19–006 

112TH CONGRESS REPT. 112–343 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

BUSINESS RISK MITIGATION AND PRICE STABILIZATION 

ACT OF 2011 

DECEMBER 23, 2011.—Ordered to be printed 

Mr. BACHUS, from the Committee on Financial Services, 

submitted the following, 

R E P O R T 

[To accompany H.R. 2682] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2682) to provide end user exemptions from certain provisions of the Commodity Exchange Act and the Securities Exchange 

Act of 1934, and for other purposes, having considered the same, 

report favorably thereon without amendment and recommend that 

the bill do pass. 

PURPOSE AND SUMMARY

‘‘End-users’’ are companies that use derivatives to hedge their 

business risk. Because end-users’ swap and security-based swap 

transactions do not pose a systemic risk to the financial system, 

Congress did not intend that end-user derivatives transactions 

would be subject to the margin and capital requirements of Title 

VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111–203) (the Dodd-Frank Act). Despite Congressional intent and the statute’s plain language, some regulators 

have interpreted Title VII as a grant of new authority to impose 

margin requirements on end-users merely because they are 

counterparties to swaps with a regulated entity, such as a swap 

dealer or financial institution. H.R. 2682 would exempt end-users 

from the margin and capital requirements under Title VII of the 

Dodd-Frank Act for swaps and security-based swap transactions 

that are not made with financial entities as defined under the 

Dodd-Frank Act. 


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BACKGROUND AND NEED FOR LEGISLATION

During floor debate on the conference report for the Dodd-Frank 

Act, two colloquies among the then-chairmen of the four committees with primary jurisdiction over Title VII clarified Congressional 

intent that the Dodd-Frank Act did not grant regulators the authority to impose margin requirements on end-user derivatives 

transactions. Nevertheless, some regulators have interpreted Title 

VII as a grant of new authority to impose margin requirements on 

end-users. Accordingly, H.R. 2682 is necessary to ensure that the 

regulators do not force end-users to post margin, thereby diverting 

much-needed capital from being used to fuel job creation and economic growth. 

On February 15, 2011, Mr. Craig Reiners of MillerCoors LLC, on 

behalf of the Coalition for Derivatives End-Users, testified before 

the Committee, and stated that ‘‘the prudent use of derivatives by 

end-user companies, such as MillerCoors, does not generate risk or 

instability in the financial marketplace and played no role in the 

financial crisis. On the contrary, these risk management tools are 

critical to reducing commercial risk and volatility in our day-to-day 

business operations, allowing us to create sustainable and prosperous businesses.’’ Further, he testified that ‘‘we believe that a 

broad end-user exemption is critically important as the [Commodity Futures Trading Commission] promulgates final rules. During the regulatory process, we have sought to ensure that the exemption created by Congress would not be unduly narrowed. In 

particular, we have urged regulators to give thoughtful consideration to key definitions to ensure that end-users like us are not 

saddled with bank-like regulation. . . . The unintended consequence of margin requirements applied to end-users or excessive 

capital requirements applied to our financial counterparties could 

be to reduce the risk management activity of end-users. Such a result could actually increase systemic risk or even push transactions 

offshore.’’ 

On March 16, 2011, Mr. Luke Zubrod of Chatham Financial, on 

behalf of the Coalition for Derivatives End-Users, testified before 

the Subcommittee on Capital Markets and Government-Sponsored 

Enterprises, and stated that ‘‘[i]f capital charges are disproportionately increased, end users may opt out of hedging, which in turn 

would translate to increased volatility in consumer prices for things 

like airline tickets, apartment rents, farm equipment, various types 

of financing, life insurance contracts, and even the price of cereal.’’ 

Further, he stated that ‘‘[w]e respectfully request that this committee provide end users with certainty by clarifying that their 

hedges will not be subject to margin requirements. In addition to 

providing important certainty for Main Street businesses, such a 

clarification would promote international harmonization and minimize regulatory arbitrage.’’ 

On July 28, 2011, Representatives Michael Grimm, Gary Peters, 

Austin Scott, and Bill Owens introduced H.R. 2682, which would 

exempt end-users from the margin requirements under Title VII of 

the Dodd-Frank Act. Representative Grimm originally introduced 

an end-user exemption bill on April 15, 2011. That bill—H.R. 1610, 

Business Risk Mitigation and Price Stabilization Act of 2011—was 

discussed at a legislative hearing on March 16, 2011. On May 3, 


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2011, the Subcommittee on Capital Markets and GovernmentSponsored Enterprises met in open session to consider H.R. 1610. 

Following the Subcommittee markup, Representatives Grimm, 

Peters, Scott, and Owens reached a compromise on the language 

for an end-user exemption, and introduced a new bill, H.R. 2682. 

HEARINGS

On March 16, 2011, the Subcommittee on Capital Markets and 

Government-Sponsored Enterprises held a hearing on a draft 

version of H.R. 1610 entitled ‘‘Legislative Proposals to Promote Job 

Creation, Capital Formation, and Market Certainty.’’ The following 

witnesses testified: 

• Mr. Kenneth A. Bertsch, President and CEO, Society of 

Corporate Secretaries & Governance Professionals 

• Mr. Tom Deutsch, Executive Director, American Securitization Forum 

• Ms. Pam Hendrickson, Chief Operating Officer, The Riverside Company 

• Mr. David Weild, Senior Advisor, Grant Thornton, LLP 

• Mr. Luke Zubrod, Director, Chatham Financial 

• Mr. Damon Silvers, Policy Director and Special Counsel, 

AFL–CIO 

COMMITTEE CONSIDERATION

On May 3, 2011, the Subcommittee on Capital Markets and Government-Sponsored Enterprises met in open session and ordered 

H.R. 1610 favorably reported to the full Committee by a record vote 

of 19 yeas and 13 nays. (Record vote no. CM–30) 

On November 30, 2011, the Committee on Financial Services met 

in open session and ordered H.R. 2682 favorably reported to the 

House by voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. There were no 

record votes taken on amendments or in connection with ordering 

H.R. 2682 reported to the House. A motion by Chairman Bachus 

to report the bill to the House with a favorable recommendation 

was agreed to by voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has held hearings and made 

findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

The objective of H.R. 2682 is to exempt end-users from the margin and capital requirements under Title VII of the Dodd-Frank 

Act for swaps and security-based swap transactions that are not 


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made with financial entities as defined under the Dodd-Frank Act. 

Because end-users’ swap and security-based swap transactions do 

not pose a systemic risk to the financial system, Congress did not 

intend that end-user derivatives transactions would be subject to 

the margin and capital requirements of Title VII of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act (P.L. 111–203). 

Despite Congressional intent and the statute’s plain language, 

some regulators have interpreted Title VII as a grant of new authority to impose margin requirements on end-users merely because they are counterparties to swaps with a regulated entity, 

such as a swap dealer or financial institution. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

DECEMBER 14, 2011. 

Hon. SPENCER BACHUS, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2682, the Business Risk 

Mitigation and Price Stabilization Act of 2011. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

H.R. 2682—Business Risk Mitigation and Price Stabilization Act of 

2011 

H.R. 2682 would allow certain nonfinancial entities that are 

counterparties in swap or security-based swap transactions to be 

exempted from provisions in current law that require such entities 

to meet certain margin requirements. (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). Both 

the Commodity Futures Trading Commission (CFTC) and the SecuVerDate Mar 15 2010 03:44 Dec 28, 2011 Jkt 019006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR343P1.XXX HR343P1

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rities and Exchange Commission (SEC) are developing regulations 

relating to margin requirements in swap transactions as the result 

of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111–203). 

Neither the CFTC nor the SEC has finalized regulations regarding margin requirements. Based on information from the two agencies, CBO expects that incorporating the provisions of H.R. 2682 at 

this point in the regulatory process would not require a significant 

increase in the workload of either agency. Therefore, CBO estimates that any change in discretionary spending to implement the 

legislation, which would be subject to the availability of appropriated funds, would not be significant. Enacting H.R. 2682 would 

not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply. 

H.R. 2586 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Susan Willie. The estimate was approved by Theresa Gullo, Deputy Assistant Director 

for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts 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. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 2682 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 2682 as the ‘‘Business Risk Mitigation and 

Price Stabilization Act of 2011.’’ 

Section 2. Margin requirements 

This section amends Section 4(s)(e) of the Commodity Exchange 

Act as added by Section 731 of the Dodd-Frank Act governing margin requirements, and exempts counterparties to swap contracts 

from those requirements other than for financial entities as defined 

under the Dodd-Frank Act. 


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This sections amends Section 15F(e) of the Securities Exchange 

Act of 1934 as added by Section 764(a) of the Dodd-Frank Act governing margin requirements and exempts counterparties to security-based swap contracts from those requirements other than for 

financial entities as defined under the Dodd-Frank Act 

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 (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

COMMODITY EXCHANGE ACT 

* * * * * * * 

SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS. 

(a) * * * 

* * * * * * * 

(e) CAPITAL AND MARGIN REQUIREMENTS.— (1) * * * 

* * * * * * * 

(4) APPLICABILITY WITH RESPECT TO COUNTERPARTIES.—The 

requirements of paragraphs (2)(A)(ii) and (2)(B)(ii) shall not 

apply to a swap in which one of the counterparties to the swap 

is not a financial entity as described in section 2(h)(7)(C), and 

such counterparty is eligible for the exception under section 

2(h)(7)(A). 

* * * * * * * 

SECTION 15F OF THE SECURITIES EXCHANGE ACT OF 

1934 

SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED 

SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS. 

(a) * * * 

* * * * * * * 

(e) CAPITAL AND MARGIN REQUIREMENTS.— 

(1) * * * 

* * * * * * * 

(4) APPLICABILITY WITH RESPECT TO COUNTERPARTIES.—The 

requirements of paragraphs (2)(A)(ii) and (2)(B)(ii) shall not 

apply to a security-based swap in which one of the counterparties to the security-based swap is not a financial entity as described in section 3C(g)(3), and such counterparty is eligible for 

the exception under section 3C(g)(1). 

* * * * * * * 

Æ 


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