I 

113TH CONGRESS 

1ST SESSION H. R. 2292 

To provide for greater regulation of high frequency trading of commodities 

futures and options and greater protection for derivatives traders and 

trading facilities, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 6, 2013 

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

Committee on Agriculture 

A BILL 

To provide for greater regulation of high frequency trading 

of commodities futures and options and greater protection for derivatives traders and trading facilities, and 

for other purposes. 

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 ‘‘Protection from Rogue 

5 Oil Traders Engaging in Computerized Trading Act’’ or 

6 the ‘‘PROTECT Act’’. 

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1 SEC. 2. REQUIREMENTS APPLICABLE TO HIGH FREQUENCY 

2 TRADERS OF COMMODITY FUTURES AND OP3 TIONS. 

4 (a) IN GENERAL.—The Commodity Exchange Act (7 

5 U.S.C. 1 et seq.) is amended by inserting after section 

6 4t the following: 

7 ‘‘SEC. 4u. REQUIREMENTS APPLICABLE TO HIGH FRE8 QUENCY TRADERS. 

9 ‘‘(a) REGISTRATION.—It shall be unlawful for any 

10 person to engage in an activity that the Commission has 

11 defined in regulations as high frequency trading, unless 

12 the person has registered with the Commission (in such 

13 form, in such manner, and providing such information as 

14 the Commission shall prescribe) as a high frequency trad15 er, and the registration has not expired or been suspended 

16 or revoked. 

17 ‘‘(b) OTHER REQUIREMENTS.—A registered high fre18 quency trader shall— 

19 ‘‘(1) test all computer programs and algorithms 

20 used by the trader in any high frequency trading ac21 tivity and determine whether the programs and algo22 rithms are functioning properly, in such manner and 

23 with such frequency as the Commission shall pre24 scribe in regulations; 

25 ‘‘(2) establish and document high frequency 

26 trading system safeguards reasonably designed to 

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1 ensure the proper function of all programs and algo2 rithms used by the high frequency trader including 

3 conditions and parameters relating to the automatic 

4 termination, pausing, or cancellation of the trader’s 

5 messaging or trading activity, maximum message 

6 and trade execution rates and order sizes, intra-day 

7 risk position limits, and market and trade moni8 toring systems that are appropriate for ensuring 

9 compliance with the system safeguards, including 

10 systems designed to monitor market volatility and 

11 the trader’s risk position on an intra-day basis; 

12 ‘‘(3) shall not simultaneously purchase and sell 

13 through the same or different accounts the same 

14 commodity contract, agreement, or transaction, un15 less the simultaneous purchases and sales are of a 

16 de minimis quantity and are reported to the Com17 mission periodically, in a form and manner to be de18 termined by the Commission; 

19 ‘‘(4) submit to the Commission semiannual re20 ports on the high frequency trading activities of the 

21 trader during the period covered by the report, in 

22 such form, in such manner, and containing such in23 formation as the Commission may require, signed by 

24 the chief executive officer (or equivalent officer) of 

25 the trader; and 

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1 ‘‘(5) conform with such business conduct stand2 ards as may be prescribed by the Commission by 

3 rule or regulation that relate to— 

4 ‘‘(A) fraud, manipulation, and other abu5 sive or disruptive practices, and other practices 

6 that may affect market integrity involving high 

7 frequency traders (including high frequency 

8 trades that are offered but not entered into); 

9 and 

10 ‘‘(B) such other matters as the Commis11 sion may determine are appropriate in the pub12 lic interest or otherwise in furtherance of the 

13 purposes of this Act, including information nec14 essary to develop a classification scheme and 

15 public reports relating to high frequency traders 

16 and trading activity and sub-categories there17 to.’’. 

18 (b) DEADLINE FOR ISSUANCE OF RULES DEFINING

19 HIGH FREQUENCY TRADING.—Within 9 months after the 

20 date of the enactment of this Act, the Commodity Futures 

21 Trading Commission shall prescribe final regulations de22 fining the activities that shall be considered to be high 

23 frequency trading for purposes of section 4u of the Com24 modities Exchange Act. 

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1 SEC. 3. FINE FOR HIGH FREQUENCY TRADING VIOLATION 

2 REQUIRED TO BE BASED ON THE DURATION 

3 OF THE VIOLATION. 

4 Section 9 of the Commodity Exchange Act (7 U.S.C. 

5 13) is amended by adding at the end the following: 

6 ‘‘(f) FINE FOR HIGH FREQUENCY TRADING VIOLA7 TION REQUIRED TO BE BASED ON THE DURATION OF

8 THE VIOLATION.—The amount of a fine imposed under 

9 this Act with respect to a violation of a high frequency 

10 trading regulation shall be determined on the basis of the 

11 number of seconds, including fractions of seconds, during 

12 which the violation continued.’’. 

13 SEC. 4. CIVIL PENALTIES UNDER THE COMMODITY EX14 CHANGE ACT. 

15 (a) AUTHORITY OF THE COMMODITY FUTURES

16 TRADING COMMISSION TO DEFINE MEANING OF ‘‘EACH

17 VIOLATION’’.—Section 9 of the Commodity Exchange Act 

18 (7 U.S.C. 13), as amended by section 3 of this Act, is 

19 amended by adding at the end the following: 

20 ‘‘(g) AUTHORITY TO DEFINE SCOPE OF VIOLA21 TION.—The Commission may define the scope of any vio22 lation for purposes of determining the number of viola23 tions involved in any case arising under this Act.’’. 

24 (b) ENFORCEMENT POWERS OF THE COMMISSION.— 

25 Section 6 of such Act is amended— 

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1 (1) in paragraph (10) of subsection (c) (7 

2 U.S.C. 9), by striking subparagraph (C) and insert3 ing the following: 

4 ‘‘(C) assess such person— 

5 ‘‘(i) a civil penalty of not more than 

6 an amount equal to the greater of— 

7 ‘‘(I) $1,000,000, in the case of a 

8 person who is an individual, for each 

9 violation; 

10 ‘‘(II) $10,000,000, in the case of 

11 any person other than an individual, 

12 for each violation; 

13 ‘‘(III) triple the monetary gain to 

14 the person and all other persons act15 ing in concert with the person, for 

16 each such violation; or 

17 ‘‘(IV) triple the total amount of 

18 losses to persons proximately caused 

19 by each such violation; or 

20 ‘‘(ii) a civil penalty of triple the max21 imum amount otherwise available under 

22 clause (i) if the person, within 5 years pre23 ceding the violation, has been— 

24 ‘‘(I) found in a proceeding 

25 brought by the Commission, or by 

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1 agreement of settlement to which the 

2 Commission is a party, to have reck3 lessly or willfully violated any provi4 sion of this Act or of the rules, regu5 lations, or orders of the Commission 

6 thereunder; or 

7 ‘‘(II) convicted of any criminal 

8 offense that involves a violation of this 

9 Act or of the rules, regulations, or or10 ders of the Commission thereunder; 

11 and’’; 

12 (2) in subsection (d) (7 U.S.C. 13b)— 

13 (A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 

14 (B) by striking ‘‘$140,000 or triple the 

15 monetary gain to such person,’’ and inserting 

16 ‘‘(A) $1,000,000, in the case of a person who 

17 is an individual, for each violation, (B) 

18 $10,000,000, in the case of any person other 

19 than an individual, for each violation, (C) triple 

20 the monetary gain to the person and all other 

21 persons acting in concert with the person, for 

22 each such violation, or (D) triple the total 

23 amount of losses to persons proximately caused 

24 by each such violation,’’; and 

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1 (C) by striking the period and inserting ‘‘; 

2 and’’; and 

3 (D) by adding after and below the end the 

4 following: 

5 ‘‘(2)(A) A person shall be held liable for a civil 

6 penalty in triple the amount otherwise available for 

7 a violation under this subsection if the person, with8 in 5 years preceding such violation, has been— 

9 ‘‘(i) found in a proceeding brought by the 

10 Commission, or by agreement of settlement to 

11 which the Commission is a party, to have reck12 lessly or willfully violated any provision of this 

13 Act or the rules, regulations, or orders of the 

14 Commission thereunder; or 

15 ‘‘(ii) convicted of any criminal offense that 

16 involves violation of this Act or the rules, regu17 lations, or orders of the Commission there18 under.’’. 

19 (c) NONENFORCEMENT OF RULES OF GOVERNMENT

20 OR OTHER VIOLATIONS.—Section 6b of such Act (7 

21 U.S.C. 13a) is amended in the 1st sentence— 

22 (1) by striking ‘‘$500,000 for each such viola23 tion, or, in any case of manipulation or attempted 

24 manipulation in violation of section 6(c), 6(d), or 

25 9(a)(2), a civil penalty of not more than $1,000,000 

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1 for each such violation’’ and inserting ‘‘(A) 

2 $1,000,000, in the case of a person who is an indi3 vidual, for each violation, (B) $10,000,000, in the 

4 case of any person other than an individual, for each 

5 violation, (C) triple the monetary gain to the person 

6 and all other persons acting in concert with the per7 son, for each such violation, or (D) triple the total 

8 amount of losses to persons proximately caused by 

9 each such violation, and such civil penalty shall be 

10 assessed for each violation on which a failure to en11 force or other violation occurs or has occurred; pro12 vided that a registered entity, director, officer, 

13 agent, or employee shall be assessed a civil penalty 

14 of triple the amount otherwise available if the per15 son, within 5 years of such violation, has been found 

16 in a proceeding brought by the Commission, or by 

17 agreement of settlement to which the Commission is 

18 a party, to have recklessly or willfully violated any 

19 provision of this Act or the rules, regulations, or or20 ders of the Commission thereunder, or convicted of 

21 any criminal offense that involves a violation of this 

22 Act or the rules, regulations, or orders of the Com23 mission thereunder’’. 

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1 (d) ACTION TO ENJOIN OR RESTRAIN VIOLA2 TIONS.—Section 6c(d) of such Act (7 U.S.C. 13a–1(d)) 

3 is amended— 

4 (1) in paragraph (1), by inserting ‘‘a civil pen5 alty in the amount of’’ after ‘‘violation’’; and 

6 (2) by striking subparagraphs (A) and (B) of 

7 paragraph (1) and inserting the following: 

8 ‘‘(A) not more than the greater of— 

9 ‘‘(i) ‘‘$1,000,000, in the case of a per10 son who is an individual, for each violation; 

11 ‘‘(ii) $10,000,000, in the case of any 

12 person other than an individual, for each 

13 violation; 

14 ‘‘(iii) triple the monetary gain to the 

15 person and all other persons acting in con16 cert with the person, for each such viola17 tion; or 

18 ‘‘(iv) triple the total amount of losses 

19 by persons proximately caused by each 

20 such violation; or 

21 ‘‘(B) triple the maximum amount other22 wise available under subparagraph (A) if the 

23 person, within 5 years preceding the violation, 

24 has been— 

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1 ‘‘(i) found in a proceeding brought by 

2 the Commission, or by agreement of settle3 ment to which the Commission is a party, 

4 to have recklessly or willfully violated any 

5 provision of this Act or of the rules, regu6 lations, or orders of the Commission there7 under; or 

8 ‘‘(ii) convicted of any criminal offense 

9 that involves a violation of this Act or of 

10 the rules, regulations, or orders of the 

11 Commission thereunder.’’. 

12 (e) CRIMINAL PENALTIES.—Section 9(a) of such Act 

13 (7 U.S.C. 13(a)) is amended by inserting ‘‘in the case of 

14 an individual or $10,000,000 in the case of any person 

15 other than an individual, for each violation,’’ after 

16 ‘‘$1,000,000’’. 

17 (f) STATUTE OF LIMITATIONS.—Section 9 of such 

18 Act (7 U.S.C. 13) is amended by adding at the end the 

19 following: 

20 ‘‘(f) STATUTE OF LIMITATIONS.—An action, suit or 

21 proceeding for the enforcement of any civil fine, penalty, 

22 or forfeiture, pecuniary or otherwise, shall not be enter23 tained unless commenced within 10 years after the date 

24 when the claim first accrued if, within the same period, 

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1 the offender or the property is found within the United 

2 States in order that proper service may be made thereon.’’. 

3 SEC. 5. EFFECTIVE DATES. 

4 (a) REQUIREMENTS APPLICABLE TO HIGH FRE5 QUENCY TRADERS.—The amendment made by section 

6 2(a) shall take effect on the date that is 9 months after 

7 the date of the enactment of this Act. 

8 (b) PENALTIES PROVISIONS.—The amendments 

9 made by sections 3 and 4 shall take effect on the date 

10 that is 15 days after the date of the enactment of this 

11 Act. 

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