I 

116TH CONGRESS 

1ST SESSION H. R. 4726 

To help end-users better utilize derivatives markets by refining the definition 

of financial entity, clarifying how affiliates can utilize the end-user exception, and harmonizing clearing and margin exemptions. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 17, 2019 

Mr. MARSHALL introduced the following bill; which was referred to the 

Committee on Agriculture 

A BILL 

To help end-users better utilize derivatives markets by refining the definition of financial entity, clarifying how affiliates can utilize the end-user exception, and harmonizing 

clearing and margin exemptions. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Certainty for End5 Users Act’’. 

6 SEC. 2. CLARIFYING THE FINANCIAL ENTITY DEFINITION. 

7 (a) IN GENERAL.—Section 2(h) of the Commodity 

8 Exchange Act (7 U.S.C. 2(h)) is amended— 


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1 (1) by striking paragraph (1)(A) and inserting 

2 the following: 

3 ‘‘(A) STANDARD FOR CLEARING.—It shall 

4 be unlawful for a financial entity to engage in 

5 a swap with another financial entity, unless the 

6 swap is submitted for clearing to a derivatives 

7 clearing organization registered under this Act 

8 or a derivatives clearing organization exempt 

9 from registration under this Act if the swap is 

10 required to be cleared.’’; and 

11 (2) in paragraph (7)— 

12 (A) in the paragraph heading, by striking 

13 ‘‘EXCEPTIONS’’ and inserting ‘‘APPLICATION OF

14 CLEARING REQUIREMENT’’; 

15 (B) by striking subparagraphs (A) and (B) 

16 and redesignating subparagraph (C) as sub17 paragraph (A); 

18 (C) in subparagraph (A) (as so redesig19 nated)— 

20 (i) by striking clause (i) and inserting 

21 the following: 

22 ‘‘(i) IN GENERAL.—In this subsection, 

23 the term ‘financial entity’ means the fol24 lowing: 


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1 ‘‘(I) INSTITUTIONS NOT STATU2 TORILY EXEMPTED.— 

3 ‘‘(aa) A financial institution. 

4 ‘‘(bb) A swap dealer. 

5 ‘‘(cc) A security-based swap 

6 dealer. 

7 ‘‘(dd) A major swap partici8 pant. 

9 ‘‘(ee) A major security-based 

10 swap participant. 

11 ‘‘(ff) A commodity pool that 

12 is required to be operated by a 

13 commodity pool operator reg14 istered with the Commission, or a 

15 foreign person that would be 

16 such a commodity pool if the for17 eign person were organized under 

18 the laws of the United States or 

19 any State. 

20 ‘‘(gg) An investment com21 pany (as defined in section 3 of 

22 the Investment Company Act of 

23 1940 (15 U.S.C. 80a–3)), or a 

24 foreign person that would be 

25 such an investment company if 


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1 the foreign person were organized 

2 under the laws of the United 

3 States or any State. 

4 ‘‘(II) PRIVATE FUNDS.—A pri5 vate fund as defined in section 202(a) 

6 of the Investment Advisers Act of 

7 1940 (15 U.S.C. 80–b–2(a)), or a for8 eign person that would be such a pri9 vate fund if the foreign person were 

10 organized under the laws of the 

11 United States or any State. 

12 ‘‘(III) OTHER PERSONS.—Such 

13 other persons the Commission deter14 mines by rule to be predominantly en15 gaged in activities that are financial 

16 in nature. In making such a deter17 mination, the Commission may con18 sider section 4(k) of the Bank Hold19 ing Company Act of 1956. The Com20 mission shall promulgate regulations 

21 to carry out this subclause.’’; 

22 (ii) in clause (iii), by striking ‘‘Such 

23 definition’’ and inserting ‘‘The term’’; and 

24 (iii) by adding at the end the fol25 lowing: 


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1 ‘‘(iv) DE MINIMIS EXCLUSION.— 

2 ‘‘(I) AMOUNTS.—A person de3 scribed in subclause (III), and not 

4 subclause (I) or (II), of clause (i) 

5 shall not be considered a financial en6 tity for purposes of this subsection if 

7 the total swaps activity of the person, 

8 when calculated with those of all other 

9 affiliated persons who are so de10 scribed, amount to less than— 

11 ‘‘(aa) $1,000,000,000 in 

12 gross notional swaps transactions 

13 calculated on the basis of a roll14 ing 12-month period; or 

15 ‘‘(bb) an alternative de mini16 mis amount of swaps activity, ex17 posure, transactions, or other 

18 measurement, as determined by 

19 the Commission. At least every 5 

20 years, the Commission shall con21 sider modifying the alternative de 

22 minimis amount due to inflation 

23 or other market factors. 


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1 ‘‘(II) CALCULATION.—The cal2 culation under subclause (I) shall not 

3 include— 

4 ‘‘(aa) swaps used to hedge 

5 or mitigate risk associated with 

6 an asset owned or liability in7 curred or reasonably likely to be 

8 owned or incurred by an entity in 

9 the conduct of such entity’s busi10 ness; or 

11 ‘‘(bb) swaps used by an in12 surance company for asset rep13 lication if they are expressly per14 mitted by State insurance regu15 lators to be entered into in con16 junction with other investments 

17 in order to replicate the invest18 ment characteristics of otherwise 

19 permissible investments. 

20 ‘‘(III) REQUIREMENTS OF ENTI21 TIES RELYING ON THE DE MINIMIS

22 EXCLUSION.—An entity that relies on 

23 the de minimis exception in this 

24 clause to avoid clearing swaps trans25 actions that the Commission requires 


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1 a financial entity to clear pursuant to 

2 paragraph (1)(A) and Commission 

3 regulations shall, with respect to the 

4 swaps, report or cause to be reported, 

5 to a registered swap data repository 

6 the reliance of the entity on the de 

7 minimis exclusion.’’; and 

8 (D) by inserting after subparagraph (A) 

9 (as amended by the preceding provisions of this 

10 paragraph) the following: 

11 ‘‘(B) ADDITIONAL DEFINITIONS.—In this 

12 subsection: 

13 ‘‘(i) AFFILIATE STATUS.—2 entities 

14 are affiliated if— 

15 ‘‘(I) 1 of the entities, directly or 

16 indirectly, holds a majority ownership 

17 interest in the other entity; or 

18 ‘‘(II) a third party, directly or in19 directly, holds a majority ownership 

20 interest in both entities. 

21 ‘‘(ii) NON-FINANCIAL ENTITY.—The 

22 term ‘non-financial entity’ means— 

23 ‘‘(I) a person not described in 

24 subparagraph (A)(i); or 


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1 ‘‘(II) a person described in clause 

2 (ii), (iii), or (iv) of subparagraph (A). 

3 ‘‘(C) REQUIREMENTS OF NON-FINANCIAL

4 ENTITIES.—A non-financial entity that engages 

5 in swaps transactions that the Commission re6 quires a financial entity to clear pursuant to 

7 paragraph (1)(A) and Commission regulations 

8 shall, with respect to the swaps, report or cause 

9 to be reported, to a registered swap data reposi10 tory their status as a non-financial entity.’’. 

11 SEC. 3. SIMPLIFYING THE END-USER AFFILIATE PROCESS. 

12 Section 2(h)(7) of the Commodity Exchange Act (7 

13 U.S.C. 2(h)(7)), as amended by section 2 of this Act, is 

14 amended— 

15 (1) by striking subparagraph (D) and inserting 

16 the following: 

17 ‘‘(D) RISK MANAGEMENT THROUGH AF18 FILIATES.— 

19 ‘‘(i) EXCEPTION.—The requirements 

20 of paragraph (1)(A) shall not apply to a 

21 swap entered into by a risk management 

22 entity if the swap is— 

23 ‘‘(I) used to hedge or mitigate el24 igible risk originating from one or 


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1 more affiliated non-financial entities; 

2 and 

3 ‘‘(II) not netted, combined, or 

4 consolidated with any other swap to 

5 which the requirements of paragraph 

6 (1)(A) apply. 

7 ‘‘(ii) RISK MANAGEMENT ENTITY DE8 FINED.—In this subparagraph, the term 

9 ‘risk management entity’ means— 

10 ‘‘(I) an entity described in sub11 clause (II), and not subclause (I), of 

12 subparagraph (A)(i), that enters only 

13 into transactions related to the man14 agement of eligible risk; 

15 ‘‘(II) an entity described in only 

16 subclause (III) of subparagraph 

17 (A)(i); or 

18 ‘‘(III) a non-financial entity. 

19 ‘‘(iii) ELIGIBLE RISK DEFINED.—In 

20 this subparagraph, the term ‘eligible risk’ 

21 means risk that— 

22 ‘‘(I) originates from a non-finan23 cial entity; 

24 ‘‘(II) is associated with an asset 

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1 ably likely to be owned or incurred by 

2 the non-financial entity in the conduct 

3 of the business of the non-financial 

4 entity; 

5 ‘‘(III) is not netted, combined, or 

6 consolidated with risk originating 

7 from any affiliated financial entity; 

8 and 

9 ‘‘(IV) if transferred, is trans10 ferred only to or through one or more 

11 affiliated risk management entities. 

12 ‘‘(iv) REQUIREMENTS OF RISK MAN13 AGEMENT ENTITIES.—A risk management 

14 entity that engages in swaps which utilize 

15 the exception in this subparagraph shall— 

16 ‘‘(I) notify the Commission, in a 

17 manner prescribed by the Commis18 sion, how the risk management entity 

19 generally meets the financial obliga20 tions of the risk management entity 

21 associated with entering into non22 cleared swaps; 

23 ‘‘(II) identify those swaps used to 

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1 nating from one or more affiliated 

2 non-financial entities; and 

3 ‘‘(III) maintain books and 

4 records of the swaps which utilize the 

5 exception in this subparagraph and 

6 the related eligible risk in such form 

7 and manner and for such period as 

8 may be required by the Commission. 

9 ‘‘(v) NO EFFECT ON NON-FINANCIAL

10 ENTITIES.—Nothing in this subparagraph 

11 shall be interpreted to limit the ability of 

12 any non-financial entity to engage in a 

13 swap to which the requirements of para14 graph (1)(A) do not apply.’’; and 

15 (2) by striking subparagraph (F) and inserting 

16 the following: 

17 ‘‘(F) ABUSE OF EXCEPTION.—The Com18 mission may prescribe such rules or issue such 

19 interpretations of the rules as the Commission 

20 determines to be necessary to prevent abuse of 

21 the exceptions described in this paragraph. The 

22 Commission may request information from a 

23 person claiming to be a non-financial entity as 

24 necessary to prevent evasion of the rules or 


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1 abuse of the exceptions described in this para2 graph.’’. 

3 SEC. 4. ALIGNMENT OF MARGIN REQUIREMENTS. 

4 Section 4s(e)(4) of the Commodity Exchange Act (7 

5 U.S.C. 6s(e)(4)) is amended to read as follows: 

6 ‘‘(4) EXCEPTIONS TO MARGIN REQUIRE7 MENTS.— 

8 ‘‘(A) IN GENERAL.—Paragraphs (2)(A)(ii) 

9 and (2)(B)(ii), including the initial and vari10 ation margin requirements imposed under such 

11 paragraphs, shall not apply to a swap— 

12 ‘‘(i) in which a counterparty is a non13 financial entity (as defined in section 

14 2(h)(7)(B)(ii)), regardless of whether the 

15 swap is required to be cleared; 

16 ‘‘(ii) that qualifies for the exception 

17 provided in subparagraph (D) of section 

18 2(h)(7), or that would so qualify if the 

19 swap were required to be cleared; or 

20 ‘‘(iii) that qualifies for an exception or 

21 exemption from the requirements of section 

22 2(h)(1)(A) pursuant to any Commission 

23 rule, regulation, or order. 

24 ‘‘(B) PRESERVATION OF VARIATION MAR25 GIN EXCHANGE REQUIREMENT APPLICABLE TO


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1 CERTAIN INSURANCE COMPANIES.—Notwith2 standing subparagraph (A) of this paragraph, if 

3 an insurance company would be a financial en4 tity for purposes of section 2(h) if the swaps 

5 described in section 2(h)(7)(A)(iv)(II)(bb) of 

6 the insurance company were not excluded from 

7 the de minimis calculation under section 

8 2(h)(7)(A)(iv), then all swaps of the insurance 

9 company shall be subject to the variation mar10 gin requirements of paragraphs (2)(A)(ii) and 

11 (2)(B)(ii) of this subsection.’’. 

12 SEC. 5. MODIFICATION OF DEFINITION OF MAJOR SWAP 

13 PARTICIPANT. 

14 Section 1a(33)(A)(iii)(I) of the Commodity Exchange 

15 Act (7 U.S.C. 1a(33)(A)(iii)(I)) is amended by inserting 

16 ‘‘, or a non-financial entity that would be considered to 

17 be a financial entity for purposes of section 2(h) but for 

18 the application of the de minimis exclusion provided for 

19 in section 2(h)(7)(A)(iv),’’ before ‘‘that is highly’’. 

Æ 


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