89–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–1119 

RESTORING FINANCIAL MARKET FREEDOM ACT OF 2017 

JANUARY 2, 2019.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 4247] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4247) to repeal title VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, having considered the same, 

report favorably thereon without amendment and recommend that 

the bill do pass. 

PURPOSE AND SUMMARY

On November 11, 2017, Rep. Ted Budd introduced the ‘‘Restoring 

Financial Market Freedom Act of 2017’’, which repeals Title VIII 

of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act (‘‘Dodd-Frank’’)(P.L. 111–203), which provides the Financial 

Stability Oversight Council (FSOC) the authority to designate certain payments and clearing organizations as systemically important ‘‘financial market utilities’’ (FMUs). The bill also retroactively 

repeals all previous FMU designations. 

BACKGROUND AND NEED FOR LEGISLATION

The goal of H.R. 4247 is to promote financial stability and restore private sector due diligence and accountability on Financial 

Market Utilities (FMUs) so that they are incentivized to engage in 

prudent risk management, clearing and settlement activities. 

Title VII of the Dodd-Frank Act requires that certain standardized over-the-counter derivatives contracts be cleared through central counterparties (CCPs) in order to mitigate any perceived sysVerDate Sep 11 2014 04:54 Jan 05, 2019 Jkt 089006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1119.XXX HR1119

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temic risk of what are known as over-the-counter derivatives. Although the proponents of this requirement believed that central 

clearing would promote financial stability by netting trades and 

centralizing the monitoring of risk, critics pointed out that CCPs 

instead concentrated systemic risk. 

This troublesome concentration of risk is compounded by the decision of the Dodd-Frank Act’s drafters to anoint CCPs as the next 

generation of ‘‘too big to fail’’ firms. Title VIII of the Dodd-Frank 

Act authorizes the FSOC to designate CCPs and payment systems 

as ‘‘systemically important financial market utilities,’’ or SIFMUs, 

which the Dodd-Frank Act defines as ‘‘any person that manages or 

operates a multilateral system for the purpose of transferring, 

clearing, or settling payments, securities, or other financial transactions among financial institutions or between financial institutions and the person.’’ A clearinghouse or a payment system designated by the FSOC as a SIFMU faces ‘‘heightened prudential supervision’’ by the Federal Reserve, which may prescribe risk-management standards for such entities and participate in examinations conducted by their primary federal regulator, typically the Securities and Exchange Commission (SEC) and/or the Commodity 

Futures Trading Commission (CFTC). Further, a designated FMU 

gains immediate access to the Federal Reserve’s discount window. 

While experts disagree on whether increased reliance upon CCPs 

amplifies rather than mitigates systemic risk, there is broad agreement that designating these organizations as ‘‘systemically important’’ and granting them immediate access to the Federal Reserve’s 

discount window increases financial instability by creating the perception that they are ‘‘too big to fail.’’ As New York Times columnist Gretchen Morgenson put it, ‘‘these large and systemically 

important financial utilities that together trade and clear trillions 

of dollars in transactions appear to have won the daily double—access to federal money, without the accountability.’’ 

In 2013 testimony before the Financial Services Committee, 

former FDIC Chairman Sheila Bair warned that granting FMUs 

access to the discount window ‘‘not only gives these firms a real advantage over other ‘non’ systemic competitors, it opens up taxpayers to potential losses and creates moral hazard.’’ According to 

former Chairman Bair, rather than making the financial system 

safer, Title VIII in fact makes it less stable because it ‘‘increases 

the likelihood of clearinghouses engaging in risky activity, adding 

an element of potential instability to an area where it had not previously existed.’’ Based upon her view that ‘‘FMUs will very likely 

become the new [Government Sponsored Enterprises],’’ former 

Chairman Bair has recommended the repeal of this ‘‘unwarranted 

expansion of the government safety net’’. 

The legislative history of the Dodd-Frank Act shows that at least 

some of its proponents recognized the danger of expanding the federal safety net to include FMUs. Even former Chairman Barney 

Frank saw the hazards of creating a new category of ‘‘too big to 

fail’’ institutions. During the Financial Services Committee’s markup of financial reform legislation in 2009, Republicans offered an 

amendment to strike the FMU provision from the bill. Rather than 

defend the provision, Chairman Frank supported the Republican 

amendment to strike it, describing the attempt to expand the Fed’s 

regulatory fiefdom as ‘‘an example of overreach on the part of some 


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for the Federal Reserve.’’ But the FMU provision reemerged in the 

Senate’s version of the financial reform bill, ultimately making it 

into the Dodd-Frank conference report that was signed into law by 

President Obama. 

To address the misguided effort codified in the Dodd-Frank Act, 

H.R. 4247 is premised upon a belief that firms that operate without 

the benefit of a federal safety net and reap the profits and suffer 

the losses from the risks they undertake should not be subject to 

the same form of intrusive prudential regulation as federally insured depository institutions whose risks are ultimately backstopped by the taxpayer; no such justification exists for firms that 

are not covered by that safety net. 

As an initial matter, proponents of imposing a bank-centric prudential regulatory model on U.S. capital markets should be required to explain how such a regime would make the financial system any safer, given the manifest failures of U.S. regulators in the 

run-up to the financial crisis. The regulators—in many cases embedded in the banks that got into the most severe trouble—were 

unable to see the crisis coming. This included the Federal Reserve, 

with its stable of 300 PhD economists and vast army of bank examiners. 

As noted by former SEC Commissioner Gallagher, the policymakers that pushed to regulate the capital markets like they are 

banks ‘‘adhere to a false narrative of the financial crisis that says 

capital markets regulators like the SEC failed, and the markets 

and market participants overseen by capital markets regulators 

were a major cause of the financial crisis. Forgotten, of course, are 

the myriad failed banks, the taxpayer dollar.’’ 

The Dodd-Frank Act’s solution to the regulatory failures exposed 

by the crisis was to double down by, among other measures, giving 

the FSOC broad license to centralize more power in the government’s hands through SIFI designations. Subjecting non-bank financial companies to supervision by the Federal Reserve imposes 

a duplicative, costly, and ultimately ineffective layer of regulation 

on these institutions, given that the Federal Reserve does not have 

the expertise necessary to supervise non-banks. In fact, in light of 

the Federal Reserve’s track record in the run-up to the financial 

crisis, it is not clear that the Federal Reserve has the expertise to 

supervise banks properly. 

Title VIII of Dodd-Frank reflects the strict view of that legislation’s proponents that any financial firm engaged in any semblance 

of ‘‘risky activity’’ must be subject to stringent regulatory oversight 

if the preservation of financial stability is the only goal. By doing 

so, Title VIII further codified the ‘‘too big to fail’’ doctrine and must 

be repealed to actually protect taxpayers. Fortunately, H.R. 4247 

does just that. 

Finally, repealing Title VIII would not leave clearing agencies 

unregulated. The SEC oversees clearing agencies primarily through 

its Division of Trading and Markets, the Office of Compliance, Inspections & Examinations (OCIE), and the Division of Enforcement. Trading and Markets administers and executes the agency’s 

programs relating to the structure and operations of the securities 

markets, which include regulation of clearing agencies and review 

of their proposed rule changes. OCIE examines clearing agencies to 

assess the overall safety, reliability, and efficiency of the clearing 


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agency and its operations. It also examines clearing agencies for 

compliance with their own rules and applicable federal laws and 

regulations. The Enforcement Division investigates and prosecutes 

violations of securities laws. The SEC may institute civil actions 

seeking injunctive and other equitable remedies and/or administrative proceedings to, among other things, suspend or revoke registration, impose limitations upon a clearing agency’s activities, 

functions, or operations, or impose other sanctions. Additionally, a 

derivatives clearing organization (DCO) is a clearinghouse, clearing 

association, clearing corporation, or similar entity that enables 

each party to an agreement, contract, or transaction to substitute, 

through novation or otherwise, the credit of the DCO for the credit 

of the parties; arranges or provides, on a multilateral basis, for the 

settlement or netting of obligations; or otherwise provides clearing 

services or arrangements that mutualize or transfer credit risk 

among participants. Any clearinghouse that seeks to provide clearing services with respect to futures contracts, options on futures 

contracts, or swaps must register with the CFTC as a DCO before 

it can begin to provide such services and is subject to CFTC oversight. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 4247 on April 26, 2017 and April 28, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on November 15th 2017 and ordered H.R. 4247 to be reported favorably 

to the House without amendment by a recorded vote of 33 yeas to 

25 nays (Record vote no. FC–117), a quorum being present. 

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. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 33 yeas to 25 nays (Record vote no. FC– 

117), a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

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

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of 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 states that H.R. 4247 will eliminate duplicative, costly and ineffective regulations and eliminate 

any implied government backstop for certain non-bank financial institutions by repealing Title VIII of the Dodd-Frank Act, which 

gives the FSOC the authority to designate FMUs as systemically 

important financial institutions. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

The Committee has not received an estimate of new budget authority contained in the cost estimate prepared by the Director of 

the Congressional Budget Office pursuant to Sec. 402 of the Congressional Budget Act of 1974. In compliance with clause 3(c)(2) of 

rule XIII of the Rules of the House, the Committee opines that 

H.R. 4247 will not establish any new budget or entitlement authority or create any tax expenditures. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to Sec. 402 of the Congressional Budget Act 

of 1974 was not submitted timely to the Committee. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

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 the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the proVerDate Sep 11 2014 02:45 Jan 05, 2019 Jkt 089006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1119.XXX HR1119

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visions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 4247 as the ‘‘Restoring Financial Market 

Freedom Act of 2017.’’ 

Section 2. Repeal of Title VIII 

This Section repeals Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to eliminate the FSOC’s authority to designate FMUs as systemically important and to retroactively repeal all previous FMU designations. 

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 omitted is enclosed in black brackets, new matter is printed in italic, 

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

roman): 

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 omitted is enclosed in black brackets and existing law in which no 

change is proposed is shown in roman): 


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DODD-FRANK WALL STREET REFORM AND CONSUMER 

PROTECTION ACT 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Dodd-Frank 

Wall Street Reform and Consumer Protection Act’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as 

follows: 

Sec. 1. Short title; table of contents. 

* * * * * * * 

øTITLE VIII—PAYMENT, CLEARING, AND SETTLEMENT SUPERVISION 

øSec. 801. Short title. 

øSec. 802. Findings and purposes. 

øSec. 803. Definitions. 

øSec. 804. Designation of systemic importance. 

øSec. 805. Standards for systemically important financial market utilities and payment, clearing, or settlement activities. 

øSec. 806. Operations of designated financial market utilities. 

øSec. 807. Examination of and enforcement actions against designated financial 

market utilities. 

øSec. 808. Examination of and enforcement actions against financial institutions 

subject to standards for designated activities. 

øSec. 809. Requests for information, reports, or records. 

øSec. 810. Rulemaking. 

øSec. 811. Other authority. 

øSec. 812. Consultation. 

øSec. 813. Common framework for designated clearing entity risk management. 

øSec. 814. Effective date.¿ 

* * * * * * * 

øTITLE VIII—PAYMENT, CLEARING, AND 

SETTLEMENT SUPERVISION 

øSEC. 801. SHORT TITLE. 

øThis title may be cited as the ‘‘Payment, Clearing, and Settlement Supervision Act of 2010’’. 

øSEC. 802. FINDINGS AND PURPOSES. 

ø(a) FINDINGS.—Congress finds the following: 

ø(1) The proper functioning of the financial markets is dependent upon safe and efficient arrangements for the clearing 

and settlement of payment, securities, and other financial 

transactions. 

ø(2) Financial market utilities that conduct or support multilateral payment, clearing, or settlement activities may reduce 

risks for their participants and the broader financial system, 

but such utilities may also concentrate and create new risks 

and thus must be well designed and operated in a safe and 

sound manner. 

ø(3) Payment, clearing, and settlement activities conducted 

by financial institutions also present important risks to the 

participating financial institutions and to the financial system. 

ø(4) Enhancements to the regulation and supervision of systemically important financial market utilities and the conduct 

of systemically important payment, clearing, and settlement 

activities by financial institutions are necessary— 


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ø(A) to provide consistency; 

ø(B) to promote robust risk management and safety and 

soundness; 

ø(C) to reduce systemic risks; and 

ø(D) to support the stability of the broader financial system. 

ø(b) PURPOSE.—The purpose of this title is to mitigate systemic 

risk in the financial system and promote financial stability by— 

ø(1) authorizing the Board of Governors to promote uniform 

standards for the— 

ø(A) management of risks by systemically important financial market utilities; and 

ø(B) conduct of systemically important payment, clearing, and settlement activities by financial institutions; 

ø(2) providing the Board of Governors an enhanced role in 

the supervision of risk management standards for systemically 

important financial market utilities; 

ø(3) strengthening the liquidity of systemically important financial market utilities; and 

ø(4) providing the Board of Governors an enhanced role in 

the supervision of risk management standards for systemically 

important payment, clearing, and settlement activities by financial institutions. 

øSEC. 803. DEFINITIONS. 

øIn this title, the following definitions shall apply: 

ø(1) APPROPRIATE FINANCIAL REGULATOR.—The term ‘‘appropriate financial regulator’’ means— 

ø(A) the primary financial regulatory agency, as defined 

in section 2 of this Act; 

ø(B) the National Credit Union Administration, with respect to any insured credit union under the Federal Credit 

Union Act (12 U.S.C. 1751 et seq.); and 

ø(C) the Board of Governors, with respect to organizations operating under section 25A of the Federal Reserve 

Act (12 U.S.C. 611), and any other financial institution engaged in a designated activity. 

ø(2) DESIGNATED ACTIVITY.—The term ‘‘designated activity’’ 

means a payment, clearing, or settlement activity that the 

Council has designated as systemically important under section 804. 

ø(3) DESIGNATED CLEARING ENTITY.—The term ‘‘designated 

clearing entity’’ means a designated financial market utility 

that is a derivatives clearing organization registered under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) or a 

clearing agency registered with the Securities and Exchange 

Commission under section 17A of the Securities Exchange Act 

of 1934 (15 U.S.C. 78q-1). 

ø(4) DESIGNATED FINANCIAL MARKET UTILITY.—The term 

‘‘designated financial market utility’’ means a financial market 

utility that the Council has designated as systemically important under section 804. 

ø(5) FINANCIAL INSTITUTION.— 

ø(A) IN GENERAL.—The term ‘‘financial institution’’ 

means— 


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ø(i) a depository institution, as defined in section 3 

of the Federal Deposit Insurance Act (12 U.S.C. 1813); 

ø(ii) a branch or agency of a foreign bank, as defined 

in section 1(b) of the International Banking Act of 

1978 (12 U.S.C. 3101); 

ø(iii) an organization operating under section 25 or 

25A of the Federal Reserve Act (12 U.S.C. 601-604a 

and 611 through 631); 

ø(iv) a credit union, as defined in section 101 of the 

Federal Credit Union Act (12 U.S.C. 1752); 

ø(v) a broker or dealer, as defined in section 3 of the 

Securities Exchange Act of 1934 (15 U.S.C. 78c); 

ø(vi) an investment company, as defined in section 

3 of the Investment Company Act of 1940 (15 U.S.C. 

80a-3); 

ø(vii) an insurance company, as defined in section 2 

of the Investment Company Act of 1940 (15 U.S.C. 

80a-2); 

ø(viii) an investment adviser, as defined in section 

202 of the Investment Advisers Act of 1940 (15 U.S.C. 

80b-2); 

ø(ix) a futures commission merchant, commodity 

trading advisor, or commodity pool operator, as defined in section 1a of the Commodity Exchange Act (7 

U.S.C. 1a); and 

ø(x) any company engaged in activities that are financial in nature or incidental to a financial activity, 

as described in section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)). 

ø(B) EXCLUSIONS.—The term ‘‘financial institution’’ does 

not include designated contract markets, registered futures 

associations, swap data repositories, and swap execution 

facilities registered under the Commodity Exchange Act (7 

U.S.C. 1 et seq.), or national securities exchanges, national 

securities associations, alternative trading systems, securities information processors solely with respect to the activities of the entity as a securities information processor, 

security-based swap data repositories, and swap execution 

facilities registered under the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.), or designated clearing entities, provided that the exclusions in this subparagraph 

apply only with respect to the activities that require the 

entity to be so registered. 

ø(6) FINANCIAL MARKET UTILITY.— 

ø(A) INCLUSION.—The term ‘‘financial market utility’’ 

means any person that manages or operates a multilateral 

system for the purpose of transferring, clearing, or settling 

payments, securities, or other financial transactions among 

financial institutions or between financial institutions and 

the person. 

ø(B) EXCLUSIONS.—The term ‘‘financial market utility’’ 

does not include— 

ø(i) designated contract markets, registered futures 

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change Act (7 U.S.C. 1 et seq.), or national securities 

exchanges, national securities associations, alternative 

trading systems, security-based swap data repositories, and swap execution facilities registered under 

the Securities Exchange Act of 1934 (15 U.S.C. 78a et 

seq.), solely by reason of their providing facilities for 

comparison of data respecting the terms of settlement 

of securities or futures transactions effected on such 

exchange or by means of any electronic system operated or controlled by such entities, provided that the 

exclusions in this clause apply only with respect to the 

activities that require the entity to be so registered; 

and 

ø(ii) any broker, dealer, transfer agent, or investment company, or any futures commission merchant, 

introducing broker, commodity trading advisor, or 

commodity pool operator, solely by reason of functions 

performed by such institution as part of brokerage, 

dealing, transfer agency, or investment company activities, or solely by reason of acting on behalf of a financial market utility or a participant therein in connection with the furnishing by the financial market 

utility of services to its participants or the use of services of the financial market utility by its participants, 

provided that services performed by such institution 

do not constitute critical risk management or processing functions of the financial market utility. 

ø(7) PAYMENT, CLEARING, OR SETTLEMENT ACTIVITY.— ø(A) IN GENERAL.—The term ‘‘payment, clearing, or settlement activity’’ means an activity carried out by 1 or 

more financial institutions to facilitate the completion of financial transactions, but shall not include any offer or sale 

of a security under the Securities Act of 1933 (15 U.S.C. 

77a et seq.), or any quotation, order entry, negotiation, or 

other pre-trade activity or execution activity. 

ø(B) FINANCIAL TRANSACTION.—For the purposes of subparagraph (A), the term ‘‘financial transaction’’ includes— 

ø(i) funds transfers; 

ø(ii) securities contracts; 

ø(iii) contracts of sale of a commodity for future delivery; 

ø(iv) forward contracts; 

ø(v) repurchase agreements; 

ø(vi) swaps; 

ø(vii) security-based swaps; 

ø(viii) swap agreements; 

ø(ix) security-based swap agreements; 

ø(x) foreign exchange contracts; 

ø(xi) financial derivatives contracts; and 

ø(xii) any similar transaction that the Council determines to be a financial transaction for purposes of this 

title. 

ø(C) INCLUDED ACTIVITIES.—When conducted with respect to a financial transaction, payment, clearing, and 

settlement activities may include— 


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ø(i) the calculation and communication of unsettled 

financial transactions between counterparties; 

ø(ii) the netting of transactions; 

ø(iii) provision and maintenance of trade, contract, 

or instrument information; 

ø(iv) the management of risks and activities associated with continuing financial transactions; 

ø(v) transmittal and storage of payment instructions; 

ø(vi) the movement of funds; 

ø(vii) the final settlement of financial transactions; 

and 

ø(viii) other similar functions that the Council may 

determine. 

ø(D) EXCLUSION.—Payment, clearing, and settlement activities shall not include public reporting of swap transaction data under section 727 or 763(i) of the Wall Street 

Transparency and Accountability Act of 2010. 

ø(8) SUPERVISORY AGENCY.— 

ø(A) IN GENERAL.—The term ‘‘Supervisory Agency’’ 

means the Federal agency that has primary jurisdiction 

over a designated financial market utility under Federal 

banking, securities, or commodity futures laws, as follows: 

ø(i) The Securities and Exchange Commission, with 

respect to a designated financial market utility that is 

a clearing agency registered with the Securities and 

Exchange Commission. 

ø(ii) The Commodity Futures Trading Commission, 

with respect to a designated financial market utility 

that is a derivatives clearing organization registered 

with the Commodity Futures Trading Commission. 

ø(iii) The appropriate Federal banking agency, with 

respect to a designated financial market utility that is 

an institution described in section 3(q) of the Federal 

Deposit Insurance Act. 

ø(iv) The Board of Governors, with respect to a designated financial market utility that is otherwise not 

subject to the jurisdiction of any agency listed in 

clauses (i), (ii), and (iii). 

ø(B) MULTIPLE AGENCY JURISDICTION.—If a designated 

financial market utility is subject to the jurisdictional supervision of more than 1 agency listed in subparagraph 

(A), then such agencies should agree on 1 agency to act as 

the Supervisory Agency, and if such agencies cannot agree 

on which agency has primary jurisdiction, the Council 

shall decide which agency is the Supervisory Agency for 

purposes of this title. 

ø(9) SYSTEMICALLY IMPORTANT AND SYSTEMIC IMPORTANCE.— 

The terms ‘‘systemically important’’ and ‘‘systemic importance’’ 

mean a situation where the failure of or a disruption to the 

functioning of a financial market utility or the conduct of a 

payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems 

spreading among financial institutions or markets and thereby 


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threaten the stability of the financial system of the United 

States. 

øSEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE. 

ø(a) DESIGNATION.— 

ø(1) FINANCIAL STABILITY OVERSIGHT COUNCIL.—The Council, 

on a nondelegable basis and by a vote of not fewer than 2⁄3 of 

members then serving, including an affirmative vote by the 

Chairperson of the Council, shall designate those financial 

market utilities or payment, clearing, or settlement activities 

that the Council determines are, or are likely to become, systemically important. 

ø(2) CONSIDERATIONS.—In determining whether a financial 

market utility or payment, clearing, or settlement activity is, 

or is likely to become, systemically important, the Council shall 

take into consideration the following: 

ø(A) The aggregate monetary value of transactions processed by the financial market utility or carried out through 

the payment, clearing, or settlement activity. 

ø(B) The aggregate exposure of the financial market utility or a financial institution engaged in payment, clearing, 

or settlement activities to its counterparties. 

ø(C) The relationship, interdependencies, or other interactions of the financial market utility or payment, clearing, or settlement activity with other financial market utilities or payment, clearing, or settlement activities. 

ø(D) The effect that the failure of or a disruption to the 

financial market utility or payment, clearing, or settlement 

activity would have on critical markets, financial institutions, or the broader financial system. 

ø(E) Any other factors that the Council deems appropriate. 

ø(b) RESCISSION OF DESIGNATION.— 

ø(1) IN GENERAL.—The Council, on a nondelegable basis and 

by a vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the Council, shall 

rescind a designation of systemic importance for a designated 

financial market utility or designated activity if the Council determines that the utility or activity no longer meets the standards for systemic importance. 

ø(2) EFFECT OF RESCISSION.—Upon rescission, the financial 

market utility or financial institutions conducting the activity 

will no longer be subject to the provisions of this title or any 

rules or orders prescribed under this title. 

ø(c) CONSULTATION AND NOTICE AND OPPORTUNITY FOR HEARING.— 

ø(1) CONSULTATION.—Before making any determination 

under subsection (a) or (b), the Council shall consult with the 

relevant Supervisory Agency and the Board of Governors. 

ø(2) ADVANCE NOTICE AND OPPORTUNITY FOR HEARING.— 

ø(A) IN GENERAL.—Before making any determination 

under subsection (a) or (b), the Council shall provide the 

financial market utility or, in the case of a payment, clearing, or settlement activity, financial institutions with advance notice of the proposed determination of the Council. 


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ø(B) NOTICE IN FEDERAL REGISTER.—The Council shall 

provide such advance notice to financial institutions by 

publishing a notice in the Federal Register. 

ø(C) REQUESTS FOR HEARING.—Within 30 days from the 

date of any notice of the proposed determination of the 

Council, the financial market utility or, in the case of a 

payment, clearing, or settlement activity, a financial institution engaged in the designated activity may request, in 

writing, an opportunity for a written or oral hearing before 

the Council to demonstrate that the proposed designation 

or rescission of designation is not supported by substantial 

evidence. 

ø(D) WRITTEN SUBMISSIONS.—Upon receipt of a timely 

request, the Council shall fix a time, not more than 30 

days after receipt of the request, unless extended at the request of the financial market utility or financial institution, and place at which the financial market utility or financial institution may appear, personally or through 

counsel, to submit written materials, or, at the sole discretion of the Council, oral testimony or oral argument. 

ø(3) EMERGENCY EXCEPTION.— ø(A) WAIVER OR MODIFICATION BY VOTE OF THE COUN- CIL.—The Council may waive or modify the requirements 

of paragraph (2) if the Council determines, by an affirmative vote of not fewer than 2⁄3 of members then serving, including an affirmative vote by the Chairperson of the 

Council, that the waiver or modification is necessary to 

prevent or mitigate an immediate threat to the financial 

system posed by the financial market utility or the payment, clearing, or settlement activity. 

ø(B) NOTICE OF WAIVER OR MODIFICATION.—The Council 

shall provide notice of the waiver or modification to the financial market utility concerned or, in the case of a payment, clearing, or settlement activity, to financial institutions, as soon as practicable, which shall be no later than 

24 hours after the waiver or modification in the case of a 

financial market utility and 3 business days in the case of 

financial institutions. The Council shall provide the notice 

to financial institutions by posting a notice on the website 

of the Council and by publishing a notice in the Federal 

Register. 

ø(d) NOTIFICATION OF FINAL DETERMINATION.— 

ø(1) AFTER HEARING.—Within 60 days of any hearing under 

subsection (c)(2), the Council shall notify the financial market 

utility or financial institutions of the final determination of the 

Council in writing, which shall include findings of fact upon 

which the determination of the Council is based. 

ø(2) WHEN NO HEARING REQUESTED.—If the Council does not 

receive a timely request for a hearing under subsection (c)(2), 

the Council shall notify the financial market utility or financial 

institutions of the final determination of the Council in writing 

not later than 30 days after the expiration of the date by which 

a financial market utility or a financial institution could have 

requested a hearing. All notices to financial institutions under 

this subsection shall be published in the Federal Register. 


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ø(e) EXTENSION OF TIME PERIODS.—The Council may extend the 

time periods established in subsections (c) and (d) as the Council 

determines to be necessary or appropriate. 

øSEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FINANCIAL 

MARKET UTILITIES AND PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES. 

ø(a) AUTHORITY TO PRESCRIBE STANDARDS.— ø(1) BOARD OF GOVERNORS.—Except as provided in paragraph (2), the Board of Governors, by rule or order, and in consultation with the Council and the Supervisory Agencies, shall 

prescribe risk management standards, taking into consideration relevant international standards and existing prudential 

requirements, governing— 

ø(A) the operations related to the payment, clearing, and 

settlement activities of designated financial market utilities; and 

ø(B) the conduct of designated activities by financial institutions. 

ø(2) SPECIAL PROCEDURES FOR DESIGNATED CLEARING ENTI- TIES AND DESIGNATED ACTIVITIES OF CERTAIN FINANCIAL INSTITUTIONS.— 

ø(A) CFTC AND COMMISSION.—The Commodity Futures 

Trading Commission and the Commission may each prescribe regulations, in consultation with the Council and 

the Board of Governors, containing risk management 

standards, taking into consideration relevant international 

standards and existing prudential requirements, for those 

designated clearing entities and financial institutions engaged in designated activities for which each is the Supervisory Agency or the appropriate financial regulator, governing— 

ø(i) the operations related to payment, clearing, and 

settlement activities of such designated clearing entities; and 

ø(ii) the conduct of designated activities by such financial institutions. 

ø(B) REVIEW AND DETERMINATION.—The Board of Governors may determine that existing prudential requirements of the Commodity Futures Trading Commission, the 

Commission, or both (including requirements prescribed 

pursuant to subparagraph (A)) with respect to designated 

clearing entities and financial institutions engaged in designated activities for which the Commission or the Commodity Futures Trading Commission is the Supervisory 

Agency or the appropriate financial regulator are insufficient to prevent or mitigate significant liquidity, credit, 

operational, or other risks to the financial markets or to 

the financial stability of the United States. 

ø(C) WRITTEN DETERMINATION.—Any determination by 

the Board of Governors under subparagraph (B) shall be 

provided in writing to the Commodity Futures Trading 

Commission or the Commission, as applicable, and the 

Council, and shall explain why existing prudential requirements, considered as a whole, are insufficient to ensure 

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ing entities or the activities of financial institutions described in subparagraph (B) will not pose significant liquidity, credit, operational, or other risks to the financial 

markets or to the financial stability of the United States. 

The Board of Governors’ determination shall contain a detailed analysis supporting its findings and identify the specific prudential requirements that are insufficient. 

ø(D) CFTC AND COMMISSION RESPONSE.—The Commodity Futures Trading Commission or the Commission, 

as applicable, shall within 60 days either object to the 

Board of Governors’ determination with a detailed analysis 

as to why existing prudential requirements are sufficient, 

or submit an explanation to the Council and the Board of 

Governors describing the actions to be taken in response 

to the Board of Governors’ determination. 

ø(E) AUTHORIZATION.—Upon an affirmative vote by not 

fewer than 2/3 of members then serving on the Council, 

the Council shall either find that the response submitted 

under subparagraph (D) is sufficient, or require the Commodity Futures Trading Commission, or the Commission, 

as applicable, to prescribe such risk management standards as the Council determines is necessary to address the 

specific prudential requirements that are determined to be 

insufficient.’’ 

ø(b) OBJECTIVES AND PRINCIPLES.—The objectives and principles 

for the risk management standards prescribed under subsection (a) 

shall be to— 

ø(1) promote robust risk management; 

ø(2) promote safety and soundness; 

ø(3) reduce systemic risks; and 

ø(4) support the stability of the broader financial system. 

ø(c) SCOPE.—The standards prescribed under subsection (a) may 

address areas such as— 

ø(1) risk management policies and procedures; 

ø(2) margin and collateral requirements; 

ø(3) participant or counterparty default policies and procedures; 

ø(4) the ability to complete timely clearing and settlement of 

financial transactions; 

ø(5) capital and financial resource requirements for designated financial market utilities; and 

ø(6) other areas that are necessary to achieve the objectives 

and principles in subsection (b). 

ø(d) LIMITATION ON SCOPE.—Except as provided in subsections 

(e) and (f) of section 807, nothing in this title shall be construed 

to permit the Council or the Board of Governors to take any action 

or exercise any authority granted to the Commodity Futures Trading Commission under section 2(h) of the Commodity Exchange Act 

or the Securities and Exchange Commission under section 3C(a) of 

the Securities Exchange Act of 1934, including— 

ø(1) the approval of, disapproval of, or stay of the clearing 

requirement for any group, category, type, or class of swaps 

that a designated clearing entity may accept for clearing; 

ø(2) the determination that any group, category, type, or 

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quirement of section 2(h)(1) of the Commodity Exchange Act or 

section 3C(a)(1) of the Securities Exchange Act of 1934; 

ø(3) the determination that any person is exempt from the 

mandatory clearing requirement of section 2(h)(1) of the Commodity Exchange Act or section 3C(a)(1) of the Securities Exchange Act of 1934; or 

ø(4) any authority granted to the Commodity Futures Trading Commission or the Securities and Exchange Commission 

with respect to transaction reporting or trade execution. 

ø(e) THRESHOLD LEVEL.—The standards prescribed under subsection (a) governing the conduct of designated activities by financial institutions shall, where appropriate, establish a threshold as 

to the level or significance of engagement in the activity at which 

a financial institution will become subject to the standards with respect to that activity. 

ø(f) COMPLIANCE REQUIRED.—Designated financial market utilities and financial institutions subject to the standards prescribed 

under subsection (a) for a designated activity shall conduct their 

operations in compliance with the applicable risk management 

standards. 

øSEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MARKET UTILITIES. 

ø(a) FEDERAL RESERVE ACCOUNT AND SERVICES.—The Board of 

Governors may authorize a Federal Reserve Bank to establish and 

maintain an account for a designated financial market utility and 

provide the services listed in section 11A(b) of the Federal Reserve 

Act (12 U.S.C. 248a(b)) and deposit accounts under the first undesignated paragraph of section 13 of the Federal Reserve Act (12 

U.S.C. 342) to the designated financial market utility that the Federal Reserve Bank is authorized under the Federal Reserve Act to 

provide to a depository institution, subject to any applicable rules, 

orders, standards, or guidelines prescribed by the Board of Governors. 

ø(b) ADVANCES.—The Board of Governors may authorize a Federal Reserve bank under section 10B of the Federal Reserve Act (12 

U.S.C. 347b) to provide to a designated financial market utility discount and borrowing privileges only in unusual or exigent circumstances, upon the affirmative vote of a majority of the Board 

of Governors then serving (or such other number in accordance 

with the provisions of section 11(r)(2) of the Federal Reserve Act 

(12 U.S.C. 248(r)(2)) after consultation with the Secretary, and 

upon a showing by the designated financial market utility that it 

is unable to secure adequate credit accommodations from other 

banking institutions. All such discounts and borrowing privileges 

shall be subject to such other limitations, restrictions, and regulations as the Board of Governors may prescribe. Access to discount 

and borrowing privileges under section 10B of the Federal Reserve 

Act as authorized in this section does not require a designated financial market utility to be or become a bank or bank holding company. 

ø(c) EARNINGS ON FEDERAL RESERVE BALANCES.—A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a designated financial market utility in the same manner 

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ject to any applicable rules, orders, standards, or guidelines prescribed by the Board of Governors. 

ø(d) RESERVE REQUIREMENTS.—The Board of Governors may exempt a designated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 

U.S.C. 461) applicable to a designated financial market utility. 

ø(e) CHANGES TO RULES, PROCEDURES, OR OPERATIONS.— ø(1) ADVANCE NOTICE.— ø(A) ADVANCE NOTICE OF PROPOSED CHANGES RE- QUIRED.—A designated financial market utility shall provide notice 60 days in advance notice to its Supervisory 

Agency of any proposed change to its rules, procedures, or 

operations that could, as defined in rules of each Supervisory Agency, materially affect, the nature or level of 

risks presented by the designated financial market utility. 

ø(B) TERMS AND STANDARDS PRESCRIBED BY THE SUPER- VISORY AGENCIES.—Each Supervisory Agency, in consultation with the Board of Governors, shall prescribe regulations that define and describe the standards for determining when notice is required to be provided under subparagraph (A). 

ø(C) CONTENTS OF NOTICE.—The notice of a proposed 

change shall describe— 

ø(i) the nature of the change and expected effects on 

risks to the designated financial market utility, its 

participants, or the market; and 

ø(ii) how the designated financial market utility 

plans to manage any identified risks. 

ø(D) ADDITIONAL INFORMATION.—The Supervisory Agency may require a designated financial market utility to 

provide any information necessary to assess the effect the 

proposed change would have on the nature or level of risks 

associated with the designated financial market utility’s 

payment, clearing, or settlement activities and the sufficiency of any proposed risk management techniques. 

ø(E) NOTICE OF OBJECTION.—The Supervisory Agency 

shall notify the designated financial market utility of any 

objection regarding the proposed change within 60 days 

from the later of— 

ø(i) the date that the notice of the proposed change 

is received; or 

ø(ii) the date any further information requested for 

consideration of the notice is received. 

ø(F) CHANGE NOT ALLOWED IF OBJECTION.—A designated 

financial market utility shall not implement a change to 

which the Supervisory Agency has an objection. 

ø(G) CHANGE ALLOWED IF NO OBJECTION WITHIN 60

DAYS.—A designated financial market utility may implement a change if it has not received an objection to the 

proposed change within 60 days of the later of— 

ø(i) the date that the Supervisory Agency receives 

the notice of proposed change; or 

ø(ii) the date the Supervisory Agency receives any 

further information it requests for consideration of the 

notice. 


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ø(H) REVIEW EXTENSION FOR NOVEL OR COMPLEX

ISSUES.—The Supervisory Agency may, during the 60-day 

review period, extend the review period for an additional 

60 days for proposed changes that raise novel or complex 

issues, subject to the Supervisory Agency providing the 

designated financial market utility with prompt written 

notice of the extension. Any extension under this subparagraph will extend the time periods under subparagraphs 

(E) and (G). 

ø(I) CHANGE ALLOWED EARLIER IF NOTIFIED OF NO OBJEC- TION.—A designated financial market utility may implement a change in less than 60 days from the date of receipt of the notice of proposed change by the Supervisory 

Agency, or the date the Supervisory Agency receives any 

further information it requested, if the Supervisory Agency 

notifies the designated financial market utility in writing 

that it does not object to the proposed change and authorizes the designated financial market utility to implement 

the change on an earlier date, subject to any conditions 

imposed by the Supervisory Agency. 

ø(2) EMERGENCY CHANGES.— ø(A) IN GENERAL.—A designated financial market utility 

may implement a change that would otherwise require advance notice under this subsection if it determines that— 

ø(i) an emergency exists; and 

ø(ii) immediate implementation of the change is necessary for the designated financial market utility to 

continue to provide its services in a safe and sound 

manner. 

ø(B) NOTICE REQUIRED WITHIN 24 HOURS.—The designated financial market utility shall provide notice of any 

such emergency change to its Supervisory Agency, as soon 

as practicable, which shall be no later than 24 hours after 

implementation of the change. 

ø(C) CONTENTS OF EMERGENCY NOTICE.—In addition to 

the information required for changes requiring advance notice, the notice of an emergency change shall describe— 

ø(i) the nature of the emergency; and 

ø(ii) the reason the change was necessary for the 

designated financial market utility to continue to provide its services in a safe and sound manner. 

ø(D) MODIFICATION OR RESCISSION OF CHANGE MAY BE

REQUIRED.—The Supervisory Agency may require modification or rescission of the change if it finds that the change 

is not consistent with the purposes of this Act or any applicable rules, orders, or standards prescribed under section 

805(a). 

ø(3) COPYING THE BOARD OF GOVERNORS.—The Supervisory 

Agency shall provide the Board of Governors concurrently with 

a complete copy of any notice, request, or other information it 

issues, submits, or receives under this subsection. 

ø(4) CONSULTATION WITH BOARD OF GOVERNORS.—Before taking any action on, or completing its review of, a change proposed by a designated financial market utility, the Supervisory 

Agency shall consult with the Board of Governors. 


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øSEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST 

DESIGNATED FINANCIAL MARKET UTILITIES. 

ø(a) EXAMINATION.—Notwithstanding any other provision of law 

and subject to subsection (d), the Supervisory Agency shall conduct 

examinations of a designated financial market utility at least once 

annually in order to determine the following: 

ø(1) The nature of the operations of, and the risks borne by, 

the designated financial market utility. 

ø(2) The financial and operational risks presented by the 

designated financial market utility to financial institutions, 

critical markets, or the broader financial system. 

ø(3) The resources and capabilities of the designated financial market utility to monitor and control such risks. 

ø(4) The safety and soundness of the designated financial 

market utility. 

ø(5) The designated financial market utility’s compliance 

with— 

ø(A) this title; and 

ø(B) the rules and orders prescribed under this title. 

ø(b) SERVICE PROVIDERS.—Whenever a service integral to the operation of a designated financial market utility is performed for the 

designated financial market utility by another entity, whether an 

affiliate or non-affiliate and whether on or off the premises of the 

designated financial market utility, the Supervisory Agency may 

examine whether the provision of that service is in compliance with 

applicable law, rules, orders, and standards to the same extent as 

if the designated financial market utility were performing the service on its own premises. 

ø(c) ENFORCEMENT.—For purposes of enforcing the provisions of 

this title, a designated financial market utility shall be subject to, 

and the appropriate Supervisory Agency shall have authority under 

the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner 

and to the same extent as if the designated financial market utility 

was an insured depository institution and the Supervisory Agency 

was the appropriate Federal banking agency for such insured depository institution. 

ø(d) BOARD OF GOVERNORS INVOLVEMENT IN EXAMINATIONS.— 

ø(1) BOARD OF GOVERNORS CONSULTATION ON EXAMINATION

PLANNING.—The Supervisory Agency shall consult annually 

with the Board of Governors regarding the scope and methodology of any examination conducted under subsections (a) and 

(b). The Supervisory Agency shall lead all examinations conducted under subsections (a) and (b) 

ø(2) BOARD OF GOVERNORS PARTICIPATION IN EXAMINATION.— 

The Board of Governors may, in its discretion, participate in 

any examination led by a Supervisory Agency and conducted 

under subsections (a) and (b). 

ø(e) BOARD OF GOVERNORS ENFORCEMENT RECOMMENDATIONS.— 

ø(1) RECOMMENDATION.—The Board of Governors may, after 

consulting with the Council and the Supervisory Agency, at 

any time recommend to the Supervisory Agency that such 

agency take enforcement action against a designated financial 

market utility in order to prevent or mitigate significant liquidity, credit, operational, or other risks to the financial markets 


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or to the financial stability of the United States. Any such recommendation for enforcement action shall provide a detailed 

analysis supporting the recommendation of the Board of Governors. 

ø(2) CONSIDERATION.—The Supervisory Agency shall consider the recommendation of the Board of Governors and submit a response to the Board of Governors within 60 days. 

ø(3) BINDING ARBITRATION.—If the Supervisory Agency rejects, in whole or in part, the recommendation of the Board of 

Governors, the Board of Governors may refer the recommendation to the Council for a binding decision on whether an enforcement action is warranted. 

ø(4) ENFORCEMENT ACTION.—Upon an affirmative vote by a 

majority of the Council in favor of the Board of Governors’ recommendation under paragraph (3), the Council may require 

the Supervisory Agency to— 

ø(A) exercise the enforcement authority referenced in 

subsection (c); and 

ø(B) take enforcement action against the designated financial market utility. 

ø(f) EMERGENCY ENFORCEMENT ACTIONS BY THE BOARD OF GOVERNORS.— 

ø(1) IMMINENT RISK OF SUBSTANTIAL HARM.—The Board of 

Governors may, after consulting with the Supervisory Agency 

and upon an affirmative vote by a majority the Council, take 

enforcement action against a designated financial market utility if the Board of Governors has reasonable cause to conclude 

that— 

ø(A) either— 

ø(i) an action engaged in, or contemplated by, a designated financial market utility (including any change 

proposed by the designated financial market utility to 

its rules, procedures, or operations that would otherwise be subject to section 806(e)) poses an imminent 

risk of substantial harm to financial institutions, critical markets, or the broader financial system of the 

United States; or 

ø(ii) the condition of a designated financial market 

utility poses an imminent risk of substantial harm to 

financial institutions, critical markets, or the broader 

financial system; and 

ø(B) the imminent risk of substantial harm precludes 

the Board of Governors’ use of the procedures in subsection (e). 

ø(2) ENFORCEMENT AUTHORITY.—For purposes of taking enforcement action under paragraph (1), a designated financial 

market utility shall be subject to, and the Board of Governors 

shall have authority under the provisions of subsections (b) 

through (n) of section 8 of the Federal Deposit Insurance Act 

(12 U.S.C. 1818) in the same manner and to the same extent 

as if the designated financial market utility was an insured depository institution and the Board of Governors was the appropriate Federal banking agency for such insured depository institution. 


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øSEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST 

FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR 

DESIGNATED ACTIVITIES. 

ø(a) EXAMINATION.—The appropriate financial regulator is authorized to examine a financial institution subject to the standards 

prescribed under section 805(a) for a designated activity in order 

to determine the following: 

ø(1) The nature and scope of the designated activities engaged in by the financial institution. 

ø(2) The financial and operational risks the designated activities engaged in by the financial institution may pose to the 

safety and soundness of the financial institution. 

ø(3) The financial and operational risks the designated activities engaged in by the financial institution may pose to 

other financial institutions, critical markets, or the broader financial system. 

ø(4) The resources available to and the capabilities of the financial institution to monitor and control the risks described 

in paragraphs (2) and (3). 

ø(5) The financial institution’s compliance with this title and 

the rules and orders prescribed under section 805(a). 

ø(b) ENFORCEMENT.—For purposes of enforcing the provisions of 

this title, and the rules and orders prescribed under this section, 

a financial institution subject to the standards prescribed under 

section 805(a) for a designated activity shall be subject to, and the 

appropriate financial regulator shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to 

the same extent as if the financial institution was an insured depository institution and the appropriate financial regulator was the 

appropriate Federal banking agency for such insured depository institution. 

ø(c) TECHNICAL ASSISTANCE.—The Board of Governors shall consult with and provide such technical assistance as may be required 

by the appropriate financial regulators to ensure that the rules and 

orders prescribed under this title are interpreted and applied in as 

consistent and uniform a manner as practicable. 

ø(d) DELEGATION.— ø(1) EXAMINATION.— ø(A) REQUEST TO BOARD OF GOVERNORS.—The appropriate financial regulator may request the Board of Governors to conduct or participate in an examination of a financial institution subject to the standards prescribed 

under section 805(a) for a designated activity in order to 

assess the compliance of such financial institution with— 

ø(i) this title; or 

ø(ii) the rules or orders prescribed under this title. 

ø(B) EXAMINATION BY BOARD OF GOVERNORS.—Upon receipt of an appropriate written request, the Board of Governors will conduct the examination under such terms and 

conditions to which the Board of Governors and the appropriate financial regulator mutually agree. 

ø(2) ENFORCEMENT.— 

ø(A) REQUEST TO BOARD OF GOVERNORS.—The appropriate financial regulator may request the Board of Governors to enforce this title or the rules or orders prescribed 


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under this title against a financial institution that is subject to the standards prescribed under section 805(a) for a 

designated activity. 

ø(B) ENFORCEMENT BY BOARD OF GOVERNORS.—Upon receipt of an appropriate written request, the Board of Governors shall determine whether an enforcement action is 

warranted, and, if so, it shall enforce compliance with this 

title or the rules or orders prescribed under this title and, 

if so, the financial institution shall be subject to, and the 

Board of Governors shall have authority under the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same 

manner and to the same extent as if the financial institution was an insured depository institution and the Board 

of Governors was the appropriate Federal banking agency 

for such insured depository institution. 

ø(e) BACK-UP AUTHORITY OF THE BOARD OF GOVERNORS.— 

ø(1) EXAMINATION AND ENFORCEMENT.—Notwithstanding any 

other provision of law, the Board of Governors may— 

ø(A) conduct an examination of the type described in 

subsection (a) of any financial institution that is subject to 

the standards prescribed under section 805(a) for a designated activity; and 

ø(B) enforce the provisions of this title or any rules or 

orders prescribed under this title against any financial institution that is subject to the standards prescribed under 

section 805(a) for a designated activity. 

ø(2) LIMITATIONS.— 

ø(A) EXAMINATION.—The Board of Governors may exercise the authority described in paragraph (1)(A) only if the 

Board of Governors has— 

ø(i) reasonable cause to believe that a financial institution is not in compliance with this title or the 

rules or orders prescribed under this title with respect 

to a designated activity; 

ø(ii) notified, in writing, the appropriate financial 

regulator and the Council of its belief under clause (i) 

with supporting documentation included; 

ø(iii) requested the appropriate financial regulator 

to conduct a prompt examination of the financial institution; 

ø(iv) either— 

ø(I) not been afforded a reasonable opportunity 

to participate in an examination of the financial 

institution by the appropriate financial regulator 

within 30 days after the date of the Board’s notification under clause (ii); or 

ø(II) reasonable cause to believe that the financial institution’s noncompliance with this title or 

the rules or orders prescribed under this title 

poses a substantial risk to other financial institutions, critical markets, or the broader financial 

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able opportunity to participate in the examination; 

and 

ø(v) obtained the approval of the Council upon an 

affirmative vote by a majority of the Council. 

ø(B) ENFORCEMENT.—The Board of Governors may exercise the authority described in paragraph (1)(B) only if the 

Board of Governors has— 

ø(i) reasonable cause to believe that a financial institution is not in compliance with this title or the 

rules or orders prescribed under this title with respect 

to a designated activity; 

ø(ii) notified, in writing, the appropriate financial 

regulator and the Council of its belief under clause (i) 

with supporting documentation included and with a 

recommendation that the appropriate financial regulator take 1 or more specific enforcement actions 

against the financial institution; 

ø(iii) either— 

ø(I) not been notified, in writing, by the appropriate financial regulator of the commencement of 

an enforcement action recommended by the Board 

of Governors against the financial institution 

within 60 days from the date of the notification 

under clause (ii); or 

ø(II) reasonable cause to believe that the financial institution’s noncompliance with this title or 

the rules or orders prescribed under this title 

poses significant liquidity, credit, operational, or 

other risks to the financial markets or to the financial stability of the United States, subject to 

the Board of Governors notifying the appropriate 

financial regulator of the Board’s enforcement action; and 

ø(iv) obtained the approval of the Council upon an 

affirmative vote by a majority of the Council. 

ø(3) ENFORCEMENT PROVISIONS.—For purposes of taking enforcement action under paragraph (1), the financial institution 

shall be subject to, and the Board of Governors shall have authority under the provisions of subsections (b) through (n) of 

section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) 

in the same manner and to the same extent as if the financial 

institution was an insured depository institution and the Board 

of Governors was the appropriate Federal banking agency for 

such insured depository institution. 

øSEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR RECORDS. 

ø(a) INFORMATION TO ASSESS SYSTEMIC IMPORTANCE.— 

ø(1) FINANCIAL MARKET UTILITIES.—The Council is authorized to require any financial market utility to submit such information as the Council may require for the sole purpose of 

assessing whether that financial market utility is systemically 

important, but only if the Council has reasonable cause to believe that the financial market utility meets the standards for 

systemic importance set forth in section 804. 

ø(2) FINANCIAL INSTITUTIONS ENGAGED IN PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES.—The Council is authorized to 


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require any financial institution to submit such information as 

the Council may require for the sole purpose of assessing 

whether any payment, clearing, or settlement activity engaged 

in or supported by a financial institution is systemically important, but only if the Council has reasonable cause to believe 

that the activity meets the standards for systemic importance 

set forth in section 804. 

ø(b) REPORTING AFTER DESIGNATION.— ø(1) DESIGNATED FINANCIAL MARKET UTILITIES.—The Board 

of Governors and the Council may each require a designated 

financial market utility to submit reports or data to the Board 

of Governors and the Council in such frequency and form as 

deemed necessary by the Board of Governors or the Council in 

order to assess the safety and soundness of the utility and the 

systemic risk that the utility’s operations pose to the financial 

system. 

ø(2) FINANCIAL INSTITUTIONS SUBJECT TO STANDARDS FOR

DESIGNATED ACTIVITIES.—The Board of Governors and the 

Council may each require 1 or more financial institutions subject to the standards prescribed under section 805(a) for a designated activity to submit, in such frequency and form as 

deemed necessary by the Board of Governors or the Council, 

reports and data to the Board of Governors and the Council 

solely with respect to the conduct of the designated activity 

and solely to assess whether— 

ø(A) the rules, orders, or standards prescribed under section 805(a) with respect to the designated activity appropriately address the risks to the financial system presented by such activity; and 

ø(B) the financial institutions are in compliance with 

this title and the rules and orders prescribed under section 

805(a) with respect to the designated activity. 

ø(3) LIMITATION.—The Board of Governors may, upon an affirmative vote by a majority of the Council, prescribe regulations under this section that impose a recordkeeping or reporting requirement on designated clearing entities or financial institutions engaged in designated activities that are subject to 

standards that have been prescribed under section 805(a)(2). 

ø(c) COORDINATION WITH APPROPRIATE FEDERAL SUPERVISORY

AGENCY.— 

ø(1) ADVANCE COORDINATION.—Before requesting any material information from, or imposing reporting or recordkeeping 

requirements on, any financial market utility or any financial 

institution engaged in a payment, clearing, or settlement activity, the Board of Governors or the Council shall coordinate 

with the Supervisory Agency for a financial market utility or 

the appropriate financial regulator for a financial institution to 

determine if the information is available from or may be obtained by the agency in the form, format, or detail required by 

the Board of Governors or the Council. 

ø(2) SUPERVISORY REPORTS.—Notwithstanding any other provision of law, the Supervisory Agency, the appropriate financial regulator, and the Board of Governors are authorized to 

disclose to each other and the Council copies of its examination 

reports or similar reports regarding any financial market utilVerDate Sep 11 2014 02:45 Jan 05, 2019 Jkt 089006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6601 E:\HR\OC\HR1119.XXX HR1119

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ity or any financial institution engaged in payment, clearing, 

or settlement activities. 

ø(d) TIMING OF RESPONSE FROM APPROPRIATE FEDERAL SUPER- VISORY AGENCY.—If the information, report, records, or data requested by the Board of Governors or the Council under subsection 

(c)(1) are not provided in full by the Supervisory Agency or the appropriate financial regulator in less than 15 days after the date on 

which the material is requested, the Board of Governors or the 

Council may request the information or impose recordkeeping or 

reporting requirements directly on such persons as provided in subsections (a) and (b) with notice to the agency. 

ø(e) SHARING OF INFORMATION.— ø(1) MATERIAL CONCERNS.—Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency are authorized to— 

ø(A) promptly notify each other of material concerns 

about a designated financial market utility or any financial institution engaged in designated activities; and 

ø(B) share appropriate reports, information, or data relating to such concerns. 

ø(2) OTHER INFORMATION.—Notwithstanding any other provision of law, the Board of Governors, the Council, the appropriate financial regulator, or any Supervisory Agency may, 

under such terms and conditions as it deems appropriate, provide confidential supervisory information and other information obtained under this title to each other, and to the Secretary, Federal Reserve Banks, State financial institution supervisory agencies, foreign financial supervisors, foreign central banks, and foreign finance ministries, subject to reasonable assurances of confidentiality, provided, however, that no 

person or entity receiving information pursuant to this section 

may disseminate such information to entities or persons other 

than those listed in this paragraph without complying with applicable law, including section 8 of the Commodity Exchange 

Act (7 U.S.C. 12). 

ø(f) PRIVILEGE MAINTAINED.—The Board of Governors, the Council, the appropriate financial regulator, and any Supervisory Agency providing reports or data under this section shall not be deemed 

to have waived any privilege applicable to those reports or data, or 

any portion thereof, by providing the reports or data to the other 

party or by permitting the reports or data, or any copies thereof, 

to be used by the other party. 

ø(g) DISCLOSURE EXEMPTION.—Information obtained by the 

Board of Governors, the Supervisory Agencies, or the Council under 

this section and any materials prepared by the Board of Governors, 

the Supervisory Agencies, or the Council regarding their assessment of the systemic importance of financial market utilities or any 

payment, clearing, or settlement activities engaged in by financial 

institutions, and in connection with their supervision of designated 

financial market utilities and designated activities, shall be confidential supervisory information exempt from disclosure under section 552 of title 5, United States Code. For purposes of such section 

552, this subsection shall be considered a statute described in subsection (b)(3) of such section 552. 


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øSEC. 810. RULEMAKING. 

øThe Board of Governors, the Supervisory Agencies, and the 

Council are authorized to prescribe such rules and issue such orders as may be necessary to administer and carry out their respective authorities and duties granted under this title and prevent 

evasions thereof. 

øSEC. 811. OTHER AUTHORITY. 

øUnless otherwise provided by its terms, this title does not divest 

any appropriate financial regulator, any Supervisory Agency, or 

any other Federal or State agency, of any authority derived from 

any other applicable law, except that any standards prescribed by 

the Board of Governors under section 805 shall supersede any less 

stringent requirements established under other authority to the extent of any conflict. 

øSEC. 812. CONSULTATION. 

ø(a) CFTC.—The Commodity Futures Trading Commission shall 

consult with the Board of Governors— 

ø(1) prior to exercising its authorities under sections 

2(h)(2)(C), 2(h)(3)(A), 2(h)(3)(C), 2(h)(4)(A), and 2(h)(4)(B) of the 

Commodity Exchange Act, as amended by the Wall Street 

Transparency and Accountability Act of 2010; 

ø(2) with respect to any rule or rule amendment of a derivatives clearing organization for which a stay of certification has 

been issued under section 745(b)(3) of the Wall Street Transparency and Accountability Act of 2010; and 

ø(3) prior to exercising its rulemaking authorities under section 728 of the Wall Street Transparency and Accountability 

Act of 2010. 

ø(b) SEC.—The Commission shall consult with the Board of Governors— 

ø(1) prior to exercising its authorities under sections 

3C(a)(2)(C), 3C(a)(3)(A), 3C(a)(3)(C), 3C(a)(4)(A), and 

3C(a)(4)(B) of the Securities Exchange Act of 1934, as amended 

by the Wall Street Transparency and Accountability Act of 

2010; 

ø(2) with respect to any proposed rule change of a clearing 

agency for which an extension of the time for review has been 

designated under section 19(b)(2) of the Securities Exchange 

Act of 1934; and 

ø(3) prior to exercising its rulemaking authorities under section 13(n) of the Securities Exchange Act of 1934, as added by 

section 763(i) of the Wall Street Transparency and Accountability Act of 2010. 

øSEC. 813. COMMON FRAMEWORK FOR DESIGNATED CLEARING ENTITY RISK MANAGEMENT. 

øThe Commodity Futures Trading Commission and the Commission shall coordinate with the Board of Governors to jointly develop 

risk management supervision programs for designated clearing entities. Not later than 1 year after the date of enactment of this Act, 

the Commodity Futures Trading Commission, the Commission, and 

the Board of Governors shall submit a joint report to the Committee on Banking, Housing, and Urban Affairs and the Committee 

on Agriculture, Nutrition, and Forestry of the Senate, and the 


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Committee on Financial Services and the Committee on Agriculture of the House of Representatives recommendations for— 

ø(1) improving consistency in the designated clearing entity 

oversight programs of the Commission and the Commodity Futures Trading Commission; 

ø(2) promoting robust risk management by designated clearing entities; 

ø(3) promoting robust risk management oversight by regulators of designated clearing entities; and 

ø(4) improving regulators’ ability to monitor the potential effects of designated clearing entity risk management on the stability of the financial system of the United States. 

øSEC. 814. EFFECTIVE DATE. 

øThis title is effective as of the date of enactment of this Act.¿ 

* * * * * * * 


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MINORITY VIEWS 

H.R. 4247 is a dangerous bill that would eliminate federal oversight of the systems involved in completing trillions of dollars in 

U.S. financial transactions per year. Specifically, the bill calls for 

the wholesale repeal of Title VIII of the Dodd-Frank Act, which authorizes the Federal Reserve, in coordination with other federal financial regulators, to supervise certain financial market utilities 

that provide critical infrastructure for transferring, clearing, and 

settling financial transactions between financial institutions. 

In the years leading up to the financial crisis, Wall Street used 

the unregulated over-the-counter derivative market to fuel demand 

for subprime mortgage securitization. Specifically, the unrestrained 

sale of credit default swaps—a type of derivative that supposedly 

insures the buyer against investment losses—obscured risks in the 

mortgage-backed securities markets. When the mortgages underlying these securities began to default, swaps sellers such as AIG 

found themselves without the resources to pay out insurance 

claims. To stop the spread of devastating losses across the U.S. financial system, the federal government stepped in and bailed out 

AIG to the tune of $180 billion in taxpayer funds. 

In 2011, the Financial Crisis Inquiry Commission found that the 

over-the-counter derivatives market was characterized by ‘‘uncontrolled leverage; lack of transparency, capital, and collateral requirements; speculation; interconnections among firms; and concentrations of risk. . . .’’ The Dodd-Frank Act was enacted to protect American taxpayers from similar recklessness on Wall Street. 

Title VII, for example, generally requires that swaps transactions 

be cleared through a central clearing agency. This requirement increases the transparency and liquidity of swap transactions and 

mitigates counterparty credit risks of the type that resulted in the 

taxpayer bailout of AIG. The new central role of clearing agencies 

in the U.S. financial system necessitates robust oversight, which is 

afforded under Title VIII. 

Title VIII of Dodd-Frank authorizes the Financial Stability Oversight Council (‘‘FSOC’’) to designate certain financial market utilities (FMUs), like swaps clearinghouses, as ‘‘systemically important,’’ and thereby subject to enhanced supervision and regulation 

by financial regulators. Systemically important FMUs include systems that, if they were to fail, could cause other failures to spread 

throughout the financial system and thereby undermine the U.S. 

economy. Additionally, to ensure financial stability, Title VIII gives 

the Federal Reserve the discretion to provide certain designated 

FMUs, in unusual or exigent circumstances, with access to the discount window through a collateralized, margined loan. Title VIII 

also authorizes the Federal Reserve to take emergency enforcement 

action against a designated FMU if there is reason to believe that 

an action taken or contemplated by the FMU poses an imminent 


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risk of substantial harm to financial institutions, critical markets, 

or the U.S. financial system. 

Since the passage of Dodd-Frank, the FSOC, by a unanimous 

vote, has designated eight FMUs as systemically important pursuant to Title VIII. FSOC concluded that these entities were systemically important based on the aggregate monetary value of transactions processed by the entity; the aggregate exposure of the entity to its counterparties; the interconnectedness of the entity with 

other FMUs; and the effect that a failure of or disruption to the 

entity would have on critical markets, financial institutions, and 

the broader financial system. Additionally, the Federal Reserve has 

used its Title VIII authority to establish risk-management standards and expectations for certain FMUs, and to work with the Securities and Exchange Commission and the Commodity Futures 

Trading Commission to share information and conduct examinations of designated FMUs. 

H.R. 4247 would do away with the entirety of Title VIII and 

would thereby eliminate any meaningful oversight of FMUs. In a 

letter to the Committee opposing H.R. 4247, Americans for Financial Reform explained that, ‘‘proper operations and risk management at these firms are critical to trillions of dollars in financial 

transactions that occur on a daily basis, and failures in risk management or oversight at such firms could lead financial markets to 

be severely disrupted almost instantaneously.’’ Public Citizen similarly opposed H.R. 4247, writing that ‘‘eliminating [Title VIII] 

would be reckless.’’ 

H.R. 4247 is dangerous legislation that would weaken regulatory 

effectiveness and once again allow unchecked systemic risks to hurt 

hardworking Americans. 

For these reasons, we oppose H.R. 4247. 

MAXINE WATERS. 

STEPHEN F. LYNCH. 

MICHAEL E. CAPUANO. 

CAROLYN B. MALONEY. 

AL GREEN. 

DANIEL T. KILDEE. 

GREGORY W. MEEKS. 

RUBEN J. KIHUEN. 

GWEN MOORE. 

BRAD SHERMAN. 

VICENTE GONZALEZ. 

EMANUEL CLEAVER. 

Æ 


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