraph and paragraph (3), such person willfully made any 

materially false or misleading statement or omitted to 

state any material fact in such person’s application or any 

update thereto; or 

(H) if refusal, suspension, or revocation of the registration of any principal of such person would be warranted 

because of a statutory disqualification listed in this paragraph: 

Provided, That such person may appeal from a decision to 

refuse registration, condition registration, suspend, revoke or 

to place restrictions upon registration made pursuant to the 

provisions of this paragraph in the manner provided in section 

6(c) of this Act; and 

Provided, further, That for the purposes of paragraphs (2) and 

(3) of this section, ‘‘principal’’ shall mean, if the person is a 

partnership, any general partner or, if the person is a corporation, any officer, director, or beneficial owner of at least 10 per 

centum of the voting shares of the corporation, and any other 

person that the Commission by rule, regulation, or order determines has the power, directly or indirectly, through agreement 

or otherwise, to exercise a controlling influence over the activities of such person which are subject to regulation by the Commission; 

(3) to refuse to register or to register conditionally any person, if it is found, after opportunity for hearing, that— 

(A) such person has been found by the Commission or by 

any court of competent jurisdiction to have violated, or has 

consented to findings of a violation of, any provision of this 

Act, or any rule, regulation, or order thereunder (other 

than a violation set forth in paragraph (2) of this section), 

or to have willfully aided, abetted, counseled, commanded, 

induced, or procured the violation by any other person of 

any such provision; 

(B) such person has been found by any court of competent jurisdiction or by any Federal or State agency or 

other governmental body, or by agreement of settlement to 

which any Federal or State agency or other governmental 

body is a party, (i) to have violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, 

the Public Utility Holding Company Act of 1935, the Trust 

Indenture Act of 1939, the Investment Advisers Act of 

1940, the Investment Company Act of 1940, the Securities 

øInvestors¿ Investor Protection Act of 1970, the Foreign 

Corrupt Practices Act of 1977, or any similar statute of a 

State or foreign jurisdiction, or any rule, regulation, or 

order under any such statutes, or the rules of the Municipal Securities Rulemaking Board or (ii) to have willfully 

aided, abetted, counseled, commanded, induced, or procured such violation by any other person; 

(C) such person failed reasonably to supervise another 

person, who is subject to such person’s supervision, with a 


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view to preventing violations of this Act, or of any of the 

statutes set forth in subparagraph (B) of this paragraph, 

or of any of the rules, regulations, or orders thereunder, 

and the person subject to supervision committed such a 

violation: Provided, That no person shall be deemed to 

have failed reasonably to supervise another person, within 

the meaning of this subparagraph if (i) there have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent 

and detect, insofar as practicable, any such violation by 

such other person and (ii) such person has reasonably discharged the duties and obligations incumbent upon that 

person, as supervisor, by reason of such procedures and 

system, without reasonable cause to believe that such procedures and system were not being complied with; 

(D) such person pleaded guilty to or was convicted of a 

felony other than a felony of the type specified in paragraph (2)(D) of this section, or was convicted of a felony of 

the type specified in paragraph (2)(D) of this section more 

than ten years preceding the filing of the application; 

(E) such person pleaded guilty to or was convicted of any 

misdemeanor which (i) involves any transaction or advice 

concerning any contract of sale of a commodity for future 

delivery or any activity subject to Commission regulation 

under section 4c or 19 of this Act or concerning a security, 

(ii) arises out of the conduct of the business of a futures 

commission merchant, introducing broker, floor broker, 

floor trader, commodity trading advisor, commodity pool 

operator, associated person of any registrant under this 

Act, securities broker, securities dealer, municipal securities broker, municipal securities dealer, transfer agent, 

clearing agency, securities information processor, investment adviser, investment company, or an affiliated person 

or employee of any of the foregoing, (iii) involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, 

counterfeiting, false pretenses, bribery, or gambling, (iv) 

involves the violation of section 152, 1341, 1342, or 1343 

or chapter 25, 47, 95, or 96 of title 18, United States Code, 

or section 7203, 7204, 7205, or 7207 of the Internal Revenue Code of 1986; 

(F) such person was debarred by any agency of the 

United States from contracting with the United States; 

(G) such person willfully made any materially false or 

misleading statement or willfully omitted to state any material fact in such person’s application or any update thereto, in any report required to be filed with the Commission 

by this Act or the regulations thereunder, in any proceeding before the Commission or in any registration disqualification proceeding; 

(H) such person has pleaded nolo contendere to criminal 

charges of felonious conduct, or has been convicted in a 

State court, in a United States military court, or in a foreign court of conduct which would constitute a felony 


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under Federal law if the offense had been committed 

under Federal jurisdiction; 

(I) in the case of an applicant for registration in any capacity for which there are minimum financial requirements prescribed under this Act or under the rules or regulations of the Commission, such person has not established that such person meets such minimum financial requirements; 

(J) such person is subject to an outstanding order denying, suspending, or expelling such person from membership in a registered entity, a registered futures association, 

any other self-regulatory organization, or any foreign regulatory body that the Commission recognizes as having a 

comparable regulatory program or barring or suspending 

such person from being associated with any member or 

members of such registered entity, association, self-regulatory organization, or foreign regulatory body; 

(K) such person has been found by any court of competent jurisdiction or by any Federal or State agency or 

other governmental body, or by agreement of settlement to 

which any Federal or State agency or other governmental 

body is a party, (i) to have violated any statute or any rule, 

regulation, or order thereunder which involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, 

counterfeiting, false pretenses, bribery, or gambling or (ii) 

to have willfully aided, abetted, counseled, commanded, induced or procured such violation by any other person; 

(L) such person has associated with such person any 

other person and knows, or in the exercise of reasonable 

care should know, of facts regarding such other person 

that are set forth as statutory disqualifications in paragraph (2) of this section, unless such person has notified 

the Commission of such facts and the Commission has determined that such other person should be registered or 

temporarily licensed; 

(M) there is other good cause; or 

(N) any principal, as defined in paragraph (2) of this section, of such person has been or could be refused registration: 

Provided, That pending final determination under this paragraph, registration shall not be granted: Provided further, That 

such person may appeal from a decision to refuse registration 

or to condition registration made pursuant to this paragraph in 

the manner provided in section 6(c) of this Act; 

(4) in accordance with the procedure provided for in section 

6(c) of this Act, to suspend, revoke, or place restrictions upon 

the registration of any person registered under this Act if 

cause exists under paragraph (3) of this section which would 

warrant a refusal of registration of such person, and to suspend or revoke the registration of any futures commission merchant or introducing broker who shall knowingly accept any 

order for the purchase or sale of any commodity for future delivery on or subject to the rules of any registered entity from 

any person if such person has been denied trading privileges 


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on any registered entity by order of the Commission under section 6(c) of this Act and the period of denial specified in such 

order shall not have expired: Provided, That such person may 

appeal from a decision to suspend, revoke, or place restrictions 

upon registration made pursuant to this paragraph in the 

manner provided in section 6(c) of this Act; 

(5) to make and promulgate such rules and regulations as, 

in the judgment of the Commission, are reasonably necessary 

to effectuate any of the provisions or to accomplish any of the 

purposes of this Act; 

(6) to communicate to the proper committee or officer of any 

registered entity, registered futures association, or self-regulatory organization as defined in section 3(a)(26) of the Securities Exchange Act of 1934, notwithstanding the provisions of 

section 8 of this Act, the full facts concerning any transaction 

or market operation, including the names of parties thereto, 

which in the judgment of the Commission disrupts or tends to 

disrupt any market or is otherwise harmful or against the best 

interests of producers, consumers, or investors, or which is necessary or appropriate to effectuate the purposes of this Act: 

Provided, That any information furnished by the Commission 

under this paragraph shall not be disclosed by such registered 

entity, registered futures association, or self-regulatory organization except in any self-regulatory action or proceeding; 

(7) to alter or supplement the rules of a registered entity insofar as necessary or appropriate by rule or regulation or by 

order, if after making the appropriate request in writing to a 

registered entity that such registered entity effect on its own 

behalf specified changes in its rules and practices, and after 

appropriate notice and opportunity for hearing, the Commission determines that such registered entity has not made the 

changes so required, and that such changes are necessary or 

appropriate for the protection of swaps traders and to assure 

fair dealing in swaps, for the protection of persons producing, 

handling, processing, or consuming any commodity traded for 

future delivery on such registered entity, or the product or byproduct thereof, or for the protection of traders or to insure fair 

dealing in commodities traded for future delivery on such registered entity. Such rules, regulations, or orders may specify 

changes with respect to such matters as— 

(A) terms or conditions in swaps or contracts of sale to 

be executed on or subject to the rules of such registered 

entity; 

(B) the form or manner of execution of purchases and 

sales for future delivery or swaps; 

(C) other trading requirements; 

(D) margin requirements, provided that the rules, regulations, or orders shall— 

(i) be limited to protecting the financial integrity of 

the derivatives clearing organization; 

(ii) be designed for risk management purposes to 

protect the financial integrity of transactions; and 

(iii) not set specific margin amounts; 

(E) safeguards with respect to the financial responsibility of members; 


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(F) the manner, method, and place of soliciting business, 

including the content of such solicitations; and 

(G) the form and manner of handling, recording, and accounting for customers’ orders, transactions, and accounts; 

(8) to make and promulgate such rules and regulations with 

respect to those persons registered under this Act, who are not 

members of a registered entity, as in the judgment of the Commission are reasonably necessary to protect the public interest 

and promote just and equitable principles of trade, including 

but not limited to the manner, method, and place of soliciting 

business, including the content of such solicitation; 

(9) to direct the registered entity, whenever it has reason to 

believe that an emergency exists, to take such action as in the 

Commission’s judgment is necessary to maintain or restore orderly trading in or liquidation of any swap or futures contract, 

including, but not limited to, the setting of temporary emergency margin levels on any swap or futures contract, and the 

fixing of limits that may apply to a market position acquired 

in good faith prior to the effective date of the Commission’s action. The term ‘‘emergency’’ as used herein shall mean, in addition to threatened or actual market manipulations and corners, 

any act of the United States or a foreign government affecting 

a commodity or any other major market disturbance which prevents the market from accurately reflecting the forces of supply 

and demand for such commodity. Any action taken by the 

Commission under this paragraph shall be subject to review 

only in the United States Court of Appeals for the circuit in 

which the party seeking review resides or has its principal 

place of business, or in the United States Court of Appeals for 

the District of Columbia Circuit. Such review shall be based 

upon an examination of all the information before the Commission at the time the determination was made. The court reviewing the Commission’s action shall not enter a stay or order 

of mandamus unless it has determined, after notice and hearing before a panel of the court, that the agency action complained of was arbitrary, capricious, an abuse of discretion, or 

otherwise not in accordance with law. Nothing herein shall be 

deemed to limit the meaning or interpretation given by a registered entity to the terms ‘‘market emergency’’, ‘‘emergency’’, 

or equivalent language in its own bylaws, rules, regulations, or 

resolutions; 

(10) to authorize any person to perform any portion of the 

registration functions under this Act, in accordance with rules, 

notwithstanding any other provision of law, adopted by such 

person and submitted to the Commission for approval or, if applicable, for review pursuant to section 17(j) of this Act, and 

subject to the provisions of this Act applicable to registrations 

granted by the Commission; and 

(11)(A) by written notice served on the person and pursuant 

to such rules, regulations, and orders as the Commission may 

adopt, to suspend or modify the registration of any person registered under this Act who is charged (in any information, indictment, or complaint authorized by a United States attorney 

or an appropriate official of any State) with the commission of 

or participation in a crime involving a violation of this Act, or 


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a violation of any other provision of Federal or State law that 

would reflect on the honesty or the fitness of the person to act 

as a fiduciary (including an offense specified in subparagraph 

(D) or (E) of paragraph (2)) that is punishable by imprisonment 

for a term exceeding one year, if the Commission determines 

that continued registration of the person may pose a threat to 

the public interest or may threaten to impair public confidence 

in any market regulated by the Commission. 

(B) Prior to the suspension or modification of the registration 

of a person under this paragraph, the person shall be afforded 

an opportunity for a hearing at which the Commission shall 

have the burden of showing that the continued registration of 

the person does, or is likely to, pose a threat to the public interest or threaten to impair public confidence in any market 

regulated by the Commission. 

(C) Any notice of suspension or modification issued under 

this paragraph shall remain in effect until such information, 

indictment, or complaint is disposed of or until terminated by 

the Commission. 

(D) On disposition of such information, indictment, or complaint, the Commission may issue and serve on such person an 

order pursuant to paragraph (2) or (4) to suspend, restrict, or 

revoke the registration of such person. 

(E) A finding of not guilty or other disposition of the charge 

shall not preclude the Commission from thereafter instituting 

any other proceedings under this Act. 

(F) A person aggrieved by an order issued under this paragraph may obtain review of such order in the same manner 

and on the same terms and conditions as are provided in section 6(b). 

* * * * * * * 

SEC. 9. (a) It shall be a felony punishable by a fine of not more than $1,000,000 or imprisonment for not more than 10 years, or 

both, together with the costs of prosecution, for: 

(1) Any person registered or required to be registered under 

this Act, or any employee or agent thereof, to embezzle, steal, 

purloin, or with criminal intent convert to such person’s use or 

to the use of another, any money, securities, or property having 

a value in excess of $100, which was received by such person 

or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to 

such customer as a result of such trades or contracts or which 

otherwise was received from any customer, client, or pool participant in connection with the business of such person. The 

word ‘‘value’’ as used in this paragraph means face, par, or 

market value, or cost price, either wholesale or retail, whichever is greater. 

(2) Any person to manipulate or attempt to manipulate the 

price of any commodity in interstate commerce, or for future 

delivery on or subject to the rules of any registered entity, or 

of any swap, or to corner or attempt to corner any such commodity or knowingly to deliver or cause to be delivered for 

transmission through the mails or interstate commerce by telegraph, telephone, wireless, or other means of communication 

false or misleading or knowingly inaccurate reports concerning 


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crop or market information or conditions that affect or tend to 

affect the price of any commodity in interstate commerce, or 

knowingly to violate the provisions of section 4, section 4b, subsections (a) øthrough (e)¿ and (c) of øsubsection 4c¿ section 4c, section 4h, section 4o(1), or section 19. 

(3) Any person knowingly to make, or cause to be made, any 

statement in any application, report, or document required to 

be filed under this Act or any rule or regulation thereunder or 

any undertaking contained in a registration statement required under this Act, or by any registered entity or registered 

futures association in connection with an application for membership or participation therein or to become associated with a 

member thereof, which statement was false or misleading with 

respect to any material fact, or knowingly to omit any material 

fact required to be stated therein or necessary to make the 

statements therein not misleading. 

(4) Any person willfully to falsify, conceal, or cover up by any 

trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or 

use any false writing or document knowing the same to contain 

any false, fictitious, or fraudulent statement or entry to a registered entity, board of trade, swap data repository, or futures 

association designated or registered under this Act acting in 

furtherance of its official duties under this Act. 

(5) Any person willfully to violate any other provision of this 

Act, or any rule or regulation thereunder, the violation of 

which is made unlawful or the observance of which is required 

under the terms of this Act, but no person shall be subject to 

imprisonment under this paragraph for the violation of any 

rule or regulation if such person proves that he had no knowledge of such rule or regulation. 

(6) Any person to abuse the end user clearing exemption 

under section 2(h)(4), as determined by the Commission. 

(b) Any person convicted of a felony under this section shall be 

suspended from registration under this Act and shall be denied 

registration or reregistration for five years or such longer period as 

the Commission may determine, and barred from using, or participating in any manner in, any market regulated by the Commission 

for five years or such longer period as the Commission shall determine, on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of 

such suspension, denial of registration or reregistration, or market 

bar is not required to protect the public interest. The Commission 

may upon petition later review such disqualification and market 

bar and for good cause shown reduce the period thereof. 

(c) It shall be a felony punishable by a fine of not more than 

$500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution, for any Commissioner of the 

Commission or any employee or agent thereof, to participate, directly or indirectly, in any transaction in commodity futures or any 

transaction of the character of or which is commonly known to the 

trade as an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, 

‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’, or any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin 


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contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a 

standardized contract, or is marketed or managed in substantially 

the same manner as such a standardized contract, or for any such 

person to participate, directly or indirectly, in any investment 

transaction in an actual commodity if nonpublic information is 

used in the investment transaction, if the investment transaction 

is prohibited by rule or regulation of the Commission, or if the investment transaction is effected by means of any instrument regulated by the Commission. The foregoing prohibitions shall not 

apply to any transaction or class of transactions that the Commission, by rule or regulation, has determined would not be contrary 

to the public interest or otherwise inconsistent with the purposes 

of this subsection. 

(d) It shall be a felony punishable by a fine of not more than $500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution—(1) for any Commissioner of 

the Commission or any employee or agent thereof who, by virtue 

of his employment or position, acquires information which may affect or tend to affect the price of any commodity futures or commodity and which information has not been made public to impart 

such information with intent to assist another person, directly or 

indirectly, to participate in any transaction in commodity futures, 

any transaction in an actual commodity, or in any transaction of 

the character of or which is commonly known to the trade as an 

‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline guaranty’’, or in any transaction for 

the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, 

leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized 

contract, or is marketed or managed in substantially the same 

manner as such a standardized contract; and (2) for any person to 

acquire such information from any Commissioner of the Commission or any employee or agent thereof and to use such information 

in any transaction in commodity futures, any transaction in an actual commodity, or in any transaction of the character of or which 

is commonly known to the trade as an ‘‘option’’, ‘‘privilege’’, ‘‘indemnity’’, ‘‘bid’’, ‘‘offer’’, ‘‘put’’, ‘‘call’’, ‘‘advance guaranty’’, or ‘‘decline 

guaranty’’, or in any transaction for the delivery of any commodity 

under a standardized contract commonly known to the trade as a 

margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or 

functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract. 

(e) It shall be a felony for any person— 

(1) who is an employee, member of the governing board, or 

member of any committee of a board of trade, registered entity, 

swap data repository, or registered futures association, in violation of a regulation issued by the Commission, willfully and 

knowingly to trade for such person’s own account, or for or on 


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behalf of any other account, in contracts for future delivery or 

options thereon, or swaps, on the basis of, or willfully and 

knowingly to disclose for any purpose inconsistent with the 

performance of such person’s official duties as an employee or 

member, any material nonpublic information obtained through 

special access related to the performance of such duties; or 

(2) willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for 

future delivery or options thereon on the basis of any material 

nonpublic information that such person knows was obtained in 

violation of paragraph (1) from an employee, member of the 

governing board, or member of any committee of a board of 

trade, registered entity, or registered futures association. 

Such felony shall be punishable by a fine of not more than 

$500,000, plus the amount of any profits realized from such trading 

or disclosure made in violation of this subsection, or imprisonment 

for not more than five years, or both, together with the costs of 

prosecution. 

* * * * * * * 

SEC. 12. (a) The Commission may cooperate with any Department or agency of the Government, any State, territory, district, or 

possession, or department, agency, or political subdivision thereof, 

any foreign futures authority, any department or agency of a foreign government or political subdivision thereof, or any person. 

(b)(1) The Commission shall have the authority to employ such 

investigators, special experts, Administrative Law Judges, clerks, 

and other employees as it may from time to time find necessary for 

the proper performance of its duties and as may be from time to 

time appropriated for by Congress. 

(2) The Commission may employ experts and consultants in accordance with section 3109 of title 5 of the United States Code, and 

compensate such persons at rates not in excess of the maximum 

daily rate prescribed for GS–18 under section 5332 of title 5 of the 

United States Code. 

(3) The Commission shall also have authority to make and enter 

into contracts with respect to all matters which in the judgment of 

the Commission are necessary and appropriate to effectuate the 

purposes and provisions of this Act, including, but not limited to, 

the rental of necessary space at the seat of Government and elsewhere. 

(4) The Commission may request (in accordance with the procedures set forth in subchapter II of chapter 31 of title 5, United 

States Code) and the Office of Personnel Management shall authorize pursuant to the request, eight positions in the Senior Executive 

Service in addition to the number of such positions authorized for 

the Commission on the date of enactment of this sentence. 

(c) All of the expenses of the Commissioners, including all necessary expenses for transportation incurred by them while on official business of the Commission, shall be allowed and paid on the 

presentation of itemized vouchers therefor approved by the Commission. 

(d) There are authorized to be appropriated such sums as are 

necessary to carry out this Act for each of the fiscal years 2008 

through ø2013¿ 2019. (e) RELATION TO OTHER LAW, DEPARTMENTS, OR AGENCIES.— 


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(1) Nothing in this Act shall supersede or preempt— 

(A) criminal prosecution under any Federal criminal 

statute; 

(B) the application of any Federal or State statute (except as provided in paragraph (2)), including any rule or 

regulation thereunder, to any transaction in or involving 

any commodity, product, right, service, or interest— 

(i) that is not conducted on or subject to the rules 

of a registered entity øor exempt board of trade¿; 

(ii) (except as otherwise specified by the Commission 

by rule or regulation) that is not conducted on or subject to the rules of any board of trade, exchange, or 

market located outside the United States, its territories or possessions; or 

(iii) that is not subject to regulation by the Commission under section 4c or 19; or 

(C) the application of any Federal or State statute, including any rule or regulation thereunder, to any person 

required to be registered or designated under this Act who 

shall fail or refuse to obtain such registration or designation. 

(2) This Act shall supersede and preempt the application of 

any State or local law that prohibits or regulates gaming or the 

operation of bucket shops (other than antifraud provisions of 

general applicability) øin the case of—¿ 

ø(A) an electronic trading facility excluded under section 

2(e) of this Act; and 

ø(B) an agreement, contract, or transaction that is excluded from this Act under section 2(c) or 2(f) of this Act 

or title IV of the Commodity Futures Modernization Act of 

2000, or exempted under section 4(c) of this Act (regardless 

of whether any such agreement, contract, or transaction is 

otherwise subject to this Act).¿ in the case of an agreement, 

contract, or transaction that is excluded from this Act 

under section 2(c) or 2(f) of this Act or title IV of the Commodity Futures Modernization Act of 2000, or exempted 

under section 4(c) of this Act (regardless of whether any 

such agreement, contract, or transaction is otherwise subject to this Act). 

(f)(1) On request from a foreign futures authority, the Commission may, in its discretion, provide assistance in accordance with 

this section if the requesting authority states that the requesting 

authority is conducting an investigation which it deems necessary 

to determine whether any person has violated, is violating, or is 

about to violate any laws, rules or regulations relating to futures 

or options matters that the requesting authority administers or enforces. The Commission may conduct such investigation as the 

Commission deems necessary to collect information and evidence 

pertinent to the request for assistance. Such assistance may be provided without regard to whether the facts stated in the request 

would also constitute a violation of the laws of the United States. 

(2) In deciding whether to provide assistance under this subsection, the Commission shall consider whether— 


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(A) the requesting authority has agreed to provide reciprocal 

assistance to the Commission in futures and options matters; 

and 

(B) compliance with the request would prejudice the public 

interest of the United States. 

(3) Notwithstanding any other provision of law, the Commission 

may accept payment and reimbursement, in cash or in kind, from 

a foreign futures authority, or made on behalf of such authority, for 

necessary expenses incurred by the Commission, its members, and 

employees in carrying out any investigation, or in providing any 

other assistance to a foreign futures authority, pursuant to this 

section. Any payment or reimbursement accepted shall be considered a reimbursement to the appropriated funds of the Commission. 

(g) Consistent with its responsibilities under section 18, the Commission is directed to facilitate the development and operation of 

computerized trading as an adjunct to the open outcry auction system. The Commission is further directed to cooperate with the Office of the United States Trade Representative, the Department of 

the Treasury, the Department of Commerce, and the Department 

of State in order to remove any trade barriers that may be imposed 

by a foreign nation on the international use of electronic trading 

systems. 

(h) REGULATION OF SWAPS AS INSURANCE UNDER STATE LAW.— 

A swap— 

(1) shall not be considered to be insurance; and 

(2) may not be regulated as an insurance contract under the 

law of any State. 

SEC. 13. (a) Any person who commits, or who willfully aids, 

abets, counsels, commands, induces, or procures the commission of, 

a violation of any of the provisions of this Act, or any of the rules, 

regulations, or orders issued pursuant to this Act, or who acts in 

combination or concert with any other person in any such violation, 

or who willfully causes an act to be done or omitted which if directly performed or omitted by him or another would be a violation 

of the provisions of this Act or any of such rules, regulations, or 

orders may be held responsible for such violation as a principal. 

(b) Any person who, directly or indirectly, controls any person 

who has violated any provision of this Act or any of the rules, regulations, or orders issued pursuant to this Act may be held liable for 

such violation in any action brought by the Commission to the 

same extent as such controlled person. In such action, the Commission has the burden of proving that the controlling person did not 

act in good faith or knowingly induced, directly or indirectly, the 

act or acts constituting the violation. 

(c) Nothing in this Act shall be construed as requiring the Commission øor the Commission¿ to report minor violations of this Act 

for prosecution, whenever it appears that the public interest does 

not require such action. 

SEC. 14. (a)(1) Any person complaining of any violation of any 

provision of this Act, or any rule, regulation, or order issued pursuant to this Act, by any person who is registered under this Act 

may, at any time within two years after the cause of action accrues, apply to the Commission for an order awarding— 


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(A) actual damages proximately caused by such violation. If 

an award of actual damages is made against a floor broker in 

connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for 

the execution of the customer order is held to be responsible 

under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such 

award; and 

(B) in the case of any action arising from a willful and intentional violation in the execution of an order on the floor of a 

registered entity, punitive or exemplary damages equal to no 

more than two times the amount of such actual damages. If an 

award of punitive or exemplary damages is made against a 

floor broker in connection with the execution of a customer 

order, and the futures commission merchant which selected the 

floor broker for the execution of the customer order is held to 

be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to 

satisfy such award if the floor broker fails to do so, except that 

such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor 

broker with the intent to assist or facilitate the floor broker’s 

violation. 

(2)(A) An action may be brought under this subsection by any 

one or more persons described in this subsection for and in behalf 

of such person or persons and other persons similarly situated, if 

the Commission permits such actions pursuant to a final rule 

issued by the Commission. 

(B) Not later than two hundred and seventy days after the date 

of enactment of this paragraph, the Commission shall propose and 

publish for public comment such rules as are necessary to carry out 

subparagraph (A). In developing such rules, the Commission shall 

consider the potential impact of such actions on resources available 

to the reparations system established under this Act and the relative merits of bringing such actions in Federal court. 

(b) The Commission may promulgate such rules, regulations, and 

orders as it deems necessary or appropriate for the efficient and expeditious administration of this section. Notwithstanding any other 

provision of law, such rules, regulations, and orders may prescribe, 

or otherwise condition, without limitation, the form, filing, and 

service of pleadings or orders, the nature and scope of discovery, 

counterclaims, motion practice (including the grounds for dismissal 

of any claim or counterclaim), hearings (including the waiver thereof, which may relate to the amount in controversy), rights of appeal, if any, and all other matters governing proceedings before the 

Commission under this section. 

(c) In case a complaint is made by a nonresident of the United 

States, the complainant shall be required, before any formal action 

is taken on his complaint, to furnish a bond in double the amount 

of the claim conditioned upon the payment of costs, including a reasonable attorney’s fee for the respondent if the respondent shall 

prevail, and any reparation award that may be issued by the Commission against the complainant on any counterclaim by respondent: Provided, That the Commission shall have authority to waive 

the furnishing of a bond by a complainant who is a resident of a 


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country which permits the filing of a complaint by a resident of the 

United States without the furnishing of a bond. 

(d)(1) If any person against whom an award has been made does 

not pay the reparation award within the time specified in the Commission’s order, the complainant, or any person for whose benefit 

such order was made, within three years of the date of the order, 

may file a certified copy of the order of the Commission, in the district court of the United States for the district in which he resides 

or in which is located the principal place of business of the respondent, for enforcement of such reparation award by appropriate 

orders. The orders, writs, and processes of such district court may 

in such case run, be served, and be returnable anywhere in the 

United States. The petitioner shall not be liable for costs in the district court, nor for costs at any subsequent state of the proceedings, 

unless they accrue upon his appeal. If the petitioner finally prevails, he shall be allowed a reasonable attorney’s fee, to be taxed 

and collected as a part of the costs of the suit. Subject to the right 

of appeal under subsection (e) of this section, an order of the Commission awarding reparations shall be final and conclusive. 

(2) A reparation award shall be directly enforceable in district court as if it were a judgment pursuant to section 1963 

of title 28, United States Code. This paragraph shall operate 

retroactively from the effective date of its enactment, and shall 

apply to all reparation awards for which a proceeding described in paragraph (1) is commenced within 3 years of the 

date of the Commission’s order. 

(e) Any order of the Commission entered hereunder shall be reviewable on petition of any party aggrieved thereby, by the United 

States Court of Appeals for any circuit in which a hearing was 

held, or if no hearing was held, any circuit in which the appellee 

is located, under the procedure provided in section 6(c) of this Act. 

Such appeal shall not be effective unless within 30 days from and 

after the date of the reparation order the appellant also files with 

the clerk of the court a bond in double the amount of the reparation awarded against the appellant conditioned upon the payment 

of the judgment entered by the court, plus interest and costs, including a reasonable attorney’s fee for the appellee, if the appellee 

shall prevail. Such bond shall be in the form of cash, negotiable securities having a market value at least equivalent to the amount 

of bond prescribed, or the undertaking of a surety company on the 

approved list of sureties issued by the Treasury Department of the 

United States. The appellee shall not be liable for costs in said 

court. If the appellee prevails, he shall be allowed a reasonable attorney’s fee to be taxed and collected as a part of his costs. 

(f) Unless the party against whom a reparation order has been 

issued shows to the satisfaction of the Commission within fifteen 

days from the expiration of the period allowed for compliance with 

such order that either an appeal as herein authorized has been 

taken or payment of the full amount of the order (or any agreed 

settlement thereof) has been made, such party shall be prohibited 

automatically from trading on all registered entities and, if the 

party is registered with the Commission, such registration shall be 

suspended automatically at the expiration of such fifteen-day period until such party shows to the satisfaction of the Commission 

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ment has been made: Provided, That if on appeal the appellee prevails or if the appeal is dismissed, the automatic prohibition 

against trading and suspension of registration shall become effective at the expiration of thirty days from the date of judgment on 

the appeal, but if the judgment is stayed by a court of competent 

jurisdiction, the suspension shall become effective ten days after 

the expiration of such stay, unless prior thereto the judgment of 

the court has been satisfied. 

(g) PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL

CUSTOMERS.—Nothing in this section prohibits a registered futures 

commission merchant from requiring a customer that is an eligible 

contract participant, as a condition to the commission merchant’s 

conducting a transaction for the customer, to enter into an agreement waiving the right to file a claim under this section. 

SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST 

LAWS. 

(a) COSTS AND BENEFITS.— ø(1) IN GENERAL.—Before promulgating a regulation under 

this Act or issuing an order (except as provided in paragraph 

(3)), the Commission shall consider the costs and benefits of 

the action of the Commission. 

ø(2) CONSIDERATIONS.—The costs and benefits of the proposed Commission action shall be evaluated in light of— 

ø(A) considerations of protection of market participants 

and the public; 

ø(B) considerations of the efficiency, competitiveness, 

and financial integrity of futures markets; 

ø(C) considerations of price discovery; 

ø(D) considerations of sound risk management practices; 

and 

ø(E) other public interest considerations.¿ 

(1) IN GENERAL.—Before promulgating a regulation under 

this Act or issuing an order (except as provided in paragraph 

(3)), the Commission, through the Office of the Chief Economist, 

shall assess and publish in the regulation or order the costs 

and benefits, both qualitative and quantitative, of the proposed 

regulation or order, and the proposed regulation or order shall 

state its statutory justification. 

(2) CONSIDERATIONS.—In making a reasoned determination 

of the costs and the benefits, the Commission shall evaluate— 

(A) considerations of protection of market participants 

and the public; 

(B) considerations of the efficiency, competitiveness, and 

financial integrity of futures and swaps markets; 

(C) considerations of the impact on market liquidity in 

the futures and swaps markets; 

(D) considerations of price discovery; 

(E) considerations of sound risk management practices; 

(F) available alternatives to direct regulation; 

(G) the degree and nature of the risks posed by various 

activities within the scope of its jurisdiction; 

(H) the costs of complying with the proposed regulation 

or order by all regulated entities, including a methodology 

for quantifying the costs (recognizing that some costs are 

difficult to quantify); 


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(I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other Federal regulations or orders; 

(J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs; 

(K) whether, in choosing among alternative regulatory 

approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive 

impacts, and equity); and 

(L) other public interest considerations. 

(3) APPLICABILITY.—This subsection does not apply to the following actions of the Commission: 

(A) An order that initiates, is part of, or is the result of 

an adjudicatory or investigative process of the Commission. 

(B) An emergency action. 

(C) A finding of fact regarding compliance with a requirement of the Commission. 

(4) JUDICIAL REVIEW.—Notwithstanding section 24(d), a court 

shall affirm a Commission assessment of costs and benefits 

under this subsection, unless the court finds the assessment to 

be an abuse of discretion. 

(b) ANTITRUST LAWS.—The Commission shall take into consideration the public interest to be protected by the antitrust laws and 

endeavor to take the least anticompetitive means of achieving the 

objectives of this Act, as well as the policies and purposes of this 

Act, in issuing any order or adopting any Commission rule or regulation (including any exemption under section 4(c) or 4c(b)), or in 

requiring or approving any bylaw, rule, or regulation of a contract 

market or registered futures association established pursuant to 

section 17 of this Act. 

* * * * * * * 

SEC. 17. (a) Any association of persons may be registered with 

the Commission as a registered futures association pursuant to 

subsection (b) of this section, under the terms and conditions hereinafter provided in this section, by filing with the Commission for 

review and approval a registration statement in such form as the 

Commission may prescribe, setting forth the information, and accompanied by the documents, below specified: 

(1) Data as to its organization, membership, and rules of procedure, and such other information as the Commission may by 

rules and regulations require as necessary or appropriate in 

the public interest; and 

(2) Copies of its constitution, charter, or articles of incorporation or association, with all amendments thereto, and of its bylaws, and of any rules or instruments corresponding to the 

foregoing, whatever the name, hereinafter in this section collectively referred to as the ‘‘rules of the association’’. 

(b) An applicant association shall not be registered as a futures 

association unless the Commission finds, under standards established by the Commission, that— 

(1) such association is in the public interest and that it will 

be able to comply with the provisions of this section and the 


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rules and regulations thereunder and to carry out the purposes 

of this section; 

(2) the rules of the association provide that any person registered under this Act, registered entity, or any other person 

designated pursuant to the rules of the Commission as eligible 

for membership may become a member of such association, except such as are excluded pursuant to paragraph (3) or (4) of 

this subsection, or a rule of the association permitted under 

this paragraph. The rules of the association may restrict membership in such association on such specified basis relating to 

the type of business done by its members, or on such other 

specified and appropriate basis, as appears to the Commission 

to be necessary or appropriate in the public interest and to 

carry out the purpose of this section. Rules adopted by the association may provide that the association may, unless the 

Commission directs otherwise in cases in which the Commission finds it appropriate in the public interest so to direct, 

deny admission to, or refuse to continue in such association 

any person if (i) such person, whether prior or subsequent to 

becoming registered as such, or (ii) any person associated within the meaning of ‘‘associated person’’ as set forth in section 4k 

of this Act, whether prior or subsequent to becoming so associated, has been and is suspended or expelled from a registered 

entity or has been and is barred or suspended from being associated with all members of such registered entity, for violation 

of any rule of such registered entity; 

(3) the rules of the association provide that, except with the 

approval or at the direction of the Commission in cases in 

which the Commission finds it appropriate in the public interest so to approve or direct, no person shall be admitted to or 

continued in membership in such association, if such person— 

(A) has been and is suspended or expelled from a registered futures association or from a registered entity or 

has been and is barred or suspended from being associated 

with all members of such association or from being associated with all members of such registered entity, for violation of any rule of such association or registered entity 

which prohibits any act or transaction constituting conduct 

inconsistent with just and equitable principles of trade, or 

requires any act the omission of which constitutes conduct 

inconsistent with just and equitable principles of trade; 

(B) is subject to an order of the Commission denying, 

suspending, or revoking his registration pursuant to section 6(c) of this Act, or expelling or suspending him from 

membership in a registered futures association or a registered entity, or barring or suspending him from being associated with a futures commission merchant; 

(C) whether prior or subsequent to becoming a member, 

by his conduct while associated with a member, was a 

cause of any suspension, expulsion, or order of the character described in clause (A) or (B) which is in effect with 

respect to such member, and in entering such a suspension, expulsion, or order, the Commission or any such registered entity or association shall have jurisdiction to determine whether or not any person was a cause thereof; or 


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(D) has associated with him any person who is known, 

or in the exercise of reasonable care should be known, to 

him to be a person who would be ineligible for admission 

to or continuance in membership under clause (A), (B), or 

(C) of this paragraph; 

(4) the rules of the association provide that, except with the 

approval or at the direction of the Commission in cases in 

which the Commission finds it appropriate in the public interest so to approve or direct, no person shall become a member 

and no natural person shall become a person associated with 

a member, unless such person is qualified to become a member 

or a person associated with a member in conformity with specified and appropriate standards with respect to the training, experience, and such other qualifications of such person as the 

association finds necessary or desirable, and in the case of a 

member, the financial responsibility of such a member. For the 

purpose of defining such standards and the application thereof, 

such rules may— 

(A) appropriately classify prospective members (taking 

into account relevant matters, including type or nature of 

business done) and persons proposed to be associated with 

members; 

(B) specify that all or any portion of such standard shall 

be applicable to any such class; 

(C) require persons in any such class to pass examinations prescribed in accordance with such rules; 

(D) provide that persons in any such class other than 

prospective members and partners, officers and supervisory employees (which latter term may be defined by 

such rules and as so defined shall include branch managers of members) of members, may be qualified solely on 

the basis of compliance with specified standards of training and such other qualifications as the association finds 

appropriate; 

(E) provide that applications to become a member or a 

person associated with a member shall set forth such facts 

as the association may prescribe as to the training, experience, and other qualifications (including, in the case of an 

applicant for membership, financial responsibility) of the 

applicant and that the association shall adopt procedures 

for verification of qualifications of the applicant, which 

may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such 

an association may receive from the Attorney General all 

the results of such identification and processing; and 

(F) require any class of persons associated with a member to be registered with the association in accordance 

with procedures specified by such rules (and any application or document supplemental thereto required by such 

rules of a person seeking to be registered with such association shall, for the purposes of section 6(c) of the Act, be 

deemed an application required to be filed under this section); 


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(5) the rules of the association assure a fair representation 

of its members in the adoption of any rule of the association 

or amendment thereto, the selection of its officers and directors, and in all other phases of the administration of its affairs; 

(6) the rules of the association provide for the equitable allocation of dues among its members, to defray reasonable expenses of administration; 

(7) the rules of the association are designed to prevent fraudulent and manipulative acts and practices, to promote just and 

equitable principles of trade, in general, to protect the public 

interest, and to remove impediments to and perfect the mechanism of free and open futures trading; 

(8) the rules of the association provide that its members and 

persons associated with its members shall be appropriately disciplined, by expulsion, suspension, fine, censure, or being suspended or barred from being associated with all members, or 

any other fitting penalty, for any violation of its rules; 

(9) the rules of the association provide a fair and orderly procedure with respect to the disciplining of members and persons 

associated with members and the denial of membership to any 

person seeking membership therein or the barring of any person from being associated with a member. In any proceeding 

to determine whether any member or other person shall be disciplined, such rules shall require that specific charges be 

brought; that such member or person shall be notified of, and 

be given an opportunity to defend against, such charges; that 

a record shall be kept; and that the determination shall include— 

(A) a statement setting forth any act or practice in which 

such member or other person may be found to have engaged, or which such member or other person may be 

found to have omitted; 

(B) a statement setting forth the specific rule or rules of 

the association of which any such act or practice, or omission to act, is deemed to be in violation; 

(C) a statement whether the acts or practices prohibited 

by such rule or rules, or the omission of any act required 

thereby, are deemed to constitute conduct inconsistent 

with just and equitable principles of trade; and 

(D) a statement setting forth the penalty imposedø;¿. 

In any proceeding to determine whether a person shall be denied membership or whether any person shall be barred from 

being associated with a member, such rules shall provide that 

the person shall be notified of, and be given an opportunity to 

be heard upon, the specific grounds for denial or bar which are 

under consideration; that a record shall be kept; and that the 

determination shall set forth the specific grounds upon which 

the denial or bar is based; 

(10) the rules of the association provide a fair, equitable, and 

expeditious procedure through arbitration or otherwise for the 

settlement of customers’ claims and grievances against any 

member or employee thereof: Provided, That (A) the use of 

such procedure by a customer shall be voluntary, (B) the term 

‘‘customer’’ as used in this paragraph shall not include another 

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ing from a violation in the execution of an order on the floor 

of a registered entity, such procedure shall provide, to the extent appropriate— 

(i) for payment of actual damages proximately caused by 

such violation. If an award of actual damages is made 

against a floor broker in connection with the execution of 

a customer order, and the futures commission merchant 

which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) 

for the floor broker’s violation, such futures commission 

merchant may be required to satisfy such award; and 

(ii) where the violation is willful and intentional, for 

payment to the customer of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the 

amount of such losses. If punitive or exemplary damages 

are awarded against a floor broker in connection with the 

execution of a customer order, and the futures commission 

merchant which selected the floor broker for the execution 

of such order is held to be responsible under section 2(a)(1) 

for the floor broker’s violation, such futures commission 

merchant may be required to satisfy the award of punitive 

or exemplary damages if the floor broker fails to do so, except that such requirement shall apply to the futures commission merchant only if it willfully and intentionally selected the floor broker with the intent to assist or facilitate 

the floor broker’s violation; øand¿ 

(11) such association provides for meaningful representation 

on the governing board of such association of a diversity of 

membership interests and provides that no less than 20 percent of the regular voting members of such board be comprised 

of qualified nonmembers of or persons who are not regulated 

by such associationø.¿; 

(12)ø(A)¿ such association provides on all major disciplinary 

committees for a diversity of membership sufficient to ensure 

fairness and to prevent special treatment or preference for any 

person in the conduct of disciplinary proceedings and the assessment of penaltiesø.¿; and 

(13) øA¿ a major disciplinary committee hearing a disciplinary matter shall include— 

(A) qualified persons representing segments of the association membership other than that of the subject of the 

proceeding; and 

(B) where appropriate to carry out the purposes of this 

paragraph, qualified persons who are not members of the 

association. 

(c) The Commission may, after notice and opportunity for hearing, suspend the registration of any futures association if it finds 

that the rules thereof do not conform to the requirements of the 

Commission, and any such suspension shall remain in effect until 

the Commission issues an order determining that such rules have 

been modified to conform with such requirements. 

(d) In addition to the fees and charges authorized by section 

8a(1) of this Act, each person registered under this Act, who is not 

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tion, shall pay to the Commission such reasonable fees and charges 

as may be necessary to defray the costs of additional regulatory duties required to be performed by the Commission because such person is not a member of a registered futures association. The Commission shall establish such additional fees and charges by rules 

and regulations. 

(e) Any person registered under this Act, who is not a member 

of a futures association registered pursuant to this section, in addition to the other requirements and obligations of this Act and the 

regulations thereunder shall be subject to such other rules and regulations as the Commission may find necessary to protect the public interest and promote just and equitable principles of trade. 

(f) Upon filing of an application for registration pursuant to subsection (a), the Commission may by order grant such registration 

if the requirements of this section are satisfied. If, after appropriate notice and opportunity for hearing, it appears to the Commission that any requirement of this section is not satisfied, the 

Commission shall by order deny such registration. 

(g) A registered futures association may, upon such reasonable 

notice as the Commission may deem necessary in the public interest, withdraw from registration by filing with the Commission a 

written notice of withdrawal in such form as the Commission may 

by rules and regulations prescribe. 

(h)(1) If any registered futures association takes any final disciplinary action against a member of the association or a person associated with a member, denies admission to any person seeking 

membership therein, or bars any person from being associated with 

a member, the association promptly shall give notice thereof to 

such member or person and file notice thereof with the Commission. The notice shall be in such form and contain such information 

as the Commission, by rule or regulation, may prescribe as necessary or appropriate to carry out the purposes of this Act. 

(2) Any action with respect to which a registered futures association is required by paragraph (1) to file notice shall be subject to 

review by the Commission on its motion, or on application by any 

person aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the Commission 

and received by the aggrieved person, or within such longer period 

as the Commission may determine. 

(3)(A) Application to the Commission for review, or the institution of review by the Commission on its own motion, shall not operate as a stay of such action unless the Commission otherwise orders, summarily or after notice and opportunity for hearing on the 

question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments). 

(B) The Commission shall establish procedures for expedited consideration and determination of the question of a stay. 

(i)(1) In a proceeding to review a final disciplinary action taken 

by a registered futures association against a member thereof or a 

person associated with a member, after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the 

presentation of supporting reasons to affirm, modify, or set aside 

the sanction imposed by the association)— 

(A) if the Commission finds that— 


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(i) the member or person associated with a member has 

engaged in the acts or practices, or has omitted the acts, 

that the association has found the member or person to 

have engaged in or omitted; 

(ii) the acts or practices, or omissions to act, are in violation of the rules of the association specified in the determination of the association; and 

(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, 

the Commission, by order, shall so declare and, as appropriate, 

affirm the sanction imposed by the association, modify the 

sanction in accordance with paragraph (2), or remand the case 

to the association for further proceedings; or 

(B) if the Commission does not make any such finding, the 

Commission, by order, shall set aside the sanction imposed by 

the association and, if appropriate, remand the case to the association for further proceedings. 

(2) If, after a proceeding under paragraph (1), the Commission 

finds that any penalty imposed on a member or person associated 

with a member is excessive or oppressive, having due regard for 

the public interest, the Commission, by order, shall cancel, reduce, 

or require the remission of the penalty. 

(3) In a proceeding to review the denial of membership in a registered futures association or the barring of any person from being 

associated with a member, after appropriate notice and opportunity 

for a hearing (which hearing may consist solely of consideration of 

the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the association)— 

(A) if the Commission finds that— 

(i) the specific grounds on which the denial or bar is 

based exist in fact; 

(ii) the denial or bar is in accordance with the rules of 

the association; and 

(iii) such rules are, and were applied in a manner, consistent with the purposes of this Act, 

the Commission, by order, shall so declare and, as appropriate, 

affirm or modify the action of the association, or remand the 

case to the association for further proceedings; or 

(B) if the Commission does not make any such finding, the 

Commission, by order, shall set aside the action of the association and require the association to admit the applicant to membership or permit the person to be associated with a member, 

or, as appropriate, remand the case to the association for further proceedings. 

(4) Any person aggrieved by a final order of the Commission entered under this subsection may file a petition for review with a 

United States court of appeals in the same manner as provided in 

section 6(c). 

(j) Every registered futures association shall file with the Commission in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest, copies of any changes in or additions to the rules of the association, and such other information and documents as the Commission may require to keep current or to supplement the registraVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00253 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

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tion statement and documents filed pursuant to subsection (a) of 

this section. A registered futures association shall submit to the 

Commission any change in or addition to its rules and may make 

such rules effective ten days after receipt of such submission by the 

Commission unless, within the ten-day period, the registered futures association requests review and approval thereof by the Commission or the Commission notifies such registered futures association in writing of its determination to review such rules for approval. The Commission shall approve such rules if such rules are 

determined by the Commission to be consistent with the requirements of this section and not otherwise in violation of this Act or 

the regulations issued pursuant to this Act, and the Commission 

shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the Commission determines at any time 

to be inconsistent with the requirements of this section or in violation of this Act or the regulations issued pursuant to this Act. If 

the Commission does not approve or institute disapproval proceedings with respect to any rule within one hundred and eighty 

days after receipt or within such longer period of time as the registered futures association may agree to, or if the Commission does 

not conclude a disapproval proceeding with respect to any rule 

within one year after receipt or within such longer period as the 

registered futures association may agree to, such rule may be made 

effective by the registered futures association until such time as 

the Commission disapproves such rule in accordance with this subsection. 

(k)(1) The Commission is authorized by order to abrogate any 

rule of a registered futures association, if after appropriate notice 

and opportunity for hearing, it appears to the Commission that 

such abrogation is necessary or appropriate to assure fair dealing 

by the members of such association, to assure a fair representation 

of its members in the administration of its affairs or effectuate the 

purposes of this section. 

(2) The Commission may in writing request any registered futures association to adopt any specified alteration or supplement to 

its rules with respect to any of the matters hereinafter enumerated. If such association fails to adopt such alteration or supplement within a reasonable time, the Commission is authorized by 

order to alter or supplement the rules of such association in the 

manner theretofore requested, or with such modifications of such 

alteration or supplement as it deems necessary if, after appropriate 

notice and opportunity for hearing, it appears to the Commission 

that such alteration or supplement is necessary or appropriate in 

the public interest or to effectuate the purposes of this section, with 

respect to— 

(A) the basis for, and procedure in connection with, the denial of membership or the barring from being associated with 

a member or the disciplining of members or persons associated 

with members, or the qualifications required for members or 

natural persons associated with members or any class thereof: 

(B) the method for adoption of any change in or addition to 

the rules of the association; 

(C) the method of choosing officers and directors. 


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(l) The Commission is authorized, if such action appears to it to 

be necessary or appropriate in the public interest or to carry out 

the purposes of this section— 

(1) after appropriate notice and opportunity for hearing, by 

order to suspend for a period not exceeding twelve months or 

to revoke the registration of a registered futures association, if 

the Commission finds that such association has violated any 

provisions of this Act or any rule or regulation thereunder, or 

has failed to enforce compliance with its own rules, or has engaged in any other activity tending to defeat the purposes of 

this Act; 

(2) after appropriate notice and opportunity for hearing, by 

order to suspend for a period not exceeding twelve months or 

to expel from a registered futures association any member 

thereof, or to suspend for a period not exceeding twelve months 

or to bar any person from being associated with a member 

thereof, if the Commission finds that such member or person— 

(A) has violated any provision of this Act or any rule or 

regulation thereunder, or has effected any transaction for 

any other person who, he had reason to believe, was violating with respect to such transaction any provision of 

this Act or any rule or regulation thereunder; or 

(B) has willfully violated any provision of this Act, as 

amended, or of any rule, regulation, or order thereunder, 

or has effected any transaction for any other person who, 

he had reason to believe, was willfully violating with respect to such transaction any provision of such Act or rule, 

regulation, or order; and 

(3) after appropriate notice and opportunity for hearing, by 

order to remove from office any officer or director of a registered futures association who, the Commission finds, has 

willfully failed to enforce the rules of the association, or has 

willfully abused his authority. 

(m) Notwithstanding any other provision of law, the Commission 

may approve rules of futures associations that, directly or indirectly, require persons eligible for membership in such associations 

to become members of at least one such association, upon a determination by the Commission that such rules are necessary or appropriate to achieve the purposes and objectives of this Act. 

(n) The Commission shall include in its annual reports to Congress information concerning any futures associations registered 

pursuant to this section and the effectiveness of such associations 

in regulating the practices of the members. 

(o)(1) The Commission may require any futures association registered pursuant to this section to perform any portion of the registration functions under this Act with respect to each member of 

the association other than a registered entity and with respect to 

each associated person of such member, in accordance with rules, 

notwithstanding any other provision of law, adopted by such futures association and submitted to the Commission pursuant to 

section 17(j) of this Act, and subject to the provisions of this Act 

applicable to registrations granted by the Commission. 

(2) In performing any Commission registration function authorized by the Commission under section 8a(10), this section, or any 

other applicable provisions of this Act, a futures association may 


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issue orders (A) to refuse to register any person, (B) to register conditionally any person, (C) to suspend the registration of any person, 

(D) to place restrictions on the registration of any person, or (E) to 

revoke the registration of any person. If such an order is the final 

decision of the futures association, any person against whom the 

order has been issued may petition the Commission to review the 

decision. The Commission may on its own initiative or upon petition decline review or grant review and affirm, set aside, or modify 

such an order of the futures association; and the findings of the futures association as to the facts, if supported by the weight of the 

evidence, shall be conclusive. Unless the Commission grants review 

under this section of an order concerning registration issued by a 

futures association, the order of the futures association shall be 

considered to be an order issued by the Commission. 

(3) Nothing in this section shall affect the Commission’s authority to review the granting of a registration application by a registered futures association that is performing any Commission registration function authorized by the Commission under section 

8a(10), this section, or any other applicable provision of this Act. 

(4) If a person against whom a futures association has issued a 

registration order under this subsection petitions the Commission 

to review that order and the Commission declines to take review, 

such person may file a petition for review with a United States 

court of appeals, in accordance with section 6(c) of this Act. 

(p) Notwithstanding any other provision of this section, each futures association registered under this section on the date of enactment of the Futures Trading Act of 1982, shall adopt and submit 

for Commission approval not later than ninety days after such date 

of enactment, and each futures association that applies for registration after such date shall adopt and include with its application for 

registration, rules of the association that require the association 

to— 

(1) establish training standards and proficiency testing for 

persons involved in the solicitation of transactions subject to 

the provisions of this Act, supervisors of such persons, and all 

persons for which it has registration responsibilities, and a 

program to audit and enforce compliance with such standards; 

(2) establish minimum capital, segregation, and other financial requirements applicable to its members for which such requirements are imposed by the Commission and implement a 

program to audit and enforce compliance with such requirements, except that such requirements may not be less stringent an those imposed on such firms by this Act or by Commission regulation; 

(3) establish minimum standards governing the sales practices of its members and persons associated therewith for 

transactions subject to the provisions of this Act; and 

(4) establish special supervisory guidelines to protect the 

public interest relating to the solicitation by telephone of new 

futures or options accounts and make such guidelines applicable to those members determined to require such guidelines in 

accordance with standards established by the Commission consistent with this Act. Such guidelines may include a requirement that, with respect to a customer with no previous futures 

or commodity options trading experience, the member may not 


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enter an order for the account of such customer for a period of 

three days following opening of the account and receipt of a 

signed acknowledgment by the customer of receipt of a risk 

disclosure statement. 

(q) (1) The Commission shall issue regulations requiring each 

registered futures association to establish and make available to 

the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association. 

(2) The regulations issued by the Commission pursuant to this 

subsection shall prohibit, for a period of time to be determined by 

the Commission, any member of a registered futures association 

who is found to have committed any major violation from service 

on the governing board of any registered futures association or registered entity, or on any disciplinary committee thereof. 

ø(q)¿ (r) Each futures association registered under this section 

shall develop a comprehensive program that fully implements the 

rules approved by the Commission under this section as soon as 

practicable but not later than September 30, 1985, in the case of 

any futures association registered on the date of enactment of the 

Futures Trading Act of 1982, and not later than two and one-half 

years after the date of registration in the case of any other futures 

association registered under this section. 

ø(r)¿ (s) Consistent with this Act, each futures association registered under this section shall issue such rules as are necessary 

to avoid duplicative or conflicting rules applicable to any futures 

commission merchant registered with the Commission pursuant to 

section 4f(a) of this Act (except paragraph (2) thereof), that is also 

registered with the Securities and Exchange Commission pursuant 

to section 15(b) of the Securities and Exchange Act of 1934 (except 

paragraph (11) thereof), with respect to the application of— 

(1) rules of such futures association of the type specified in 

section 4d(e) involving security futures products; and 

(2) similar rules of national securities associations registered 

pursuant to section 15A(a) of the Securities and Exchange Act 

of 1934 involving security futures products. 

(t) A registered futures association shall— 

(1) require each member of the association that is a futures 

commission merchant to maintain written policies and procedures regarding the maintenance of— 

(A) the residual interest of the member, as described in 

section 1.23 of title 17, Code of Federal Regulations, in any 

customer segregated funds account of the member, as identified in section 1.20 of such title, and in any foreign futures and foreign options customer secured amount funds 

account of the member, as identified in section 30.7 of such 

title; and 

(B) the residual interest of the member, as described in 

section 22.2(e)(4) of such title, in any cleared swaps customer collateral account of the member, as identified in section 22.2 of such title; and 

(2) establish rules to govern the withdrawal, transfer or disbursement by any member of the association, that is a futures 

commission merchant, of the member’s residual interest in customer segregated funds as provided in such section 1.20, in foreign futures and foreign options customer secured amount 


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funds, identified as provided in such section 30.7, and from a 

cleared swaps customer collateral, identified as provided in 

such section 22.2. 

(u) A registered futures association shall require any member of 

the association that is a futures commission merchant to— 

(1) use an electronic system or systems to report financial and 

operational information to the association or another party designated by the registered futures association, including information related to customer segregated funds, foreign futures and 

foreign options customer secured amount funds accounts, and 

cleared swaps customer collateral, in accordance with such 

terms, conditions, documentation standards, and regular time 

intervals as are established by the registered futures association; 

(2) instruct each depository, including any bank, trust company, derivatives clearing organization, or futures commission 

merchant, holding customer segregated funds under section 

1.20 of title 17, Code of Federal Regulations, foreign futures 

and foreign options customer secured amount funds under section 30.7 of such title, or cleared swap customer funds under 

section 22.2 of such title, to report balances in the futures commission merchant’s section 1.20 customer segregated funds, section 30.7 foreign futures and foreign options customer secured 

amount funds, and section 22.2 cleared swap customer funds, 

to the registered futures association or another party designated 

by the registered futures association, in the form, manner, and 

interval prescribed by the registered futures association; and 

(3) hold section 1.20 customer segregated funds, section 30.7 

foreign futures and foreign options customer secured amount 

funds and section 22.2 cleared swaps customer funds in a depository that reports the balances in these accounts of the futures commission merchant held at the depository to the registered futures association or another party designated by the 

registered futures association in the form, manner, and interval 

prescribed by the registered futures association. 

(v) A futures commission merchant that has adjusted net capital 

in an amount less than the amount required by regulations established by the Commission or a self-regulatory organization of which 

the futures commission merchant is a member shall immediately 

notify the Commission and the self-regulatory organization of this 

occurrence. 

(w) A futures commission merchant that does not hold a sufficient 

amount of funds in segregated accounts for futures customers under 

section 1.20 of title 17, Code of Federal Regulations, in foreign futures and foreign options secured amount accounts for foreign futures and foreign options secured amount customers under section 

30.7 of such title, or in segregated accounts for cleared swap customers under section 22.2 of such title, as required by regulations 

established by the Commission or a self-regulatory organization of 

which the futures commission merchant is a member, shall immediately notify the Commission and the self-regulatory organization 

of this occurrence. 

(x) Within such time period established by the Commission after 

the end of each fiscal year, a futures commission merchant shall file 

with the Commission a report from the chief compliance officer of 


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the futures commission merchant containing an assessment of the 

internal compliance programs of the futures commission merchant. 

* * * * * * * 

SEC. 20. (a) Notwithstanding title 11 of the United States Code, 

the Commission may provide, with respect to a commodity broker 

that is a debtor under chapter 7 of title 11 of the United States 

Code, by rule or regulation— 

(1) that certain cash, securities, other property, or commodity contracts are to be included in or excluded from customer property or member property; 

(2) that certain cash, securities, other property, or commodity contracts are to be specifically identifiable to a particular customer in a specific capacity; 

(3) the method by which the business of such commodity 

broker is to be conducted or liquidated after the date of the filing of the petition under such chapter, including the payment 

and allocation of margin with respect to commodity contracts 

not specifically identifiable to a particular customer pending 

their orderly liquidation; 

(4) any persons to which customer property and commodity 

contracts may be transferred under section 766 of title 11 of 

the United States Code; øand¿ 

(5) how the net equity of a customer is to be determinedø.¿; 

and 

(6) that cash, securities, or other property of the estate of a 

commodity broker, including the trading or operating accounts 

of the commodity broker and commodities held in inventory by 

the commodity broker, shall be included in customer property, 

subject to any otherwise unavoidable security interest, or otherwise unavoidable contractual offset or netting rights of creditors 

(including rights set forth in a rule or bylaw of a derivatives 

clearing organization or a clearing agency) in respect of such 

property, but only to the extent that the property that is otherwise customer property is insufficient to satisfy the net equity 

claims of public customers (as such term may be defined by the 

Commission by rule or regulation) of the commodity broker. 

(b) As used in this section, the terms ‘‘commodity broker’’, ‘‘commodity contract’’, ‘‘customer’’, ‘‘customer property’’, ‘‘member property’’, ‘‘net equity’’, and ‘‘security’’ have the meanings assigned such 

terms for the purposes of subchapter IV of chapter 7 of title 11 of 

the United States Code. 

(c) The Commission shall exercise its authority to ensure that securities held in a portfolio margining account carried as a futures 

account are customer property and the owners of those accounts 

are customers for the purposes of subchapter IV of chapter 7 of 

title 11 of the United States Code. 

SEC. 21. SWAP DATA REPOSITORIES. 

(a) REGISTRATION REQUIREMENT.— 

(1) REQUIREMENT; AUTHORITY OF DERIVATIVES CLEARING ORGANIZATION.— 

(A) IN GENERAL.—It shall be unlawful for any person, 

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mentality of interstate commerce to perform the functions 

of a swap data repository. 

(B) REGISTRATION OF DERIVATIVES CLEARING ORGANIZATIONS.—A derivatives clearing organization may register 

as a swap data repository. 

(2) INSPECTION AND EXAMINATION.—Each registered swap 

data repository shall be subject to inspection and examination 

by any representative of the Commission. 

(3) COMPLIANCE WITH CORE PRINCIPLES.— 

(A) IN GENERAL.—To be registered, and maintain registration, as a swap data repository, the swap data repository shall comply with— 

(i) the requirements and core principles described in 

this section; and 

(ii) any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). 

(B) REASONABLE DISCRETION OF SWAP DATA REPOSITORY.—Unless otherwise determined by the Commission 

by rule or regulation, a swap data repository described in 

subparagraph (A) shall have reasonable discretion in establishing the manner in which the swap data repository 

complies with the core principles described in this section. 

(b) STANDARD SETTING.— 

(1) DATA IDENTIFICATION.— 

(A) IN GENERAL.—In accordance with subparagraph (B), 

the Commission shall prescribe standards that specify the 

data elements for each swap that shall be collected and 

maintained by each registered swap data repository. 

(B) REQUIREMENT.—In carrying out subparagraph (A), 

the Commission shall prescribe consistent data element 

standards applicable to registered entities and reporting 

counterparties. 

(2) DATA COLLECTION AND MAINTENANCE.—The Commission 

shall prescribe data collection and data maintenance standards 

for swap data repositories. 

(3) COMPARABILITY.—The standards prescribed by the Commission under this subsection shall be comparable to the data 

standards imposed by the Commission on derivatives clearing 

organizations in connection with their clearing of swaps. 

(c) DUTIES.—A swap data repository shall— 

(1) accept data prescribed by the Commission for each swap 

under subsection (b); 

(2) confirm with both counterparties to the swap the accuracy of the data that was submitted; 

(3) maintain the data described in paragraph (1) in such 

form, in such manner, and for such period as may be required 

by the Commission; 

(4)(A) provide direct electronic access to the Commission (or 

any designee of the Commission, including another registered 

entity); and 

(B) provide the information described in paragraph (1) in 

such form and at such frequency as the Commission may require to comply with the public reporting requirements contained in section 2(a)(13); 


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(5) at the direction of the Commission, establish automated 

systems for monitoring, screening, and analyzing swap data, 

including compliance and frequency of end user clearing exemption claims by individual and affiliated entities; 

(6) maintain the privacy of any and all swap transaction information that the swap data repository receives from a swap 

dealer, counterparty, or any other registered entity; and 

(7) on a confidential basis pursuant to section 8, upon request, and after notifying the Commission of the request, make 

available all data obtained by the swap data repository, including individual counterparty trade and position data, to— 

(A) each appropriate prudential regulator; 

(B) the Financial Stability Oversight Council; 

(C) the Securities and Exchange Commission; 

(D) the Department of Justice; and 

(E) any other person that the Commission determines to 

be appropriate, including— 

(i) foreign financial supervisors (including foreign futures authorities); 

(ii) foreign central banks; and 

(iii) foreign ministries; and 

(8) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allows for the 

timely recovery and resumption of operations and the fulfillment of the responsibilities and obligations of the organization. 

ø(d) CONFIDENTIALITY AND INDEMNIFICATION AGREEMENT.—Before the swap data repository may share information with any entity described in subsection (c)(7)— 

ø(1) the swap data repository shall receive a written agreement from each entity stating that the entity shall abide by 

the confidentiality requirements described in section 8 relating 

to the information on swap transactions that is provided; and 

ø(2) each entity shall agree to indemnify the swap data repository and the Commission for any expenses arising from litigation relating to the information provided under section 8.¿ 

(d) CONFIDENTIALITY AGREEMENT.—Before the swap data repository may share information with any entity described in subsection 

(c)(7), the swap data repository shall receive a written agreement 

from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided. 

(e) DESIGNATION OF CHIEF COMPLIANCE OFFICER.— 

(1) IN GENERAL.—Each swap data repository shall designate 

an individual to serve as a chief compliance officer. 

(2) DUTIES.—The chief compliance officer shall— 

(A) report directly to the board or to the senior officer of 

the swap data repository; 

(B) review the compliance of the swap data repository 

with respect to the requirements and core principles described in this section; 

(C) in consultation with the board of the swap data repository, a body performing a function similar to the board 

of the swap data repository, or the senior officer of the 

swap data repository, resolve any conflicts of interest that 

may arise; 


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(D) be responsible for administering each policy and procedure that is required to be established pursuant to this 

section; 

(E) ensure compliance with this Act (including regulations) relating to agreements, contracts, or transactions, 

including each rule prescribed by the Commission under 

this section; 

(F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer 

through any— 

(i) compliance office review; 

(ii) look-back; 

(iii) internal or external audit finding; 

(iv) self-reported error; or 

(v) validated complaint; and 

(G) establish and follow appropriate procedures for the 

handling, management response, remediation, retesting, 

and closing of noncompliance issues. 

(3) ANNUAL REPORTS.— 

(A) IN GENERAL.—In accordance with rules prescribed by 

the Commission, the chief compliance officer shall annually prepare and sign a report that contains a description 

of— 

(i) the compliance of the swap data repository of the 

chief compliance officer with respect to this Act (including regulations); and 

(ii) each policy and procedure of the swap data repository of the chief compliance officer (including the 

code of ethics and conflict of interest policies of the 

swap data repository). 

(B) REQUIREMENTS.—A compliance report under subparagraph (A) shall— 

(i) accompany each appropriate financial report of 

the swap data repository that is required to be furnished to the Commission pursuant to this section; 

and 

(ii) include a certification that, under penalty of law, 

the compliance report is accurate and complete. 

(f) CORE PRINCIPLES APPLICABLE TO SWAP DATA REPOSITORIES.— 

(1) ANTITRUST CONSIDERATIONS.—Unless necessary or appropriate to achieve the purposes of this Act, a swap data repository shall not— 

(A) adopt any rule or take any action that results in any 

unreasonable restraint of trade; or 

(B) impose any material anticompetitive burden on the 

trading, clearing, or reporting of transactions. 

(2) GOVERNANCE ARRANGEMENTS.—Each swap data repository shall establish governance arrangements that are transparent— 

(A) to fulfill public interest requirements; and 

(B) to support the objectives of the Federal Government, 

owners, and participants. 

(3) CONFLICTS OF INTEREST.—Each swap data repository 

shall— 


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(A) establish and enforce rules to minimize conflicts of 

interest in the decision-making process of the swap data 

repository; and 

(B) establish a process for resolving conflicts of interest 

described in subparagraph (A). 

(4) ADDITIONAL DUTIES DEVELOPED BY COMMISSION.— (A) IN GENERAL.—The Commission may develop 1 or 

more additional duties applicable to swap data repositories. 

(B) CONSIDERATION OF EVOLVING STANDARDS.—In developing additional duties under subparagraph (A), the Commission may take into consideration any evolving standard 

of the United States or the international community. 

(C) ADDITIONAL DUTIES FOR COMMISSION DESIGNEES.— 

The Commission shall establish additional duties for any 

registrant described in section ø1a(48)¿ 1a(49) in order to 

minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the swap 

data repository. 

(g) REQUIRED REGISTRATION FOR SWAP DATA REPOSITORIES.—Any 

person that is required to be registered as a swap data repository 

under this section shall register with the Commission regardless of 

whether that person is also licensed as a bank or registered with 

the Securities and Exchange Commission as a swap data repository. 

(h) RULES.—The Commission shall adopt rules governing persons 

that are registered under this section. 

SEC. 22. (a)(1) Any person (other than a registered entity or registered futures association) who violates this Act or who willfully 

aids, abets, counsels, induces, or procures the commission of a violation of this Act shall be liable for actual damages resulting from 

one or more of the transactions referred to in subparagraphs (A) 

through (D) of this paragraph and caused by such violation to any 

other person— 

(A) who received trading advice from such person for a fee; 

(B) who made through such person any contract of sale of 

any commodity for future delivery (or option on such contract 

or any commodity) or any swap; or who deposited with or paid 

to such person money, securities, or property (or incurred debt 

in lieu thereof) in connection with any order to make such contract or any swap; 

(C) who purchased from or sold to such person or placed 

through such person an order for the purchase or sale of— 

(i) an option subject to section 4c of this Act (other than 

an option purchased or sold on a registered entity or other 

board of trade); 

(ii) a contract subject to section 19 of this Act; or 

(iii) an interest or participation in a commodity pool; or 

(iv) a swap; or 

(D) who purchased or sold a contract referred to in subparagraph (B) hereof or swap if the violation constitutes— 

(i) the use or employment of, or an attempt to use or employ, in connection with a swap, or a contract of sale of a 

commodity, in interstate commerce, or for future delivery 

on or subject to the rules of any registered entity, any maVerDate Sep 11 2014 05:21 May 30, 2015 Jkt 049006 PO 00000 Frm 00263 Fmt 6659 Sfmt 6601 E:\HR\OC\HR134.XXX HR134

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
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nipulative device or contrivance in contravention of such 

rules and regulations as the Commission shall promulgate 

by not later than 1 year after the date of enactment of the 

Dodd-Frank Wall Street Reform and Consumer Protection 

Act; or 

(ii) a manipulation of the price of any such contract or 

swap or the price of the commodity underlying such contract or swap. 

(2) Except as provided in subsection (b), the rights of action authorized by this subsection and by sections 5(d)(13), 5b(c)(2)(H), 14, 

and 17(b)(10) of this Act shall be the exclusive remedies under this 

Act available to any person who sustains loss as a result of any alleged violation of this Act. Nothing in this subsection shall limit or 

abridge the rights of the parties to agree in advance of a dispute 

upon any forum for resolving claims under this section, including 

arbitration. 

(3) In any action arising from a violation in the execution of an 

order on the floor of a registered entity, the person referred to in 

paragraph (1) shall be liable for— 

(A) actual damages proximately caused by such violation. If 

an award of actual damages is made against a floor broker in 

connection with the execution of a customer order, and the futures commission merchant which selected the floor broker for 

the execution of the customer order is held to be responsible 

under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such 

award; and 

(B) where the violation is willful and intentional, punitive or 

exemplary damages equal to no more than two times the 

amount of such actual damages. If an award of punitive or exemplary damages is made against a floor broker in connection 

with the execution of a customer order, and the futures commission merchant which selected the floor broker for the execution of the customer order is held to be responsible under section 2(a)(1) for the floor broker’s violation, such futures commission merchant may be required to satisfy such award if the 

floor broker fails to do so, except that such requirement shall 

apply to the futures commission merchant only if it willfully 

and intentionally selected the floor broker with the intent to 

assist or facilitate the floor broker’s violation. 

(4) CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.— 

(A) IN GENERAL.—No hybrid instrument sold to any investor 

shall be void, voidable, or unenforceable, and no party to a hybrid instrument shall be entitled to rescind, or recover any 

payment made with respect to, the hybrid instrument under 

this section or any other provision of Federal or State law, 

based solely on the failure of the hybrid instrument to comply 

with the terms or conditions of section 2(f) or regulations of the 

Commission. 

(B) SWAPS.—No agreement, contract, or transaction between 

eligible contract participants or persons reasonably believed to 

be eligible contract participants shall be void, voidable, or unenforceable, and no party to such agreement, contract, or 

transaction shall be entitled to rescind, or recover any payment 


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made with respect to, the agreement, contract, or transaction 

under this section or any other provision of Federal or State 

law, based solely on the failure of the agreement, contract, or 

transaction— 

(i) to meet the definition of a swap under section 1a; or 

(ii) to be cleared in accordance with section 2(h)(1). 

(5) LEGAL CERTAINTY FOR LONG-TERM SWAPS ENTERED INTO BE- FORE THE DATE OF ENACTMENT OF THE WALL STREET TRANS- PARENCY AND ACCOUNTABILITY ACT OF 2010.— 

(A) EFFECT ON SWAPS.—Unless specifically reserved in the 

applicable swap, neither the enactment of the Wall Street 

Transparency and Accountability Act of 2010, nor any requirement under that Act or an amendment made by that Act, shall 

constitute a termination event, force majeure, illegality, increased costs, regulatory change, or similar event under a swap 

(including any related credit support arrangement) that would 

permit a party to terminate, renegotiate, modify, amend, or 

supplement 1 or more transactions under the swap. 

(B) POSITION LIMITS.—Any position limit established under 

the Wall Street Transparency and Accountability Act of 2010 

shall not apply to a position acquired in good faith prior to the 

effective date of any rule, regulation, or order under the Act 

that establishes the position limit; provided, however, that 

such positions shall be attributed to the trader if the trader’s 

position is increased after the effective date of such position 

limit rule, regulation, or order. 

(6) CONTRACT ENFORCEMENT FOR FOREIGN FUTURES CON- TRACTS.—A contract of sale of a commodity for future delivery traded or executed on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes 

of section 4(a) shall not be void, voidable, or unenforceable, and a 

party to such a contract shall not be entitled to rescind or recover 

any payment made with respect to the contract, based on the failure of the foreign board of trade to comply with any provision of 

this Act. 

(b)(1)(A) A registered entity that fails to enforce any bylaw, rule, 

regulation, or resolution that it is required to enforce by section 5, 

5b, 5c, 5h, or 21, (B) a licensed board of trade that fails to enforce 

any bylaw, rule, regulation, or resolution that it is required to enforce by the Commission, or (C) any registered entity that in enforcing any such bylaw, rule, regulation, or resolution violates this 

Act or any Commission rule, regulation, or order, shall be liable for 

actual damages sustained by a person who engaged in any transaction on or subject to the rules of such registered entity to the extent of such person’s actual losses that resulted from such transaction and were caused by such failure to enforce or enforcement 

of such bylaws, rules, regulations, or resolutions. 

(2) A registered futures association that fails to enforce any 

bylaw or rule that is required under section 17 of this Act or in enforcing any such bylaw or rule violates this Act or any Commission 

rule, regulation, or order shall be liable for actual damages sustained by a person that engaged in any transaction specified in 

subsection (a) of this section to the extent of such person’s actual 

losses that resulted from such transaction and were caused by such 

failure to enforce or enforcement of such bylaw or rule. 


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(3) Any individual who, in the capacity as an officer, director, 

governor, committee member, or employee øof registered¿ of a registered entity or a registered futures association willfully aids, 

abets, counsels, induces, or procures any failure by any such entity 

to enforce (or any violation of the Act in enforcing) any bylaw, rule, 

regulation, or resolution referred to in paragraph (1) or (2) of this 

subsection, shall be liable for actual damages sustained by a person 

who engaged in any transaction specified in subsection (a) of this 

section on, or subject to the rules of, such registered entity or, in 

the case of an officer, director, governor, committee member, or employee of a registered futures association, any transaction specified 

in subsection (a) of this section, in either case to the extent of such 

person’s actual losses that resulted from such transaction and were 

caused by such failure or violation. 

(4) A person seeking to enforce liability under this section must 

establish that the registered entity, registered futures association, 

officer, director, governor, committee member, or employee acted in 

bad faith in failing to take action or in taking such action as was 

taken, and that such failure or action caused the loss. 

(5) The rights of action authorized by this subsection shall be the 

exclusive remedy under this Act available to any person who sustains a loss as a result of (A) the alleged failure by a registered entity or registered futures association or by any officer, director, governor, committee member, or employee to enforce any bylaw, rule, 

regulation, or resolution referred to in paragraph (1) or (2) of this 

subsection, or (B) the taking of action in enforcing any bylaw, rule, 

regulation, or resolution referred to in this subsection that is alleged to have violated this Act, or any Commission rule, regulation, 

or order. 

(c) The United States district courts shall have exclusive jurisdiction of actions brought under this section. Any such action shall be 

brought not later than two years after the date the cause of action 

arises. Any action brought under subsection (a) of this section may 

be brought in any judicial district wherein the defendant is found, 

resides, or transacts business, or in the judicial district wherein 

any act or transaction constituting the violation occurs. Process in 

such action may be served in any judicial district of which the defendant is an inhabitant or wherever the defendant may be found. 

(d) The provisions of this section shall become effective with respect to causes of action accruing on or after the date of enactment 

of the Futures Trading Act of 1982: Provided, That the enactment 

of the Futures Trading Act of 1982 shall not affect any right of any 

parties which may exist with respect to causes of action accruing 

prior to such date. 

SEC. 23. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION. 

(a) DEFINITIONS.—In this section: 

(1) COVERED JUDICIAL OR ADMINISTRATIVE ACTION.—The term 

‘‘covered judicial or administrative action’’ means any judicial 

or administrative action brought by the Commission under this 

Act that results in monetary sanctions exceeding $1,000,000. 

(2) FUND.—The term ‘‘Fund’’ means the Commodity Futures 

Trading Commission Customer Protection Fund established 

under subsection (g). 


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(3) MONETARY SANCTIONS.—The term ‘‘monetary sanctions’’, 

when used with respect to any judicial or administrative action 

means— 

(A) any monies, including penalties, disgorgement, restitution, and interest ordered to be paid; and 

(B) any monies deposited into a disgorgement fund or 

other fund pursuant to section 308(b) of the SarbanesOxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such 

action or any settlement of such action. 

(4) ORIGINAL INFORMATION.—The term ‘‘original information’’ 

means information that— 

(A) is derived from the independent knowledge or analysis of a whistleblower; 

(B) is not known to the Commission from any other 

source, unless the whistleblower is the original source of 

the information; and 

(C) is not exclusively derived from an allegation made in 

a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news 

media, unless the whistleblower is a source of the information. 

(5) RELATED ACTION.—The term ‘‘related action’’, when used 

with respect to any judicial or administrative action brought by 

the Commission under this Act, means any judicial or administrative action brought by an entity described in subclauses (I) 

through (VI) of subsection (h)(2)(C) that is based upon the 

original information provided by a whistleblower pursuant to 

subsection (a) that led to the successful enforcement of the 

Commission action. 

(6) SUCCESSFUL RESOLUTION.—The term ‘‘successful resolution’’, when used with respect to any judicial or administrative 

action brought by the Commission under this Act, includes any 

settlement of such action. 

(7) WHISTLEBLOWER.—The term ‘‘whistleblower’’ means any 

individual, or 2 or more individuals acting jointly, who provides information relating to a violation of this Act to the Commission, in a manner established by rule or regulation by the 

Commission. 

(b) AWARDS.— (1) IN GENERAL.—In any covered judicial or administrative 

action, or related action, the Commission, under regulations 

prescribed by the Commission and subject to subsection (c), 

shall pay an award or awards to 1 or more whistleblowers who 

voluntarily provided original information to the Commission 

that led to the successful enforcement of the covered judicial or 

administrative action, or related action, in an aggregate 

amount equal to— 

(A) not less than 10 percent, in total, of what has been 

collected of the monetary sanctions imposed in the action 

or related actions; and 

(B) not more than 30 percent, in total, of what has been 

collected of the monetary sanctions imposed in the action 

or related actions. 

(2) PAYMENT OF AWARDS.—Any amount paid under paragraph (1) shall be paid from the Fund. 


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(c) DETERMINATION OF AMOUNT OF AWARD; DENIAL OF AWARD.— (1) DETERMINATION OF AMOUNT OF AWARD.— (A) DISCRETION.—The determination of the amount of an 

award made under subsection (b) shall be in the discretion 

of the Commission. 

(B) CRITERIA.—In determining the amount of an award 

made under subsection (b), the Commission— 

(i) shall take into consideration— 

(I) the significance of the information provided 

by the whistleblower to the success of the covered 

judicial or administrative action; 

(II) the degree of assistance provided by the 

whistleblower and any legal representative of the 

whistleblower in a covered judicial or administrative action; 

(III) the programmatic interest of the Commission in deterring violations of the Act (including 

regulations under the Act) by making awards to 

whistleblowers who provide information that leads 

to the successful enforcement of such laws; and 

(IV) such additional relevant factors as the 

Commission may establish by rule or regulation; 

and 

(ii) shall not take into consideration the balance of 

the Fund. 

(2) DENIAL OF AWARD.—No award under subsection (b) shall 

be made— 

(A) to any whistleblower who is, or was at the time the 

whistleblower acquired the original information submitted 

to the Commission, a member, officer, or employee of— 

(i) a appropriate regulatory agency; 

(ii) the Department of Justice; 

(iii) a registered entity; 

(iv) a registered futures association; 

(v) a self-regulatory organization as defined in section 3(a) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)); or 

(vi) a law enforcement organization; 

(B) to any whistleblower who is convicted of a criminal 

violation related to the judicial or administrative action for 

which the whistleblower otherwise could receive an award 

under this section; 

(C) to any whistleblower who submits information to the 

Commission that is based on the facts underlying the covered action submitted previously by another whistleblower; 

(D) to any whistleblower who fails to submit information 

to the Commission in such form as the Commission may, 

by rule or regulation, require. 

(d) REPRESENTATION.— (1) PERMITTED REPRESENTATION.—Any whistleblower who 

makes a claim for an award under subsection (b) may be represented by counsel. 

(2) REQUIRED REPRESENTATION.— 

(A) IN GENERAL.—Any whistleblower who anonymously 

makes a claim for an award under subsection (b) shall be 


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represented by counsel if the whistleblower submits the information upon which the claim is based. 

(B) DISCLOSURE OF IDENTITY.—Prior to the payment of 

an award, a whistleblower shall disclose the identity of the 

whistleblower and provide such other information as the 

Commission may require, directly or through counsel for 

the whistleblower. 

(e) NO CONTRACT NECESSARY.—No contract with the Commission 

is necessary for any whistleblower to receive an award under subsection (b), unless otherwise required by the Commission, by rule 

or regulation. 

(f) APPEALS.— 

(1) IN GENERAL.—Any determination made under this section, including whether, to whom, or in what amount to make 

awards, shall be in the discretion of the Commission. 

(2) APPEALS.—Any determination described in paragraph (1) 

may be appealed to the appropriate court of appeals of the 

United States not more than 30 days after the determination 

is issued by the Commission. 

(3) REVIEW.—The court shall review the determination made 

by the Commission in accordance with øsection 7064¿ section 

706 of title 5, United States Code. 

(g) COMMODITY FUTURES TRADING COMMISSION CUSTOMER PRO- TECTION FUND.— (1) ESTABLISHMENT.—There is established in the Treasury of 

the United States a revolving fund to be known as the ‘‘Commodity Futures Trading Commission Customer Protection 

Fund’’. 

(2) USE OF FUND.—The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, 

for— 

(A) the payment of awards to whistleblowers as provided 

in subsection (a); and 

(B) the funding of customer education initiatives designed to help customers protect themselves against fraud 

or other violations of this Act, or the rules and regulations 

thereunder. 

(3) DEPOSITS AND CREDITS.—There shall be deposited into or 

credited to the Fund: 

(A) MONETARY SANCTIONS.—Any monetary sanctions collected by the Commission in any covered judicial or administrative action that is not otherwise distributed to victims 

of a violation of this Act or the rules and regulations thereunder underlying such action, unless the balance of the 

Fund at the time the monetary judgment is collected exceeds $100,000,000. 

(B) ADDITIONAL AMOUNTS.—If the amounts deposited 

into or credited to the Fund under subparagraph (A) are 

not sufficient to satisfy an award made under subsection 

(b), there shall be deposited into or credited to the Fund 

an amount equal to the unsatisfied portion of the award 

from any monetary sanction collected by the Commission 

in any judicial or administrative action brought by the 

Commission under this Act that is based on information 

provided by a whistleblower. 


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(C) INVESTMENT INCOME.—All income from investments 

made under paragraph (4). 

(4) INVESTMENTS.— 

(A) AMOUNTS IN FUND MAY BE INVESTED.—The Commission may request the Secretary of the Treasury to invest 

the portion of the Fund that is not, in the Commission’s 

judgment, required to meet the current needs of the Fund. 

(B) ELIGIBLE INVESTMENTS.—Investments shall be made 

by the Secretary of the Treasury in obligations of the 

United States or obligations that are guaranteed as to 

principal and interest by the United States, with maturities suitable to the needs of the Fund as determined by 

the Commission. 

(C) INTEREST AND PROCEEDS CREDITED.—The interest on, 

and the proceeds from the sale or redemption of, any obligations held in the Fund shall be credited to, and form a 

part of, the Fund. 

(5) REPORTS TO CONGRESS.—Not later than October 30 of 

each year, the Commission shall transmit to the Committee on 

Agriculture, Nutrition, and Forestry of the Senate, and the 

Committee on Agriculture of the House of Representatives a 

report on— 

(A) the Commission’s whistleblower award program 

under this section, including a description of the number 

of awards granted and the types of cases in which awards 

were granted during the preceding fiscal year; 

(B) customer education initiatives described in paragraph (2)(B) that were funded by the Fund during the preceding fiscal year; 

(C) the balance of the Fund at the beginning of the preceding fiscal year; 

(D) the amounts deposited into or credited to the Fund 

during the preceding fiscal year; 

(E) the amount of earnings on investments of amounts 

in the Fund during the preceding fiscal year; 

(F) the amount paid from the Fund during the preceding 

fiscal year to whistleblowers pursuant to subsection (b); 

(G) the amount paid from the Fund during the preceding 

fiscal year for customer education initiatives described in 

paragraph (2)(B); 

(H) the balance of the Fund at the end of the preceding 

fiscal year; and 

(I) a complete set of audited financial statements, including a balance sheet, income statement, and cash flow analysis. 

(h) PROTECTION OF WHISTLEBLOWERS.— 

(1) PROHIBITION AGAINST RETALIATION.— 

(A) IN GENERAL.—No employer may discharge, demote, 

suspend, threaten, harass, directly or indirectly, or in any 

other manner discriminate against, a whistleblower in the 

terms and conditions of employment because of any lawful 

act done by the whistleblower— 

(i) in providing information to the Commission in accordance with subsection (b); or 


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(ii) in assisting in any investigation or judicial or administrative action of the Commission based upon or 

related to such information. 

(B) ENFORCEMENT.— 

(i) CAUSE OF ACTION.—An individual who alleges 

discharge or other discrimination in violation of subparagraph (A) may bring an action under this subsection in the appropriate district court of the United 

States for the relief provided in subparagraph (C), unless the individual who is alleging discharge or other 

discrimination in violation of subparagraph (A) is an 

employee of the Federal Government, in which case 

the individual shall only bring an action under section 

1221 of title 5, United States Code. 

(ii) SUBPOENAS.—A subpoena requiring the attendance of a witness at a trial or hearing conducted under 

this subsection may be served at any place in the 

United States. 

(iii) STATUTE OF LIMITATIONS.—An action under this 

subsection may not be brought more than 2 years after 

the date on which the violation reported in subparagraph (A) is committed. 

(C) RELIEF.—Relief for an individual prevailing in an action brought under subparagraph (B) shall include— 

(i) reinstatement with the same seniority status that 

the individual would have had, but for the discrimination; 

(ii) the amount of back pay otherwise owed to the individual, with interest; and 

(iii) compensation for any special damages sustained 

as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorney’s fees. 

(2) CONFIDENTIALITY.— 

(A) IN GENERAL.—Except as provided in subparagraphs 

(B) and (C), the Commission, and any officer or employee 

of the Commission, shall not disclose any information, including information provided by a whistleblower to the 

Commission, which could reasonably be expected to reveal 

the identity of a whistleblower, except in accordance with 

the provisions of section 552a of title 5, United States 

Code, unless and until required to be disclosed to a defendant or respondent in connection with a public proceeding 

instituted by the Commission or any entity described in 

subparagraph (C). For purposes of section 552 of title 5, 

United States Code, this paragraph shall be considered a 

statute described in subsection (b)(3)(B) of such section 

552. 

(B) EFFECT.—Nothing in this paragraph is intended to 

limit the ability of the Attorney General to present such 

evidence to a grand jury or to share such evidence with potential witnesses or defendants in the course of an ongoing 

criminal investigation. 

(C) AVAILABILITY TO GOVERNMENT AGENCIES.— 


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(i) IN GENERAL.—Without the loss of its status as 

confidential in the hands of the Commission, all information referred to in subparagraph (A) may, in the 

discretion of the Commission, when determined by the 

Commission to be necessary or appropriate to accomplish the purposes of this Act and protect customers 

and in accordance with clause (ii), be made available 

to— 

(I) the Department of Justice; 

(II) an appropriate department or agency of the 

Federal Government, acting within the scope of its 

jurisdiction; 

(III) a registered entity, registered futures association, or self-regulatory organization as defined 

in section 3(a) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)); 

(IV) a State attorney general in connection with 

any criminal investigation; 

(V) an appropriate department or agency of any 

State, acting within the scope of its jurisdiction; 

and 

(VI) a foreign futures authority. 

(ii) MAINTENANCE OF INFORMATION.—Each of the entities, agencies, or persons described in clause (i) shall 

maintain information described in that clause as confidential, in accordance with the requirements in subparagraph (A). 

(iii) STUDY ON IMPACT OF FOIA EXEMPTION ON COMMODITY FUTURES TRADING COMMISSION.— 

(I) STUDY.—The Inspector General of the Commission shall conduct a study— 

(aa) on whether the exemption under section 552(b)(3) of title 5, United States Code 

(known as the Freedom of Information Act) 

established in paragraph (2)(A) aids whistleblowers in disclosing information to the Commission; 

(bb) on what impact the exemption has had 

on the public’s ability to access information 

about the Commission’s regulation of commodity futures and option markets; and 

(cc) to make any recommendations on 

whether the Commission should continue to 

use the exemption. 

(II) REPORT.—Not later than 30 months after 

the date of enactment of this clause, the Inspector 

General shall— 

(aa) submit a report on the findings of the 

study required under this clause to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives; and 


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(bb) make the report available to the public 

through publication of a report on the website 

of the Commission. 

(3) RIGHTS RETAINED.—Nothing in this section shall be 

deemed to diminish the rights, privileges, or remedies of any 

whistleblower under any Federal or State law, or under any 

collective bargaining agreement. 

(i) RULEMAKING AUTHORITY.—The Commission shall have the authority to issue such rules and regulations as may be necessary or 

appropriate to implement the provisions of this section consistent 

with the purposes of this section. 

(j) IMPLEMENTING RULES.—The Commission shall issue final 

rules or regulations implementing the provisions of this section not 

later than 270 days after the date of enactment of the Wall Street 

Transparency and Accountability Act of 2010. 

(k) ORIGINAL INFORMATION.—Information submitted to the Commission by a whistleblower in accordance with rules or regulations 

implementing this section shall not lose its status as original information solely because the whistleblower submitted such information prior to the effective date of such rules or regulations, provided 

such information was submitted after the date of enactment of the 

Wall Street Transparency and Accountability Act of 2010. 

(l) AWARDS.—A whistleblower may receive an award pursuant to 

this section regardless of whether any violation of a provision of 

this Act, or a rule or regulation thereunder, underlying the judicial 

or administrative action upon which the award is based occurred 

prior to the date of enactment of the Wall Street Transparency and 

Accountability Act of 2010. 

(m) PROVISION OF FALSE INFORMATION.—A whistleblower who 

knowingly and willfully makes any false, fictitious, or fraudulent 

statement or representation, or who makes or uses any false writing or document knowing the same to contain any false, fictitious, 

or fraudulent statement or entry, shall not be entitled to an award 

under this section and shall be subject to prosecution under section 

1001 of title 18, United States Code. 

(n) NONENFORCEABILITY OF CERTAIN PROVISIONS WAIVING

RIGHTS AND REMEDIES OR REQUIRING ARBITRATION OF DISPUTES.— (1) WAIVER OF RIGHTS AND REMEDIES.—The rights and remedies provided for in this section may not be waived by any 

agreement, policy form, or condition of employment including 

by a predispute arbitration agreement. 

(2) PREDISPUTE ARBITRATION AGREEMENTS.—No predispute 

arbitration agreement shall be valid or enforceable, if the 

agreement requires arbitration of a dispute arising under this 

section. 

SEC. 24. JUDICIAL REVIEW OF COMMISSION RULES. 

(a) A person adversely affected by a rule of the Commission promulgated under this Act may obtain review of the rule in the United 

States Court of Appeals for the District of Columbia Circuit or the 

United States Court of Appeals for the circuit where the party resides or has the principal place of business, by filing in the court, 

within 60 days after publication in the Federal Register of the entry 

of the rule, a written petition requesting that the rule be set aside. 

(b) A copy of the petition shall be transmitted forthwith by the 

clerk of the court to an officer designated by the Commission for 


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that purpose. Thereupon the Commission shall file in the court the 

record on which the rule complained of is entered, as provided in 

section 2112 of title 28, United States Code, and the Federal Rules 

of Appellate Procedure. 

(c) On the filing of the petition, the court has jurisdiction, which 

becomes exclusive on the filing of the record, to affirm and enforce 

or to set aside the rule in whole or in part. 

(d) The court shall affirm and enforce the rule unless the Commission’s action in promulgating the rule is found to be arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance 

with law; contrary to constitutional right, power, privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, 

or short of statutory right; or without observance of procedure required by law. 

FUTURES TRADING ACT OF 1978 

PLAN FOR USER FEES

SEC. 26. (a) Notwithstanding any other provision of law, the 

Commodity Futures Trading Commission may develop and implement a plan to charge and collect reasonable fees to cover the estimated cost of regulating transactions under the jurisdiction of the 

Commission. However, prior to implementing such a plan, the 

Commission shall report its intention to do so to the House Committee on Agriculture and the Senate Committee on Agriculture, 

Nutrition, and Forestry. The Commission shall include in its report 

the feasibility and desirability of collecting such fees. Any plan developed under this section shall not be implemented until approved 

by the House Committee on Agriculture and the Senate Committee 

on Agriculture, Nutrition, and Forestry. Fees collected under any 

plan approved under this section shall be deposited in the Treasury 

of the United States as miscellaneous receipts. 

ø(b) The Commodity Futures Trading Commission shall submit 

to Congress a report containing the results of a study of the regulatory experience of the National Futures Association for the period 

beginning January 1, 1983 and ending September 30, 1985. The report shall be submitted not later than January 1, 1986. The report 

shall include (but not to be limited to) the following— 

ø(1) the extent to which the National Futures Association 

has fully implemented the program provided in the rules approved by the Commission under section 17(p) and (q) of the 

Commodity Exchange Act and the effectiveness of the operation of such program; 

ø(2) the actual and projected cost savings to the Federal Government, if any, resulting from operations of the National Futures Association; 

ø(3) the actual and projected costs which the Commission 

and the public would have incurred if the Association had not 

undertaken self-regulatory responsibility for certain areas 

under the Commission’s jurisdiction; 

ø(4) problem areas, if any, encountered by the Association; 

ø(5) the nature of the working relationship between the Association and the Commission; 


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ø(6) an assessment of the actual and projected efficiencies 

the Commission has achieved or expects to be achieved as a result of the continuing regulatory activities of the Association; 

and 

ø(7) the immediate and projected capabilities of the Commission at the time of submission of the study to turn its attention 

to more immediate problems of regulation, as a result of the 

activities of the Association.¿ 

ø(c)¿ (b) Nothing in this section shall limit the authority of the 

Commission to promulgate, after notice and opportunity for hearing, a schedule of appropriate fees to be charged for services rendered and activities and functions performed by the Commission in 

conjunction with its administration and enforcement of the Commodity Exchange Act: Provided, That the fees for any specified 

service or activity or function shall not exceed the actual cost thereof to the Commission. 


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smartinez on DSK4TPTVN1PROD with REPORTS-HSEInsert offset folio 347 here HR134A.001
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smartinez on DSK4TPTVN1PROD with REPORTS-HSEInsert offset folio 348 here HR134A.002