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[House Report 106-711]
[From the U.S. Government Publishing Office]

106th Congress                                            Rept. 106-711
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 2

======================================================================

 
    COMMODITY FUTURES MODERNIZATION AND FINANCIAL CONTRACT NETTING 
                        IMPROVEMENT ACT OF 2000

                                _______
                                

               September 6, 2000.--Ordered to be printed

                                _______
                                

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 4541]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Banking and Financial Services, to whom was 
referred the bill (H.R. 4541) to reauthorize and amend the 
Commodity Exchange Act to promote legal certainty, enhance 
competition, and reduce systemic risk in markets for futures 
and over-the-counter derivatives, and for other purposes, 
having considered the same, report favorably thereon with 
amendments and recommend that the bill as amended do pass.
  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Commodity Futures 
Modernization and Financial Contract Netting Improvement Act of 2000''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

                TITLE I--COMMODITY FUTURES MODERNIZATION

Sec. 101. Short title.
Sec. 102. Purposes.
Sec. 103. Definitions.
Sec. 104. Agreements, contracts, and transactions in foreign currency, 
government securities, and certain other commodities.
Sec. 105. Legal certainty for excluded derivative transactions.
Sec. 106. Excluded electronic trading facilities.
Sec. 107. Conformity with the Gramm-Leach-Bliley Act; hybrid 
instruments.
Sec. 108. Futures on securities.
Sec. 109. Transactions in exempt commodities.
Sec. 110. Swap transactions.
Sec. 111. Application of the Commodity Exchange Act.
Sec. 112. Protection of the public interest.
Sec. 113. Prohibited transactions.
Sec. 114. Designation of boards of trade as contract markets.
Sec. 115. Derivatives transaction execution facilities.
Sec. 116. Derivatives clearing.
Sec. 117. Common provisions applicable to registered entities.
Sec. 118. Exempt boards of trade.
Sec. 119. Suspension or revocation of designation as contract market.
Sec. 120. Authorization of appropriations.
Sec. 121. Preemption.
Sec. 122. Predispute resolution agreements for institutional customers.
Sec. 123. Consideration of costs and benefits and antitrust laws.
Sec. 124. Contract enforcement.
Sec. 125. Special procedures to encourage and facilitate bona fide 
hedging by agricultural producers.
Sec. 126. Rule of construction.
Sec. 127. Authority of agencies to construe the term ``contract 
market''.
Sec. 128. Technical and conforming amendments.
Sec. 129. Report to Congress.
Sec. 130. Effective date.
Sec. 131. International activities of the Commodity Futures Trading 
Commission.
Sec. 132. Antifraud provisions.
Sec. 133. Retail swap customer protections.

            TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT

Sec. 201. Short title.
Sec. 202. Treatment of certain agreements by conservators or receivers 
of insured depository institutions.
Sec. 203. Authority of the Corporation with respect to failed and 
failing institutions.
Sec. 204. Amendments relating to transfers of qualified financial 
contracts.
Sec. 205. Amendments relating to disaffirmance or repudiation of 
qualified financial contracts.
Sec. 206. Clarifying amendment relating to master agreements.
Sec. 207. Federal Deposit Insurance Corporation Improvement Act of 
1991.
Sec. 208. Bankruptcy code amendments.
Sec. 209. Recordkeeping requirements.
Sec. 210. Exemptions from contemporaneous execution requirement.
Sec. 211. Damage measure.
Sec. 212. SIPC stay.
Sec. 213. Asset-backed securitizations.
Sec. 214. Application of amendments.

                TITLE I--COMMODITY FUTURES MODERNIZATION

SEC. 101. SHORT TITLE.

  This title may be cited as the ``Commodity Futures Modernization Act 
of 2000''.

SEC. 102. PURPOSES.

  The purposes of this title are--
          (1) to reauthorize the appropriation for the Commodity 
        Futures Trading Commission;
          (2) to streamline and eliminate unnecessary regulation for 
        the commodity futures exchanges and other entities regulated 
        under the Commodity Exchange Act;
          (3) to transform the role of the Commodity Futures Trading 
        Commission to oversight of the futures markets;
          (4) to provide a statutory and regulatory framework for 
        allowing the trading of futures on securities;
          (5) to provide the Commission jurisdiction over certain 
        retail foreign exchange transactions and bucket shops that may 
        not be otherwise regulated;
          (6) to promote innovation for futures and derivatives and to 
        reduce systemic risk by enhancing legal certainty in the 
        markets for certain futures and derivatives transactions;
          (7) to reduce systemic risk and provide greater stability to 
        markets during times of market disorder by allowing the 
        clearing of transactions in over-the-counter derivatives 
        through appropriately regulated clearing organizations; and
          (8) to enhance the competitive position of United States 
        financial institutions and financial markets.

SEC. 103. DEFINITIONS.

  Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
          (1) by redesignating--
                  (A) paragraphs (1) through (7) as paragraphs (2) 
                through (8), respectively;
                  (B) paragraphs (8) through (12) as paragraphs (16) 
                through (20), respectively;
                  (C) paragraphs (13) through (15) as paragraphs (22) 
                through (24), respectively; and
                  (D) paragraph (16) as paragraph (28);
          (2) by inserting before paragraph (2) (as so redesignated by 
        paragraph (1) of this section) the following new paragraph:
          ``(1) Banking product.--
                  ``(A) In general.--The term `banking product' means 
                any agreement, contract, or transaction that is an 
                identified banking product (as defined in section 
                206(a) of the Gramm-Leach-Bliley Act).
                  ``(B) Exclusion.--The term `banking product' does not 
                include a contract for the sale of a commodity for 
                future delivery traded on a contract market designated 
                under section 5 of this Act or an agreement, contract, 
                or transaction traded on a derivatives transaction 
                execution facility registered under section 5a.'';
          (3) by inserting after paragraph (8) (as so redesignated by 
        paragraph (1) of this section) the following new paragraphs:
          ``(9) Derivatives clearing organization.--
                  ``(A) In general.--The term `derivatives clearing 
                organization' means a clearinghouse, clearing 
                association, clearing corporation, or similar entity, 
                facility, system, or organization that, with respect to 
                a derivative agreement, contract, or transaction--
                          ``(i) enables each party to the derivative 
                        agreement, contract, or transaction to 
                        substitute, through novation or otherwise, the 
                        credit of the derivatives clearing organization 
                        for the credit of the parties;
                          ``(ii) arranges or provides, on a 
                        multilateral basis, for the settlement or 
                        netting of obligations resulting from such 
                        agreements, contracts, or transactions executed 
                        by parties in the derivatives clearing 
                        organization; or
                          ``(iii) otherwise provides clearing services 
                        or arrangements that mutualize or transfer 
                        among parties in the derivatives clearing 
                        organization the credit risk arising from such 
                        agreements, contracts, or transactions executed 
                        by the parties.
                  ``(B) Exclusions.--The term `derivatives clearing 
                organization' does not include an entity, facility, 
                system, or organization solely because it arranges or 
                provides for--
                          ``(i) settlement, netting, or novation of 
                        obligations resulting from agreements, 
                        contracts, or transactions, on a bilateral 
                        basis and without a centralized counterparty;
                          ``(ii) settlement or netting of cash payments 
                        through an interbank payment system; or
                          ``(iii) settlement, netting, or novation of 
                        obligations resulting from a sale of a 
                        commodity in a transaction in the spot market 
                        for the commodity.
          ``(10) Electronic trading facility.--The term `electronic 
        trading facility' means a trading facility that--
                  ``(A) operates by means of an electronic network; and
                  ``(B) maintains a real-time audit trail of bids, 
                offers, and the matching of orders or the execution of 
                transactions.
          ``(11) Eligible commercial participant.--The term `eligible 
        commercial participant' means a party or entity described in 
        paragraph (11)(A)(i), (ii), (v), or (vii) or paragraph (11)(C), 
        who, in connection with its business--
                  ``(A) has a demonstrable capacity or ability, 
                directly or through separate contractual arrangements, 
                to make or take delivery of the underlying physical 
                commodity;
                  ``(B) incurs risks, in addition to price risk, 
                related to the commodity; or
                  ``(C) is a dealer that regularly provides hedging, 
                risk management, or market-making services to the 
                foregoing entities.
          ``(12) Eligible contract participant.--The term `eligible 
        contract participant' means--
                  ``(A) acting for its own account--
                          ``(i) a financial institution;
                          ``(ii) an insurance company regulated by a 
                        State (including a subsidiary or affiliate of 
                        such an insurance company);
                          ``(iii) an investment company subject to 
                        regulation under the Investment Company Act of 
                        1940 (15 U.S.C. 80a-1 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation 
                        (regardless of whether each investor in the 
                        investment company or the foreign person is 
                        itself an eligible contract participant);
                          ``(iv) a commodity pool that--
                                  ``(I) has total assets exceeding 
                                $5,000,000; and
                                  ``(II) is formed and operated by a 
                                person subject to regulation under this 
                                Act or a foreign person performing a 
                                similar role or function subject as 
                                such to foreign regulation (regardless 
                                of whether each investor in the 
                                commodity pool or the foreign person is 
                                itself an eligible contract 
                                participant);
                          ``(v) a corporation, partnership, 
                        proprietorship, organization, trust, or other 
                        entity--
                                  ``(I) that has total assets exceeding 
                                $10,000,000;
                                  ``(II) the obligations of which under 
                                an agreement, contract, or transaction 
                                are guaranteed or otherwise supported 
                                by a letter of credit or keepwell, 
                                support, or other agreement by an 
                                entity described in subclause (I), in 
                                clause (i), (ii), (iii), (iv), or 
                                (vii), or in subparagraph (C); or
                                  ``(III) that--
                                          ``(aa) has a net worth 
                                        exceeding $1,000,000; and
                                          ``(bb) enters into an 
                                        agreement, contract, or 
                                        transaction in connection with 
                                        the conduct of the entity's 
                                        business or to manage the risk 
                                        associated with an asset or 
                                        liability owned or incurred or 
                                        reasonably likely to be owned 
                                        or incurred by the entity in 
                                        the conduct of the entity's 
                                        business;
                          ``(vi) an employee benefit plan subject to 
                        the Employee Retirement Income Security Act of 
                        1974 (29 U.S.C. 1001 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation--
                                  ``(I) that has total assets exceeding 
                                $5,000,000; or
                                  ``(II) the investment decisions of 
                                which are made by--
                                          ``(aa) an investment advisor 
                                        or commodity trading advisor 
                                        subject to regulation under the 
                                        Investment Advisers Act of 1940 
                                        (15 U.S.C. 80b-1 et seq.) or 
                                        this Act;
                                          ``(bb) a foreign person 
                                        performing a similar role or 
                                        function subject as such to 
                                        foreign regulation;
                                          ``(cc) a financial 
                                        institution; or
                                          ``(dd) an insurance company 
                                        regulated by a State (including 
                                        a subsidiary or affiliate of 
                                        such an insurance company);
                          ``(vii)(I) a governmental entity (including 
                        the United States, a State, or a foreign 
                        government) or political subdivision of a 
                        governmental entity;
                          ``(II) a multinational or supranational 
                        government entity; or
                          ``(III) an instrumentality, agency, or 
                        department of an entity described in subclause 
                        (I) or (II);
                          ``(viii) a broker or dealer subject to 
                        regulation under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation, except 
                        that, if the broker or dealer or foreign person 
                        is a natural person or proprietorship, the 
                        broker or dealer or foreign person shall not be 
                        considered to be an eligible contract 
                        participant unless the broker or dealer or 
                        foreign person also meets the requirements of 
                        clause (v) or (xi);
                          ``(ix) a futures commission merchant subject 
                        to regulation under this Act or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation, except 
                        that, if the futures commission merchant or 
                        foreign person is a natural person or 
                        proprietorship, the futures commission merchant 
                        or foreign person shall not be considered to be 
                        an eligible contract participant unless the 
                        futures commission merchant or foreign person 
                        also meets the requirements of clause (v) or 
                        (xi);
                          ``(x) a floor broker or floor trader subject 
                        to regulation under this Act in connection with 
                        any transaction that takes place on or through 
                        the facilities of a registered entity or an 
                        exempt board of trade, or any affiliate 
                        thereof, on which such person regularly trades; 
                        or
                          ``(xi) an individual who has total assets in 
                        an amount in excess of--
                                  ``(I) $10,000,000; or
                                  ``(II) $5,000,000 and who enters into 
                                the agreement, contract, or transaction 
                                in order to manage the risk associated 
                                with an asset owned or liability 
                                incurred, or reasonably likely to be 
                                owned or incurred, by such individual 
                                with total assets exceeding 
                                $10,000,000;
                  ``(B)(i) a person described in any of clauses (i) 
                through (x) of subparagraph (A) or in subparagraph (C), 
                acting as broker or performing an equivalent agency 
                function on behalf of another person described in 
                subparagraph (A) or (C);
                  ``(ii) an investment adviser subject to regulation 
                under the Investment Advisors Act of 1940, a commodity 
                trading advisor subject to regulation under this Act, a 
                foreign person performing a similar role or function 
                subject as such to foreign regulation, or a person 
                described in any of clauses (i) through (x) of 
                subparagraph (A) or in subparagraph (C), in any such 
                case acting as investment manager or fiduciary (but 
                excluding a person acting as broker or performing an 
                equivalent agency function) for another person 
                described in subparagraph (A) or (C) and who is 
                authorized by such person to commit such person to the 
                transaction; or
                  ``(iii) a commodity trading advisor subject to 
                regulation under this Act, having assets under 
                management of not less than $25,000,000 and acting as 
                investment manager or fiduciary for another person and 
                authorized by such person to commit such person to the 
                transaction; or
                  ``(C) any other person that the Commission determines 
                to be eligible in light of the financial or other 
                qualifications of the person.
          ``(13) Exclusion-eligible commodity.--
                  ``(A) In general.--The term `exclusion-eligible 
                commodity' means--
                          ``(i) an interest rate, exchange rate, 
                        currency, security, security index, credit risk 
                        or measure, debt or equity instrument, index or 
                        measure of inflation, or other macroeconomic 
                        index or measure;
                          ``(ii) any other rate, differential, index, 
                        or measure of economic or commercial risk, 
                        return, or value that is--
                                  ``(I) not based in substantial part 
                                on the value of a narrow group of 
                                commodities not described in clause 
                                (i); or
                                  ``(II) based solely on 1 or more 
                                commodities that have no cash market;
                          ``(iii) any economic or commercial index 
                        based on prices, rates, values, or levels that 
                        are not within the control of any party to the 
                        relevant contract, agreement, or transaction; 
                        or
                          ``(iv) an occurrence, extent of an 
                        occurrence, or contingency (other than a change 
                        in the price, rate, value, or level of a 
                        commodity not described in clause (i)) that 
                        is--
                                  ``(I) beyond the control of the 
                                parties to the relevant contract, 
                                agreement, or transaction; and
                                  ``(II) associated with a financial, 
                                commercial, or economic consequence.
                  ``(B) Reference to excluded commodity.--Any reference 
                in this Act to the term `excluded commodity' shall be 
                deemed to be a reference to `exclusion-eligible 
                commodity'.
          ``(14) Exempt commodity.--The term `exempt commodity' means a 
        commodity that is not an excluded commodity or an agricultural 
        commodity.
          ``(15) Financial institution.--The term `financial 
        institution' means--
                  ``(A) a corporation operating under the fifth 
                undesignated paragraph of section 25 of the Federal 
                Reserve Act (12 U.S.C. 603), commonly known as `an 
                agreement corporation';
                  ``(B) a corporation organized under section 25A of 
                the Federal Reserve Act (12 U.S.C. 611 et seq.), 
                commonly known as an `Edge Act corporation';
                  ``(C) an institution that is regulated by the Farm 
                Credit Administration;
                  ``(D) a Federal credit union or State credit union 
                (as defined in section 101 of the Federal Credit Union 
                Act (12 U.S.C. 1752));
                  ``(E) a depository institution (as defined in section 
                3 of the Federal Deposit Insurance Act (12 U.S.C. 
                1813));
                  ``(F) a foreign bank or a branch or agency of a 
                foreign bank (each as defined in section 1(b) of the 
                International Banking Act of 1978 (12 U.S.C. 3101(b)));
                  ``(G) any financial holding company (as defined in 
                section 2 of the Bank Holding Company Act of 1956);
                  ``(H) a trust company; or
                  ``(I) a similarly regulated subsidiary or affiliate 
                of an entity described in any of subparagraphs (A) 
                through (H).'';
          (3) by inserting after paragraph (20) (as so redesignated by 
        paragraph (1)) the following new paragraph:
          ``(21) Hybrid instrument.--
                  ``(A) In general.--The term `hybrid instrument' means 
                a deposit instrument offered by a financial 
                institution, or a security, having 1 or more payments 
                indexed to the value, level, or rate of 1 or more 
                commodities.
                  ``(B) Deposit instrument defined.--The term `deposit 
                instrument' means an instrument representing an 
                interest described in paragraph (1), (2), (3), (4), or 
                (5) of section 3(l) of the Federal Deposit Insurance 
                Act, other than in subparagraph (A), (B), or (C) at the 
                end of paragraph (5).'';
          (4) by inserting after paragraph (24) (as so redesignated by 
        paragraph (1)) the following new paragraphs:
          ``(25) Nonexempt security.--The term `nonexempt security' 
        means a security that is not an exempted security under section 
        3 of the Securities Act of 1933 or section 3(a)(12) of the 
        Securities Exchange Act of 1934 (other than any municipal 
        security, as defined in section 3(a)(29) of the Securities 
        Exchange Act of 1934).
          ``(26) Option.--The term `option' means an agreement, 
        contract, or transaction that is of the character of, or is 
        commonly known to the trade as, an `option', `privilege', 
        `indemnity', `bid', `offer', `put', `call', `advance guaranty', 
        or `decline guaranty'.
          ``(27) Organized exchange.--The term `organized exchange' 
        means a trading facility that--
                  ``(A) permits trading by persons other than--
                          ``(i) eligible contract participants trading 
                        on a principal-to-principal basis; or
                          ``(ii) eligible contract participants 
                        described in subclause (I), (II), (III), (IV), 
                        (V) or (VI) of section 2(c)(2)(B), acting as a 
                        broker or performing an equivalent agency 
                        function on behalf of eligible contract 
                        participants; or
                  ``(B) has adopted (directly or through another 
                nongovernmental entity) rules that--
                          ``(i) govern the conduct of participants, 
                        other than rules that govern the submission of 
                        orders or execution of transactions on the 
                        trading facility; or
                          ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
          (5) by adding at the end the following new paragraphs:
          ``(29) Registered entity.--The term `registered entity' 
        means--
                  ``(A) a board of trade designated as a contract 
                market under section 5;
                  ``(B) a derivatives transaction execution facility 
                registered under section 5a; or
                  ``(C) a derivatives clearing organization registered 
                under section 5b.
          ``(30) Security.--The term `security' has the meaning given 
        the term in section 3(a) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)) as in effect on date of the enactment of 
        this paragraph.
          ``(31) Trading facility.--
                  ``(A) In general.--The term `trading facility' means 
                a person or group of persons that constitutes, 
                maintains, or provides a physical or electronic 
                facility or system in which multiple participants have 
                the ability to execute or trade agreements, contracts, 
                or transactions by accepting bids and offers made by 
                other participants that are open to multiple 
                participants in the facility or system.
                  ``(B) Exclusions.--The term `trading facility' does 
                not include--
                          ``(i) a person or group of persons solely 
                        because the person or group of persons 
                        constitutes, maintains, or provides an 
                        electronic facility or system that enables 
                        participants to negotiate the terms of and 
                        enter into bilateral transactions as a result 
                        of communications exchanged by the parties and 
                        not from interaction of multiple orders within 
                        a predetermined, nondiscretionary automated 
                        trade matching algorithm;
                          ``(ii) a government securities dealer or 
                        government securities broker, to the extent 
                        that the dealer or broker executes or trades 
                        agreements, contracts, or transactions in 
                        government securities, or assists persons in 
                        communicating about, negotiating, entering 
                        into, executing, or trading an agreement, 
                        contract, or transaction in government 
                        securities (as the terms `government securities 
                        dealer', `government securities broker', and 
                        `government securities' are defined in section 
                        3(a) of the Securities Exchange Act of 1934 (15 
                        U.S.C. 78c(a)));
                          ``(iii) facilities on which bids and offers, 
                        and acceptances of bids and offers effected on 
                        the facility, are not binding; or
                          ``(iv) a person or group of persons solely 
                        because the person or group of persons 
                        constitutes, maintains, or provides an 
                        electronic facility or system that--
                                  ``(I) enables participants to enter 
                                into bilateral transactions with other 
                                participants; and
                                  ``(II) incorporates credit screens or 
                                filters that prevent any participant 
                                from executing a transaction with 
                                another participant unless both 
                                participants have approved the 
                                extension of credit to the other.''.

SEC. 104. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN CURRENCY, 
                    GOVERNMENT SECURITIES, AND CERTAIN OTHER 
                    COMMODITIES.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) is 
amended by adding at the end the following:
  ``(c) Agreements, Contracts, and Transactions in Foreign Currency, 
Government Securities, and Certain Other Commodities.--
          ``(1) In general.--Except as provided in paragraph (2), 
        nothing in this Act (other than section 5b or 12(e)(2)(B)) 
        governs or applies to an agreement, contract, or transaction 
        in--
                  ``(A) foreign currency;
                  ``(B) government securities;
                  ``(C) security warrants;
                  ``(D) security rights;
                  ``(E) resales of installment loan contracts;
                  ``(F) repurchase transactions in an excluded 
                commodity; or
                  ``(G) mortgages or mortgage purchase commitments.
          ``(2) Commission jurisdiction.--
                  ``(A) Agreements, contracts, and transactions that 
                are futures traded on an organized exchange.--This Act 
                applies to, and the Commission shall have jurisdiction 
                over, an agreement, contract, or transaction described 
                in paragraph (1) that is--
                          ``(i) a contract of sale of a commodity for 
                        future delivery (or an option thereon), or an 
                        option on a commodity (other than foreign 
                        currency or a security), that is executed or 
                        traded on an organized exchange; or
                          ``(ii) an option on foreign currency and is 
                        executed or traded on an organized exchange 
                        that is not a national securities exchange.
                  ``(B) Agreements, contracts, and transactions in 
                retail foreign currency.--This Act applies to, and the 
                Commission shall have jurisdiction over, an agreement, 
                contract, or transaction in foreign currency that--
                          ``(i) is a contract of sale for future 
                        delivery (or an option on such a contract) or 
                        an option; and
                          ``(ii) is offered to, or entered into with, a 
                        person that is not an eligible contract 
                        participant, unless the counterparty, or the 
                        person offering to be the counterparty, of the 
                        person is--
                                  ``(I) a financial institution;
                                  ``(II) a broker or dealer registered 
                                under section 15(b) or 15C of the 
                                Securities Exchange Act of 1934 (15 
                                U.S.C. 78o(b), 78o-5) or a futures 
                                commission merchant registered under 
                                this Act;
                                  ``(III) an associated person of a 
                                broker or dealer registered under 
                                section 15(b) or 15C of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78o(b), 
                                78o-5), or an affiliated person of a 
                                futures commission merchant registered 
                                under this Act, concerning the 
                                financial or securities activities of 
                                which the registered person makes and 
                                keeps records under section 15C(b) or 
                                17(h) of the Securities Exchange Act of 
                                1934 (15 U.S.C. 78o-5(b), 78q(h)) or 
                                section 4f(c)(2)(B) of this Act;
                                  ``(IV) an insurance company that is 
                                subject to State regulation (including 
                                a subsidiary or affiliate of such an 
                                insurance company);
                                  ``(V) a financial holding company (as 
                                defined in section 2 of the Bank 
                                Holding Company Act of 1956); or
                                  ``(VI) an investment bank holding 
                                company (as defined in section 17(i) of 
                                the Securities Exchange Act of 
                                1934).''.

SEC. 105. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 104) is amended by adding at the end the 
following:
  ``(d) Excluded Derivative Transactions.--
          ``(1) In general.--Nothing in this Act (other than section 5b 
        or 12(e)(2)(B)) governs or applies to an agreement, contract, 
        or transaction in an excluded commodity if--
                  ``(A) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants at the time at which the persons 
                enter into the agreement, contract, or transaction; and
                  ``(B) the agreement, contract, or transaction is not 
                executed or traded on a trading facility.
          ``(2) Electronic trading facility exclusion.--Nothing in this 
        Act (other than section 5a, 5b, or 12(e)(2)(B)) governs or 
        applies to an agreement, contract, or transaction in an 
        excluded commodity if--
                  ``(A) the agreement, contract, or transaction is--
                          ``(i) entered into--
                                  ``(I) on a principal-to-principal 
                                basis between parties trading for their 
                                own accounts or as described in section 
                                1a(12)(B)(ii) of this Act; and
                                  ``(II) only between eligible contract 
                                participants (as defined in 
                                subparagraphs (A), (B)(ii), and (C) 
                                section 1a(12)) at the time at which 
                                the persons enter into the agreement, 
                                contract, or transaction; or
                          ``(ii) entered into only between eligible 
                        contract participants described in subclause 
                        (I), (II), (III), (IV), (V), or (VI) of section 
                        2(c)(2)(B)(ii) acting as a broker or performing 
                        a similar agency function on behalf of persons 
                        that are eligible contract participants at the 
                        time at which the persons enter into the 
                        agreement, contract, or transaction; and
                  ``(B) the agreement, contract, or transaction is 
                executed or traded on an electronic trading 
                facility.''.

SEC. 106. EXCLUDED ELECTRONIC TRADING FACILITIES.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 105) is amended by adding at the end the 
following:
  ``(e) Excluded Electronic Trading Facilities.--
          ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to an electronic trading 
        facility that limits transactions authorized to be conducted on 
        its facilities to those satisfying the requirements of sections 
        2(d)(2) and 2(h)(3)(B) of this Act.
          ``(2) Effect on authority to establish and operate.--Nothing 
        in this Act shall prohibit a board of trade designated by the 
        Commission as a contract market or derivatives transaction 
        execution facility, or an exempt board of trade, from 
        establishing and operating an electronic trading facility 
        excluded under this Act pursuant to paragraph (1).''.

SEC. 107. CONFORMITY WITH THE GRAMM-LEACH-BLILEY ACT; HYBRID 
                    INSTRUMENTS.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 106) is amended by adding at the end the 
following:
  ``(f) Exclusion for Qualifying Hybrid Instruments.--
          ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to--
                  ``(A) a banking product or security sold or provided 
                by an entity that is listed in any of subclauses (I) 
                through (VI) of section 2(c)(2)(B)(ii); or
                  ``(B) a hybrid instrument that is predominantly a 
                security or a deposit instrument.
          ``(2) Exception.--Paragraph (1)(A) shall not apply to any 
        swap agreement (as defined in section 206(b) of the Gramm-
        Leach-Bliley Act) with any party who is not an eligible 
        contract participant unless such swap agreement is entered into 
        after final regulations have been prescribed under section 49 
        of the Federal Deposit Insurance Act.
          ``(3) Predominance.--A hybrid instrument shall be considered 
        to be predominantly a security or deposit instrument if--
                  ``(A) the issuer of the hybrid instrument receives 
                payment in full of the purchase price of the hybrid 
                instrument, substantially contemporaneously with 
                delivery of the hybrid instrument;
                  ``(B) the purchaser or holder of the hybrid 
                instrument is not required to make any payment to the 
                issuer in addition to the purchase price paid under 
                subparagraph (A), whether as margin, settlement 
                payment, or otherwise, during the life of the hybrid 
                instrument or at maturity;
                  ``(C) the issuer of the hybrid instrument is not 
                subject by the terms of the instrument to mark-to-
                market margining requirements; and
                  ``(D) the hybrid instrument is not marketed as a 
                contract of sale for future delivery of a commodity (or 
                option on such a contract) subject to this Act.
          ``(4) Mark-to-market margining requirements.--For the 
        purposes of paragraph (3)(C), mark-to-market margining 
        requirements do not include the obligation of an issuer of a 
        secured debt instrument to increase the amount of collateral 
        held in pledge for the benefit of the purchaser of the secured 
        debt instrument to secure the repayment obligations of the 
        issuer under the secured debt instrument.''.

SEC. 108. FUTURES ON SECURITIES.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 107) is amended by adding at the end the 
following:
  ``(g) Notwithstanding any other provision of law:
          ``(1) This Act shall not apply to and the Commission shall 
        have no jurisdiction to designate a board of trade as a 
        contract market for any transaction whereby any party to the 
        transaction acquires a put, call, or other option on 1 or more 
        securities (as defined in section 2(a)(1) of the Securities Act 
        of 1933 or section 3(a)(10) of the Securities Exchange Act of 
        1934, on the date of enactment of the Futures Trading Act of 
        1982), including any group or index of securities and any 
        interest in or based on the value of securities.
          ``(2) Nothing in this subsection governs or applies to--
                  ``(A) an agreement, contract, or transaction in a 
                commodity that is excluded under subsection (c) or (d);
                  ``(B) an electronic trading facility that is excluded 
                under subsection (e); or
                  ``(C) a hybrid instrument that is covered by an 
                exclusion under subsection (f) or an exemption granted 
                by the Commission under section 4(c) (whether or not 
                the hybrid instrument is otherwise subject to this 
                Act).
          ``(3) Except as provided in paragraph (4) of this subsection, 
        or unless excluded by paragraph (2) of this subsection, a 
        person shall not offer to enter into, enter into, or confirm 
        the execution of any contract of sale (or option on the 
        contract) for future delivery of any security or interest in or 
        based on the value of a nonexempt security.
          ``(4)(A) Except as excluded by paragraph (2) of this 
        subsection, this Act shall apply to and the Commission shall 
        have exclusive jurisdiction with respect to accounts, 
        agreements (including any transaction which is of the character 
        of, or is commonly known to the trade as an option, privilege, 
        indemnity, bid, offer, put, call, advance guaranty, or decline 
        guaranty), and transactions involving, and may designate a 
        board of trade as a contract market under section 5 or register 
        the board of trade as a derivatives transaction execution 
        facility under section 5a in, contracts of sale (or options on 
        the contracts) for future delivery of 1 or more securities (as 
        defined in section 2(a)(1) of the Securities Act of 1933 or 
        section 3(a)(10) of the Securities Exchange Act of 1934), 
        including any group or index of securities and any interest in 
        or based on the value of securities.
          ``(B) The Commission shall not designate a board of trade as 
        a contract market under section 5 or register a board of trade 
        as a derivatives transaction execution facility under section 
        5a with respect to any such contracts of sale (or options on 
        the contracts) for future delivery unless the board of trade 
        demonstrates and the Commission expressly finds that the 
        specific contract (or option on the contract) with respect to 
        which the application for the designation or recognition has 
        been made meets the following requirements:
                  ``(i) Settlement of or delivery on the contract (or 
                option on the contract) shall be effected in cash or by 
                means other than the transfer or receipt of a nonexempt 
                security.
                  ``(ii) Susceptibility to price manipulation.--Trading 
                in a contract (or option on such a contract) described 
                in subparagraph (A) shall not be readily susceptible 
                to--
                          ``(I) manipulation of the price of the 
                        contract (or option on such a contract); or
                          ``(II) causing or being used in the 
                        manipulation of the price of any underlying 
                        security, option on a security, or option on a 
                        group or index that includes a security.
                  ``(iii) If the contract is based on a single 
                nonexempt security, an option on the security 
                underlying the contract would meet all Securities and 
                Exchange Commission requirements for listing on a 
                national securities exchange.
                  ``(iv) If the contract is based on any group or index 
                of nonexempt securities comprised of fewer than 5 
                securities, or on an index in which a single nonexempt 
                security predominates, an option on each security 
                comprising the group or index would meet all 
                requirements for listing on a national securities 
                exchange.
                  ``(v)(I) In general.--The contract will be traded on 
                a board of trade that establishes the level of margin 
                for futures contracts (or options on the contracts) 
                based on a single nonexempt security, an index of fewer 
                than 5 nonexempt securities, or an index in which a 
                single nonexempt security predominates, at a level 
                consistent with the level of margin on comparable 
                option contracts listed on any national securities 
                exchange.
                  ``(II) Consistency.--For the purposes of subclause 
                (I), a margin for designated futures on securities and 
                options on securities shall be considered to be 
                consistent if the margin provides a similar level of 
                protection against defaults by counterparties, taking 
                into account any differences in--
                          ``(aa) the price volatility of the contracts;
                          ``(bb) the frequency with which margin 
                        requirements are made; and
                          ``(cc) the period of time within which margin 
                        calls must be met.
                          ``(vi) The contract will be traded on a board 
                        of trade that prohibits a person who acts as a 
                        floor broker for any contract of sale (or 
                        options on the contract) for future delivery of 
                        a nonexempt security, an index based on fewer 
                        than 5 nonexempt securities, or an index in 
                        which a single nonexempt security predominates, 
                        from trading that contract for the broker's own 
                        account during the same trading session.
                  ``(vii) The contract will be traded on a board of 
                trade that collects, maintains, and promptly provides 
                to the Securities and Exchange Commission such 
                information as the Commission and the Securities and 
                Exchange Commission jointly consider necessary to 
                perform the enforcement responsibilities described in 
                paragraph (6).
          ``(5) The Commission shall consult with the Securities and 
        Exchange Commission with respect to any application submitted 
        by a board of trade for designation as a contract market or 
        derivatives transaction execution facility with respect to any 
        contract of sale (or option on the contract) for future 
        delivery of a nonexempt security or a group or index of such 
        securities. If, not later than 15 days after the consultation, 
        the Securities and Exchange Commission objects to the 
        designation of a board of trade as a contract market or 
        derivatives transaction execution facility in the contract (or 
        option on the contract) on the ground that any requirement of 
        paragraph (4)(B) is not met, the Commission shall afford the 
        Securities and Exchange Commission an opportunity for an oral 
        hearing to be transcribed before the Commission, and shall give 
        appropriate weight to the views of the Securities and Exchange 
        Commission. The oral hearing shall be held before Commission 
        action upon the application for the designation, and not less 
        than 30 nor more than 45 days after the Securities and Exchange 
        Commission has objected. If such an oral hearing is held, the 
        Securities and Exchange Commission fails to withdraw its 
        objections, and the Commission issues an order designating a 
        board of trade as a contract market or recognizes the board of 
        trade as a derivatives transaction execution facility with 
        respect to any such contract (or option on the contract), the 
        Securities and Exchange Commission may seek judicial review of 
        the order in accordance with the procedural requirements set 
        forth in section 6(c). If, pursuant to section 6, there is a 
        hearing on the record with respect to an application for such 
        designation, the Securities and Exchange Commission may 
        participate in that hearing as an interested party.
          ``(6) Notwithstanding any other provision of this Act, the 
        Securities and Exchange Commission may enforce against a person 
        that purchases or sells any contract of sale (or option on the 
        contract) for future delivery of any nonexempt security, any 
        index comprised of fewer than 5 nonexempt securities, or any 
        index in which a single nonexempt security predominates to the 
        same extent as if the person had purchased or sold an option on 
        the security or index under the following provisions of the 
        securities laws and regulations with respect to the following 
        categories of conduct:
                  ``(A) Section 10(b) and 21A of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78j(b), 78u-1) with 
                respect to insider trading.
                  ``(B) Section 16(b) of such Act (15 U.S.C. 78p(b)) 
                with respect to unfair use of information in short 
                swing trading by a corporate insider.
                  ``(C) Section 9 of such Act (15 U.S.C. 78i) with 
                respect to manipulation of securities prices.
                  ``(D) Section 10(b) of such Act (15 U.S.C. 78J(b)) 
                and section 204A of the Investment Adviser's Act of 
                1940 (15 U.S.C. 80b-4a) with respect to frontrunning.
                  ``(E) Section 14 of the Securities Exchange Act of 
                1934 (15 U.S.C. 78n) with respect to the pricing and 
                integrity of tender offers.
                  ``(F) Rule 144 of the rules of the Securities and 
                Exchange Commission (17 C.F.R. 230.144) with respect to 
                trading in restricted securities.
          ``(7)(A) Notwithstanding any other provision of this Act, any 
        contract market or derivatives transaction execution facility 
        in a nonexempt security or stock index futures contract (or 
        option thereon) shall file with the Board of Governors of the 
        Federal Reserve System any rule establishing or changing the 
        levels of margin (initial and maintenance) for the nonexempt 
        security or stock index futures contract (or option on the 
        contract).
          ``(B) The Board may at any time request any contract market 
        or derivatives transaction execution facility to set the level 
        of margin for any nonexempt security or stock index futures 
        contract (or option on the contract) at such levels as the 
        Board in its judgment determines are appropriate to preserve 
        the financial integrity of the contract market or derivatives 
        transaction execution facility or its clearing system or to 
        prevent systemic risk. If the contract market or derivatives 
        transaction execution facility fails to do so within the time 
        specified by the Board in its request, the Board may direct the 
        contract market or derivatives transaction execution facility 
        to alter or supplement the rules of the contract market or 
        derivatives transaction execution facility as specified in the 
        request.
          ``(C) Subject to such conditions as the Board may determine, 
        the Board may delegate any or all of its authority under this 
        paragraph to the Commission or an intermarket margin board as 
        provided in subparagraph (D).
          ``(D) Intermarket margin board.--
                  ``(i) Establishment.--With the concurrence of the 
                Securities and Exchange Commission and the Commission, 
                the Board may establish an intermarket margin board, 
                consisting of representatives of any or all of the 
                three agencies.
                  ``(ii) Duties.--The intermarket margin board may set 
                and maintain margin levels and rules pertaining to 
                margin for futures on a single nonexempt security, an 
                index of fewer than 5 nonexempt securities, or an index 
                in which a single nonexempt security predominates, 
                listed on a contract market or derivatives transaction 
                execution facility. In discharging these duties, the 
                intermarket margin board shall endeavor to make the 
                levels of margin for futures and options on a single 
                nonexempt security consistent taking into account any 
                material differences in such contracts, including--
                          ``(I) the price volatility of the contracts;
                          ``(II) the frequency with which margin calls 
                        are made; and
                          ``(III) the period of time within which 
                        margin calls must be met.
          ``(E) This paragraph shall not be construed to supersede or 
        limit the authority granted to the Commission in section 8a(9) 
        to direct a contract market or derivatives transaction 
        execution facility, on finding an emergency to exist, to raise 
        temporary emergency margin levels on any futures contract or 
        option on the contract covered by this paragraph.
          ``(F) Any action taken by the Board under this paragraph, or 
        by the Commission acting under the delegation of authority 
        under subparagraph (C), directing a contract market or 
        derivatives transaction execution facility to alter or 
        supplement a contract market or derivatives transaction 
        execution facility rule shall be subject to review only in the 
        United States Court of Appeals for the judicial circuit in 
        which the party seeking review resides or has its principal 
        place of business, or in the United States Court of Appeals for 
        the District of Columbia Circuit. The review shall be based on 
        the examination of all information before the Board or the 
        Commission, as the case may be, at the time the determination 
        was made. The court reviewing the action of the Board or the 
        Commission shall not enter a stay or order of mandamus unless 
        the court determines, after notice and a hearing before a panel 
        of the court, that the agency action complained of was 
        arbitrary, capricious, an abuse of discretion, or otherwise not 
        in accordance with law.
          ``(8) This subsection shall not be construed to prohibit--
                  ``(A) an agreement, contract, or transaction excluded 
                from this Act by paragraph (2); or
                  ``(B) any hybrid instrument that is covered by the 
                terms of any exemption granted by the Commission under 
                section 4(c) (whether or not any such hybrid instrument 
                is otherwise subject to this Act).
          ``(9)(A) No futures commission merchant, commodity trading 
        advisor, or introducing broker shall recommend to any customer 
        the purchase or sale of any contract of sale for future 
        delivery of a single nonexempt security, an index of fewer than 
        5 nonexempt securities, or an index in which a single nonexempt 
        security predominates, unless the futures commission merchant, 
        commodity trading advisor, or introducing broker complies with 
        the rules described in subparagraph (B) of a registered futures 
        association of which such merchant, advisor, or broker is a 
        member.
          ``(B) Within 9 months of the date of enactment of the 
        Commodity Futures Modernization Act of 2000, a registered 
        futures association shall adopt rules requiring a futures 
        commission merchant, a commodity trading advisor, or an 
        introducing broker which recommends to any customer the 
        purchase or sale of any contract of sale for future delivery of 
        a single nonexempt security, an index of fewer than 5 nonexempt 
        securities, or an index in which a single nonexempt security 
        predominates to ascertain through reasonable due diligence that 
        the recommendation is suitable for that customer in light of 
        the customer's financial position and trading goals. The 
        registered futures association shall consult with the 
        Commission and the Securities and Exchange Commission prior to 
        the adoption of any such rule, and shall submit any such rule 
        to the Commission for approval in the manner and according to 
        the procedures described in section 17(j) of this Act, 
        provided, that in such case the rule shall become effective if 
        the Commission fails to disapprove such rule within 90 days of 
        submission.
          ``(10)(A) Nothing in this Act shall be construed to require 
        or authorize the Commission to review or approve, directly or 
        indirectly, any contract, rule, regulation, or action adopted 
        by a foreign board of trade, exchange, or market, or a 
        clearinghouse for such a board of trade, exchange, or market, 
        relating to any transaction involving a contract of sale for 
        future delivery (or option on such a contract) in or involving 
        any security, including any foreign government debt security, 
        or group or index of such securities, if--
                  ``(i)(I) in the case of a contract of sale for future 
                delivery (or option on such a contract) in or involving 
                a single equity security, the United States is not the 
                primary trading market for the underlying security; or
                  ``(II) in the case of a contract of sale for future 
                delivery (or option on such a contract) in or involving 
                a group or index of equity securities, less than 25 
                percent of the weighting of the group or index is 
                derived from securities for which the United States is 
                the primary trading market for the securities 
                underlying the contract for future delivery (or option 
                on the contract); and
                  ``(ii) settlement of or delivery on the contract for 
                future delivery (or option on such a contract) is to be 
                effected in cash or by means other than the transfer or 
                receipt of a security in the United States other than 
                an exempted security.
          ``(B) Within 90 days after the date of the enactment of this 
        paragraph, the Commission shall adopt such procedures as it 
        deems appropriate pursuant to which, consistent with this Act, 
        the Commission shall authorize the offer and sale in the United 
        States of any contract of sale for future delivery (or option 
        on such a contract) of a security, other than a security of the 
        type described in subparagraph (A)(i)(I) or a group or index of 
        securities of the type described in subparagraph (A)(i)(II), 
        traded on or subject to the rules of a foreign board of trade, 
        exchange, or market, or a clearinghouse for such a board of 
        trade, exchange, or market, except that such procedures shall 
        not require a foreign board of trade, exchange, or market, or a 
        clearinghouse for such a board of trade, exchange, or market to 
        apply for designation as a contract market under this Act with 
        respect to such a contract for future delivery (or option on 
        such a contract).''.

SEC. 109. TRANSACTIONS IN EXEMPT COMMODITIES.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 108) is amended by adding at the end the 
following.
  ``(h) Legal Certainty for Certain Transactions in Exempt 
Commodities.--
          ``(1) Except as provided in paragraph (2) of this subsection, 
        nothing in this Act shall apply to a contract, agreement or 
        transaction in an exempt commodity which--
                  ``(A) is entered into solely between persons that are 
                eligible contract participants at the time they enter 
                into the agreement, contract, or transaction; and
                  ``(B) is not entered into on a trading facility.
          ``(2) An agreement, contract, or transaction described in 
        paragraph (1) of this subsection shall be subject to--
                  ``(A) sections 5b and 12(e)(2)(B) of this Act;
                  ``(B) sections 4b and 4n of this Act and the 
                regulations of the Commission pursuant to section 4c(b) 
                of this Act proscribing fraud in connection with 
                commodity option transactions, to the extent such 
                agreement, contract, or transaction is not between 
                eligible commercial participants and would otherwise be 
                subject to those provisions; and
                  ``(C) sections 6(c) and 9(a)(2) of this Act to the 
                extent they prohibit manipulation of the market price 
                of any commodity in interstate commerce, to the extent 
                such agreement, contract, or transaction would 
                otherwise be subject to those provisions.
          ``(3) Except as provided in paragraph (4) of this subsection, 
        nothing in this Act shall apply to an agreement, contract, or 
        transaction in an exempt commodity (other than a metal 
        commodity enumerated in section 1a(3) of this Act) which--
                  ``(A) is entered into solely between persons that are 
                eligible contract participants at the time at which the 
                persons enter into the agreement, contract, or 
                transaction; and
                  ``(B) is executed or traded on an electronic trading 
                facility.
          ``(4) An agreement, contract, or transaction described in 
        paragraph (3) shall be subject to--
                  ``(A) sections 5b and 12(e)(2)(B) of this Act;
                  ``(B) sections 4b and 4n of this Act and the 
                regulations of the Commission pursuant to section 4c(b) 
                of this Act proscribing fraud in connection with 
                commodity option transactions and section 6(c) and 
                9(a)(2) of this Act, to the extent these provisions 
                prohibit manipulation of the market price of any 
                commodity in interstate commerce, to the extent such 
                agreement, contract, or transaction would otherwise be 
                subject to those provisions; and
                  ``(C) such rules and regulations as the Commission 
                may prescribe if necessary to ensure timely 
                dissemination by the electronic trading facility of 
                price, trading volume, and other trading data to the 
                extent appropriate, if the Commission determines that 
                the electronic trading facility performs a significant 
                price discovery function for transactions related to 
                the commodity executed or traded on the electronic 
                trading facility.''.

SEC. 110. SWAP TRANSACTIONS.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 109) is amended by adding at the end the 
following new subsection:
  ``(i) Excluded Swap Transactions.--
          ``(1) In general.--No provision of this Act (other than 
        section 5b or 12(e)(2)(B)) shall apply to or govern any 
        agreement, contract, or transaction in a commodity other than 
        an agricultural commodity enumerated in section 1a(3) if--
                  ``(A) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants at the time they enter into the 
                agreement, contract, or transaction; and
                  ``(B) the material economic terms of the agreement, 
                contract, or transaction are subject to individual 
                negotiation and are not specified by the rules terms or 
                conditions of a trading facility.
          ``(2) Exclusion.--Paragraph (1) shall not apply to--
                  ``(A) a contract for the sale of a commodity for 
                future delivery traded on a contract market designated 
                under section 5; or
                  ``(B) any agreement, contract, or transaction traded 
                on a derivatives transaction execution facility 
                registered under section 5a.''.

SEC. 111. APPLICATION OF THE COMMODITY EXCHANGE ACT.

  Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 110) is amended by adding at the end the 
following new subsection:
  ``(j) Application of the Act.--No provision of this Act shall be 
construed as--
          ``(1) implying or creating any presumption that--
                  ``(A) any agreement, contract, or transaction that is 
                eligible for an exclusion or exemption from regulation 
                under this Act; or
                  ``(B) any agreement, contract, or transaction that is 
                not eligible for an exclusion or exemption from 
                regulation under this Act,
        is or would otherwise be subject to this Act; or
          ``(2) conferring jurisdiction on the Commission with respect 
        to any such agreement, contract, or transaction, except as 
        expressly provided in section 5b.''.

SEC. 112. PROTECTION OF THE PUBLIC INTEREST.

  The Commodity Exchange Act is amended by striking section 3 (7 U.S.C. 
5) and inserting the following:

``SEC. 3. FINDINGS AND PURPOSE.

  ``(a) Findings.--The futures contracts and options contracts that are 
subject to this Act are entered into regularly in interstate and 
international commerce and are affected with a national public interest 
by providing a means for managing and assuming price risks, discovering 
prices, and disseminating pricing information through trading in 
liquid, fair and financially secure trading facilities.
  ``(b) Purpose.--It is the purpose of this Act to serve the public 
interests described in subsection (a) through a system of effective 
self-regulation of trading facilities, clearing systems, market 
participants and market professionals under the oversight of the 
Commission. To foster these public interests, it is further the purpose 
of this Act to deter and prevent price manipulation or any other 
disruptions to market integrity; to ensure the financial integrity of 
all transactions subject to this Act and the avoidance of systemic 
risk; to protect all market participants from fraudulent or other 
abusive sales practices and misuses of customer assets; and to promote 
responsible innovation and fair competition among boards of trade, 
other markets and market participants.''.

SEC. 113. PROHIBITED TRANSACTIONS.

  Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended by 
striking ``Sec. 4c.'' and all that follows through subsection (a) and 
inserting the following:

``SEC. 4C. PROHIBITED TRANSACTIONS.

  ``(a) In General.--
          ``(1) Prohibition.--It shall be unlawful for any person to 
        offer to enter into, enter into, or confirm the execution of a 
        transaction described in paragraph (2) involving any commodity 
        if the transaction is used or may be used to--
                  ``(A) hedge any transaction in interstate commerce in 
                the commodity or the product or byproduct of the 
                commodity;
                  ``(B) determine the price basis of any such 
                transaction in interstate commerce in the commodity; or
                  ``(C) deliver any such commodity sold, shipped, or 
                received in interstate commerce for the execution of 
                the transaction.
          ``(2) Transaction.--A transaction referred to in paragraph 
        (1) is a transaction that--
                  ``(A)(i) is, is of the character of, or is commonly 
                known to the trade as, a `wash sale' or `accommodation 
                trade'; or
                  ``(ii) is a fictitious sale; or
                  ``(B) is used to cause any price to be reported, 
                registered, or recorded that is not a true and bona 
                fide price.''.

SEC. 114. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

  The Commodity Exchange Act is amended--
          (1) by redesignating section 5b (7 U.S.C. 7b) as section 5e; 
        and
          (2) by striking sections 5 and 5a (7 U.S.C. 7, 7a) and 
        inserting the following:

``SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

  ``(a) Applications.--A board of trade applying to the Commission for 
designation as a contract market shall submit an application to the 
Commission that includes any relevant materials and records the 
Commission may require consistent with this Act.
  ``(b) Criteria for Designation.--
          ``(1) In general.--To be designated as a contract market, the 
        board of trade shall demonstrate to the Commission that the 
        board of trade meets the criteria specified in this subsection.
          ``(2) Prevention of market manipulation.--The board of trade 
        shall have the capacity to prevent market manipulation through 
        market surveillance, compliance, and enforcement practices and 
        procedures, including methods for conducting real-time 
        monitoring of trading and comprehensive and accurate trade 
        reconstructions.
          ``(3) Fair and equitable trading.--The board of trade shall 
        establish and enforce trading rules to ensure fair and 
        equitable trading through the facilities of the contract 
        market, and the capacity to detect, investigate, and discipline 
        any person that violates the rules. Such rules may authorize--
                  ``(A) an exchange of--
                          ``(i) futures in connection with a cash 
                        commodity transaction;
                          ``(ii) futures for cash commodities;
                          ``(iii) transfer trades or office trades; or
                          ``(iv) futures for swaps; and
                  ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the contract market or a derivatives clearing 
                organization.
          ``(4) Trade execution facility.--The board of trade shall--
                  ``(A) establish and enforce rules defining, or 
                specifications detailing, the manner of operation of 
                the trade execution facility maintained by the board of 
                trade, including rules or specifications describing the 
                operation of any electronic matching platform; and
                  ``(B) demonstrate that the trading facility operates 
                in accordance with the rules or specifications.
          ``(5) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules and procedures for 
        ensuring the financial integrity of transactions entered into 
        by or through the facilities of the contract market.
          ``(6) Disciplinary procedures.--The board of trade shall 
        establish and enforce disciplinary procedures that authorize 
        the board of trade to discipline, suspend, or expel members or 
        market participants that violate the rules of the board of 
        trade, or similar methods for performing the same functions, 
        including delegation of the functions to third parties.
          ``(7) Public access.--The board of trade shall provide the 
        public with access to the rules, regulations, and contract 
        specifications of the board of trade.
          ``(8) Ability to obtain information.--The board of trade 
        shall establish and enforce rules that will allow the board of 
        trade to obtain any necessary information to perform any of the 
        functions described in this subsection, including the capacity 
        to carry out such international information-sharing agreements 
        as the Commission may require.
  ``(c) Existing Contract Markets.--A board of trade that is designated 
as a contract market on the effective date of the Commodity Futures 
Modernization Act of 2000 shall be considered to be a designated 
contract market under this section.
  ``(d) Core Principles for Contract Markets.--
          ``(1) In general.--To maintain the designation of a board of 
        trade as a contract market, a board of trade shall comply with 
        the core principles specified in this subsection.
          ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce compliance with the rules of the contract 
        market, including the terms and conditions of any contracts to 
        be traded and any limitations on access to the contract market.
          ``(3) Contracts not readily subject to manipulation.--The 
        board of trade shall list on the contract market only contracts 
        that are not readily susceptible to manipulation.
          ``(4) Monitoring of trading.--The board of trade shall 
        monitor trading to prevent manipulation, price distortion, and 
        disruptions of the delivery or cash-settlement process.
          ``(5) Position limitations or accountability.--To reduce the 
        potential threat of market manipulation or congestion, 
        especially during trading in the delivery month, the board of 
        trade shall adopt position limitations or position 
        accountability for speculators, where necessary and 
        appropriate.
          ``(6) Emergency authority.--The board of trade shall adopt 
        rules to provide for the exercise of emergency authority, in 
        consultation or cooperation with the Commission, where 
        necessary and appropriate, including the authority to--
                  ``(A) liquidate or transfer open positions in any 
                contract;
                  ``(B) suspend or curtail trading in any contract; and
                  ``(C) require market participants in any contract to 
                meet special margin requirements.
          ``(7) Availability of general information.--The board of 
        trade shall make available to market authorities, market 
        participants, and the public information concerning--
                  ``(A) the terms and conditions of the contracts of 
                the contract market; and
                  ``(B) the mechanisms for executing transactions on or 
                through the facilities of the contract market.
          ``(8) Daily publication of trading information.--The board of 
        trade shall make public daily information on settlement prices, 
        volume, open interest, and opening and closing ranges for 
        actively traded contracts on the contract market.
          ``(9) Execution of transactions.--The board of trade shall 
        provide a competitive, open, and efficient market and mechanism 
        for executing transactions.
          ``(10) Trade information.--The board of trade shall maintain 
        rules and procedures to provide for the recording and safe 
        storage of all identifying trade information in a manner that 
        enables the contract market to use the information for purposes 
        of assisting in the prevention of customer and market abuses 
        and providing evidence of any violations of the rules of the 
        contract market.
          ``(11) Financial integrity of contracts.--The board of trade 
        shall establish and enforce rules providing for the financial 
        integrity of any contracts traded on the contract market, 
        including rules to ensure the financial integrity of any 
        futures commission merchants and introducing brokers and the 
        protection of customer funds.
          ``(12) Protection of market participants.--The board of trade 
        shall establish and enforce rules to protect market 
        participants from abusive practices committed by any party 
        acting as an agent for the participants.
          ``(13) Dispute resolution.--The board of trade shall 
        establish and enforce rules regarding and provide facilities 
        for alternative dispute resolution as appropriate for market 
        participants and any market intermediaries.
          ``(14) Governance fitness standards.--The board of trade 
        shall establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, members of 
        the contract market, and any other persons with direct access 
        to the facility (including any parties affiliated with any of 
        the persons described in this paragraph).
          ``(15) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the contract market and 
        establish a process for resolving such conflicts of interest.
          ``(16) Composition of boards of mutually owned contract 
        markets.--In the case of a mutually owned contract market, the 
        board of trade shall ensure that the composition of the 
        governing board reflects market participants.
          ``(17) Recordkeeping.--The board of trade shall--
                  ``(A) maintain full records of all activities related 
                to the business of the contract market in a form and 
                manner acceptable to the Commission for a period of at 
                least 5 years;
                  ``(B) make the records readily available during at 
                least the first 2 years of the 5-year period and 
                provide the records to the Commission at the expense of 
                the person required to maintain the records; and
                  ``(C) keep the records open to inspection by any 
                representative of the Commission or the Department of 
                Justice.
          ``(18) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                  ``(A) adopting any rules or taking any actions that 
                result in any unreasonable restraints of trade; or
                  ``(B) imposing any material anticompetitive burden on 
                trading on the contract market.
  ``(e) Current Agricultural and Metal Commodities.--
          ``(1) Subject to paragraph (2), a contract for purchase or 
        sale for future delivery of an agricultural or metal commodity 
        enumerated in section 1a(3) that is available for trade on a 
        contract market, as of the date of the enactment of this 
        subsection, may be traded only on a contract market designated 
        under this section.
          ``(2) In order to promote responsible economic or financial 
        innovation and fair competition, the Commission, on application 
        by any person, after notice and public comment and opportunity 
        for hearing, may prescribe rules and regulations to provide for 
        the offer and sale of contracts for future delivery or options 
        thereon to be conducted on a derivatives transaction execution 
        facility.''.

SEC. 115. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

  The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5 (as amended by section 112(2)) the following:

``SEC. 5A. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

  ``(a) In General.--In lieu of compliance with the contract market 
designation requirements of section 5, a board of trade may elect to 
operate as a registered derivatives transaction execution facility if 
the facility is--
          ``(1) designated as a contract market and meets the 
        requirements of this section; or
          ``(2) registered as a derivatives transaction execution 
        facility under subsection (c).
  ``(b) Requirements for Trading Futures Contracts or Other Derivatives 
Transactions.--
          ``(1) In general.--A registered derivatives transaction 
        execution facility under subsection (a) may trade any futures 
        contract (or option on such a contract) on or through the 
        facility only by satisfying the requirements of this section.
          ``(2) Requirements for underlying commodities.--A registered 
        derivatives transaction execution facility may trade any 
        futures contract only if--
                  ``(A) the underlying commodity has a nearly 
                inexhaustible deliverable supply;
                  ``(B) the underlying commodity has a deliverable 
                supply that is sufficiently large that the contract is 
                highly unlikely to be susceptible to the threat of 
                manipulation;
                  ``(C) the underlying commodity has no cash market; or
                  ``(D) the Commission determines, based on the market 
                characteristics, surveillance history, self-regulatory 
                record, and capacity of the facility that trading in 
                the futures contract is highly unlikely to be 
                susceptible to the threat of manipulation.
          ``(3) Eligible traders.--To trade on a registered derivatives 
        transaction execution facility, a person shall--
                  ``(A) be authorized by the board of trade to trade on 
                the facility; and
                  ``(B)(i) be an eligible contract participant; or
                  ``(ii) be a person trading through a futures 
                commission merchant that--
                          ``(I) is registered with the Commission;
                          ``(II) is a member of a futures self-
                        regulatory organization;
                          ``(III) is a clearing member of a derivatives 
                        clearing organization; and
                          ``(IV) has net capital of at least 
                        $20,000,000.
          ``(4) Trading by contract markets.--A board of trade that is 
        designated as a contract market shall, to the extent that the 
        contract market also operates a registered derivatives 
        transaction execution facility--
                  ``(A) provide a physical location for the contract 
                market trading of the board of trade that is separate 
                from trading on the derivatives transaction execution 
                facility of the board of trade; or
                  ``(B) if the board of trade uses the same electronic 
                trading system for trading on the contract market and 
                derivatives transaction execution facility of the board 
                of trade, identify whether the electronic trading is 
                taking place on the contract market or the derivatives 
                transaction execution facility.
  ``(c) Criteria for Registration.--
          ``(1) In general.--To be registered as a registered 
        derivatives transaction execution facility, the board of trade 
        shall demonstrate to the Commission that the board of trade 
        meets the criteria specified in this paragraph.
          ``(2) Deterrence of abuses.--The board of trade shall 
        establish and enforce trading rules that will deter abuses and 
        has the capacity to detect, investigate, and enforce those 
        rules, including means to--
                  ``(A) obtain information necessary to perform the 
                functions required under this section; or
                  ``(B) use technological means to--
                          ``(i) provide market participants with 
                        impartial access to the market; and
                          ``(ii) capture information that may be used 
                        in establishing whether rule violations have 
                        occurred.
          ``(3) Trading procedures.--The board of trade shall establish 
        and enforce rules or terms and conditions defining, or 
        specifications detailing, trading procedures to be used in 
        entering and executing orders traded on the facilities of the 
        board of trade. Such rules may authorize--
                  ``(A) an exchange of--
                          ``(i) futures in connection with a cash 
                        commodity transaction;
                          ``(ii) futures for cash commodities;
                          ``(iii) transfer trades or office trades; or
                          ``(iv) futures for swaps; and
                  ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the registered derivatives transaction 
                execution facility or a derivatives clearing 
                organization.
          ``(4) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules or terms and conditions 
        providing for the financial integrity of transactions entered 
        on or through the facilities of the board of trade, including 
        rules or terms and conditions to ensure the financial integrity 
        of any futures commission merchants and introducing brokers and 
        the protection of customer funds.
  ``(d) Core Principles for Registered Derivatives Transaction 
Execution Facilities.--
          ``(1) In general.--To maintain the registration of a board of 
        trade as a derivatives transaction execution facility, a board 
        of trade shall comply with the core principles specified in 
        this subsection.
          ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce the rules of the facility, including any 
        terms and conditions of any contracts traded on or through the 
        facility and any limitations on access to the facility.
          ``(3) Monitoring of trading.--The board of trade shall 
        monitor trading in the contracts of the facility to ensure 
        orderly trading in the contract and to maintain an orderly 
        market while providing any necessary trading information to the 
        Commission to allow the Commission to discharge the 
        responsibilities of the Commission under the Act.
          ``(4) Disclosure of general information.--The board of trade 
        shall disclose publicly and to the Commission information 
        concerning--
                  ``(A) contract terms and conditions;
                  ``(B) trading conventions, mechanisms, and practices;
                  ``(C) financial integrity protections; and
                  ``(D) other information relevant to participation in 
                trading on the facility.
          ``(5) Daily publication of trading information.--The board of 
        trade shall make public daily information on settlement prices, 
        volume, open interest, and opening and closing ranges for 
        actively traded contracts on the facility.
          ``(6) Fitness standards.--The board of trade shall establish 
        and enforce appropriate fitness standards for directors, 
        members of any disciplinary committee, members, and any other 
        persons with direct access to the facility, including any 
        parties affiliated with any of the persons described in this 
        paragraph.
          ``(7) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the derivatives transaction 
        execution facility and establish a process for resolving such 
        conflicts of interest.
          ``(8) Recordkeeping.--The board of trade shall--
                  ``(A) maintain full records of all activities related 
                to the business of the derivatives transaction 
                execution facility in a form and manner acceptable to 
                the Commission for a period of at least 5 years;
                  ``(B) make the records readily available during at 
                least the first 2 years of the 5-year period and 
                provide the records to the Commission at the expense of 
                the person required to maintain the records; and
                  ``(C) keep the records open to inspection by any 
                representatives of the Commission or the Department of 
                Justice.
          ``(9) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                  ``(A) adopting any rules or taking any actions that 
                result in any unreasonable restraint of trade; or
                  ``(B) imposing any material anticompetitive burden on 
                trading on the derivatives transaction execution 
                facility.
  ``(e) Use of Broker-Dealers, Depository Institutions, and Farm Credit 
System Institutions as Intermediaries.--
          ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer, 
        depository institution, or institution of the Farm Credit 
        System that meets the requirements of paragraph (2) to--
                  ``(A) act as an intermediary in transactions executed 
                on the facility on behalf of customers of the broker-
                dealer, depository institution, or institution of the 
                Farm Credit System; and
                  ``(B) receive funds of customers to serve as margin 
                or security for such transactions.
          ``(2) Requirements.--The requirements referred to in 
        paragraph (1) are that--
                  ``(A) the broker-dealer be in good standing with the 
                Securities and Exchange Commission, or the depository 
                institution or institution of the Farm Credit System be 
                in good standing with Federal bank regulatory agencies 
                (including the Farm Credit Administration), as 
                applicable; and
                  ``(B) if the broker-dealer, depository institution, 
                or institution of the Farm Credit System carries or 
                holds customer accounts or funds for transactions on 
                the derivatives transaction execution facility for more 
                than 1 business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit System 
                is registered as a futures commission merchant and is a 
                member of a registered futures association.
          ``(3) Implementation.--The Commission shall cooperate and 
        coordinate with the Securities and Exchange Commission, the 
        Secretary of the Treasury, and Federal banking regulatory 
        agencies (including the Farm Credit Administration) in adopting 
        rules and taking any other appropriate action to facilitate the 
        implementation of this subsection.
  ``(f) Segregation of Customer Funds.--Not later than 180 days after 
the effective date of the Commodity Futures Modernization Act of 2000, 
consistent with regulations adopted by the Commission, a registered 
derivatives transaction execution facility may authorize a futures 
commission merchant to offer any customer of the futures commission 
merchant that is an eligible contract participant the right to not 
segregate the customer funds of the futures commission merchant for 
purposes of trading on or through the facilities of the registered 
derivatives transaction execution facility.
  ``(g) Election To Trade Excluded Commodities.--
          ``(1) In general.--A board of trade that is a registered 
        derivatives transaction execution facility may trade on the 
        facility any agreements, contracts, or transactions involving 
        excluded commodities that are otherwise excluded from this Act 
        under section 2(c), 2(d), or 2(h).
          ``(2) Exclusive jurisdiction of the commission.--The 
        Commission shall have exclusive jurisdiction over agreements, 
        contracts, or transactions described in paragraph (1) to the 
        extent that the agreements, contracts, or transactions are 
        traded on a derivatives transaction execution facility.''.

SEC. 116. DERIVATIVES CLEARING.

  (a) In General.--Subtitle A of title IV of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 is amended--
          (1) by inserting before the section heading for section 401, 
        the following new heading:

      ``CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING'';

          (2) in section 402, by striking ``this subtitle'' and 
        inserting ``this chapter''; and
          (3) by inserting after section 407, the following new 
        chapter:

            ``CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS

``SEC. 408. DEFINITIONS.

  ``For purposes of this chapter, the following definitions shall 
apply:
          ``(1) Multilateral clearing organization.--The term 
        `multilateral clearing organization' means a system utilized by 
        more than 2 participants in which the bilateral credit 
        exposures of participants arising from the transactions cleared 
        are effectively eliminated and replaced by a system of 
        guarantees, insurance, or mutualized risk of loss.
          ``(2) Over-the-counter derivative instrument.--The term 
        `over-the-counter derivative instrument' means--
                  ``(A) any agreement, contract, or transaction, 
                including the terms and conditions incorporated by 
                reference in any such agreement, contract, or 
                transaction, which is an interest rate swap, option, or 
                forward agreement, including a rate floor, rate cap, 
                rate collar, cross-currency rate swap, basis swap, and 
                forward rate agreement; a spot, same day-tomorrow, 
                tomorrow-next, forward, or other foreign exchange or 
                precious metals agreement; acurrency swap, option, or 
forward agreement; an equity index or equity swap, option, or forward 
agreement; a debt index or debt swap, option, or forward agreement; a 
credit spread or credit swap, option, or forward agreement; a commodity 
index or commodity swap, option, or forward agreement; and a weather 
swap, weather derivative, or weather option;
                  ``(B) any agreement, contract or transaction similar 
                to any other agreement, contract, or transaction 
                referred to in this clause that is presently, or in the 
                future becomes, regularly entered into by parties that 
                participate in swap transactions (including terms and 
                conditions incorporated by reference in such agreement) 
                and that is a forward, swap, or option on 1 or more 
                occurrences of any event, rates, currencies, 
                commodities, equity securities or other equity 
                instruments, debt securities or other debt instruments, 
                economic or other indices or measures of economic or 
                other risk or value;
                  ``(C) any contract of sale of a commodity for future 
                delivery or commodity option described in subsection 
                (c), (d), (f), (h), or (i) of section 2 of the 
                Commodity Exchange Act or exempted under section 4(c) 
                of such Act; and
                  ``(D) any option to enter into any, or any 
                combination of, agreements, contracts or transactions 
                referred to in this subparagraph.
          ``(3) Other definitions.--The terms `State member bank' and 
        `affiliate' have the meanings given the terms in section 3 of 
        the Federal Deposit Insurance Act.

``SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.

  ``(a) In General.--Except with respect to clearing organizations 
described in subsection (b), no person may operate a multilateral 
clearing organization for over-the-counter derivative instruments, or 
otherwise engage in activities that constitute such a multilateral 
clearing organization unless the person is a national bank, State 
member bank, an affiliate of a national bank or a State member bank, or 
a corporation chartered under section 25A of the Federal Reserve Act.
  ``(b) Clearing Organizations.--Subsection (a) shall not apply to any 
clearing organization that--
          ``(1) is registered as a clearing agency under the Securities 
        Exchange Act of 1934;
          ``(2) performs clearing functions for a contract market 
        designated pursuant to the Commodity Exchange Act; or
          ``(3) is supervised by a foreign financial regulator that an 
        appropriate Federal financial regulatory agency has determined 
        satisfies appropriate standards.''.
  (b) Enforcement Powers of the Board of Governors of the Federal 
Reserve System.--Section 9 of the Federal Reserve Act (12 U.S.C. 221) 
is amended by adding at the end the following new paragraph:
          ``(24) Enforcement authority.--Section 3(u), subsections (j) 
        and (k) of section 7, subsections (b) through (n), (s), (u), 
        and (v) of section 8, and section 19 of the Federal Deposit 
        Insurance Act shall apply to a State member bank which is not 
        an insured depository institution (as defined in section 3 of 
        the Federal Deposit Insurance Act) in the same manner and to 
        the same extent as such provisions apply to State member 
        insured banks, and any reference in such sections to an insured 
        depository institution shall be deemed to include a reference 
        to any such noninsured State member bank.''.
  (c) Resolution of Clearing Banks.--The Federal Reserve Act (12 U.S.C. 
221 et seq.) is amended by inserting after section 9A the following new 
section:

``SEC. 9B. RESOLUTION OF CLEARING BANKS.

  ``(a) Conservatorship or Receivership.--
          ``(1) Appointment.--The Board may appoint a conservator or 
        receiver to take possession and control of any uninsured State 
        member bank which operates, or operates as, a multilateral 
        clearing organization pursuant to section 409 of the Federal 
        Deposit Insurance Corporation Improvement Act of 1991 to the 
        same extent and in the same manner as the Comptroller of the 
        Currency may appoint a conservator or receiver for a national 
        bank.
          ``(2) Powers.--The conservator or receiver for an uninsured 
        State member bank referred to in paragraph (1) shall exercise 
        the same powers, functions, and duties, subject to the same 
        limitations, as a conservator or receiver for a national bank.
  ``(b) Board Authority.--The Board shall have the same authority with 
respect to any conservator or receiver appointed under subsection (a), 
and the uninsured State member bank for which the conservator or 
receiver has been appointed, as the Comptroller of the Currency has 
with respect to a conservator or receiver for a national bank and the 
national bank for which the conservator or receiver has been appointed.
  ``(c) Bankruptcy Proceedings.--The Board (in the case of an uninsured 
State member bank which operates, or operates as, such a multilateral 
clearing organization) may direct a conservator or receiver appointed 
for such bank to file a petition pursuant to title 11, United States 
Code, in which case, title 11, United States Code, shall apply to such 
bank in lieu of otherwise applicable Federal or State insolvency 
law.''.
  (d) Technical and Conforming Amendments to Title 11, United States 
Code.--
          (1) Bankruptcy code debtors.--Section 109(b)(2) of title 11, 
        United States Code, is amended by striking ``; or'' and 
        inserting the following: ``, except that an uninsured State 
        member bank, or a corporation organized under section 25A of 
        the Federal Reserve Act, which operates, or operates as, a 
        multilateral clearing organization pursuant to section 409 of 
        the Federal Deposit Insurance Corporation Improvement Act of 
        1991 may be a debtor if a petition is filed at the direction of 
        the Board of Governors of the Federal Reserve System; or''.
          (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
        States Code, is amended to read as follows:
  ``(d) Only a railroad, a person that may be a debtor under chapter 7 
of this title (except a stockbroker or a commodity broker), and an 
uninsured State member bank, or a corporation organized under section 
25A of the Federal Reserve Act, which operates, or operates as, a 
multilateral clearing organization pursuant to section 409 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991 may be a 
debtor under chapter 11 of this title.''.
          (3) Definition of financial institution.--Section 101(22) of 
        title 11, United States Code, is amended to read as follows:
          ``(22) the term `financial institution'--
                  ``(A) means a Federal reserve bank or an entity 
                (domestic or foreign) that is a commercial or savings 
                bank, industrial savings bank, savings and loan 
                association, trust company, a bank or a corporation 
                organized under section 25A of the Federal Reserve Act 
                and, when any such bank or entity is acting as agent or 
                custodian for a customer in connection with a 
                securities contract, as defined in section 741, such 
                customer; and
                  ``(B) includes any person described in subparagraph 
                (A) which operates, or operates as, a multilateral 
                clearing organization pursuant to section 409 of the 
                Federal Deposit Insurance Corporation Improvement Act 
                of 1991;''.
          (4) Definition of uninsured state member bank.--Section 101 
        of title 11, United States Code, is amended by inserting after 
        paragraph (54) the following new paragraph--
  ``(54A) the term `uninsured State member bank' means a State member 
bank (as defined in section 3 of the Federal Deposit Insurance Act) the 
deposits of which are not insured by the Federal Deposit Insurance 
Corporation; and''.
  (5) Subchapter v of chapter 7.--
                  (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                          (i) by redesignating subsections (e) through 
                        (i) as subsections (f) through (j), 
                        respectively; and
                          (ii) by inserting after subsection (d) the 
                        following new subsection:
  ``(e) Scope of Application.--Subchapter V of chapter 7 of this title 
shall apply only in a case under such chapter concerning the 
liquidation of an uninsured State member bank, or a corporation 
organized under section 25A of the Federal Reserve Act, which operates, 
or operates as, a multilateral clearing organization pursuant to 
section 409 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991.''.
                  (B) Clearing bank liquidation.--Chapter 7 of title 
                11, United States Code, is amended by adding at the end 
                the following new subchapter:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec. 781. Definitions

  ``For purposes of this subchapter, the following definitions shall 
apply:
          ``(1) Board.--The term `Board' means the Board of Governors 
        of the Federal Reserve System.
          ``(2) Depository institution.--The term `depository 
        institution' has the same meaning as in section 3 of the 
        Federal Deposit Insurance Act, and includes any wholesale bank.
          ``(3) Clearing bank.--The term `clearing bank' means an 
        uninsured State member bank, or a corporation organized under 
        section 25A of the Federal Reserve Act, which operates, or 
        operates as, a multilateral clearing organization pursuant to 
        section 409 of the Federal Deposit Insurance Corporation 
        Improvement Act of 1991.

``Sec. 782. Selection of trustee

  ``(a) In General.--
          ``(1) Appointment.--Notwithstanding any other provision of 
        this title, the conservator or receiver who files the petition 
        shall be the trustee under this chapter, unless the Board 
        designates an alternative trustee.
          ``(2) Successor.--The Board may designate a successor trustee 
        if required.
  ``(b) Authority of Trustee.--Whenever the Board appoints or 
designates a trustee, chapter 3 and sections 704 and 705 of this title 
shall apply to the Board in the same way and to the same extent that 
they apply to a United States trustee.

``Sec. 783. Additional powers of trustee

  ``(a) Distribution of Property Not of the Estate.--The trustee under 
this subchapter has power to distribute property not of the estate, 
including distributions to customers that are mandated by subchapters 
III and IV of this chapter.
  ``(b) Disposition of Institution.--The trustee under this subchapter 
may, after notice and a hearing--
          ``(1) sell the clearing bank to a depository institution or 
        consortium of depository institutions(which consortium may 
agree on the allocation of the clearing bank among the consortium);
          ``(2) merge the clearing bank with a depository institution;
          ``(3) transfer contracts to the same extent as could a 
        receiver for a depository institution under paragraphs (9) and 
        (10) of section 11(e) of the Federal Deposit Insurance Act;
          ``(4) transfer assets or liabilities to a depository 
        institution;
          ``(5) transfer assets and liabilities to a bridge bank as 
        provided in paragraphs (1), (3)(A), (5), (6), of section 11(n) 
        of the Federal Deposit Insurance Act, paragraphs (9) through 
        (13) of such section, and subparagraphs (A) through (H) and 
        subparagraph (K) of paragraph (4) of such section 11(n), except 
        that--
                  ``(A) the bridge bank to which such assets or 
                liabilities are transferred shall be treated as a 
                clearing bank for the purpose of this subsection; and
                  ``(B) any references in any such provision of law to 
                the Federal Deposit Insurance Corporation shall be 
                construed to be references to the appointing agency and 
                that references to deposit insurance shall be omitted.
  ``(c) Certain Transfers Included.--Any reference in this section to 
transfers of liabilities includes a ratable transfer of liabilities 
within a priority class.

``Sec. 784. Right to be heard

  ``The Board or a Federal reserve bank (in the case of a clearing bank 
that is a member of that bank) may raise and may appear and be heard on 
any issue in a case under this subchapter.''.
  (e) Clerical Amendment.--The table of sections for chapter 7 of title 
11, United States Code, is amended by adding at the end the following 
new items:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec.
``781. Definitions.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.

  (f) Resolution of Edge Act Corporations.--The 16th undesignated 
paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 624) is 
amended to read as follows:
          ``(16) Appointment of receiver or conservator.--
                  ``(A) In general.--The Board may appoint a 
                conservator or receiver for a corporation organized 
                under the provisions of this section to the same extent 
                and in the same manner as the Comptroller of the 
                Currency may appoint a conservator or receiver for a 
                national bank, and the conservator or receiver for such 
                corporation shall exercise the same powers, functions, 
                and duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
                  ``(B) Equivalent authority.--The Board shall have the 
                same authority with respect to any conservator or 
                receiver appointed for a corporation organized under 
                the provisions of this section under this paragraph and 
                any such corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver of a 
                national bank and the national bank for which a 
                conservator or receiver has been appointed.
                  ``(C) Title 11 petitions.--The Board may direct the 
                conservator or receiver of a corporation organized 
                under the provisions of this section to file a petition 
                pursuant to title 11, United States Code, in which 
                case, title 11, United States Code, shall apply to the 
                corporation in lieu of otherwise applicable Federal or 
                State insolvency law.''.
  (g) Derivatives Clearing Organizations.--The Commodity Exchange Act 
(7 U.S.C. 1 et seq.) is amended by inserting after section 5a (as added 
by section 15) the following new section:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

  ``(a) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for a derivatives clearing organization, 
unless registered with the Commission, directly or indirectly to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a derivatives clearing organization 
described in section 1a(8) with respect to a contract of sale of a 
commodity for future delivery, option on a contract of sale of a 
commodity for future delivery, or option on a commodity that is not an 
exclusion-eligible commodity (unless the contract or option is 
described in subsection (c), (d), (f), (h), or (i) of section 2 or 
exempted under section 4(c)).
  ``(b) Voluntary Registration.--A derivatives clearing organization 
that clears agreements, contracts, or transactions described in 
subsection (c), (d), (f), (h), or (i) of section 2 or exempted under 
section 4(c) may register with the Commission as a derivatives clearing 
organization.
  ``(c) Registration of Derivatives Clearing Organizations.--
          ``(1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing such 
        information as the Commission may require for the purpose of 
        making the determinations required for approval under paragraph 
        (2).
          ``(2) Core principles.--
                  ``(A) In general.--To be registered and to maintain 
                registration as a derivatives clearing organization, an 
                applicant shall demonstrate to the Commission that the 
                applicant complies with the core principles specified 
                in this paragraph. 
                  ``(B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate financial, 
                operational, and managerial resources to discharge the 
                responsibilities of a derivatives clearing organization 
                without interruption in various market conditions.
                  ``(C) Participant and product eligibility.--The 
                applicant shall establish--
                          ``(i) appropriate admission and continuing 
                        eligibility standards (including appropriate 
                        minimum financial requirements) for members of 
                        and participants in the organization; and
                          ``(ii) appropriate standards for determining 
                        eligibility of agreements, contracts, or 
                        transactions submitted to the applicant.
                  ``(D) Risk management.--The applicant shall have the 
                ability to manage the risks associated with discharging 
                the responsibilities of a derivatives clearing 
                organization through the use of appropriate tools and 
                procedures.
                  ``(E) Settlement procedures.--The applicant shall 
                have the ability to--
                          ``(i) complete settlements on a timely basis 
                        under varying circumstances;
                          ``(ii) maintain an adequate record of the 
                        flow of funds associated with each transaction 
                        that the applicant clears; and
                          ``(iii) comply with the terms and conditions 
                        of any permitted netting or offset arrangements 
                        with other clearing organizations.
                  ``(F) Treatment of funds.--The applicant shall have 
                standards and procedures designed to protect and ensure 
                the safety of member and participant funds.
                  ``(G) Default rules and procedures.--The applicant 
                shall have rules and procedures designed to allow for 
                efficient, fair, and safe management of events when 
                members or participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                  ``(H) Rule enforcement.--The applicant shall--
                          ``(i) maintain adequate arrangements and 
                        resources for the effective monitoring and 
                        enforcement of compliance with rules of the 
                        applicant and for resolution of disputes; and
                          ``(ii) have the authority and ability to 
                        discipline, limit, suspend, or terminate a 
                        member's or participant's activities for 
                        violations of rules of the applicant.
                  ``(I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                          ``(i) has established and will maintain a 
                        program of oversight and risk analysis to 
                        ensure that the automated systems of the 
                        applicant function properly and have adequate 
                        capacity and security; and
                          ``(ii) has established and will maintain 
                        emergency procedures and a plan for disaster 
                        recovery, and will periodically test backup 
                        facilities sufficient to ensure daily 
                        processing, clearing, and settlement of 
                        transactions.
                  ``(J) Reporting.--The applicant shall provide to the 
                Commission all information necessary for the Commission 
                to conduct the oversight function of the applicant with 
                respect to the activities of the derivatives clearing 
                organization.
                  ``(K) Recordkeeping.--The applicant shall--
                          ``(i) maintain full records of all activities 
                        related to the business of the applicant as a 
                        derivatives clearing organization in a form and 
                        manner acceptable to the Commission for a 
                        period of at least 5 years;
                          ``(ii) make the records readily available 
                        during at least the first 2 years of the 5-year 
                        period and provide the records to the 
                        Commission at the expense of the person 
                        required to maintain the records; and
                          ``(iii) keep the records open to inspection 
                        by any representative of the Commission or the 
                        Department of Justice.
                  ``(L) Public information.--The applicant shall make 
                information concerning the rules and operating 
                procedures governing the clearing and settlement 
                systems (including default procedures) available to 
                market participants.
                  ``(M) Information sharing.--The applicant shall--
                          ``(i) enter into and abide by the terms of 
                        all appropriate and applicable domestic and 
                        international information-sharing agreements; 
                        and
                          ``(ii) use relevant information obtained from 
                        the agreements in carrying out the clearing 
                        organization's risk management program.
                  ``(N) Antitrust considerations.--Unless appropriate 
                to achieve the purposes of this Act, the derivatives 
                clearing organization shall avoid--
                          ``(i) adopting any rule or taking any action 
                        that results in any unreasonable restraint of 
                        trade; or
                          ``(ii) imposing any material anticompetitive 
                        burden on trading on the contract market.
          ``(3) Orders concerning competition.--A derivatives clearing 
        organization may request the Commission to issue an order 
        concerning whether a rule or practice of the applicant is the 
        least anticompetitive means of achieving the objectives, 
        purposes, and policies of this Act.
  ``(d) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that--
          ``(1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of trade 
        that has been designated by the Commission as a contract market 
        for such agreements, contracts, or transactions before the date 
        of enactment of this section; and
          ``(2) the Commission has reviewed and approved the rules of 
        the derivatives clearing organization before that date.
  ``(e) Appointment of Trustee.--
          ``(1) In general.--If a proceeding under section 5e results 
        in the suspension or revocation of the registration of a 
        derivatives clearing organization, or if a derivatives clearing 
        organization withdraws from registration, the Commission, on 
        notice to the derivatives clearing organization, may apply to 
        the appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
          ``(2) Assumption of jurisdiction.--If the Commission applies 
        for appointment of a trustee under paragraph (1)--
                  ``(A) the court may take exclusive jurisdiction over 
                the derivatives clearing organization and the records 
                and assets of the derivatives clearing organization, 
                wherever located; and
                  ``(B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the Commission, 
                as trustee with power to take possession and continue 
                to operate or terminate the operations of the 
                derivatives clearing organization in an orderly manner 
                for the protection of participants, subject to such 
                terms and conditions as the court may prescribe.
  ``(f) Linking of Regulated Clearing Facilities.--
          ``(1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing organizations 
        registered under this Act with other regulated clearance 
        facilities for the coordinated settlement of cleared 
        transactions.
          ``(2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking agencies 
        and the Securities and Exchange Commission.''.

SEC. 117. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

  The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5b (as added by section 14) the following:

``SEC. 5C. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

  ``(a) Acceptable Business Practices Under Core Principles.--
          ``(1) In general.--Consistent with the purposes of this Act, 
        the Commission may issue interpretations, or approve 
        interpretations submitted to the Commission, of sections 5(d), 
        5a(d), and 5b(d)(2) to describe what would constitute an 
        acceptable business practice under such sections.
          ``(2) Effect of interpretation.--An interpretation issued 
        under paragraph (1) shall not provide the exclusive means for 
        complying with such sections.
  ``(b) Delegation of Functions Under Core Principles.--
          ``(1) In general.--A contract market or derivatives 
        transaction execution facility may comply with any applicable 
        core principle through delegation of any relevant function to a 
        registered futures association or another registered entity.
          ``(2) Responsibility.--A contract market or derivatives 
        transaction execution facility that delegates a function under 
        paragraph (1) shall remain responsible for carrying out the 
        function.
  ``(c) New Contracts, New Rules, and Rule Amendments.--
          ``(1) In general.--Subject to paragraph (2), a registered 
        entity may elect to list for trading any new contract or other 
        instrument, or may elect to approve and implement any new rule 
        or rule amendment, by providing to the Commission (and the 
        Secretary of the Treasury, in the case of a contract of sale 
        for future delivery of a government security (or option 
        thereon) or a rule or rule amendment specifically related to 
        such a contract) a written certification that the new contract, 
        new rule, or rule amendment complies with this Act (including 
        regulations under this Act).
          ``(2) Prior approval.--
                  ``(A) In general.--A registered entity may request 
                that the Commission grant prior approval to any new 
                contract or other instrument, new rule, or rule 
                amendment.
                  ``(B) Prior approval required.--Notwithstanding any 
                other provision of this section, a designated contract 
                market shall submit to the Commission for prior 
                approval each rule amendment that materially changes 
                the terms and conditions, as determined by the 
                Commission, in any contract of sale for future delivery 
                of a commodity specifically enumerated in section 1a(3) 
                of this Act (or any option thereon) traded through its 
                facilities if such rule amendment applies to contracts 
                and delivery months which have already been listed for 
                trading and have open interest.
                  ``(C) Deadline.--If prior approval is requested under 
                subparagraph (A), the Commission shall take final 
                action on the request not later than 90 days after 
                submission of the request, unless the person submitting 
                the request agrees to an extension of the time 
                limitation established under this subparagraph.
          ``(3) Approval.--The Commission shall approve any such new 
        contract or instrument, new rule, or rule amendment unless the 
        Commission finds that the new contract or instrument, new rule, 
        or rule amendment would violate this Act.
  ``(d) Violation of Core Principles.--
          ``(1) In general.--If the Commission has reason to believe 
        that a registered entity is violating any applicable provision 
        specified in section 5(d), 5a(d), or5b(d)(2), the Commission 
shall notify the registered entity in writing of the reasons for the 
preliminary determination by the Commission of a violation, including 
any data, materials, and facts the Commission relied on in making the 
preliminary determination.
          ``(2) Injunctive or administrative action.--The Commission 
        may initiate an action for an injunction under section 6c or an 
        administrative proceeding, to demonstrate, by the preponderance 
        of the evidence, that--
                  ``(A) the registered entity is violating any 
                applicable provision specified in section 5(d), 5a(d), 
                or 5b(d)(2); and
                  ``(B) the Commission has recommended an appropriate 
                remedial action to remove the deficiency based on an 
                analysis of the costs and benefits in the public 
                interest of the Commission recommendation.
          ``(3) Burden of proof.--In making a determination that a 
        registered entity is violating any applicable provision 
        specified in section 5(d), 5a(d), or 5b(d)(2), the Commission 
        shall have the burden of proving that the registered entity is 
        violating the applicable core principle.
  ``(e) Reservation of Emergency Authority.--Nothing in this section 
shall limit or in any way affect the emergency powers of the Commission 
provided in section 8a(9) of this Act.''.

SEC. 118. EXEMPT BOARDS OF TRADE.

  The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5c (as added by section 115) the following:

``SEC. 5D. EXEMPT BOARDS OF TRADE.

  ``(a) In General.--Except as otherwise provided in this section, a 
contract of sale (or option on such a contract) of a commodity for 
future delivery traded on or through the facilities of an exempt board 
of trade shall be exempt from all provisions of this Act, other than 
section 2(g).
  ``(b) Criteria for Exemption.--To qualify for an exemption under 
subsection (a), a board of trade shall limit trading on or through the 
facilities of the board of trade to contracts of sale of a commodity 
for future delivery (or options on such contracts)--
          ``(1) that have--
                  ``(A) a nearly inexhaustible deliverable supply;
                  ``(B) a deliverable supply that is sufficiently 
                large, and a cash market sufficiently liquid, to render 
                any contract traded on the commodity highly unlikely to 
                be susceptible to the threat of manipulation; or
                  ``(C) no cash market;
          ``(2) that are entered into only between persons that are 
        eligible contract participants at the time at which the persons 
        enter into the contract; and
          ``(3) that are not contracts of sale (or options on the 
        contract) for future delivery of any security, including any 
        group or index of securities or any interest in, or interest 
        that is based on the value of, any security.
  ``(c) Antimanipulation Requirements.--A party to a futures contract 
or related option that is traded on an exempt board of trade shall be 
subject to sections 4b, 4n, 6(c), and 9(a)(2), and the Commission shall 
enforce those provisions with respect to any such trading.
  ``(d) Price Discovery.--If the Commission finds that an exempt board 
of trade is a significant source ofprice discovery for any underlying 
commodity in any transaction traded on or through the facilities of the 
board of trade, the board of trade shall disseminate publicly on a 
daily basis trading volume, opening and closing price ranges, open 
interest, and other trading data as appropriate to the market.
  ``(e) Jurisdiction.--The Commission shall have exclusive jurisdiction 
over any account, agreement, or transaction involving a contract of 
sale of a commodity for future delivery, or related option, to the 
extent that such account, agreement, or transaction is traded on an 
exempt board of trade.
  ``(f) Subsidiaries.--A board of trade that is designated as a 
contract market or registered as a derivatives transaction execution 
facility may operate an exempt board of trade by establishing a 
separate subsidiary or other legal entity and otherwise satisfying the 
requirements of this section.''.

SEC. 119. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

  Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 112(1)) is amended to read as follows:

``SEC. 5E. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED 
                    ENTITY.

  ``The failure of a registered entity to comply with any provision of 
this Act, or any regulation or order of the Commission under this Act, 
shall be cause for the suspension of the registered entity for a period 
not to exceed 180 days, or revocation of designation as a registered 
entity in accordance with the procedures and subject to the judicial 
review provided in section 6(b).''.

SEC. 120. AUTHORIZATION OF APPROPRIATIONS.

  Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is 
amended by striking ``2000'' and inserting ``2005''.

SEC. 121. PREEMPTION.

  Section 12(e) of the Commodity Exchange Act (7 U.S.C. 16(e)) is 
amended by striking paragraph (2) and inserting the following:
          ``(2) the application of any Federal or State law (including 
        any regulation) to an agreement, contract, or transaction in or 
        involving any commodity, product, right, service, or interest, 
        except that this Act shall supersede and preempt--
                  ``(A) in the case of any such agreement, contract, or 
                transaction--
                          ``(i) that is conducted on or subject to the 
                        rules of a registered entity or exempt board of 
                        trade;
                          ``(ii) that is conducted on or subject to the 
                        rules of any board of trade, exchange, or 
                        market located outside the United States, or 
                        any territory or possession of the United 
                        States (in accordance with any terms or 
                        conditions specified by the Commission by 
                        regulation); and
                          ``(iii) that is subject to regulation by the 
                        Commission under section 4c or 19; and
                  ``(B) any State or local law that prohibits or 
                regulates gaming or the operation of bucket shops 
                (other than antifraud provisions of general 
                applicability) in the case of--
                          ``(i) an electronic trading facility under 
                        section 2(e); or
                          ``(ii) an agreement, contract, or transaction 
                        that is excluded or exempt under section 2(c), 
                        2(d), 2(f), or 2(h) or is covered by the terms 
                        of an exemption granted by the Commission under 
                        section 4(c) (regardless of whether any such 
                        agreement, contract, or transaction is 
                        otherwise subject to this Act); or''.

SEC. 122. PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS.

  Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended by 
striking subsection (g) and inserting the following:
  ``(g) Predispute Resolution Agreements for Institutional Customers.--
Nothing in this section prohibits a registered futures commission 
merchant from requiring a customer that is an eligible contract 
participant, as a condition to the commission merchant's conducting a 
transaction for the customer, to enter into an agreement waiving the 
right to file a claim under this section.''.

SEC. 123. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

  Section 15 of the Commodity Exchange Act (7 U.S.C. 19) is amended by 
striking ``Sec. 15. The Commission'' and inserting the following:

``SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

  ``(a) Costs and Benefits.--
          ``(1) In general.--Before promulgating a regulation under 
        this Act or issuing an order (except as provided in paragraph 
        (3)), the Commission shall consider the costs and benefits of 
        the action of the Commission.
          ``(2) Considerations.--The costs and benefits of the proposed 
        Commission action shall be evaluated in light of--
                  ``(A) considerations of protection of market 
                participants and the public;
                  ``(B) considerations of the efficiency, 
                competitiveness, and financial integrity of futures 
                markets;
                  ``(C) considerations of price discovery;
                  ``(D) considerations of sound risk management 
                practices; and
                  ``(E) other public interest considerations.
          ``(3) Applicability.--This subsection does not apply to the 
        following actions of the Commission:
                  ``(A) An order that initiates, is part of, or is the 
                result of an adjudicatory or investigative process of 
                the Commission.
                  ``(B) An emergency action.
                  ``(C) A finding of fact regarding compliance with a 
                requirement of the Commission.
  ``(b) Antitrust Laws.--The Commission''.

SEC. 124. CONTRACT ENFORCEMENT.

  Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is 
amended by adding at the end the following:
  ``(4) Contract Enforcement Between Eligible Counterparties.--
          ``(A) In general.--No agreement, contract, or transaction 
        involving a party described in subclauses (I) through (VI) of 
        section 2(c)(2)(B)(ii) or between eligible contract 
        participants shall be void, voidable, or unenforceable, and no 
        such counterparty or eligible contract participant shall be 
        entitled to rescind, or recover any payment made with respect 
        to, such an agreement, contract, or transaction, under this 
        section or any other provision of Federal or State law based 
        solely on the failure of the agreement, contract, or 
        transaction to comply with the terms or conditions of an 
        exemption or exclusion from any provision of this Act or 
        regulations of the Commission.
          ``(B) Exception.--This paragraph shall not apply to any swap 
        agreement (as defined in section 206(b) of the Gramm-Leach-
        Bliley Act) with any party who is not an eligible contract 
        participant unless such swap agreement is entered into after 
        final regulations have been prescribed under section 49 of the 
        Federal Deposit Insurance Act.

SEC. 125. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
                    HEDGING BY AGRICULTURAL PRODUCERS.

  The Commodity Exchange Act, as otherwise amended by this Act, is 
amended by inserting after section 4o the following:

``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
                    HEDGING BY AGRICULTURAL PRODUCERS.

  ``(a) Authority.--The Commission shall consider issuing rules or 
orders which--
          ``(1) prescribe procedures under which each contract market 
        is to provide for orderly delivery, including temporary storage 
        costs, of any agricultural commodity enumerated in section 
        1a(3) which is the subject of a contract for purchase or sale 
        for future delivery;
          ``(2) increase the ease with which domestic agricultural 
        producers may participate in contract markets, including by 
        addressing cost and margin requirements, so as to better enable 
        such producers to hedge price risk associated with their 
        production;
          ``(3) provide flexibility in the minimum quantities of such 
        agricultural commodities that may be the subject of a contract 
        for purchase or sale for future delivery that is traded on a 
        contract market, to better allow domestic agricultural 
        producers to hedge such price risk; and
          ``(4) encourage exchanges to provide information and 
        otherwise facilitate the participation of domestic agricultural 
        producers in contract markets.
  ``(b) Report.--Within 1 year after the date of enactment of this 
section, the Commission shall submit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report on the steps it has 
taken to implement this section and on the activities of contract 
markets pursuant to this section.''.

SEC. 126. RULE OF CONSTRUCTION.

  Except as expressly provided in this title or an amendment made by 
this title, nothing in this title or an amendment made by the title 
supersedes, affects, or otherwise limits or expands the scope and 
applicability of laws governing the Securities and Exchange Commission.

SEC. 127. AUTHORITY OF AGENCIES TO CONSTRUE THE TERM ``CONTRACT 
                    MARKET''.

  Each executive agency of the United States Government that has 
authority to prescribe regulations under a statute that uses the term 
``contract market'' may prescribe regulations construing such term as 
referring to any contract market, derivatives transaction execution 
facility, or derivatives clearing organization that is registered with 
the Commodity Futures Trading Commission.

SEC. 128. TECHNICAL AND CONFORMING AMENDMENTS.

  (a) Commodity Exchange Act.--
          (1) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is 
        amended--
                  (A) in paragraph (3), by inserting ``aluminum, 
                copper, gold, palladium, platinum, silver,'' after 
                ``orange juice,'';
                  (B) in paragraphs (4), (5), (8), (9), (12), and (14), 
                by inserting ``or derivatives transaction execution 
                facility'' after ``contract market'' each place it 
                appears; and
                  (C) in paragraph (15)--
                          (i) in the paragraph heading, by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                          (ii) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity''.
          (2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 
        4, 4a, 3) is amended--
                  (A) by striking ``Sec. 2. (a)(1)(A)(i) The'' and 
                inserting the following:

``SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF 
                    AGENT; COMMODITY FUTURES TRADING COMMISSION; 
                    TRANSACTION IN INTERSTATE COMMERCE.

  ``(a) Jurisdiction of Commission; Commodity Futures Trading 
Commission.--
          ``(1) Jurisdiction of commission.--
                  ``(A) In general.--The''; and
                  (B) in subsection (a)--
                          (i) in paragraph (1) (as amended by 
                        subparagraph (A))--
                                  (I) by striking subparagraph (B);
                                  (II) by striking ``subparagraph (B) 
                                of this paragraph'' and inserting 
                                ``subsection (c), (d), (e), (f), (g), 
                                or (i)'';
                                  (III) by striking ``contract market 
                                designated pursuant to section 5 of 
                                this Act'' and inserting ``contract 
                                market designated or derivatives 
                                transaction execution facility 
                                registered pursuant to section 5 or 
                                5a'';
                                  (IV) by redesignating subclauses (I) 
                                and (II) as clauses (i) and (ii);
                                  (V) by striking clause (ii); and
                                  (VI) in clause (iii), by striking 
                                ``(iii) The'' and inserting the 
                                following:
                  ``(B) Liability of principal for act of agent.--
                The'';
                          (ii) in paragraph (7), by striking ``contract 
                        market'' and inserting ``registered entity'';
                          (iii) in paragraph (8)(B)(ii)--
                                  (I) in the first sentence, by 
                                striking ``designation as a contract 
                                market'' and inserting ``designation or 
                                registration as a contract market or 
                                derivatives transaction execution 
                                facility'';
                                  (II) in the second sentence, by 
                                striking ``designate a board of trade 
                                as a contract market'' and inserting 
                                ``designate or register a board of 
                                trade as a contract market or 
                                derivatives transaction execution 
                                facility''; and
                                  (III) in the fourth sentence, by 
                                striking ``designating, or refusing, 
                                suspending, or revoking the designation 
                                of, a board of trade as a contract 
                                market involving transactions for 
                                future delivery referred to in this 
                                clause or in considering possible 
                                emergency action under section 8a(9) of 
                                this Act'' and inserting ``designating, 
                                registering, or refusing, suspending, 
                                or revoking the designation or 
                                registration of, a board of trade as a 
                                contract market or derivatives 
                                transaction execution facility 
                                involving transactions for future 
                                delivery referred to in this clause or 
                                in considering any possible action 
                                under this Act (including without 
                                limitation emergency action under 
                                section 8a(9))'', and by striking 
                                ``designation, suspension, revocation, 
                                or emergency action'' and inserting 
                                ``designation, registration, 
                                suspension, revocation, or action''; 
                                and
                          (iv) by moving paragraphs (2) through (11) 2 
                        ems to the right.
          (3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is 
        amended--
                  (A) in subsection (a)--
                          (i) in paragraph (1), by striking 
                        ``designated by the Commission as a `contract 
                        market' for'' and inserting ``designated or 
                        registered by the Commission as a contract 
                        market or derivatives transaction execution 
                        facility for'';
                          (ii) in paragraph (2), by striking ``member 
                        of such''; and
                          (iii) in paragraph (3), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; and
                  (B) in subsection (c)--
                          (i) in paragraph (1)--
                                  (I) by striking ``designated as a 
                                contract market'' and inserting 
                                ``designated or registered as a 
                                contract market or derivatives 
                                transaction execution facility''; and
                                  (II) by striking ``section 
                                2(a)(1)(B)'' and inserting ``section 
                                2(g)''; and
                          (ii) in paragraph (2)(B)(ii), by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market''.
          (4) Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is 
        amended--
                  (A) in subsection (a)--
                          (i) in the first sentence, by inserting ``or 
                        derivatives transaction execution facilities'' 
                        after ``contract markets''; and
                          (ii) in the second sentence, by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market'';
                  (B) in subsection (b)--
                          (i) in paragraph (1), by inserting ``, or 
                        derivatives transaction execution facility or 
                        facilities,'' after ``markets''; and
                          (ii) in paragraph (2), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; and
                  (C) in subsection (e)--
                          (i) by striking ``contract market or'' each 
                        place it appears and inserting ``contract 
                        market, derivatives transaction execution 
                        facility, or'';
                          (ii) by striking ``licensed or designated'' 
                        each place it appears and inserting ``licensed, 
                        designated, or registered''; and
                          (iii) by striking ``contract market, or'' and 
                        inserting ``contract market or derivatives 
                        transaction execution facility, or''.
          (5) Section 4b(a) of the Commodity Exchange Act (7 U.S.C. 
        6b(a)) is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
          (6) Sections 4c(g), 4d, 4e, and 4f of the Commodity Exchange 
        Act (7 U.S.C. 6c(g), 6d, 6e, 6f) are amended by inserting ``or 
        derivatives transaction execution facility'' after ``contract 
        market'' each place it appears.
          (7) Section 4g of the Commodity Exchange Act (7 U.S.C. 6g) is 
        amended--
                  (A) in subsection (b), by striking ``clearinghouse 
                and contract market'' and inserting ``registered 
                entity''; and
                  (B) in subsection (f), by striking ``clearinghouses, 
                contract markets, and exchanges'' and inserting 
                ``registered entities''.
          (8) Section 4h of the Commodity Exchange Act (7 U.S.C. 6h) is 
        amended by striking ``contract market'' each place it appears 
        and inserting ``registered entity''.
          (9) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i) is 
        amended in the first sentence by inserting ``or derivatives 
        transaction execution facility'' after ``contract market''.
          (10) Section 4j of the Commodity Exchange Act (7 U.S.C. 6j) 
        is repealed.
          (11) Section 4l of the Commodity Exchange Act (7 U.S.C. 6l) 
        is amended by inserting ``or derivatives transaction execution 
        facilities'' after ``contract markets'' each place it appears.
          (12) Section 4p of the Commodity Exchange Act (7 U.S.C. 6p) 
        (as determined before the redesignation by paragraph (13) of 
        this subsection) is amended--
                  (A) in the third sentence of subsection (a), by 
                striking ``Act or contract markets'' and inserting 
                ``Act, contract markets, or derivatives transaction 
                execution facilities''; and
                  (B) in subsection (b), by inserting ``derivatives 
                transaction execution facility,'' after ``contract 
                market,''.
          (13) The Commodity Exchange Act (as amended by paragraphs 
        (10), (11), and (12)) is amended by redesignating section 4k 
        through 4p (7 U.S.C. 6k through 6p) as sections 4j through 4o, 
        respectively.
          (14) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9, 
        9a, 9b, 13b, 15) is amended--
                  (A) in subsection (a)--
                          (i) in the first sentence--
                                  (I) by striking ``board of trade 
                                desiring to be designated a `contract 
                                market' shall make application to the 
                                Commission for such designation'' and 
                                inserting ``person desiring to be 
                                designated or registered as a contract 
                                market or derivatives transaction 
                                execution facility shall make 
                                application to the Commission for such 
                                designation or registration'';
                                  (II) by striking ``above conditions'' 
                                and inserting ``conditions set forth in 
                                this Act''; and
                                  (III) by striking ``above 
                                requirements'' and inserting ``the 
                                requirements of this Act'';
                          (ii) in the second sentence, by striking 
                        ``designation as a contract market within one 
                        year'' and inserting ``designation or 
                        registration as a contract market or 
                        derivatives transaction execution facility 
                        within 180 days'';
                          (iii) in the third sentence--
                                  (I) by striking ``board of trade'' 
                                and inserting ``person''; and
                                  (II) by striking ``one-year period'' 
                                and inserting ``180-day period''; and
                          (iv) in the last sentence, by striking 
                        ``designate as a `contract market' any board of 
                        trade that has made application therefor, such 
                        board of trade'' and inserting ``designate or 
                        register as a contract market or derivatives 
                        transaction execution facility any person that 
                        has made application therefor, such person'';
                  (B) in subsection (b)--
                          (i) in the first sentence--
                                  (I) by striking ``designation of any 
                                board of trade as a `contract market' 
                                upon'' and inserting ``designation or 
                                registration of any contract market or 
                                derivatives transaction execution 
                                facility on'';
                                  (II) by striking ``board of trade'' 
                                each place it appears and inserting 
                                ``contract market or derivatives 
                                transaction execution facility''; and
                                  (III) by striking ``designation as 
                                set forth in section 5 of this Act'' 
                                and inserting ``designation or 
                                registration as set forth in sections 5 
                                through 5b'';
                          (ii) in the second sentence--
                                  (I) by striking ``board of trade'' 
                                the first place it appears and 
                                inserting ``contract market or 
                                derivatives transaction execution 
                                facility''; and
                                  (II) by striking ``board of trade'' 
                                the second and third places it appears 
                                and inserting ``person''; and
                          (iii) in the last sentence, by striking 
                        ``board of trade'' each place it appears and 
                        inserting ``person'';
                  (C) in subsection (c)--
                          (i) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                          (ii) by striking ``contract markets'' each 
                        place it appears and inserting ``registered 
                        entities''; and
                          (iii) by striking ``trading privileges'' each 
                        place it appears and inserting ``privileges'';
                  (D) in subsection (d), by striking ``contract 
                market'' each place it appears and inserting 
                ``registered entity''; and
                  (E) in subsection (e), by striking ``trading on all 
                contract markets'' each place it appears and inserting 
                ``the privileges of all registered entities''.
          (15) Section 6a of the Commodity Exchange Act (7 U.S.C. 10a) 
        is amended--
                  (A) in the first sentence of subsection (a), by 
                striking ``designated as a `contract market' shall'' 
                and inserting ``designated or registered as a contract 
                market or a derivatives transaction execution 
                facility''; and
                  (B) in subsection (b), by striking ``designated as a 
                contract market'' and inserting ``designated or 
                registered as a contract market or a derivatives 
                transaction execution facility''.
          (16) Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) 
        is amended--
                  (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity'';
                  (B) in the first sentence, by striking ``designation 
                as set forth in section 5 of this Act'' and inserting 
                ``designation or registration as set forth in sections 
                5 through 5c''; and
                  (C) in the last sentence, by striking ``the contract 
                market's ability'' and inserting ``the ability of the 
                registered entity''.
          (17) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 
        13a-1(a)) by striking ``contract market'' and inserting 
        ``registered entity''.
          (18) Section 6d(1) of the Commodity Exchange Act (7 U.S.C. 
        13a-2(1)) is amended by inserting ``derivatives transaction 
        execution facility,'' after ``contract market,''.
          (19) Section 7 of the Commodity Exchange Act (7 U.S.C. 11) is 
        amended--
                  (A) in the first sentence--
                          (i) by striking ``board of trade'' and 
                        inserting ``person'';
                          (ii) by inserting ``or registered'' after 
                        ``designated'';
                          (iii) by inserting ``or registration'' after 
                        ``designation'' each place it appears; and
                          (iv) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                  (B) in the second sentence--
                          (i) by striking ``designation of such board 
                        of trade as a contract market'' and inserting 
                        ``designation or registration of the registered 
                        entity''; and
                          (ii) by striking ``contract markets'' and 
                        inserting ``registered entities''; and
                  (C) in the last sentence--
                          (i) by striking ``board of trade'' and 
                        inserting ``person''; and
                          (ii) by striking ``designated again a 
                        contract market'' and inserting ``designated or 
                        registered again a registered entity''.
          (20) Section 8(c) of the Commodity Exchange Act (7 U.S.C. 
        12(c)) is amended in the first sentence by striking ``board of 
        trade'' and inserting ``registered entity''.
          (21) Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) 
        is amended--
                  (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity''; and
                  (B) in paragraph (2)(F), by striking ``trading 
                privileges'' and inserting ``privileges''.
          (22) Sections 8b and 8c(e) of the Commodity Exchange Act (7 
        U.S.C. 12b, 12c(e)) are amended by striking ``contract market'' 
        each place it appears and inserting ``registered entity''.
          (23) Section 8e of the Commodity Exchange Act (7 U.S.C. 12e) 
        is amended--
                  (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity'';
                  (B) in subsection (a), by striking ``section 5a(b)'' 
                and inserting ``sections 5 through 5c'';
                  (C) in subsection (b)--
                          (i) in paragraph (1), by striking ``a 
                        contract market's trade monitoring system 
                        implemented pursuant to section 5a(b)'' and 
                        inserting ``the trade monitoring system of a 
                        registered entity implemented pursuant to 
                        sections 5 through 5c'';
                          (ii) by striking paragraph (3) and inserting 
                        the following:
          ``(3) Remedies.--On becoming final, the Commission deficiency 
        order may require the registered entity to--
                  ``(A) institute appropriate improvements in its trade 
                monitoring system necessary to correct the deficiencies 
                in the order;
                  ``(B) satisfy stated objective performance criteria 
                to correct the deficiencies;
                  ``(C) upgrade or reconfigure existing systems for 
                collecting or processing relevant data on trading and 
                trader or broker activity, including, where 
                appropriate, the commitment of additional resources.''; 
                and
                          (iii) in paragraph (5)--
                                  (I) in the paragraph heading, by 
                                striking ``Designation as contract 
                                market'' and inserting ``Designation or 
                                registration as registered entity'';
                                  (II) by inserting ``or registration'' 
                                after ``designation''; and
                                  (III) by striking ``board of trade'' 
                                and inserting ``person'';
                  (D) in subsection (d)(2), by striking ``section 5b'' 
                and inserting ``section 5e''; and
                  (E) in the paragraph heading of subsection (e)(2), by 
                striking ``Contract markets'' and inserting 
                ``Registered entities''.
          (24) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is 
        amended--
                  (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity''; and
                  (B) in subsection (a)(2), by striking ``section 
                4o(1),'' and inserting ``section 4n(1),''.
          (25) Section 14 of the Commodity Exchange Act (7 U.S.C. 18) 
        is amended--
                  (A) in subsection (a)(1)(B), by striking ``contract 
                market'' and inserting ``registered entity''; and
                  (B) in subsection (f), by striking ``contract 
                markets'' and inserting ``registered entities''.
          (26) Section 17 of the Commodity Exchange Act (7 U.S.C. 21) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
          (27) Section 22 of the Commodity Exchange Act (7 U.S.C. 25) 
        is amended--
                  (A) in subsection (a)--
                          (i) in paragraph (1)--
                                  (I) by striking ``contract market, 
                                clearing organization of a contract 
                                market, licensed board of trade,'' and 
                                inserting ``registered entity''; and
                                  (II) in subparagraph (C)(i), by 
                                striking ``contract market'' and 
                                inserting ``registered entity'';
                          (ii) in paragraph (2), by striking ``sections 
                        5a(11),'' and inserting ``sections 5(d)(13), 
                        5b(b)(1)(E),''; and
                          (iii) in paragraph (3), by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                  (B) in subsection (b)--
                          (i) in paragraph (1)--
                                  (I) by striking ``contract market or 
                                clearing organization of a contract 
                                market'' and inserting ``registered 
                                entity'';
                                  (II) by striking ``section 5a(8) and 
                                section 5a(9) of this Act'' and 
                                inserting ``sections 5 through 5c'';
                                  (III) by striking ``contract market, 
                                clearing organization of a contract 
                                market, or licensed board of trade'' 
                                and inserting ``registered entity''; 
                                and
                                  (IV) by striking ``contract market or 
                                licensed board of trade'' and inserting 
                                ``registered entity'';
                          (ii) in paragraph (3)--
                                  (I) by striking ``contract market, 
                                clearing organization, licensed board 
                                of trade,'' and inserting ``registered 
                                entity''; and
                                  (II) by striking ``contract market, 
                                licensed board of trade'' and inserting 
                                ``registered entity'';
                          (iii) in paragraph (4), by striking 
                        ``contract market, licensed board of trade, 
                        clearing organization'' and inserting 
                        ``registered entity''; and
                          (iv) in paragraph (5), by striking ``contract 
                        market, licensed board of trade, clearing 
                        organization,'' and inserting ``registered 
                        entity''.
  (b) Federal Deposit Insurance Corporation Improvement Act of 1991.--
Section 402(2) of the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (12 U.S.C. 4402(2)) is amended by striking subparagraph (B) 
and inserting the following:
                  ``(B) that is registered as a derivatives clearing 
                organization under section 5b of the Commodity Exchange 
                Act.''.

SEC. 129. REPORT TO CONGRESS.

  (a) The Commodity Futures Trading Commission (in this section 
referred to as the ``Commission'') shall undertake and complete a study 
of the Commodity Exchange Act (in this section referred to as ``the 
Act'') and the Commission's rules, regulations and orders governing the 
conduct of persons required to be registered under the Act, not later 
than 1 year after the date of the enactment of this Act. The study 
shall identify--
          (1) the core principles and interpretations of acceptable 
        business practices that the Commission has adopted or intends 
        to adopt to replace the provisions of the Act and the 
        Commission's rules and regulations thereunder;
          (2) the rules and regulations that the Commission has 
        determined must be retained and the reasons therefor;
          (3) the extent to which the Commission believes it can effect 
        the changes identified in paragraph (1) of this subsection 
        through its exemptive authority under section 4(c) of the Act; 
        and
          (4) the regulatory functions the Commission currently 
        performs that can be delegated to a registered futures 
        association (within the meaning of the Act) and the regulatory 
        functions that the Commission has determined must be retained 
        and the reasons therefor.
  (b) In conducting the study, the Commission shall solicit the views 
of the public as well as Commission registrants, registered entities, 
and registered futures associations (all within the meaning of the 
Act).
  (c) The Commission shall transmit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report of the results of its 
study, which shall include an analysis of comments received.

SEC. 130. EFFECTIVE DATE.

  (a) In General.--Except as provided in subsection (b), this title 
shall take effect on the date of enactment of this Act.
  (b) Jurisdiction of Commission.--Section 108, and the amendments made 
by that section, shall take effect 1 year after the date of enactment 
of this Act.

SEC. 131. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING 
                    COMMISSION.

  (a) Findings.--The Congress finds that--
          (1) derivatives markets serving United States industry are 
        increasingly global in scope;
          (2) developments in data processing and communications 
        technologies enable users of risk management services to 
        analyze and compare those services on a worldwide basis;
          (3) financial services regulatory policy must be flexible to 
        account for rapidly changing derivatives industry business 
        practices;
          (4) regulatory impediments to the operation of global 
        business interests can compromise the competitiveness of United 
        States businesses;
          (5) events that disrupt financial markets and economies are 
        often global in scope, require rapid regulatory response, and 
        coordinated regulatory effort across international 
        jurisdictions;
          (6) through its membership in the International Organisation 
        of Securities Commissions, the Commodity Futures Trading 
        Commission has promoted beneficial communication among market 
        regulators and international regulatory cooperation; and
          (7) the Commodity Futures Trading Commission and other United 
        States financial regulators and self-regulatory organizations 
        should continue to foster productive and cooperative working 
        relationships with their counterparts in foreign jurisdictions.
  (b) Sense of the Congress.--It is the sense of the Congress that, 
consistent with its responsibilities under the Commodity Exchange Act, 
the Commodity Futures Trading Commission should, as part of its 
international activities, continue to coordinate with foreign 
regulatory authorities, to participate in international regulatory 
organizations and forums, and to provide technical assistance to 
foreign government authorities, in order to encourage--
          (1) the facilitation of cross-border transactions through the 
        removal or lessening of any unnecessary legal or practical 
        obstacles;
          (2) the development of internationally accepted regulatory 
        standards of best practice;
          (3) the enhancement of international supervisory cooperation 
        and emergency procedures;
          (4) the strengthening of international cooperation for 
        customer and market protection; and
          (5) improvements in the quality and timeliness of 
        international information sharing.

SEC. 132. ANTIFRAUD PROVISIONS.

  (a) In General.--It shall be unlawful to commit retail derivatives 
fraud by the use of any means or instruments of transportation or 
communication in interstate commerce or of the mails.
  (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Eligible contract participant.--The term ``eligible 
        contract participant'' has the same meaning as in section 1a of 
        the Commodity Exchange Act.
          (2) Federal financial institution regulator.--The term 
        ``Federal financial institution regulator'' means--
                  (A) any Federal functional regulator (as defined in 
                section 509(2) of the Gramm-Leach-Bliley Act) in the 
                case of any financial institution described in 
                paragraph (3)(A); and
                  (B) the Commodity Futures Trading Commission, in the 
                case of a financial institution described in paragraph 
                (3)(B).
          (3) Financial institution.--The term ``financial 
        institution''--
                  (A) has the meaning given to such term in 
                subparagraph (A) of section 509(3) of the Gramm-Leach-
                Bliley Act; and
                  (B) includes any person or entity described in 
                subparagraph (B) of such section 509(3).
          (4) Retail derivatives fraud.--The term ``retail derivatives 
        fraud'' means any fraud perpetrated by a party on a 
        counterparty (other than a counterparty that is an eligible 
        contract participant) to any agreement, contract, transaction, 
        warrant, note or option (other than a contract of sale of a 
        commodity for future delivery or an option on such contract 
        (unless such contract or option has been excluded from the 
        Commodity Exchange Act under subsection (c), (d), (f), or (i) 
        of section 2 of such Act), or a security) that is based, in 
        whole or in part, on the value of any interest in, or a 
        quantitative measure relating to 1 or more commodities, 
        securities, currencies, interest or other rates, indices, or 
        other assets, or the occurrence of any event.
          (5) Security.--The term ``security'' has the same meaning as 
        in section 3 of the Securities Exchange Act of 1934.
  (c) Enforcement.--This section shall be enforced by the appropriate 
Federal financial institution regulator, any appropriate State 
insurance authority, and the Federal Trade Commission with respect to 
financial institutions and other persons subject to the jurisdiction of 
such agency or authority under applicable law, as follows:
          (1) Under section 8 of the Federal Deposit Insurance Act, in 
        the case of--
                  (A) national banks, Federal branches and Federal 
                agencies of foreign banks, and any subsidiaries of such 
                entities (except brokers, dealers, futures commission 
                merchants, persons providing insurance, investment 
                companies, and investment advisers), by the office of 
                the Comptroller of the Currency;
                  (B) member banks of the Federal Reserve System (other 
                than national banks), branches and agencies of foreign 
                banks (other than Federal branches, Federal agencies, 
                and insured State branches of foreign banks), 
                commercial lending companies owned or controlled by 
                foreign banks, organizations operating under section 25 
                or 25A of the Federal Reserve Act, and bank holding 
                companies and their nonbank affiliates (other than 
                financial institutions of whom the Securities and 
                Exchange Commission is the federal functional 
                regulator), by the Board of Governors of the Federal 
                Reserve System;
                  (C) banks insured by the Federal Deposit Insurance 
                Corporation (other than members of the Federal Reserve 
                System), insured State branches of foreign banks, and 
                any subsidiaries of such entities (other than 
                subsidiaries of whom the Securities and Exchange 
                Commission is the Federal functional regulator), by the 
                Board of Directors of the Federal Deposit Insurance 
                Corporation; and
                  (D) savings associations the deposits of which are 
                insured by the Federal Deposit Insurance Corporation, 
                and any subsidiaries of such savings associations 
                (other than a subsidiary of whom the Securities and 
                Exchange Commission is the Federal functional 
                regulator), by the Director of the Office of Thrift 
                Supervision.
          (2) Under the Federal Credit Union Act, by the Board of the 
        National Credit Union Administration with respect to any 
        federally insured credit union, and any subsidiary of any such 
        credit union (other than a subsidiary of whom the Securities 
        and Exchange Commission is the Federal functional regulator).
          (3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to--
                  (A) any broker, dealer, or investment bank holding 
                company; or
                  (B) any associated person of a broker or dealer, 
                concerning the financial or securities activities of 
                which the broker or dealer makes and keeps records 
                under section 15C(b) or 17(h) of the Securities 
                Exchange Act of 1934.
          (4) Under the Investment Company Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        companies.
          (5) Under the Investment Advisers Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        advisers.
          (6) Under the Commodity Exchange Act, by the Commodity 
        Futures Trading Commission with respect to a commodity trading 
        adviser, commodity pool operator, or futures commission 
        merchant.
          (7) Under State insurance law, in the case of any person 
        engaged in providing insurance, by the applicable State 
        insurance authority of the State in which the defrauded person 
        is domiciled.
          (8) Under the Federal Trade Commission Act, by the Federal 
        Trade Commission for any other financial institution or other 
        person that is not subject to the jurisdiction of any agency or 
        authority under any other paragraph of this subsection.
  (d) Criminal Penalties.--Any person who willfully violates subsection 
(a) shall be fined not more than $1,000,000, in the case of an 
individual, or $2,500,000 in the case of any person other than an 
individual, or imprisoned not more than 10 years, or both.

SEC. 133. RETAIL SWAP CUSTOMER PROTECTIONS.

  (a) In General.--The Federal Deposit Insurance Act (12 U.S.C. 1811 et 
seq.) is amended by adding at the end the following new section:

``SEC. 49. RETAIL SWAP CUSTOMER PROTECTIONS.

  ``(a) Regulations Authorized.--The Board of Governors of the Federal 
Reserve System and the Secretary of the Treasury may, in consultation 
with appropriate Federal banking agencies, the Securities and Exchange 
Commission, and the Commodity Futures Trading Commission, jointly 
prescribe customer protection regulations that apply to sales practices 
relating to swap agreements (as defined in section 206(b) of the Gramm-
Leach-Bliley Act) between financial institutions and retail customers.
  ``(b) Sales Practice Regulations.--The regulations prescribed under 
subsection (a) may address--
          ``(1) the information that financial institutions shall 
        obtain from retail customers in order to determine whether swap 
        agreements recommended by the financial institution to retail 
        customers are appropriate in light of the retail customer's net 
        worth, ability and willingness to incur losses, risk management 
        needs, financial goals, investment experience and history, and 
        other indicia of appropriateness;
          ``(2) information that financial institutions shall provide 
        to retail customers to help the retail customers understand the 
        economic characteristics and risks of swap agreements 
        recommended by financial institutions;
          ``(3) measures to protect retail customers against 
        fraudulent, deceptive, and manipulative acts and practices;
          ``(4) the extent to which access of retail customers to 
        particular classes of swap agreements should be restricted; and
          ``(5) such other matters as the Secretary of the Treasury and 
        the Board of Governors of the Federal Reserve System determine 
        are necessary or appropriate for the protection of retail 
        customers of swap agreements.
  ``(c) Definitions.--
          ``(1) Financial Institution.--The term `financial 
        institution' means a person described in subclause (I), (II), 
        (III), (IV), (V), or (VI) of section 2(c)(2)(B)(ii) of the 
        Commodity Exchange Act.
          ``(2) Retail Customer.--The term `retail customer' means a 
        person other than an eligible contract participant (as defined 
        in section 1a(11) of the Commodity Exchange Act).
  ``(d) Enforcement.--The regulations prescribed under subsection (a) 
shall be enforced as follows:
          ``(1) Subject to section 45 of the Federal Deposit Insurance 
        Act, under section 8 of the Federal Deposit Insurance Act, in 
        the case of--
                  ``(A) any national bank, Federal branch or Federal 
                agency of a foreign bank, or any subsidiary of a 
                national bank (other than any broker, dealer, 
                investment company or investment adviser) by the 
                Comptroller of the Currency;
                  ``(B) any member bank (other than a national bank), 
                branch or agency of a foreign bank (other than a 
                Federal branch, Federal agency, or insured State branch 
                of a foreign bank), commercial lending company owned or 
                controlled by a foreign bank, organization operating 
                under section 25 or 25A of the Federal Reserve Act, any 
                subsidiary of any such entity (other than any broker, 
                dealer, investment company or investment adviser) and 
                any bank holding company and any nonbank affiliate of 
                any such company (other than any broker, dealer, 
                investment company or investment adviser) by the Board 
                of Governors of the Federal Reserve System;
                  ``(C) any insured State nonmember bank, insured State 
                branch of a foreign bank, or any subsidiary of any such 
                entity (other than any broker, dealer, investment 
                company, or investment adviser) by the Board of 
                Directors of the Federal Deposit Insurance Corporation; 
                and
                  ``(D) any savings association the deposits of which 
                are insured by the Corporation, any savings and loan 
                holding company, or any subsidiary of any such savings 
                association or holding company (other than any broker, 
                dealer, investment company or investment adviser) by 
                the Director of the Office of Thrift Supervision.
          ``(2) Under the Federal Credit Union Act, by the National 
        Credit Union Administration Board with respect to any federally 
        insured credit union, and any subsidiaries of such an entity.
          ``(3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to any 
        registered broker or dealer, or any associated person thereof 
        that is not otherwise regulated.
          ``(4) Under the Commodity Exchange Act, by the Commodity 
        Futures Trading Commission, with respect to any registered 
        futures commission merchant, or any affiliated person of any 
        such futures commission merchant that is not otherwise 
        regulated.
          ``(5) Under State insurance law, in the case of any person 
        engaged in providing insurance, or any affiliate of any such 
        person that is not otherwise regulated, by the applicable State 
        insurance authority of the State in which the person is 
        domiciled.''.
  (b) Report.--If regulations authorized under the amendment made by 
subsection (a) have not been prescribed in final form before the end of 
the 1-year period beginning on the date of the enactment of this Act, 
the Board of Governors of the Federal Reserve System and the Secretary 
of the Treasury shall each submit a report to the Congress within 15 
days after the end of such period containing an explanation of why such 
regulations were not prescribed in final form by the end of such 
period.

            TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT

SEC. 201. SHORT TITLE.

  This title may be cited as the ``Financial Contract Netting 
Improvement Act of 2000''.

SEC. 202. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS 
                    OF INSURED DEPOSITORY INSTITUTIONS.

  (a) Definition of Qualified Financial Contract.--Section 
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order'' 
after ``any similar agreement that the Corporation determines by 
regulation''.
  (b) Definition of Securities Contract.--Section 11(e)(8)(D)(ii) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(ii)) is 
amended to read as follows:
                          ``(ii) Securities contract.--The term 
                        `securities contract'--
                                  ``(I) means a contract for the 
                                purchase, sale, or loan of a security, 
                                a certificate of deposit, a mortgage 
                                loan, or any interest in a mortgage 
                                loan, a group or index of securities, 
                                certificates of deposit, or mortgage 
                                loans or interests therein (including 
                                any interest therein or based on the 
                                value thereof) or any option on any of 
                                the foregoing, including any option to 
                                purchase or sell any such security, 
                                certificate of deposit, loan, interest, 
                                group or index, or option;
                                  ``(II) does not include any purchase, 
                                sale, or repurchase obligation under a 
                                participation in a commercial mortgage 
                                loan unless the Corporation determines 
                                by regulation, resolution, or order to 
                                include any such agreement within the 
                                meaning of such term;
                                  ``(III) means any option entered into 
                                on a national securities exchange 
                                relating to foreign currencies;
                                  ``(IV) means the guarantee by or to 
                                any securities clearing agency of any 
                                settlement of cash, securities, 
                                certificates of deposit, mortgage loans 
                                or interests therein, group or index of 
                                securities, certificates of deposit, or 
                                mortgage loans or interests therein 
                                (including any interest therein or 
                                based on the value thereof) or option 
                                on any of the foregoing, including any 
                                option to purchase or sell any such 
                                security, certificate of deposit, loan, 
                                interest, group or index, or option;
                                  ``(V) means any margin loan;
                                  ``(VI) means any other agreement or 
                                transaction that is similar to any 
                                agreement or transaction referred to in 
                                this clause;
                                  ``(VII) means any combination of the 
                                agreements or transactions referred to 
                                in this clause;
                                  ``(VIII) means any option to enter 
                                into any agreement or transaction 
                                referred to in this clause;
                                  ``(IX) means a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (III), (IV), (V), (VI), (VII), or 
                                (VIII), together with all supplements 
                                to any such masteragreement, without 
regard to whether the master agreement provides for an agreement or 
transaction that is not a securities contract under this clause, except 
that the master agreement shall be considered to be a securities 
contract under this clause only with respect to each agreement or 
transaction under the master agreement that is referred to in subclause 
(I), (III), (IV), (V), (VI), (VII), or (VIII); and
                                  ``(X) means any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreement or transaction 
                                referred to in this clause.''.
  (c) Definition of Commodity Contract.--Section 11(e)(8)(D)(iii) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iii)) is 
amended to read as follows:
                          ``(iii) Commodity contract.--The term 
                        `commodity contract' means--
                                  ``(I) with respect to a futures 
                                commission merchant, a contract for the 
                                purchase or sale of a commodity for 
                                future delivery on, or subject to the 
                                rules of, a contract market or board of 
                                trade;
                                  ``(II) with respect to a foreign 
                                futures commission merchant, a foreign 
                                future;
                                  ``(III) with respect to a leverage 
                                transaction merchant, a leverage 
                                transaction;
                                  ``(IV) with respect to a clearing 
                                organization, a contract for the 
                                purchase or sale of a commodity for 
                                future delivery on, or subject to the 
                                rules of, a contract market or board of 
                                trade that is cleared by such clearing 
                                organization, or commodity option 
                                traded on, or subject to the rules of, 
                                a contract market or board of trade 
                                that is cleared by such clearing 
                                organization;
                                  ``(V) with respect to a commodity 
                                options dealer, a commodity option;
                                  ``(VI) any other agreement or 
                                transaction that is similar to any 
                                agreement or transaction referred to in 
                                this clause;
                                  ``(VII) any combination of the 
                                agreements or transactions referred to 
                                in this clause;
                                  ``(VIII) any option to enter into any 
                                agreement or transaction referred to in 
                                this clause;
                                  ``(IX) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), (III), (IV), (V), (VI), 
                                (VII), or (VIII), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                commodity contract under this clause, 
                                except that the master agreement shall 
                                be considered to be a commodity 
                                contract under this clause only with 
                                respect to each agreement or 
                                transaction under the master agreement 
                                that is referred to in subclause (I), 
                                (II), (III), (IV), (V), (VI), (VII), or 
                                (VIII); or
                                  ``(X) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreement or transaction 
                                referred to in this clause.''.
  (d) Definition of Forward Contract.--Section 11(e)(8)(D)(iv) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is amended 
to read as follows:
                          ``(iv) Forward contract.--The term `forward 
                        contract' means--
                                  ``(I) a contract (other than a 
                                commodity contract) for the purchase, 
                                sale, or transfer of a commodity or any 
                                similar good, article, service, right, 
                                or interest which is presently or in 
                                the future becomes the subject of 
                                dealing in the forward contract trade, 
                                or product or byproduct thereof, with a 
                                maturity date more than 2 days after 
                                the date the contract is entered into, 
                                including a repurchase transaction, 
                                reverse repurchase transaction, 
                                consignment, lease, swap, hedge 
                                transaction, deposit, loan, option, 
                                allocated transaction, unallocated 
                                transaction, or any other similar 
                                agreement;
                                  ``(II) any combination of agreements 
                                or transactions referred to in 
                                subclauses (I) and (III);
                                  ``(III) any option to enter into any 
                                agreement or transaction referred to in 
                                subclause (I) or (II);
                                  ``(IV) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), or (III), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                forward contract under this clause, 
                                except that the master agreement shall 
                                be considered to be a forward contract 
                                under this clause only with respect to 
                                each agreement or transaction under the 
                                master agreement that is referred to in 
                                subclause (I), (II), or (III); or
                                  ``(V) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreement or transaction 
                                referred to in subclause (I), (II), 
                                (III), or (IV).''.
  (e) Definition of Repurchase Agreement.--Section 11(e)(8)(D)(v) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(v)) is 
amended to read as follows:
                          ``(v) Repurchase agreement.--The term 
                        `repurchase agreement' (which definition also 
                        applies to the term `reverse repurchase 
                        agreement')--
                                  ``(I) means an agreement, including 
                                related terms, which provides for the 
                                transfer of 1 or more certificates of 
                                deposit, mortgage-related securities 
                                (as such term is defined in the 
                                Securities Exchange Act of 1934), 
                                mortgage loans, interests in mortgage-
                                related securities or mortgage loans, 
                                eligible bankers' acceptances, 
                                qualified foreign government securities 
                                or securities that are direct 
                                obligations of, or that are fully 
                                guaranteed by, the United States or any 
                                agency of the United States against the 
                                transfer of funds by the transferee of 
                                such certificates of deposit, eligible 
                                bankers' acceptances, securities, 
                                loans, or interests with a simultaneous 
                                agreement by such transferee to 
                                transfer to the transferor thereof 
                                certificates of deposit, eligible 
                                bankers' acceptances, securities, 
                                loans, or interests as described above, 
                                at a date certain not later than 1 year 
                                after such transfers or on demand, 
                                against the transfer of funds, or any 
                                other similar agreement;
                                  ``(II) does not include any 
                                repurchase obligation under a 
                                participation in a commercial mortgage 
                                loan unless the Corporation determines 
                                by regulation, resolution, or order to 
                                include any such participation within 
                                the meaning of such term;
                                  ``(III) means any combination of 
                                agreements or transactions referred to 
                                in subclauses (I) and (IV);
                                  ``(IV) means any option to enter into 
                                any agreement or transaction referred 
                                to in subclause (I) or (III);
                                  ``(V) means a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (III), or (IV), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                repurchase agreement under this clause, 
                                except that the master agreement shall 
                                be considered to be a repurchase 
                                agreement under this subclause only 
                                with respect to each agreement or 
                                transaction under the master agreement 
                                that is referred to in subclause (I), 
                                (III), or (IV); and
                                  ``(VI) means any security agreement 
                                or arrangement or other credit 
                                enhancement related to any agreement or 
                                transaction referred to in subclause 
                                (I), (III), (IV), or (V).
                        For purposes of this clause, the term 
                        `qualified foreign government security' means a 
                        security that is a direct obligation of, or 
                        that is fully guaranteed by, the central 
                        government of a member of the Organization for 
                        Economic Cooperation and Development (as 
                        determined by regulation or order adopted by 
                        the appropriate Federal banking authority).''.
  (f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi)) is amended 
to read as follows:
                          ``(vi) Swap agreement.--The term `swap 
                        agreement' means--
                                  ``(I) any agreement, including the 
                                terms and conditions incorporated by 
                                reference in any such agreement, which 
                                is an interest rate swap, option, 
                                future, or forward agreement, including 
                                a rate floor, rate cap, rate collar, 
                                cross-currency rate swap, and basis 
                                swap; a spot, same day-tomorrow, 
                                tomorrow-next, forward, or other 
                                foreign exchange or precious metals 
                                agreement; a currency swap, option, 
                                future, or forward agreement; an equity 
                                index or equity swap, option, future, 
                                or forward agreement; a debt index or 
                                debt swap, option, future, or forward 
                                agreement; a credit spread or credit 
                                swap, option, future, or forward 
                                agreement; a commodity indexor 
commodity swap, option, future, or forward agreement; or a weather 
swap, weather derivative, or a weather option;
                                  ``(II) any agreement or transaction 
                                similar to any other agreement or 
                                transaction referred to in this clause 
                                that is presently, or in the future 
                                becomes, regularly entered into in the 
                                swap market (including terms and 
                                conditions incorporated by reference in 
                                such agreement) and that is a forward, 
                                swap, future, or option on 1 or more 
                                rates, currencies, commodities, equity 
                                securities or other equity instruments, 
                                debt securities or other debt 
                                instruments, or economic indices or 
                                measures of economic risk or value;
                                  ``(III) any combination of agreements 
                                or transactions referred to in this 
                                clause;
                                  ``(IV) any option to enter into any 
                                agreement or transaction referred to in 
                                this clause;
                                  ``(V) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), (III), or (IV), together 
                                with all supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement contains an 
                                agreement or transaction that is not a 
                                swap agreement under this clause, 
                                except that the master agreement shall 
                                be considered to be a swap agreement 
                                under this clause only with respect to 
                                each agreement or transaction under the 
                                master agreement that is referred to in 
                                subclause (I), (II), (III), or (IV); 
                                and
                                  ``(VI) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreements or 
                                transactions referred to in 
                                subparagraph (I), (II), (III), (IV), or 
                                (V).
                        Such term is applicable for purposes of this 
                        title only and shall not be construed or 
                        applied so as to challenge or affect the 
                        characterization, definition, or treatment of 
                        any swap agreement under any other statute, 
                        regulation, or rule, including the Securities 
                        Act of 1933, the Securities Exchange Act of 
                        1934, the Public Utility Holding Company Act of 
                        1935, the Trust Indenture Act of 1939, the 
                        Investment Company Act of 1940, the Investment 
                        Advisers Act of 1940, the Securities Investor 
                        Protection Act of 1970, the Commodity Exchange 
                        Act, and the regulations promulgated by the 
                        Securities and Exchange Commission or the 
                        Commodity Futures Trading Commission.''.
  (g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(viii)) is amended to 
read as follows:
                          ``(viii) Transfer.--The term `transfer' means 
                        every mode, direct or indirect, absolute or 
                        conditional, voluntary or involuntary, of 
                        disposing of or parting with property or with 
                        an interest in property, including retention of 
                        title as a security interest and foreclosure of 
                        the depository institutions's equity of 
                        redemption.''.
  (h) Treatment of Qualified Financial Contracts.--Section 11(e)(8) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended--
          (1) in subparagraph (A), by striking ``paragraph (10)'' and 
        inserting ``paragraphs (9) and (10)'';
          (2) in subparagraph (A)(i), by striking ``to cause the 
        termination or liquidation'' and inserting ``such person has to 
        cause the termination, liquidation, or acceleration'';
          (3) by amending subparagraph (A)(ii) to read as follows:
                          ``(ii) any right under any security agreement 
                        or arrangement or other credit enhancement 
                        related to 1 or more qualified financial 
                        contracts described in clause (i);''; and
          (4) by amending subparagraph (E)(ii) to read as follows:
                          ``(ii) any right under any security agreement 
                        or arrangement or other credit enhancement 
                        related to 1 or more qualified financial 
                        contracts described in clause (i);''.
  (i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is amended by 
inserting ``section 5242 of the Revised Statutes of the United States 
(12 U.S.C. 91) or any other Federal or State law relating to the 
avoidance of preferential or fraudulent transfers,'' before ``the 
Corporation''.

SEC. 203. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND 
                    FAILING INSTITUTIONS.

  (a) In General.--Section 11(e)(8) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(e)(8)) is amended--
          (1) in subparagraph (E), by striking ``other than paragraph 
        (12) of this subsection, subsection (d)(9)'' and inserting 
        ``other than subsections (d)(9) and (e)(10)''; and
          (2) by adding at the end the following new subparagraphs:
                  ``(F) Clarification.--No provision of law shall be 
                construed as limiting the right or power of the 
                Corporation, or authorizing any court or agency to 
                limit or delay, in any manner, the right or power of 
                the Corporation to transfer any qualified financial 
                contract in accordance with paragraphs (9) and (10) of 
                this subsection or to disaffirm or repudiate any such 
                contract in accordance with paragraph (1).
                  ``(G) Walkaway clauses not effective.--
                          ``(i) In general.--Notwithstanding the 
                        provisions of subparagraphs (A) and (E), and 
                        sections 403 and 404 of the Federal Deposit 
                        Insurance Corporation Improvement Act of 1991, 
                        no walkaway clause shall be enforceable in a 
                        qualified financial contract of an insured 
                        depository institution in default.
                          ``(ii) Walkaway clause defined.--For purposes 
                        of this subparagraph, the term `walkaway 
                        clause' means a provision in a qualified 
                        financial contract that, after calculation of a 
                        value of a party's position or an amount due to 
                        or from 1 of the parties in accordance with its 
                        terms upon termination, liquidation, or 
                        acceleration of the qualified financial 
                        contract, either does not create a payment 
                        obligation of a party or extinguishes a payment 
                        obligation of a party in whole or in part 
                        solely because of such party's status as a 
                        nondefaulting party.''.
  (b) Technical and Conforming Amendment.--Section 11(e)(12)(A) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(12)(A)) is amended by 
inserting ``or the exercise of rights or powers'' after ``the 
appointment''.

SEC. 204. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL 
                    CONTRACTS.

  (a) Transfers of Qualified Financial Contracts to Financial 
Institutions.--Section 11(e)(9) of the Federal Deposit Insurance Act 
(12 U.S.C. 1821(e)(9)) is amended to read as follows:
          ``(9) Transfer of qualified financial contracts.--
                  ``(A) In general.--In making any transfer of assets 
                or liabilities of a depository institution in default 
                which includes any qualified financial contract, the 
                conservator or receiver for such depository institution 
                shall either--
                          ``(i) transfer to 1 financial institution, 
                        other than a financial institution for which a 
                        conservator, receiver, trustee in bankruptcy, 
                        or other legal custodian has been appointed or 
                        which is otherwise the subject of a bankruptcy 
                        or insolvency proceeding--
                                  ``(I) all qualified financial 
                                contracts between any person or any 
                                affiliate of such person and the 
                                depository institution in default;
                                  ``(II) all claims of such person or 
                                any affiliate of such person against 
                                such depository institution under any 
                                such contract (other than any claim 
                                which, under the terms of any such 
                                contract, is subordinated to the claims 
                                of general unsecured creditors of such 
                                institution);
                                  ``(III) all claims of such depository 
                                institution against such person or any 
                                affiliate of such person under any such 
                                contract; and
                                  ``(IV) all property securing or any 
                                other credit enhancement for any 
                                contract described in subclause (I) or 
                                any claim described in subclause (II) 
                                or (III) under any such contract; or
                          ``(ii) transfer none of the qualified 
                        financial contracts, claims, property or other 
                        credit enhancement referred to in clause (i) 
                        (with respect to such person and any affiliate 
                        of such person).
                  ``(B) Transfer to foreign bank, foreign financial 
                institution, or branch or agency of a foreign bank or 
                financial institution.--In transferring any qualified 
                financial contracts and related claims and property 
                pursuant to subparagraph (A)(i), the conservator or 
                receiver for such depository institution shall not make 
                such transfer to a foreign bank, financial institution 
                organized under the laws of a foreign country, or a 
                branch or agency of a foreign bank or financial 
                institution unless, under the law applicable to such 
                bank, financial institution, branch or agency, to the 
                qualified financial contracts, and to any netting 
                contract, any security agreement or arrangement or 
                other credit enhancement related to 1 or more qualified 
                financial contracts, the contractual rights of the 
                parties to such qualified financial contracts, netting 
                contracts, security agreements orarrangements, or other 
credit enhancements are enforceable substantially to the same extent as 
permitted under this section.
                  ``(C) Transfer of contracts subject to the rules of a 
                clearing organization.--In the event that a conservator 
                or receiver transfers any qualified financial contract 
                and related claims, property and credit enhancements 
                pursuant to subparagraph (A)(i) and such contract is 
                subject to the rules of a clearing organization, the 
                clearing organization shall not be required to accept 
                the transferee as a member by virtue of the transfer.
                  ``(D) Definition.--For purposes of this section, the 
                term `financial institution' means a broker or dealer, 
                a depository institution, a futures commission 
                merchant, or any other institution as determined by the 
                Corporation by regulation to be a financial 
                institution.''.
  (b) Notice to Qualified Financial Contract Counterparties.--Section 
11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(10)(A)) is amended by amending the flush material following 
clause (ii) to read as follows: ``the conservator or receiver shall 
notify any person who is a party to any such contract of such transfer 
by 5:00 p.m. (eastern time) on the business day following the date of 
the appointment of the receiver, in the case of a receivership, or the 
business day following such transfer, in the case of a 
conservatorship.''.
  (c) Rights Against Receiver and Treatment of Bridge Banks.--Section 
11(e)(10) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(10)) 
is further amended--
          (1) by redesignating subparagraph (B) as subparagraph (D); 
        and
          (2) by inserting after subparagraph (A) the following new 
        subparagraphs:
                  ``(B) Certain rights not enforceable.--
                          ``(i) Receivership.--A person who is a party 
                        to a qualified financial contract with an 
                        insured depository institution may not exercise 
                        any right such person has to terminate, 
                        liquidate, or net such contract under paragraph 
                        (8)(A) or section 403 or 404 of the Federal 
                        Deposit Insurance Corporation Improvement Act 
                        of 1991 solely by reason of or incidental to 
                        the appointment of a receiver for the 
                        depository institution (or the insolvency or 
                        financial condition of the depository 
                        institution for which the receiver has been 
                        appointed)--
                                  ``(I) until 5:00 p.m. (eastern time) 
                                on the business day following the date 
                                of the appointment of the receiver; or
                                  ``(II) after the person has received 
                                notice that the contract has been 
                                transferred pursuant to paragraph 
                                (9)(A).
                          ``(ii) Conservatorship.--A person who is a 
                        party to a qualified financial contract with an 
                        insured depository institution may not exercise 
                        any right such person has to terminate, 
                        liquidate, or net such contract under paragraph 
                        (8)(E) or section 403 or 404 of the Federal 
                        Deposit Insurance Corporation Improvement Act 
                        of 1991, solely by reason of or incidental to 
                        the appointment of a conservator for the 
                        depository institution (or the insolvency or 
                        financial condition of the depository 
                        institution for which the conservator has been 
                        appointed).
                          ``(iii) Notice.--For purposes of this 
                        subsection, the Corporation as receiver or 
                        conservator of an insured depository 
                        institution shall be deemed to have notified a 
                        person who is a party to a qualified financial 
                        contract with such depository institution if 
                        the Corporation has taken steps reasonably 
                        calculated to provide notice to such person by 
                        the time specified in subparagraph (A) of this 
                        subsection.
                  ``(C) Treatment of bridge banks.--The following 
                institutions shall not be considered a financial 
                institution for which a conservator, receiver, trustee 
                in bankruptcy, or other legal custodian has been 
                appointed or which is otherwise the subject of a 
                bankruptcy or insolvency proceeding for purposes of 
                paragraph (9)--
                          ``(i) a bridge bank; or
                          ``(ii) a depository institution organized by 
                        the Corporation, for which a conservator is 
                        appointed either--
                                  ``(I) immediately upon the 
                                organization of the institution; or
                                  ``(II) at the time of a purchase and 
                                assumption transaction between such 
                                institution and the Corporation as 
                                receiver for a depository institution 
                                in default.''.

SEC. 205. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF 
                    QUALIFIED FINANCIAL CONTRACTS.

  (a) In General.--Section 11(e) of the Federal Deposit Insurance Act 
(12 U.S.C. 1821(e)) is further amended--
          (1) by redesignating paragraphs (11) through (15) as 
        paragraphs (12) through (16), respectively; and
          (2) by inserting after paragraph (10) the following new 
        paragraph:
          ``(11) Disaffirmance or repudiation of qualified financial 
        contracts.--In exercising the rights of disaffirmance or 
        repudiation of a conservator or receiver with respect to any 
        qualified financial contract to which an insured depository 
        institution is a party, the conservator or receiver for such 
        institution shall either--
                  ``(A) disaffirm or repudiate all qualified financial 
                contracts between--
                          ``(i) any person or any affiliate of such 
                        person; and
                          ``(ii) the depository institution in default; 
                        or
                  ``(B) disaffirm or repudiate none of the qualified 
                financial contracts referred to in subparagraph (A) 
                (with respect to such person or any affiliate of such 
                person).''.
  (b) Technical and Conforming Amendments.--Section 11(e)(8) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended in 
subparagraph (C)(i), by striking ``(11)'' and inserting ``(12)''.

SEC. 206. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.

  Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(e)(8)(D)(vii)) is amended to read as follows:
                          ``(vii) Treatment of master agreement as 1 
                        agreement.--Any master agreement for any 
                        contract or agreement described in any 
                        preceding clause of this subparagraph (or any 
                        master agreement for such master agreement or 
                        agreements), together with all supplements to 
                        such master agreement, shall be treated as a 
                        single agreement and a single qualified 
                        financial contract. If a master agreement 
                        contains provisions relating to agreements or 
                        transactions that are not themselves qualified 
                        financial contracts, the master agreement shall 
                        be deemed to be a qualified financial contract 
                        only with respect to those transactions that 
                        are themselves qualified financial 
                        contracts.''.

SEC. 207. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 
                    1991.

  (a) Definitions.--Section 402 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended--
          (1) in paragraph (2)--
                  (A) by inserting ``or exempt from such registration 
                pursuant to an order of the Securities and Exchange 
                Commission'' before the semicolon at the end of 
                subparagraph (A)(ii); and
                  (B) by inserting ``or that has been granted an 
                exemption pursuant to section 4(c)(1) of such Act'' 
                before the period at the end of subparagraph (B);
          (2) in paragraph (6)--
                  (A) by redesignating subparagraphs (B) through (D) as 
                subparagraphs (C) through (E), respectively;
                  (B) by inserting after subparagraph (A) the following 
                new subparagraph:
                  ``(B) an uninsured national bank or an uninsured 
                State bank that is a member of the Federal Reserve 
                System if the national bank or State member bank is not 
                eligible to make application to become an insured bank 
                under section 5 of the Federal Deposit Insurance 
                Act;''; and
                  (C) by amending subparagraph (C) (as redesignated) to 
                read as follows:
                  ``(C) a branch or agency of a foreign bank, a foreign 
                bank and any branch or agency of the foreign bank, or 
                the foreign bank that established the branch or agency, 
                as those terms are defined in section 1(b) of the 
                International Banking Act of 1978;'';
          (3) in paragraph (11), by adding before the period ``and any 
        other clearing organization with which such clearing 
        organization has a netting contract'';
          (4) by amending paragraph (14)(A)(i) to read as follows:
                          ``(i) means a contract or agreement between 
                        two or more financial institutions, clearing 
                        organizations, or members that provides for 
                        netting present or future payment obligations 
                        or payment entitlements (including liquidation 
                        or closeout values relating to such obligations 
                        or entitlements) among the parties to the 
                        agreement; and''; and
          (5) by adding at the end the following new paragraph:
          ``(15) Payment.--The term `payment' means a payment of United 
        States dollars, another currency, or a composite currency, and 
        a noncash delivery, including a payment or delivery to 
        liquidate an unmatured obligation.''.
  (b) Enforceability of Bilateral Netting Contracts.--Section 403 of 
the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 
U.S.C. 4403) is amended--
          (1) by amending subsection (a) to read as follows:
  ``(a) General Rule.--Notwithstanding any other provision of State or 
Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of 
section 11(e) of the Federal Deposit Insurance Act or any order 
authorized under section 5(b)(2) of the Securities Investor Protection 
Act of 1970), the covered contractual payment obligations and the 
covered contractual payment entitlements between any two financial 
institutions shall be netted in accordance with, and subject to the 
conditions of, the terms of any applicable netting contract (except as 
provided in section 561(b)(2) of title 11, United States Code).''; and
          (2) by adding at the end the following new subsection:
  ``(f) Enforceability of Security Agreements.--The provisions of any 
security agreement or arrangement or other credit enhancement related 
to 1 or more netting contracts between any two financial institutions 
shall be enforceable in accordance with their terms (except as provided 
in section 561(b)(2) of title 11, United States Code) and shall not be 
stayed, avoided, or otherwise limited by any State or Federal law 
(other than paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of 
the Federal Deposit Insurance Act and section 5(b)(2) of the Securities 
Investor Protection Act of 1970).''.
  (c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (12 U.S.C. 4404) is amended--
          (1) by amending subsection (a) to read as follows:
  ``(a) General Rule.--Notwithstanding any other provision of State or 
Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of 
section 11(e) of the Federal Deposit Insurance Act and any order 
authorized under section 5(b)(2) of the Securities Investor Protection 
Act of 1970), the covered contractual payment obligations and the 
covered contractual payment entitlements of a member of a clearing 
organization to and from all other members of a clearing organization 
shall be netted in accordance with and subject to the conditions of any 
applicable netting contract (except as provided in section 561(b)(2) of 
title 11, United States Code).''; and
          (2) by adding at the end the following new subsection:
  ``(h) Enforceability of Security Agreements.--The provisions of any 
security agreement or arrangement or other credit enhancement related 
to 1 or more netting contracts between any two members of a clearing 
organization shall be enforceable in accordance with their terms 
(except as provided in section 561(b)(2) of title 11, United States 
Code) and shall not be stayed, avoided, or otherwise limited by any 
State or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) 
of section 11(e) of the Federal Deposit Insurance Act and section 
5(b)(2) of the Securities Investor Protection Act of 1970).''.
  (d) Enforceability of Contracts With Uninsured National Banks and 
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is 
amended--
          (1) by redesignating section 407 as section 407A; and
          (2) by adding after section 406 the following new section:

``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND 
                    UNINSURED FEDERAL BRANCHES AND AGENCIES.

  ``(a) In General.--Notwithstanding any other provision of law, 
paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal 
Deposit Insurance Act shall apply to an uninsured national bank or 
uninsured Federal branch or Federal agency except--
          ``(1) any reference to the `Corporation as receiver' or `the 
        receiver or the Corporation' shall refer to the receiver of an 
        uninsured national bank or uninsured Federal branch or Federal 
        agency appointed by the Comptroller of the Currency;
          ``(2) any reference to the `Corporation' (other than in 
        section 11(e)(8)(D) of such Act), the `Corporation, whether 
        acting as such or as conservator or receiver', a `receiver', or 
        a `conservator' shall refer to the receiver or conservator of 
        an uninsured national bank or uninsured Federal branch or 
        Federal agency appointed by the Comptroller of the Currency; 
        and
          ``(3) any reference to an `insured depository institution' or 
        `depository institution' shall refer to an uninsured national 
        bank or an uninsured Federal branch or Federal agency.
  ``(b) Liability.--The liability of a receiver or conservator of an 
uninsured national bank or uninsured Federal branch or agency shall be 
determined in the same manner and subject to the same limitations that 
apply to receivers and conservators of insured depository institutions 
under section 11(e) of the Federal Deposit Insurance Act.
  ``(c) Regulatory Authority.--
          ``(1) In general.--The Comptroller of the Currency, in 
        consultation with the Federal Deposit Insurance Corporation, 
        may promulgate regulations to implement this section.
          ``(2) Specific requirement.--In promulgating regulations to 
        implement this section, the Comptroller of the Currency shall 
        ensure that the regulations generally are consistent with the 
        regulations and policies of the Federal Deposit Insurance 
        Corporation adopted pursuant to the Federal Deposit Insurance 
        Act.
  ``(d) Definitions.--For purposes of this section, the terms `Federal 
branch', `Federal agency', and `foreign bank' have the same meaning as 
in section 1(b) of the International Banking Act.''.

SEC. 208. BANKRUPTCY CODE AMENDMENTS.

  (a) Definitions of Forward Contract, Repurchase Agreement, Securities 
Clearing Agency, Swap Agreement, Commodity Contract, and Securities 
Contract.--Title 11, United States Code, is amended--
          (1) in section 101--
                  (A) in paragraph (25)--
                          (i) by striking ``means a contract'' and 
                        inserting ``means--
                  ``(A) a contract'';
                          (ii) by striking ``, or any combination 
                        thereof or option thereon;'' and inserting ``, 
                        or any other similar agreement;''; and
                          (iii) by adding at the end the following:
                  ``(B) any combination of agreements or transactions 
                referred to in subparagraphs (A) and (C);
                  ``(C) any option to enter into an agreement or 
                transaction referred to in subparagraph (A) or (B);
                  ``(D) a master agreement that provides for an 
                agreement or transaction referred to in subparagraph 
                (A), (B), or (C), together with all supplements to any 
                such master agreement, without regard to whether such 
                master agreement provides for an agreement or 
                transaction that is not a forward contract under this 
                paragraph, except that such master agreement shall be 
                considered to be a forward contract under this 
                paragraph only with respect to each agreement or 
                transaction under such master agreement that is 
                referred to in subparagraph (A), (B) or (C); or
                  ``(E) any security agreement or arrangement, or other 
                credit enhancement related to any agreement or 
                transaction referred to in subparagraph (A), (B), (C), 
                or (D), but not to exceed the actual value of such 
                contract on the date of the filing of the petition;'';
                  (B) in paragraph (46), by striking ``on any day 
                during the period beginning 90 days before the date 
                of'' and replacing it with ``at any time before'';
                  (C) by amending paragraph (47) to read as follows:
          ``(47) `repurchase agreement' (which definition also applies 
        to a `reverse repurchase agreement')--
                  ``(A) means--
                          ``(i) an agreement, including related terms, 
                        which provides for the transfer of 1 or more 
                        certificates of deposit, mortgage-related 
                        securities (as defined in the Securities 
                        Exchange Act of 1934), mortgage loans, 
                        interests in mortgage-related securities or 
                        mortgage loans, eligible bankers' acceptances, 
                        qualified foreign government securities, or 
                        securities that are direct obligations of, or 
                        that are fully guaranteed by, the United States 
                        or any agency of the United States against the 
                        transfer of funds by the transferee of such 
                        certificates of deposit, eligible bankers' 
                        acceptances, securities, loans, or interests, 
                        with a simultaneous agreement by such 
                        transferee to transfer to the transferor 
                        thereof certificates of deposit, eligible 
                        bankers' acceptance, securities, loans, or 
                        interests of the kind described above, at a 
                        date certain not later than 1 year after such 
                        transfer or on demand, against the transfer of 
                        funds;
                          ``(ii) any combination of agreements or 
                        transactions referred to in clauses (i) and 
                        (iii);
                          ``(iii) an option to enter into an agreement 
                        or transaction referred to in clause (i) or 
                        (ii);
                          ``(iv) a master agreement that provides for 
                        an agreement or transaction referred to in 
                        clause (i), (ii), or (iii), together with all 
                        supplements to any such master agreement, 
                        without regard to whether suchmaster agreement 
provides for an agreement or transaction that is not a repurchase 
agreement under this paragraph, except that such master agreement shall 
be considered to be a repurchase agreement under this paragraph only 
with respect to each agreement or transaction under the master 
agreement that is referred to in clause (i), (ii), or (iii); or
                          ``(v) any security agreement or arrangement 
                        or other credit enhancement related to any 
                        agreement or transaction referred to in clause 
                        (i), (ii), (iii), or (iv), but not to exceed 
                        the actual value of such contract on the date 
                        of the filing of the petition; and
                  ``(B) does not include a repurchase obligation under 
                a participation in a commercial mortgage loan,
        and, for purposes of this paragraph, the term `qualified 
        foreign government security' means a security that is a direct 
        obligation of, or that is fully guaranteed by, the central 
        government of a member of the Organization for Economic 
        Cooperation and Development;'';
                  (D) in paragraph (48) by inserting ``or exempt from 
                such registration under such section pursuant to an 
                order of the Securities and Exchange Commission'' after 
                ``1934''; and
                  (E) by amending paragraph (53B) to read as follows:
          ``(53B) `swap agreement'--
                  ``(A) means--
                          ``(i) any agreement, including the terms and 
                        conditions incorporated by reference in such 
                        agreement, which is an interest rate swap, 
                        option, future, or forward agreement, including 
                        a rate floor, rate cap, rate collar, cross-
                        currency rate swap, and basis swap; a spot, 
                        same day-tomorrow, tomorrow-next, forward, or 
                        other foreign exchange or precious metals 
                        agreement; a currency swap, option, future, or 
                        forward agreement; an equity index or an equity 
                        swap, option, future, or forward agreement; a 
                        debt index or a debt swap, option, future, or 
                        forward agreement; a credit spread or a credit 
                        swap, option, future, or forward agreement; a 
                        commodity index or a commodity swap, option, 
                        future, or forward agreement; or a weather 
                        swap, weather derivative, or weather option;
                          ``(ii) any agreement or transaction similar 
                        to any other agreement or transaction referred 
                        to in this paragraph that--
                                  ``(I) is presently, or in the future 
                                becomes, regularly entered into in the 
                                swap market (including terms and 
                                conditions incorporated by reference 
                                therein); and
                                  ``(II) is a forward, swap, future, or 
                                option on 1 or more rates, currencies, 
                                commodities, equity securities, or 
                                other equity instruments, debt 
                                securities or other debt instruments, 
                                or economic indices or measures of 
                                economic risk or value;
                          ``(iii) any combination of agreements or 
                        transactions referred to in this paragraph;
                          ``(iv) any option to enter into an agreement 
                        or transaction referred to in this paragraph;
                          ``(v) a master agreement that provides for an 
                        agreement or transaction referred to in clause 
                        (i), (ii), (iii), or (iv), together with all 
                        supplements to any such master agreement, and 
                        without regard to whether the master agreement 
                        contains an agreement or transaction that is 
                        not a swap agreement under this paragraph, 
                        except that the master agreement shall be 
                        considered to be a swap agreement under this 
                        paragraph only with respect to each agreement 
                        or transaction under the master agreement that 
                        is referred to in clause (i), (ii), (iii), or 
                        (iv); or
                  ``(B) any security agreement or arrangement or other 
                credit enhancement related to any agreements or 
                transactions referred to in subparagraph (A), but not 
                to exceed the actual value of such contract on the date 
                of the filing of the petition; and
                  ``(C) is applicable for purposes of this title only 
                and shall not be construed or applied so as to 
                challenge or affect the characterization, definition, 
                or treatment of any swap agreement under any other 
                statute, regulation, or rule, including the Securities 
                Act of 1933, the Securities Exchange Act of 1934, the 
                Public Utility Holding Company Act of 1935, the Trust 
                Indenture Act of 1939, the Investment Company Act of 
                1940, the Investment Advisers Act of 1940, the 
                Securities Investor Protection Act of 1970, the 
                Commodity Exchange Act, and the regulations prescribed 
                by the Securities and Exchange Commission or the 
                Commodity Futures Trading Commission.'';
          (2) by amending section 741(7) to read as follows:
          ``(7) `securities contract'--
                  ``(A) means--
                          ``(i) a contract for the purchase, sale, or 
                        loan of a security, a certificate of deposit, a 
                        mortgage loan or any interest in a mortgage 
                        loan, a group or index of securities, 
                        certificates of deposit or mortgage loans or 
                        interests therein (including an interest 
                        therein or based on the value thereof), or 
                        option on any of the foregoing, including an 
                        option to purchase or sell any such security, 
                        certificate of deposit, loan, interest, group 
                        or index, or option;
                          ``(ii) any option entered into on a national 
                        securities exchange relating to foreign 
                        currencies;
                          ``(iii) the guarantee by or to any securities 
                        clearing agency of a settlement of cash, 
                        securities, certificates of deposit, mortgage 
                        loans or interests therein, group or index of 
                        securities, or mortgage loans or interests 
                        therein (including any interest therein or 
                        based on the value thereof), or option on any 
                        of the foregoing, including an option to 
                        purchase or sell any such security, certificate 
                        of deposit, loan, interest, group or index, or 
                        option;
                          ``(iv) any margin loan;
                          ``(v) any other agreement or transaction that 
                        is similar to an agreement or transaction 
                        referred to in this paragraph;
                          ``(vi) any combination of the agreements or 
                        transactions referred to in this paragraph;
                          ``(vii) any option to enter into any 
                        agreement or transaction referred to in this 
                        paragraph;
                          ``(viii) a master agreement that provides for 
                        an agreement or transaction referred to in 
                        clause (i), (ii), (iii), (iv), (v), (vi), or 
                        (vii), together with all supplements to any 
                        such master agreement, without regard to 
                        whether the master agreement provides for an 
                        agreement or transaction that is not a 
                        securities contract under this paragraph, 
                        except that such master agreement shall be 
                        considered to be a securities contract under 
                        this paragraph only with respect to each 
                        agreement or transaction under such master 
                        agreement that is referred to in clause (i), 
                        (ii), (iii), (iv), (v), (vi), or (vii); or
                          ``(ix) any security agreement or arrangement 
                        or other credit enhancement related to any 
                        agreement or transaction referred to in this 
                        paragraph, but not to exceed the actual value 
                        of such contract on the date of the filing of 
                        the petition; and
                  ``(B) does not include any purchase, sale, or 
                repurchase obligation under a participation in a 
                commercial mortgage loan.''; and
          (3) in section 761(4)--
                  (A) by striking ``or'' at the end of subparagraph 
                (D); and
                  (B) by adding at the end the following:
                  ``(F) any other agreement or transaction that is 
                similar to an agreement or transaction referred to in 
                this paragraph;
                  ``(G) any combination of the agreements or 
                transactions referred to in this paragraph;
                  ``(H) any option to enter into an agreement or 
                transaction referred to in this paragraph;
                  ``(I) a master agreement that provides for an 
                agreement or transaction referred to in subparagraph 
                (A), (B), (C), (D), (E), (F), (G), or (H), together 
                with all supplements to such master agreement, without 
                regard to whether the master agreement provides for an 
                agreement or transaction that is not a commodity 
                contract under this paragraph, except that the master 
                agreement shall be considered to be a commodity 
                contract under this paragraph only with respect to each 
                agreement or transaction under the master agreement 
                that is referred to in subparagraph (A), (B), (C), (D), 
                (E), (F), (G), or (H); or
                  ``(J) any security agreement or arrangement or other 
                credit enhancement related to any agreement or 
                transaction referred to in this paragraph, but not to 
                exceed the actual value of such contract on the date of 
                the filing of the petition;''.
  (b) Definitions of Financial Participant and Forward Contract 
Merchant.--Section 101 of title 11, United States Code, is amended--
          (1) by inserting after paragraph (22) the following:
          ``(22A) `financial participant' means an entity that, at the 
        time it enters into a securities contract, commodity contract 
        or forward contract, or at the time ofthe filing of the 
petition, has 1 or more agreements or transactions described in 
paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the 
debtor or any other entity (other than an affiliate) of a total gross 
dollar value of at least $1,000,000,000 in notional or actual principal 
amount outstanding on any day during the previous 15-month period, or 
has gross mark-to-market positions of at least $100,000,000 (aggregated 
across counterparties) in 1 or more such agreement or transaction with 
the debtor or any other entity (other than an affiliate) on any day 
during the previous 15-month period;''; and
          (2) by amending paragraph (26) to read as follows:
          ``(26) `forward contract merchant' means a Federal reserve 
        bank, or an entity whose business consists in whole or in part 
        of entering into forward contracts as or with merchants or in a 
        commodity, as defined or in section 761, or any similar good, 
        article, service, right, or interest which is presently or in 
        the future becomes the subject of dealing or in the forward 
        contract trade;''.
  (c) Definition of Master Netting Agreement and Master Netting 
Agreement Participant.--Section 101 of title 11, United States Code, is 
amended by inserting after paragraph (38) the following new paragraphs:
          ``(38A) `master netting agreement' means an agreement 
        providing for the exercise of rights, including rights of 
        netting, setoff, liquidation, termination, acceleration, or 
        closeout, under or in connection with 1 or more contracts that 
        are described in any 1 or more of paragraphs (1) through (5) of 
        section 561(a), or any security agreement or arrangement or 
        other credit enhancement related to 1 or more of the foregoing. 
        If a master netting agreement contains provisions relating to 
        agreements or transactions that are not contracts described in 
        paragraphs (1) through (5) of section 561(a), the master 
        netting agreement shall be deemed to be a master netting 
        agreement only with respect to those agreements or transactions 
        that are described in any 1 or more of the paragraphs (1) 
        through (5) of section 561(a);
          ``(38B) `master netting agreement participant' means an 
        entity that, at any time before the filing of the petition, is 
        a party to an outstanding master netting agreement with the 
        debtor;''.
  (d) Swap Agreements, Securities Contracts, Commodity Contracts, 
Forward Contracts, Repurchase Agreements, and Master Netting Agreements 
Under the Automatic-Stay.--
          (1) In general.--Section 362(b) of title 11, United States 
        Code, is amended--
                  (A) in paragraph (6), by inserting ``, pledged to and 
                under the control of,'' after ``held by'';
                  (B) in paragraph (7), by inserting ``, pledged to and 
                under the control of,'' after ``held by'';
                  (C) by amending paragraph (17) to read as follows:
          ``(17) under subsection (a), of the setoff by a swap 
        participant of a mutual debt and claim under or in connection 
        with 1 or more swap agreements that constitutes the setoff of a 
        claim against the debtor for any payment or other transfer of 
        property due from the debtor under or in connection with any 
        swap agreement against any payment due to the debtor from the 
        swap participant under or in connection with any swap agreement 
        or against cash, securities, or other property held by, pledged 
        to and under the control of, or due from such swap participant 
        to margin, guarantee, secure, or settle any swap agreement;'';
                  (D) in paragraph (18) by striking the period at the 
                end and inserting ``; or''; and
                  (E) by inserting after paragraph (18) the following 
                new paragraph:
          ``(19) under subsection (a), of the setoff by a master 
        netting agreement participant of a mutual debt and claim under 
        or in connection with 1 or more master netting agreements or 
        any contract or agreement subject to such agreements that 
        constitutes the setoff of a claim against the debtor for any 
        payment or other transfer of property due from the debtor under 
        or in connection with such agreements or any contract or 
        agreement subject to such agreements against any payment due to 
        the debtor from such master netting agreement participant under 
        or in connection with such agreements or any contract or 
        agreement subject to such agreements or against cash, 
        securities, or other property held by, pledged to and under the 
        control of, or due from such master netting agreement 
        participant to margin, guarantee, secure, or settle such 
        agreements or any contract or agreement subject to such 
        agreements, to the extent such participant is eligible to 
        exercise such offset rights under paragraph (6), (7), or (17) 
        for each individual contract covered by the master netting 
        agreement in issue.''.
          (2) Limitation.--Section 362 of title 11, United States Code, 
        is amended by adding at the end the following:
  ``(i) Limitation.--The exercise of rights not subject to the stay 
arising under subsection (a) pursuant to paragraph (6), (7), or (17), 
or (32) of subsection (b) shall not be stayed by any order of a court 
or administrative agency in any proceeding under this title.''.
  (e) Limitation of Avoidance Powers Under Master Netting Agreement.--
Section 546 of title 11, United States Code, is amended--
          (1) in subsection (g) (as added by section 103 of Public Law 
        101-311)--
                  (A) by striking ``under a swap agreement''; and
                  (B) by striking ``in connection with a swap 
                agreement'' and inserting ``under or in connection with 
                any swap agreement''; and
          (2) by adding at the end the following:
  ``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 
548(b), the trustee may not avoid a transfer made by or to a master 
netting agreement participant under or in connection with any master 
netting agreement or any individual contract covered thereby that is 
made before the commencement of the case, except under section 
548(a)(1)(A), and except to the extent the trustee could otherwise 
avoid such a transfer made under an individual contract covered by such 
master netting agreement.''.
  (f) Fraudulent Transfers of Master Netting Agreements.--Section 
548(d)(2) of title 11, United States Code, is amended--
          (1) in subparagraph (C), by striking ``and'';
          (2) in subparagraph (D), by striking the period and inserting 
        ``; and''; and
          (3) by adding at the end the following new subparagraph:
          ``(E) a master netting agreement participant that receives a 
        transfer in connection with a master netting agreement or any 
        individual contract covered thereby takes for value to the 
        extent of such transfer, except, with respect to a transfer 
        under any individual contract covered thereby, to the extent 
        such master netting agreement participant otherwise did not 
        take (or is otherwise not deemed to have taken) such transfer 
        for value.''.
  (g) Termination or Acceleration of Securities Contracts.--Section 555 
of title 11, United States Code, is amended--
          (1) by amending the section heading to read as follows:

``Sec. 555. Contractual right to liquidate, terminate, or accelerate a 
                    securities contract'';

        and
          (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
  (h) Termination or Acceleration of Commodities or Forward 
Contracts.--Section 556 of title 11, United States Code, is amended--
          (1) by amending the section heading to read as follows:

``Sec. 556. Contractual right to liquidate, terminate, or accelerate a 
                    commodities contract or forward contract'';

        and
          (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
  (i) Termination or Acceleration of Repurchase Agreements.--Section 
559 of title 11, United States Code, is amended--
          (1) by amending the section heading to read as follows:

``Sec. 559. Contractual right to liquidate, terminate, or accelerate a 
                    repurchase agreement'';

        and
          (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
  (j) Liquidation, Termination, or Acceleration of Swap Agreements.--
Section 560 of title 11, United States Code, is amended--
          (1) by amending the section heading to read as follows:

``Sec. 560. Contractual right to liquidate, terminate, or accelerate a 
                    swap agreement'';

          (2) in the first sentence, by striking ``termination of a 
        swap agreement'' and inserting ``liquidation, termination, or 
        acceleration of 1 or more swap agreements''; and
          (3) by striking ``in connection with any swap agreement'' and 
        inserting ``in connection with the termination, liquidation, or 
        acceleration of 1 or more swap agreements''.
  (k) Liquidation, Termination, Acceleration, or Offset Under a Master 
Netting Agreement and Across Contracts.--(1) Title 11, United States 
Code, is amended by inserting after section 560 the following:

``Sec. 561. Contractual right to terminate, liquidate, accelerate, or 
                    offset under a master netting agreement and across 
                    contracts

  ``(a) In General.--Subject to subsection (b), the exercise of any 
contractual right, because of a condition of the kind specified in 
section 365(e)(1), to cause the termination, liquidation, or 
acceleration of or to offset or net termination values, payment amounts 
or other transfer obligations arising under or in connection with 1 or 
more (or the termination, liquidation, or acceleration of 1 or more)--
          ``(1) securities contracts, as defined in section 741(7);
          ``(2) commodity contracts, as defined in section 761(4);
          ``(3) forward contracts;
          ``(4) repurchase agreements;
          ``(5) swap agreements; or
          ``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation of any 
provision of this title or by any order of a court or administrative 
agency in any proceeding under this title.
  ``(b) Exception.--
          ``(1) A party may exercise a contractual right described in 
        subsection (a) to terminate, liquidate, or accelerate only to 
        the extent that such party could exercise such a right under 
        section 555, 556, 559, or 560 for each individual contract 
        covered by the master netting agreement in issue.
          ``(2) If a debtor is a commodity broker subject to subchapter 
        IV of chapter 7--
                  ``(A) a party may not net or offset an obligation to 
                the debtor arising under, or in connection with, a 
                commodity contract against any claim arising under, or 
                in connection with, other instruments, contracts, or 
                agreements listed in subsection (a), except to the 
                extent the party has positive net equity in the 
                commodity accounts at the debtor, as calculated under 
                such subchapter; and
                  ``(B) another commodity broker may not net or offset 
                an obligation to the debtor arising under, or in 
                connection with, a commodity contract entered into or 
                held on behalf of a customer of the debtor against any 
                claim arising under, or in connection with, other 
                instruments, contracts, or agreements listed in 
                subsection (a).
  ``(c) Rule of Application.--Subparagraphs (A) and (B) of subsection 
(b)(2) shall not be construed as prohibiting the offset of claims and 
obligations arising pursuant to--
          ``(1) a cross-margining arrangement that has been approved by 
        the Commodity Futures Trading Commission or that has been 
        submitted to such Commission pursuant to section 5a(a)(12) of 
        the Commodity Exchange Act and has been permitted to go into 
        effect; or
          ``(2) another netting arrangement, between a clearing 
        organization (as defined in section 761) and another entity, 
        that has been approved by the Commodity Futures Trading 
        Commission.
  ``(d) Definition.--As used in this section, the term `contractual 
right' includes a right set forth in a rule or bylaw of a national 
securities exchange, a national securities association, or a securities 
clearing agency, a right set forth in a bylaw of a clearing 
organization or contract market or in a resolution of the governing 
board thereof, and a right, whether or not evidenced in writing, 
arising under common law, under law merchant, or by reason of normal 
business practice.''.
  (2) Conforming amendment.--The table of sections of chapter 5 of 
title 11, United States Code, is amended by inserting after the item 
relating to section 560 the following:

``561. Contractual right to terminate, liquidate, accelerate, or offset 
under a master netting agreement and across contracts.''.

  (l) Municipal Bankruptcies.--Section 901(a) of title 11, United 
States Code, is amended--
          (1) by inserting ``555, 556,'' after ``553,''; and
          (2) by inserting ``559, 560, 561, 562,'' after ``557,''.
  (m) Ancillary Proceedings.--Section 304 of title 11, United States 
Code, is amended by adding at the end the following new subsection:
  ``(d) Any provisions of this title relating to securities contracts, 
commodity contracts, forward contracts, repurchase agreements, swap 
agreements, or master netting agreements shall apply in a case 
ancillary to a foreign proceeding under this section or any other 
section of this title so that enforcement of contractual provisions of 
such contracts and agreements in accordance with their terms will not 
be stayed or otherwise limited by operation of any provision of this 
title or by order of a court in any proceeding under this title, and to 
limit avoidance powers to the same extent as in a proceeding under 
chapter 7 or 11 (such enforcement not to be limited based on the 
presence or absence of assets of the debtor in the United States).''.
  (n) Commodity Broker Liquidations.--Title 11, United States Code, is 
amended by inserting after section 766 the following:

``Sec. 767. Commodity broker liquidation and forward contract 
                    merchants, commodity brokers, stockbrokers, 
                    financial institutions, financial participants, 
                    securities clearing agencies, swap participants, 
                    repo participants, and master netting agreement 
                    participants

  ``Notwithstanding any other provision of this title, the exercise of 
rights by a forward contract merchant, commodity broker, stockbroker, 
financial institution, financial participant, securities clearing 
agency, swap participant, repo participant, or master netting agreement 
participant under this title shall not affect the priority of any 
unsecured claim it may have after the exercise of such rights.''.
  (o) Stockbroker Liquidations.--Title 11, United States Code, is 
amended by inserting after section 752 the following:

``Sec. 753. Stockbroker liquidation and forward contract merchants, 
                    commodity brokers, stockbrokers, financial 
                    institutions, financial participants, securities 
                    clearing agencies, swap participants, repo 
                    participants, and master netting agreement 
                    participants

  ``Notwithstanding any other provision of this title, the exercise of 
rights by a forward contract merchant, commodity broker, stockbroker, 
financial institution, securities clearing agency, swap participant, 
repo participant, financial participant, or master netting agreement 
participant under this title shall not affect the priority of any 
unsecured claim it may have after the exercise of such rights.''.
  (p) Setoff.--Section 553 of title 11, United States Code, is 
amended--
          (1) in subsection (a)(3)(C), by inserting ``(except for a 
        setoff of a kind described in section 362(b)(6), 362(b)(7), 
        362(b)(17), 362(b)(32), 555, 556, 559, 560 or 561)'' before the 
        period; and
          (2) in subsection (b)(1), by striking ``362(b)(14)'' and 
        inserting ``362(b)(17), 362(b)(32), 555, 556, 559, 560, 561''.
  (q) Securities Contracts, Commodity Contracts, and Forward 
Contracts.--Title 11, United States Code, is amended--
          (1) in section 362(b)(6), by striking ``financial 
        institutions,'' each place such term appears and inserting 
        ``financial institution, financial participant'';
          (2) in section 546(e), by inserting ``financial 
        participant,'' after ``financial institution,'';
          (3) in section 548(d)(2)(B), by inserting ``financial 
        participant,'' after ``financial institution,'';
          (4) in section 555--
                  (A) by inserting ``financial participant,'' after 
                ``financial institution,''; and
                  (B) by inserting before the period at the end ``, a 
                right set forth in a bylaw of a clearing organization 
                or contract market or in a resolution of the governing 
                board thereof, and a right, whether or not in writing, 
                arising under common law, under law merchant, or by 
                reason of normal business practice''; and
          (5) in section 556, by inserting ``, financial participant'' 
        after ``commodity broker''.
  (r) Conforming Amendments.--Title 11, United States Code, is 
amended--
          (1) in the table of sections of chapter 5--
                  (A) by amending the items relating to sections 555 
                and 556 to read as follows:

``555. Contractual right to liquidate, terminate, or accelerate a 
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a 
commodities contract or forward contract.'';

                and
                  (B) by amending the items relating to sections 559 
                and 560 to read as follows:

``559. Contractual right to liquidate, terminate, or accelerate a 
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap 
agreement.'';

                and
          (2) in the table of sections of chapter 7--
                  (A) by inserting after the item relating to section 
                766 the following:

``767. Commodity broker liquidation and forward contract merchants, 
commodity brokers, stockbrokers, financial institutions, financial 
participants, securities clearing agencies, swap participants, repo 
participants, and master netting agreement participants.'';

                and
                  (B) by inserting after the item relating to section 
                752 the following:

``753. Stockbroker liquidation and forward contract merchants, 
commodity brokers, stockbrokers, financial institutions, financial 
participants, securities clearing agencies, swap participants, repo 
participants, and master netting agreement participants.''.

SEC. 209. RECORDKEEPING REQUIREMENTS.

  Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(8)) is amended by adding at the end the following new 
subparagraph:
                  ``(H) Recordkeeping requirements.--The Corporation, 
                in consultation with the appropriate Federal banking 
                agencies, may prescribe regulations requiring more 
                detailed recordkeeping with respect to qualified 
                financial contracts (including market valuations) by 
                insured depository institutions.''.

SEC. 210. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.

  Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1823(e)(2)) is amended to read as follows:
          ``(2) Exemptions from contemporaneous execution 
        requirement.--An agreement to provide for the lawful 
        collateralization of--
                  ``(A) deposits of, or other credit extension by, a 
                Federal, State, or local governmental entity, or of any 
                depositor referred to in section 11(a)(2), including an 
                agreement to provide collateral in lieu of a surety 
                bond;
                  ``(B) bankruptcy estate funds pursuant to section 
                345(b)(2) of title 11, United States Code;
                  ``(C) extensions of credit, including any overdraft, 
                from a Federal reserve bank or Federal home loan bank; 
                or
                  ``(D) 1 or more qualified financial contracts, as 
                defined in section 11(e)(8)(D),
        shall not be deemed invalid pursuant to paragraph (1)(B) solely 
        because such agreement was not executed contemporaneously with 
        the acquisition of the collateral or because of pledges, 
        delivery, or substitution of the collateral made in accordance 
        with such agreement.''.

SEC. 211. DAMAGE MEASURE.

  (a) In General.--Title 11, United States Code, is amended--
          (1) by inserting after section 561 the following:

``Sec. 562. Damage measure in connection with swap agreements, 
                    securities contracts, forward contracts, commodity 
                    contracts, repurchase agreements, or master netting 
                    agreements

  ``If the trustee rejects a swap agreement, securities contract as 
defined in section 741, forward contract, commodity contract (as 
defined in section 761) repurchase agreement, or master netting 
agreement pursuant to section 365(a), or if a forward contract 
merchant, stockbroker, financial institution, securities clearing 
agency, repo participant, financial participant, master netting 
agreement participant, or swap participant liquidates, terminates, or 
accelerates such contract or agreement, damages shall be measured as of 
the earlier of--
          ``(1) the date of such rejection; or
          ``(2) the date of such liquidation, termination, or 
        acceleration.''; and
          (2) in the table of sections of chapter 5 by inserting after 
        the item relating to section 561 the following:

``562. Damage measure in connection with swap agreements, securities 
contracts, forward contracts, commodity contracts, repurchase 
agreements, or master netting agreements.''.

  (b) Claims Arising From Rejection.--Section 502(g) of title 11, 
United States Code, is amended--
          (1) by designating the existing text as paragraph (1); and
          (2) by adding at the end the following:
  ``(2) A claim for damages calculated in accordance with section 562 
shall be allowed under subsection (a), (b), or (c), or disallowed under 
subsection (d) or (e), as if such claim had arisen before the date of 
the filing of the petition.''.

SEC. 212. SIPC STAY.

  Section 5(b)(2) of the Securities Investor Protection Act of 1970 (15 
U.S.C. 78eee(b)(2)) is amended by adding after subparagraph (B) the 
following new subparagraph:
                  ``(C) Exception from stay.--
                          ``(i) Notwithstanding section 362 of title 
                        11, United States Code, neither the filing of 
                        an application under subsection (a)(3) nor any 
                        order or decree obtained by the Securities 
                        Investor Protection Corporation from the court 
                        shall operate as a stay of any contractual 
                        rights of a creditor to liquidate, terminate, 
                        or accelerate a securities contract, commodity 
                        contract, forward contract, repurchase 
                        agreement, swap agreement, or master netting 
                        agreement, each as defined in title 11, United 
                        States Code, to offset or net termination 
                        values, payment amounts, or other transfer 
                        obligations arising under or in connection with 
                        1 or more of such contracts or agreements, or 
                        to foreclose on any cash collateral pledged by 
                        the debtor whether or not with respect to 1 or 
                        more of such contracts or agreements.
                          ``(ii) Notwithstanding clause (i), such 
                        application, order, or decree may operate as a 
                        stay of the foreclosure on or disposition of 
                        securities collateral pledged by the debtor, 
                        whether or not with respect to 1 or more of 
                        such contracts or agreements, securities sold 
                        by the debtor under a repurchase agreement or 
                        securities lent under a securities lending 
                        agreement.
                          ``(iii) As used in this section, the term 
                        `contractual right' includes a right set forth 
                        in a rule or bylaw of a national securities 
                        exchange, a national securities association, or 
                        a securities clearing agency, a right set forth 
                        in a bylaw of a clearing organization or 
                        contract market or in a resolution of the 
                        governing board thereof, and a right, whether 
                        or not in writing, arising under common law, 
                        under law merchant, or by reason of normal 
                        business practice.''.

SEC. 213. ASSET-BACKED SECURITIZATIONS.

  Section 541 of title 11, United States Code, is amended--
          (1) in subsection (b)--
                  (A) by striking ``or'' at the end of paragraph 
                (4)(B)(ii);
                  (B) by redesignating paragraph (5) as paragraph (6); 
                and
                  (C) by inserting after paragraph (4) the following 
                new paragraph:
          ``(5) any eligible asset (or proceeds thereof), to the extent 
        that such eligible asset was transferred by the debtor before 
        the date of commencement of the case, to an eligible entity in 
        connection with an asset-backed securitization, except to the 
        extent such asset (or proceeds or value thereof) may be 
        recovered by the trustee under section 550 by virtue of 
        avoidance under section 548(a)(1); or''; and
          (2) by adding at the end the following new subsection:
  ``(e) For purposes of this section, the following definitions shall 
apply:
          ``(1) the term `asset-backed securitization' means a 
        transaction in which eligible assets transferred to an eligible 
        entity are used as the source of payment on securities, 
        including all securities issued by governmental units, at least 
        1 class or tranche of which is rated investment grade by 1 or 
        more nationally recognized securities rating organizations, 
        when the securities are initially issued by an issuer;
          ``(2) the term `eligible asset' means--
                  ``(A) financial assets (including interests therein 
                and proceeds thereof), either fixed or revolving, 
                whether or not such assets are in existence as of the 
                date of the transfer, including residential and 
                commercial mortgage loans, consumer receivables, trade 
                receivables, assets of governmental units (including 
                payment obligations relating to taxes, receipts, fines, 
                tickets, and other sources of revenue), and lease 
                receivables, that, by their terms, convert into cash 
                within a finite time period, plus any residual interest 
                in property subject to receivables included in such 
                financial assets plus any rights or other assets 
                designed to assure the servicing or timely distribution 
                of proceeds to security holders;
                  ``(B) cash; and
                  ``(C) securities, including all securities issued by 
                governmental units.
          ``(3) the term `eligible entity' means--
                  ``(A) an issuer; or
                  ``(B) a trust, corporation, partnership, governmental 
                unit, limited liability company (including a single 
                member limited liability company), or other entity 
                engaged exclusively in the business of acquiring and 
                transferring eligible assets directly or indirectly to 
                an issuer and taking actions ancillary thereto;
          ``(4) the term `issuer' means a trust, corporation, 
        partnership, governmental unit, limited liability company 
        (including a single member limited liability company), or other 
        entity engaged exclusively in the business of acquiring and 
        holding eligible assets, issuing securities backed by eligible 
        assets, and taking actions ancillary thereto; and
          ``(5) the term `transferred' means the debtor, pursuant to a 
        written agreement, represented and warranted that eligible 
        assets were sold, contributed, or otherwise conveyed with the 
        intention of removing them from the estate of the debtor 
        pursuant to subsection (b)(5) (whether or not reference is made 
        to this title or any section of this title), irrespective, 
        without limitation, of--
                  ``(A) whether the debtor directly or indirectly 
                obtained or held an interest in the issuer or in any 
                securities issued by the issuer;
                  ``(B) whether the debtor had an obligation to 
                repurchase or to service or supervise the servicing of 
                all or any portion of such eligible assets; or
                  ``(C) the characterization of such sale, 
                contribution, or other conveyance for tax, accounting, 
                regulatory reporting, or other purposes.''.

SEC. 214. APPLICATION OF AMENDMENTS.

  The amendments made by this title shall apply with respect to cases 
commenced or appointments made under any Federal or State law after the 
date of the enactment of this Act, but shall not apply with respect to 
cases commenced or appointments made under any Federal or State law 
before the date of the enactment of this Act.

  Amend the title so as to read:

      A bill to reauthorize and amend the Commodity Exchange 
Act to promote legal certainty, enhance competition, and reduce 
systemic risk in markets for futures and over-the-counter 
derivatives, to revise the banking and bankruptcy insolvency 
laws with respect to the termination and netting of financial 
contracts, and for other purposes.

                           Purpose of Summary

    H.R. 4541, ``Commodity Futures Modernization and Financial 
Contract Netting Improvement Act of 2000'', as amended by the 
Committee on Banking and Financial Services, is intended to 
reduce systemic risk to the Nation's financial markets by 
providing legal certainty to certain over-the-counter (OTC) 
derivatives and to update Federal insolvency laws concerning 
the treatment of derivatives contracts. Both aspects of the 
legislation are responsive to recommendations from the 
President's Working Group on Financial Markets.\1\
---------------------------------------------------------------------------
    \1\ The President's Working Group on Financial Markets (PWG) is 
composed of the Secretary of the Treasury, the Chairman of the Board of 
Governors of the Federal Reserve System, the Chairman of the Securities 
and Exchange Commission (SEC), and the Chairman of the Commodity 
Trading Commission (CFTC), In addition, the Federal Deposit Insurance 
Corporation (FDIC), the Federal Reserve Bank of New York, the Office of 
the Comptroller of the Currency (OCC), and the Office of Thrift 
Supervision (OTS) participated in the Working Group reports.
---------------------------------------------------------------------------
    The purpose of Title I, the ``Commodity Futures 
Modernization Act of 2000'', is threefold. First, Title I 
reauthorizes the CFTC, the regulatory body established under 
the Commodity Exchange Act (CEA), for five years. Second, it 
modernizes the regulatory structure of U.S. futures markets by 
providing regulatory relief for futures exchanges and their 
markets and by allowing futures on securities. Third, and of 
most importance to the Committee, it provides greater legal 
certainty to certain OTC transactions by explicitly excluding 
such transactions from the CEA and by providing for the 
clearing of derivatives contracts by banks and other regulated 
entities. The purpose of Title II, the ``Financial Contract 
Netting Improvement Act of 2000'', is to update bank insolvency 
laws and the Bankruptcy Code to minimize risk of a disruption 
with or between financial markets upon the insolvency of a 
market participant.\2\
---------------------------------------------------------------------------
    \2\ On July 27, 2000, the Committee also ordered to be reported 
H.R. 1161, the ``Financial Contract Netting Improvement Act of 2000.'' 
Title II incorporates the provisions of H.R. 1161 as reported by the 
Committee. See the report accompanying H.R. 1161 for further 
explanation of the purpose and summary of these provisions.
---------------------------------------------------------------------------

                  Background and Need for Legislation

        title i--The Commodity Futures Modernization Act of 2000

    In modernizing the CEA, Title I ensures that as banks and 
other financial institutions continue to reinvent the risk 
management business, consumers are protected and the safety and 
soundness of the financial system are enhanced without 
diminishing the competitiveness of U.S. markets.
    Over the past ten years there has been enormous growth in 
the use of swaps \3\ and related off-exchange derivatives. This 
phenomenal growth can be attributed to the fact that swaps 
offer genuine economic value to the parties that use them. The 
overwhelming majority of the trillions of dollars of swaps are 
financial transactions engaged in by banks. According to recent 
figures from the OCC, the notional measure of U.S. commercial 
banks' derivatives transactions is almost $35 trillion, and of 
this amount $31 trillion represents OTC derivatives activities, 
yielding some $2.5 billion in revenues. The most recent total 
of banks' credit exposure from off-balance sheet derivatives 
contracts is $396 billion.
---------------------------------------------------------------------------
    \3\ As noted in the PWG report on Over-the-Counter Derivatives 
Markets and the Commodity Exchange Act the terminology used to describe 
derivative instruments is not precise. As in the PWG report, the term 
``OTC derivatives'' is meant to include swaps with both terms to be 
construed broadly.
---------------------------------------------------------------------------
    OTC derivatives have become essential to banks' risk 
management strategies, their propriety trading activities, and 
the services they provide their customers. Large banks have 
made customized risk management readily available to a wide 
range of enterprises, providing liquid and creditworthy 
contracts. At the same time, banks of all sizes in communities 
across the country have used swaps to insulate themselves 
against the vicissitudes of interest rate and other economic 
risks. In sum, banks are central to financial OTC derivatives 
markets and these markets have become central to a wide range 
of banking activities.
    The United States has been at the forefront of innovation 
in swap activity to the great benefit of global financial 
markets. U.S. leadership in swaps, however, has been 
periodically threatened by the peculiarities of the CEA, which 
governs the trading of futures contracts on futures exchanges. 
The CEA does not contain a definition of ``futures contract,'' 
referring instead to ``contracts of sale of a commodity for 
future delivery.'' The CEA requires that futures contracts must 
be traded on a CFTC regulated exchange, unless a statutory 
exclusion or regulatory exemption from such requirement can be 
found. A futures contract that must be traded on an exchange 
under the CEA, but is instead traded over-the-counter, is 
illegal and unenforceable. The risk that the CFTC or a court 
might determine that a particular group swap agreement is an 
illegal off-exchange futures contract is known as ``legal 
uncertainty.''
    Legal uncertainty raised the prospect that a banking 
product might be found to be a futures contract, thus subject 
to commodity futures law and regulation. In the unlikely event 
that the CFTC or a court determines that a swap is an illegal 
off-exchange futures contract, systemic difficulties could 
result. A determination that a swap is a future contract could 
jeopardize the value of billions of dollars worth of swaps on 
the books of banks. Legal uncertainty is a potential impediment 
to the growth of the swaps business in the United States and 
poses unwarranted and unnecessary risk on the financial system 
as a whole.
    Legal uncertainty for derivatives has for years been of 
particular concern to the Committee. Outdated statutes that 
raise questions about the enforceability of contracts with 
banks and bar improvements in the ways banks reduce risk pose a 
palpable threat to the safety and soundness of the financial 
system. U.S. banking regulators warn that uncertainties and 
unintended consequences associated with the CEA could 
potentially turn financial disruptions in the global system 
into financial disasters.
    The CFTC itself has tried to address these serious 
concerns. In 1989 the CFTC established, in its Swaps Policy 
Statement, that swaps are not appropriately regulated as 
futures. Since then, the CFTC has generally adhered to this 
policy in its actions. In addition, no Federal agency, no 
court, and no Congress has ever found that swaps are futures. 
As a result, the de facto reality is that swaps have never been 
regulated as futures under the CEA. Every day banks write an 
enormous volume of swaps contracts that are sustained by this 
consensus.
    On November 9, 1999, the PWG transmitted its report 
entitled Over-the-Counter Derivatives Markets and the Commodity 
Exchange Act. The report made a number of legislative 
recommendations to clarify that certain off-exchange 
transactions are not subject to the CEA. H.R. 4541, as reported 
by the Committee on Agriculture, implements the PWG's 
legislative recommendations. The Banking Committee amendment 
builds on the PWG recommendations by expanding the kinds of 
derivative transactions that are excluded from the CEA and, 
thus, provides legal certainty.
    To address concerns that consumers are adequately protected 
as these complex financial products become more readily 
available to a broader class of end users, the Committee 
amendment alsoprovides a regulatory framework in which these 
markets can develop. First, retail derivatives fraud is made a criminal 
offense and relevant agencies are provided with clear civil enforcement 
powers to pursue fraud. Second, certain swaps provided to retail 
customers are not given the legal certainty afforded swaps to more 
sophisticated customers unless the Federal Reserve and the Treasury 
Department jointly prescribe customer protection regulations.

      title ii--financial contract netting improvement Act of 2000

    Title II amends the U.S. Bankruptcy Code and a number of 
Federal banking laws to address the treatment of certain 
financial transactions following the insolvency of a party to 
such transactions. The amendments clarify and improve 
consistency between the applicable statutes and minimize risk 
of a disruption within or between financial markets upon the 
insolvency of a market participant. The near failure of Long-
Term Capital Management in the fall of 1998 highlights the need 
for the U.S. to further refine its bankruptcy and insolvency 
laws in order to avoid systemic risk to the nation's financial 
system in the event of a failure of a large bank, hedge fund, 
or securities firm with substantial exposures to interest rate 
and currency swaps and other complex financial instruments.

                              Explanation

    The Committee on Agriculture reported to the full House its 
amendment to H.R. 4541 on June 29, 2000. The Committee on 
Banking and Financial Services (Committee) in its consideration 
of H.R. 4541 used as the base text the Agriculture Committee 
amendment, with the committee modifying those provisions in the 
bill providing legal certainty to OTC transactions, describing 
margin requirements on futures on securities, making retail 
derivatives fraud illegal and incorporating the PWG's 
recommendations on netting. Specifically, H.R. 4541, as 
reported by the Committee on Agriculture, is amended as 
follows.
    1. In section 107, banking products and securities (when 
either are offered by banks, broker-dealers, insurance 
companies, or affiliates of any of these institutions) are 
excluded from the CEA. The CEA exclusion for swaps (as defined 
in the Gramm-Leach-Bliley Act) involving counterparties other 
than eligible contract participants does not take effect unless 
and until the Federal Reserve Board and the Department of 
Treasury jointly prescribe retail customer protection 
regulations as provided for in new section 133.
    2. A new anti-fraud section (section 132) is added that: 
(1) defines retail derivatives fraud in connection with certain 
derivatives transactions that are neither futures nor 
securities as fraud perpetrated on parties that are not 
eligible contract participants; (2) clarifies which agencies 
exercise civil enforcement authority over retail derivatives 
fraud; and (3) imposes criminal penalties for retail 
derivatives fraud.
    3. A new section (section 110) is added which excludes from 
the CEA nonagricultural swaps if the swap is entered into 
between persons that are eligible participants and the terms of 
the swap are subject to individual negotiation and not 
specified by terms of a trading facility. This new section does 
not apply to swaps executed on a CFTC-designated or CFTC-
registered facility.
    4. A new section (Section 111) is added to clarify that 
nothing in the CEA is to imply or create any presumption that a 
transaction is or is not subject to the CEA or CFTC 
jurisdiction because it is or is not eligible for an exclusion 
or exemption provided for under the CEA or by the CFTC.
    5. The section on Contract Enforcement (section 124) is 
amended to provide that a transaction shall not be 
unenforceable under Federal or State law based solely on the 
failure of the transaction to comply with the terms of an 
exemption or exclusion provided for under the CEA or by the 
CFTC. The provision applies to transactions between eligible 
contract participants or involving institutions excluded under 
the retail foreign exchange provisions of section 104.
    6. The definition of ``eligible contract participant'' is 
amended to include an individual (acting for his or her own 
account) with total assets of $5 million and who enters into a 
transaction in order to manage the risk associated with an 
asset or liability owned or incurred or reasonably likely to be 
owned or incurred by such person.
    7. The definition of ``financial institution'' is amended 
to include a financial holding company, a new category of 
financial services firm authorized under provisions of the 
Gramm-Leach-Bliley Act.
    8. The term ``excluded commodity'' is renamed ``exclusion-
eligible commodity'' and the definition for such term is 
conformed to the scope of the PWG recommendation to exclude 
from the CEA certain derivatives with a non-finite supply.
    9. The exclusive jurisdiction clause of the CEA is amended 
to ensure that this clause may not be construed to apply to any 
transaction that is excluded from the CEA by H.R. 4541.
    10. The section on futures on securities (section 108) is 
amended to clarify what criteria are to be taken into 
consideration when determining if a margin requirement for a 
futures on securities is consistent with a margin requirement 
for a comparable options contract listed on any national 
securities exchange. Because the Committee was working under 
tight time constraints the Committee devoted most of its 
consideration to the provisions of the bill relating to legal 
certainty rather than these provisions relating to futures 
contracts on non-exempt securities traded on CFTC regulated 
markets.
    11. The section on derivatives clearing (section 116) is 
modified to include amendments to banking and other laws to 
allow the Federal Reserve to supervise derivatives clearing by 
multilateral clearing organizations and clarify the laws that 
govern the resolution of insolvent clearing banks. These 
amendments also allow clearing organizations supervised as 
banks to clear the full range of transactions that are 
exclusion- or exemption-eligible.
    12. The definition of ``trading facility'' is amended to 
exclude electronic systems that facilitate bilateral 
transactions and prevent any participant from executing a 
transaction with another participant unless both participants 
have approved the extension of credit to the other.
    13. The principal-to-principal requirement for the 
exclusions in sections 104, 105, and 106 is modified to clarify 
that financial institutions, broker-dealers and their 
affiliates, insurance companies and their affiliates, financial 
holding companies, and investment bank holding companies can 
act as agents for eligible contract participants in an excluded 
trading facility.
    14. A new title (Title II) is added incorporating the PWG's 
legislative recommendations to clarify the treatment and cross-
product netting of derivatives contracts upon the insolvency of 
a counter party.

                                Hearings

    On April 11, 2000, the Committee held a hearing on the 
Working Group legislative recommendations concerning OTC 
derivatives, hedge funds, and netting provisions. 
Appearingbefore the Committee were: The Honorable Richard H. Baker, 
Chairman, Subcommittee on Capital Markets, Securities, and Government-
Sponsored Enterprises; Lewis A. Sachs, Assistant Secretary for 
Financial Markets, Department of the Treasury; Patrick M. Parkinson, 
Associate Director, Division of Research and Statistics, Board of 
Governors of the Federal Reserve System; Annette L. Nazareth, Director, 
Division of Market Regulation, U.S. Securities and Exchange Commission; 
C. Robert Paul, General Counsel, Commodity Futures Trading Commission; 
Daniel P. Cunningham, Partner, Cravath, Swaine & Moore, on behalf of 
The International Swaps and Derivatives Association, Inc.; Mr. Shawn 
Dorsch, President, Chief Operating Officer, and Co-Founder, DNI 
Holdings, Inc. (Blackbird); Mark D. Young, Partner, Kirkland & Ellis, 
on behalf of The Chicago Board of Trade; Terrence A. Duffy, Vice 
Chairman, The Chicago Mercantile Exchange; Mark C. Brickell, Managing 
Director, J.P. Morgan & Co., Inc.; Michael A. Watkins, Deputy General 
Counsel, First Union Corporation, on behalf of The ABA Securities 
Association; Garrett Glass, Chief Market Risk Officer, Bank One 
Corporation, on behalf of The Financial Services Roundtable; George 
Crapple, Chairman, The Managed Funds Association; and William P. Miller 
II, Chairman of the Executive Committee, The End Users of Derivatives 
Council of the Association for Financial Professionals.
    On July 19, 2000, the Committee held a hearing on H.R. 
4541: the ``Commodity Futures Modernization Act of 2000.'' 
Appearing before the Committee were: Lee Sachs, Assistant 
Secretary for Financial Markets, Department of the Treasury; 
Patrick M. Parkinson, Associate Director, Division of Research 
and Statistics, Board of Governors of the Federal Reserve 
System; Annette L. Nazareth, Director, Division of Market 
Regulation, U.S. Securities and Exchange Commission; C. Robert 
Paul, General Counsel, Commodity Futures Trading Commission; 
Hal S. Scott, Nomura Professor of International Financial 
Systems and Director of the International Financial Systems 
Program, Harvard Law School; Shawn Dorsch, President, Chief 
Operating Officer, and Co-Founder, DNI Holdings, Inc. 
(Blackbird); Mark C. Brickell, Managing Director, J.P. Morgan & 
Co., Inc.; Richard E. Grove, Jr., Executive Director and CEO, 
International Swaps and Derivatives Association, Inc.; Dennis 
Oakley, Managing Partner, Chase Manhattan Bank; Mark D. Young, 
Kirkland & Ellis on behalf of the Chicago Board of Trade and 
the Chicago Mercantile Exchange.

                   Committee Consideration and Votes

    On July 27, 2000, the full Committee met in open session to 
consider H.R. 4541. A quorum being present, the Committee by 
voice vote passed H.R. 4541 wth an amendment, and ordered it to 
be favorably reported with an amendment to the full House of 
Representatives for consideration. Also, the Committee adopted, 
by voice vote, a motion to authorize the Chairman to offer such 
motions as may be necessary in the House of Representatives to 
go to conference with the Senate on a similar bill.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that 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.

         Committee on Government Reform and Oversight Findings

    As provided for in clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, no oversight findings have 
been submitted to the Committee by the Committee on Government 
Reform.

                        Constitutional Authority

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, the Constitutional Authority 
of Congress to enact this legislation is derived from Article 
I, section 8, clause 1 (relating to the general welfare of the 
United States); Article I, section 8, clause 3 (relating to 
Congressional power to regulate commerce); Article 1, section 
8, clause 5 (relating to the power ``to coin money'' and 
``regulate the value thereof ''); and Article I, section 8, 
clause 18 (relating to making all laws necessary and proper for 
carrying into execution powers vested by the Constitution in 
the government of the United States).

               New Budget Authority and Tax expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                    Congressional Accountability Act

    The reporting requirement under section 102(b)(3) of the 
Congressional Accountability Act (P.L. 104-1) is inapplicable 
because this legislation does not relate to terms and 
conditions of employment or access to public services or 
accommodations.

    Congressional Budget Office Cost Estimate and Unfunded Mandates 
                                Analysis

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 6, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, U.S. House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4541, the 
Commodity Futures Modernization and Financial Contract Netting 
Improvement Act of 2000.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark Hadley, 
who can be reached at 226-2860.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 4541--Commodity Futures Modernization and Financial Contract 
        Netting Improvement Act of 2000

    Summary: H.R. 4541 would reauthorize funding for the 
activities of Commodity Futures Trading Commission (CFTC) 
during the 2001-2005 period. The bill also would allow trading 
of futures contracts based on single stocks (single-stock 
futures) under certain conditions, with oversight being shared 
by the CFTC and the Securities and Exchange Commission (SEC). 
In addition, H.R. 4541 would clarify that certain over-the-
counter derivative transactions are outside of the jurisdiction 
of the CFTC. The bill also would establish a new crime related 
to derivatives fraud and would authorize the Federal Trade 
Commission (FTC) to combat such fraud. Finally, the bill would 
amend banking and bankruptcy laws to provide consistent 
treatment of certain financial contracts and to encourage the 
settlement by a single payment, on a net basis, of all the 
contracted-but-not-yet-due claims and liabilities of an 
insolvent institution.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing this legislation would cost $368 
million over the 2001-2005 period. Most of this cost would be 
incurred by the CFTC; CBO estimates that the SEC would spend $3 
million a year to regulate trading of futures contracts on 
individual securities and fight derivatives fraud, and that the 
FTC would spend and additional $1 million a year to help combat 
securities fraud.
    By imposing new duties on financial institutions 
regulators, establishing a new crime, and allowing trading of 
single-stock futures, H.R. 4541 would affect direct spending 
and receipts; therefore, pay-as-you-go procedures would apply. 
CBO estimates that any impact on direct spending and receipts 
would not be significant in any year.
    H.R. 4541 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO estimates that 
the costs would not exceed the threshold established in the act 
($55 million in 2000, adjusted annually for inflation). CBO's 
estimate of the impact of H.R. 4541 on the private sector will 
be provided later in a separate statement.
    Estimated cost for the Federal Government: The estimated 
budgetary impact of H.R. 4541 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\

Proposed Changes to CFTC Spending:
    Estimated Authorization Level.............................        67        69        72        74        77
    Estimated Outlays.........................................        60        68        71        73        76
Proposed Changes to SEC Spending:
    Estimated Authorization Level.............................         3         3         3         3         3
    Estimated Outlays.........................................         3         3         3         3         3
Proposed Changes to FTC Spending:
    Estimated Authorization Level.............................         1         1         1         1         1
    Estimated Outlays.........................................         1         1         1         1         1
Total Changes in Spending:
    Estimated Authorization Level.............................        71        73        76        78        81
    Estimated Outlays.........................................        64        72        75        77        80
----------------------------------------------------------------------------------------------------------------
\1\ In addition to authorizing additional spending subject to appropriation, enacting H.R. 4541 would have an
  insignificant effect on direct spending and receipts.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the start of fiscal year 2001 and 
that the necessary amounts will be appropriated for each fiscal 
year. Outlay estimates are based on historical spending rates 
for the affected agencies. Enactment of H.R. 4541 also would 
affect direct spending and receipts because it would assign new 
duties to regulators of financial institutions, it would create 
a new crime, and would result in additional SEC fee 
collections. CBO estimates that those additional effects would 
not be significant.

Spending subject to appropriation

    H.R. 4541 would reauthorize funding for activities of the 
CFTC over the 2001-2005 period. Based on the agency's current 
budget and adjusting for anticipated inflation, CBO estimates 
that this reauthorization would cost $59 million in 2001 and a 
total of $343 million over the five-year period.
    The bill also would make several changes to the Commodity 
Exchange Act that would increase the administrative costs of 
the CFTC. The CFTC would share oversight of single-stock 
futures transactions with the SEC. CBO estimates that this 
change to the CFTC's regulatory responsibilities would require 
the agency to hire new staff. Based on information from the 
CFTC, CBO estimates that these changes to the CFTC's 
administrative responsibilities would cost $1 million a year 
over the 2001-2005 period. The bill also clarifies that the 
CFTC does not have jurisdiction over certain over-the-counter 
derivatives transactions.
    H.R. 4541 also would require that the SEC play a 
significant role in overseeing single-stock futures 
transactions and combating fraud related to such transactions. 
Based on information from the SEC, CBO estimates that the SEC 
would have to hire additional staff to handle these new 
responsibilities. We estimate this new effort would cost about 
$3 million a year during the 2001+2005 period.
    H.R. 4541 would require the FTC to combat certain 
securities fraud among parties who are not regulated by the 
SEC, CFTC, or banking regulators. Based on information from the 
FTC, CBO estimates implementing this provision would cost about 
$1 million a year.
    Although enacting this bill could eliminate certain 
bankruptcy proceedings, CBO estimates that any subsequent 
reduction in the workload of federal agencies would not have a 
significant impact on the budgets of the Executive Office for 
United States Trustees or the federal court system.

Direct spending

    H.R. 4541 would required the Office of the Comptroller of 
the Currency (OCC), and the Federal Deposit Insurance 
Corporation (FDIC), to issue regulations to implement the 
provisions of the legislation concerning bankrupt financial 
institutions and to combat fraud in certain securities trading. 
The OCC charges fees to cover all its administrative costs; 
therefore, additional spending by the OCC would have no net 
budgetary effect over time. That is not the case with the FDIC, 
however, which uses deposit insurance premiums paid by all 
banks to cover the expenses it incurs to supervise state-
chartered banks. Because the balances in the deposit insurance 
funds exceed the levels required under current law, very few 
banks or savings and loans pay premiums for deposit insurance 
at this time. Therefore, CBO expects that the FDIC would 
recover from premium income very little, if any, of the 
administrative costs associated with implementing H.R. 4541. 
However, we do not expect these costs to be significant.
    The bill would give the FDIC, acting as receiver for 
insolvent financial institutions, additional flexibility to 
determine the most appropriate method for resolving a failing 
bank or savings and loan. As a result, we expect that enacting 
H.R. 4541 could help reduce the losses associated with closing 
insured institutions. Although it is difficult to assess the 
amount of savings, if any, associated with the bill's 
clarification of the treatment of certain financial 
transactions affecting failing banks and savings and loans, CBO 
estimates that the net effect on FDIC outlays would probably be 
negligible.

Revenues

    H.R. 4541 would establish a new federal crime relating to 
derivatives fraud. As a result, the federal government would be 
able to pursue cases that it otherwise would not be able to 
prosecute. Because those prosecuted and convicted under H.R. 
4541 could be subject to criminal fines, the federal government 
might collect additional fines if the bill is enacted. 
Collections of such fines are recorded in the budget as 
governmental receipts (revenues), which are deposited in the 
Crime Victims Fund and spent in subsequent years. CBO expects 
that any additional receipts and direct spending would be less 
than $500,000 each year.
    H.R. 4541 would require the Federal Reserve Board to issue 
new regulations to implement provisions of the bill to combat 
fraud in derivatives trading. Budgetary effects of these 
additional responsibilities on the Federal Reserve would be 
recorded as a change in revenues. Based on information from the 
Federal Reserve, CBO estimates that enacting H.R. 4541 would 
reduce such revenues by less than $500,000 a year over the 
2001-2005 period.
    Under current law, the SEC collects a fee equal to \1/
300\th of a percent of the aggregate value of securities traded 
through national securities exchanges, brokers, and dealers. 
Such fees are recorded as revenues. H.R. 4541 would allow the 
trading of single-stock futures on national securities 
exchanges. By creating a new category of financial transactions 
that would be subject to SEC fees, this bill would increase 
revenues collected by the SEC. However, based on information 
provided by the CFTC, the SEC, and by private groups, CBO 
estimates that any increase in such revenues would not be 
significant.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act (BBEDCA) sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. CBO estimates that enacting H.R. 4541 would affect 
spending and governmental receipts but that there would be no 
significant impact in any year.
    Under BBEDCA, provisions providing funding necessary to 
meet the government's deposit insurance commitment are excluded 
from pay-as-you-go procedures. CBO believes that the 
administrative costs associated with FDIC issuing regulations 
under H.R. 4541 are related to safety and soundness of deposit 
insurance, and thus, would be excluded. In any case, we 
estimate that those changes would be less than $500,000 
annually.
    Estimated impact on State, local, and tribal governments: 
H.R. 4541 would require state insurance regulators to enforce 
antifraud and consumer protection regulations with regard to 
certain derivative and swap transactions. The bill also would 
preempt state laws affecting bankruptcy proceedings of certain 
state banks that are members of the Federal Reserve, certain 
commodities transactions that are conducted in markets 
regulated by the Commodity Futures Trading Commission (CFTC), 
and certain commodities contracts that are excluded from 
regulation by the CFTC. Both the new duties for state insurance 
regulators and the preemptions of state law would be mandates 
as defined by UMRA. CBO estimates that the costs of these 
mandates would not be significant and would not exceed the 
threshold established in the act ($55 million in 2000, adjusted 
annually for inflation).
    Estimated impact on the private sector: CBO's estimate of 
the impact of H.R. 4541 on the private sector will be provided 
later in a separate statement.
    Previous CBO estimates: CBO has transmitted cost estimates 
for three other bills that would reauthorize the CFTC. 
Differences in the estimates reflect differences in the bills. 
On September 6, 2000, CBO transmitted a cost estimate for H.R. 
4541 as ordered reported by the House Committee on Commerce on 
July 27, 2000. On June 29, 2000, CBO transmitted a cost 
estimate for H.R. 4541 as ordered reported by the House 
Committee on Agriculture on June 27, 2000. On July 11, 2000, 
CBO transmitted a cost estimate for S. 2697, the Commodity 
Futures Modernization Act of 2000, as ordered reported by the 
Senate Committee on Agriculture, Nutrition, and Forestry, on 
June 29, 2000.
    Estimate prepared by: Federal Costs: Mark Hadley; Impact on 
State, Local, and Tribal Governments: Susan Sieg Tompkins.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

              Section-by-Section Analysis of H.R. 4541 \4\

          Title I--Commodity Futures Modernization Act of 2000

Section 101. Short title and table of contents

    The title is entitled the ``Commodity Futures Modernization 
Act of 2000.''
---------------------------------------------------------------------------
    \4\ Given that the amendment reported by the Committee on 
Agriculture was the base text for Committee consideration of H.R. 4541, 
the Committee has relied on the section-by-section analysis of that 
amendment as contained in House Report #106-711, Part I.
---------------------------------------------------------------------------

Section 102. Purposes

    The section lists eight purposes for the title including 
reauthorizing the CFTC; streamlining the CEA; eliminating 
unnecessary regulation for futures exchanges; transforming the 
regulatory role of the CFTC; providing a legislative and 
regulatory framework for the trading of futures on securities; 
providing CFTC jurisdiction over the retail foreign exchange 
market and bucket shops; promoting innovation and reducing 
systemic risk for OTC derivatives; allowing clearing of OTC 
derivatives and enhancing the competitive position of the U.S. 
financial institutions and markets.

Section 103. Definitions

    Section 103 adds definitions to section 1a of the CEA for 
the following terms: ``banking product''; ``derivatives 
clearing organizations''; ``designated future on a security''; 
``electronic trading facility''; ``eligible commercial 
participant'', ``eligible contract participant''; ``exempt 
commodity''; ``exclusion-eligible commodity''; ``financial 
institution''; ``hybrid instrument''; ``nonexempt security''; 
``option''; ``organized exchange''; ``registered entity''; 
``security''; and ``trading facility''.
    Section 103 differs from section 3 of the Agriculture 
Committee reported bill in that it adds a definition for 
``banking product'' and modifies the definitions for ``eligible 
contract participant'', ``excluded commodity'', ``financial 
institution'', ``hybrid instrument'', ``organized exchange'', 
and ``trading facility''. Section 103 defines ``banking 
product'' as meaning any agreement, contract, or transaction 
that is an identified banking product (as defined in section 
206(a) of the Gramm-Leach-Bliley Act).
    The section modifies the definition of ``eligible contract 
participant'' to include natural persons (acting for their own 
account) with total assets of $5 million and who enter into a 
transaction in order to manage the risk associated with an 
asset or liability owned or incurred or reasonably likely to be 
owned or incurred by such persons. It modifies the definition 
of ``financial institution'' to include a financial holding 
company, a new category of financial services firm authorized 
under provisions of the Gramm-Leach-Bliley Act. It renames the 
term ``excluded commodity'' to ``exclusion-eligible commodity'' 
and modifies the definition of such term in keeping with the 
President's Working Group recommendation to exclude from the 
CEA derivatives with a non-finite supply. It excludes from the 
definition of ``trading facility'' electronic systems that 
facilitate bilateral transactions and prevent any participant 
from executing a transaction with another participant unless 
both participants have approved the extension of credit to the 
other.

Section 104. Agreements, contracts, and transactions in foreign 
        currency, government securities and certain other commodities

    Section 104 clarifies section 2 of the CEA (the ``Treasury 
Amendment'') with respect to CFTC jurisdiction over foreign 
currency transactions by adding a new subsection (c).
    New paragraph (c)(2) excludes foreign currency transactions 
from CFTC regulation, other than those conducted on an 
organized exchange or as between unregulated entities and 
persons who are not eligible contract participants.
    The Committee amendment excludes from the definition of 
``organized exchange'', a facility that permits trading (1) by 
eligible contract participants trading on a principal-to-
principal basis; or (2) by eligible contract participants that 
are financial institutions, broker-dealers or the affiliates, 
insurance companies of their affiliates, financial holding 
companies, or investment bank holding companies acting as 
agents on behalf of eligible contract participants.
    New subparagraph (c)(2)(B) provides the CFTC with 
jurisdiction over retail foreign currency futures and options 
transactions that are not regulated by another federal 
regulator. This would allow the CFTC to take enforcement action 
against illegal bucket shops.

Section 105. Legal certainty for excluded derivatives transactions 
        (over-the-counter transactions)

    Section 105 amends section 2 of the CEA to create a new 
subsection (d), which states that nothing in the CEA applies to 
transactions in an excluded commodity if the transaction (1) is 
entered into between eligible contract participants and is not 
conducted on a trading facility; or (2) is between eligible 
contract participants, trading on a principal-to-principal 
basis, and the transaction is conducted on an electronic 
trading facility. In addition, under section 105 of the 
Committee amendment the ``principal-to-principal'' requirement 
does not apply to transactions entered into between eligible 
contract participants that are specified regulated entities if 
the transaction is executed or traded on an electronic trading 
facility.

Section 106. Excluded electronic trading facilities

    This section amends section 2 of the CEA to create a new 
subsection (e) that allows for the electronic trading of 
excluded commodities. Paragraph (e)(2) states that nothing in 
the CEA shall prohibit a contract market or derivatives 
transaction execution facility from establishing and operating 
an excluded electronic trading facility.

Section 107. Conformity with the Gramm-Leach-Bliley Act; hybrid 
        instruments

    This section amends section 2 of the CEA to create a new 
subsection (f) that provides that nothing in the CEA applies to 
a hybrid instrument that is predominantly a security or 
depository instrument, or to banking products or securities 
offered by certain regulated entities or their affiliates. 
Banking products, as defined in the Gramm-Leach-Bliley Act, 
encompasses instruments and transactions that are not properly 
regulated under the CEA when entered into by the enumerated 
regulated entities described in the section. New paragraph 
(f)(2) excepts from this exclusion swap agreements (as defined 
in section 106(b) of the Gramm-Leach-Bliley Act) with any party 
who is not an eligible contract participant until the Federal 
Reserve and Treasury Department promulgate new retail swap 
customer protection rules as provided for in section 133. New 
paragraph (f)(3) sets forth conditions for determining 
predominance to cover any hybrid instrument in which (1) the 
issuer of the instrument receives payment in full of the 
purchase price at the time the instrument is delivered; (2) the 
purchaser is not required to make additional payments; (3) the 
issuer of the instrument is not subject to mark-to-market 
margining requirements; and (4) the instrument is not marketed 
as a futures contract. New paragraph (4) clarifies that mark-
to-marketing requirements do not include the obligation of an 
issuer of a secured debt instrument to increase the amount of 
collateral for the instrument.

Section 108. Futures on securities

    This section amends section 2 of the CEA by adding a new 
subsection (g) that reforms the Shad-Johnson jurisdictional 
accord.
    Paragraph (1) provides that CFTC has no jurisdiction to 
designate a board of trade as a contract market for any 
transaction whereby any party to the transaction acquires a 
put, call, or other option on 1 or more securities (as defined 
in section 2(a)(1) of the Securities Act of 1933 or section 
3(a)(10) of the Securities Exchange Act of 1934, on the date of 
enactment of the Futures Trading Act of 1982), including any 
group or index of securities and any interest in or based on 
the value of securities.
    Paragraph (2) is a savings clause to ensure that excluded 
OTC equity derivatives remain outside the CEA and jurisdiction 
of the CFTC.
    Paragraph (3) states that it is illegal to provide for the 
trading of futures on securities except as provided for in the 
Act.
    Paragraph (4) provides CFTC with exclusive jurisdiction for 
futures on securities and provides criteria for contract market 
designation of these products including: cash settlement; 
insusceptibility to price manipulation (both of the contract 
and the underlying stock or an option on that stock); margin 
requirements; and making information available to the 
regulators. With regard to the establishment of margin 
requirements, the Committee amendment provides that a margin 
requirement for a futures on securities is to be consistent 
with a margin requirement for a comparable options contract 
listed on any national securities exchange. A margin 
requirement meets this consistency test if the margin provides 
a similar level of protection against defaults by 
counterparties taking into account any difference in the price 
volatility of the contracts, the frequency with which margin 
requirements are made, and the period of time within which 
margin calls must be met.
    Paragraph (5) requires the CFTC and SEC to consult with 
regard to the listing of a futures on a security. If the SEC is 
not satisfied that all requirements regarding a single stock 
future are being met by a contract market, the CFTC shall give 
the SEC an opportunity for an oral hearing. If the hearing is 
held and the SEC's objections are not resolved, the SEC may 
seek judicial review. Paragraph (6) authorizes the SEC to 
enforce the securities laws related to insider trading with 
respect to futures on securities.
    Paragraph (7) authorizes the FED to establish an 
Intermarket Margin Board with the concurrence of the CFTC and 
SEC. This would allow the CFTC, FED, and SEC to work jointly to 
set the margin on single stock futures at appropriate levels to 
preserve market financial integrity or to prevent systemic 
risk.
    Paragraph (8) provides that this subsection shall not be 
construed to prohibit any agreement, contract, or transaction 
excluded from this Act by paragraph (2); or any hybrid 
instrument that is covered by the terms of any exemption 
granted by CFTC.
    Paragraph (9) directs a registered futures association to 
adopt rules requiring a futures commission merchant (FCM), 
commodity trading advisor (CTA) or an introducing broker (IB) 
to determine if a customer is suitable to purchase single stock 
futures. FCM's already follow a `know your customer' rule, 
however, this paragraph will ensure customer protection adheres 
to suitability standards currently used when selling securities 
and options on securities.
    Paragraph (10) authorizes the offer and sale in the United 
States of any futures or option contracts on securities 
(excluding securities described in subparagraphs (A)(i) (I) or 
(II)), traded on a foreign board of trade without being a 
designated contract market under the CEA, if (1) for single 
stock futures, the United States is not the primary trading 
market for the underlying security; or (2) for stock index 
futures, less than 25 percent of the index is based on 
securities that are primarily traded in the United States; and 
settlement of the futures contract does not involve the 
transfer or receipt of a security in the United States. The 
CFTC is required to promulgate appropriate regulations 
implementing this section within 90 days of enactment.

Section 109. Transactions in exempt commodities

    This section amends section 2 of the CEA by adding a new 
subsection (h) to provide legal certainty for exempt 
commodities. Exempt commodities must be traded between eligible 
participants and not traded on a trading facility (except an 
electronic trading facility). The amendment further provides 
that transactions in an exempt commodity, other than a metal 
commodity, can be conducted between eligible contract 
participants and traded on an electronic trading facility. All 
transactions are also subject to the clearing system provisions 
of the bill, state fraud statutes, and the fraud and anti-
manipulation provisions of the Act. In addition, CFTC may 
prescribe rules to ensure the timely dissemination of 
electronic trading facility data if CFTC determines that the 
electronic facility performs a significant price discovery 
function.

Section 110. Swap transactions

    This section amends section 2 of the CEA to exclude from 
the CEA a nonagricultural swap if the swap is entered into 
between persons that are eligible participants and the terms of 
the swap are subject to individual negotiation and not 
specified by terms of a trading facility. This exclusion does 
not apply to swaps executed on a CFTC-designated or CFTC-
registered facility.

Section 111. Application of the Commodity Exchange Act

    This section modifies section 2 of the CEA to clarify that 
nothing in the CEA is to imply or create any presumption that a 
transaction is or is not subject to the CEA or CFTC 
jurisdiction because it is or is not eligible for an exclusion 
or exemption provided for under the CEA or by the CFTC.

Section 112. Protection of the public interest

    This section rewrites section 3 of the CEA that lists the 
responsibilities of the CFTC and purposes of the CEA in 
protecting the public interest. These include: protecting 
investors from fraud and manipulation; fostering efficiency and 
fairness with transparent price dissemination; preventing 
market manipulation and minimizing the risk of systemic 
failure; and promoting financial innovation and fair 
competition.

Section 113. Prohibited transactions

    This section rewrites section 4c of the CEA for clarity.

Section 114. Designation of Boards of Trade as contract markets

    This section strikes current law sections 5 and 5a and adds 
a new section 5 to the CEA providing for the designation of 
boards of trade as contract markets. Subsection (b) contains 
criteria that boards of trade must meet in order to be 
designated as a contract market. These include establishing and 
enforcing rules preventing market manipulation; ensuring fair 
and equitable trading by authorizing various futures exchange 
transactions; specifying how the trade execution facility 
operates, including any electronic matching systems; ensuring 
the financial integrity of transactions; disciplining members 
or market participants who violate the rules; allowing for 
public access to the board of trade rules and enabling the 
board of trade to obtain information in order to enforce its 
rules. Existing contract markets are grandfathered in under new 
subsection (c). The 18 core principles that must be met to 
maintain designation as a contract market are contained in new 
subsection (d) and provide that a board of trade must:
          Monitor and enforce compliance with the contract 
        market rules;
          List only contracts that are not susceptible to 
        manipulation;
          Monitor trading to prevent manipulation, price 
        distortion and delivery or settlement disruptions;
          Adopt position limits for speculators and hedgers;
          Adopt rules to provide for the exercise of emergency 
        authority, including the authority to liquidate or 
        transfer open positions, suspend trading and make 
        margin calls;
          Make available the terms and conditions of the 
        contracts and the mechanisms for executing 
        transactions;
          Publish daily information on prices, bids, offers, 
        volume, open interest, and opening and closing ranges;
          Provide a competitive, open and efficient market and 
        mechanism for executing transactions;
          Provide for the safe storage of all trade information 
        in a readily usable manner to assist in fraud 
        prevention;
          Provide for the financial integrity of the contracts, 
        the futures commission merchants and customer funds;
          Protect market participants from abusive practices;
          Provide for alternative dispute resolutions for 
        market participants and intermediaries;
          Establish and enforce rules regarding fitness 
        standards for those involved in market governance;
          Establish and enforce rules to minimize conflicts of 
        interest in a contract market;
          Ensure that the governing board reflects the 
        composition of the market participants (in the case of 
        mutually owned exchanges);
          Maintain records and make them available at any time 
        for inspection by the Attorney General; and
          Avoid taking any action that restrains trade or 
        imposes anticompetitive burdens on the markets.
    Subsection (e) provides that, with respect to futures 
contracts involving agricultural or metal commodities 
enumerated in section 1a(3) of the CEA, such contracts may only 
trade on designated contract markets. However, upon application 
by any person, the CFTC may prescribe rules and regulations to 
allow such agricultural or metal commodities to trade on a 
derivatives transaction execution facility in instances where 
it would promote responsible economic or financial innovation 
and fair competition.

Section 114. Derivatives transaction execution facilities

    This section amends the CEA by adding a new section 5a 
authorizing a new trading designation called a derivatives 
transaction execution facility (DTEF). Under subsection (b), a 
board of trade may elect to operate as a DTEF rather than a 
contract market if they meet the DTEF designation requirements. 
registered DTEF may trade any non-designated futures contract 
if the commodity underlying the contract has a nearly 
inexhaustible supply, is not susceptible to manipulation, and 
does not have a cash market in commercial practice. Eligible 
DTEF traders include authorized contract market participants 
and persons trading through registered futures commission 
merchants with capital of at least $20,000,000 that are members 
of a self-regulatory organization (SRO) and a clearing 
organization. Boards of trade that have been designated as 
contract markets may operate as DTEFs if they provide a 
separate location for DTEF trading or, in the case of an 
electronic system, identify whether the trading is on a DTEF or 
contract market.
    Subsection (c) provides criteria for boards of trade that 
wish to register as DTEFs, including: establishing and 
enforcing trading rules, by authorizing various futures 
exchange transactions, that will deter abuses and provide 
market participants impartial access to the markets and capture 
information that may be used in rule enforcement; and defining 
trading procedures to be used and provide for the financial 
integrity of DTEF transactions.
    To maintain registration as a DTEF, a board of trade must 
comply with 9 core principles listed in subsection (d):
          Maintain and enforce rules
          Ensure orderly trading and provide trading 
        information to the CFTC;
          Publicly disclose information regarding contract 
        terms, trading practices, and financial integrity 
        protections;
          Provide information on prices, bids and offers to 
        market participants as well as daily information in 
        volume and open interest for the actively traded 
        contracts;
          Establish and enforce rules regarding fitness 
        standards for those involved in DTEF governance;
          Establish and enforce rules to minimum conflicts of 
        interest in a derivatives transaction execution 
        facility;
          Maintian records and make them available at any time 
        for inspection by the Attorney General; and
          Avoid taking any action that restrains trade or 
        imposes anticompetitive burdens on the markets.
    Subsection (e) allows a broker-dealer, bank, or Farm Credit 
Institution in good standing to act as an intermediary on 
behalf of its customers and to receive funds serving as margin 
or security for the customer's transactions. If such entity 
holds the DTEF customer funds or accounts for more than 1 
business day, such entity must be a registered FCM and a member 
of a registered futures association. The CFTC and SEC are to 
coordinate in adopting rules to implement this subsection.
    Under subsection (f), the CFTC may adopt regulations to 
allow FCMs to give their customers the right to not segregate 
customer funds for purposes of trading on the DTEF.
    Subsection (g) clarifies that a DTEF may trade derivatives 
that otherwise would be excluded, exempted or not subject to 
the CEA and the CFTC has exclusive jurisdiction only when these 
instruments are traded on a DTEF.

Section 116. Derivatives clearing organizations

    This section amends the Federal banking laws, bankruptcy 
code and the CEA to provide a clear statutory basis for the 
regulation of clearing systems that develop for OTC 
derivatives.
    Subsection (a) amends the Federal Deposit Insurance 
Corporation Improvement Act to prohibit persons from operating 
a multilateral clearing organization for derivative 
transactions unless the person is a national or state member 
bank, an affiliate of such a bank or an Edge Act corporation. 
This prohibition does not apply to a clearing organization that 
(1) is registered as a clearing agency under the Securities 
Exchange Act of 1934, (2) performs clearing functions for a 
CFTC registered market, or (3) is supervised by a foreign 
financial regulator which satisfies appropriate standards 
determined by an appropriate Federal financial regulator.
    Subsections (b) and (c) amend the Federal Reserve Act (FRA) 
to provide the FED with enforcement authority over uninsured 
state member banks and resolution authority over such banks 
which operate as multilateral clearing organizations.
    Subsections (d) and (e) make technical and conforming 
changes to the Bankruptcy Code.
    Subsection (f) amends the FRA to provide the FED resolution 
authority over insolvent Edge Act corporations.
    Subsection (g) amends the CEA to create a new section 5(b) 
regarding derivatives clearing organizations.

Section 117. Common provisions applicable to registered entities.

    The section amends the CEA to create a new section 5c that 
contains provisions affecting all registered entities (contract 
markets, DTEFs, and derivatives clearing organizations).
    Subsection (a) allows the CFTC to issue or approve 
interpretations to describe what would constitute an acceptable 
business practice under the core principals for registered 
entities.
    Subsection (b) allows a registered entity to delegate its 
self regulatory functions to a registered futures association, 
while specifying that responsibility for carrying out these 
functions remain with th4e registered entity.
    Subsection (c) enables the registered entity to trade new 
products or adopt or amend rules by providing the CFTC (or, in 
the case of a government security product, the Secretary of the 
Treasury) a written certification that the new contract or new 
rule or amendment complies with the CEA. This subsection would 
allow a registered entity to request that the CFTC grant prior 
approval of a new contract, new rule or rule amendment. For 
enumerated commodity products, a contract market (futures 
exchange) shall submit to the CFTC for prior approval each rule 
amendment that materially changes the terms and conditions of a 
contract that has already been listed and has substantial open 
interest.
    Subsection (d) grants the CFTC the authority to informally 
resolve potential violations of the core principals for 
registered entities.
    Subsection (e) reserves all of CFTC's emergency powers.

Section 118. Exempt boards of trade

    This section amends the CEA to create a new section 5d 
regarding exempt boards of trade. Under subsections (a) and 
(b), futures contracts traded on an exempt board of trade would 
be exempt from the CEA (except section 2(g) regarding equity 
futures) if:
          (1) The commodity underlying the futures contract has 
        an inexhaustible deliverable supply, is not subject to 
        manipulation, or has no cash market;
          (2) Participants are eligible contract participants 
        (large institutional investors); and
          (3) The contracts do not involve securities 
        (including security indices).
    Subsection (c) subjects futures contracts traded on an 
exempt board of trade to the anti-fraud and anti-manipulation 
provisions of the CEA.
    Under subsection (d), if the CFTC finds that an exempt 
board of trade is a significant source of price discovery for 
the underlying commodity, the board of trade shall disseminate 
publicly on a daily basis trading volume, opening and closing 
price ranges, open interest, and other trading data as 
appropriate to the market.

Section 119. Suspension or revocation of designation as contract market

    This section amends the CEA to authorize the CFTC to 
suspend the registration of a registered entity for 180 days 
for any violation of the CEA.

Section 120. Authorization of appropriations

    This section amends section 12(d) of the CEA by striking 
2000 and reauthorizing appropriations through fiscal year 2005.

Section 121. Preemption

    This section rewrites paragraph 12(e)(2) of the CEA for 
clarity and to conform with changes made in the bill. It 
restates the current provisions that the CEA supersedes and 
preempts other laws in the case of transactions conducted on a 
registered entity or subject to regulation by the CFTC (even if 
outside the United States), and adds that in the case of 
excluded electronic trading facilities and any agreements, 
contracts or transactions that are excluded commodities or 
covered by a 4(c) exemption, the CEA supersedes and preempts 
State gaming and bucket shop laws (except State antifraud laws 
of general applicability).

Section 122. Predispute resolution agreements for institutional 
        customers

    This section amends subsection 14(g) of the CEA to clarify 
that futures commission merchants, as a condition of doing 
business, may require customers, that are eligible contract 
participants, to waive their right to file a reparations claim 
with the CFTC.

Section 123. Consideration of costs and benefits and antitrust laws

    This section amends section 15 of the CEA to add a new 
subsection (a) requiring the CFTC, before promulgating 
regulations and issuing orders, to consider the costs and 
benefits of its action. This does not apply to orders 
associated with an adjudicatory or investigative process, or to 
emergency actions or findings of fact regarding compliance with 
CFTC rules.

Section 124. Contract enforcement

    This section amends subsection 22(a) of the CEA to provide 
that a transaction shall not be unenforceable under Federal or 
State law based solely on the failure of the transaction to 
comply with the terms of an exemption or exclusion provided for 
under the CEA or by the CFTC. The provision applies to 
transactions between eligible contract participants or 
involving institutions excluded under the retail foreign 
exchange provisions of section 104. This safe harbor does not 
apply to any swap agreement (as defined in the Gramm-Leach-
Bliley Act) with any party who is not an eligible contract 
participant unless such swap agreement is entered into after 
regulations have been prescribed under section 133 of the 
Commodities Futures Modernization Act of 2000.
    Some swaps may not meet the terms of exemptions or 
exclusions provided for in the legislation. Any failure to 
provide a statutory exclusion or exemption for these categories 
of swaps transactions does not reflect, and should not be 
construed to reflect, a determination by Congress that these 
categories of swaps transactions are subject to the Commodity 
Exchange Act.

Section 125. Special procedures to encourage and facilitate bona fide 
        hedging by agricultural producers

    This section authorizes the CFTC to consider several 
factors to improve domestic agricultural producers' ability to 
use contract markets for hedging price risk. Specifically, this 
section authorizes CFTC, in issuing rules or orders, to 
consider: procedures to facilitate the orderly delivery of 
agricultural commodities, including temporary storage costs; 
the ease with which domestic agricultural producers may 
participate in contract markets, including cost and margin 
requirements; and flexibility in the minimum quantities of 
contract size. This section also requires the CFTC to report to 
the House and Senate Agriculture Committees regarding steps 
taken to implement this section.

Section 126. Rule of construction

    This section provides that nothing in this Act supersedes, 
affects, or otherwise limits or expands the scope and 
applicability of laws governing the Securities and Exchange 
Commission unless expressly provided.

Section 127. Authority of agencies to construe the term ``Contract 
        Market''

    This section authorizes Federal agencies to prescribe 
regulations construing the term ``contract market.'' Many 
statutes other than the CEA, including the Federal securities 
laws and the Internal Revenue Code, refer to transactions 
occurring on a contract market. Because the bill amends the CEA 
to createnew categories of regulated entities, this section 
gives other agencies rulemaking authority to construe the term to cover 
these entities as well as contract markets.

Section 128. Technical and conforming amendments

    This section makes technical and conforming amendments 
throughout the CEA to reflect changes made by the bill.

Section 129. Report to Congress

    This section requires the CFTC to study the CEA and its 
rules, regulations and orders governing the conduct of CFTC 
registrants and report to Congress within one year.

Section 130. Effective date

    This section provides that Title I shall take effect on the 
date of enactment, except section 109 (dealing with equity 
futures), which takes effect one year after enactment.

Section 131. International activities of the Commodity Futures Trading 
        Commission

    This section contains Congressional findings about the 
changing and global nature of derivatives markets, the increase 
in the use of data processing and communications technologies 
that enable users of risk management services to analyze and 
compare services on a worldwide basis, and the need for 
financial regulatory policy to be flexible and to avoid 
compromising U.S. competitiveness.
    This section also contains a Sense of Congress regarding 
the importance of the CFTC, as part of its international 
activities, to continue to coordinate with foreign regulatory 
authorities, participate in international regulatory 
organizations and forums, and provide technical assistance to 
foreign government authorities in order to encourage and 
facilitate cross-border transactions, reduce unnecessary 
obstacles, and enhance international cooperation and 
information sharing.

Section 132. Antifraud provisions

    This section makes it unlawful to commit retail derivatives 
fraud by the use of any means or instruments of transportation 
or communication in interstate commerce or the mails. Under the 
section, retail derivatives fraud is defined, in connection 
with certain derivatives transactions that are neither futures 
nor securities, as fraud perpetrated on parties that are not 
eligible contract participants. This section is enforced by the 
appropriate Federal financial regulator, state insurance 
authority, and the Federal Trade Commission with respect to 
financial institutions subject to their jurisdiction. The 
section criminal penalties for retail derivatives fraud.

Section 133. Retail swap customer protections

    This section adds a new section to the Federal Deposit 
Insurance Act authorizing the FED and the Treasury Department 
to jointly prescribe consumer protection regulations that apply 
to sales practices relating to swap agreements (as defined in 
section 206(b) of the Gramm-Leach-Bliley Act) between financial 
institutions and retail customers. If such regulations are not 
prescribed after one year after enactment, the two agencies 
must submit a report to the Congress within 15 days explaining 
why such regulations were not prescribed in final form.

      title ii--financial contract Netting improvement act of 2000

Section 201. Short title

    Title II is entitled the ``Financial Contract Netting 
Improvement Act of 2000''.

Section 202. Treatment of certain agreements by conservators or 
        receivers of insured depository institutions

    Subsections (a) through (f) amend the FDIA definitions of 
``qualified financial contract,'' ``securities contract,'' 
``commodity contract,'' ``forward contract,'' ``repurchase 
agreement'' and ``swap agreement'' to make them consistent with 
the definitions in the Bankruptcy Code.
    Subsection (b) amends the definition of ``securities 
contract'' to encompass options on securities and margin loans. 
The inclusion of ``margin loans'' in the definition is intended 
to encompass only those loans commonly known in the securities 
industry as ``margin loans'' and does not include other loans 
utilizing securities as collateral, however documented.
    Subsection (b) also specifies that purchase, sale and 
repurchase obligations under a participation in a commercial 
mortgage loan do not constitute ``securities contracts.'' While 
a contract for the purchase or sale or a participation may 
constitute a ``securities contract'', the purchase, sale or 
repurchase obligation embedded in a participation agreement 
does not make that agreement a ``securities contract.''
    Subsection (e) amends the definition of ``repurchase 
agreement'' to codify the substance of the FDIC's 1995 
regulation defining repurchase agreement to include those on 
qualified foreign government securities. See 12 C.F.R. 
Sec. 360.5. The term ``qualified foreign government 
securities'' is defined to include those that are direct 
obligations of, or fully guaranteed by, central governments of 
members of the Organization for Economic Cooperation and 
Development (OECD). Subsection (e) reflects developments in the 
repurchase agreement markets, which increasingly use foreign 
government securities as the underlying asset. Any risk 
presented by this modification is addressed by limiting it to 
those issued or guaranteed by OECD member states.
    Subsection (e), like subsection (b) for ``securities 
contracts'', specifies that repurchase obligations under a 
participation in a commercial mortgage loan do not make the 
participation agreement a ``repurchase agreement.'' Such 
repurchase obligations embedded in participations in commercial 
loans (such as recourse obligations) do not constitute a 
``repurchase agreement.'' However, a repurchase agreement 
involving the transfer of participations in commercial mortgage 
loans with a simultaneous agreement to repurchase the 
participation on demand or at a date certain one year or less 
after such transfer would constitute a ``repurchase 
agreement.''
    Subsection (f) amends the definition of ``swap agreement'' 
to include an ``interest rate swap, option, future, or forward 
agreement, including a rate floor, rate cap, rate collar, 
cross-currency rate swap, and basis swap; a spot, same day-
tomorrow, tomorrow-next, forward or other foreign exchange or 
precious metals agreements; a currency swap, option, future, or 
forward agreement; an equity index or equity swap, option, 
spread, future, or forward agreement; a debt index or debt 
swap, option, future, or forward agreement; a credit swap, 
option, future, or forward agreement; a commodity index or 
commodity swap, option, future, or forward agreement; or a 
weather swap, weather derivative, or a weather option.'' This 
amendment would achieve contractual netting across economically 
similar over-the-counter products that can be terminated and 
closed out on a mark-to-market basis.
    These definitions apply only for purposes of the FDIA and 
the Bankruptcy Code. These definitions, and the 
characterization of a certain transaction as a ``swap 
agreement'', are not intended to effect the characterization, 
definition, or treatment of any instruments under any other 
statute, regulation, or rule including, but not limited to, the 
statutes, regulations or rules enumerated in subsection (f).
    Subsection (g) amends the FDIA by adding a definition for 
``transfer,'' which is a key term used in the FDIA, to ensure 
that it is broadly construed to encompass dispositions of 
property or interests in property. The definition tracks that 
in section 101 of the Bankruptcy Code.
    Subsection (h) makes clarifying technical changes to 
conform the receivership and conservatorship provisions of the 
FDIA. This subsection (h) also clarifies that the FDIA 
expressly protects rights under security agreements, 
arrangements or other credit enhancement related to one or more 
qualified financial contracts (QFCs). An example of a 
securityarrangement is a right of set off, and examples of other credit 
enhancements are letters of credit, guarantees, reimbursement 
obligations and other similar agreements.
    Subsection (i) clarifies that no provision of Federal or 
state law relating to the avoidance of preferential or 
fraudulent transfers (including the anti-preference provision 
of the National Bank Act) can be invoked to avoid a transfer 
made in connection with any QFC of an insured depository 
institution in conservatorship or receivership, absent actual 
fraudulent intent on the part of the transferee.

Section 203. Authority of the corporation with respect to failed and 
        failing institutions

    Section 203 provides that no provision of law, including 
FDICIA, shall be construed to limit the power of the FDIC to 
transfer or to repudiate any QFC in accordance with its powers 
under the FDIA. As discussed below, there has been some 
uncertainty regarding whether or not FDICIA limits the 
authority of the FDIC to transfer or to repudiate QFCs of an 
insolvent financial institution. Section 203--as well as other 
provisions in the Act--clarify that FDICIA does not limit the 
transfer powers of the FDIC with respect to QFCs.
    Section 203 denies enforcement to ``walkaway'' clause in 
QFCs. A walkaway clauses is defined as a provision that, after 
calculation of a value of a party's position or an amount due 
to or from one of the parties upon termination, liquidation or 
acceleration of the QFC, either does not create a payment 
obligation of a party or extinguishes a payment obligation of a 
party in whole or in part solely because of such party's status 
as a non-defaulting party.

Section 204. Amendments relating to transfers of qualified financial 
        contracts

    Subsection (a) amends the FDIA to expand the transfer 
authority of the FDIC to permit transfers of QFCs to 
``financial institutions'' as defined in FDICIA or in 
regulations. This provision will allow the FDIC to transfer 
QFCs to a non-depository financial institution, provided the 
institution is not subject to bankruptcy or insolvency 
proceedings.
    The new FDIA provision specifies that when the FDIC 
transfers QFCs that are subject to the rules of a particular 
clearing organization, the transfer will not require the 
clearing organization to accept the transferee as a member of 
the organization. This provision gives the FDIC flexibility in 
resolving QFCs subject to the rules of a clearing organization, 
while preserving the ability of such organizations to enforce 
appropriate risk reducing membership requirements.
    The new FDIA provision also permits transfers to an 
eligible financial institution that is a non-U.S. person, or 
the branch or agency of a non-U.S. person if, following the 
transfer, the contractual rights of the parties would be 
enforceable substantially to the same extent as under the FDIA.
    Subsection (b) amends the notification requirements 
following a transfer of the QFCs of a failed depository 
institution to require the FDIC to notify any party to a 
transferred QFC of such transfer by 5:00 p.m. (Eastern Time) on 
the business day following the date of the appointment of the 
FDIC acting as receiver or following the date of such transfer 
by the FDIC acting as a conservator. This amendment is 
consistent with the policy statement on QFCs issued by the FDIC 
on December 12, 1989.
    Subsection (c) amends the FDIA to clarify the relationship 
between the FDIA and FDICIA. There has been some uncertainty 
whether FDICIA permits counterparties to terminate or liquidate 
a QFC before the expiration of the time period provided by the 
FDIA during which the FDIC may repudiate or transfer a QFC in a 
conservatorship or receivership. Subsection (c) provides that a 
party may not terminate a QFC based solely on the appointment 
of the FDIC as receiver until 5:00 p.m. (Eastern Time) on the 
business day following the appointment of the receiver or after 
the person has received notice of a transfer under FDIA section 
11(d)(9), or based solely on the appointment of the FDIC as 
conservator, notwithstanding the provisions of FDICIA. This 
provides the FDIC with an opportunity to undertake an orderly 
resolution of the insured depository institution.
    The amendment also prohibits the enforcement of rights of 
termination or liquidation that are based solely on the 
``financial condition'' of the depository institution in 
receivership or conservatorship. For example, termination based 
on a cross-default provision in a QFC that is triggered upon a 
default under another contract could be stayed if such other 
default was caused by an acceleration of amounts due under that 
other contract, and such acceleration was based solely on the 
appointment of a conservator or receiver for that depository 
institution. Similarly, a provision in a QFC permitting 
termination of the QFC based solely on a downgraded credit 
rating of a party will not be enforceable in an FDIC 
receivership or conservatorship because the provision is based 
solely on the financial condition of the depository institution 
in default. However, any payment, delivery or other 
performance-based default, or breach of a representation or 
covenant putting in question the enforceability of the 
agreement, will not be deemed to be based solely on financial 
condition for purposes of this provision. The amendment is not 
intended to prevent counterparties from taking all actions 
permitted and recovering all damages authorized upon 
repudiation of any QFC by a conservator or receiver.
    The amendment allows the FDIC to meet its obligation to 
provide notice to parties to transferred QFCs by taking steps 
reasonably calculated to provide notice to such parties by the 
required time. This is consistent with the existing policy 
statement on QFCs issued by the FDIC on December 12, 1989.
    Finally, the amendment permits the FDIC to transfer QFCs of 
a failed depository institution to a bridge bank or a 
depository institution organized by the FDIC for which a 
conservator is appointed either (i) immediately upon the 
organization of such institution or (ii) at the time of a 
purchase and assumption transaction between the FDIC and the 
institution. This provision clarifies that such institutions 
are not to be considered financial institutions that are 
ineligible to receive such transfers under FDIA section 
11(e)(9). This is consistent with the existing policy statement 
on QFCs issued by the FDIC on December 12, 1989.

Section 205. Amendments relating to disaffirmance or repudiation of 
        qualified financial contracts

    Section 205 limits the disaffirmance and repudiation 
authority of the FDIC with respect to QFCs so that such 
authority is consistent with the FDIC's transfer authority 
under FDIA section 11(e)(9). This ensures that no 
disaffirmance, repudiation or transfer authority of the FDIC 
may be exercised to ``cherry-pick'' or otherwise treat 
independently all the QFCs between a depository institution in 
default and a person or any affiliate of such person. The FDIC 
has announced that its policy is not to repudiate or disaffirm 
QFCs selectively. This unified treatment is fundamental to the 
reduction of systemic risk.

Section 206. Clarifying amendment relating to master agreements

    Section 206 states that a master agreement for one or more 
securities contracts, commodity contracts, forward contracts, 
repurchase agreements or swap agreements will be treated as a 
single QFC under the FDIA. This provision ensures that cross-
product netting pursuant to a master agreement will be 
enforceable under the FDIA. Cross-product netting permits a 
wide variety of financial transactions between two parties to 
be netted, thereby maximizing the present and potential future 
risk-reducing benefits of the netting arrangement between the 
parties. Express recognition of the enforceability of such 
cross-product master agreements furthers the policy of 
increasing legal certainty and reducing systemic risks in the 
case of an insolvency of a large financial participant. Similar 
Bankruptcy Code clarifications to recognize cross-product 
netting both under a master agreement and in the absence of a 
master agreement are described below.

Section 207. Federal Deposit Insurance Corporation Improvement Act of 
        1991

    Subsection (a)(1) amends the definition of ``clearing 
organization'' to include clearinghouses that are subject to 
exemptions pursuant to orders of the SEC or the CFTC.
    Subsection (a)(2). FDICIA provides that a netting 
arrangement will be enforced pursuant to its terms, 
notwithstanding the failure of a party to the agreement. 
However, the current netting provisions of FDICIA limit this 
protection to ``financial institutions,'' which include 
depository institutions. Subsection (a)(2) amends the FDICIA 
definition of covered institutions to include (i) uninsured 
national and State member banks, irrespective of their 
eligibility for deposit insurance and (ii) foreign banks 
(including the foreign bank and its branches or agencies as a 
combined group, or only the foreign bank parent of a branch or 
agency). The Federal Reserve Board already has by regulation 
included certain foreign banks in the definition of a 
``financial institution'' for purposes of FDICIA and the latter 
change will statutorily extend the protections of FDICIA to 
ensure that U.S. financial organizations participating in 
netting agreements with foreign banks are covered by the Act, 
thereby enhancing the safety and soundness of these 
arrangements.
    Subsection (a)(3) amends FDICIA to provide that, for 
purposes of FDICIA, two or more clearing organizations that 
enter into a netting contract are considered ``members'' of 
each other. This assures the enforceability of netting 
arrangements involving two or more clearing organizations and a 
member common to all such organizations, thus reducing systemic 
risk in the event of the failure of such a member. Under the 
current FDICIA provisions, the enforceability of such 
arrangements depends on a case-by-case determination that 
clearing organizations could be regarded as members of each 
other for purposes of FDICIA.
    Subsection (a)(4) amends the FDICIA definition of netting 
contract and the general rules applicable to netting contracts. 
The current FDICIA provisions require that the netting 
agreement must be governed by the law of the United States or a 
State to receive the protections of FDICIA. However, many of 
these agreements, particularly netting arrangements covering 
positions taken in foreign exchange dealings, are governed by 
the laws of a foreign country. This subsection broadens the 
definition of ``netting contract'' to include those agreements 
governed by foreign law, and preserves the FDICIA requirement 
that a netting contract is not invalid under, or precluded by, 
Federal law.
    Subsection (a)(5) adds a new definition of ``payment'' to 
FDICIA.
    Subsections (b) and (c) establish two exceptions to 
FDICIA's protection of the enforceability of the provisions of 
netting contracts between financial institutions and among 
clearing organization members.
    First, the termination provisions of netting contracts will 
not be enforceable based solely on (i) the appointment of a 
conservator for an insolvent depository institution under the 
FDIA or (ii) the appointment of a receiver for such institution 
under the FDIA, if such receiver transfers or repudiates QFCs 
in accordance with the FDIA and gives notice of a transfer by 
5:00 p.m. on the business day following the appointment of a 
receiver. This change is made to confirm the FDIC's flexibility 
to transfer or repudiate the QFCs of an insolvent depository 
institution in accordance with the terms of the FDIA. This 
modification also provides important legal certainty regarding 
the treatment of QFCs under the FDIA, because the current 
relationship between the FDIA and FDICIA is unclear.
    The second exception provides that FDICIA does not override 
a stay order under SIPA with respect to foreclosure on 
securities (but not cash) collateral of a debtor (section 212 
makes a conforming change to SIPA). There is also an exception 
relating to insolvent commodity brokers.
    Subsections (b) and (c) also clarify that a security 
agreement or other credit enhancement related to a netting 
contract is enforceable to the same extent as the underlying 
netting contract.
    Subsection (d) adds a new section 407 to FDICIA. This new 
section provides that, notwithstanding any other law, QFCs with 
uninsured national banks or uninsured Federal branches or 
agencies that are placed in receivership or conservatorship 
will be treated in the same manner as if the contract were with 
an insured national bank or insured Federal branch for which a 
receiver or conservator was appointed. This provision will 
ensure that parties to QFCs with uninsured national banks or 
uninsured Federal branches or agencies will have the same 
rights and obligations as parties entering into the same 
agreements with insured depository institutions. The new 
section also specifically limits the powers of a receiver or 
conservator for an uninsured national bank or uninsured Federal 
branch or agency to those contained in 12 U.S.C. 
Sec. 1821(e)(8), (9), (10), and (11), which address QFCs.
    While the amendment would apply the same rules to uninsured 
national banks and Federal branches and agencies that apply to 
insured institutions, the provision would not change the rules 
that apply to insured institutions. Nothing in this section 
would amend the International Banking Act, the Federal Deposit 
Insurance Act, the National Bank Act, or other statutory 
provisions with respect to receiverships of insured national 
banks or Federal branches.

Section 208. Bankruptcy code amendments

    Subsection (a)(1) amends the Bankruptcy Code definitions of 
``repurchase agreement'' and ``swap agreement'' to conform with 
the amendments to the FDIA contained in sections 202(e) and 20-
2(f) of the Act.
    In connection with the definition of ``repurchase 
agreement,'' the term ``qualified foreign government 
securities'' is defined to include securities that are direct 
obligations of, or fully guaranteed by, central governments of 
members of the Organization for Economic Cooperation and 
Development (OECD). This language reflects developments in the 
repurchase agreement markets, which increasingly use foreign 
government securities as the underlying asset. Any risk 
presented by this modification is addressed by limiting it to 
those obligating or guaranteed by OECD member states.
    Subsection (a)(1) specifies that repurchase obligations 
under a participation in an commercial mortgage loan do not 
make the participation agreement a ``repurchase agreement.'' 
Such repurchase obligations embedded in participations in 
commercial loans (such as recourse obligations) do not 
constitute a ``repurchase agreement.'' However, a repurchase 
agreement involving the transfer to participations in 
commercial mortgage loans with a simultaneous agreement to 
repurchase the participation on demand or at a date certain one 
year or less after such transfer would constitute a 
``repurchase agreement.''
    The amendments to the definition of ``repurchase 
agreement'' are not intended to affect the interpretation of 
the definition of ``securities contract.''
    The definition of ``swap agreement,'' in conjunction with 
the addition of ``spot foreign exchange transactions'' that was 
added to the definition in 1994, will achieve contractual 
netting across economically similar over-the-counter products 
that can be terminated and closed out on a mark-to-market 
basis.
    The definition of ``swap agreement'' originally was 
intended to provide sufficient flexibility to avoid the need to 
amend the definition as the nature and uses of swap 
transactions matured. For that reason, the phrase ``or any 
other similar agreement'' was included in the definition. To 
clarify this, subsection (a)(1) expands the definition of 
``swap agreement'' to include ``any agreement or transaction 
similar to any other agreement or transaction referred to in 
[subsection (a)(1)] that is presently, or in the future 
becomes, regularly entered into in the swap market [. . .] and 
is a forward, swap, future, or option on one or more rates 
currencies, commodities, equity securities or other equity 
instruments, debt securities or other debt instruments, or 
economic indices or measures of economic risk or value.'' 
Subsection (a)(1) specifies that this definition of 
swapagreement applies only for purposes of the Bankruptcy Code and is 
inapplicable to the other statutes, rules and regulations enumerated in 
that section.
    The definition also includes any security agreement or 
arrangement, or other credit enhancement, related to a swap 
agreement. This ensures that any such agreement, arrangement or 
enhancement is itself deemed to be a swap agreement, and 
therefore eligible for treatment as such for purposes of 
termination, liquidation, acceleration, offset and netting 
under the Bankruptcy Code and the FDIA. Similar changes are 
made in the definitions of ``forward contract,'' ``commodity 
contract'' and ``repurchase agreement.'' An example of a 
security arrangement is a right of setoff; examples of other 
credit enhancements are letters of credit, guarantees, 
reimbursement obligations and other similar agreements.
    Subsections (a)(2) and (a)(3) amend the Bankruptcy Code 
definitions of ``securities contract'' and ``commodity 
contract,'' respectively, to conform them to the definitions in 
the FDIA, and also to include any security agreements or 
arrangements or other credit enhancements related to one or 
more such contracts. Subsection (a)(2), like the amendments to 
the FDIA, amends the definition of ``securities contract'' to 
encompass options on securities and margin loans. The inclusion 
of ``margin loans'' in the definition is intended to encompass 
only those loans commonly known in the securities industry as 
``margin loans'' and does not include other loans utilizing 
securities as collateral, however, documented.
    Subsection (a)(2) also specifies that purchase, sale and 
repurchase obligations under a participation in a commercial 
mortgage loan do not constitute ``securities contracts.'' While 
a contract for the purchase or sale or a participation may 
constitute a ``securities contract,'' the purchase, sale or 
repurchase obligation embedded in a participation agreement 
does not make that agreement a ``securities contract.''
    Subsection (b) amends the Bankruptcy Code definitions of 
``forward contract merchant'' and also adds a new definition of 
``financial participant'' to limit the potential impact of 
insolvencies upon other major market participants. This 
definition will allow such market participants to close-out and 
net agreements with insolvent entities under sections 
362(b)(6), 546, 548, 555, and 556 even if the creditor could 
not qualify as, for example, a commodity broker. Section 116(d) 
of the Act amends the definition of financial institution to 
conform to the changes made in this subsection. The new 
subsection preserves the limitations of the right to close-out 
and net such contracts, in most cases, to entities who qualify 
under the Bankruptcy Code's counter party limitations. However, 
where the counter party has transactions with a total gross 
dollar value of at least $1 billion in notional principal 
amount outstanding on any day during the previous 15-month 
period, or has gross mark-to-market positions of at least $100 
million (aggregated across counter parties) in one or more 
agreements or transactions on any day during the previous 15-
month period, the new subsection and corresponding amendments 
would permit it to exercise netting rights irrespective of its 
inability otherwise to satisfy those counter party limitations. 
This change will help prevent systemic impacts upon the markets 
from a single failure.
    Subsection (c) adds to the Bankruptcy Code new definitions 
for the terms ``master netting agreement'' and ``master netting 
agreement participant.'' The definition of ``master netting 
agreement'' is designed to protect the termination and close-
out netting provisions of cross-product master agreements 
between parties. Such an agreement may be used (i) to document 
a wide variety of securities contracts, commodity contracts, 
forward contracts, repurchase agreements and swap agreements or 
(ii) as an umbrella agreement for separate master agreements 
between the same parties, each of which is used to document a 
discrete type of transaction. The definition includes security 
agreements or arrangements or other credit enhancements related 
to one or more such agreements and clarifies that a master 
netting agreement will be treated as such even if it documents 
transactions that are not within the enumerated categories of 
qualifying transactions (but the provisions of the Bankruptcy 
Code relating to master netting agreements and the other 
categories of transactions will not apply to such other 
transactions).
    A ``master netting agreement participant'' is any entity 
that is a party to an outstanding master netting agreement with 
a debtor before the filing of a bankruptcy petition.
    Subsection (d) amends section 362(b) of the Bankruptcy Code 
to protect enforcement, free from the automatic stay, of setoff 
or netting provisions in swap agreements and in master netting 
agreements and security agreements or arrangements related to 
one or more swap agreements or master netting agreements. This 
provision parallels the over provisions of the Bankruptcy Code 
that protect netting provisions of securities contracts, 
commodity contracts, forward contracts, and repurchase 
agreements. Because the relevant definitions include related 
security agreements, the reference to ``setoff'' in this 
provision, as well as in section 362(b)(6) and (7) of the 
Bankruptcy Code, are intended to refer also to rights to 
foreclose on, and to set off against, obligations to return 
collateral securing swap agreements, master netting 
arrangements, repurchase agreements, securities contracts, 
commodity contracts, or forward contracts. Collateral may be 
pledged to cover the cost of replacing the defaulted 
transactions in the relevant market, as well as other costs and 
expenses incurred or estimated to be incurred for the purpose 
of hedging or reducing the risks arising out of such 
termination. Enforcement of these agreements and arrangements 
is consistent with the policy goal of minimizing systemic risk.
    Subsection (d) also clarifies that the provisions 
protecting setoff and foreclosure in relation to securities 
contracts, commodity contracts, forward contracts, repurchase 
agreements, swap agreements, and master netting agreements free 
from the automatic stay apply to collateral pledged by the 
debtor that is under the control of the creditor but that 
cannot technically be ``held by'' the creditor, such as 
receivables and book-entry securities, and to collateral that 
has been repledged by the creditor.
    Subsection (e) amends section 546 of the Bankruptcy Code to 
provide that transfers made under or in connection with a 
master netting agreement may not be avoided by a trustee except 
where such transfer is made with actual intent to hinder, delay 
or defraud. This section of the Act also clarifies the 
limitation on a trustee's power to avoid transfers made under 
swap agreements.
    Subsection (f) amends section 548(d) of the Bankruptcy Code 
to provide that transfers made under or in connection with a 
master netting agreement may not be avoided by a trustee except 
where such transfer is made with actual intent to hinder, delay 
or defraud. This amendment provides the same protections for 
transfers made under, or in connection with, master netting 
agreements as currently is provided for margin payments and 
settlement payments received by commodity brokers, forward 
contract merchants, stockbrokers, financial institutions 
securities clearing agencies, repo participants, and swap 
participants under section 546 and 548(d).
    Subsections (g), (h), (i) and (j) clarify that the 
provisions of the Bankruptcy Code that protect (i) rights of 
liquidation under securities contracts, commodity contracts, 
forward contracts and repurchase agreements also protect rights 
of termination or acceleration under such contracts, and (ii) 
rights to terminate under swap agreements also protect rights 
of liquidation and acceleration.
    Subsection (k) adds a new section 561 to the Bankruptcy 
Code to protect the contractual right of a master netting 
agreement participant to enforce any rights of termination, 
liquidation, acceleration, offset or netting under a master 
netting agreement. Such rights include rights arising (i) from 
the rules of a securities exchange or clearing organization, 
(ii) under common law, law merchant or (iii) by reason of 
normal business practice. This is consistent with the current 
treatment of rights under swap agreements under section 560 of 
the Bankruptcy Code.
    For the purposes of Bankruptcy Code sections 555, 556, 559, 
560 and 561, it is intended that the normal business practice 
in the event of a default of a party based on bankruptcy or 
insolvency is to terminate, liquidate or accelerate securities 
contracts, commodity contracts, forward contracts, repurchase 
agreements, swap agreements and master netting agreements with 
the bankrupt or insolvent party.
    The protection of netting and offset rights in sections 560 
and 561 is in addition to the protections afforded in sections 
362(b)(6), (b)(7), (b)(17) and (b)(32). For example, cross-
product netting will be protected from the automatic stay under 
section 561 even in the absence of a master netting agreement.
    Sections 561(b)(2) and (3) limit the exercise of 
contractual rights to net or to offset obligations where one 
leg of the obligations sought to be netted relates to commodity 
contracts. Under subsection (b)(2), netting or offset is not 
permitted if the obligations are not mutual. This means, for 
example, that proprietary obligations cannot be netted or 
offset against obligations held for, or on behalf of, some 
other party. Even if the obligations are mutual, under 
subsection (b)(3) netting or offset is not permitted in a 
commodity broker bankruptcy if the party seeking to net or to 
offset has no positive net equity in the commodity account at 
the debtor. Subsections (b)(2) and (b)(3) limit the depletion 
of assets available for distribution to customers of commodity 
brokers. This is consistent with the principle of Subchapter IV 
of Chapter 7 of the Bankruptcy Code, which gives priority to 
customer claims in the bankruptcy of a commodity broker.
    Under the Act, the termination, liquidation or acceleration 
rights of a master netting agreement participant are subject to 
limitations contained in other provisions of the Bankruptcy 
Code relating to securities contracts and repurchase 
agreements. In particular, if a securities contract or 
repurchase agreement is documented under a master netting 
agreement, a party's termination, liquidation and acceleration 
rights would be subject to the provisions of the Bankruptcy 
Code relating to orders authorized under the provisions of SIPA 
or any statute administered by the SEC. In addition, the 
netting rights of a party to a master netting agreement would 
be subject to any contractual terms between the parties 
limiting or waiving netting or set off rights. Similarly, a 
waiver by a bank or a counter party of netting or set off 
rights in connection with QFCs would be enforceable under the 
FDIA.
    Subsection (1) clarifies that, with respect to municipal 
bankruptcies, all the provisions of the Bankruptcy Code 
relating to securities contracts, commodity contracts, forward 
contracts, repurchase agreements, swap agreements and master 
netting agreements (which by their terms are intended to apply 
in all proceedings under title 11) will apply in a Chapter 9 
proceeding for a municipality. Although sections 555, 556, 559 
and 560 provide that they apply in any proceeding under the 
Bankruptcy Code, this subsection makes a technical amendment in 
Chapter 9 to clarify the applicability of these provisions.
    Subsection (m) clarifies that the provisions of the 
Bankruptcy Code related to securities contracts, commodity 
contracts, forward contracts, repurchase agreements, swap 
agreements and master netting agreements apply in a section 304 
proceeding ancillary to a foreign insolvency proceeding.
    Subsections (n) and (o) amend those provisions in the 
Bankruptcy Code concerning the liquidation of commodity brokers 
and stockbrokers. Subchapter III of Chapter 7 of the Bankruptcy 
Code details specific rules for the liquidation of 
stockbrokers. Subchapter IV of Chapter 7 of the Bankruptcy Code 
and regulations of the CFTC detail specific rules for the 
liquidation of commodity brokers. These authorities are 
designed to protect customers and customer property of an 
insolvent stockbroker or commodity broker.
    Subsections (n) and (o) clarify the rights of parties to 
commodity contracts, securities contracts, forward contracts, 
swap agreements, repurchase agreements and master netting 
agreements with an insolvent commodity broker or stockbroker. 
They ensure that non-customers will not defeat the priority 
scheme of Subchapter III or IV priority by gaining access to 
assets held in segregated customer accounts. The subsections 
also clarify that the exercise of termination and netting 
rights will not otherwise affect customer property or 
distributions by the trustee of the insolvent commodity broker 
or stockbroker after the exercise of such rights.
    Subsection (p) amends section 553 of the Bankruptcy Code to 
clarify that the acquisition by a creditor of setoff rights in 
connection with swap agreements, repurchase agreements, 
securities contracts, forward contracts, commodity contracts 
and master netting agreements cannot be avoided as a 
preference.
    This subsection also adds setoff of the kinds described in 
sections 555, 556, 559, 560, and 561 of the Bankruptcy Code to 
the types of set off excepted from section 553(b).

Section 209. Recordkeeping requirements

    Section 209 amends section 11(e)(8) of the Federal deposit 
Insurance Act to explicitly authorize the FDIC, in consultation 
with appropriate Federal banking agencies, to prescribe 
regulations on recordkeeping with respect to QFCs. Adequate 
recordkeeping for such transactions is essential to effective 
risk management and to the reduction of systemic risk permitted 
by the orderly resolution of depository institutions utilizing 
QFCs.

Section 210. Exemptions from contemporaneous execution requirement

    Section 210 amends FDIA section 13(e)(2) to provide that an 
agreement for the collateralization of governmental deposits, 
bankruptcy estate funds, Federal Reserve Bank or Federal Home 
Loan Bank extensions of credit or one or more QFCs shall not be 
deemed invalid solely because such agreement was not entered 
into contemporaneously with the acquisition of the collateral 
or because of pledges, delivery or substitution of the 
collateral made in accordance with such agreement.
    The amendment codifies portions of policy statements issued 
by the FDIC regarding the application of section 13(e), which 
codifies the ``D'Oench Duhme'' doctrine. With respect to QFCs, 
this codification recognizes that QFCs often are subject to 
collateral and other security arrangements that may require 
posting and return of collateral on an ongoing basis based on 
the mark-to-market values of the collateralized transactions. 
The codification of only portions of the existing FDIC policy 
statements on these and related issues should not give rise to 
any negative implication regarding the continued validity of 
these policy statements.

Section 211. Damage measure

    Section 211 adds a new section 562 to the Bankruptcy Code 
providing that damages under any swap agreement, securities 
contract, forward contract, commodity contract, repurchase 
agreement or master netting agreement will be calculated as of 
the earlier of (i) the date of rejection of such agreement by a 
trustee or (ii) the date of liquidation, termination or 
acceleration of such contract or agreement.
    New section 562 provides important legal certainty and 
makes the Bankruptcy Code consistent with the current 
provisions related to the timing of the calculation of damages 
under QFCs in the FDIA.

Section 212. SIPC stay

    Section 212 amends SIPA to provide that an order or decree 
issued pursuant to SIPA shall not operate as a stay of any 
right of liquidation, termination, acceleration, offset or 
netting under one or more securities contracts, commodity 
contracts, forward contracts, repurchase agreements, swap 
agreements or master netting agreements (as defined in the 
Bankruptcy Code and including rights of foreclosure on 
collateral), except that such order or decree may stay any 
right to foreclose on securities (but not cash) collateral 
pledged by the debtor or sold by the debtor under a repurchase 
agreement (a corresponding amendment to FDICIA is made by 
section 7). A creditor that was stayed in exercising rights 
against securities collateral would be entitled to post-
insolvency interest to the extent of the collateral.

Section 213. Asset-backed securitizations

    Section 213 amends section 541 of the Bankruptcy Code to 
provide that certain assets transferred to an eligible entity 
in connection with an asset-backed securitization generally 
will not be included within the bankruptcy estate of the 
debtor. This provision recognizes that a valid transfer of such 
assets to an ``eligible entity'', generally eliminates the 
debtor's legal or equitable interests in those assets. 
Accordingly, subject to the avoidance powers in section 548(a), 
the transfer will be treated as a sale of those assets not 
subject to avoidance.

Section 214. Application of amendments

    Section 214 provides that the amendments made by the Act 
shall not apply with respect to cases commenced, or to 
conservator/receiver appointments made, before the date of 
enactment.

         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, existing law in which no change is 
proposed is shown in roman):

                         COMMODITY EXCHANGE ACT

SEC. 1A. DEFINITIONS.

  As used in this Act:
          (1) Banking product.--
                  (A) In general.--The term ``banking product'' 
                means any agreement, contract, or transaction 
                that is an identified banking product (as 
                defined in section 206(a) of the Gramm-Leach-
                Bliley Act).
                  (B) Exclusion.--The term ``banking product'' 
                does not include a contract for the sale of a 
                commodity for future delivery traded on a 
                contract market designated under section 5 of 
                this Act or an agreement, contract, or 
                transaction traded on a derivatives transaction 
                execution facility registered under section 5a.
          [(1)] (2) Board of trade.--The term ``board of 
        trade'' means any exchange or association, whether 
        incorporated or unincorporated, of persons who are 
        engaged in the business of buying or selling any 
        commodity or receiving the same for sale on 
        consignment.
          [(2)] (3) Commission.--The term ``Commission'' means 
        the Commodity Futures Trading Commission established 
        under section 2(a)(2).
          [(3)] (4) Commodity.--The term ``commodity'' means 
        wheat, cotton, rice, corn, oats, barley, rye, flaxseed, 
        grain sorghums, mill feeds, butter, eggs, Solanum 
        tuberosum (Irish potatoes), wool, wool tops, fats and 
        oils (including lard, tallow, cottonseed oil, peanut 
        oil, soybean oil, and all other fats and oils), 
        cottonseed meal, cottonseed, peanuts, soybeans, soybean 
        meal, livestock, livestock products, and frozen 
        concentrated orange juice, aluminum, copper, gold, 
        palladium, platinum, silver, and all other goods and 
        articles, except onions as provided in Public Law 85-
        839 (7 U.S.C. 13-1), and all services, rights, and 
        interests in which contracts for future delivery are 
        presently or in the future dealt in.
          [(4)] (5) Commodity pool operator.--The term 
        ``commodity pool operator'' means any person engaged in 
        a business that is of the nature of an investment 
        trust, syndicate, or similar form of enterprise, and 
        who, in connection therewith, solicits, accepts, or 
        receives from others, funds, securities, or property, 
        either directly or through capital contributions, the 
        sale of stock or other forms of securities, or 
        otherwise, for the purpose of trading in any commodity 
        for future delivery on or subject to the rules of any 
        contract market or derivatives transaction execution 
        facility, except that the term does not include such 
        persons not within the intent of the definition of the 
        term as the Commission may specify by rule, regulation, 
        or order.
          [(5)] (6) Commodity trading advisor.--
                  (A) In general.--Except as otherwise provided 
                in this paragraph, the term ``commodity trading 
                advisor'' means any person who--
                          (i) for compensation or profit, 
                        engages in the business of advising 
                        others, either directly or through 
                        publications, writings, or electronic 
                        media, as to the value of or the 
                        advisability of trading in--
                                  (I) any contract of sale of a 
                                commodity for future delivery 
                                made or to be made on or 
                                subject to the rules of a 
                                contract market or derivatives 
                                transaction execution facility;
                                  (II) any commodity option 
                                authorized under section 4c; or
                                  (III) any leverage 
                                transaction authorized under 
                                section 19; or
                          (ii) for compensation or profit, and 
                        as part of a regular business, issues 
                        or promulgates analyses or reports 
                        concerning any of the activities 
                        referred to in clause (i).
                  (B) Exclusions.--Subject to subparagraph (C), 
                the term ``commodity trading advisor'' does not 
                include--
                          (i) any bank or trust company or any 
                        person acting as an employee thereof;
                          (ii) any news reporter, news 
                        columnist, or news editor of the print 
                        or electronic media, or any lawyer, 
                        accountant, or teacher;
                          (iii) any floor broker or futures 
                        commission merchant;
                          (iv) the publisher or producer of any 
                        print or electronic data of general and 
                        regular dissemination, including its 
                        employees;
                          (v) the fiduciary of any defined 
                        benefit plan that is subject to the 
                        Employee Retirement Income Security Act 
                        of 1974 (29 U.S.C. 1001 et seq.);
                          (vi) any contract market or 
                        derivatives transaction execution 
                        facility; and
                          (vii) such other persons not within 
                        the intent of this paragraph as the 
                        Commission may specify by rule, 
                        regulation, or order.
                  (C) Incidental services.--Subparagraph (B) 
                shall apply only if the furnishing of such 
                services by persons referred to in subparagraph 
                (B) is solely incidental to the conduct of 
                their business or profession.
                  (D) Advisors.--The Commission, by rule or 
                regulation, may include within the term 
                ``commodity trading advisor'', any person 
                advising as to the value of commodities or 
                issuing reports or analyses concerning 
                commodities if the Commission determines that 
                the rule or regulation will effectuate the 
                purposes of this paragraph.
          [(6)] (7) Contract of sale.--The term ``contract of 
        sale'' includes sales, agreements of sale, and 
        agreements to sell.
          [(7)] (8) Cooperative association of producers.--The 
        term ``cooperative association of producers'' means any 
        cooperative association, corporate, or otherwise, not 
        less than 75 percent in good faith owned or controlled, 
        directly or indirectly, by producers of agricultural 
        products and otherwise complying with the Act of 
        February 18, 1922 (42 Stat. 388, chapter 57; 7 U.S.C. 
        291 and 292), including any organization acting for a 
        group of such associations and owned or controlled by 
        such associations, except that business done for or 
        with the United States, or any agency thereof, shall 
        not be considered either member or nonmember business 
        in determining the compliance of any such association 
        with this Act.
          (9) Derivatives clearing organization.--
                  (A) In general.--The term ``derivatives 
                clearing organization'' means a clearinghouse, 
                clearing association, clearing corporation, or 
                similar entity, facility, system, or 
                organization that, with respect to a derivative 
                agreement, contract, or transaction--
                          (i) enables each party to the 
                        derivative agreement, contract, or 
                        transaction to substitute, through 
                        novation or otherwise, the credit of 
                        the derivatives clearing organization 
                        for the credit of the parties;
                          (ii) arranges or provides, on a 
                        multilateral basis, for the settlement 
                        or netting of obligations resulting 
                        from such agreements, contracts, or 
                        transactions executed by parties in the 
                        derivatives clearing organization; or
                          (iii) otherwise provides clearing 
                        services or arrangements that mutualize 
                        or transfer among parties in the 
                        derivatives clearing organization the 
                        credit risk arising from such 
                        agreements, contracts, or transactions 
                        executed by the parties.
                  (B) Exclusions.--The term ``derivatives 
                clearing organization'' does not include an 
                entity, facility, system, or organization 
                solely because it arranges or provides for--
                          (i) settlement, netting, or novation 
                        of obligations resulting from 
                        agreements, contracts, or transactions, 
                        on a bilateral basis and without a 
                        centralized counterparty;
                          (ii) settlement or netting of cash 
                        payments through an interbank payment 
                        system; or
                          (iii) settlement, netting, or 
                        novation of obligations resulting from 
                        a sale of a commodity in a transaction 
                        in the spot market for the commodity.
          (10) Electronic trading facility.--The term 
        ``electronic trading facility'' means a trading 
        facility that--
                  (A) operates by means of an electronic 
                network; and
                  (B) maintains a real-time audit trail of 
                bids, offers, and the matching of orders or the 
                execution of transactions.
          (11) Eligible commercial participant.--The term 
        ``eligible commercial participant'' means a party or 
        entity describedin paragraph (11)(A)(i), (ii), (v), or 
(vii) or paragraph (11)(C), who, in connection with its business--
                  (A) has a demonstrable capacity or ability, 
                directly or through separate contractual 
                arrangements, to make or take delivery of the 
                underlying physical commodity;
                  (B) incurs risks, in addition to price risk, 
                related to the commodity; or
                  (C) is a dealer that regularly provides 
                hedging, risk management, or market-making 
                services to the foregoing entities.
          (12) Eligible contract participant.--The term 
        ``eligible contract participant'' means--
                  (A) acting for its own account--
                          (i) a financial institution;
                          (ii) an insurance company regulated 
                        by a State (including a subsidiary or 
                        affiliate of such an insurance 
                        company);
                          (iii) an investment company subject 
                        to regulation under the Investment 
                        Company Act of 1940 (15 U.S.C. 80a-1 et 
                        seq.) or a foreign person performing a 
                        similar role or function subject as 
                        such to foreign regulation (regardless 
                        of whether each investor in the 
                        investment company or the foreign 
                        person is itself an eligible contract 
                        participant);
                          (iv) a commodity pool that--
                                  (I) has total assets 
                                exceeding $5,000,000; and
                                  (II) is formed and operated 
                                by a person subject to 
                                regulation under this Act or a 
                                foreign person performing a 
                                similar role or function 
                                subject as such to foreign 
                                regulation (regardless of 
                                whether each investor in the 
                                commodity pool or the foreign 
                                person is itself an eligible 
                                contract participant);
                          (v) a corporation, partnership, 
                        proprietorship, organization, trust, or 
                        other entity--
                                  (I) that has total assets 
                                exceeding $10,000,000;
                                  (II) the obligations of which 
                                under an agreement, contract, 
                                or transaction are guaranteed 
                                or otherwise supported by a 
                                letter of credit or keepwell, 
                                support, or other agreement by 
                                an entity described in 
                                subclause (I), in clause (i), 
                                (ii), (iii), (iv), or (vii), or 
                                in subparagraph (C); or
                                  (III) that--
                                          (aa) has a net worth 
                                        exceeding $1,000,000; 
                                        and
                                          (bb) enters into an 
                                        agreement, contract, or 
                                        transaction in 
                                        connection with the 
                                        conduct of the entity's 
                                        business or to manage 
                                        the risk associated 
                                        with an asset or 
                                        liability owned or 
                                        incurred or reasonably 
                                        likely to be owned or 
                                        incurred by the entity 
                                        in the conduct of the 
                                        entity's business;
                          (vi) an employee benefit plan subject 
                        to the Employee Retirement Income 
                        Security Act of 1974 (29 U.S.C. 1001 et 
                        seq.) or a foreign person performing a 
                        similar role or function subject as 
                        such to foreign regulation--
                                  (I) that has total assets 
                                exceeding $5,000,000; or
                                  (II) the investment decisions 
                                of which are made by--
                                          (aa) an investment 
                                        advisor or commodity 
                                        trading advisor subject 
                                        to regulation under the 
                                        Investment Advisers Act 
                                        of 1940 (15 U.S.C. 80b-
                                        1 et seq.) or this Act;
                                          (bb) a foreign person 
                                        performing a similar 
                                        role or function 
                                        subject as such to 
                                        foreign regulation;
                                          (cc) a financial 
                                        institution; or
                                          (dd) an insurance 
                                        company regulated by a 
                                        State (including a 
                                        subsidiary or affiliate 
                                        of such an insurance 
                                        company);
                          (vii)(I) a governmental entity 
                        (including the United States, a State, 
                        or a foreign government) or political 
                        subdivision of a governmental entity;
                          (II) a multinational or supranational 
                        government entity; or
                          (III) an instrumentality, agency, or 
                        department of an entity described in 
                        subclause (I) or (II);
                          (viii) a broker or dealer subject to 
                        regulation under the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78a et 
                        seq.) or a foreign person performing a 
                        similar role or function subject as 
                        such to foreign regulation, except 
                        that, if the broker or dealer or 
                        foreign person is a natural person or 
                        proprietorship, the broker or dealer or 
                        foreign person shall not be considered 
                        to be an eligible contract participant 
                        unless the broker or dealer or foreign 
                        person also meets the requirements of 
                        clause (v) or (xi);
                          (ix) a futures commission merchant 
                        subject to regulation under this Act or 
                        a foreign person performing a similar 
                        role or function subject as such to 
                        foreign regulation, except that, if the 
                        futures commission merchant or foreign 
                        person is a natural person or 
                        proprietorship, the futures commission 
                        merchant or foreign person shall not be 
                        considered to be an eligible contract 
                        participant unless the futures 
                        commission merchant or foreign person 
                        also meets the requirements of clause 
                        (v) or (xi);
                          (x) a floor broker or floor trader 
                        subject to regulation under this Act in 
                        connection with any transaction that 
                        takes place on or through the 
                        facilities of a registered entity or an 
                        exempt board of trade, or any affiliate 
                        thereof, on which such person regularly 
                        trades; or
                          (xi) an individual who has total 
                        assets in an amount in excess of--
                                  (I) $10,000,000; or
                                  (II) $5,000,000 and who 
                                enters into the agreement, 
                                contract, or transaction in 
                                order to manage the risk 
                                associated with an asset owned 
                                or liability incurred, or 
                                reasonably likely to be owned 
                                or incurred, by such individual 
                                with total assets exceeding 
                                $10,000,000;
                  (B)(i) a person described in any of clauses 
                (i) through (x) of subparagraph (A) or in 
                subparagraph (C), acting as broker or 
                performing an equivalent agency function on 
                behalf of another person described in 
                subparagraph (A) or (C);
                  (ii) an investment adviser subject to 
                regulation under the Investment Advisors Act of 
                1940, a commodity trading advisor subject to 
                regulation under this Act, a foreign person 
                performing a similar role or function subject 
                as such to foreign regulation, or a person 
                described in any of clauses (i) through (x) of 
                subparagraph (A) or in subparagraph (C), in any 
                such case acting as investment manager or 
                fiduciary (but excluding a person acting as 
                broker or performing an equivalent agency 
                function) for another person described in 
                subparagraph (A) or (C) and who is authorized 
                by such person to commit such person to the 
                transaction; or
                  (iii) a commodity trading advisor subject to 
                regulation under this Act, having assets under 
                management of not less than $25,000,000 and 
                acting as investment manager or fiduciary for 
                another person and authorized by such person to 
                commit such person to the transaction; or
                  (C) any other person that the Commission 
                determines to be eligible in light of the 
                financial or other qualifications of the 
                person.
          (13) Exclusion-eligible commodity.--
                  (A) In general.--The term ``exclusion-
                eligible commodity'' means--
                          (i) an interest rate, exchange rate, 
                        currency, security, security index, 
                        credit risk or measure, debt or equity 
                        instrument, index or measure of 
                        inflation, or other macroeconomic index 
                        or measure;
                          (ii) any other rate, differential, 
                        index, or measure of economic or 
                        commercial risk, return, or value that 
                        is--
                                  (I) not based in substantial 
                                part on the value of a narrow 
                                group of commodities not 
                                described in clause (i); or
                                  (II) based solely on 1 or 
                                more commodities that have no 
                                cash market;
                          (iii) any economic or commercial 
                        index based on prices, rates, values, 
                        or levels that are not within the 
                        control of any party to the relevant 
                        contract, agreement, or transaction; or
                          (iv) an occurrence, extent of an 
                        occurrence, or contingency (other than 
                        a change in the price, rate, value, or 
                        level of a commodity not described in 
                        clause (i)) that is--
                                  (I) beyond the control of the 
                                parties to the relevant 
                                contract, agreement, or 
                                transaction; and
                                  (II) associated with a 
                                financial, commercial, or 
                                economic consequence.
                  (B) Reference to excluded commodity.--Any 
                reference in this Act to the term ``excluded 
                commodity'' shall be deemed to be a reference 
                to ``exclusion-eligible commodity''.
          (14) Exempt commodity.--The term ``exempt commodity'' 
        means a commodity that is not an excluded commodity or 
        an agricultural commodity.
          (15) Financial institution.--The term ``financial 
        institution'' means--
                  (A) a corporation operating under the fifth 
                undesignated paragraph of section 25 of the 
                Federal Reserve Act (12 U.S.C. 603), commonly 
                known as ``an agreement corporation'';
                  (B) a corporation organized under section 25A 
                of the Federal Reserve Act (12 U.S.C. 611 et 
                seq.), commonly known as an ``Edge Act 
                corporation'';
                  (C) an institution that is regulated by the 
                Farm Credit Administration;
                  (D) a Federal credit union or State credit 
                union (as defined in section 101 of the Federal 
                Credit Union Act (12 U.S.C. 1752));
                  (E) a depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act 
                (12 U.S.C. 1813));
                  (F) a foreign bank or a branch or agency of a 
                foreign bank (each as defined in section 1(b) 
                of the International Banking Act of 1978 (12 
                U.S.C. 3101(b)));
                  (G) any financial holding company (as defined 
                in section 2 of the Bank Holding Company Act of 
                1956);
                  (H) a trust company; or
                  (I) a similarly regulated subsidiary or 
                affiliate of an entity described in any of 
                subparagraphs (A) through (H).
          [(8)] (16) Floor broker.--The term ``floor broker'' 
        means any person who, in or surrounding any pit, ring, 
        post, or other place provided by a contract market or 
        derivatives transaction execution facility for the 
        meeting of persons similarly engaged, shall purchase or 
        sell for any other person any commodity for future 
        delivery on or subject to the rules of any contract 
        market or derivatives transaction execution facility.
          [(9)] (17) Floor trader.--The term ``floor trader'' 
        means any person who, in or surrounding any pit, ring, 
        post, or other place provided by a contract market or 
        derivatives transaction execution facility for the 
        meeting of persons similarly engaged, purchases, or 
        sells solely for such person's own account, any 
        commodity for future delivery on or subject to the 
        rules of any contract market or derivatives transaction 
        execution facility.
          [(10)] (18) Foreign futures authority.--The term 
        ``foreign futures authority'' means any foreign 
        government, or any department, agency, governmental 
        body, or regulatory organization empowered by a foreign 
        government to administer or enforce a law, rule, or 
        regulation as it relates to a futures or options 
        matter, or any department or agency of a political 
        subdivision of a foreign government empowered to 
        administer or enforce a law, rule, or regulation as it 
        relates to a futures or options matter.
          [(11)] (19) Future delivery.--The term ``future 
        delivery'' does not include any sale of any cash 
        commodity for deferred shipment or delivery.
          [(12)] (20) Futures commission merchant.--The term 
        ``futures commission merchant'' means an individual, 
        association, partnership, corporation, or trust that--
                  (A) is engaged in soliciting or in accepting 
                orders for the purchase or sale of any 
                commodity for future delivery on or subject to 
                the rules of any contract market or derivatives 
                transaction execution facility; and
                  (B) in or in connection with such 
                solicitation or acceptance of orders, accepts 
                any money, securities, or property (or extends 
                credit in lieu thereof) to margin, guarantee, 
                or secure any trades or contracts that result 
                or may result therefrom.
          (21) Hybrid instrument.--
                  (A) In general.--The term ``hybrid 
                instrument'' means a deposit instrument offered 
                by a financial institution, or a security, 
                having 1 or more payments indexed to the value, 
                level, or rate of 1 or more commodities.
                  (B) Deposit instrument defined.--The term 
                ``deposit instrument'' means an instrument 
                representing an interest described in paragraph 
                (1), (2), (3), (4), or (5) of section 3(l) of 
                the Federal Deposit Insurance Act, other than 
                in subparagraph (A), (B), or (C) at the end of 
                paragraph (5).
          [(13)] (22) Interstate commerce.--The term 
        ``interstate commerce'' means commerce--
                  (A) between any State, territory, or 
                possession, or the District of Columbia, and 
                any place outside thereof; or
                  (B) between points within the same state, 
                territory, or possession, or the District of 
                Columbia, but through any place outside 
                thereof, or within any territory or possession, 
                or the District of Columbia.
          [(14)] (23) Introducing broker.--The term 
        ``introducing broker'' means any person (except an 
        individual who elects to be and is registered as an 
        associated person of a futures commission merchant) 
        engaged in soliciting or in accepting orders for the 
        purchase or sale of any commodity for future delivery 
        on or subject to the rules of any contract market or 
        derivatives transaction execution facility who does not 
        accept any money, securities, or property (or extend 
        credit in lieu thereof) to margin, guarantee, or secure 
        any trades or contracts that result or may result 
        therefrom.
          [(15)] (24) Member of a [contract market] registered 
        entity.--The term ``member of a [contract market] 
        registered entity'' means an individual, association, 
        partnership, corporation, or trust owning or holding 
        membership in, or admitted to membership representation 
        on, a [contract market] registered entity or given 
        members' trading privileges thereon.
          (25) Nonexempt security.--The term ``nonexempt 
        security'' means a security that is not an exempted 
        security under section 3 of the Securities Act of 1933 
        or section 3(a)(12) of theSecurities Exchange Act of 
1934 (other than any municipal security, as defined in section 3(a)(29) 
of the Securities Exchange Act of 1934).
          (26) Option.--The term ``option'' means an agreement, 
        contract, or transaction that is of the character of, 
        or is commonly known to the trade as, an ``option'', 
        ``privilege'', ``indemnity'', ``bid'', ``offer'', 
        ``put'', ``call'', ``advance guaranty'', or ``decline 
        guaranty''.
          (27) Organized exchange.--The term ``organized 
        exchange'' means a trading facility that--
                  (A) permits trading by persons other than--
                          (i) eligible contract participants 
                        trading on a principal-to-principal 
                        basis; or
                          (ii) eligible contract participants 
                        described in subclause (I), (II), 
                        (III), (IV), (V) or (VI) of section 
                        2(c)(2)(B), acting as a broker or 
                        performing an equivalent agency 
                        function on behalf of eligible contract 
                        participants; or
                  (B) has adopted (directly or through another 
                nongovernmental entity) rules that--
                          (i) govern the conduct of 
                        participants, other than rules that 
                        govern the submission of orders or 
                        execution of transactions on the 
                        trading facility; or
                          (ii) include disciplinary sanctions 
                        other than the exclusion of 
                        participants from trading.
          [(16)] (28) Person.--The term ``person'' imports the 
        plural or singular, and includes individuals, 
        associations, partnerships, corporations, and trusts.
          (29) Registered entity.--The term ``registered 
        entity'' means--
                  (A) a board of trade designated as a contract 
                market under section 5;
                  (B) a derivatives transaction execution 
                facility registered under section 5a; or
                  (C) a derivatives clearing organization 
                registered under section 5b.
          (30) Security.--The term ``security'' has the meaning 
        given the term in section 3(a) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78c(a)) as in effect on 
        date of the enactment of this paragraph.
          (31) Trading facility.--
                  (A) In general.--The term ``trading 
                facility'' means a person or group of persons 
                that constitutes, maintains, or provides a 
                physical or electronic facility or system in 
                which multiple participants have the ability to 
                execute or trade agreements, contracts, or 
                transactions by accepting bids and offers made 
                by other participants that are open to multiple 
                participants in the facility or system.
                  (B) Exclusions.--The term ``trading 
                facility'' does not include--
                          (i) a person or group of persons 
                        solely because the person or group of 
                        persons constitutes, maintains, or 
                        provides an electronic facility or 
                        system that enables participants to 
                        negotiate the terms of and enter into 
                        bilateral transactions as a result of 
                        communications exchanged by the parties 
                        and not from interaction of multiple 
                        orders within a predetermined, 
                        nondiscretionary automated trade 
                        matching algorithm;
                          (ii) a government securities dealer 
                        or government securities broker, to the 
                        extent that the dealer or broker 
                        executes or trades agreements, 
                        contracts, or transactions in 
                        government securities, or assists 
                        persons in communicating about, 
                        negotiating, entering into, executing, 
                        or trading an agreement, contract, or 
                        transaction in government securities 
                        (as the terms ``government securities 
                        dealer'', ``government securities 
                        broker'', and ``government securities'' 
                        are defined in section 3(a) of the 
                        Securities Exchange Act of 1934 (15 
                        U.S.C. 78c(a)));
                          (iii) facilities on which bids and 
                        offers, and acceptances of bids and 
                        offers effected on the facility, are 
                        not binding; or
                          (iv) a person or group of persons 
                        solely because the person or group of 
                        persons constitutes, maintains, or 
                        provides an electronic facility or 
                        system that--
                                  (I) enables participants to 
                                enter into bilateral 
                                transactions with other 
                                participants; and
                                  (II) incorporates credit 
                                screens or filters that prevent 
                                any participant from executing 
                                a transaction with another 
                                participant unless both 
                                participants have approved the 
                                extension of credit to the 
                                other.
      [Sec. 2. (a)(1)(A)(i) The]

SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF 
                    AGENT; COMMODITY FUTURES TRADING COMMISSION; 
                    TRANSACTION IN INTERSTATE COMMERCE.

  (a) Jurisdiction of Commission; Commodity Futures Trading 
Commission.--
          (1) Jurisdiction of commission.--
                  (A) In general.--The Commission shall have 
                exclusive jurisdiction, except to the extent 
                otherwise provided in [subparagraph (B) of this 
                paragraph] subsection (c), (d), (e), (f), (g), 
                or (i), with respect to accounts, agreements 
                (including any transaction which is of the 
                character of, or is commonly known to the trade 
                as, an ``option'', ``privilege'', 
                ``indemnity'', ``bid'', ``offer'', ``put'', 
                ``call'', ``advance guaranty'', or ``decline 
                guaranty''), and transactions involving 
                contracts of sale of a commodity for future 
                delivery, traded or executed on a [contract 
                market designated pursuant to section 5 of this 
                Act] contract market designated or derivatives 
                transaction execution facility registered 
                pursuant to section 5 or 5a or any other board 
                of trade, exchange, or market, and transactions 
                subject to regulation by the Commission 
                pursuant to section 19 of this Act. Except as 
                hereinabove provided, nothing contained in this 
                section shall [(I)] (i) supersede or limit the 
                jurisdiction at any time conferred on the 
                Securities and Exchange Commission or other 
                regulatory authorities under the laws of the 
                UnitedStates or of any State, or [(II)] (ii) 
restrict the Securities and Exchange Commission and such other 
authorities from carrying out their duties and responsibilities in 
accordance with such laws. Nothing in this section shall supersede or 
limit the jurisdiction conferred on courts of the United States or any 
State.
  [(ii) Nothing in this Act shall be deemed to govern or in any 
way be applicable to transactions in foreign currency, security 
warrants, security rights, resales of installment loan 
contracts, repurchase options, government securities, or 
mortgages and mortgage purchase commitments, unless such 
transactions involve the sale thereof for future delivery 
conducted on a board of trade.
  [(iii) The]
                  (B) Liability of principal for act of 
                agent.--The act, omission, or failure of any 
                official, agent, or other person acting for any 
                individual, association, partnership, 
                corporation, or trust within the scope of his 
                employment or office shall be deemed the act, 
                omission, or failure of such individual, 
                association, partnership, corporation, or 
                trust, as well as of such official, agent, or 
                other person.
  [(B) Notwithstanding any other provision of law--
          [(i) This Act shall not apply to and the Commission 
        shall have no jurisdiction to designate a board of 
        trade as a contract market for any transaction whereby 
        any party to such transaction acquires any put, call, 
        or other option on one or more securities (as defined 
        in section 2(1) of the Securities Act of 1933 or 
        section 3(a)(10) of the Securities Exchange Act of 1934 
        on the date of enactment of the Futures Trading Act of 
        1982), including any group or index of such securities, 
        or any interest therein or based on the value thereof.
          [(ii) This Act shall apply to and the Commission 
        shall have exclusive jurisdiction with respect to 
        accounts, agreements (including any transaction which 
        is of the character of, or is commonly known to the 
        trade as, an ``option'', ``privilege'', ``indemnity'', 
        ``bid'', ``offer'', ``put'', ``call'', ``advance 
        guaranty'', or ``decline guaranty'') and transactions 
        involving, and may designate a board of trade as a 
        contract market in, contracts of sale (or options on 
        such contracts) for future delivery of a group or index 
        of securities (or any interest therein or based upon 
        the value thereof): Provided, however, That no board of 
        trade shall be designated as a contract market with 
        respect to any such contracts of sale (or options on 
        such contracts) for future delivery unless the board of 
        trade making such application demonstrates and the 
        Commission expressly finds that the specific contract 
        (or option on such contract) with respect to which the 
        application has been made meets the following minimum 
        requirements:
                  [(I) Settlement of or delivery on such 
                contract (or option on such contract) shall be 
                effected in cash or by means other than the 
                transfer or receipt of any security, except an 
                exempted security under section 3 of the 
                Securities Act of 1933 or section 3(a)(12) of 
                the Securities Exchange Act of 1934 as in 
                effect on the date of enactment of the Futures 
                Trading Act of 1982 (other than any municipal 
                security, as defined in section 3(a)(29) of the 
                Securities Exchange Act of 1934 on the date of 
                enactment of the Futures Trading Act of 1982);
                  [(II) Trading in such contract (or option on 
                such contract) shall not be readily susceptible 
                to manipulation of the price of such contract 
                (or option on such contract), nor to causing or 
                being used in the manipulation of the price of 
                any underlying security, option on such 
                security or option on a group or index 
                including such securities; and
                  [(III) Such group or index of securities 
                shall be predominately composed of the 
                securities of unaffiliated issuers and shall be 
                a widely published measure of, and shall 
                reflect, the market for all publicly traded 
                equity or debt securities or a substantial 
                segment thereof, or shall be comparable to such 
                measure.
          [(iii) Upon application by a board of trade for 
        designation as a contract market with respect to any 
        contract of sale (or option on such contract) for 
        future delivery involving a group or index of 
        securities, the Commission shall provide an opportunity 
        for public comment on whether such contracts (or 
        options on such contracts) meet the minimum 
        requirements set forth in clause (ii) of this 
        subparagraph.
          [(iv)(I) The Commission shall consult with the 
        Securities and Exchange Commission with respect to any 
        application which is submitted by a board of trade 
        before December 9, 1982, for designation as a contract 
        market with respect to any contract of sale (or option 
        on such contract) for future delivery of a group or 
        index of securities. If, no later than fifteen days 
        following the close of the public comment period, the 
        Securities and Exchange Commission shall object to the 
        designation of a board of trade as a contract market in 
        such contract (or option on such contract) on the 
        ground that any minimum requirement of clause (ii) of 
        this subparagraph is not met, the Commission shall 
        afford the Securities and Exchange Commission an 
        opportunity for an oral hearing, to be transcribed, 
        before the Commission, and shall give appropriate 
        weight to the views of the Securities and Exchange 
        Commission. Such oral hearing shall be held after the 
        public comment period, prior to Commission action upon 
        such designation, and not less than thirty nor more 
        than forty-five days after the close of the public 
        comment period, unless both the Commission and the 
        Securities and Exchange Commission otherwise agree. If 
        such an oral hearing is held, the Securities and 
        Exchange Commission fails to withdraw its objections, 
        and the Commission issues an order designating a board 
        of trade as a contract market with respect to any such 
        contract (or option on such contract), the Securities 
        and Exchange Commission shall have the right of 
        judicial review of such order in accordance with the 
        standards of section 6(c) of this Act. If, pursuant to 
        section 6 of this Act, there is a hearing on the record 
        with respect to such application for designation, the 
        Securities and Exchange Commission shall have the right 
        to participate in that hearing as an interested party.
          [(II) Effective for any application submitted by a 
        board of trade on or after December 9, 1982, for 
        designation as a contract market with respect to any 
        contract of sale (or option on such contract) for 
        future delivery of a group or index of securities, the 
        Commission shall transmit a copy of such application to 
        the Securities and Exchange Commission for review. The 
        Commission shall not approve any such application if 
        the Securities and Exchange Commission determines that 
        such contract (or option on such contract) fails to 
        meet the minimum requirements set forth in clause (ii) 
        of this subparagraph. Such determination shall be made 
        by order no later than forty-five days after the close 
        of the public comment period under clause (iii) of this 
        subparagraph. In the event of such determination, the 
        board of trade shall be afforded an opportunity for a 
        hearing on the record before the Securities and 
        Exchange Commission. If a board of trade requests a 
        hearing on the record, the hearing shall commence no 
        later than thirty days following the receipt of the 
        request, and a final determination shall be made no 
        later than thirty days after the close of the hearing. 
        A person aggrieved by any such order of the Securities 
        and Exchange Commission may obtain judicial review 
        thereof in the same manner and under such terms and 
        conditions as are provided in section 6(b) of this Act.
          [(v) No person shall offer to enter into, enter into, 
        or confirm the execution of any contract of sale (or 
        option on such contract) for future delivery of any 
        security, or interest therein or based on the value 
        thereof, except an exempted security under section 3 of 
        the Securities Act of 1933 or section 3(a)(12) of the 
        Securities Exchange Act of 1934 as in effect on the 
        date of enactment of the Futures Trading Act of 1982 
        (other than any municipal security as defined in 
        section 3(a)(29) of the Securities Exchange Act of 1934 
        on the date of enactment of the Futures Trading Act of 
        1982), or except as provided in clause (ii) of this 
        subparagraph, any group or index of such securities or 
        any interest therein or based on the value thereof.
          [(vi)(I) Notwithstanding any other provision of this 
        Act, any contract market in a stock index futures 
        contract (or option thereon) shall file with the Board 
        of Governors of the Federal Reserve System any rule 
        establishing or changing the levels of margin (initial 
        and maintenance) for the stock index futures contract 
        (or option thereon).
          [(II) The Board may at any time request any contract 
        market to set the margin for any stock index futures 
        contract (or option thereon) at such levels as the 
        Board in its judgment determines are appropriate to 
        preserve the financial integrity of the contract market 
        or its clearing system or to prevent systemic risk. If 
        the contract market fails to do so within the time 
        specified by the Board in its request, the Board may 
        direct the contract market to alter or supplement the 
        rules of the contract market as specified in the 
        request.
          [(III) Subject to such conditions as the Board may 
        determine, the Board may delegate any or all of its 
        authority under this clause only to the Commission.
          [(IV) Nothing in this clause shall supersede or limit 
        the authority granted to the Commission in section 
        8a(9) to direct a contract market, on finding an 
        emergency to exist, to raise temporary emergency margin 
        levels on any futures contract or option on the 
        contract covered by this clause.
          [(V) Any action taken by the Board, or by the 
        Commission acting under the delegation of authority 
        under subclause III, under this clause directing a 
        contract market to alter or supplement a contract 
        market rule shall be subject to review only in the 
        Court of Appeals where the party seeking review resides 
        or has its principal place of business, or in the 
        United States Court of Appeals for the District of 
        Columbia Circuit. The review shall be based on the 
        examination of all information before the Board or the 
        Commission, as the case may be, at the time the 
        determination was made. The court reviewing the action 
        of the Board or the Commission shall not enter a stay 
        or order of mandamus unless the court has determined, 
        after notice and a hearing before a panel of the court, 
        that the agency action complained of was arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.]
          (2)(A) There is hereby established, as an independent 
        agency of the United States Government, a Commodity 
        Futures Trading Commission. The Commission shall be 
        composed of five Commissioners who shall be appointed 
        by the President, by and with the advice and consent of 
        the Senate. In nominating persons for appointment, the 
        President shall--
                  (i) select persons who shall each have 
                demonstrated knowledge in futures trading or 
                its regulation, or the production, 
                merchandising, processing or distribution of 
                one or more of the commodities or other goods 
                and articles, services, rights, and interests 
                covered by this Act; and
                  (ii) seek to ensure that the demonstrated 
                knowledge of the Commissioners is balanced with 
                respect to such areas.
        Not more than three of the members of the Commission 
        shall be members of the same political party. Each 
        Commissioner shall hold office for a term of five years 
        and until his successor is appointed and has qualified, 
        except that he shall not so continue to serve beyond 
        the expiration of the next session of Congress 
        subsequent to the expiration of said fixed term of 
        office, and except (i) any Commissioner appointed to 
        fill a vacancy occurring prior to the expiration of the 
        term for which his predecessor was appointed shall be 
        appointed for the remainder of such term, and (ii) the 
        terms of office of the Commissioners first taking 
        office after the enactment of this paragraph shall 
        expire as designated by the President at the time of 
        nomination, one at the end of one year, one at the end 
        of two years, one at the end of three years, one at the 
        end of four years, and one at the end of five years.
          (B) The President shall appoint, by and with the 
        advice and consent of the Senate, a member of the 
        Commission as Chairman, who shall serve as Chairman at 
        the pleasure of the President. An individual may be 
        appointed as Chairman at the same time that person is 
        appointed as a Commissioner. The Chairman shall be the 
        chief administrative officer of the Commission and 
        shall preside at hearings before the Commission. At any 
        time, the President may appoint, by and with the advice 
        and consent of the Senate, a different Chairman, and 
        the Commissioner previously appointed as Chairman may 
        complete that Commissioner's term as a Commissioner.
          (3) A vacancy in the Commission shall not impair the 
        right of the remaining Commissioners to exercise all 
        the powers of the Commission.
          (4) The Commission shall have a General Counsel, who 
        shall be appointed by the Commission and serve at the 
        pleasure of the Commission. The General Counsel shall 
        report directly to the Commission and serve as its 
        legal advisor. The Commission shall appoint such other 
        attorneys as may be necessary, in the opinion of the 
        Commission, to assist the General Counsel, represent 
        the Commission in all disciplinary proceedings pending 
        before it, represent the Commission in courts of law 
        whenever appropriate, assist the Department of Justice 
        in handling litigation concerning the Commission in 
        courts of law, and perform such other legal duties and 
        functions as the Commission may direct.
          (5) The Commission shall have an Executive Director, 
        who shall be appointed by the Commission and serve at 
        the pleasure of the Commission. The Executive Director 
        shall report directly to the Commission and perform 
        such functions and duties as the Commission may 
        prescribe.
          (6)(A) Except as otherwise provided in this paragraph 
        and in paragraphs (4) and (5) of this subsection, the 
        executive and administrative functions of the 
        Commission, including functions of the Commission with 
        respect to the appointment and supervision of personnel 
        employed under the Commission, the distribution of 
        business among such personnel and among administrative 
        units of the Commission, and the use and expenditure of 
        funds, according to budget categories, plans, programs, 
        and priorities established and approved by the 
        Commission, shall be exercised solely by the Chairman.
          (B) In carrying out any of his functions under the 
        provisions of this paragraph, the Chairman shall be 
        governed by general policies, plans, priorities, and 
        budgets approved by the Commission and by such 
        regulatory decisions, findings, and determinations as 
        the Commission may by law be authorized to make.
          (C) The appointment by the Chairman of the heads of 
        major administrative units under the Commission shall 
        be subject to the approval of the Commission.
          (D) Personnel employed regularly and full time in the 
        immediate offices of Commissioners other than the 
        Chairman shall not be affected by the provisions of 
        this paragraph.
          (E) There are hereby reserved to the Commission its 
        functions with respect to revising budget estimates and 
        with respect to determining the distribution of 
        appropriated funds according to major programs and 
        purposes.
          (F) The Chairman may from time to time make such 
        provisions as he shall deem appropriate authorizing the 
        performance by any officer, employee, or administrative 
        unit under hisjurisdiction of any functions of the 
Chairman under this paragraph.
          (7) No Commissioner or employee of the Commission 
        shall accept employment or compensation from any 
        person, exchange, or clearinghouse subject to 
        regulation by the Commission under this Act during his 
        term of office, nor shall he participate, directly or 
        indirectly, in any [contract market] registered entity 
        operations or transactions of a character subject to 
        regulation by the Commission.
          (8)(A) The Commission shall, in cooperation with the 
        Secretary of Agriculture, maintain a liaison between 
        the Commission and the Department of Agriculture. The 
        Secretary shall take such steps as may be necessary to 
        enable the Commission to obtain information and utilize 
        such services and facilities of the Department of 
        Agriculture as may be necessary in order to maintain 
        effectively such liaison. In addition, the Secretary 
        shall appoint a liaison officer, who shall be an 
        employee of the Office of the Secretary, for the 
        purpose of maintaining a liaison between the Department 
        of Agriculture and the Commission. The Commission shall 
        furnish such liaison officer appropriate office space 
        within the offices of the Commission and shall allow 
        such liaison officer to attend and observe all 
        deliberations and proceedings of the Commission.
          (B)(i) The Commission shall maintain communications 
        with the Department of the Treasury, the Board of 
        Governors of the Federal Reserve System, and the 
        Securities and Exchange Commission for the purpose of 
        keeping such agencies fully informed of Commission 
        activities that relate to the responsibilities of those 
        agencies, for the purpose of seeking the views of those 
        agencies on such activities, and for considering the 
        relationships between the volume and nature of 
        investment and trading in contracts of sale of a 
        commodity for future delivery and in securities and 
        financial instruments under the jurisdiction of such 
        agencies.
          (ii) When a board of trade applies for [designation 
        as a contract market] designation or registration as a 
        contract market or derivatives transaction execution 
        facility involving transactions for future delivery of 
        any security issued or guaranteed by the United States 
        or any agency thereof, the Commission shall promptly 
        deliver a copy of such application to the Department of 
        the Treasury and the Board of Governors of the Federal 
        Reserve System. The Commission may not [designate a 
        board of trade as a contract market] designate or 
        register a board of trade as a contract market or 
        derivatives transaction execution facility based on 
        such application until forty-five days after the date 
        the Commission delivers the application to such 
        agencies or until the Commission receives comments from 
        each of such agencies on the application, whichever 
        period is shorter. Any comments received by the 
        Commission from such agencies shall be included as part 
        of the public record of the Commission's designation 
        proceeding. In [designating, or refusing, suspending, 
        or revoking the designation of, a board of trade as a 
        contract market involving transactions for future 
        delivery referred to in this clause or in considering 
        possible emergency action under section 8a(9) of this 
        Act] designating, registering, or refusing, suspending, 
        or revoking the designation or registration of, a board 
        of trade as a contract market or derivatives 
        transaction execution facility involving transactions 
        for future delivery referred to in this clause or in 
        considering any possible action under this Act 
        (including without limitation emergency action under 
        section 8a(9)) with respect to such transactions, the 
        Commission shall take into consideration all comments 
        it receives from the Department of the Treasury and the 
        Board of Governors of the Federal Reserve System and 
        shall consider the effect that any such [designation, 
        suspension, revocation, or emergency action] 
        designation, registration, suspension, revocation, or 
        action may have on the debt financing requirements of 
        the United States Government and the continued 
        efficiency and integrity of the underlying market for 
        government securities.
          (iii) The provisions of this subparagraph shall not 
        create any rights, liabilities, or obligations upon 
        which actions may be brought against the Commission.
          (9)(A) Whenever the Commission submits any budget 
        estimate or request to the President or the Office of 
        Management and Budget, it shall concurrently transmit 
        copies of that estimate or request to the House and 
        Senate Appropriations Committees and the House 
        Committee on Agriculture and the Senate Committee on 
        Agriculture, Nutrition, and Forestry.
          (B) Whenever the Commission transmits any legislative 
        recommendations, or testimony, or comments on 
        legislation to the President or the Office of 
        Management and Budget, it shall concurrently transmit 
        copies thereof to the House Committee on Agriculture 
        and the Senate Committee on Agriculture, Nutrition, and 
        Forestry. No officer or agency of the United States 
        shall have any authority to require the Commission to 
        submit its legislative recommendations, or testimony, 
        or comments on legislation to any officer or agency of 
        the United States for approval, comments, or review, 
        prior to the submission of such recommendations, 
        testimony, or comments to the Congress. In instances in 
        which the Commission voluntarily seeks to obtain the 
        comments or review of any officer or agency of the 
        United States, the Commission shall include a 
        description of such actions in its legislative 
        recommendations, testimony, or comments on legislation 
        which it transmits to the Congress.
          (C) Whenever the Commission issues for official 
        publication any opinion, release, rule, order, 
        interpretation, or other determination on a matter, the 
        Commission shall provide that any dissenting, 
        concurring, or separate opinion by any Commissioner on 
        the matter be published in full along with the 
        Commission opinion, release, rule, order, 
        interpretation, or determination.
          (10) The Commission shall have an official seal, 
        which shall be judicially noticed.
          (11) The Commission is authorized to promulgate such 
        rules and regulations as it deems necessary to govern 
        the operating procedures and conduct of the business of 
        the Commission.

           *       *       *       *       *       *       *

  (c) Agreements, Contracts, and Transactions in Foreign 
Currency, Government Securities, and Certain Other 
Commodities.--
          (1) In general.--Except as provided in paragraph (2), 
        nothing in this Act (other than section 5b or 
        12(e)(2)(B)) governs or applies to an agreement, 
        contract, or transaction in--
                  (A) foreign currency;
                  (B) government securities;
                  (C) security warrants;
                  (D) security rights;
                  (E) resales of installment loan contracts;
                  (F) repurchase transactions in an excluded 
                commodity; or
                  (G) mortgages or mortgage purchase 
                commitments.
          (2) Commission jurisdiction.--
                  (A) Agreements, contracts, and transactions 
                that are futures traded on an organized 
                exchange.--This Act applies to, and the 
                Commission shall have jurisdiction over, an 
                agreement, contract, or transaction described 
                in paragraph (1) that is--
                          (i) a contract of sale of a commodity 
                        for future delivery (or an option 
                        thereon), or an option on a commodity 
                        (other than foreign currency or a 
                        security), that is executed or traded 
                        on an organized exchange; or
                          (ii) an option on foreign currency 
                        and is executed or traded on an 
                        organized exchange that is not a 
                        national securities exchange.
                  (B) Agreements, contracts, and transactions 
                in retail foreign currency.--This Act applies 
                to, and the Commission shall have jurisdiction 
                over, an agreement, contract, or transaction in 
                foreign currency that--
                          (i) is a contract of sale for future 
                        delivery (or an option on such a 
                        contract) or an option; and
                          (ii) is offered to, or entered into 
                        with, a person that is not an eligible 
                        contract participant, unless the 
                        counterparty, or the person offering to 
                        be the counterparty, of the person is--
                                  (I) a financial institution;
                                  (II) a broker or dealer 
                                registered under section 15(b) 
                                or 15C of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 
                                78o(b), 78o-5) or a futures 
                                commission merchant registered 
                                under this Act;
                                  (III) an associated person of 
                                a broker or dealer registered 
                                under section 15(b) or 15C of 
                                the Securities Exchange Act of 
                                1934 (15 U.S.C. 78o(b), 78o-5), 
                                or an affiliated person of a 
                                futures commission merchant 
                                registered under this Act, 
                                concerning the financial or 
                                securities activities of which 
                                the registered person makes and 
                                keeps records under section 
                                15C(b) or 17(h) of the 
                                Securities Exchange Actof 1934 
(15 U.S.C. 78o-5(b), 78q(h)) or section 4f(c)(2)(B) of this Act;
                                  (IV) an insurance company 
                                that is subject to State 
                                regulation (including a 
                                subsidiary or affiliate of such 
                                an insurance company);
                                  (V) a financial holding 
                                company (as defined in section 
                                2 of the Bank Holding Company 
                                Act of 1956); or
                                  (VI) an investment bank 
                                holding company (as defined in 
                                section 17(i) of the Securities 
                                Exchange Act of 1934).
  (d) Excluded Derivative Transactions.--
          (1) In general.--Nothing in this Act (other than 
        section 5b or 12(e)(2)(B)) governs or applies to an 
        agreement, contract, or transaction in an excluded 
        commodity if--
                  (A) the agreement, contract, or transaction 
                is entered into only between persons that are 
                eligible contract participants at the time at 
                which the persons enter into the agreement, 
                contract, or transaction; and
                  (B) the agreement, contract, or transaction 
                is not executed or traded on a trading 
                facility.
          (2) Electronic trading facility exclusion.--Nothing 
        in this Act (other than section 5a, 5b, or 12(e)(2)(B)) 
        governs or applies to an agreement, contract, or 
        transaction in an excluded commodity if--
                  (A) the agreement, contract, or transaction 
                is--
                          (i) entered into--
                                  (I) on a principal-to-
                                principal basis between parties 
                                trading for their own accounts 
                                or as described in section 
                                1a(12)(B)(ii) of this Act; and
                                  (II) only between eligible 
                                contract participants (as 
                                defined in subparagraphs (A), 
                                (B)(ii), and (C) section 
                                1a(12)) at the time at which 
                                the persons enter into the 
                                agreement, contract, or 
                                transaction; or
                          (ii) entered into only between 
                        eligible contract participants 
                        described in subclause (I), (II), 
                        (III), (IV), (V), or (VI) of section 
                        2(c)(2)(B)(ii) acting as a broker or 
                        performing a similar agency function on 
                        behalf of persons that are eligible 
                        contract participants at the time at 
                        which the persons enter into the 
                        agreement, contract, or transaction; 
                        and
                  (B) the agreement, contract, or transaction 
                is executed or traded on an electronic trading 
                facility.
  (e) Excluded Electronic Trading Facilities.--
          (1) In general.--Nothing in this Act (other than 
        section 12(e)(2)(B)) governs or is applicable to an 
        electronic trading facility that limits transactions 
        authorized to be conducted on its facilities to those 
        satisfying the requirements of sections 2(d)(2) and 
        2(h)(3)(B) of this Act.
          (2) Effect on authority to establish and operate.--
        Nothing in this Act shall prohibit a board of trade 
        designated by the Commission as a contract market or 
        derivatives transaction execution facility, or an 
        exempt board of trade, from establishing and operating 
        an electronic trading facility excluded under this Act 
        pursuant to paragraph (1).
  (f) Exclusion for Qualifying Hybrid Instruments.--
          (1) In general.--Nothing in this Act (other than 
        section 12(e)(2)(B)) governs or is applicable to--
                  (A) a banking product or security sold or 
                provided by an entity that is listed in any of 
                subclauses (I) through (VI) of section 
                2(c)(2)(B)(ii); or
                  (B) a hybrid instrument that is predominantly 
                a security or a deposit instrument.
          (2) Exception.--Paragraph (1)(A) shall not apply to 
        any swap agreement (as defined in section 206(b) of the 
        Gramm-Leach-Bliley Act) with any party who is not an 
        eligible contract participant unless such swap 
        agreement is entered into after final regulations have 
        been prescribed under section 49 of the Federal Deposit 
        Insurance Act
          (3) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security or deposit 
        instrument if--
                  (A) the issuer of the hybrid instrument 
                receives payment in full of the purchase price 
                of the hybrid instrument, substantially 
                contemporaneously with delivery of the hybrid 
                instrument;
                  (B) the purchaser or holder of the hybrid 
                instrument is not required to make any payment 
                to the issuer in addition to the purchase price 
                paid under subparagraph (A), whether as margin, 
                settlement payment, or otherwise, during the 
                life of the hybrid instrument or at maturity;
                  (C) the issuer of the hybrid instrument is 
                not subject by the terms of the instrument to 
                mark-to-market margining requirements; and
                  (D) the hybrid instrument is not marketed as 
                a contract of sale for future delivery of a 
                commodity (or option on such a contract) 
                subject to this Act.
          (4) Mark-to-market margining requirements.--For the 
        purposes of paragraph (3)(C), mark-to-market margining 
        requirements do not include the obligation of an issuer 
        of a secured debt instrument to increase the amount of 
        collateral held in pledge for the benefit of the 
        purchaser of the secured debt instrument to secure the 
        repayment obligations of the issuer under the secured 
        debt instrument.
  (g) Notwithstanding any other provision of law:
          (1) This Act shall not apply to and the Commission 
        shall have no jurisdiction to designate a board of 
        trade as a contract market for any transaction whereby 
        any party to the transaction acquires a put, call, or 
        other option on 1 or more securities (as defined in 
        section 2(a)(1) of the Securities Act of 1933 or 
        section 3(a)(10) of the Securities Exchange Act of 
        1934, on the date of enactment of the Futures Trading 
        Act of 1982), including any group or index of 
        securities and any interest in or based on the value of 
        securities.
          (2) Nothing in this subsection governs or applies 
        to--
                  (A) an agreement, contract, or transaction in 
                a commodity that is excluded under subsection 
                (c) or (d);
                  (B) an electronic trading facility that is 
                excluded under subsection (e); or
                  (C) a hybrid instrument that is covered by an 
                exclusion under subsection (f) or an exemption 
                granted by the Commission under section 4(c) 
                (whether or not the hybrid instrument is 
                otherwise subject to this Act).
          (3) Except as provided in paragraph (4) of this 
        subsection, or unless excluded by paragraph (2) of this 
        subsection, a person shall not offer to enter into, 
        enter into, or confirm the execution of any contract of 
        sale (or option on the contract) for future delivery of 
        any security or interest in or based on the value of a 
        nonexempt security.
          (4)(A) Except as excluded by paragraph (2) of this 
        subsection, this Act shall apply to and the Commission 
        shall have exclusive jurisdiction with respect to 
        accounts, agreements (including any transaction which 
        is of the character of, or is commonly known to the 
        trade as an option, privilege, indemnity, bid, offer, 
        put, call, advance guaranty, or decline guaranty), and 
        transactions involving, and may designate a board of 
        trade as a contract market under section 5 or register 
        the board of trade as a derivatives transaction 
        execution facility under section 5a in, contracts of 
        sale (or options on the contracts) for future delivery 
        of 1 or more securities (as defined in section 2(a)(1) 
        of the Securities Act of 1933 or section 3(a)(10) of 
        the Securities Exchange Act of 1934), including any 
        group or index of securities and any interest in or 
        based on the value of securities.
          (B) The Commission shall not designate a board of 
        trade as a contract market under section 5 or register 
        a board of trade as a derivatives transaction execution 
        facility under section 5a with respect to any such 
        contracts of sale (or options on the contracts) for 
        future delivery unless the board of trade demonstrates 
        and the Commission expressly finds that the specific 
        contract (or option on the contract) with respect to 
        which the application for the designation or 
        recognition has been made meets the following 
        requirements:
                  (i) Settlement of or delivery on the contract 
                (or option on the contract) shall be effected 
                in cash or by means other than the transfer or 
                receipt of a nonexempt security.
                  (ii) Susceptibility to price manipulation.--
                Trading in a contract (or option on such a 
                contract) described in subparagraph (A) shall 
                not be readily susceptible to--
                          (I) manipulation of the price of the 
                        contract (or option on such a 
                        contract); or
                          (II) causing or being used in the 
                        manipulation of the price of any 
                        underlying security, option on a 
                        security, or option on a group or index 
                        that includes a security.
                  (iii) If the contract is based on a single 
                nonexempt security, an option on the security 
                underlying the contract would meet all 
                Securities and Exchange Commission requirements 
                for listing on a national securities exchange.
                  (iv) If the contract is based on any group or 
                index of nonexempt securities comprised of 
                fewer than 5 securities, or on an index in 
                which a single nonexempt security predominates, 
                an option on each security comprising the group 
                or index would meet all requirements for 
                listing on a national securities exchange.
                  (v)(I) In general.--The contract will be 
                traded on a board of trade that establishes the 
                level of margin for futures contracts (or 
                options on the contracts) based on a single 
                nonexempt security, an index of fewer than 5 
                nonexempt securities, or an index in which a 
                single nonexempt security predominates, at a 
                level consistent with the level of margin on 
                comparable option contracts listed on any 
                national securities exchange.
                  (II) Consistency.--For the purposes of 
                subclause (I), a margin for designated futures 
                on securities and options on securities shall 
                be considered to be consistent if the margin 
                provides a similar level of protection against 
                defaults by counterparties, taking into account 
                any differences in--
                          (aa) the price volatility of the 
                        contracts;
                          (bb) the frequency with which margin 
                        requirements are made; and
                          (cc) the period of time within which 
                        margin calls must be met.
                  (vi) The contract will be traded on a board 
                of trade that prohibits a person who acts as a 
                floor broker for any contract of sale (or 
                options on the contract) for future delivery of 
                a nonexempt security, an index based on fewer 
                than 5 nonexempt securities, or an index in 
                which a single nonexempt security predominates, 
                from trading that contract for the broker's own 
                account during the same trading session.
                  (vii) The contract will be traded on a board 
                of trade that collects, maintains, and promptly 
                provides to the Securities and Exchange 
                Commission such information as the Commission 
                and the Securities and Exchange Commission 
                jointly consider necessary to perform the 
                enforcement responsibilities described in 
                paragraph (6).
          (5) The Commission shall consult with the Securities 
        and Exchange Commission with respect to any application 
        submitted by a board of trade for designation as a 
        contract market or derivatives transaction execution 
        facility with respect to any contract of sale (or 
        option on the contract) for future delivery of a 
        nonexempt security or a group or index of such 
        securities. If, not later than 15 days after the 
        consultation, the Securities and Exchange Commission 
        objects to the designation of a board of trade as a 
        contract market or derivatives transaction execution 
        facility in the contract (or option on the contract) on 
        the ground that any requirement of paragraph (4)(B) is 
        not met, the Commission shall afford the Securities and 
        Exchange Commission an opportunity for an oral hearing 
        to be transcribed before the Commission, and shall give 
        appropriate weight to the views of the Securities and 
        Exchange Commission. The oral hearing shall be held 
        before Commission action upon the application for the 
        designation, and not less than 30 nor more than 45 days 
        after the Securities and Exchange Commission has 
        objected. If such an oral hearing is held, the 
        Securities and Exchange Commission fails to withdraw 
        its objections, and the Commission issues an order 
        designating a board of trade as a contract market or 
        recognizes the board of trade as a derivatives 
        transaction execution facility with respect to any such 
        contract (or option on the contract), the Securities 
        and Exchange Commission may seek judicial review of the 
        order in accordance with the procedural requirements 
        set forth in section 6(c). If, pursuant to section 6, 
        there is a hearing on the record with respect to an 
        application for such designation, the Securities and 
        Exchange Commission may participate in that hearing as 
        an interested party.
          (6) Notwithstanding any other provision of this Act, 
        the Securities and Exchange Commission may enforce 
        against a person that purchases or sells any contract 
        of sale (or option on the contract) for future delivery 
        of any nonexempt security, any index comprised of fewer 
        than 5 nonexempt securities, or any index in which a 
        single nonexempt security predominates to the same 
        extent as if the person had purchased or sold an option 
        on the security or index under the following provisions 
        of the securities laws and regulations with respect to 
        the following categories of conduct:
                  (A) Section 10(b) and 21A of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78j(b), 78u-1) 
                with respect to insider trading.
                  (B) Section 16(b) of such Act (15 U.S.C. 
                78p(b)) with respect to unfair use of 
                information in short swing trading by a 
                corporate insider.
                  (C) Section 9 of such Act (15 U.S.C. 78i) 
                with respect to manipulation of securities 
                prices.
                  (D) Section 10(b) of such Act (15 U.S.C. 
                78J(b)) and section 204A of the Investment 
                Adviser's Act of 1940 (15 U.S.C. 80b-4a) with 
                respect to frontrunning.
                  (E) Section 14 of the Securities Exchange Act 
                of 1934 (15 U.S.C. 78n) with respect to the 
                pricing and integrity of tender offers.
                  (F) Rule 144 of the rules of the Securities 
                and Exchange Commission (17 C.F.R. 230.144) 
                with respect to trading in restricted 
                securities.
          (7)(A) Notwithstanding any other provision of this 
        Act, any contract market or derivatives transaction 
        execution facility in a nonexempt security or stock 
        index futures contract (or option thereon) shall file 
        with the Board of Governors of the Federal Reserve 
        System any rule establishing or changing the levels of 
        margin (initial and maintenance) for the nonexempt 
        security or stock index futures contract (or option on 
        the contract).
          (B) The Board may at any time request any contract 
        market or derivatives transaction execution facility to 
        set the level of margin for any nonexempt security or 
        stock index futures contract (or option on the 
        contract) at such levels as the Board in its judgment 
        determines are appropriate to preserve the financial 
        integrity of the contract market or derivatives 
        transaction execution facility or its clearing system 
        or to prevent systemic risk. If the contract market or 
        derivatives transaction execution facility fails to do 
        so within the time specified by the Board in its 
        request, the Board may direct the contract marketor 
derivatives transaction execution facility to alter or supplement the 
rules of the contract market or derivatives transaction execution 
facility as specified in the request.
          (C) Subject to such conditions as the Board may 
        determine, the Board may delegate any or all of its 
        authority under this paragraph to the Commission or an 
        intermarket margin board as provided in subparagraph 
        (D).
          (D) Intermarket margin board.--
                  (i) Establishment.--With the concurrence of 
                the Securities and Exchange Commission and the 
                Commission, the Board may establish an 
                intermarket margin board, consisting of 
                representatives of any or all of the three 
                agencies.
                  (ii) Duties.--The intermarket margin board 
                may set and maintain margin levels and rules 
                pertaining to margin for futures on a single 
                nonexempt security, an index of fewer than 5 
                nonexempt securities, or an index in which a 
                single nonexempt security predominates, listed 
                on a contract market or derivatives transaction 
                execution facility. In discharging these 
                duties, the intermarket margin board shall 
                endeavor to make the levels of margin for 
                futures and options on a single nonexempt 
                security consistent taking into account any 
                material differences in such contracts, 
                including--
                          (I) the price volatility of the 
                        contracts;
                          (II) the frequency with which margin 
                        calls are made; and
                          (III) the period of time within which 
                        margin calls must be met.
          (E) This paragraph shall not be construed to 
        supersede or limit the authority granted to the 
        Commission in section 8a(9) to direct a contract market 
        or derivatives transaction execution facility, on 
        finding an emergency to exist, to raise temporary 
        emergency margin levels on any futures contract or 
        option on the contract covered by this paragraph.
          (F) Any action taken by the Board under this 
        paragraph, or by the Commission acting under the 
        delegation of authority under subparagraph (C), 
        directing a contract market or derivatives transaction 
        execution facility to alter or supplement a contract 
        market or derivatives transaction execution facility 
        rule shall be subject to review only in the United 
        States Court of Appeals for the judicial circuit in 
        which the party seeking review resides or has its 
        principal place of business, or in the United States 
        Court of Appeals for the District of Columbia Circuit. 
        The review shall be based on the examination of all 
        information before the Board or the Commission, as the 
        case may be, at the time the determination was made. 
        The court reviewing the action of the Board or the 
        Commission shall not enter a stay or order of mandamus 
        unless the court determines, after notice and a hearing 
        before a panel of the court, that the agency action 
        complained of was arbitrary, capricious, an abuse of 
        discretion, or otherwise not in accordance with law.
          (8) This subsection shall not be construed to 
        prohibit--
                  (A) an agreement, contract, or transaction 
                excluded from this Act by paragraph (2); or
                  (B) any hybrid instrument that is covered by 
                the terms of any exemption granted by the 
                Commission under section 4(c) (whether or not 
                any such hybrid instrument is otherwise subject 
                to this Act).
          (9)(A) No futures commission merchant, commodity 
        trading advisor, or introducing broker shall recommend 
        to any customer the purchase or sale of any contract of 
        sale for future delivery of a single nonexempt 
        security, an index of fewer than 5 nonexempt 
        securities, or an index in which a single nonexempt 
        security predominates, unless the futures commission 
        merchant, commodity trading advisor, or introducing 
        broker complies with the rules described in 
        subparagraph (B) of a registered futures association of 
        which such merchant, advisor, or broker is a member.
          (B) Within 9 months of the date of enactment of the 
        Commodity Futures Modernization Act of 2000, a 
        registered futures association shall adopt rules 
        requiring a futures commission merchant, a commodity 
        trading advisor, or an introducing broker which 
        recommends to any customer the purchase or sale of any 
        contract of sale for future delivery of a single 
        nonexempt security, an index of fewer than 5 nonexempt 
        securities, or an index in which a single nonexempt 
        security predominates to ascertain through reasonable 
        due diligence that the recommendation is suitable for 
        that customer in light of the customer's financial 
        position and trading goals. The registered futures 
        association shall consult with the Commission and the 
        Securities and Exchange Commission prior to the 
        adoption of any such rule, and shall submit any such 
        rule to the Commission for approval in the manner and 
        according to the procedures described in section 17(j) 
        of this Act, provided, that in such case the rule shall 
        become effective if the Commission fails to disapprove 
        such rule within 90 days of submission.
          (10)(A) Nothing in this Act shall be construed to 
        require or authorize the Commission to review or 
        approve, directly or indirectly, any contract, rule, 
        regulation, or action adopted by a foreign board of 
        trade, exchange, or market, or a clearinghouse for such 
        a board of trade, exchange, or market, relating to any 
        transaction involving a contract of sale for future 
        delivery (or option on such a contract) in or involving 
        any security, including any foreign government debt 
        security, or group or index of such securities, if--
                  (i)(I) in the case of a contract of sale for 
                future delivery (or option on such a contract) 
                in or involving a single equity security, the 
                United States is not the primary trading market 
                for the underlying security; or
                  (II) in the case of a contract of sale for 
                future delivery (or option on such a contract) 
                in or involving a group or index of equity 
                securities, less than 25 percent of the 
                weighting of the group or index is derived from 
                securities for which the United States is the 
                primary trading market for the securities 
                underlying the contract for future delivery (or 
                option on the contract); and
                  (ii) settlement of or delivery on the 
                contract for future delivery (or option on such 
                a contract) is to be effected incash or by 
means other than the transfer or receipt of a security in the United 
States other than an exempted security.
          (B) Within 90 days after the date of the enactment of 
        this paragraph, the Commission shall adopt such 
        procedures as it deems appropriate pursuant to which, 
        consistent with this Act, the Commission shall 
        authorize the offer and sale in the United States of 
        any contract of sale for future delivery (or option on 
        such a contract) of a security, other than a security 
        of the type described in subparagraph (A)(i)(I) or a 
        group or index of securities of the type described in 
        subparagraph (A)(i)(II), traded on or subject to the 
        rules of a foreign board of trade, exchange, or market, 
        or a clearinghouse for such a board of trade, exchange, 
        or market, except that such procedures shall not 
        require a foreign board of trade, exchange, or market, 
        or a clearinghouse for such a board of trade, exchange, 
        or market to apply for designation as a contract market 
        under this Act with respect to such a contract for 
        future delivery (or option on such a contract).
  (h) Legal Certainty for Certain Transactions in Exempt 
Commodities.--
          (1) Except as provided in paragraph (2) of this 
        subsection, nothing in this Act shall apply to a 
        contract, agreement or transaction in an exempt 
        commodity which--
                  (A) is entered into solely between persons 
                that are eligible contract participants at the 
                time they enter into the agreement, contract, 
                or transaction; and
                  (B) is not entered into on a trading 
                facility.
          (2) An agreement, contract, or transaction described 
        in paragraph (1) of this subsection shall be subject 
        to--
                  (A) sections 5b and 12(e)(2)(B) of this Act;
                  (B) sections 4b and 4n of this Act and the 
                regulations of the Commission pursuant to 
                section 4c(b) of this Act proscribing fraud in 
                connection with commodity option transactions, 
                to the extent such agreement, contract, or 
                transaction is not between eligible commercial 
                participants and would otherwise be subject to 
                those provisions; and
                  (C) sections 6(c) and 9(a)(2) of this Act to 
                the extent they prohibit manipulation of the 
                market price of any commodity in interstate 
                commerce, to the extent such agreement, 
                contract, or transaction would otherwise be 
                subject to those provisions.
          (3) Except as provided in paragraph (4) of this 
        subsection, nothing in this Act shall apply to an 
        agreement, contract, or transaction in an exempt 
        commodity (other than a metal commodity enumerated in 
        section 1a(3) of this Act) which--
                  (A) is entered into solely between persons 
                that are eligible contract participants at the 
                time at which the persons enter into the 
                agreement, contract, or transaction; and
                  (B) is executed or traded on an electronic 
                trading facility.
          (4) An agreement, contract, or transaction described 
        in paragraph (3) shall be subject to--
                  (A) sections 5b and 12(e)(2)(B) of this Act;
                  (B) sections 4b and 4n of this Act and the 
                regulations of the Commission pursuant to 
                section 4c(b) of this Act proscribing fraud in 
                connection with commodity option transactions 
                and section 6(c) and 9(a)(2) of this Act, to 
                the extent these provisions prohibit 
                manipulation of the market price of any 
                commodity in interstate commerce, to the extent 
                such agreement, contract, or transaction would 
                otherwise be subject to those provisions; and
                  (C) such rules and regulations as the 
                Commission may prescribe if necessary to ensure 
                timely dissemination by the electronic trading 
                facility of price, trading volume, and other 
                trading data to the extent appropriate, if the 
                Commission determines that the electronic 
                trading facility performs a significant price 
                discovery function for transactions related to 
                the commodity executed or traded on the 
                electronic trading facility.
  (i) Excluded Swap Transactions.--
          (1) In general.--No provision of this Act (other than 
        section 5b or 12(e)(2)(B)) shall apply to or govern any 
        agreement, contract, or transaction in a commodity 
        other than an agricultural commodity enumerated in 
        section 1a(3) if--
                  (A) the agreement, contract, or transaction 
                is entered into only between persons that are 
                eligible contract participants at the time they 
                enter into the agreement, contract, or 
                transaction; and
                  (B) the material economic terms of the 
                agreement, contract, or transaction are subject 
                to individual negotiation and are not specified 
                by the rules terms or conditions of a trading 
                facility.
          (2) Exclusion.--Paragraph (1) shall not apply to--
                  (A) a contract for the sale of a commodity 
                for future delivery traded on a contract market 
                designated under section 5; or
                  (B) any agreement, contract, or transaction 
                traded on a derivatives transaction execution 
                facility registered under section 5a.
  (j) Application of the Act.--No provision of this Act shall 
be construed as--
          (1) implying or creating any presumption that--
                  (A) any agreement, contract, or transaction 
                that is eligible for an exclusion or exemption 
                from regulation under this Act; or
                  (B) any agreement, contract, or transaction 
                that is not eligible for an exclusion or 
                exemption from regulation under this Act,
        is or would otherwise be subject to this Act; or
          (2) conferring jurisdiction on the Commission with 
        respect to any such agreement, contract, or 
        transaction, except as expressly provided in section 
        5b.
  [Sec. 3. Transactions in commodities involving the sale 
thereof for future delivery as commonly conducted on boards of 
trade and known as ``futures'' are affected with a national 
public interest. Such futures transactions are carried on in 
large volume by the public generally and by persons engaged in 
the business of buying and selling commodities and the products 
and byproducts thereof in interstate commerce. The prices 
involved in such transactions are generally quoted and 
disseminated throughout the United States and in foreign 
countries as a basis for determining the prices to the producer 
and the consumer of commodities and the products and byproducts 
thereof and to facilitate the movements thereof in interstate 
commerce. Such transactions are utilized by shippers, dealers, 
millers, and others engaged in handling commodities and the 
products and byproducts thereof in interstate commerce as a 
means of hedging themselves against possible loss through 
fluctuations in price. The transactions and prices of 
commodities on such boards of trade are susceptible to 
excessive speculation and can be manipulated, controlled, 
cornered or squeezed, to the detriment of the producer or the 
consumer and the persons handling commodities and the products 
and byproducts thereof in interstate commerce, rendering 
regulation imperative for the protection of such commerce and 
the national public interest therein. Furthermore, transactions 
which are of the character of, or are commonly known to the 
trade as, ``options'' are or may be utilized by commercial and 
other entities for risk shifting and other purposes. Options 
transactions are in interstate commerce or affect such commerce 
and the national economy, rendering regulation of such 
transactions imperative for the protection of such commerce and 
the national public interest.]

SEC. 3. FINDINGS AND PURPOSE.

  (a) Findings.--The futures contracts and options contracts 
that are subject to this Act are entered into regularly in 
interstate and international commerce and are affected with a 
national public interest by providing a means for managing and 
assuming price risks, discovering prices, and disseminating 
pricing information through trading in liquid, fair and 
financially secure trading facilities.
  (b) Purpose.--It is the purpose of this Act to serve the 
public interests described in subsection (a) through a system 
of effective self-regulation of trading facilities, clearing 
systems, market participants and market professionals under the 
oversight of the Commission. To foster these public interests, 
it is further the purpose of this Act to deter and prevent 
price manipulation or any other disruptions to market 
integrity; to ensure the financial integrity of all 
transactions subject to this Act and the avoidance of systemic 
risk; to protect all market participants from fraudulent or 
other abusive sales practices and misuses of customer assets; 
and to promote responsible innovation and fair competition 
among boards of trade, other markets and market participants.
    Sec. 4. (a) Unless exempted by the Commission pursuant to 
subsection (c), it shall be unlawful for any person to offer to 
enter into, to enter into, to execute, to confirm the execution 
of, or to conduct any office or business anywhere in the United 
States, its territories or possessions, for the purpose of 
soliciting, or accepting any order for, or otherwise dealing 
in, any transaction in, or in connection with, a contract for 
the purchase or sale of a commodity for future delivery (other 
than a contract which is made on or subject to the rules of a 
board of trade, exchange, or market located outside the United 
States, its territories or possessions) unless--
          (1) such transaction is conducted on or subject to 
        the rules of a board of trade which has been 
        [designated by the Commission as a ``contract market'' 
        for] designated or registered by theCommission as a 
contract market or derivatives transaction execution facility for such 
commodity;
          (2) such contract is executed or consummated by or 
        through a [member of such] contract market; and
          (3) such contract is evidenced by a record in writing 
        which shows the date, the parties to such contract and 
        their addresses, the property covered and its price, 
        and the terms of delivery: Provided, That each contract 
        market or derivatives transaction execution facility 
        member shall keep such record for a period of three 
        years from the date thereof, or for a longer period if 
        the Commission shall so direct, which record shall at 
        all times be open to the inspection of any 
        representative of the Commission or the Department of 
        Justice.

           *       *       *       *       *       *       *

  (c)(1) In order to promote responsible economic or financial 
innovation and fair competition, the Commission by rule, 
regulation, or order, after notice and opportunity for hearing, 
may (on its own initiative or on application of any person, 
including any board of trade [designated as a contract market] 
designated or registered as a contract market or derivatives 
transaction execution facility for transactions for future 
delivery in any commodity under section 5 of this Act) exempt 
any agreement, contract, or transaction (or class thereof) that 
is otherwise subject to subsection (a) (including any person or 
class of persons offering, entering into, rendering advice or 
rendering other services with respect to, the agreement, 
contract, or transaction), either unconditionally or on stated 
terms or conditions or for stated periods and either 
retroactively or prospectively, or both, from any of the 
requirements of subsection (a), or from any other provision of 
this Act (except section [2(a)(1)(B)] 2(g)), if the Commission 
determines that the exemption would be consistent with the 
public interest.
  (2) The Commission shall not grant any exemption under 
paragraph (1) from any of the requirements of subsection (a) 
unless the Commission determines that--
          (A) the requirement should not be applied to the 
        agreement, contract, or transaction for which the 
        exemption is sought and that the exemption would be 
        consistent with the public interest and the purposes of 
        this Act; and
          (B) the agreement, contract, or transaction--
                  (i) will be entered into solely between 
                appropriate persons; and
                  (ii) will not have a material adverse effect 
                on the ability of the Commission or any 
                contract market or derivatives transaction 
                execution facility to discharge its regulatory 
                or self-regulatory duties under this Act.

           *       *       *       *       *       *       *

    Sec. 4a. (a) Excessive speculation in any commodity under 
contracts of sale of such commodity for future delivery made on 
or subject to the rules of contract markets or derivatives 
transaction execution facilities causing sudden or unreasonable 
fluctuations or unwarranted changes in the price of such 
commodity, is an undue and unnecessary burden on interstate 
commerce in such commodity. For the purpose of diminishing, 
eliminating, or preventing such burden, the Commission shall, 
from time to time, after due notice and opportunity for 
hearing, by rule, regulation, or order, proclaim and fix such 
limits on the amounts of trading which may be done or positions 
which may be held by any person under contracts of sale of such 
commodity for future delivery on or subject to the rules of any 
contract market or derivatives transaction execution facility 
as the Commission finds are necessary to diminish, eliminate, 
or prevent such burden. In determining whether any person has 
exceeded such limits, the positions held and trading done by 
any persons directly or indirectly controlled by such person 
shall be included with the positions held and trading done by 
such person; and further, such limits upon positions and 
trading shall apply to positions held by, and trading done by, 
two or more persons acting pursuant to an expressed or implied 
agreement or understanding, the same as if the positions were 
held by, or the trading were done by, a single person. Nothing 
in this section shall be construed to prohibit the Commission 
from fixing different trading or position limits for different 
commodities, markets, futures, or delivery months, or for 
different number of days remaining until the last day of 
trading in a contract, or different trading limits for buying 
and selling operations, or different limits for the purposes of 
paragraphs (1) and (2) of subsection (b) of this section, or 
from exempting transactions normally known to the trade as 
``spreads'' or ``straddles'' or ``arbitrage'' or from fixing 
limits applying to such transactions or positions different 
from limits fixed for other transactions or positions. The word 
``arbitrage'' in domestic markets shall be defined to mean the 
same as a ``spread'' or ``straddle''. The Commission is 
authorized to define the term ``international arbitrage''.
    (b) The Commission shall, in such rule, regulation, or 
order, fix a reasonable time (not to exceed ten days) after the 
promulgation of the rule, regulation, or order; after which, 
and until such rule, regulation, or order is suspended, 
modified, or revoked, it shall be unlawful for any person--
          (1) directly or indirectly to buy or sell, or agree 
        to buy or sell, under contracts of sale of such 
        commodity for future delivery on or subject to the 
        rules of the contract market or markets, or derivatives 
        transaction execution facility or facilities, to which 
        the rule, regulation, or order applies, any amount of 
        such commodity during any one business day in excess of 
        any trading limit fixed for one business day by the 
        Commission in such rule, regulation, or order for or 
        with respect to such commodity; or
          (2) directly or indirectly to hold or control a net 
        long or a net short position in any commodity for 
        future delivery on or subject to the rules of any 
        contract market or derivatives transaction execution 
        facility in excess of any position limit fixed by the 
        Commission for or with respect to such commodity: 
        Provided, That such position limit shall not apply to a 
        position acquired in good faith prior to the effective 
        date of such rule, regulation, or order.

           *       *       *       *       *       *       *

    (e) Nothing in this section shall prohibit or impair the 
adoption by any [contract market or] contract market, 
derivatives transaction execution facility, or by any other 
board of trade [licensed or designated] licensed, designated, 
or registered by the Commission of any bylaw, rule, regulation, 
or resolution fixing limits on the amount of trading which may 
be done or positions which may be held by any person under 
contracts of sale of any commodity for future delivery traded 
on or subject to the rules of such [contract market, or] 
contract market or derivatives transaction execution facility, 
or under options on such contracts or commodities traded on or 
subject to the rules of such [contract market or] contract 
market, derivatives transaction execution facility, or  such 
board of trade: Provided, That if the Commission shall have 
fixed limits under this section for any contract or under 
section 4c of this Act for any commodity option, then the 
limits fixed by the bylaws, rules, regulations, and resolutions 
adopted by such [contract market or] contract market, 
derivatives transaction execution facility, or such board of 
trade shall not be higher than the limits fixed by the 
Commission. It shall be a violation of this Act for any person 
to violate any bylaw, rule, regulation, or resolution of any 
[contract market or] contract market, derivatives transaction 
execution facility, or other board of trade [licensed or 
designated] licensed, designated, or registered by the 
Commission fixing limits on the amount of trading which may be 
done or positions which may be held by any person under 
contracts of sale of any commodity for future delivery or under 
options on such contracts or commodities, if such bylaw, rule, 
regulation, or resolution has been approved by the Commission: 
Provided, That the provisions of section 9(c) of this Act shall 
apply only to those who knowingly violate such limits.
    Sec. 4b. (a) It shall be unlawful (1) for any member of a 
[contract market] registered entity, or for any correspondent, 
agent, or employee of any member, in or in connection with any 
order to make, or the making of, any contract of sale of any 
commodity in interstate commerce, made, or to be made, on or 
subject to the rules of any [contract market] registered 
entity, for or on behalf of any other person, or (2) for any 
person, in or in connection with any order to make, or the 
making of, any contract of sale of any commodity for future 
delivery, made, or to be made, for or on behalf of any other 
person if such contract for future delivery is or may be used 
for (A) hedging any transaction in interstate commerce in such 
commodity or the products or by products thereof, or (B) 
determining the price basis of any transaction in interstate 
commerce in such commodity, or (C) delivering any such 
commodity sold, shipped, or received in interstate commerce for 
the fulfillment thereof--
          (i) * * *

           *       *       *       *       *       *       *

    [Sec. 4c. (a) It shall be unlawful for any person to offer 
to enter into, enter into, or confirm the execution of, any 
transaction involving any commodity, which is or may be used 
for (1) hedging any transaction in interstate commerce in such 
commodity or the products or byproducts thereof, or (2) 
determining the price basis of any such transaction in 
interstate commerce in such commodity, or (3) delivering any 
such commodity sold, shipped, or received in interstate 
commerce for the fulfillment thereof--
          [(A) if such transaction is, is of the character of, 
        or is commonly known to the trade as, a ``wash sale'', 
        ``cross trade'', or ``accommodation trade'', or is a 
        fictitious sale; or
           [(B) if such transaction is used to cause any price 
        to be reported, registered, or recorded which is not a 
        true and bona fide price.
    Nothing in this section shall be construed to prevent the 
exchange of futures in connection with cash commodity 
transactions or of futures for cash commodities, or of transfer 
trades or office trades if made in accordance with board of 
trade rules applying to such transactions and such rules shall 
have been approved by the Commission.]

SEC. 4C. PROHIBITED TRANSACTIONS.

  (a) In General.--
          (1) Prohibition.--It shall be unlawful for any person 
        to offer to enter into, enter into, or confirm the 
        execution of a transaction described in paragraph (2) 
        involving any commodity if the transaction is used or 
        may be used to--
                  (A) hedge any transaction in interstate 
                commerce in the commodity or the product or 
                byproduct of the commodity;
                  (B) determine the price basis of any such 
                transaction in interstate commerce in the 
                commodity; or
                  (C) deliver any such commodity sold, shipped, 
                or received in interstate commerce for the 
                execution of the transaction.
          (2) Transaction.--A transaction referred to in 
        paragraph (1) is a transaction that--
                  (A)(i) is, is of the character of, or is 
                commonly known to the trade as, a ``wash sale'' 
                or ``accommodation trade''; or
                  (ii) is a fictitious sale; or
                  (B) is used to cause any price to be 
                reported, registered, or recorded that is not a 
                true and bona fide price.

           *       *       *       *       *       *       *

  (g) The Commission shall adopt rules requiring that a 
contemporaneous written record be made, as practicable, of all 
orders for execution on the floor or subject to the rules of 
each contract market or derivatives transaction execution 
facility placed by a member of the contract market who is 
present on the floor at the time such order is placed.
    Sec. 4d. It shall be unlawful for any person to engage as 
futures commission merchant or introducing broker in soliciting 
orders or accepting orders for the purchase or sale of any 
commodity for future delivery, or involving any contracts of 
sale of any commodity for future delivery, on or subject to the 
rules of any contract market or derivatives transaction 
execution facility unless--
          (1) such person shall have registered, under this 
        Act, with the Commission as such futures commission 
        merchant or introducing broker and such registration 
        shall not have expired nor been suspended nor revoked; 
        and
          (2) such person shall, if a futures commission 
        merchant, whether a member or nonmember of a contract 
        market or derivatives transaction execution facility, 
        treat and deal with all money, securities, and property 
        received by such person to margin, guarantee, or secure 
        the trades or contracts of any customer of such person, 
        or accruing to such customer as the result of such 
        trades or contracts, as belonging to such customer. 
        Such money, securities, and property shall be 
        separately accounted for and shall not be commingled 
        with the funds of such commission merchant or be used 
        to margin or guarantee the trades or contracts, or to 
        secure or extend the credit, of any customer or person 
        other than the one for whom the same are held: 
        Provided, however, That such money, securities, and 
        property of the customers of such futures commission 
        merchant may, for convenience, be commingled and 
        deposited in the same account or accounts with any bank 
        or trust company or with the clearing house 
        organization of such contract market or derivatives 
        transaction execution facility, and that such share 
        thereof as in the normal course of business shall be 
        necessary to margin, guarantee, secure, transfer, 
        adjust, or settle the contracts or trades of such 
        customers, or resulting market positions, with the 
        clearing-house organization of such contract market or 
        derivatives transaction execution facility or with any 
        member of such contract market or derivatives 
        transaction execution facility, may be withdrawn and 
        applied to such purposes, including the payment of 
        commissions, brokerage, interest, taxes, storage, and 
        other charges, lawfully accruing in connection with 
        such contracts and trades: Provided further, That in 
        accordance with such terms and conditions as the 
        Commission may prescribe by rule, regulation, or order, 
        such money, securities, and property of the customers 
        of such futures commission merchant may be commingled 
        and deposited as provided in this section with any 
        other money, securities, and property received by such 
        futures commission merchant and required by the 
        Commission to be separately accounted for and treated 
        and dealt with as belonging to the customers of such 
        futures commission merchant: Provided further, That 
        such money may be invested in obligations of the United 
        States, in general obligations of any State or of any 
        political subdivision thereof, and in obligations fully 
        guaranteed as to principal and interest by the United 
        States, such investments to be made in accordance with 
        such rules and regulations and subject to such 
        conditions as the Commission may prescribe.
    It shall be unlawful for any person, including but not 
limited to any clearing agency of a contract market or 
derivatives transaction execution facility and any depository, 
that has received any money, securities, or property for 
deposit in a separate account as provided in paragraph (2) of 
this section, to hold, dispose of, or use any such money, 
securities, or property as belonging to the depositing futures 
commission merchant or any person other than the customers of 
such futures commission merchant.
    Sec. 4e. It shall be unlawful for any person to act as 
floor trader in executing purchases and sales, or as floor 
broker in executing any orders for the purchase or sale, of any 
commodity for future delivery, or involving any contracts of 
sale of any commodity for future delivery, on or subject to the 
rules of any contract market or derivatives transaction 
execution facility unless such person shall have registered, 
under this Act, with the Commission as such floor trader or 
floor broker and such registration shall not have expired nor 
been suspended nor revoked.
    Sec. 4f. (a)  * * *
    (b) Notwithstanding any other provisions of this Act, no 
person desiring to register as futures commission merchant or 
as introducing broker shall be so registered unless he meets 
such minimum financial requirements as the Commission may by 
regulation prescribe as necessary to insure his meeting his 
obligations as a registrant, and each person so registered 
shall at all times continue to meet such prescribed minimum 
financial requirements: Provided, That such minimum financial 
requirements will be considered met if the applicant for 
registration or registrant is a member of a contract market or 
derivatives transaction execution facility and conforms to 
minimum financial standards and related reporting requirements 
set by such contract market  in its bylaws, rules, regulations, 
or resolutions and approved by the Commission as adequate to 
effectuate the purposes of this subsection.
  (c)(1) As used in this subsection:
          (i) * * *

           *       *       *       *       *       *       *

  (3)(A) * * *
  (B) The Commission, in requiring reports pursuant to this 
paragraph, shall specify the information required, the period 
for which it is required, the time and date on which the 
information must be furnished, and whether the information is 
to be furnished directly to the Commission or to a contract 
market or derivatives transaction execution facility or other 
self-regulatory organization with primary responsibility for 
examining the registered futures commission merchant's 
financial and operational condition.

           *       *       *       *       *       *       *

    Sec. 4g. (a) * * *
    (b) Every [clearinghouse and contract market] registered 
entity shall maintain daily trading records. The daily trading 
records shall include such information as the Commission shall 
prescribe by rule.

           *       *       *       *       *       *       *

    (f) Nothing contained in this section shall be construed to 
prohibit the Commission from making separate determinations for 
different [clearinghouses, contract markets, and exchanges] 
registered entities when such determinations are warranted in 
the judgment of the Commission.
    Sec. 4h. It shall be unlawful for any person falsely to 
represent such person to be a member of a [contract market] 
registered entity or the representative or agent of such 
member, or to be a registrant under this Act or the 
representative or agent of any registrant, in soliciting or 
handling any order or contract for the purchase or sale of any 
commodity in interstate commerce or for future delivery, or 
falsely to represent in connection with the handling of any 
such order or contract that the same is to be or has been 
executed on, or by or through a member of, any [contract 
market] registered entity.
    Sec. 4i. It shall be unlawful for any person to make any 
contract for the purchase or sale of any commodity for future 
delivery on or subject to the rules of any contract market or 
derivatives transaction execution facility--
          (1) * * *

           *       *       *       *       *       *       *

    [Sec. 4j. (a)(1) The Commission shall issue regulations to 
prohibit the privilege of dual trading on each contract market 
which has not been exempted from such regulations under 
paragraph (3). The regulations issued by the Commission under 
this paragraph--
          [(A) shall provide that the prohibition of dual 
        trading thereunder shall take effect not less than 
        thirty days after the issuance of the regulations;
          [(B) shall provide for exceptions, as the Commission 
        determines necessary and appropriate, to ensure 
        fairness and orderly trading in affected contract 
        markets, including--
                  [(i) transition measures and a reasonable 
                phase-in period,
                  [(ii) exceptions for spread transactions and 
                the correction of trading errors,
                  [(iii) allowance for a customer to designate 
                in writing not less than once annually a named 
                floor broker to execute orders for such 
                customer, notwithstanding the regulations to 
                prohibit the privilege of dual trading required 
                under this paragraph, and
                  [(iv) other measures reasonably designed to 
                accommodate unique or special characteristics 
                of individual boards of trade or contract 
                markets, to address emergency or unusual market 
                conditions, or otherwise to further the public 
                interest;
          [(C) shall establish procedures for the application 
        for and issuance of exemptions under paragraph (3) 
        which, among other things, shall specify the relevant 
        data required to be submitted by the board of trade 
        with each application;
          [(D) shall specify the methodology by which it shall 
        determine the average daily trading volume on a 
        contract market for purposes of paragraph (4) based on 
        a moving daily average of either six or twelve months; 
        and
          [(E) shall establish an expeditious procedure to 
        revoke an exemption granted under paragraph (3) 
        providing sufficient notice, opportunity for hearing, 
        and findings to assure fundamental fairness.
  [(2) As used in this section, the term ``dual trading'' means 
the execution of customer orders by a floor broker during any 
trading session in which the floor broker executes any trade in 
the same contract market for--
          [(A) the account of such floor broker;
          [(B) an account for which such floor broker has 
        trading discretion; or
          [(C) an account controlled by a person with whom such 
        floor broker is subject to trading restrictions under 
        section 4j(d).
  [(3) The Commission shall exempt a contract market from the 
regulations issued under paragraph (1), either unconditionally 
or on stated conditions (including stated periods of time) 
relevant to the attainment or maintenance of compliance with 
the standards in subparagraphs (A) and (B), upon finding that--
          [(A) the trade monitoring system in place at the 
        contract market satisfies the requirements of section 
        5a(b) with regard to violations attributable to dual 
        trading at such contract market; or
          [(B)(i) there is a substantial likelihood that a dual 
        trading suspension would harm the public interest in 
        hedging or price basing at such contract market, and
          [(ii) other corrective actions, such as those 
        described in section 8e, are sufficient and appropriate 
        to bring the contract market into compliance with the 
        standard in subparagraph (A).
  [(4)(A) The regulations issued by the Commission under 
paragraph (1) shall not apply to any contract market in which 
the Commission determines that the average daily trading volume 
is less than the threshold trading level established for the 
contract market under this paragraph.
  [(B) The threshold trading level shall be set initially at 
eight thousand contracts.
  [(C) The Commission may, by rule or order--
          [(i) increase, or
          [(ii) at any time following the date three years 
        after the date of enactment of this paragraph, 
        decrease,
the threshold trading level for specific contract markets after 
taking into consideration the actual or potential effects of a 
dual trading ban on the public interest in hedging or price 
basing at the affected contract market.
  [(D) The Commission shall provide the affected contract 
market with adequate notice of any such increase or decrease.
  [(5) Before the Commission denies an application for an 
exemption under paragraph (3) or exempts a contract market 
subject to conditions, it shall--
          [(A) provide the affected board of trade with notice 
        of the reason or reasons that the application was not 
        approved as submitted, including--
                  [(i) any reason the Commission has to believe 
                that the trade monitoring system in place at 
                the contract market does not satisfy the 
                requirements of paragraph (3)(A) and the basis 
                for such reason;
                  [(ii) any corrective action or actions, such 
                as those described in section 8e, that the 
                Commission believes the affected contract 
                market must take to satisfy the requirements of 
                paragraph (3)(A), and an acceptable timetable 
                for such corrective action; and
                  [(iii) any conditions or limitations that the 
                Commission proposes to attach to the exemption 
                under paragraph (3);
          [(B) provide the affected board of trade with an 
        opportunity for a hearing through submission of written 
        data, views, or arguments and, under terms set by the 
        Commission at the request of the board of trade, 
        through an oral presentation of views and comments to 
        the Commission, in order to make thedemonstration 
required under paragraph (3) or otherwise to petition the Commission 
with respect to its application; and
          [(C) make findings, based on the information, views, 
        and arguments placed before it in connection with the 
        application, as to whether--
                  [(i) the standard in either paragraph (3)(A) 
                or (3)(B) applies, and
                  [(ii) any conditions or limitations which the 
                Commission proposes to attach under paragraph 
                (3) are appropriate in light of the purposes of 
                this subsection.
The Commission shall publish in the Federal Register notice of 
any exemptive petitions filed under paragraph (3) and any 
proposed or final actions the Commission may take on such 
petitions. Unless the Commission determines that more immediate 
action is appropriate in the public interest, any Commission 
order denying an application or exempting a contract market 
conditionally shall not take effect for at least twenty days 
following the issuance of the order.
  [(6) Violation of an order issued under this subsection shall 
be considered a violation of an order of the Commission for 
purposes of--
          [(i) establishing liability and assessing penalties 
        against a contract market or any director, officer, 
        agent, or employee thereof under section 6b or 6c; or
          [(ii) initiating proceedings under section 5b or 
        6(a).
  [(7) Any board of trade which has applied to the Commission 
to exempt a contract market from the regulations issued under 
paragraph (1) may obtain judicial review of any final action of 
the Commission to deny such application, to issue an exemption 
subject to conditions, or to revoke an exemption, only in the 
United States Court of Appeals for the circuit in which the 
party seeking review resides or has its principal place of 
business, or in the United States Court of Appeals for the 
District of Columbia Circuit, under the standards applicable to 
rulemaking proceedings under section 553 of title 5, United 
States Code.
  [(8)(A) The Commission shall issue the regulations required 
under paragraph (1) not later than two hundred and seventy days 
after the enactment of this section. If, prior to the effective 
date of the prohibition on dual trading under such regulations, 
a board of trade submits to the Commission an application for 
an exemption for a contract market under paragraph (3), the 
Commission shall not apply the prohibition against dual trading 
under paragraph (1) to the contract market until the Commission 
has approved or denied the application.
  [(B) The Commission shall approve or deny any application for 
an exemption under paragraph (3) within seventy-five days after 
receipt of the application, or as soon as practicable.
  [(b) If, in addition to the regulations issued pursuant to 
subsection (a), the Commission has reason to believe that dual 
trading-related or facilitated abuses are not being or cannot 
be effectively addressed by subsection (a), the Commission 
shall make a determination, after notice and opportunity for 
hearing, whether or not a floor broker may trade for his own 
account or any account in which such broker has trading 
discretion, and also execute a customer's order for future 
delivery and, if the Commission determines that such trades and 
such executions shall be permitted, the Commission shall 
further determine the terms, conditions, and circumstances 
under which such trades and such executions shall be conducted: 
Provided, That any such determination shall, at a minimum, take 
into account the effect upon the liquidity of trading of each 
market: And provided further, That nothing herein shall be 
construed to prohibit the Commission from making separate 
determinations for different contract markets when such are 
warranted in the judgment of the Commission, or to prohibit 
contract markets from setting terms and conditions more 
restrictive than those set by the Commission.
    [(c) The Commission shall within nine months after the 
effective date of the Commodity Futures Trading Commission Act 
of 1974, and subsequently when it determines that changes are 
required, make a determination, after notice and opportunity 
for hearing, whether or not a futures commission merchant may 
trade for its own account or any proprietary account, as 
defined by the Commission, and if the Commission determines 
that such trades shall be permitted, the Commission shall 
further determine the terms, conditions, and circumstances 
under which such trades shall be conducted: Provided, That any 
such determination, at a minimum, shall take into account the 
effect upon the liquidity of trading of each market: And 
provided further, That nothing herein shall be construed to 
prohibit the Commission from making separate determinations for 
different contract markets when such are warranted in the 
judgment of the Commission, or to prohibit contract markets 
from setting terms and conditions more restrictive than those 
set by the Commission.
  [(d)(1) Except as provided in paragraph (2), a floor broker 
may not execute an order of a customer if such floor broker 
knows the opposite party to the transaction to be a floor 
broker or floor trader with whom such trader or broker has a 
relationship involving trading on such contract market as--
          [(A) a partner in a partnership;
          [(B) an employer or employee; or
          [(C) Such other affiliation as the Commission may 
        specify by rule.
  [(2) Paragraph (1) shall not apply--
          [(A) if the Commission has adopted rules that the 
        Commission certifies to Congress require procedures and 
        standards designed to prevent violations of this Act 
        attributable to the trading described in paragraph (1); 
        or
          [(B) to any contract market that has implemented 
        rules designed to prevent violations of this Act 
        attributable to the trading described in paragraph (1), 
        except that, if the Commission determines, by rule or 
        order, that such rules are not adequate to prevent such 
        violations, paragraph (1) shall become effective with 
        respect to such contract market after a reasonable 
        period determined by the Commission.]
    Sec. [4k.] 4j. (1) It shall be unlawful for any person to 
be associated with a futures commission merchant as a partner, 
officer, or employee, or to be associated with an introducing 
broker as a partner, officer, employee, or agent (or any person 
occupying a similar status or performing similar functions), in 
any capacity that involves (i) the solicitation or acceptance 
of customers' orders (other than in a clerical capacity) or 
(ii) the supervision of any person or persons so engaged, 
unless such person is registered with the Commission under this 
Act as an associated person of such futures commission merchant 
or of such introducing broker and such registration shall not 
have expired, been suspended (and the period of suspension has 
not expired), or been revoked. It shall be unlawful for a 
futures commission merchant or introducing broker to permit 
such a person to become or remain associated with the futures 
commission merchant or introducing broker in any such capacity 
if such futures commission merchant or introducing broker knew 
or should have known that such person was not so registered or 
that such registration had expired, been suspended (and the 
period of suspension has not expired), or been revoked. Any 
individual who is registered as a floor broker, futures 
commission merchant, or introducing broker (and such 
registration is not suspended or revoked) need not also 
register under this subsection.
    (2) It shall be unlawful for any person to be associated 
with a commodity pool operator as a partner, officer, employee, 
consultant, or agent (or any person occupying a similar status 
or performing similar functions), in any capacity that involves 
(i) the solicitation of funds, securities, or property for a 
participation in a commodity pool or (ii) the supervision of 
any person or persons so engaged, unless such person is 
registered with the Commission under this Act as an associated 
person of such commodity pool operator and such registration 
shall not have expired, been suspended (and the period of 
suspension has not expired), or been revoked. It shall be 
unlawful for a commodity pool operator to permit such a person 
to become or remain associated with the commodity pool operator 
in any such capacity if the commodity pool operator knew or 
should have known that such person was not so registered or 
that such registration had expired, been suspended (and the 
period of suspension has not expired), or been revoked. Any 
individual who is registered as a floor broker, futures 
commission merchant, introducing broker, commodity pool 
operator, or as an associated person of another category of 
registrant under this section (and such registration is not 
suspended or revoked) need not also register under this 
subsection. The Commission may exempt any person or class of 
persons from having to register under this subsection by rule, 
regulation, or order.
    (3) It shall be unlawful for any person to be associated 
with a commodity trading advisor as a partner, officer, 
employee, consultant, or agent (or any person occupying a 
similar status or performing similar functions), in any 
capacity which involves (i) the solicitation of a client's or 
prospective client's discretionary account or (ii) the 
supervision of any person or persons so engaged, unless such 
person is registered with the Commission under this Act as an 
associated person of such commodity trading advisor and such 
registration shall not have expired, been suspended (and the 
period of suspension has not expired), or been revoked. It 
shall be unlawful for a commodity trading advisor to permit 
such a person to become or remain associated with the commodity 
trading advisor in any such capacity if the commodity trading 
advisor knew or shouldhave known that such person was not so 
registered or that such registration had expired, been suspended (and 
the period of suspension has not expired), or been revoked. Any 
individual who is registered as a floor broker, futures commission 
merchant, introducing broker, commodity trading advisor, or as an 
associated person of another category of registrant under this section 
(and such registration is not suspended or revoked) need not also 
register under this subsection. The Commission may exempt any person or 
class of persons from having to register under this subsection by rule, 
regulation, or order.
    (4) Any person desiring to be registered as an associated 
person of a futures commission merchant, of an introducing 
broker, of a commodity pool operator, or of a commodity trading 
advisor shall make application to the Commission in the form 
and manner prescribed by the Commission, giving such 
information and facts as the Commission may deem necessary 
concerning the applicant. Such person, when registered 
hereunder, shall likewise continue to report and furnish to the 
Commission such information as the Commission may require. Such 
registration shall expire at such time as the Commission may by 
rule, regulation, or order prescribe.
    (5) It shall be unlawful for any registrant to permit a 
person to become or remain an associated person of such 
registrant, if the registrant knew or should have known of 
facts regarding such associated person that are set forth as 
statutory disqualifications in section 8a(2) of this Act, 
unless such registrant has notified the Commission of such 
facts and the Commission has determined that such person should 
be registered or temporarily licensed.
    Sec. [4l.] 4k. It is hereby found that the activities of 
commodity trading advisors and commodity pool operators are 
affected with a national public interest in that, among other 
things--
          (1) their advice, counsel, publications, writings, 
        analyses, and reports are furnished and distributed, 
        and their contracts, solicitations, subscriptions, 
        agreements, and other arrangements with clients take 
        place and are negotiated and performed by the use of 
        the mails and other means and instrumentalities of 
        interstate commerce;
          (2) their advice, counsel, publications, writings, 
        analyses, and reports customarily relate to and their 
        operations are directed toward and cause the purchase 
        and sale of commodities for future delivery on or 
        subject to the rules of contract markets or derivatives 
        transaction execution facilities; and
          (3) the foregoing transactions occur in such volume 
        as to affect substantially transactions on contract 
        markets or derivatives transaction execution 
        facilities.
    Sec. [4m.] 4l. (1) It shall be unlawful for any commodity 
trading advisor or commodity pool operator, unless registered 
under this Act, to make use of the mails or any means or 
instrumentality of interstate commerce in connection with his 
business as such commodity trading advisor or commodity pool 
operator: Provided, That the provisions of this section shall 
not apply to any commodity trading advisor who, during the 
course of the preceding twelve months, has not furnished 
commodity trading advice to more than fifteen persons and who 
does not hold himself out generally to the public as a 
commodity trading advisor. The provisions of this section shall 
not apply to any commodity trading advisor who is a (1) dealer, 
processor, broker, or seller in cash market transactions of any 
commodity specifically set forth in section 2(a) of this Act 
prior to the enactment of the Commodity Futures Trading 
Commission Act of 1974 (or products thereof) or (2) nonprofit, 
voluntary membership, general farm organization, who provides 
advice on the sale or purchase of any commodity specifically 
set forth in section 2(a) of this Act prior to the enactment of 
the Commodity Futures Trading Commission Act of 1974; if the 
advice by the person described in clause (1) or (2) of this 
sentence as a commodity trading advisor is solely incidental to 
the conduct of that person's business: Provided, That such 
person shall be subject to proceedings under section 14 of this 
Act.
    (2) Nothing in this Act shall relieve any person of any 
obligation or duty, or affect the availability of any right or 
remedy available to the Securities and Exchange Commission or 
any private party arising under the Securities Act of 1933 or 
the Securities Exchange Act of 1934 governing the issuance, 
offer, purchase, or sale of securities of a commodity pool, or 
of persons engaged in transactions with respect to such 
securities, or reporting by a commodity pool.
    Sec. [4n.] 4m. (1) Any commodity trading advisor or 
commodity pool operator, or any person who contemplates 
becoming a commodity trading advisor or commodity pool 
operator, may register under this Act by filing an application 
with the Commission. Such application shall contain such 
information, in such form and detail, as the Commission may, by 
rules and regulations, prescribe as necessary or appropriate in 
the public interest, including the following:
          (A) the name and form of organization, including 
        capital structure, under which the applicant engages or 
        intends to engage in business; the name of the State 
        under the laws of which he is organized; the location 
        of his principal business office and branch offices, if 
        any; the names and addresses of all partners, officers, 
        directors, and persons performing similar functions or, 
        if the applicant be an individual, of such individual; 
        and the number of employees;
          (B) the education, the business affiliations for the 
        past ten years, and the present business affiliations 
        of the applicant and of his partners, officers, 
        directors, and persons performing similar functions and 
        of any controlling person thereof;
          (C) the nature of the business of the applicant, 
        including the manner of giving advice and rendering of 
        analyses or reports;
          (D) the nature and scope of the authority of the 
        applicant with respect to clients' funds and accounts;
          (E) the basis upon which the applicant is or will be 
        compensated; and
          (F) such other information as the Commission may 
        require to determine whether the applicant is qualified 
        for registration.
    (2) Each registration under this section shall expire on 
the 30th day of June of each year, or at such other time, not 
less than one year from the effective date thereof, as the 
Commission may by rule, regulation or order prescribe, and 
shall be renewed upon application therefor subject to the same 
requirements as in the case of an original application.
    (3)(A) Every commodity trading advisor and commodity pool 
operator registered under this Act shall maintain books and 
records and file such reports in such form and manner as may be 
prescribed by the Commission. All such books and records shall 
be kept for a period of at least three years, or longer if the 
Commission so directs, and shall be open to inspection by any 
representative of the Commission or the Department of Justice. 
Upon the request of the Commission, a registered commodity 
trading advisor or commodity pool operator shall furnish the 
name and address of each client, subscriber, or participant, 
and submit samples or copies of all reports, letters, 
circulars, memorandums, publications, writings, or other 
literature or advice distributed to clients, subscribers, or 
participants, or prospective clients, subscribers, or 
participants.
    (B) Unless otherwise authorized by the Commission by rule 
or regulation, all commodity trading advisors and commodity 
pool operators shall make a full and complete disclosure to 
their subscribers, clients, or participants of all futures 
market positions taken or held by the individual principals of 
their organization.
    (4) Every commodity pool operator shall regularly furnish 
statements of account to each participant in his operations. 
Such statements shall be in such form and manner as may be 
prescribed by the Commission and shall include complete 
information as to the current status of all trading accounts in 
which such participant has an interest.
    Sec. [4o.] 4n. (1) It shall be unlawful for a commodity 
trading advisor, associated person of a commodity trading 
advisor, commodity pool operator, or associated person of a 
commodity pool operator by use of the mails or any means or 
instrumentality of interstate commerce, directly or 
indirectly--
          (A) to employ any device, scheme, or artifice to 
        defraud any client or participant or prospective client 
        or participant; or
          (B) to engage in any transaction, practice, or course 
        of business which operates as a fraud or deceit upon 
        any client or participant or prospective client or 
        participant.
    (2) It shall be unlawful for any commodity trading advisor, 
associated person of a commodity trading advisor, commodity 
pool operator, or associated person of a commodity pool 
operator registered under this Act to represent or imply in any 
manner whatsoever that such person has been sponsored, 
recommended, or approved, or that such person's abilities or 
qualifications have in any respect been passed upon, by the 
United States or any agency or officer thereof. This section 
shall not be construed to prohibit a statement that a person is 
registered under this Act as a commodity trading advisor, 
associated person of a commodity trading advisor, commodity 
pool operator, or associated person of a commodity pool 
operator, if such statement is true in fact and if the effect 
of such registration is not misrepresented.
    Sec. [4p.] 4o. (a) The Commission may specify by rules and 
regulations appropriate standards with respect to training, 
experience, and such other qualifications as the Commission 
finds necessary or desirable to insure the fitness of persons 
required to beregistered with the Commission. In connection 
therewith, the Commission may prescribe by rules and regulations the 
adoption of written proficiency examinations to be given to applicants 
for registration and the establishment of reasonable fees to be charged 
to such applicants to cover the administration of such examinations. 
The Commission may further prescribe by rules and regulations that, in 
lieu of examinations administered by the Commission, futures 
associations registered under section 17 of this [Act or contract 
markets] Act, contract markets, or derivatives transaction execution 
facilities may adopt written proficiency examinations to be given to 
applicants for registration and charge reasonable fees to such 
applicants to cover the administration of such examinations. 
Notwithstanding any other provision of this section, the Commission may 
specify by rules and regulations such terms and conditions as it deems 
appropriate to protect the public interest wherein exception to any 
written proficiency examination shall be made with respect to 
individuals who have demonstrated, through training and experience, the 
degree of proficiency and skill necessary to protect the interests of 
customers, clients, pool participants, or other members of the public 
with whom such individuals deal.
  (b) The Commission shall issue regulations to require new 
registrants, within six months after receiving such 
registration, to attend a training session, and all other 
registrants to attend periodic training sessions, to ensure 
that registrants understand their responsibilities to the 
public under this Act, including responsibilities to observe 
just and equitable principles of trade, any rule or regulation 
of the Commission, any rule of any appropriate contract market, 
derivatives transaction execution facility, registered futures 
association, or other self-regulatory organization, or any 
other applicable Federal or state law, rule or regulation.

SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
                    HEDGING BY AGRICULTURAL PRODUCERS.

  (a) Authority.--The Commission shall consider issuing rules 
or orders which--
          (1) prescribe procedures under which each contract 
        market is to provide for orderly delivery, including 
        temporary storage costs, of any agricultural commodity 
        enumerated in section 1a(3) which is the subject of a 
        contract for purchase or sale for future delivery;
          (2) increase the ease with which domestic 
        agricultural producers may participate in contract 
        markets, including by addressing cost and margin 
        requirements, so as to better enable such producers to 
        hedge price risk associated with their production;
          (3) provide flexibility in the minimum quantities of 
        such agricultural commodities that may be the subject 
        of a contract for purchase or sale for future delivery 
        that is traded on a contract market, to better allow 
        domestic agricultural producers to hedge such price 
        risk; and
          (4) encourage exchanges to provide information and 
        otherwise facilitate the participation of domestic 
        agricultural producers in contract markets.
  (b) Report.--Within 1 year after the date of enactment of 
this section, the Commission shall submit to the Committee on 
Agriculture of the House of Representatives and the Committee 
on Agriculture, Nutrition, and Forestry of the Senate a report 
on the steps it has taken to implement this section and on the 
activities of contract markets pursuant to this section.
    [Sec. 5. The Commission is hereby authorized and directed 
to designate any board of trade as a ``contract market'' when, 
and only when, such board of trade complies with and carries 
out the following conditions and requirements:
          [(1) When located at a terminal market where any cash 
        commodity of the kind specified in the contracts of 
        sale of commodities for future delivery to be executed 
        on such board is sold in sufficient volumes and under 
        such conditions as fairly to reflect the general value 
        of the commodity and the differences in value between 
        the various grades of such commodity, and where there 
        is available to such board of trade official inspection 
        service approved by the Secretary of Agriculture or the 
        Commission for the purpose: Provided, That any board of 
        trade not so located shall be designated as a 
        ``contract market'' if such board of trade provides for 
        the delivery of commodities on such contracts at a 
        delivery point or points and upon terms and conditions 
        approved by the Commission.
          [(2) When the governing board thereof provides for 
        the making and filing by the board or any member 
        thereof, as the Commission may direct, of reports in 
        accordance with the rules and regulations, and in such 
        manner and form and at such times as may be prescribed 
        by the Commission, showing the details and terms of all 
        transactions entered into by the board, or the members 
        thereof, either in cash transactions or transactions 
        for future delivery consummated on or subject to the 
        rules of a board of trade, and when such governing 
        board provides, in accordance with such rules and 
        regulations, for the keeping of a record by the board 
        or the members of the board of trade, as the Commission 
        may direct, showing the details and terms of all cash 
        and future transactions entered into by them, 
        consummated on or subject to the rules of a board of 
        trade, such record to be in permanent form, showing the 
        parties to all such transactions, including the persons 
        for whom made, any assignments or transfers thereof, 
        with the parties thereto, and the manner in which said 
        transactions are fulfilled, discharged, or terminated. 
        Such record shall be required to be kept for a period 
        of three years from the date thereof, or for a longer 
        period if the Commission shall so direct, and shall at 
        all times be open to the inspection of any 
        representative of the Commission or United States 
        Department of Justice.
          [(3) When the governing board thereof provides for 
        the prevention of dissemination by the board or any 
        member thereof, of false or misleading or knowingly 
        inaccurate reports concerning crop or market 
        information or conditions that affect or tend to affect 
        the price of any commodity in interstate commerce.
          [(4) When the governing board thereof provides for 
        the prevention of manipulation of prices and the 
        cornering of any commodity by the dealers or operators 
        upon such board.
          [(5) When the governing board thereof does not 
        exclude from membership in, and all privileges on, such 
        board of trade, any duly authorized representative of 
        any lawfully formed and conducted cooperative 
        association of producers having adequate financial 
        responsibility which is engaged in any cash commodity 
        business, if such association has complied, and agrees 
        to comply, with such terms and conditions as are or may 
        be imposed lawfully on other members of such board: 
        Provided, That no rule of a contract market shall 
        forbid or be construed to forbid the return on a 
        patronage basis by such cooperative association to its 
        bona fide members of moneys collected in excess of the 
        expense of conducting the business of such association.
          [(6) When the governing board provides for making 
        effective the final orders or decisions entered 
        pursuant to the provisions of section 6(c), and the 
        orders issued pursuant to the provisions of section 5a 
        of this Act, and for compliance in all other respects 
        with the requirements applicable to such board of trade 
        under this Act.
          [(7) When such board of trade demonstrates that 
        transactions for future delivery in the commodity for 
        which designation as a contract market is sought will 
        not be contrary to the public interest.
          [(8) When such board of trade demonstrates that every 
        contract market for which such board of trade is 
        designated complies with the requirements of section 
        5a(b).
    [Sec. 5a. (a) Each contract market shall--
          [(1) promptly furnish the Commission copies of all 
        bylaws, rules, regulations, and resolutions made or 
        issued by it or by the governing board thereof or any 
        committee, and of all changes and proposed changes 
        therein;
          [(2) keep all books, records, minutes, and journals 
        of proceedings of such contract market, and its 
        governing board, committees, subsidiaries, and 
        affiliates in a manner that will clearly describe all 
        matters discussed by such contract market, governing 
        board, committees, subsidiaries and affiliates and 
        reveal any action taken in such matters, and allow 
        inspection at all times by any authorized 
        representative of the Commission or United States 
        Department of Justice of all such books, records, 
        minutes, and journals of proceedings. Such books, 
        records, minutes, and journals of proceedings shall be 
        kept for a period of three years from the date thereof, 
        or for a longer period if the Commission shall so 
        direct;
          [(3) require the operators of warehouses in which or 
        out of which any commodity is deliverable on any 
        contract for future delivery made on or subject to the 
        rules of such contract market, to make such reports, 
        keep such records, and permit such warehouse visitation 
        as the Commission may prescribe. Such books and records 
        shall be required to be kept for a period of three 
        years from the date thereof, or for a longer period if 
        the Commission shall so direct, and such books, 
        records, and warehouses shall be open at all times to 
        inspection by any representative of the Commission or 
        United States Department of Justice;
          [(4) when so directed by order of the Commission, 
        provide for a period, after trading in contracts of 
        sale of any commodity for future delivery in a delivery 
        month has ceased, during which contracts of sale of 
        such commodity for future delivery in such month may be 
        satisfied by the delivery of the actual cash commodity. 
        Whenever, after due notice and opportunity for hearing, 
        the Commission finds that provision for such a period 
        of delivery for any one or more commodities or markets 
        would prevent or tend to prevent ``squeezes'' and 
        market congestion endangering price stability, it 
        shall, by order, require such period of delivery (which 
        shall be not less than three nor more than ten business 
        days) applicable to such commodities and markets as it 
        finds will prevent or tend to prevent such ``squeezes'' 
        and market congestion: Provided, however, That such 
        order shall not apply to then existing contracts;
          [(5) require the party making delivery of any 
        commodity on any contract of sale of such commodity for 
        future delivery to furnish the party obligated under 
        the contract to accept delivery, written notice of the 
        date of delivery at least one business day prior to 
        such date of delivery. Whenever, after due notice and 
        opportunity for hearing, the Commission finds that the 
        giving of longer notice of delivery is necessary to 
        prevent or diminish unfair practices in trading in any 
        one or more commodities or markets, it shall by order 
        require such longer notice of delivery (which shall be 
        not more than ten business days) applicable to such 
        commodities and markets as it finds will prevent or 
        diminish such unfair practices: Provided, however, That 
        such order shall not apply to then existing contracts;
          [(6) require that all contracts of sale of any 
        commodity for future delivery on such contract market 
        shall provide for the delivery thereunder of 
        commodities of grades conforming to United States 
        standards, if such standards shall have been officially 
        promulgated and adopted by the Commission;
          [(7) require that receipts issued under the United 
        States Warehouse Act (U.S.C., 1934 ed., title 7, secs. 
        241-273) shall be accepted in satisfaction of any 
        futures contract, made on or subject to the rules of 
        such contract market, without discrimination and 
        notwithstanding that the warehouseman issuing such 
        receipts is not also licensed as a warehouseman under 
        the laws of any State or enjoys other or different 
        privileges than under State law: Provided, however, 
        That such receipts shall be for the kind, quality, and 
        quantity of commodity specified in such contract and 
        that the warehouse in which the commodity is stored 
        meets such reasonable requirements as may be imposed by 
        such contract market on other warehouses as to 
        location, accessibility, and suitability for 
        warehousing and delivery purposes: And provided 
        further, That this subsection shall apply only to 
        futures contracts for those commodities which may be 
        delivered from a warehouse subject to the United States 
        Warehouse Act;
          [(8) enforce all bylaws, rules, regulations, and 
        resolutions, made or issued by it or by the governing 
        board thereof or any committee, that (i) have been 
        approved by the Commission pursuant to paragraph (12) 
        of this section, (ii) have become effective under such 
        paragraph, or (iii) must be enforced pursuant to any 
        Commission rule, regulation, or order; and revoke and 
        not enforce any bylaw, rule, regulation, or resolution, 
        made, issued, or proposed by it or by the governing 
        board thereof or any committee, that has been 
        disapproved by the Commission;
          [(9) enforce all bylaws, rules, regulations, and 
        resolutions made or issued by it or by the governing 
        board thereof or by any committee, which provide 
        minimum financial standards and related reporting 
        requirements for futures commission merchants who are 
        members of such contract market, and which have been 
        approved by the Commission;
          [(10) permit the delivery of any commodity, on 
        contracts of sale thereof for future delivery, of such 
        grade or grades, at such point or points and at such 
        quality and locational price differentials as will tend 
        to prevent or diminish price manipulation, market 
        congestion, or the abnormal movement of such commodity 
        in interstate commerce. If the Commission after 
        investigation finds that the rules and regulations 
        adopted by a contract market permitting delivery of any 
        commodity on contracts of sale thereof for future 
        delivery, do not accomplish the objectives of this 
        subsection, then the Commission shall notify the 
        contract market of its finding and afford the contract 
        market an opportunity to make appropriate changes in 
        such rules and regulations. If the contract market 
        within seventy-five days of such notification fails to 
        make the changes which in the opinion of the Commission 
        are necessary to accomplish the objectives of this 
        subsection, then the Commission after granting the 
        contract market an opportunity to be heard, may change 
        or supplement such rules and regulations of the 
        contract market to achieve the above objectives: 
        Provided, That any order issued under this paragraph 
        shall not apply to contracts of sale for future 
        delivery in any months in which contracts are currently 
        outstanding and open: And provided further, That no 
        requirement for an additional delivery point or points 
        shall be promulgated following hearings until the 
        contract market affected has had notice and opportunity 
        to file exceptions to the proposed order determining 
        the location and number of such delivery point or 
        points;
          [(11) provide a fair and equitable procedure through 
        arbitration or otherwise (such as by delegation to a 
        registered futures association having rules providing 
        for such procedures) for the settlement of customers' 
        claims and grievances against any member or employee 
        thereof: Provided, That (A) the use of such procedure 
        by a customer shall be voluntary, (B) the term 
        ``customer'' as used in this paragraph shall not 
        include another member of the contract market, and (C) 
        in the case of a claim arising from a violation in the 
        execution of an order on the floor of a contract 
        market, such procedure shall provide, to the extent 
        appropriate--
                  [(i) for payment of actual damages 
                proximately caused by such violation. If an 
                award of actual damages is made against a floor 
                broker in connection with the execution of a 
                customer order, and the futures commission 
                merchantwhich selected the floor broker for the 
execution of the customer order is held to be responsible under section 
2(a)(1) for the floor broker's violation, such futures commission 
merchant may be required to satisfy such award; and
                  [(ii) where the violation is willful and 
                intentional, for payment to the customer of 
                punitive or exemplary damages, in addition to 
                losses proximately caused by the violation, in 
                an amount equal to no more than two times the 
                amount of such losses. If punitive or exemplary 
                damages are awarded against a floor broker in 
                connection with the execution of a customer 
                order, and the futures commission merchant 
                which selected the floor broker for the 
                execution of such order is held to be 
                responsible under section 2(a)(1) for the floor 
                broker's violation, such futures commission 
                merchant may be required to satisfy the award 
                of punitive or exemplary damages if the floor 
                broker fails to do so, except that such 
                requirement shall apply to the futures 
                commission merchant only if it willfully and 
                intentionally selected the floor broker with 
                the intent to assist or facilitate the floor 
                broker's violation;
          [(12)(A) except as otherwise provided in this 
        paragraph, submit to the Commission for its prior 
        approval all bylaws, rules, regulations, and 
        resolutions (``rules'') made or issued by such contract 
        market, or by the governing board thereof or any 
        committee thereof, that relate to terms and conditions 
        in contracts of sale to be executed on or subject to 
        the rules of such contract market, as such terms and 
        conditions are defined by the Commission by rule or 
        regulation, except those rules relating to the setting 
        of levels of margin. Each contract market shall submit 
        to the Commission all other rules (except those 
        relating to the setting of levels of margin and except 
        those that the Commission may specify by regulation) 
        and may make such rules effective ten days after 
        receipt of such submission by the Commission unless, 
        within the ten-day period, the contract market requests 
        review and approval thereof by the Commission or the 
        Commission notifies such contract market in writing of 
        its determination to review such rules for approval. 
        The determination to review such rules for approval 
        shall not be delegable to any employee of the 
        Commission. At least thirty days before approving any 
        rules of major economic significance, as determined by 
        the Commission, the Commission shall publish a notice 
        of such rules in the Federal Register. The Commission 
        shall give interested persons an opportunity to 
        participate in the approval process through the 
        submission of written data, views, or arguments. The 
        determination by the Commission whether any such rules 
        are of major economic significance shall be final and 
        not subject to judicial review. The Commission shall 
        approve such rules if such rules are determined by the 
        Commission not to be in violation of this Act or the 
        regulations of the Commission and the Commission shall 
        disapprove, after appropriate notice and opportunity 
        for hearing, any such rule which the Commission 
        determines at any time to be in violation of the 
        provisions of this Act or the regulations of the 
        Commission. If the Commission institutes proceedings to 
        determine whether a rule should be disapproved pursuant 
        to this paragraph, it shall provide the contract market 
        with written notice of the proposed grounds for 
        disapproval, including the specific sections of this 
        Act or the Commission's regulations which would be 
        violated. At the conclusion of such proceedings, the 
        Commission shall approve or disapprove such rule. Any 
        disapproval shall specify the sections of this Act or 
        the Commission's regulations which the Commission 
        determines such rule has violated or, if effective, 
        would violate. If the Commission does not approve or 
        institute disapproval proceedings with respect to any 
        rule within one hundred and eighty days after receipt 
        or within such longer period as the contract market may 
        agree to, or if the Commission does not conclude a 
        disapproval proceeding with respect to any rule within 
        one year after receipt or within such longer period as 
        the contract market may agree to, such rule may be made 
        effective by the contract market until such time as the 
        Commission disapproves such rule in accordance with 
        this paragraph.
          [(B)(i) The Commission shall issue regulations to 
        specify the terms and conditions under which, in an 
        emergency as defined by the Commission, a contract 
        market may, by a two-thirds vote of its governing 
        board, make a rule (hereinafter referred to as an 
        ``emergency rule'') effective on a temporary basis 
        without prior Commission approval, or without 
        compliance with the ten-day notice requirement under 
        subparagraph (A), or during any period of review by the 
        Commission, if the contract market makes every effort 
        practicable to notify the Commission of such emergency 
        rule, along with a complete explanation of the 
        emergency involved, prior to making the emergency rule 
        effective. If the contract market does not provide the 
        Commission with such notification and explanation 
        before making the emergency rule effective, the 
        contract market shall provide the Commission with such 
        notification and explanation at the earliest possible 
        date. The Commission may delegate the power to receive 
        such notification and explanation to such individuals 
        as the Commission determines necessary and appropriate.
          [(ii) Within ten days of the receipt from a contract 
        market of notification of such an emergency rule and an 
        explanation of the emergency involved, or as soon as 
        practicable, the Commission shall determine whether it 
        is appropriate either--
                  [(I) to permit such rule to remain in effect 
                during the pendency of the emergency, or
                  [(II) to suspend the effect of such rule 
                pending review either under the procedures of 
                subparagraph (A) or otherwise.
        The Commission shall submit a report on its 
        determination and the basis thereof with respect to 
        such emergency rule to the affected contract market, to 
        the Committee on Agriculture of the House of 
        Representatives and the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate. If the report is 
        submitted more than ten days after the Commission's 
        receipt of notification of such an emergency rule from 
        a contract market, the report shall explain why 
        submission within such ten-day period was not 
        practicable. A determination by the Commission to 
        suspend the effect of a rule under this subparagraph 
        shall be subject to judicial review on the same basis 
        as an emergency determination under section 8a(9). 
        Nothing in this paragraph shall be construed to limit 
        the authority of the Commission under section 8a(9);
          [(13) provide for disclosure to the contract market 
        and the Commission of any trade, business, or financial 
        partnership, cost-, profit-, or capital-sharing 
        agreements or other formal arrangement among or between 
        floor brokers and traders on such contract market where 
        such partnership agreement or arrangement is material 
        and known to the floor broker or floor trader;
          [(14)(A) provide for meaningful representation on the 
        governing board of the contract market's board of trade 
        of a diversity of interests, including--
                  [(i) futures commission merchants;
                  [(ii) producers of, and consumers, 
                processors, distributors, or merchandisers of, 
                principal commodities traded on the board of 
                trade;
                  [(iii) floor brokers and traders; and
                  [(iv) participants in a variety of pits or 
                principal groups of commodities traded on the 
                exchange.
          [(B) provide that no less than 20 percent of the 
        regular voting members of such board be comprised of 
        nonmembers of such contract market's board of trade 
        with--
                  [(i) expertise in futures trading, or the 
                regulation thereof, or in commodities traded 
                through contracts on the board of trade; or
                  [(ii) other eminent qualifications making 
                such person capable of participating in and 
                contributing to board deliberations.
          [(C) provide that no less than 10 percent of the 
        regular voting members of such board be comprised where 
        applicable of farmers, producers, merchants, or 
        exporters of principal commodities traded on the 
        exchange;
          [(15)(A) provide on all major disciplinary committees 
        for a diversity of membership sufficient to ensure 
        fairness and to prevent special treatment or preference 
        for any person in the conduct of disciplinary 
        proceedings and the assessment of penalties.
          [(B) Consistent with Commission rules, a major 
        disciplinary committee hearing a disciplinary matter 
        shall include--
                  [(i) a majority of qualified persons 
                representing a trading status other than that 
                of the subject of the proceeding; and
                  [(ii) where appropriate to carry out the 
                purposes of this Act, qualified persons who are 
                not members of the exchange.
          [(C) For purposes of this paragraph, a trading status 
        on a contract market may include, consistent with 
        Commission rules, such categories as--
                  [(i) floor brokers and traders;
                  [(ii) producers, consumers, processors, 
                distributors, or merchandisers of commodities;
                  [(iii) futures commission merchants; and
                  [(iv) members of the aforementioned 
                categories who participate in particular 
                contract markets or principal groups of 
                commodities on the board of trade.
          [(D) If a contract market takes final disciplinary 
        action against a member for a violation that involves 
        the execution of a customer transaction and results in 
        financial harm to such customer, the contract market 
        shall promptly inform the futures commission merchant 
        identified on the records of such contract market as 
        having cleared such transaction, and such futures 
        commission merchant shall promptly inform the person 
        identified on its records as the owner of the account 
        for which such transaction was executed, of the 
        disciplinary action and the principal facts thereof;
          [(16) provide that no member found by the Commission, 
        a contract market, a registered futures association, or 
        a court of competent jurisdiction to have committed any 
        violation of this Act or any other provision of law 
        that would reflect on the fitness of the member may 
        serve on any contract market oversight or disciplinary 
        panel for an appropriate period (as defined by 
        Commission rule); and
          [(17)(A) provide for the avoidance of conflict of 
        interest in deliberations by the governing board and 
        any disciplinary and oversight committees. In order to 
        comply with this subparagraph, each contract market 
        shall adopt rules and procedures to require, at a 
        minimum, that
                  [(i) any member of a governing board or a 
                disciplinary or other oversight committee must 
                abstain from confidential deliberations and 
                voting on any matter where the named party in 
                interest is the member, the member's employer, 
                the member's employee, or any other person that 
                has a business, employment, or family 
                relationship with the member that warrants 
                abstention by the member;
                  [(ii) any member of a governing board or a 
                disciplinary or other oversight committee must 
                abstain from voting on any significant action 
                that would not be submitted to the Commission 
                for its prior approval, if, as determined in 
                accordance with regulations promulgated by the 
                Commission, the member knowingly has a direct 
                and substantial financial interest in the 
                result of the vote, based either on positions 
                held personally or at an affiliated firm;
                  [(iii) prior to the deliberations of the 
                governing board, disciplinary board, or other 
                oversight committee, acting directly or 
                indirectly through an authorized member or 
                contract market official, the positions of the 
                members of such board or committee, and 
                positions of the firm or firms with which such 
                members are affiliated, are reviewed: Provided, 
                however, That no contract market or official, 
                employee, member, other than the member whose 
                position or positions are being reviewed, or 
                agent thereof shall be subject to liability, 
                except for liability in an action initiated by 
                the Commission, for having conducted this 
                review and for having taken or not taken 
                further action; and
                  [(iv) the board or committee shall clearly 
                reflect, in the minutes of such meeting, that 
                the review required in clause (iii) occurred 
                and any decisions by a member to abstain or by 
                the board or committee whether to direct a 
                member or members to abstain from deliberations 
                or voting on the matter before the board or 
                committee.
        Any member prohibited from voting on a rule pursuant to 
        this paragraph shall not be included in determining 
        whether there has been a two-thirds vote of members of 
        the governing board or committee as required by 
        subparagraph (12).
          [(B) For the purposes of this paragraph, the term 
        ``significant action that would not be submitted to the 
        Commission for its prior approval'' includes--
                  [(i) any nonphysical emergency rule; or
                  [(ii) any changes in margin levels designed 
                to respond to extraordinary market conditions 
                that are likely to have a substantial affect on 
                prices in any contract traded on such contract 
                market, but does not include any rule not 
                submitted for prior Commission approval because 
                such rule is unrelated to terms and conditions 
                of any contract traded on such contract market.
          [(C) Notwithstanding the provisions of subparagraph 
        (A)(ii), the Commission shall issue rules establishing 
        the conditions under which a member of a board or 
        committee who is required to abstain from voting on a 
        significant action, as provided in subparagraph 
        (A)(ii), may participate in deliberations on that 
        action prior to such vote, where the member's 
        participation is consistent with the public interest.
  [(b)(1) Each contract market shall maintain and utilize a 
system to monitor trading to detect and deter violations of the 
contract market's rules and regulations committed in the making 
of trades and the execution of customer orders on the floor or 
subject to the rules of such contract market. The system shall 
include--
          [(A) physical observation of trading areas;
          [(B) audit trail and recordkeeping systems able to 
        capture essential data on the terms, participants, and 
        sequence of transactions (including relevant data on 
        unmatched trades and out-trades);
          [(C) systems capable of reviewing, and used to 
        review, data on trades effectively on a regular basis 
        to detect violations committed in making trades and 
        executing customer orders on the floor or subject to 
        the rules of such contract market, including--
                  [(i) all types of violations attributable to 
                dual trading; and
                  [(ii) to the full extent feasible, as 
                determined by the Commission, all other types 
                of violations involving the making of trades 
                and the execution of customer orders;
          [(D) the use of information gathered through such 
        system on a consistent basis to bring appropriate 
        disciplinary actions against violators;
          [(E) the commitment of resources to such system 
        necessary for such system to be effective in detecting 
        and deterring such violations, including adequate staff 
        to develop and prosecute disciplinary actions; and
          [(F) the assessment of meaningful penalties against 
        violators and the referral of appropriate cases to the 
        Commission.
  [(2) The audit trail system of the contract market shall, 
consistent with Commission regulations, accurately record--
          [(A) the times of trades in increments of no more 
        than one minute in length; and
          [(B) the sequence of trades for each floor trader and 
        broker.
  [(3) Beginning three years after the date of enactment of 
this subsection, the audit trail system of each contract 
market, except as provided in paragraph (5) and except to the 
extent the Commission determines that circumstances beyond the 
control of the contract market prevent compliance despite the 
contract market's affirmative good faith efforts to comply, 
shall--
          [(A) for all trades, record accurately and promptly 
        the essential data on terms, participants, and times as 
        required by the Commission by rule, including the time 
        of execution of such trade, through a means that--
                  [(i) records such data in a form which cannot 
                be altered except in a manner that will leave a 
                complete and independent record of such 
                alteration;
                  [(iii) identifies such time, to the extent 
                practicable as determined by the Commission--
                  [(ii) continually provides such data to the 
                contract market;
                          [(I) independently of the person 
                        making the trade;
                          [(II) through a mechanism that 
                        records the time automatically when 
                        entered by the person making the trade; 
                        or
                          [(III) through such other means that 
                        will capture a similarly reliable time; 
                        and
                  [(iv) is adequately precise to determine, to 
                the extent practicable as determined by the 
                Commission by rule or order--
                          [(I) the sequence of all trades by 
                        each floor trader; and
                          [(II) the sequence of all trades by 
                        each floor broker; and
          [(B) to the extent practicable as determined by the 
        Commission by rule or order, for customer trades, 
        record the time that each order is received on the 
        floor of the board of trade, is received by the floor 
        broker for execution (or when such order is transmitted 
        in an extremely rapid manner to the broker), and is 
        reported from the floor of the board of trade as 
        executed, through a means that--
                  [(i) records such times in a form which 
                cannot be altered except in a manner that will 
                leave a complete and independent record of such 
                alteration;
                  [(ii) continually provides such data to the 
                contract market;
                  [(iii) identifies such time--
                          [(I) independently of the person 
                        making the trade or processing the 
                        order;
                          [(II) through a mechanism that 
                        records the time automatically when 
                        entered by the person making the trade 
                        or processing such order, as 
                        appropriate; or
                          [(III) through such other means as 
                        will capture a similarly reliable time; 
                        and
                  [(iv) is adequately precise to determine--
                          [(I) the sequence in which, for each 
                        futures commission merchant, floor 
                        broker, or member firm, as applicable, 
                        all orders are received on and reported 
                        from the floor of the contract market; 
                        and
                          [(II) the sequence in which orders 
                        are received by each floor broker for 
                        execution.
  [(4) The Commission may, by rule, establish standards under 
which the audit trail systems required under paragraph (3) 
shall record, to the extent practicable--
          [(A) the sequence of all trades made by all floor 
        traders and floor brokers; and
          [(B) the interval between the time of receipt and the 
        time of execution of each order by the floor broker 
        executing the order.
  [(5)(A) The Commission shall, by rule or order, make 
exemptions from the requirements of paragraph (3)--
          [(i) for an exchange with respect to which the 
        Commission finds that--
                  [(I) the volume of trading on such exchange 
                is relatively small and the exchange has 
                demonstrated substantial compliance with the 
                objectives of such paragraph; and
                  [(II) the trade monitoring system at such 
                exchange otherwise maintains a high level of 
                compliance with this subsection; and
          [(ii) to the extent determined appropriate by the 
        Commission, for categories of customer orders with 
        respect to which the Commission finds that such orders 
        are transmitted to and reported from the trading pit in 
        an extremely rapid manner such that substantial 
        compliance with the objectives of paragraph (3) can be 
        otherwise achieved.
  [(B) For purposes of subparagraph (A)(i)(I) the Commission 
shall find that the volume of trading at an exchange is 
relatively small if, among other things, the Commission 
determines that the average daily trading volume for each 
contract market for which the board of trade is designated is 
less than the threshold trading level established for the 
contract market under section 4j(a)(4).
  [(6) Any rule or order adopted by the Commission under 
paragraphs (4) and (5) shall become effective thirty 
legislative days or ninety calendar days, whichever is later, 
after submission of such rule or order to the Committee on 
Agriculture of the House of Representatives and the Committee 
on Agriculture, Nutrition, and Forestry of the Senate. For 
purposes of this paragraph, the term ``legislative day'' means 
any day on which either House of Congress is in session.
      [Sec. 5b. The failure or refusal of any board of trade to 
comply with any of the provisions of this Act, or any of the 
rules, regulations, or orders of the Commission or the 
commission thereunder, shall be cause for suspending for a 
period not to exceed six months or revoking the designation of 
such board of trade as a ``contract market'' in accordance with 
the procedure and subject to the judicial review provided in 
section 6(b) of this Act.]

SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

  (a) Applications.--A board of trade applying to the 
Commission for designation as a contract market shall submit an 
application to the Commission that includes any relevant 
materials and records the Commission may require consistent 
with this Act.
  (b) Criteria for Designation.--
          (1) In general.--To be designated as a contract 
        market, the board of trade shall demonstrate to the 
        Commission that the board of trade meets the criteria 
        specified in this subsection.
          (2) Prevention of market manipulation.--The board of 
        trade shall have the capacity to prevent market 
        manipulation through market surveillance, compliance, 
        and enforcement practices and procedures, including 
        methods for conducting real-time monitoring of trading 
        and comprehensive and accurate trade reconstructions.
          (3) Fair and equitable trading.--The board of trade 
        shall establish and enforce trading rules to ensure 
        fair and equitable trading through the facilities of 
        the contract market, and the capacity to detect, 
        investigate, and discipline any person that violates 
        the rules. Such rules may authorize--
                  (A) an exchange of--
                          (i) futures in connection with a cash 
                        commodity transaction;
                          (ii) futures for cash commodities;
                          (iii) transfer trades or office 
                        trades; or
                          (iv) futures for swaps; and
                  (B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm 
                the execution of a contract for the purchase or 
                sale of a commodity for future delivery if the 
                contract is reported, recorded, or cleared in 
                accordance with the rules of the contract 
                market or a derivatives clearing organization.
          (4) Trade execution facility.--The board of trade 
        shall--
                  (A) establish and enforce rules defining, or 
                specifications detailing, the manner of 
                operation of the trade execution facility 
                maintained by the board of trade, including 
                rules or specifications describing the 
                operation of any electronic matching platform; 
                and
                  (B) demonstrate that the trading facility 
                operates in accordance with the rules or 
                specifications.
          (5) Financial integrity of transactions.--The board 
        of trade shall establish and enforce rules and 
        procedures for ensuring the financial integrity of 
        transactions entered into by or through the facilities 
        of the contract market.
          (6) Disciplinary procedures.--The board of trade 
        shall establish and enforce disciplinary procedures 
        that authorize the board of trade to discipline, 
        suspend, or expel members or market participants that 
        violate the rules of the board of trade, or similar 
        methods for performing the same functions, including 
        delegation of the functions to third parties.
          (7) Public access.--The board of trade shall provide 
        the public with access to the rules, regulations, and 
        contract specifications of the board of trade.
          (8) Ability to obtain information.--The board of 
        trade shall establish and enforce rules that will allow 
        the board of trade to obtain any necessary information 
        to perform any of the functions described in this 
        subsection, including the capacity to carry out such 
        international information-sharing agreements as the 
        Commission may require.
  (c) Existing Contract Markets.--A board of trade that is 
designated as a contract market on the effective date of the 
Commodity Futures Modernization Act of 2000 shall be considered 
to be a designated contract market under this section.
  (d) Core Principles for Contract Markets.--
          (1) In general.--To maintain the designation of a 
        board of trade as a contract market, a board of trade 
        shall comply with the core principles specified in this 
        subsection.
          (2) Compliance with rules.--The board of trade shall 
        monitor and enforce compliance with the rules of the 
        contract market, including the terms and conditions of 
        any contracts to be traded and any limitations on 
        access to the contract market.
          (3) Contracts not readily subject to manipulation.--
        The board of trade shall list on the contract market 
        only contracts that are not readily susceptible to 
        manipulation.
          (4) Monitoring of trading.--The board of trade shall 
        monitor trading to prevent manipulation, price 
        distortion, and disruptions of the delivery or cash-
        settlement process.
          (5) Position limitations or accountability.--To 
        reduce the potential threat of market manipulation or 
        congestion, especially during trading in the delivery 
        month, the board of trade shall adopt position 
        limitations or position accountability for speculators, 
        where necessary and appropriate.
          (6) Emergency authority.--The board of trade shall 
        adopt rules to provide for the exercise of emergency 
        authority, in consultation or cooperation with the 
        Commission, where necessary and appropriate, including 
        the authority to--
                  (A) liquidate or transfer open positions in 
                any contract;
                  (B) suspend or curtail trading in any 
                contract; and
                  (C) require market participants in any 
                contract to meet special margin requirements.
          (7) Availability of general information.--The board 
        of trade shall make available to market authorities, 
        market participants, and the public information 
        concerning--
                  (A) the terms and conditions of the contracts 
                of the contract market; and
                  (B) the mechanisms for executing transactions 
                on or through the facilities of the contract 
                market.
          (8) Daily publication of trading information.--The 
        board of trade shall make public daily information on 
        settlement prices, volume, open interest, and opening 
        and closing ranges for actively traded contracts on the 
        contract market.
          (9) Execution of transactions.--The board of trade 
        shall provide a competitive, open, and efficient market 
        and mechanism for executing transactions.
          (10) Trade information.--The board of trade shall 
        maintain rules and procedures to provide for the 
        recording and safe storage of all identifying trade 
        information in a manner that enables the contract 
        market to use the information for purposes of assisting 
        in the prevention of customer and market abuses and 
        providing evidence of any violations of the rules of 
        the contract market.
          (11) Financial integrity of contracts.--The board of 
        trade shall establish and enforce rules providing for 
        the financial integrity of any contracts traded on the 
        contract market, including rules to ensure the 
        financial integrity of any futures commission merchants 
        and introducing brokers and the protection of customer 
        funds.
          (12) Protection of market participants.--The board of 
        trade shall establish and enforce rules to protect 
        market participants from abusive practices committed by 
        any party acting as an agent for the participants.
          (13) Dispute resolution.--The board of trade shall 
        establish and enforce rules regarding and provide 
        facilities for alternative dispute resolution as 
        appropriate for market participants and any market 
        intermediaries.
          (14) Governance fitness standards.--The board of 
        trade shall establish and enforce appropriate fitness 
        standards for directors, members of any disciplinary 
        committee, members of the contract market, and any 
        other persons with direct access to the facility 
        (including any parties affiliated with any of the 
        persons described in this paragraph).
          (15) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of 
        interest in the decisionmaking process of the contract 
        market and establish a process for resolving such 
        conflicts of interest.
          (16) Composition of boards of mutually owned contract 
        markets.--In the case of a mutually owned contract 
        market, the board of trade shall ensure that the 
        composition of the governing board reflects market 
        participants.
          (17) Recordkeeping.--The board of trade shall--
                  (A) maintain full records of all activities 
                related to the business of the contract market 
                in a form and manner acceptable to the 
                Commission for a period of at least 5 years;
                  (B) make the records readily available during 
                at least the first 2 years of the 5-year period 
                and provide the records to the Commission at 
                the expense of the person required to maintain 
                the records; and
                  (C) keep the records open to inspection by 
                any representative of the Commission or the 
                Department of Justice.
          (18) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the 
        board of trade shall endeavor to avoid--
                  (A) adopting any rules or taking any actions 
                that result in any unreasonable restraints of 
                trade; or
                  (B) imposing any material anticompetitive 
                burden on trading on the contract market.
  (e) Current Agricultural and Metal Commodities.--
          (1) Subject to paragraph (2), a contract for purchase 
        or sale for future delivery of an agricultural or metal 
        commodity enumerated in section 1a(3) that is available 
        for trade on a contract market, as of the date of the 
        enactment of this subsection, may be traded only on a 
        contract market designated under this section.
          (2) In order to promote responsible economic or 
        financial innovation and fair competition, the 
        Commission, on application by any person, after notice 
        and public comment and opportunity for hearing, may 
        prescribe rules and regulations to provide for the 
        offer and sale of contracts for future delivery or 
        options thereon to be conducted on a derivatives 
        transaction execution facility.

SEC. 5A. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

  (a) In General.--In lieu of compliance with the contract 
market designation requirements of section 5, a board of trade 
may elect to operate as a registered derivatives transaction 
execution facility if the facility is--
          (1) designated as a contract market and meets the 
        requirements of this section; or
          (2) registered as a derivatives transaction execution 
        facility under subsection (c).
  (b) Requirements for Trading Futures Contracts or Other 
Derivatives Transactions.--
          (1) In general.--A registered derivatives transaction 
        execution facility under subsection (a) may trade any 
        futures contract (or option on such a contract) on or 
        through the facility only by satisfying the 
        requirements of this section.
          (2) Requirements for underlying commodities.--A 
        registered derivatives transaction execution facility 
        may trade any futures contract only if--
                  (A) the underlying commodity has a nearly 
                inexhaustible deliverable supply;
                  (B) the underlying commodity has a 
                deliverable supply that is sufficiently large 
                that the contract is highly unlikely to be 
                susceptible to the threat of manipulation;
                  (C) the underlying commodity has no cash 
                market; or
                  (D) the Commission determines, based on the 
                market characteristics, surveillance history, 
                self-regulatory record, and capacity of the 
                facility that trading in the futures contract 
                is highly unlikely to be susceptible to the 
                threat of manipulation.
          (3) Eligible traders.--To trade on a registered 
        derivatives transaction execution facility, a person 
        shall--
                  (A) be authorized by the board of trade to 
                trade on the facility; and
                  (B)(i) be an eligible contract participant; 
                or
                  (ii) be a person trading through a futures 
                commission merchant that--
                          (I) is registered with the 
                        Commission;
                          (II) is a member of a futures self-
                        regulatory organization;
                          (III) is a clearing member of a 
                        derivatives clearing organization; and
                          (IV) has net capital of at least 
                        $20,000,000.
          (4) Trading by contract markets.--A board of trade 
        that is designated as a contract market shall, to the 
        extent that the contract market also operates a 
        registered derivatives transaction execution facility--
                  (A) provide a physical location for the 
                contract market trading of the board of trade 
                that is separate from trading on the 
                derivatives transaction execution facility of 
                the board of trade; or
                  (B) if the board of trade uses the same 
                electronic trading system for trading on the 
                contract market and derivatives transaction 
                execution facility of the board of trade, 
                identify whether the electronic trading is 
                taking place on the contract market or the 
                derivatives transaction execution facility.
  (c) Criteria for Registration.--
          (1) In general.--To be registered as a registered 
        derivatives transaction execution facility, the board 
        of trade shall demonstrate to the Commission that the 
        board of trade meets the criteria specified in this 
        paragraph.
          (2) Deterrence of abuses.--The board of trade shall 
        establish and enforce trading rules that will deter 
        abuses and has the capacity to detect, investigate, and 
        enforce those rules, including means to--
                  (A) obtain information necessary to perform 
                the functions required under this section; or
                  (B) use technological means to--
                          (i) provide market participants with 
                        impartial access to the market; and
                          (ii) capture information that may be 
                        used in establishing whether rule 
                        violations have occurred.
          (3) Trading procedures.--The board of trade shall 
        establish and enforce rules or terms and conditions 
        defining, or specifications detailing, trading 
        procedures to be used in entering and executing orders 
        traded on the facilities of the board of trade. Such 
        rules may authorize--
                  (A) an exchange of--
                          (i) futures in connection with a cash 
                        commodity transaction;
                          (ii) futures for cash commodities;
                          (iii) transfer trades or office 
                        trades; or
                          (iv) futures for swaps; and
                  (B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm 
                the execution of a contract for the purchase or 
                sale of a commodity for future delivery if the 
                contract is reported, recorded, or cleared in 
                accordance with the rules of the registered 
                derivatives transaction execution facility or a 
                derivatives clearing organization.
          (4) Financial integrity of transactions.--The board 
        of trade shall establish and enforce rules or terms and 
        conditions providing for the financial integrity of 
        transactions entered on or through the facilities of 
        the board of trade, including rules or terms and 
        conditions to ensure the financial integrity of any 
        futures commission merchants and introducing brokers 
        and the protection of customer funds.
  (d) Core Principles for Registered Derivatives Transaction 
Execution Facilities.--
          (1) In general.--To maintain the registration of a 
        board of trade as a derivatives transaction execution 
        facility, a board of trade shall comply with the core 
        principles specified in this subsection.
          (2) Compliance with rules.--The board of trade shall 
        monitor and enforce the rules of the facility, 
        including any terms and conditions of any contracts 
        traded on or through the facility and any limitations 
        on access to the facility.
          (3) Monitoring of trading.--The board of trade shall 
        monitor trading in the contracts of the facility to 
        ensure orderly trading in the contract and to maintain 
        an orderly market while providing any necessary trading 
        information to the Commission to allow the Commission 
        to discharge the responsibilities of the Commission 
        under the Act.
          (4) Disclosure of general information.--The board of 
        trade shall disclose publicly and to the Commission 
        information concerning--
                  (A) contract terms and conditions;
                  (B) trading conventions, mechanisms, and 
                practices;
                  (C) financial integrity protections; and
                  (D) other information relevant to 
                participation in trading on the facility.
          (5) Daily publication of trading information.--The 
        board of trade shall make public daily information on 
        settlement prices, volume, open interest, and opening 
        and closing ranges for actively traded contracts on the 
        facility.
          (6) Fitness standards.--The board of trade shall 
        establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, 
        members, and any other persons with direct access to 
        the facility, including any parties affiliated with any 
        of the persons described in this paragraph.
          (7) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of 
        interest in the decisionmaking process of the 
        derivatives transaction execution facility and 
        establish a process for resolving such conflicts of 
        interest.
          (8) Recordkeeping.--The board of trade shall--
                  (A) maintain full records of all activities 
                related to the business of the derivatives 
                transaction execution facility in a form and 
                manner acceptable to the Commission for a 
                period of at least 5 years;
                  (B) make the records readily available during 
                at least the first 2 years of the 5-year period 
                and provide the records to the Commission at 
                the expense of the person required to maintain 
                the records; and
                  (C) keep the records open to inspection by 
                any representatives of the Commission or the 
                Department of Justice.
          (9) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the 
        board of trade shall endeavor to avoid--
                  (A) adopting any rules or taking any actions 
                that result in any unreasonable restraint of 
                trade; or
                  (B) imposing any material anticompetitive 
                burden on trading on the derivatives 
                transaction execution facility.
  (e) Use of Broker-Dealers, Depository Institutions, and Farm 
Credit System Institutions as Intermediaries.--
          (1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer, 
        depository institution, or institution of the Farm 
        Credit System that meets the requirements of paragraph 
        (2) to--
                  (A) act as an intermediary in transactions 
                executed on the facility on behalf of customers 
                of the broker-dealer, depository institution, 
                or institution of the Farm Credit System; and
                  (B) receive funds of customers to serve as 
                margin or security for such transactions.
          (2) Requirements.--The requirements referred to in 
        paragraph (1) are that--
                  (A) the broker-dealer be in good standing 
                with the Securities and Exchange Commission, or 
                the depository institution or institution of 
                the Farm Credit System be in good standing with 
                Federal bank regulatory agencies (including the 
                Farm Credit Administration), as applicable; and
                  (B) if the broker-dealer, depository 
                institution, or institution of the Farm Credit 
                System carries or holds customer accounts or 
                funds for transactions on the derivatives 
                transaction execution facility for more than 1 
                business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit 
                System is registered as a futures commission 
                merchant and is a member of a registered 
                futures association.
          (3) Implementation.--The Commission shall cooperate 
        and coordinate with the Securities and Exchange 
        Commission, the Secretary of the Treasury, and Federal 
        banking regulatory agencies (including the Farm Credit 
        Administration) in adopting rules and taking any other 
        appropriate action to facilitate the implementation of 
        this subsection.
  (f) Segregation of Customer Funds.--Not later than 180 days 
after the effective date of the Commodity Futures Modernization 
Act of 2000, consistent with regulations adopted by the 
Commission, a registered derivatives transaction execution 
facility may authorize a futures commission merchant to offer 
any customer of the futures commission merchant that is an 
eligible contract participant the right to not segregate the 
customer funds of the futures commission merchant for purposes 
of trading on or through the facilities of the registered 
derivatives transaction execution facility.
  (g) Election To Trade Excluded Commodities.--
          (1) In general.--A board of trade that is a 
        registered derivatives transaction execution facility 
        may trade on the facility any agreements, contracts, or 
        transactions involving excluded commodities that are 
        otherwise excluded from this Act under section 2(c), 
        2(d), or 2(h).
          (2) Exclusive jurisdiction of the commission.--The 
        Commission shall have exclusive jurisdiction over 
        agreements, contracts, or transactions described in 
        paragraph (1) to the extent that the agreements, 
        contracts, or transactions are traded on a derivatives 
        transaction execution facility.

SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

  (a) Registration Requirement.--Except as provided in 
subsection (b), it shall be unlawful for a derivatives clearing 
organization, unless registered with the Commission, directly 
or indirectly to make use of the mails or any means or 
instrumentality of interstate commerce to perform the functions 
of a derivatives clearing organization described in section 
1a(8) with respect to a contract of sale of a commodity for 
future delivery, option on a contract of sale of a commodity 
for future delivery, or option on a commodity that is not an 
exclusion-eligible commodity (unless the contract or option is 
described in subsection (c), (d), (f), (h), or (i) of section 2 
or exempted under section 4(c)).
  (b) Voluntary Registration.--A derivatives clearing 
organization that clears agreements, contracts, or transactions 
described in subsection (c), (d), (f), (h), or (i) of section 2 
or exempted under section 4(c) may register with the Commission 
as a derivatives clearing organization.
  (c) Registration of Derivatives Clearing Organizations.--
          (1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing 
        such information as the Commission may require for the 
        purpose of making the determinations required for 
        approval under paragraph (2).
          (2) Core principles.--
                  (A) In general.--To be registered and to 
                maintain registration as a derivatives clearing 
                organization, an applicant shall demonstrate to 
                the Commission that the applicant complies with 
                the core principles specified in this 
                paragraph. 
                  (B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate 
                financial, operational, and managerial 
                resources to discharge the responsibilities of 
                a derivatives clearing organization without 
                interruption in various market conditions.
                  (C) Participant and product eligibility.--The 
                applicant shall establish--
                          (i) appropriate admission and 
                        continuing eligibility standards 
                        (including appropriate minimum 
                        financial requirements) for members of 
                        and participants in the organization; 
                        and
                          (ii) appropriate standards for 
                        determining eligibility of agreements, 
                        contracts, or transactions submitted to 
                        the applicant.
                  (D) Risk management.--The applicant shall 
                have the ability to manage the risks associated 
                with discharging the responsibilities of a 
                derivatives clearing organization through the 
                use of appropriate tools and procedures.
                  (E) Settlement procedures.--The applicant 
                shall have the ability to--
                          (i) complete settlements on a timely 
                        basis under varying circumstances;
                          (ii) maintain an adequate record of 
                        the flow of funds associated with each 
                        transaction that the applicant clears; 
                        and
                          (iii) comply with the terms and 
                        conditions of any permitted netting or 
                        offset arrangements with other clearing 
                        organizations.
                  (F) Treatment of funds.--The applicant shall 
                have standards and procedures designed to 
                protect and ensure the safety of member and 
                participant funds.
                  (G) Default rules and procedures.--The 
                applicant shall have rules and procedures 
                designed to allow for efficient, fair, and safe 
                management of events when members or 
                participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                  (H) Rule enforcement.--The applicant shall--
                          (i) maintain adequate arrangements 
                        and resources for the effective 
                        monitoring and enforcement of 
                        compliance with rules of the applicant 
                        and for resolution of disputes; and
                          (ii) have the authority and ability 
                        to discipline, limit, suspend, or 
                        terminate a member's or participant's 
                        activities for violations of rules of 
                        the applicant.
                  (I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                          (i) has established and will maintain 
                        a program of oversight and risk 
                        analysis to ensure that the automated 
                        systems of the applicant function 
                        properly and have adequate capacity and 
                        security; and
                          (ii) has established and will 
                        maintain emergency procedures and a 
                        plan for disaster recovery, and will 
                        periodically test backup facilities 
                        sufficient to ensure daily processing, 
                        clearing, and settlement of 
                        transactions.
                  (J) Reporting.--The applicant shall provide 
                to the Commission all information necessary for 
                the Commission to conduct the oversight 
                function of the applicant with respect to the 
                activities of the derivatives clearing 
                organization.
                  (K) Recordkeeping.--The applicant shall--
                          (i) maintain full records of all 
                        activities related to the business of 
                        the applicant as a derivatives clearing 
                        organization in a form and manner 
                        acceptable to the Commission for a 
                        period of at least 5 years;
                          (ii) make the records readily 
                        available during at least the first 2 
                        years of the 5-year period and provide 
                        the records to the Commission at the 
                        expense of the person required to 
                        maintain the records; and
                          (iii) keep the records open to 
                        inspection by any representative of the 
                        Commission or the Department of 
                        Justice.
                  (L) Public information.--The applicant shall 
                make information concerning the rules and 
                operating procedures governing the clearing and 
                settlement systems (including default 
                procedures) available to market participants.
                  (M) Information sharing.--The applicant 
                shall--
                          (i) enter into and abide by the terms 
                        of all appropriate and applicable 
                        domestic and international information-
                        sharing agreements; and
                          (ii) use relevant information 
                        obtained from the agreements in 
                        carrying out the clearing 
                        organization's risk management program.
                  (N) Antitrust considerations.--Unless 
                appropriate to achieve the purposes of this 
                Act, the derivatives clearing organization 
                shall avoid--
                          (i) adopting any rule or taking any 
                        action that results in any unreasonable 
                        restraint of trade; or
                          (ii) imposing any material 
                        anticompetitive burden on trading on 
                        the contract market.
          (3) Orders concerning competition.--A derivatives 
        clearing organization may request the Commission to 
        issue an order concerning whether a rule or practice of 
        the applicant is the least anticompetitive means of 
        achieving the objectives, purposes, and policies of 
        this Act.
  (d) Existing Derivatives Clearing Organizations.--A 
derivatives clearing organization shall be deemed to be 
registered under this section to the extent that--
          (1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of 
        trade that has been designated by the Commission as a 
        contract market for such agreements, contracts, or 
        transactions before the date of enactment of this 
        section; and
          (2) the Commission has reviewed and approved the 
        rules of the derivatives clearing organization before 
        that date.
  (e) Appointment of Trustee.--
          (1) In general.--If a proceeding under section 5e 
        results in the suspension or revocation of the 
        registration of a derivatives clearing organization, or 
        if a derivatives clearing organization withdraws from 
        registration, the Commission, on notice to the 
        derivatives clearing organization, may apply to the 
        appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
          (2) Assumption of jurisdiction.--If the Commission 
        applies for appointment of a trustee under paragraph 
        (1)--
                  (A) the court may take exclusive jurisdiction 
                over the derivatives clearing organization and 
                the records and assets of the derivatives 
                clearing organization, wherever located; and
                  (B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the 
                Commission, as trustee with power to take 
                possession and continue to operate or terminate 
                the operations of the derivatives clearing 
                organization in an orderly manner for the 
                protection of participants, subject to such 
                terms and conditions as the court may 
                prescribe.
  (f) Linking of Regulated Clearing Facilities.--
          (1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing 
        organizations registered under this Act with other 
        regulated clearance facilities for the coordinated 
        settlement of cleared transactions.
          (2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking 
        agencies and the Securities and Exchange Commission.

SEC. 5C. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

  (a) Acceptable Business Practices Under Core Principles.--
          (1) In general.--Consistent with the purposes of this 
        Act, the Commission may issue interpretations, or 
        approve interpretations submitted to the Commission, of 
        sections 5(d), 5a(d), and 5b(d)(2) to describe what 
        would constitute an acceptable business practice under 
        such sections.
          (2) Effect of interpretation.--An interpretation 
        issued under paragraph (1) shall not provide the 
        exclusive means for complying with such sections.
  (b) Delegation of Functions Under Core Principles.--
          (1) In general.--A contract market or derivatives 
        transaction execution facility may comply with any 
        applicable core principle through delegation of any 
        relevant function to a registered futures association 
        or another registered entity.
          (2) Responsibility.--A contract market or derivatives 
        transaction execution facility that delegates a 
        function under paragraph (1) shall remain responsible 
        for carrying out the function.
  (c) New Contracts, New Rules, and Rule Amendments.--
          (1) In general.--Subject to paragraph (2), a 
        registered entity may elect to list for trading any new 
        contract or other instrument, or may elect to approve 
        and implement any new rule or rule amendment, by 
        providing to the Commission (and the Secretary of the 
        Treasury, in the case of a contract of sale for future 
        delivery of a government security (or option thereon) 
        or a rule or rule amendment specifically related to 
        such a contract) a written certification that the new 
        contract, new rule, or rule amendment complies with 
        this Act (including regulations under this Act).
          (2) Prior approval.--
                  (A) In general.--A registered entity may 
                request that the Commission grant prior 
                approval to any new contract or other 
                instrument, new rule, or rule amendment.
                  (B) Prior approval required.--Notwithstanding 
                any other provision of this section, a 
                designated contract market shall submit to the 
                Commission for prior approval each rule 
                amendment that materially changes the terms and 
                conditions, as determined by the Commission, in 
                any contract of sale for future delivery of a 
                commodity specifically enumerated in section 
                1a(3) of this Act (or any option thereon) 
                traded through its facilities if such rule 
                amendment applies to contracts and delivery 
                months which have already been listed for 
                trading and have open interest.
                  (C) Deadline.--If prior approval is requested 
                under subparagraph (A), the Commission shall 
                take final action on the request not later than 
                90 days after submission of the request, unless 
                the person submitting the request agrees to an 
                extension of the time limitation established 
                under this subparagraph.
          (3) Approval.--The Commission shall approve any such 
        new contract or instrument, new rule, or rule amendment 
        unless the Commission finds that the new contract or 
        instrument, new rule, or rule amendment would violate 
        this Act.
  (d) Violation of Core Principles.--
          (1) In general.--If the Commission has reason to 
        believe that a registered entity is violating any 
        applicable provision specified in section 5(d), 5a(d), 
        or 5b(d)(2), the Commission shall notify the registered 
        entity in writing of the reasons for the preliminary 
        determination by the Commission of a violation, 
        including any data, materials, and facts the Commission 
        relied on in making the preliminary determination.
          (2) Injunctive or administrative action.--The 
        Commission may initiate an action for an injunction 
        under section 6c or an administrative proceeding, to 
        demonstrate, by the preponderance of the evidence, 
        that--
                  (A) the registered entity is violating any 
                applicable provision specified in section 5(d), 
                5a(d), or 5b(d)(2); and
                  (B) the Commission has recommended an 
                appropriate remedial action to remove the 
                deficiency based on an analysis of the costs 
                and benefits in the public interest of the 
                Commission recommendation.
          (3) Burden of proof.--In making a determination that 
        a registered entity is violating any applicable 
        provision specified in section 5(d), 5a(d), or 
        5b(d)(2), the Commission shall have the burden of 
        proving that the registered entity is violating the 
        applicable core principle.
  (e) Reservation of Emergency Authority.--Nothing in this 
section shall limit or in any way affect the emergency powers 
of the Commission provided in section 8a(9) of this Act.

SEC. 5D. EXEMPT BOARDS OF TRADE.

  (a) In General.--Except as otherwise provided in this 
section, a contract of sale (or option on such a contract) of a 
commodity for future delivery traded on or through the 
facilities of an exempt board of trade shall be exempt from all 
provisions of this Act, other than section 2(g).
  (b) Criteria for Exemption.--To qualify for an exemption 
under subsection (a), a board of trade shall limit trading on 
or through the facilities of the board of trade to contracts of 
sale of a commodity for future delivery (or options on such 
contracts)--
          (1) that have--
                  (A) a nearly inexhaustible deliverable 
                supply;
                  (B) a deliverable supply that is sufficiently 
                large, and a cash market sufficiently liquid, 
                to render any contract traded on the commodity 
                highly unlikely to be susceptible to the threat 
                of manipulation; or
                  (C) no cash market;
          (2) that are entered into only between persons that 
        are eligible contract participants at the time at which 
        the persons enter into the contract; and
          (3) that are not contracts of sale (or options on the 
        contract) for future delivery of any security, 
        including any group or index of securities or any 
        interest in, or interest that is based on the value of, 
        any security.
  (c) Antimanipulation Requirements.--A party to a futures 
contract or related option that is traded on an exempt board of 
trade shall be subject to sections 4b, 4n, 6(c), and 9(a)(2), 
and the Commission shall enforce those provisions with respect 
to any such trading.
  (d) Price Discovery.--If the Commission finds that an exempt 
board of trade is a significant source of price discovery for 
any underlying commodity in any transaction traded on or 
through the facilities of the board of trade, the board of 
trade shall disseminate publicly on a daily basis trading 
volume, opening and closing price ranges, open interest, and 
other trading data as appropriate to the market.
  (e) Jurisdiction.--The Commission shall have exclusive 
jurisdiction over any account, agreement, or transaction 
involving a contract of sale of a commodity for future 
delivery, or related option, to the extent that such account, 
agreement, or transaction is traded on an exempt board of 
trade.
  (f) Subsidiaries.--A board of trade that is designated as a 
contract market or registered as a derivatives transaction 
execution facility may operate an exempt board of trade by 
establishing a separate subsidiary or other legal entity and 
otherwise satisfying the requirements of this section.

SEC. 5E. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED ENTITY.

  The failure of a registered entity to comply with any 
provision of this Act, or any regulation or order of the 
Commission under this Act, shall be cause for the suspension of 
the registered entity for a period not to exceed 180 days, or 
revocation of designation as a registered entity in accordance 
with the procedures and subject to the judicial review provided 
in section 6(b).
    Sec. 6. (a) Any [board of trade desiring to be designated a 
``contract market'' shall make application to the Commission 
for such designation] person desiring to be designated or 
registered as a contract market or derivatives transaction 
execution facility shall make application to the Commission for 
such designation or registration and accompany the same with a 
showing that it complies with the [above conditions] conditions 
set forth in this Act, and with a sufficient assurance that it 
will continue to comply with the [above requirements] the 
requirements of this Act. The Commission shall approve or deny 
an application for [designation as a contract market within one 
year] designation or registration as a contract market or 
derivatives transaction execution facility within 180 days of 
the filing of the application. If the Commission notifies the 
[board of trade] person that its application is materially 
incomplete and specifies the deficiencies in the application, 
the running of the [one-year period] 180-day period shall be 
stayed from the time of such notification until the application 
is resubmitted in completed form: Provided, That the Commission 
shall have not less than sixty days to approve or deny the 
application from the time the application is resubmitted in 
completed form. If the Commission denies an application, it 
shall specify the grounds for the denial. In the event of a 
refusal to [designate as a ``contract market'' any board of 
trade that has made application therefor, such board of trade] 
designate or register as a contract market or derivatives 
transaction execution facility any person that has made 
application therefor, such person shall be afforded an 
opportunity for a hearing on the record before the Commission, 
with the right to appeal an adverse decision after such hearing 
to the court of appeals as provided for in other cases in 
subsection (b) of this section.
    (b) The Commission is authorized to suspend for a period 
not to exceed six months or to revoke the [designation of any 
board of trade as a ``contract market'' upon] designation or 
registration of any contract market or derivatives transaction 
execution facility on a showing that such [board of trade] 
contract market or derivatives transaction execution facility 
is not enforcing or has not enforced its rules of government 
made a condition of its [designation as set forth in section 5 
of this Act] designation or registration as set forth in 
sections 5 through 5b or that such [board of trade] contract 
market or derivatives transaction execution facility, or any 
director, officer, agent, or employee thereof, otherwise is 
violating or has violated any of the provisions of this Act or 
any of the rules, regulations, or orders of the Commission or 
the Commission thereunder. Such suspension or revocation shall 
only be after a notice to the officers of the [board of trade] 
contract market or derivatives transaction execution facility 
affected and upon a hearing on the record: Provided, That such 
suspension or revocation shall be final and conclusive, unless 
within fifteen days after such suspension or revocation by the 
Commission such [board of trade] person appeals to the court of 
appeals for the circuit in which it has its principal place of 
business, by filing with the clerk of such court a written 
petition praying that the order of the Commission be set aside 
or modified in the manner stated in the petition, together with 
a bond in such sum as the court may determine, conditioned that 
such [board of trade] person will pay the costs of the 
proceedings if the court so directs. The clerk of the court in 
which such a petition is filed shall immediately cause a copy 
thereof to be delivered to the Commission and file in the court 
the record in such proceedings, as provided in section 2112 of 
title 28, United States Code. The testimony and evidence taken 
or submitted before the Commission, duly filed as aforesaid as 
a part of the record, shall be considered by the court of 
appeals as the evidence in the case. Such a court may affirm or 
set aside the order of the Commission or may direct it to 
modify its order. No such order of the Commission shall be 
modified or set aside by the court of appeals unless it is 
shown by the [board of trade] person that the order is 
unsupported by theweight of the evidence or was issued without 
due notice and a reasonable opportunity having been afforded to such 
[board of trade] person for a hearing, or infringes the Constitution of 
the United States, or is beyond the jurisdiction of the Commission.
    (c) If the Commission has reason to believe that any person 
(other than a [contract market] registered entity) is 
manipulating or attempting to manipulate or has manipulated or 
attempted to manipulate the market price of any commodity, in 
interstate commerce, or for future delivery on or subject to 
the rules of any [contract market] registered entity, or has 
willfully made any false or misleading statement of a material 
fact in any registration application or any report filed with 
the Commission under this Act, or willfully omitted to state in 
any such application or report any material fact which is 
required to be stated therein, or otherwise is violating or has 
violated any of the provisions of this Act or of the rules, 
regulations, or orders of the Commission or the Commission 
thereunder, it may serve upon such person a complaint stating 
its charges in that respect, which complaint shall have 
attached or shall contain therein a notice of hearing, 
specifying a day and place not less than three days after the 
service thereof, requiring such person to show cause why an 
order should not be made prohibiting him from trading on or 
subject to the rules of any [contract market] registered 
entity, and directing that all [contract markets] registered 
entities refuse all [trading] privileges to such person, until 
further notice of the Commission and to show cause why the 
registration of such person, if registered with the Commission 
in any capacity, should not be suspended or revoked. Said 
hearing may be held in Washington, District of Columbia, or 
elsewhere, before the Commission or before an Administrative 
Law Judge designated by the Commission, which Administrative 
Law Judge shall cause all evidence to be reduced to writing and 
forthwith transmit the same to the Commission. For the purpose 
of securing effective enforcement of the provisions of this 
Act, for the purpose of any investigation or proceeding under 
this Act, and for the purpose of any action taken under section 
12(f), any member of the Commission or any Administrative Law 
Judge or other officer designated by the Commission (except as 
provided in the fifth sentence of this subsection) may 
administer oaths and affirmations, subpoena witnesses, compel 
their attendance, take evidence, and require the production of 
any books, papers, correspondence, memoranda, or other records 
that the Commission deems relevant or material to the inquiry. 
The attendance of witnesses and the production of any such 
records may be required from any place in the United States, 
any State or any foreign country or jurisdiction at any 
designated place of hearing. A subpoena issued under this 
section may be served upon any person who is not to be found 
within the territorial jurisdiction of any court of the United 
States in such manner as the Federal Rules of Civil Procedure 
prescribe for service of process in a foreign country, except 
that a subpoena to be served on a person who is not to be found 
within the territorial jurisdiction of any court of the United 
States may be issued only on the prior approval of the 
Commission. In case of contumacy by, or refusal to obey a 
subpoena issued to, any person, the Commission may invoke the 
aid of any court of the United States within the jurisdiction 
in which the investigation or proceeding is conducted, or where 
such person resides or transacts business, in requiring the 
attendance and testimony of witnesses and the production of 
books, papers, correspondence, memoranda, and other records. 
Such court may issue an order requiring such person to appear 
before the Commission or member or Administrative Law Judge or 
other officer designated by the Commission, there to produce 
records, if so ordered, or to give testimony touching the 
matter under investigation or in question. Any failure to obey 
such order of the court may be punished by the court as a 
contempt thereof. All process in any such case may be served in 
the judicial district wherein such person is an inhabitant or 
transacts business or wherever such person may be found. Upon 
evidence received, the Commission may (1) prohibit such person 
from trading on or subject to the rules of any [contract 
market] registered entity and require all [contract markets] 
registered entities to refuse such person all [trading] 
privileges thereon for such period as may be specified in the 
order, (2) if such person is registered with the Commission in 
any capacity, suspend, for a period not to exceed six months, 
or revoke, the registration of such person, (3) assess such 
person a civil penalty of not more than the higher of $100,000 
or triple the monetary gain to such person for each such 
violation and (4) require restitution to customers of damages 
proximately caused by violations of such persons. Notice of 
such order shall be sent forthwith by registered mail or by 
certified mail or delivered to the offending person and to the 
governing boards of said [contract markets] registered 
entities. After the issuance of the order by the Commission, as 
aforesaid, the person against whom it is issued may obtain a 
review of such order or such other equitable relief as to the 
court may seem just by filing in the United States court of 
appeals of the circuit in which the petitioner is doing 
business, or in the case of an order denying registration, the 
circuit in which the petitioner's principal place of business 
listed on petitioner's application for registration is located, 
a written petition, within fifteen days after the notice of 
such order is given to the offending person praying that the 
order of the Commission be set aside. A copy of such petition 
shall be forthwith transmitted by the clerk of the court to the 
Commission and thereupon the Commission shall file in the court 
the record theretofore made, as provided in section 2112 of 
title 28, United States Code. Upon the filing of the petition 
the court shall have jurisdiction to affirm, to set aside, or 
modify the order of the Commission, and the findings of the 
Commission as to the facts, if supported by the weight of 
evidence, shall in like manner be conclusive.
    (d) If any person (other than a [contract market] 
registered entity) is manipulating or attempting to manipulate 
or has manipulated or attempted to manipulate the market price 
of any commodity, in interstate commerce, or for future 
delivery on or subject to the rules of any [contract market] 
registered entity, or otherwise is violating or has violated 
any of the provisions of this Act or of the rules, regulations, 
or orders of the Commission or the commission thereunder, the 
Commission may, upon notice and hearing, and subject to appeal 
as in other cases provided for in subsection (c), make and 
enter an order directing that such person shall cease and 
desist therefrom and, if such person thereafter and after the 
lapse of the period allowed for appeal of such order or after 
the affirmance of such order, shall fail or refuse to obey or 
comply with such order, such person shall be guilty of a 
misdemeanor and, upon conviction thereof, shall be fined not 
more than the higher of $100,000 or triple the monetary gain to 
such person, or imprisoned for not less than six months nor 
more than one year, or both, except that if such failure or 
refusal to obey or comply with such order involves any offense 
within paragraph (a) or (b) of section 9 of this Act, such 
person shall be guilty of a felony and, upon conviction 
thereof, shall be subject to the penalties of said paragraph 
9(a) or 9(b): Provided, That any such cease and desist order 
against any respondent in any case of manipulation of, or 
attempt to manipulate, the price of any commodity shall be 
issued only in conjunction with an order issued against such 
respondent under subsection (c). Each day during which such 
failure or refusal to obey or comply with such order continues 
shall be deemed a separate offense.
    (e)(1) In determining the amount of the money penalty 
assessed under subsection (c), the Commission shall consider 
the appropriateness of such penalty to the gravity of the 
violation.
  (2) Unless the person against whom a money penalty is 
assessed under subsection (c) shows to the satisfaction of the 
Commission within fifteen days from the expiration of the 
period allowed for payment of such penalty that either an 
appeal as authorized by subsection (c) has been taken or 
payment of the full amount of the penalty then due has been 
made, at the end of such fifteen-day period and until such 
person shows to the satisfaction of the Commission that payment 
of such amount with interest thereon to date of payment has 
been made--
          (A) such person shall be prohibited automatically 
        from [trading on all contract markets] the privileges 
        of all registered entities; and
          (B) if such person is registered with the Commission, 
        such registration shall be suspended automatically.
  (3) If a person against whom a money penalty is assessed 
under subsection (c) takes an appeal and if the Commission 
prevails or the appeal is dismissed, unless such person shows 
to the satisfaction of the Commission that payment of the full 
amount of the penalty then due has been made by the end of 
thirty days from the date of entry of judgment on the appeal--
          (A) such person shall be prohibited automatically 
        from [trading on all contract markets] the privileges 
        of all registered entities; and

           *       *       *       *       *       *       *

    Sec. 6a. (a) No board of trade which has been [designated 
as a ``contract market'' shall] designated or registered as a 
contract market or a derivatives transaction execution facility 
exclude from membership in, and all privileges on, such board 
of trade, any association or corporation engaged in cash 
commodity business having adequate financial responsibility 
which is organized under the cooperative laws of any State, or 
which has been recognized as a cooperative association of 
producers by the United States Government or by any agency 
thereof, if such association or corporation complies and agrees 
to comply with such terms and conditions asare or may be 
imposed lawfully upon other members of such board, and as are or may be 
imposed lawfully upon a cooperative association of producers engaged in 
cash commodity business, unless such board of trade is authorized by 
the Commission to exclude such association or corporation from 
membership and privileges after hearing held upon at least three days' 
notice subsequent to the filing of complaint by the board of trade: 
Provided, however, That if any such association or corporation shall 
fail to meet its obligations with any established clearing house or 
clearing agency of any contract market, such association or corporation 
shall be ipso facto debarred from further trading on such contract 
market, except such trading as may be necessary to close open trades 
and to discharge existing contracts in accordance with the rules of 
such contract market applicable in such cases. Such Commission may 
prescribe that such association or corporation shall have and retain 
membership and privileges, with or without imposing conditions, or it 
may permit such board of trade immediately to bar such association or 
corporation from membership and privileges. Any order of said 
Commission entered hereunder shall be reviewable by the court of 
appeals for the circuit in which such association or corporation, or 
such board of trade, has its principal place of business, on written 
petition either of such association or corporation, or of such board of 
trade, under the procedure provided in section 6(b) of this Act, but 
such order shall not be stayed by the court pending review.
    (b) No rule of any board of trade [designated as a contract 
market] designated or registered as a contract market or a 
derivatives transaction execution facility shall forbid or be 
construed to forbid the payment of compensation on a commodity-
unit basis, or otherwise, by any federated cooperative 
association to its regional member-associations for services 
rendered or to be rendered in connection with any organization 
work, educational activity, or procurement of patronage, 
provided no part of any such compensation is returned to 
patrons (whether members or nonmembers) of such cooperative 
association, or of its regional or local member-associations, 
otherwise than as a dividend on capital stock or as a patronage 
dividend out of the net earnings or surplus of such federated 
cooperative association.
    Sec. 6b. If any [contract market] registered entity is not 
enforcing or has not enforced its rules of government made a 
condition of its [designation as set forth in section 5 of this 
Act] designation or registration as set forth in sections 5 
through 5c, or if any [contract market] registered entity, or 
any director, officer, agent, or employee of any [contract 
market] registered entity otherwise is violating or has 
violated any of the provisions of this Act or any of the rules, 
regulations, or orders of the Commission thereunder, the 
Commission may, upon notice and hearing on the record and 
subject to appeal as in other cases provided for in section 
6(b) of this Act, make and enter an order directing that such 
[contract market] registered entity, director, officer, agent, 
or employee shall cease and desist from such violation, and 
assess a civil penalty of not more than $500,000 for each such 
violation. If such [contract market] registered entity, 
director, officer, agent, or employee, after the entry of such 
a cease and desist order and the lapse of the period allowed 
for appeal of such order or after the affirmance of such order, 
shall fail or refuse to obey or comply with such order, such 
[contract market] registered entity, director, officer, agent, 
or employee shall be guilty of a misdemeanor and, upon 
conviction thereof, shall be fined not more than $500,000 or 
imprisoned for not less than six months nor more than one year, 
or both. Each day during which such failure or refusal to obey 
such cease and desist order continues shall be deemed a 
separate offense. If the offending [contract market] registered 
entity or other person upon whom such penalty is imposed, after 
the lapse of the period allowed for appeal or after the 
affirmance of such penalty, shall fail to pay such penalty, the 
Commission shall refer the matter to the Attorney General who 
shall recover such penalty by action in the appropriate United 
States district court. In determining the amount of the money 
penalty assessed under this section, the Commission shall 
consider the gravity of the offense, and in the case of a 
[contract market] registered entity shall further consider 
whether the amount of the penalty will materially impair [the 
contract market's ability] the ability of the registered entity 
to carry on its operations and duties.
    Sec. 6c. (a) Whenever it shall appear to the Commission 
that any [contract market] registered entity or other person 
has engaged, is engaging, or is about to engage in any act or 
practice constituting a violation of any provision of this Act 
or any rule, regulation, or order thereunder, or is restraining 
trading in any commodity for future delivery, the Commission 
may bring an action in the proper district court of the United 
States or the proper United States court of any territory or 
other place subject to the jurisdiction of the United States, 
to enjoin such act or practice, or to enforce compliance with 
this Act, or any rule, regulation or order thereunder, and said 
courts shall have jurisdiction to entertain such actions: 
Provided, That no restraining order (other than a restraining 
order which prohibits any person from destroying, altering or 
disposing of, or refusing to permit authorized representatives 
of the Commission to inspect, when and as requested, any books 
and records or other documents or which prohibits any person 
from withdrawing, transferring, removing, dissipating, or 
disposing of any funds, assets, or other property, and other 
than an order appointing a temporary receiver to administer 
such restraining order and to perform such other duties as the 
court may consider appropriate) or injunction for violation of 
the provisions of this Act shall be issued ex parte by said 
court.

           *       *       *       *       *       *       *

    Sec. 6d. (1) Whenever it shall appear to the attorney 
general of any State, the administrator of the securities laws 
of any State, or such other official as a State may designate, 
that the interests of the residents of that State have been, 
are being, or may be threatened or adversely affected because 
any person (other than a contract market, derivatives 
transaction execution facility, clearinghouse, floor broker, or 
floor trader) has engaged in, is engaging or is about to engage 
in, any act or practice constituting a violation of any 
provision of this Act or any rule, regulation, or order of the 
Commission thereunder, the State may bring a suit in equity or 
an action at law on behalf of its residents to enjoin such act 
or practice, to enforce compliance with this Act, or any rule, 
regulation, or order of the Commission thereunder, to obtain 
damages on behalf of their residents, or to obtain such further 
and other relief as the court may deem appropriate.

           *       *       *       *       *       *       *

    Sec. 7. Any [board of trade] person that has been 
designated or registered a [contract market] registered entity 
in the manner herein provided may have such designation or 
registration vacated and set aside by giving notice in writing 
to the Commission requesting that its designation or 
registration as a [contract market] registered entity be 
vacated, which notice shall be served at least ninety days 
prior to the date named therein as the date when the vacation 
of designation or registration shall take effect. Upon receipt 
of such notice the Commission shall forthwith order the 
vacation of the [designation of such board of trade as a 
contract market] designation or registration of the registered 
entity, effective upon the day named in the notice, and shall 
forthwith send a copy of the notice and its order to all other 
[contract markets] registered entities. From and after the date 
upon which the vacation became effective the said [board of 
trade] person can thereafter be [designated again a contract 
market] designated or registered again a registered entity by 
making application to the Commission in the manner herein 
provided for an original application.
    Sec. 8. (a) * * *

           *       *       *       *       *       *       *

    (c) The Commission may make or issue such reports as it 
deems necessary, or such opinions or orders as may be required 
under other provisions of law, relative to the conduct of any 
[board of trade] registered entity or to the transactions of 
any person found guilty of violating the provisions of this Act 
or the rules, regulations, or orders of the Commission 
thereunder in proceedings brought under section 6 of this Act. 
In any such report or opinion, the Commission may set forth the 
facts as to any actual transaction or any information referred 
to in subsection (b) of this section, if such facts or 
information have previously been disclosed publicly in 
connection with a congressional proceeding, or in an 
administrative or judicial proceeding brought under this Act.

           *       *       *       *       *       *       *

    Sec. 8a. The Commission is authorized--
          (1) * * *
          (2) upon notice, but without a hearing and pursuant 
        to such rules, regulations, or orders as the Commission 
        may adopt, to refuse to register, to register 
        conditionally, or to suspend or place restrictions upon 
        the registration of, any person and with such a hearing 
        as may be appropriate to revoke the registration of any 
        person--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) if such person is subject to an 
                outstanding order of the Commission denying 
                [trading] privileges on any [contract market] 
                registered entity to such person, denying, 
                suspending, or revoking such person's 
                membership in any [contract market] registered 
                entity or registered futuresassociation, or 
barring or suspending such person from being associated with a 
registrant under this Act or with a member of a [contract market] 
registered entity or with a member of a registered futures association;

           *       *       *       *       *       *       *

          (3) to refuse to register or to register 
        conditionally any person, if it is found, after 
        opportunity for hearing, that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (J) such person is subject to an outstanding 
                order denying, suspending, or expelling such 
                person from membership in a [contract market] 
                registered entity, a registered futures 
                association, any other self-regulatory 
                organization, or any foreign regulatory body 
                that the Commission recognizes as having a 
                comparable regulatory program or barring or 
                suspending such person from being associated 
                with any member or members of such [contract 
                market] registered entity, association, self-
                regulatory organization, or foreign regulatory 
                body;

           *       *       *       *       *       *       *

          (4) in accordance with the procedure provided for in 
        section 6(c) of this Act, to suspend, revoke, or place 
        restrictions upon the registration of any person 
        registered under this Act if cause exists under 
        paragraph (3) of this section which would warrant a 
        refusal of registration of such person, and to suspend 
        or revoke the registration of any futures commission 
        merchant or introducing broker who shall knowingly 
        accept any order for the purchase or sale of any 
        commodity for future delivery on or subject to the 
        rules of any [contract market] registered entity from 
        any person if such person has been denied trading 
        privileges on any [contract market] registered entity 
        by order of the Commission under section 6(c) of this 
        Act and the period of denial specified in such order 
        shall not have expired: Provided, That such person may 
        appeal from a decision to suspend, revoke, or place 
        restrictions upon registration made pursuant to this 
        paragraph in the manner provided in section 6(c) of 
        this Act;

           *       *       *       *       *       *       *

          (6) to communicate to the proper committee or officer 
        of any [contract market] registered entity, registered 
        futures association, or self-regulatory organization as 
        defined in section 3(a)(26) of the Securities Exchange 
        Act of 1934, notwithstanding the provisions of section 
        8 of this Act, the full facts concerning any 
        transaction or market operation, including the names of 
        parties thereto, which in the judgment of the 
        Commission disrupts or tends to disrupt any market or 
        is otherwise harmful or against the best interests of 
        producers, consumers, or investors, or which is 
        necessary or appropriate to effectuate the purposes of 
        this Act: Provided, That any information furnished by 
        the Commission under this paragraph shall not be 
        disclosed by such [contract market] registered entity, 
        registered futures association, or self-regulatory 
        organization except in any self-regulatory action or 
        proceeding;
          (7) to alter or supplement the rules of a [contract 
        market] registered entity insofar as necessary or 
        appropriate by rule or regulation or by order, if after 
        making the appropriate request in writing to a 
        [contract market] registered entity that such [contract 
        market] registered entity effect on its own behalf 
        specified changes in its rules and practices, and after 
        appropriate notice and opportunity for hearing, the 
        Commission determines that such [contract market] 
        registered entity has not made the changes so required, 
        and that such changes are necessary or appropriate for 
        the protection of persons producing, handling, 
        processing, or consuming any commodity traded for 
        future delivery on such [contract market] registered 
        entity, or the product or byproduct thereof, or for the 
        protection of traders or to insure fair dealing in 
        commodities traded for future delivery on such 
        [contract market] registered entity. Such rules, 
        regulations, or orders may specify changes with respect 
        to such matters as--
                  (A) terms or conditions in contracts of sale 
                to be executed on or subject to the rules of 
                such [contract market] registered entity;

           *       *       *       *       *       *       *

          (8) to make and promulgate such rules and regulations 
        with respect to those persons registered under this 
        Act, who are not members of a [contract market] 
        registered entity, as in the judgment of the Commission 
        are reasonably necessary to protect the public interest 
        and promote just and equitable principles of trade, 
        including but not limited to the manner, method, and 
        place of soliciting business, including the content of 
        such solicitation;
          (9) to direct the [contract market] registered 
        entity, whenever it has reason to believe that an 
        emergency exists, to take such action as in the 
        Commission's judgment is necessary to maintain or 
        restore orderly trading in or liquidation of any 
        futures contract, including, but not limited to, the 
        setting of temporary emergency margin levels on any 
        futures contract, and the fixing of limits that may 
        apply to a market position acquired in good faith prior 
        to the effective date of the Commission's action. The 
        term ``emergency'' as used herein shall mean, in 
        addition to threatened or actual market manipulations 
        and corners, any act of the United States or a foreign 
        government affecting a commodity or any other major 
        market disturbance which prevents the market from 
        accurately reflecting the forces of supply and demand 
        for such commodity. Any action taken by the Commission 
        under this paragraph shall be subject to review only in 
        the United States Court of Appeals for the circuit in 
        which the party seeking review resides or has its 
        principal place of business, or in the United States 
        Court of Appeals for the District of Columbia Circuit. 
        Such review shall be based upon an examination of all 
        the information before the Commission at the time the 
        determination was made. The court reviewing the 
        Commission's action shall not enter a stay or order of 
        mandamus unless it has determined, after notice and 
        hearing before a panel of the court, that the agency 
        action complained of was arbitrary, capricious, an 
        abuse of discretion, or otherwise not in accordance 
        with law. Nothing herein shall be deemed to limit the 
        meaning or interpretation given by a [contract market] 
        registered entity to the terms ``market emergency'', 
        ``emergency'', or equivalent language in its own 
        bylaws, rules, regulations, or resolutions;

           *       *       *       *       *       *       *

    Sec. 8b. It shall be unlawful for any person, against whom 
there is outstanding any order of the Commission prohibiting 
him from trading on or subject to the rules of any [contract 
market] registered entity, to make or cause to be made in 
contravention of such order, any contract for future delivery 
of any commodity, on or subject to the rules of any [contract 
market] registered entity.
    Sec. 8c. (a)

           *       *       *       *       *       *       *

  (e)(1) The Commission shall issue regulations requiring each 
contract market to establish and make available to the public a 
schedule of major violations of any rule within the 
disciplinary jurisdiction of such [contract market] registered 
entity.

           *       *       *       *       *       *       *

SEC. 8E. COMMISSION OVERSIGHT; DEFICIENCY ORDERS.

  (a) Assessments.--At least once every two years, to the 
extent practicable, the Commission shall assess whether the 
trade monitoring system of each [contract market] registered 
entity satisfies [section 5a(b)] sections 5 through 5c.
  (b) Deficiency Orders.--
          (1) Causes.--The Commission may issue a proposed 
        deficiency order in accordance with paragraph (2), or 
        take such other administrative or enforcement action as 
        the Commission determines is appropriate, if, based on 
        its assessment or on other information, the Commission 
        at any time has reason to believe that [a contract 
        market's trade monitoring system implemented pursuant 
        to section 5a(b)] the trade monitoring system of a 
        registered entity implemented pursuant to sections 5 
        through 5c does not satisfy one or more of the 
        requirements of such section.

           *       *       *       *       *       *       *

          (2) Contents.--A proposed deficiency order issued 
        under this subsection shall specify--
                  (A) the deficiencies the Commission has 
                reason to believe exist in the trade monitoring 
                system of the [contract market] registered 
                entity and a statement of reasons supporting 
                the Commission's belief that those deficiencies 
                exist;
                  (B) the corrective action that the Commission 
                believes that the [contract market] registered 
                entity must take and an acceptable timetable 
                for such corrective action; and
                  (C) a date, not less than twenty days from 
                the date of issuance of the proposed deficiency 
                order, when such deficiency order will become 
                final, subject to subsection (d).
          [(3) Remedies.--On becoming final, the Commission 
        deficiency order may--
                  [(A) require the contract market to--
                          [(i) institute appropriate 
                        improvements in its trade monitoring 
                        system necessary to correct the 
                        deficiencies noted therein;
                          [(ii) satisfy stated objective 
                        performance criteria to correct such 
                        deficiencies;
                          [(iii) upgrade or reconfigure 
                        existing systems for collecting or 
                        processing relevant data on trading and 
                        trader or broker activity, including, 
                        where appropriate, the commitment of 
                        additional resources; or
                  [(B) revoke any exemption of the contract 
                market from the regulations prohibiting the 
                privilege of dual trading under section 4j(a), 
                if the deficiency noted in such deficiency 
                order relates to--
                          [(i) the audit trail system the 
                        contract market is required to maintain 
                        under paragraph (2), (3), or (4) of 
                        section 5a(b); or
                          [(ii) the prevention, detection, or 
                        disciplining of violations attributable 
                        to such trading at such, subject to the 
                        standards, exceptions, and duration 
                        provisions of section 4j(a); or
                  [(C) take any combination of the actions 
                described in subparagraphs (A) and (B).]
          (3) Remedies.--On becoming final, the Commission 
        deficiency order may require the registered entity to--
                  (A) institute appropriate improvements in its 
                trade monitoring system necessary to correct 
                the deficiencies in the order;
                  (B) satisfy stated objective performance 
                criteria to correct the deficiencies;
                  (C) upgrade or reconfigure existing systems 
                for collecting or processing relevant data on 
                trading and trader or broker activity, 
                including, where appropriate, the commitment of 
                additional resources.
          (4) Removal.--If the Commission finds, after notice 
        and opportunity for a hearing on the record prior to 
        such deficiency order becoming final, that a named 
        officer, director, committee member, or employee of 
        such [contract market] registered entity has 
        willfully--
                  (A) violated this Act, the rules or 
                regulations of the Commission thereunder, or 
                the rules of such [contract market] registered 
                entity;
                  (B) abused the authority of such person; or
                  (C) without reasonable justification or 
                excuse, failed to enforce compliance with any 
                provision of the rules of such [contract 
                market] registered entity by any member or 
                person associated with a member thereof,
        the Commission may issue a deficiency order under this 
        section to remove such officer, director, committee 
        member, or employee.
          (5) [Designation as contract market] Designation or 
        registration as registered entity.--Notwithstanding 
        section 6, during the period that a proposed or final 
        deficiency order under this section is in effect, the 
        Commission may refrain from approving any application 
        for designation or registration as a [contract market] 
        registered entity made by the [board of trade] person 
        whose [contract market] registered entity is the 
        subject of such deficiency order.
          (6) Delegation.--The Commission shall not delegate 
        the authority to issue deficiency orders under this 
        subsection.
  (c) Rescission, Modification, or Delay of Deficiency 
Orders.--Before any proposed deficiency order issued by the 
Commission under subsection (b) may become final, the 
Commission shall--
          (1) provide the affected [contract market] registered 
        entity with an opportunity for a hearing through 
        submission of written data, views, or arguments and, 
        under terms set by the Commission at the request of the 
        [contract market] registered entity, through an oral 
        presentation of views and comments to the Commission, 
        in order to petition the Commission to rescind, modify, 
        or delay such deficiency order; and
          (2) rule on such petition, not less than twenty days 
        before the deficiency order takes effect, making 
        findings, as appropriate, as to whether--
                  (A) the deficiencies cited by the Commission 
                have been corrected or are being corrected 
                under an expeditious timetable acceptable to 
                the Commission;
                  (B) the trade monitoring system of the 
                [contract market] registered entity is 
                deficient as noted in the deficiency order; or
                  (C) the timetable for corrective action by 
                the [contract market] registered entity in the 
                proposed deficiency order, and the particular 
                corrective action proposed, is appropriate in 
                light of the deficiencies noted and the 
                purposes of this Act.
  (d) Penalties.--Violation of a final deficiency order issued 
under subsection (c) shall be considered a violation of an 
order of the Commission for purposes of--
          (1) establishing liability and assessing penalties 
        against a [contract market] registered entity or any 
        director, officer, agent, or employee thereof under 
        section 6b or 6c; or
          (2) initiating proceedings under section [5b] 5e or 
        6(a).
  (e) Judicial Review.--
          (1) Persons.--Any person, other than a [contract 
        market] registered entity, aggrieved by a deficiency 
        order issued under subsection (b)(4), may obtain review 
        of such deficiency order when issued by the Commission 
        under the terms and conditions in section 6(b).
          (2) [Contract markets] Registered entities.--Any 
        [contract market] registered entity that has petitioned 
        the Commission to rescind, modify, or delay any 
        proposed deficiency order issued under subsection (b) 
        may obtain judicial review of any final such deficiency 
        order only in the United States Court of Appeals for 
        the circuit in which the party seeking review resides 
        or has its principal place of business, or in the 
        United States Court of Appeals for the District of 
        Columbia Circuit, under the standards applicable to 
        rulemaking proceedings under section 553 of title 5, 
        United States Code.
    Sec. 9. (a) It shall be a felony punishable by a fine of 
not more than $1,000,000 (or $500,000 in the case of a person 
who is an individual) or imprisonment for not more than five 
years, or both, together with the costs of prosecution, for:
          (1) * * *
          (2) Any person to manipulate or attempt to manipulate 
        the price of any commodity in interstate commerce, or 
        for future delivery on or subject to the rules of any 
        [contract market] registered entity, or to corner or 
        attempt to corner any such commodity or knowingly to 
        deliver or cause to be delivered for transmission 
        through the mails or interstate commerce by telegraph, 
        telephone, wireless, or other means of communication 
        false or misleading or knowingly inaccurate reports 
        concerning crop or market information or conditions 
        that affect or tend to affect the price of any 
        commodity in interstate commerce, or knowingly to 
        violate the provisions of section 4, section 4b, 
        subsections (a) through (e) of subsection 4c, section 
        4h, section [4o(1)] 4n(1), or section 19.
          (3) Any person knowingly to make, or cause to be 
        made, any statement in any application, report, or 
        document required to be filed under this Act or any 
        rule or regulation thereunder or any undertaking 
        contained in a registration statement required under 
        this Act, or by any [contract market] registered entity 
        or registered futures association in connection with an 
        application for membership or participation therein or 
        to become associated with a member thereof, which 
        statement was false or misleading with respect to any 
        material fact, or knowingly to omit any material fact 
        required to be stated therein or necessary to make the 
        statements therein not misleading.
          (4) Any person willfully to falsify, conceal, or 
        cover up by any trick, scheme, or artifice a material 
        fact, make any false, fictitious, or fraudulent 
        statements or representations, or make or use any false 
        writing or document knowing the same to contain any 
        false, fictitious, or fraudulent statement or entry to 
        a [contract market] registered entity, board of trade, 
        or futures association designated or registered under 
        this Act acting in furtherance of its official duties 
        under this Act.

           *       *       *       *       *       *       *

      (f) It shall be a felony for any person--
          (1) who is an employee, member of the governing 
        board, or member of any committee of a board of trade, 
        [contract market] registered entity, or registered 
        futures association, in violation of a regulation 
        issued by the Commission, willfully and knowingly to 
        trade for such person's own account, or for or on 
        behalf of any other account, in contracts for future 
        delivery or options thereon on the basis of, or 
        willfully and knowingly to disclose for any purpose 
        inconsistent with the performance of such person's 
        official duties as an employee or member, any material 
        nonpublic information obtained through special access 
        related to the performance of such duties.
          (2) willfully and knowingly to trade for such 
        person's own account, or for or on behalf of any other 
        account, in contractsfor future delivery or options 
thereon on the basis of any material nonpublic information that such 
person knows was obtained in violation of paragraph (1) from an 
employee, member of the governing board, or member of any committee of 
a board of trade, [contract market] registered entity, or registered 
futures association.
Such felony shall be punishable by a fine of not more than 
$500,000, plus the amount of any profits realized from such 
trading or disclosure made in violation of this subsection, or 
imprisonment for not more than five years, or both, together 
with the costs of prosecution.

           *       *       *       *       *       *       *

    Sec. 12. (a) * * *

           *       *       *       *       *       *       *

  (d) There are authorized to be appropriated such sums as are 
necessary to carry out this Act for each of fiscal years 1995 
through [2000] 2005.
    (e) Nothing in this Act shall supersede or preempt--
          (1) criminal prosecution under any Federal criminal 
        statute;
          [(2) the application of any Federal or State statute, 
        including any rule or regulation thereunder, to any 
        transaction in or involving any commodity, product, 
        right, service, or interest (A) that is not conducted 
        on or subject to the rules of a contract market, or, in 
        the case of any State or local law that prohibits or 
        regulates gaming or the operation of ``bucket shops'' 
        (other than antifraud provisions of general 
        applicability), that is not a transaction or class of 
        transactions that has received or is covered by the 
        terms of any exemption previously granted by the 
        Commission under subsection (c) of section 4 of this 
        Act, or (B) (except as otherwise specified by the 
        Commission by rule or regulation) that is not conducted 
        on or subject to the rules of any board of trade, 
        exchange, or market located outside the United States, 
        its territories or possessions, or (C) that is not 
        subject to regulation by the Commission under section 
        4c or 19 of this Act; or]
          (2) the application of any Federal or State law 
        (including any regulation) to an agreement, contract, 
        or transaction in or involving any commodity, product, 
        right, service, or interest, except that this Act shall 
        supersede and preempt--
                  (A) in the case of any such agreement, 
                contract, or transaction--
                          (i) that is conducted on or subject 
                        to the rules of a registered entity or 
                        exempt board of trade;
                          (ii) that is conducted on or subject 
                        to the rules of any board of trade, 
                        exchange, or market located outside the 
                        United States, or any territory or 
                        possession of the United States (in 
                        accordance with any terms or conditions 
                        specified by the Commission by 
                        regulation); and
                          (iii) that is subject to regulation 
                        by the Commission under section 4c or 
                        19; and
                  (B) any State or local law that prohibits or 
                regulates gaming or the operation of bucket 
                shops (other than antifraud provisions of 
                general applicability) in the case of--
                          (i) an electronic trading facility 
                        under section 2(e); or
                          (ii) an agreement, contract, or 
                        transaction that is excluded or exempt 
                        under section 2(c), 2(d), 2(f), or 2(h) 
                        or is covered by the terms of an 
                        exemption granted by the Commission 
                        under section 4(c) (regardless of 
                        whether any such agreement, contract, 
                        or transaction is otherwise subject to 
                        this Act); or

           *       *       *       *       *       *       *

    Sec. 14. (a)(1) Any person complaining of any violation of 
any provision of this Act, or any rule, regulation, or order 
issued pursuant to this Act, by any person who is registered 
under this Act may, at any time within two years after the 
cause of action accrues, apply to the Commission for an order 
awarding--
          (A) * * *
          (B) in the case of any action arising from a willful 
        and intentional violation in the execution of an order 
        on the floor of a [contract market] registered entity, 
        punitive or exemplary damages equal to no more than two 
        times the amount of such actual damages. If an award of 
        punitive or exemplary damages is made against a floor 
        broker in connection with the execution of a customer 
        order, and the futures commission merchant which 
        selected the floor broker for the execution of the 
        customer order is held to be responsible under section 
        2(a)(1) for the floor broker's violation, such futures 
        commission merchant may be required to satisfy such 
        award if the floor broker fails to do so, except that 
        such requirement shall apply to the futures commission 
        merchant only if it willfully and intentionally 
        selected the floor broker with the intent to assist or 
        facilitate the floor broker's violation.

           *       *       *       *       *       *       *

    (f) Unless the party against whom a reparation order has 
been issued shows to the satisfaction of the Commission within 
fifteen days from the expiration of the period allowed for 
compliance with such order that either an appeal as herein 
authorized has been taken or payment of the full amount of the 
order (or any agreed settlement thereof) has been made, such 
party shall be prohibited automatically from trading on all 
[contract markets] registered entities and, if the party is 
registered with the Commission, such registration shall be 
suspended automatically at the expiration of such fifteen-day 
period until such party shows to the satisfaction of the 
Commission that payment of such amount with interest thereon to 
date of payment has been made: Provided, That if on appeal the 
appellee prevails or if the appeal is dismissed, the automatic 
prohibition against trading and suspension of registration 
shall become effective at the expiration of thirty days from 
the date of judgment on the appeal, but if the judgment is 
stayed by a court of competent jurisdiction, the suspension 
shall become effective ten days after the expiration of such 
stay, unless prior thereto the judgment of the court has been 
satisfied.
    [(g) The provisions of this section shall not become 
effective until fifteen months after the date of its enactment: 
Provided, That claims which arise within one year immediately 
prior to the effective date of this section may be heard by the 
Commission after such 15-month period.]
  (g) Predispute Resolution Agreements for Institutional 
Customers.--Nothing in this section prohibits a registered 
futures commission merchant from requiring a customer that is 
an eligible contract participant, as a condition to the 
commission merchant's conducting a transaction for the 
customer, to enter into an agreement waiving the right to file 
a claim under this section.
    [Sec. 15. The Commission]

SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

  (a) Costs and Benefits.--
          (1) In general.--Before promulgating a regulation 
        under this Act or issuing an order (except as provided 
        in paragraph (3)), the Commission shall consider the 
        costs and benefits of the action of the Commission.
          (2) Considerations.--The costs and benefits of the 
        proposed Commission action shall be evaluated in light 
        of--
                  (A) considerations of protection of market 
                participants and the public;
                  (B) considerations of the efficiency, 
                competitiveness, and financial integrity of 
                futures markets;
                  (C) considerations of price discovery;
                  (D) considerations of sound risk management 
                practices; and
                  (E) other public interest considerations.
          (3) Applicability.--This subsection does not apply to 
        the following actions of the Commission:
                  (A) An order that initiates, is part of, or 
                is the result of an adjudicatory or 
                investigative process of the Commission.
                  (B) An emergency action.
                  (C) A finding of fact regarding compliance 
                with a requirement of the Commission.
  (b) Antitrust Laws.--The Commission  shall take into 
consideration the public interest to be protected by the 
antitrust laws and endeavor to take the least anticompetitive 
means of achieving the objectives of this Act, as well as the 
policies and purposes of this Act, in issuing any order or 
adopting any Commission rule or regulation (including any 
exemption under section 4(c) or 4c(b)), or in requiring or 
approving any bylaw, rule, or regulation of a contract market 
or registered futures association established pursuant to 
section 17 of this Act.

           *       *       *       *       *       *       *

    Sec. 17. (a) * * *
    (b) An applicant association shall not be registered as a 
futures association unless the Commission finds, under 
standards established by the Commission, that--
          (1) * * *
          (2) the rules of the association provide that any 
        person registered under this Act, [contract market] 
        registered entity, or any other person designated 
        pursuant to the rules of the Commission as eligible for 
        membership may become a member of such association, 
        except such as are excluded pursuant to paragraph (3) 
        or (4) of this subsection, or a rule of the association 
        permitted under this paragraph. The rules of the 
        association may restrict membership in such association 
        on such specified basis relating to the type of 
        business done by its members, or on such other 
        specified and appropriate basis, as appears to the 
        Commission to be necessary or appropriate in the public 
        interest and to carry out the purpose of this section. 
        Rules adopted by the association may provide that the 
        association may, unless the Commission directs 
        otherwise in cases in which the Commission finds it 
        appropriate in the public interest so to direct, deny 
        admission to, or refuse to continue in such association 
        any person if (i) such person, whether prior of 
        subsequent to becoming registered as such, or (ii) any 
        person associated within the meaning of ``associated 
        person'' as set forth in section 4k of this Act, 
        whether prior or subsequent to becoming so associated, 
        has been and is suspended or expelled from a [contract 
        market] registered entity or has been and is barred or 
        suspended from being associated with all members of 
        such [contract market] registered entity, for violation 
        of any rule of such [contract market] registered 
        entity;
          (3) the rules of the association provide that, except 
        with the approval or at the direction of the Commission 
        in cases in which the Commission finds it appropriate 
        in the public interest so to approve or direct, no 
        person shall be admitted to or continued in membership 
        in such association, if such person--
                  (A) has been and is suspended or expelled 
                from a registered futures association or from a 
                [contract market] registered entity or has been 
                and is barred or suspended from being 
                associated with all members of such association 
                or from being associated with all members of 
                such [contract market] registered entity, for 
                violation of any rule of such association or 
                [contract market] registered entity which 
                prohibits any act or transaction constituting 
                conduct inconsistent with just and equitable 
                principles of trade, or requires any act the 
                omission of which constitutes conduct 
                inconsistent with just and equitable principles 
                of trade;
                  (B) is subject to an order of the Commission 
                denying, suspending, or revoking his 
                registration pursuant to section 6(c) of this 
                Act, or expelling or suspending him from 
                membership in a registered futures association 
                or a [contract market] registered entity, or 
                barring or suspending him from being associated 
                with a futures commission merchant;
                  (C) whether prior or subsequent to becoming a 
                member, by his conduct while associated with a 
                member, was a cause of any suspension, 
                expulsion, or order of the character described 
                in clause (A) or (B) which is in effect with 
                respect to such member, and in entering such a 
                suspension, expulsion, or order, the Commission 
                or any such [contract market] registered entity 
                or association shall have jurisdiction to 
                determine whether or not any person was a cause 
                thereof; or

           *       *       *       *       *       *       *

          (10) the rules of the association provide a fair, 
        equitable, and expeditious procedure through 
        arbitration or otherwise for the settlement of 
        customers' claims and grievances against any member or 
        employee thereof: Provided, That (A) the use of such 
        procedure by a customer shall be voluntary, (B) the 
        term ``customer'' as used in this paragraph shall not 
        include another member of the association, and (C) in 
        the case of a claim arising from a violation in the 
        execution of an order on the floor of a [contract 
        market] registered entity, such procedure shall 
        provide, to the extent appropriate--
                  (i) * * *

           *       *       *       *       *       *       *

    (o)(1) The Commission may require any futures association 
registered pursuant to this section to perform any portion of 
the registration functions under this Act with respect to each 
member of the association other than a [contract market] 
registered entity and with respect to each associated person of 
such member, in accordance with rules, notwithstanding any 
other provision of law, adopted by such futures association and 
submitted to the Commission pursuant to section 17(j) of this 
Act, and subject to the provisions of this Act applicable to 
registrations granted by the Commission.

           *       *       *       *       *       *       *

  (q)(1) The Commission shall issue regulations requiring each 
registered futures association to establish and make available 
to the public a schedule of major violations of any rule within 
the disciplinary jurisdiction of such registered futures 
association.
  (2) The regulations issued by the Commission pursuant to this 
subsection shall prohibit, for a period of time to be 
determined by the Commission, any member of a registered 
futures association who is found to have committed any major 
violation from service on the governing board of any registered 
futures association or [contract market] registered entity, or 
on any disciplinary committee thereof.

           *       *       *       *       *       *       *

    Sec. 22. (a)(1) Any person (other than a [contract market, 
clearing organization of a contract market, licensed board of 
trade,] registered entity or registered futures association) 
who violates this Act or who willfully aids, abets, counsels, 
induces, or procures the commission of a violation of this Act 
shall be liable for actual damages resulting from one or more 
of the transactions referred to in subparagraphs (A) through 
(D) of this paragraph and caused by such violation to any other 
person--
          (A) * * *

           *       *       *       *       *       *       *

          (C) who purchased from or sold to such person or 
        placed through such person an order for the purchase or 
        sale of--
                  (i) an option subject to section 4c of this 
                Act (other than an option purchased or sold on 
                a [contract market] registered entity or other 
                board of trade);

           *       *       *       *       *       *       *

    (2) Except as provided in subsection (b), the rights of 
action authorized by this subsection and by sections [5a(11),] 
5(d)(13), 5b(b)(1)(E), 14, and 17(b)(10) of this Act shall be 
the exclusive remedies under this Act available to any person 
who sustains loss as a result of any alleged violation of this 
Act. Nothing in this subsection shall limit or abridge the 
rights of the parties to agree in advance of a dispute upon any 
forum for resolving claims under this section, including 
arbitration.
  (3) In any action arising from a violation in the execution 
of an order on the floor of a [contract market] registered 
entity, the person referred to in paragraph (1) shall be liable 
for--
          (A) * * *
  (4) Contract enforcement between eligible counterparties.--
          (A) In general.--No agreement, contract, or 
        transaction involving a party described in subclauses 
        (I) through (VI) of section 2(c)(2)(B)(ii) or between 
        eligible contract participants shall be void, voidable, 
        or unenforceable, and no such counterparty or eligible 
        contract participant shall be entitled to rescind, or 
        recover any payment made with respect to, such an 
        agreement, contract, or transaction, under this section 
        or any other provision of Federal or State law based 
        solely on the failure of the agreement, contract, or 
        transaction to comply with the terms or conditions of 
        an exemption or exclusion from any provision of this 
        Act or regulations of the Commission.
          (B) Exception.--This paragraph shall not apply to any 
        swap agreement (as defined in section 206(b) of the 
        Gramm-Leach-Bliley Act) with any party who is not an 
        eligible contract participant unless such swap 
        agreement is entered into after final regulations have 
        been prescribed under section 49 of the Federal Deposit 
        Insurance Act.
    (b)(1)(A) A [contract market or clearing organization of a 
contract market] registered entity that fails to enforce any 
bylaw, rule, regulation, or resolution that it is required to 
enforce by [section 5a(8) and section 5a(9) of this Act] 
sections 5 through 5c, (B) a licensed board of trade that fails 
to enforce any bylaw, rule, regulation, or resolution that it 
is required to enforce by the Commission, or (C) any [contract 
market, clearing organization of a contract market, or licensed 
board of trade] registered entity that in enforcing any such 
bylaw, rule, regulation, or resolution violates this Act or any 
Commission rule, regulation, or order, shall be liable for 
actual damages sustained by a person who engaged in any 
transaction on or subject to the rules of such [contract market 
or licensed board of trade] registered entity to the extent of 
such person's actual losses that resulted from such transaction 
and were caused by such failure to enforce or enforcement of 
such bylaws, rules, regulations, or resolutions.

           *       *       *       *       *       *       *

    (3) Any individual who, in the capacity as an officer, 
director, governor, committee member, or employee of [a 
contract market, clearing organization, licensed board of 
trade,] registered entity or a registered futures association 
willfully aids, abets, counsels, induces, or procures any 
failure by any such entity to enforce (or any violation of the 
Act in enforcing) any bylaw, rule, regulation, or resolution 
referred to in paragraph (1) or (2) of this subsection, shall 
be liable for actual damages sustained by a person who engaged 
in any transaction specified in subsection (a) of this section 
on, or subject to the rules of, such [contract market, licensed 
board of trade] registered entity or, in the case of an 
officer, director, governor, committee member, or employee of a 
registered futures association, any transaction specified in 
subsection (a) of this section, in either case to the extent of 
such person's actual losses that resulted from such transaction 
and were caused by such failure or violation.
    (4) A person seeking to enforce liability under this 
section must establish that the [contract market, licensed 
board of trade, clearing organization] registered entity, 
registered futures association, officer, director, governor, 
committee member, or employee acted in bad faith in failing to 
take action or in taking such action as was taken, and that 
such failure or action caused the loss.
    (5) The rights of action authorized by this subsection 
shall be the exclusive remedy under this Act available to any 
person who sustains a loss as a result of (A) the alleged 
failure by a [contract market, licensed board of trade, 
clearing organization,] registered entity or registered futures 
association or by any officer, director, governor, committee 
member, or employee to enforce any bylaw, rule, regulation, or 
resolution referred to in paragraph (1) or (2) of this 
subsection, or (B) the taking of action in enforcing any bylaw, 
rule, regulation, or resolution referred to in this subsection 
that is alleged to have violated this Act, or any Commission 
rule, regulation, or order.

           *       *       *       *       *       *       *

FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991

           *       *       *       *       *       *       *

                   TITLE IV--MISCELLANEOUS PROVISIONS

               Subtitle A--Payment System Risk Reduction

CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING

           *       *       *       *       *       *       *

SEC. 402. DEFINITIONS.

  For purposes of this [subtitle] chapter--
          (1)  * * *

           *       *       *       *       *       *       *

          (2) Clearing organization.--The term ``clearing 
        organization'' means a clearinghouse, clearing 
        association, clearing corporation, or similar 
        organization--
                  (A) that provides clearing, netting, or 
                settlement services for its members and--
                          (i) in which all members other than 
                        the clearing organization itself are 
                        financial institutions or other 
                        clearing organizations; or
                          (ii) which is registered as a 
                        clearing agency under the Securities 
                        Exchange Act of 1934 or exempt from 
                        such registration pursuant to an order 
                        of the Securities and Exchange 
                        Commission; or
                  [(B) that performs clearing functions for a 
                contract market designated pursuant to the 
                Commodity Exchange Act.]
                  (B) that is registered as a derivatives 
                clearing organization under section 5b of the 
                Commodity Exchange Act or that has been granted 
                an exemption pursuant to section 4(c)(1) of 
                such Act.

           *       *       *       *       *       *       *

          (6) Depository institution.--The term ``depository 
        institution'' means--
                  (A) a depository institution as defined in 
                section 19(b)(1)(A) of the Federal Reserve Act 
                (other than clause (vii));
                  [(B) a branch or agency as defined in section 
                1(b) of the International Banking Act of 1978;]
                  (B) an uninsured national bank or an 
                uninsured State bank that is a member of the 
                Federal Reserve System if the national bank or 
                State member bank is not eligible to make 
                application to become an insured bank under 
                section 5 of the Federal Deposit Insurance Act;
                  (C) a branch or agency of a foreign bank, a 
                foreign bank and any branch or agency of the 
                foreign bank, or the foreign bank that 
                established the branch or agency, as those 
                terms are defined in section 1(b) of the 
                International Banking Act of 1978;
                  [(C)] (D) a corporation chartered under 
                section 25(a) of the Federal Reserve Act; or
                  [(D)] (E) a corporation having an agreement 
                or undertaking with the Board of Governors of 
                the Federal Reserve System under section 25 of 
                the Federal Reserve Act.

           *       *       *       *       *       *       *

          (11) Member.--The term ``member'' means a member of 
        or participant in a clearing organization, and includes 
        the clearing organization and any other clearing 
        organization with which such clearing organization has 
        a netting contract.

           *       *       *       *       *       *       *

          (14) Netting contract.--
                  (A) In general.--The term ``netting 
                contract''--
                          [(i) means a contract or agreement 
                        between 2 or more financial 
                        institutions or members, that--
                                  [(I) is governed by the laws 
                                of the United States, any 
                                State, or any political 
                                subdivision of any State, and
                                  [(II) provides for netting 
                                present or future payment 
                                obligations or payment 
                                entitlements (including 
                                liquidation or close-out values 
                                relating to the obligations or 
                                entitlements) among the parties 
                                to the agreement; and]
                          (i) means a contract or agreement 
                        between two or more financial 
                        institutions, clearing organizations, 
                        or members that provides for netting 
                        present or future payment obligations 
                        or payment entitlements (including 
                        liquidation or closeout values relating 
                        to such obligations or entitlements) 
                        among the parties to the agreement; and

           *       *       *       *       *       *       *

          (15) Payment.--The term ``payment'' means a payment 
        of United States dollars, another currency, or a 
        composite currency, and a noncash delivery, including a 
        payment or delivery to liquidate an unmatured 
        obligation.

           *       *       *       *       *       *       *

SEC. 403. BILATERAL NETTING.

  [(a) General Rule.--Notwithstanding any other provision of 
law, the covered contractual payment obligations and the 
covered contractual payment entitlements between any 2 
financial institutions shall be netted in accordance with, and 
subject to the conditions of, the terms of any applicable 
netting contract.]
  (a) General Rule.--Notwithstanding any other provision of 
State or Federal law (other than paragraphs (8)(E), (8)(F), and 
(10)(B) of section 11(e) of the Federal Deposit Insurance Act 
or any order authorized under section 5(b)(2) of the Securities 
Investor Protection Act of 1970), the covered contractual 
payment obligations and the covered contractual payment 
entitlements between any two financial institutions shall be 
netted in accordance with, and subject to the conditions of, 
the terms of any applicable netting contract (except as 
provided in section 561(b)(2) of title 11, United States Code).

           *       *       *       *       *       *       *

  (f) Enforceability of Security Agreements.--The provisions of 
any security agreement or arrangement or other credit 
enhancement related to 1 or more netting contracts between any 
two financial institutions shall be enforceable in accordance 
with their terms (except as provided in section 561(b)(2) of 
title 11, United States Code) and shall not be stayed, avoided, 
or otherwise limited by any State or Federal law (other than 
paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of the 
Federal Deposit Insurance Act and section 5(b)(2) of the 
Securities Investor Protection Act of 1970).

SEC. 404. CLEARING ORGANIZATION NETTING.

  [(a) General Netting Rule.--Notwithstanding any other 
provision of law, the covered contractual payment obligations 
and covered contractual payment entitlements of a member of a 
clearing organization to and from all other members of a 
clearing organization shall be netted in accordance with and 
subject to the conditions of any applicable netting contract.]
  (a) General Rule.--Notwithstanding any other provision of 
State or Federal law (other than paragraphs (8)(E), (8)(F), and 
(10)(B) of section 11(e) of the Federal Deposit Insurance Act 
and any order authorized under section 5(b)(2) of the 
Securities Investor Protection Act of 1970), the covered 
contractual payment obligations and the covered contractual 
payment entitlements of a member of a clearing organization to 
and from all other members of a clearing organization shall be 
netted in accordance with and subject to the conditions of any 
applicable netting contract (except as provided in section 
561(b)(2) of title 11, United States Code).

           *       *       *       *       *       *       *

  (h) Enforceability of Security Agreements.--The provisions of 
any security agreement or arrangement or other credit 
enhancement related to 1 or more netting contracts between any 
two members of a clearing organization shall be enforceable in 
accordance with their terms (except as provided in section 
561(b)(2) of title 11, United States Code) and shall not be 
stayed, avoided, or otherwise limited by any State or Federal 
law (other than paragraphs (8)(E), (8)(F), and (10)(B) of 
section 11(e) of the Federal Deposit Insurance Act and section 
5(b)(2) of the Securities Investor Protection Act of 1970).

           *       *       *       *       *       *       *

SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND 
                    UNINSURED FEDERAL BRANCHES AND AGENCIES.

  (a) In General.--Notwithstanding any other provision of law, 
paragraphs (8), (9), (10), and (11) of section 11(e) of the 
Federal Deposit Insurance Act shall apply to an uninsured 
national bank or uninsured Federal branch or Federal agency 
except--
          (1) any reference to the ``Corporation as receiver'' 
        or ``the receiver or the Corporation'' shall refer to 
        the receiver of an uninsured national bank or uninsured 
        Federal branch or Federal agency appointed by the 
        Comptroller of the Currency;
          (2) any reference to the ``Corporation'' (other than 
        in section 11(e)(8)(D) of such Act), the ``Corporation, 
        whether acting as such or as conservator or receiver'', 
        a ``receiver'', or a ``conservator'' shall refer to the 
        receiver or conservator of an uninsured national bank 
        or uninsured Federal branch or Federal agency appointed 
        by the Comptroller of the Currency; and
          (3) any reference to an ``insured depository 
        institution'' or ``depository institution'' shall refer 
        to an uninsured national bank or an uninsured Federal 
        branch or Federal agency.
  (b) Liability.--The liability of a receiver or conservator of 
an uninsured national bank or uninsured Federal branch or 
agency shall be determined in the same manner and subject to 
the same limitations that apply to receivers and conservators 
of insured depository institutions under section 11(e) of the 
Federal Deposit Insurance Act.
  (c) Regulatory Authority.--
          (1) In general.--The Comptroller of the Currency, in 
        consultation with the Federal Deposit Insurance 
        Corporation, may promulgate regulations to implement 
        this section.
          (2) Specific requirement.--In promulgating 
        regulations to implement this section, the Comptroller 
        of the Currency shall ensure that the regulations 
        generally are consistent with the regulations and 
        policies of the Federal Deposit Insurance Corporation 
        adopted pursuant to the Federal Deposit Insurance Act.
  (d) Definitions.--For purposes of this section, the terms 
``Federal branch'', ``Federal agency'', and ``foreign bank'' 
have the same meaning as in section 1(b) of the International 
Banking Act.

SEC. [407.] 407A. NATIONAL EMERGENCIES.

  The provisions of this subtitle may not be construed to limit 
the authority of the President under the Trading With the Enemy 
Act (50 U.S.C. App. 1 et seq.) or the International Emergency 
Economic Powers Act (50 U.S.C. 1701 et seq.).

           *       *       *       *       *       *       *

             CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS

SEC. 408. DEFINITIONS.

  For purposes of this chapter, the following definitions shall 
apply:
          (1) Multilateral clearing organization.--The term 
        ``multilateral clearing organization'' means a system 
        utilized by more than 2 participants in which the 
        bilateral credit exposures of participants arising from 
        the transactions cleared are effectively eliminated and 
        replaced by a system of guarantees, insurance, or 
        mutualized risk of loss.
          (2) Over-the-counter derivative instrument.--The term 
        ``over-the-counter derivative instrument'' means--
                  (A) any agreement, contract, or transaction, 
                including the terms and conditions incorporated 
                by reference in any such agreement, contract, 
                or transaction, which is an interest rate swap, 
                option, or forward agreement, including a rate 
                floor, rate cap, rate collar, cross-currency 
                rate swap, basis swap, and forward rate 
                agreement; a spot, same day-tomorrow, tomorrow-
                next, forward, or other foreign exchange or 
                precious metals agreement; a currency swap, 
                option, or forward agreement; an equity index 
                or equity swap, option, or forward agreement; a 
                debt index or debt swap, option, or forward 
                agreement; a credit spread or credit swap, 
                option, or forward agreement; a commodity index 
                or commodity swap, option, or forward 
                agreement; and a weather swap, weather 
                derivative, or weather option;
                  (B) any agreement, contract or transaction 
                similar to any other agreement, contract, or 
                transaction referred to in this clause that is 
                presently, or in the future becomes, regularly 
                entered into by parties that participate in 
                swap transactions (including terms and 
                conditions incorporated by reference in such 
                agreement) and that is a forward, swap, or 
                option on 1 or more occurrences of any event, 
                rates, currencies, commodities, equity 
                securities or other equity instruments, debt 
                securities or other debt instruments, economic 
                or other indices or measures of economic or 
                other risk or value;
                  (C) any contract of sale of a commodity for 
                future delivery or commodity option described 
                in subsection (c), (d), (f), (h), or (i) of 
                section 2 of the Commodity Exchange Act or 
                exempted under section 4(c) of such Act; and
                  (D) any option to enter into any, or any 
                combination of, agreements, contracts or 
                transactions referred to in this subparagraph.
          (3) Other definitions.--The terms ``State member 
        bank'' and ``affiliate'' have the meanings given the 
        terms in section 3 of the Federal Deposit Insurance 
        Act.

SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.

  (a) In General.--Except with respect to clearing 
organizations described in subsection (b), no person may 
operate a multilateral clearing organization for over-the-
counter derivative instruments, or otherwise engage in 
activities that constitute such a multilateral clearing 
organization unless the person is a national bank, State member 
bank, an affiliate of a national bank or a State member bank, 
or a corporation chartered under section 25A of the Federal 
Reserve Act.
  (b) Clearing Organizations.--Subsection (a) shall not apply 
to any clearing organization that--
          (1) is registered as a clearing agency under the 
        Securities Exchange Act of 1934;
          (2) performs clearing functions for a contract market 
        designated pursuant to the Commodity Exchange Act; or
          (3) is supervised by a foreign financial regulator 
        that an appropriate Federal financial regulatory agency 
        has determined satisfies appropriate standards.

           *       *       *       *       *       *       *

                              ----------                              

FEDERAL RESERVE ACT

           *       *       *       *       *       *       *

                        state banks as members.

  Sec. 9. Any bank incorporated by special law of any State, or 
organized under the general laws of any State or of the United 
States, including Morris Plan banks and other incorporated 
banking institutions engaged in similar business, desiring to 
become a member of the Federal Reserve System, may make 
application to the Board of Governors of the Federal Reserve 
System, under such rules and regulations as it may prescribe, 
for the right to subscribe to the stock of the Federal reserve 
bank organized within the district in which the applying bank 
is located. Such application shall be for the same amount of 
stock that the applying bank would be required to subscribe to 
as a national bank. For the purposes of membership of any such 
bank the terms ``capital'' and ``capital stock'' shall include 
the amount of outstanding capital notes and debentures legally 
issued by the applying bank and purchased by the Reconstruction 
Finance Corporation. The Board of Governors of the Federal 
Reserve System, subject to the provisions of this Act and to 
such conditions as it may prescribe pursuant thereto may permit 
the applying bank to become a stockholder of such Federal 
reserve bank.

           *       *       *       *       *       *       *

          (24) Enforcement authority.--Section 3(u), 
        subsections (j) and (k) of section 7, subsections (b) 
        through (n), (s), (u), and (v) of section 8, and 
        section 19 of the Federal Deposit Insurance Act shall 
        apply to a State member bank which is not an insured 
        depository institution (as defined in section 3 of the 
        Federal Deposit Insurance Act) in the same manner and 
        to the same extent as such provisions apply to State 
        member insured banks, and any reference in such 
        sections to an insured depository institution shall be 
        deemed to include a reference to any such noninsured 
        State member bank.

           *       *       *       *       *       *       *

SEC. 9B. RESOLUTION OF CLEARING BANKS.

  (a) Conservatorship or Receivership.--
          (1) Appointment.--The Board may appoint a conservator 
        or receiver to take possession and control of any 
        uninsured State member bank which operates, or operates 
        as, a multilateral clearing organization pursuant to 
        section 409 of the Federal Deposit Insurance 
        Corporation Improvement Act of 1991 to the same extent 
        and in the same manner as the Comptroller of the 
        Currency may appoint a conservator or receiver for a 
        national bank.
          (2) Powers.--The conservator or receiver for an 
        uninsured State member bank referred to in paragraph 
        (1) shall exercise the same powers, functions, and 
        duties, subject to the same limitations, as a 
        conservator or receiver for a national bank.
  (b) Board Authority.--The Board shall have the same authority 
with respect to any conservator or receiver appointed under 
subsection (a), and the uninsured State member bank for which 
the conservator or receiver has been appointed, as the 
Comptroller of the Currency has with respect to a conservator 
or receiver for a national bank and the national bank for which 
the conservator or receiver has been appointed.
  (c) Bankruptcy Proceedings.--The Board (in the case of an 
uninsured State member bank which operates, or operates as, 
such a multilateral clearing organization) may direct a 
conservator or receiver appointed for such bank to file a 
petition pursuant to title 11, United States Code, in which 
case, title 11, United States Code, shall apply to such bank in 
lieu of otherwise applicable Federal or State insolvency law.

           *       *       *       *       *       *       *

     banking corporations authorized to do foreign banking business

  Sec. 25A. Corporations to be organized for the purpose of 
engaging in international or foreign banking or other 
international orforeign financial operations, or in banking or 
other financial operations in a dependency or insular possession of the 
United States, either directly or through the agency, ownership, or 
control of local institutions in foreign countries, or in such 
dependencies or insular possessions as provided by this section, and to 
act when required by the Secretary of the Treasury as fiscal agents of 
the United States, may be formed by any number of natural persons, not 
less in any case than five: Provided, That nothing in this section 
shall be construed to deny the right of the Secretary of the Treasury 
to use any corporation organized under this section as depositaries in 
Panama and the Panama Canal Zone, or in the Philippine Islands and 
other insular possessions and dependencies of the United States.

           *       *       *       *       *       *       *

  [Whenever the Board of Governors of the Federal Reserve 
System shall become satisfied of the insolvency of any such 
corporation, it may appoint a receiver who shall take 
possession of all of the property and assets of the corporation 
and exercise the same rights, privileges, powers, and authority 
with respect thereto as are now exercised by receivers of 
national banks appointed by the Comptroller of the Currency of 
the United States: Provided, however, That the assets of the 
corporation subject to the laws of other countries or 
jurisdictions shall be dealt with in accordance with the terms 
of such laws.]
          (16) Appointment of receiver or conservator.--
                  (A) In general.--The Board may appoint a 
                conservator or receiver for a corporation 
                organized under the provisions of this section 
                to the same extent and in the same manner as 
                the Comptroller of the Currency may appoint a 
                conservator or receiver for a national bank, 
                and the conservator or receiver for such 
                corporation shall exercise the same powers, 
                functions, and duties, subject to the same 
                limitations, as a conservator or receiver for a 
                national bank.
                  (B) Equivalent authority.--The Board shall 
                have the same authority with respect to any 
                conservator or receiver appointed for a 
                corporation organized under the provisions of 
                this section under this paragraph and any such 
                corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver 
                of a national bank and the national bank for 
                which a conservator or receiver has been 
                appointed.
                  (C) Title 11 petitions.--The Board may direct 
                the conservator or receiver of a corporation 
                organized under the provisions of this section 
                to file a petition pursuant to title 11, United 
                States Code, in which case, title 11, United 
                States Code, shall apply to the corporation in 
                lieu of otherwise applicable Federal or State 
                insolvency law.

           *       *       *       *       *       *       *

                              ----------                              

TITLE 11, UNITED STATES CODE

           *       *       *       *       *       *       *

CHAPTER 1--GENERAL PROVISIONS

           *       *       *       *       *       *       *

Sec. 101. Definitions

  In this title--
          (1)  * * *

           *       *       *       *       *       *       *

          [(22) ``financial institution'' means a person that 
        is a commercial or savings bank, industrial savings 
        bank, savings and loan association, or trust company 
        and, when any such person is acting as agent or 
        custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this 
        title, such customer;]
          (22) the term ``financial institution''--
                  (A) means a Federal reserve bank or an entity 
                (domestic or foreign) that is a commercial or 
                savings bank, industrial savings bank, savings 
                and loan association, trust company, a bank or 
                a corporation organized under section 25A of 
                the Federal Reserve Act and, when any such bank 
                or entity is acting as agent or custodian for a 
                customer in connection with a securities 
                contract, as defined in section 741, such 
                customer; and
                  (B) includes any person described in 
                subparagraph (A) which operates, or operates 
                as, a multilateral clearing organization 
                pursuant to section 409 of the Federal Deposit 
                Insurance Corporation Improvement Act of 1991;
          (22A) ``financial participant'' means an entity that, 
        at the time it enters into a securities contract, 
        commodity contract or forward contract, or at the time 
        of the filing of the petition, has 1 or more agreements 
        or transactions described in paragraph (1), (2), (3), 
        (4), (5), or (6) of section 561(a) with the debtor or 
        any other entity (other than an affiliate) of a total 
        gross dollar value of at least $1,000,000,000 in 
        notional or actual principal amount outstanding on any 
        day during the previous 15-month period, or has gross 
        mark-to-market positions of at least $100,000,000 
        (aggregated across counterparties) in 1 or more such 
        agreement or transaction with the debtor or any other 
        entity (other than an affiliate) on any day during the 
        previous 15-month period;

           *       *       *       *       *       *       *

          (25) ``forward contract'' [means a contract] means--
                  (A) a contract (other than a commodity 
                contract) for the purchase, sale, or transfer 
                of a commodity, as defined in section 761(8) of 
                this title, or any similar good, article, 
                service, right, or interest which is presently 
                or in the future becomes the subject of dealing 
                in the forward contract trade, or product or 
                byproduct thereof, with a maturity date more 
                than two days after the date the contract is 
                entered into, including, but not limited to, a 
                repurchase transaction, reverse repurchase 
                transaction, consignment, lease, swap, hedge 
                transaction, deposit, loan, option, allocated 
                transaction, unallocated transaction[, or any 
                combination thereof or option thereon;], or any 
                other similar agreement;
                  (B) any combination of agreements or 
                transactions referred to in subparagraphs (A) 
                and (C);
                  (C) any option to enter into an agreement or 
                transaction referred to in subparagraph (A) or 
                (B);
                  (D) a master agreement that provides for an 
                agreement or transaction referred to in 
                subparagraph (A), (B), or (C), together with 
                all supplements to any such master agreement, 
                without regard to whether such master agreement 
                provides for an agreement or transaction that 
                is not a forward contract under this paragraph, 
                except that such master agreement shall be 
                considered to be a forward contract under this 
                paragraph only with respect to each agreement 
                or transaction under such master agreement that 
                is referred to in subparagraph (A), (B) or (C); 
                or
                  (E) any security agreement or arrangement, or 
                other credit enhancement related to any 
                agreement or transaction referred to in 
                subparagraph (A), (B), (C), or (D), but not to 
                exceed the actual value of such contract on the 
                date of the filing of the petition;
          [(26) ``forward contract merchant'' means a person 
        whose business consists in whole or in part of entering 
        into forward contracts as or with merchants in a 
        commodity, as defined in section 761(8) of this title, 
        or any similar good, article, service, right, or 
        interest which is presently or in the future becomes 
        the subject of dealing in the forward contract trade;]
          (26) ``forward contract merchant'' means a Federal 
        reserve bank, or an entity whose business consists in 
        whole or in part of entering into forward contracts as 
        or with merchants or in a commodity, as defined or in 
        section 761, or any similar good, article, service, 
        right, or interest which is presently or in the future 
        becomes the subject of dealing or in the forward 
        contract trade;

           *       *       *       *       *       *       *

          (38A) ``master netting agreement'' means an agreement 
        providing for the exercise of rights, including rights 
        of netting, setoff, liquidation, termination, 
        acceleration, or closeout, under or in connection with 
        1 or more contracts that are described in any 1 or more 
        of paragraphs (1) through (5) of section 561(a), or any 
        security agreement or arrangement or other credit 
        enhancement related to 1 or more of the foregoing. If a 
        master netting agreement contains provisions relating 
        to agreements or transactions that are not contracts 
        described in paragraphs (1) through (5) of section 
        561(a), the master netting agreement shall be deemed to 
        be a master netting agreement only with respect to 
        those agreements or transactions that are described in 
        any 1 or more of the paragraphs (1) through (5) of 
        section 561(a);
          (38B) ``master netting agreement participant'' means 
        an entity that, at any time before the filing of the 
        petition, is a party to an outstanding master netting 
        agreement with the debtor;

           *       *       *       *       *       *       *

          (46) ``repo participant'' means an entity that, [on 
        any day during the period beginning 90 days before the 
        date of] at any time before the filing of the petition, 
        has an outstanding repurchase agreement with the 
        debtor;
          [(47) ``repurchase agreement'' (which definition also 
        applies to a reverse repurchase agreement) means an 
        agreement, including related terms, which provides for 
        the transfer of certificates of deposit, eligible 
        bankers' acceptances, or securities that are direct 
        obligations of, or that are fully guaranteed as to 
        principal and interest by, the United States or any 
        agency of the United States against the transfer of 
        funds by the transferee of such certificates of 
        deposit, eligible bankers' acceptances, or securities 
        with a simultaneous agreement by such transferee to 
        transfer to the transferor thereof certificates of 
        deposit, eligible bankers' acceptances, or securities 
        as described above, at a date certain not later than 
        one year after such transfers or on demand, against the 
        transfer of funds;]
          (47) ``repurchase agreement'' (which definition also 
        applies to a ``reverse repurchase agreement'')--
                  (A) means--
                          (i) an agreement, including related 
                        terms, which provides for the transfer 
                        of 1 or more certificates of deposit, 
                        mortgage-related securities (as defined 
                        in the Securities Exchange Act of 
                        1934), mortgage loans, interests in 
                        mortgage-related securities or mortgage 
                        loans, eligible bankers' acceptances, 
                        qualified foreign government 
                        securities, or securities that are 
                        direct obligations of, or that are 
                        fully guaranteed by, the United States 
                        or any agency of the United States 
                        against the transfer of funds by the 
                        transferee of such certificates of 
                        deposit, eligible bankers' acceptances, 
                        securities, loans, or interests, with a 
                        simultaneous agreement by such 
                        transferee to transfer to the 
                        transferor thereof certificates of 
                        deposit, eligible bankers' acceptance, 
                        securities, loans, or interests of the 
                        kind described above, at a date certain 
                        not later than 1 year after such 
                        transfer or on demand, against the 
                        transfer of funds;
                          (ii) any combination of agreements or 
                        transactions referred to in clauses (i) 
                        and (iii);
                          (iii) an option to enter into an 
                        agreement or transaction referred to in 
                        clause (i) or (ii);
                          (iv) a master agreement that provides 
                        for an agreement or transaction 
                        referred to in clause (i), (ii), or 
                        (iii), together with all supplements to 
                        any such master agreement, without 
                        regard to whether such master agreement 
                        provides for an agreement or 
                        transaction that is not a repurchase 
                        agreement under this paragraph, except 
                        that such master agreement shall be 
                        considered to be a repurchase agreement 
                        under this paragraph only with respect 
                        to each agreement or transaction under 
                        the master agreement that is referred 
                        to in clause (i), (ii), or (iii); or
                          (v) any security agreement or 
                        arrangement or other credit enhancement 
                        related to any agreement or transaction 
                        referred to in clause (i), (ii), (iii), 
                        or (iv), but not to exceed the actual 
                        value of such contract on the date of 
                        the filing of the petition; and
                  (B) does not include a repurchase obligation 
                under a participation in a commercial mortgage 
                loan,
        and, for purposes of this paragraph, the term 
        ``qualified foreign government security'' means a 
        security that is a direct obligation of, or that is 
        fully guaranteed by, the central government of a member 
        of the Organization for Economic Cooperation and 
        Development;
          (48) ``securities clearing agency'' means person that 
        is registered as a clearing agency under section 17A of 
        the Securities Exchange Act of 1934 or exempt from such 
        registration under such section pursuant to an order of 
        the Securities and Exchange Commission or whose 
        business is confined to the performance of functions of 
        a clearing agency with respect to exempted securities, 
        as defined in section 3(a)(12) of such Act for the 
        purposes of such section 17A;

           *       *       *       *       *       *       *

          [(53B) ``swap agreement'' means--
                  [(A) an agreement (including terms and 
                conditions incorporated by reference therein) 
                which is a rate swap agreement, basis swap, 
                forward rate agreement, commodity swap, 
                interest rate option, forward foreign exchange 
                agreement, spot foreign exchange agreement, 
                rate cap agreement, rate floor agreement, rate 
                collar agreement, currency swap agreement, 
                cross-currency rate swap agreement, currency 
                option, any other similar agreement (including 
                any option to enter into any of the foregoing);
                  [(B) any combination of the foregoing; or
                  [(C) a master agreement for any of the 
                foregoing together with all supplements;]
          (53B) ``swap agreement''--
                  (A) means--
                          (i) any agreement, including the 
                        terms and conditions incorporated by 
                        reference in such agreement, which is 
                        an interest rate swap, option, future, 
                        or forward agreement, including a rate 
                        floor, rate cap, rate collar, cross-
                        currency rate swap, and basis swap; a 
                        spot, same day-tomorrow, tomorrow-next, 
                        forward, or other foreign exchange or 
                        precious metals agreement; a currency 
                        swap, option, future, or forward 
                        agreement; an equity index or an equity 
                        swap, option, future, or forward 
                        agreement; a debt index or a debt swap, 
                        option, future, or forward agreement; a 
                        credit spread or a credit swap, option, 
                        future, or forward agreement; a 
                        commodity index or a commodity swap, 
                        option, future, or forward agreement; 
                        or a weather swap, weather derivative, 
                        or weather option;
                          (ii) any agreement or transaction 
                        similar to any other agreement or 
                        transaction referred to in this 
                        paragraph that--
                                  (I) is presently, or in the 
                                future becomes, regularly 
                                entered into in the swap market 
                                (including terms and conditions 
                                incorporated by reference 
                                therein); and
                                  (II) is a forward, swap, 
                                future, or option on 1 or more 
                                rates, currencies, commodities, 
                                equity securities, or other 
                                equity instruments, debt 
                                securities or other debt 
                                instruments, or economic 
                                indices or measures of economic 
                                risk or value;
                          (iii) any combination of agreements 
                        or transactions referred to in this 
                        paragraph;
                          (iv) any option to enter into an 
                        agreement or transaction referred to in 
                        this paragraph;
                          (v) a master agreement that provides 
                        for an agreement or transaction 
                        referred to in clause (i), (ii), (iii), 
                        or (iv), together with all supplements 
                        to any such master agreement, and 
                        without regard to whether the master 
                        agreement contains an agreement or 
                        transaction that is not a swap 
                        agreement under this paragraph, except 
                        that the master agreement shall be 
                        considered to be a swap agreement under 
                        this paragraph only with respect to 
                        each agreement or transaction under the 
                        master agreement that is referred to in 
                        clause (i), (ii), (iii), or (iv); or
                  (B) any security agreement or arrangement or 
                other credit enhancement related to any 
                agreements or transactions referred to in 
                subparagraph (A), but not to exceed the actual 
                value of such contract on the date of the 
                filing of the petition; and
                  (C) is applicable for purposes of this title 
                only and shall not be construed or applied so 
                as to challenge or affect the characterization, 
                definition, or treatment of any swap agreement 
                under any other statute, regulation, or rule, 
                including the Securities Act of 1933, the 
                Securities Exchange Act of 1934, the Public 
                Utility Holding Company Act of 1935, the Trust 
                Indenture Act of 1939, the Investment Company 
                Act of 1940, the Investment Advisers Act of 
                1940, the Securities Investor Protection Act of 
                1970, the Commodity Exchange Act, and the 
                regulations prescribed by the Securities and 
                Exchange Commission or the Commodity Futures 
                Trading Commission.

           *       *       *       *       *       *       *

  (54A) the term ``uninsured State member bank'' means a State 
member bank (as defined in section 3 of the Federal Deposit 
Insurance Act) the deposits of which are not insured by the 
Federal Deposit Insurance Corporation; and

           *       *       *       *       *       *       *

Sec. 103. Applicability of chapters

  (a)  * * *

           *       *       *       *       *       *       *

  (e) Scope of Application.--Subchapter V of chapter 7 of this 
title shall apply only in a case under such chapter concerning 
the liquidation of an uninsured State member bank, or a 
corporationorganized under section 25A of the Federal Reserve 
Act, which operates, or operates as, a multilateral clearing 
organization pursuant to section 409 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991.
  [(e)] (f) Except as provided in section 901 of this title, 
only chapters 1 and 9 of this title apply in a case under such 
chapter 9.
  [(f)] (g) Except as provided in section 901 of this title, 
subchapters I, II, and III of chapter 11 of this title apply 
only in a case under such chapter.
  [(g)] (h) Subchapter IV of chapter 11 of this title applies 
only in a case under such chapter concerning a railroad.
  [(h)] (i) Chapter 13 of this title applies only in a case 
under such chapter.
  [(i)] (j) Chapter 12 of this title applies only in a case 
under such chapter.

           *       *       *       *       *       *       *

Sec. 109. Who may be a debtor

  (a)  * * *
  (b) A person may be a debtor under chapter 7 of this title 
only if such person is not--
          (1) a railroad;
          (2) a domestic insurance company, bank, savings bank, 
        cooperative bank, savings and loan association, 
        building and loan association, homestead association, a 
        small business investment company licensed by the Small 
        Business Administration under subsection (c) or (d) of 
        section 301 of the Small Business Investment Act of 
        1958, credit union, or industrial bank or similar 
        institution which is an insured bank as defined in 
        section 3(h) of the Federal Deposit Insurance Act[; 
        or], except that an uninsured State member bank, or a 
        corporation organized under section 25A of the Federal 
        Reserve Act, which operates, or operates as, a 
        multilateral clearing organization pursuant to section 
        409 of the Federal Deposit Insurance Corporation 
        Improvement Act of 1991 may be a debtor if a petition 
        is filed at the direction of the Board of Governors of 
        the Federal Reserve System; or

           *       *       *       *       *       *       *

  [(d) Only a person that may be a debtor under chapter 7 of 
this title, except a stockbroker or a commodity broker, and a 
railroad may be a debtor under chapter 11 of this title.]
  (d) Only a railroad, a person that may be a debtor under 
chapter 7 of this title (except a stockbroker or a commodity 
broker), and an uninsured State member bank, or a corporation 
organized under section 25A of the Federal Reserve Act, which 
operates, or operates as, a multilateral clearing organization 
pursuant to section 409 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 may be a debtor under 
chapter 11 of this title.

           *       *       *       *       *       *       *

CHAPTER 3--CASE ADMINISTRATION

           *       *       *       *       *       *       *

SUBCHAPTER I--COMMENCEMENT OF A CASE

           *       *       *       *       *       *       *

Sec. 304. Cases ancillary to foreign proceedings

  (a) * * *

           *       *       *       *       *       *       *

  (d) Any provisions of this title relating to securities 
contracts, commodity contracts, forward contracts, repurchase 
agreements, swap agreements, or master netting agreements shall 
apply in a case ancillary to a foreign proceeding under this 
section or any other section of this title so that enforcement 
of contractual provisions of such contracts and agreements in 
accordance with their terms will not be stayed or otherwise 
limited by operation of any provision of this title or by order 
of a court in any proceeding under this title, and to limit 
avoidance powers to the same extent as in a proceeding under 
chapter 7 or 11 (such enforcement not to be limited based on 
the presence or absence of assets of the debtor in the United 
States).

SUBCHAPTER IV--ADMINISTRATIVE POWERS

           *       *       *       *       *       *       *

Sec. 362. Automatic stay

  (a)  * * *

           *       *       *       *       *       *       *

  (b) The filing of a petition under section 301, 302, or 303 
of this title, or of an application under section 5(a)(3) of 
the Securities Investor Protection Act of 1970, does not 
operate as a stay--
          (1)  * * *

           *       *       *       *       *       *       *

          (6) under subsection (a) of this section, of the 
        setoff by a commodity broker, forward contract 
        merchant, stockbroker, [financial institutions,] 
        financial institution, financial participant or 
        securities clearing agency of any mutual debt and claim 
        under or in connection with commodity contracts, as 
        defined in section 761 of this title, forward 
        contracts, or securities contracts, as defined in 
        section 741 of this title, that constitutes the setoff 
        of a claim against the debtor for a margin payment, as 
        defined in section 101, 741, or 761 of this title, or 
        settlement payment, as defined in section 101 or 741 of 
        this title, arising out of commodity contracts, forward 
        contracts, or securities contracts against cash, 
        securities, or other property held by, pledged to and 
        under the control of, or due from such commodity 
        broker, forward contract merchant, stockbroker, 
        [financial institutions,] financial institution, 
        financial participant or securities clearing agency to 
        margin, guarantee, secure, or settle commodity 
        contracts, forward contracts, or securities contracts;
          (7) under subsection (a) of this section, of the 
        setoff by a repo participant, of any mutual debt and 
        claim under or in connection with repurchase agreements 
        that constitutes the setoff of a claim against the 
        debtor for a margin payment, as defined in section 741 
        or 761 of this title, or settlement payment, as defined 
        in section 741 of this title, arising out of repurchase 
        agreements against cash, securities, or other property 
        held by, pledged to and under the control of, or due 
        from such repo participant to margin, guarantee, secure 
        or settle repurchase agreements;

           *       *       *       *       *       *       *

          [(17) under subsection (a) of this section, of the 
        setoff by a swap participant, of any mutual debt and 
        claim under or in connection with any swap agreement 
        that constitutes the setoff of a claim against the 
        debtor for any payment due from the debtor under or in 
        connection with any swap agreement against any payment 
        due to the debtor from the swap participant under or in 
        connection with any swap agreement or against cash, 
        securities, or other property of the debtor held by or 
        due from such swap participant to guarantee, secure or 
        settle any swap agreement; or]
          (17) under subsection (a), of the setoff by a swap 
        participant of a mutual debt and claim under or in 
        connection with 1 or more swap agreements that 
        constitutes the setoff of a claim against the debtor 
        for any payment or other transfer of property due from 
        the debtor under or in connection with any swap 
        agreement against any payment due to the debtor from 
        the swap participant under or in connection with any 
        swap agreement or against cash, securities, or other 
        property held by, pledged to and under the control of, 
        or due from such swap participant to margin, guarantee, 
        secure, or settle any swap agreement;
          (18) under subsection (a) of the creation or 
        perfection of a statutory lien for an ad valorem 
        property tax imposed by the District of Columbia, or a 
        political subdivision of a State, if such tax comes due 
        after the filing of the petition[.]; or
          (19) under subsection (a), of the setoff by a master 
        netting agreement participant of a mutual debt and 
        claim under or in connection with 1 or more master 
        netting agreements or any contract or agreement subject 
        to such agreements that constitutes the setoff of a 
        claim against the debtor for any payment or other 
        transfer of property due from the debtor under or in 
        connection with such agreements or any contract or 
        agreement subject to such agreements against any 
        payment due to the debtor from such master netting 
        agreement participant under or in connection with such 
        agreements or any contract or agreement subject to such 
        agreements or against cash, securities, or other 
        property held by, pledged to and under the control of, 
        or due from such master netting agreement participant 
        to margin, guarantee, secure, or settle such agreements 
        or any contract or agreement subject to such 
        agreements, to the extent such participant is eligible 
        to exercise such offset rights under paragraph(6), (7), 
or (17) for each individual contract covered by the master netting 
agreement in issue.

           *       *       *       *       *       *       *

  (i) Limitation.--The exercise of rights not subject to the 
stay arising under subsection (a) pursuant to paragraph (6), 
(7), or (17), or (32) of subsection (b) shall not be stayed by 
any order of a court or administrative agency in any proceeding 
under this title.

           *       *       *       *       *       *       *

CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE

           *       *       *       *       *       *       *

                       SUBCHAPTER III--THE ESTATE

541.  Property of the estate.
     * * * * * * *
[555.  Contractual right to liquidate a securities contract.
[556.  Contractual right to liquidate a commodity contract or forward 
          contract.]
555.  Contractual right to liquidate, terminate, or accelerate a 
          securities contract.
556.  Contractual right to liquidate, terminate, or accelerate a 
          commodities contract or forward contract.
     * * * * * * *
[559.  Contractual right to liquidate a repurchase agreement.
[560.  Contractual right to terminate a swap agreement.]
559.  Contractual right to liquidate, terminate, or accelerate a 
          repurchase agreement.
560.  Contractual right to liquidate, terminate, or accelerate a swap 
          agreement.
561.  Contractual right to terminate, liquidate, accelerate, or offset 
          under a master netting agreement and across contracts.
562.  Damage measure in connection with swap agreements, securities 
          contracts, forward contracts, commodity contracts, repurchase 
          agreements, or master netting agreements.

           *       *       *       *       *       *       *

SUBCHAPTER I--CREDITORS AND CLAIMS

           *       *       *       *       *       *       *

Sec. 502. Allowance of claims or interests

  (a)  * * *

           *       *       *       *       *       *       *

  (g)(1) A claim arising from the rejection, under section 365 
of this title or under a plan under chapter 9, 11, 12, or 13 of 
this title, of an executory contract or unexpired lease of the 
debtor that has not been assumed shall be determined, and shall 
be allowed under subsection (a), (b), or (c) of this section or 
disallowed under subsection (d) or (e) of this section, the 
same as if such claim had arisen before the date of the filing 
of the petition.
  (2) A claim for damages calculated in accordance with section 
562 shall be allowed under subsection (a), (b), or (c), or 
disallowed under subsection (d) or (e), as if such claim had 
arisen before the date of the filing of the petition.

           *       *       *       *       *       *       *

                       SUBCHAPTER III--THE ESTATE

Sec. 541. Property of the estate

  (a)  * * *

           *       *       *       *       *       *       *

  (b) Property of the estate does not include--
          (1)  * * *

           *       *       *       *       *       *       *

          (4) any interest of the debtor in liquid or gaseous 
        hydrocarbons to the extent that--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (B)(i)  * * *
                  (ii) but for the operation of this paragraph, 
                the estate could include the interest referred 
                to in clause (i) only by virtue of section 542 
                of this title; [or]
          (5) any eligible asset (or proceeds thereof), to the 
        extent that such eligible asset was transferred by the 
        debtor before the date of commencement of the case, to 
        an eligible entity in connection with an asset-backed 
        securitization, except to the extent such asset (or 
        proceeds or value thereof) may be recovered by the 
        trustee under section 550 by virtue of avoidance under 
        section 548(a)(1); or
          [(5)] (6) any interest in cash or cash equivalents 
        that constitute proceeds of a sale by the debtor of a 
        money order that is made--
                  (A)  * * *

           *       *       *       *       *       *       *

  (e) For purposes of this section, the following definitions 
shall apply:
          (1) the term ``asset-backed securitization'' means a 
        transaction in which eligible assets transferred to an 
        eligible entity are used as the source of payment on 
        securities, including all securities issued by 
        governmental units, at least 1 class or tranche of 
        which is rated investment grade by 1 or more nationally 
        recognized securities rating organizations, when the 
        securities are initially issued by an issuer;
          (2) the term ``eligible asset'' means--
                  (A) financial assets (including interests 
                therein and proceeds thereof), either fixed or 
                revolving, whether or not such assets are in 
                existence as of the date of the transfer, 
                including residential and commercial mortgage 
                loans, consumer receivables, trade receivables, 
                assets of governmental units (including payment 
                obligations relating to taxes, receipts, fines, 
                tickets, and other sources of revenue), and 
                lease receivables, that, by their terms, 
                convert into cash within a finite time period, 
                plus any residual interest in property subject 
                to receivables included in such financial 
                assets plus any rights or other assets designed 
                to assure the servicing or timely distribution 
                of proceeds to security holders;
                  (B) cash; and
                  (C) securities, including all securities 
                issued by governmental units.
          (3) the term ``eligible entity'' means--
                  (A) an issuer; or
                  (B) a trust, corporation, partnership, 
                governmental unit, limited liability company 
                (including a single member limited liability 
                company), or other entity engaged exclusively 
                in the business of acquiring and transferring 
                eligible assets directly or indirectly to an 
                issuer and taking actions ancillary thereto;
          (4) the term ``issuer'' means a trust, corporation, 
        partnership, governmental unit, limited liability 
        company (including a single member limited liability 
        company), or other entity engaged exclusively in the 
        business of acquiring and holding eligible assets, 
        issuing securities backed by eligible assets, and 
        taking actions ancillary thereto; and
          (5) the term ``transferred'' means the debtor, 
        pursuant to a written agreement, represented and 
        warranted that eligible assets were sold, contributed, 
        or otherwise conveyed with the intention of removing 
        them from the estate of the debtor pursuant to 
        subsection (b)(5) (whether or not reference is made to 
        this title or any section of this title), irrespective, 
        without limitation, of--
                  (A) whether the debtor directly or indirectly 
                obtained or held an interest in the issuer or 
                in any securities issued by the issuer;
                  (B) whether the debtor had an obligation to 
                repurchase or to service or supervise the 
                servicing of all or any portion of such 
                eligible assets; or
                  (C) the characterization of such sale, 
                contribution, or other conveyance for tax, 
                accounting, regulatory reporting, or other 
                purposes.

           *       *       *       *       *       *       *

Sec. 546. Limitations on avoiding powers

  (a)  * * *

           *       *       *       *       *       *       *

  (e) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 
548(b) of this title, the trustee may not avoid a transfer that 
is a margin payment, as defined in section 101, 741, or 761 of 
this title, or settlement payment, as defined in section 101 or 
741 of this title, made by or to a commodity broker, forward 
contract merchant, stockbroker, financial institution, 
financial participant, or securities clearing agency, that is 
made before the commencement of the case, except under section 
548(a)(1)(A) of this title.

           *       *       *       *       *       *       *

  (g) Notwithstanding sections 544, 545, 547, 548(a)(1)(B) and 
548(b) of this title, the trustee may not avoid a transfer 
[under a swap agreement], made by or to a swap participant, [in 
connection with a swap agreement] under or in connection with 
any swapagreement and that is made before the commencement of 
the case, except under section 548(a)(1)(A) of this title.

           *       *       *       *       *       *       *

  (j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 
548(b), the trustee may not avoid a transfer made by or to a 
master netting agreement participant under or in connection 
with any master netting agreement or any individual contract 
covered thereby that is made before the commencement of the 
case, except under section 548(a)(1)(A), and except to the 
extent the trustee could otherwise avoid such a transfer made 
under an individual contract covered by such master netting 
agreement.

           *       *       *       *       *       *       *

Sec. 548. Fraudulent transfers and obligations

  (a)  * * *

           *       *       *       *       *       *       *

  (d)(1)  * * *
  (2) In this section--
          (A)  * * *
          (B) a commodity broker, forward contract merchant, 
        stockbroker, financial institution, financial 
        participant, or securities clearing agency that 
        receives a margin payment, as defined in section 101, 
        741, or 761 of this title, or settlement payment, as 
        defined in section 101 or 741 of this title, takes for 
        value to the extent of such payment;
          (C) a repo participant that receives a margin 
        payment, as defined in section 741 or 761 of this 
        title, or settlement payment, as defined in section 741 
        of this title, in connection with a repurchase 
        agreement, takes for value to the extent of such 
        payment; [and]
          (D) a swap participant that receives a transfer in 
        connection with a swap agreement takes for value to the 
        extent of such transfer[.]; and
          (E) a master netting agreement participant that 
        receives a transfer in connection with a master netting 
        agreement or any individual contract covered thereby 
        takes for value to the extent of such transfer, except, 
        with respect to a transfer under any individual 
        contract covered thereby, to the extent such master 
        netting agreement participant otherwise did not take 
        (or is otherwise not deemed to have taken) such 
        transfer for value.

           *       *       *       *       *       *       *

Sec. 553. Setoff

  (a) Except as otherwise provided in this section and in 
sections 362 and 363 of this title, this title does not affect 
any right of a creditor to offset a mutual debt owing by such 
creditor to the debtor that arose before the commencement of 
the case under this title against a claim of such creditor 
against the debtor that arose before the commencement of the 
case, except to the extent that--
          (1)  * * *

           *       *       *       *       *       *       *

          (3) the debt owed to the debtor by such creditor was 
        incurred by such creditor--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) for the purpose of obtaining a right of 
                setoff against the debtor (except for a setoff 
                of a kind described in section 362(b)(6), 
                362(b)(7), 362(b)(17), 362(b)(32), 555, 556, 
                559, 560 or 561).
  (b)(1) Except with respect to a setoff of a kind described in 
section 362(b)(6), 362(b)(7), [362(b)(14)] 362(b)(17), 
362(b)(32), 555, 556, 559, 560, 561, 365(h), 546(h), or 
365(i)(2) of this title, if a creditor offsets a mutual debt 
owing to the debtor against a claim against the debtor on or 
within 90 days before the date of the filing of the petition, 
then the trustee may recover from such creditor the amount so 
offset to the extent that any insufficiency on the date of such 
setoff is less than the insufficiency on the later of--
          (A)  * * *

           *       *       *       *       *       *       *

[Sec. 555. Contractual right to liquidate a securities contract]

Sec. 555. Contractual right to liquidate, terminate, or accelerate a 
                    securities contract

  The exercise of a contractual right of a stockbroker, 
financial institution, financial participant, or securities 
clearing agency to cause the [liquidation] liquidation, 
termination, or acceleration of a securities contract, as 
defined in section 741 of this title, because of a condition of 
the kind specified in section 365(e)(1) of this title shall not 
be stayed, avoided, or otherwise limited by operation of any 
provision of this title or by order of a court or 
administrative agency in any proceeding under this title unless 
such order is authorized under the provisions of the Securities 
Investor Protection Act of 1970 or any statute administered by 
the Securities and Exchange Commission. As used in this 
section, the term ``contractual right'' includes a right set 
forth in a rule or bylaw of a national securities exchange, a 
national securities association, or a securities clearing 
agency, a right set forth in a bylaw of a clearing organization 
or contract market or in a resolution of the governing board 
thereof, and a right, whether or not in writing, arising under 
common law, under law merchant, or by reason of normal business 
practice.

[Sec. 556. Contractual right to liquidate a commodities contract or 
                    forward contract]

Sec. 556. Contractual right to liquidate, terminate, or accelerate a 
                    commodities contract or forward contract

  The contractual right of a commodity broker, financial 
participant or forward contract merchant to cause the 
[liquidation] liquidation, termination, or acceleration of a 
commodity contract, as defined in section 761 of this title, or 
forward contract because of a condition of the kind specified 
in section 365(e)(1) of this title, and the right to a 
variation or maintenance margin payment received from a trustee 
with respect to open commodity contracts orforward contracts, 
shall not be stayed, avoided, or otherwise limited by operation of any 
provision of this title or by the order of a court in any proceeding 
under this title. As used in this section, the term ``contractual 
right'' includes a right set forth in a rule or bylaw of a clearing 
organization or contract market or in a resolution of the governing 
board thereof and a right, whether or not evidenced in writing, arising 
under common law, under law merchant or by reason of normal business 
practice.

           *       *       *       *       *       *       *

[Sec. 559. Contractual right to liquidate a repurchase agreement]

Sec. 559. Contractual right to liquidate, terminate, or accelerate a 
                    repurchase agreement

  The exercise of a contractual right of a repo participant to 
cause the [liquidation] liquidation, termination, or 
acceleration of a repurchase agreement because of a condition 
of the kind specified in section 365(e)(1) of this title shall 
not be stayed, avoided, or otherwise limited by operation of 
any provision of this title or by order of a court or 
administrative agency in any proceeding under this title, 
unless, where the debtor is a stockbroker or securities 
clearing agency, such order is authorized under the provisions 
of the Securities Investor Protection Act of 1970 or any 
statute administered by the Securities and Exchange Commission. 
In the event that a repo participant liquidates one or more 
repurchase agreements with a debtor and under the terms of one 
or more such agreements has agreed to deliver assets subject to 
repurchase agreements to the debtor, any excess of the market 
prices received on liquidation of such assets (or if any such 
assets are not disposed of on the date of liquidation of such 
repurchase agreements, at the prices available at the time of 
liquidation of such repurchase agreements from a generally 
recognized source or the most recent closing bid quotation from 
such a source) over the sum of the stated repurchase prices and 
all expenses in connection with the liquidation of such 
repurchase agreements shall be deemed property of the estate, 
subject to the available rights of setoff. As used in this 
section, the term ``contractual right'' includes a right set 
forth in a rule or bylaw, applicable to each party to the 
repurchase agreement, of a national securities exchange, a 
national securities association, or a securities clearing 
agency, and a right, whether or not evidenced in writing, 
arising under common law, under law merchant or by reason of 
normal business practice.

[Sec. 560. Contractual right to terminate a swap agreement]

Sec. 560. Contractual right to liquidate, terminate, or accelerate a 
                    swap agreement

  The exercise of any contractual right of any swap participant 
to cause the [termination of a swap agreement] liquidation, 
termination, or acceleration of 1 or more swap agreements 
because of a condition of the kind specified in section 
365(e)(1) of this title or to offset or net out any termination 
values or payment amounts arising under or [in connection with 
any swap agreement] in connection with the termination, 
liquidation, or acceleration of 1 or more swap agreements shall 
not be stayed, avoided, or otherwise limited by operation of 
any provision of this title or by order of a court or 
administrative agency in any proceeding under this title. As 
used in this section, the term ``contractual right'' includes a 
right, whether or not evidenced in writing, arising under 
common law, under law merchant, or by reason of normal business 
practice.

Sec. 561. Contractual right to terminate, liquidate, accelerate, or 
                    offset under a master netting agreement and across 
                    contracts

  (a) In General.--Subject to subsection (b), the exercise of 
any contractual right, because of a condition of the kind 
specified in section 365(e)(1), to cause the termination, 
liquidation, or acceleration of or to offset or net termination 
values, payment amounts or other transfer obligations arising 
under or in connection with 1 or more (or the termination, 
liquidation, or acceleration of 1 or more)--
          (1) securities contracts, as defined in section 
        741(7);
          (2) commodity contracts, as defined in section 
        761(4);
          (3) forward contracts;
          (4) repurchase agreements;
          (5) swap agreements; or
          (6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation 
of any provision of this title or by any order of a court or 
administrative agency in any proceeding under this title.
  (b) Exception.--
          (1) A party may exercise a contractual right 
        described in subsection (a) to terminate, liquidate, or 
        accelerate only to the extent that such party could 
        exercise such a right under section 555, 556, 559, or 
        560 for each individual contract covered by the master 
        netting agreement in issue.
          (2) If a debtor is a commodity broker subject to 
        subchapter IV of chapter 7--
                  (A) a party may not net or offset an 
                obligation to the debtor arising under, or in 
                connection with, a commodity contract against 
                any claim arising under, or in connection with, 
                other instruments, contracts, or agreements 
                listed in subsection (a), except to the extent 
                the party has positive net equity in the 
                commodity accounts at the debtor, as calculated 
                under such subchapter; and
                  (B) another commodity broker may not net or 
                offset an obligation to the debtor arising 
                under, or in connection with, a commodity 
                contract entered into or held on behalf of a 
                customer of the debtor against any claim 
                arising under, or in connection with, other 
                instruments, contracts, or agreements listed in 
                subsection (a).
  (c) Rule of Application.--Subparagraphs (A) and (B) of 
subsection (b)(2) shall not be construed as prohibiting the 
offset of claims and obligations arising pursuant to--
          (1) a cross-margining arrangement that has been 
        approved by the Commodity Futures Trading Commission or 
        that has been submitted to such Commission pursuant to 
        section5a(a)(12) of the Commodity Exchange Act and has 
been permitted to go into effect; or
          (2) another netting arrangement, between a clearing 
        organization (as defined in section 761) and another 
        entity, that has been approved by the Commodity Futures 
        Trading Commission.
  (d) Definition.--As used in this section, the term 
``contractual right'' includes a right set forth in a rule or 
bylaw of a national securities exchange, a national securities 
association, or a securities clearing agency, a right set forth 
in a bylaw of a clearing organization or contract market or in 
a resolution of the governing board thereof, and a right, 
whether or not evidenced in writing, arising under common law, 
under law merchant, or by reason of normal business practice.

Sec. 562. Damage measure in connection with swap agreements, securities 
                    contracts, forward contracts, commodity contracts, 
                    repurchase agreements, or master netting agreements

  If the trustee rejects a swap agreement, securities contract 
as defined in section 741, forward contract, commodity contract 
(as defined in section 761) repurchase agreement, or master 
netting agreement pursuant to section 365(a), or if a forward 
contract merchant, stockbroker, financial institution, 
securities clearing agency, repo participant, financial 
participant, master netting agreement participant, or swap 
participant liquidates, terminates, or accelerates such 
contract or agreement, damages shall be measured as of the 
earlier of--
          (1) the date of such rejection; or
          (2) the date of such liquidation, termination, or 
        acceleration.

           *       *       *       *       *       *       *

CHAPTER 7--LIQUIDATION

           *       *       *       *       *       *       *

                 SUBCHAPTER III--STOCKBROKER LIQUIDATION

741. Definitions for this subchapter.
     * * * * * * *
753. Stockbroker liquidation and forward contract merchants, commodity 
          brokers, stockbrokers, financial institutions, financial 
          participants, securities clearing agencies, swap participants, 
          repo participants, and master netting agreement participants.

               SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION

     * * * * * * *
767. Commodity broker liquidation and forward contract merchants, 
          commodity brokers, stockbrokers, financial institutions, 
          financial participants, securities clearing agencies, swap 
          participants, repo participants, and master netting agreement 
          participants.

                 SUBCHAPTER V--CLEARING BANK LIQUIDATION

Sec.
781. Definitions.
782. Selection of trustee.
783. Additional powers of trustee.
784. Right to be heard.

           *       *       *       *       *       *       *

                SUBCHAPTER III--STOCKBROKER LIQUIDATION

Sec. 741. Definitions for this subchapter

  In this subchapter--
          (1)  * * *

           *       *       *       *       *       *       *

          [(7) ``securities contract'' means contract for the 
        purchase, sale, or loan of a security, including an 
        option for the purchase or sale of a security, 
        certificate of deposit, or group or index of securities 
        (including any interest therein or based on the value 
        thereof), or any option entered into on a national 
        securities exchange relating to foreign currencies, or 
        the guarantee of any settlement of cash or securities 
        by or to a securities clearing agency;]
          (7) ``securities contract''--
                  (A) means--
                          (i) a contract for the purchase, 
                        sale, or loan of a security, a 
                        certificate of deposit, a mortgage loan 
                        or any interest in a mortgage loan, a 
                        group or index of securities, 
                        certificates of deposit or mortgage 
                        loans or interests therein (including 
                        an interest therein or based on the 
                        value thereof), or option on any of the 
                        foregoing, including an option to 
                        purchase or sell any such security, 
                        certificate of deposit, loan, interest, 
                        group or index, or option;
                          (ii) any option entered into on a 
                        national securities exchange relating 
                        to foreign currencies;
                          (iii) the guarantee by or to any 
                        securities clearing agency of a 
                        settlement of cash, securities, 
                        certificates of deposit, mortgage loans 
                        or interests therein, group or index of 
                        securities, or mortgage loans or 
                        interests therein (including any 
                        interest therein or based on the value 
                        thereof), or option on any of the 
                        foregoing, including an option to 
                        purchase or sell any such security, 
                        certificate of deposit, loan, interest, 
                        group or index, or option;
                          (iv) any margin loan;
                          (v) any other agreement or 
                        transaction that is similar to an 
                        agreement or transaction referred to in 
                        this paragraph;
                          (vi) any combination of the 
                        agreements or transactions referred to 
                        in this paragraph;
                          (vii) any option to enter into any 
                        agreement or transaction referred to in 
                        this paragraph;
                          (viii) a master agreement that 
                        provides for an agreement or 
                        transaction referred to in clause (i), 
                        (ii), (iii), (iv), (v), (vi), or (vii), 
                        together with all supplements to any 
                        such master agreement, without regard 
                        to whether the master agreement 
                        provides for an agreement or 
                        transaction that is not a securities 
                        contract under this paragraph, except 
                        that such master agreement shall be 
                        considered to be a securities contract 
                        under this paragraph only with respect 
                        to each agreement or transaction under 
                        such master agreement that is referred 
                        to in clause (i), (ii), (iii), (iv), 
                        (v), (vi), or (vii); or
                          (ix) any security agreement or 
                        arrangement or other credit enhancement 
                        related to any agreement or transaction 
                        referred to in this paragraph, but not 
                        to exceed the actual value of such 
                        contract on the date of the filing of 
                        the petition; and
                  (B) does not include any purchase, sale, or 
                repurchase obligation under a participation in 
                a commercial mortgage loan.

           *       *       *       *       *       *       *

Sec. 753. Stockbroker liquidation and forward contract merchants, 
                    commodity brokers, stockbrokers, financial 
                    institutions, financial participants, securities 
                    clearing agencies, swap participants, repo 
                    participants, and master netting agreement 
                    participants

  Notwithstanding any other provision of this title, the 
exercise of rights by a forward contract merchant, commodity 
broker, stockbroker, financial institution, securities clearing 
agency, swap participant, repo participant, financial 
participant, or master netting agreement participant under this 
title shall not affect the priority of any unsecured claim it 
may have after the exercise of such rights.

              SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION

Sec. 761. Definitions for this subchapter

  In this subchapter--
          (1)  * * *

           *       *       *       *       *       *       *

          (4) ``commodity contract'' means--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (D) with respect to a clearing organization, 
                contract for the purchase or sale of a 
                commodity for future delivery on, or subject to 
                the rules of, a contract market or board of 
                trade that is cleared by such clearing 
                organization, or commodity option traded on, or 
                subject to the rules of, a contract market or 
                board of trade that is cleared by such clearing 
                organization; [or]

           *       *       *       *       *       *       *

                  (F) any other agreement or transaction that 
                is similar to an agreement or transaction 
                referred to in this paragraph;
                  (G) any combination of the agreements or 
                transactions referred to in this paragraph;
                  (H) any option to enter into an agreement or 
                transaction referred to in this paragraph;
                  (I) a master agreement that provides for an 
                agreement or transaction referred to in 
                subparagraph (A), (B), (C), (D), (E), (F), (G), 
                or (H), together with all supplements to such 
                master agreement, without regard to whether the 
                master agreement provides for an agreement or 
                transaction that is not a commodity contract 
                under this paragraph, except that the master 
                agreement shall be considered to be a commodity 
                contract under this paragraph only with respect 
                to each agreement or transaction under the 
                master agreement that is referred to in 
                subparagraph (A), (B), (C), (D), (E), (F), (G), 
                or (H); or
                  (J) any security agreement or arrangement or 
                other credit enhancement related to any 
                agreement or transaction referred to in this 
                paragraph, but not to exceed the actual value 
                of such contract on the date of the filing of 
                the petition;

           *       *       *       *       *       *       *

Sec. 767. Commodity broker liquidation and forward contract merchants, 
                    commodity brokers, stockbrokers, financial 
                    institutions, financial participants, securities 
                    clearing agencies, swap participants, repo 
                    participants, and master netting agreement 
                    participants

  Notwithstanding any other provision of this title, the 
exercise of rights by a forward contract merchant, commodity 
broker, stockbroker, financial institution, financial 
participant, securities clearing agency, swap participant, repo 
participant, or master netting agreement participant under this 
title shall not affect the priority of any unsecured claim it 
may have after the exercise of such rights.

                SUBCHAPTER V--CLEARING BANK LIQUIDATION

Sec. 781. Definitions

  For purposes of this subchapter, the following definitions 
shall apply:
          (1) Board.--The term ``Board'' means the Board of 
        Governors of the Federal Reserve System.
          (2) Depository institution.--The term ``depository 
        institution'' has the same meaning as in section 3 of 
        the Federal Deposit Insurance Act, and includes any 
        wholesale bank.
          (3) Clearing bank.--The term ``clearing bank'' means 
        an uninsured State member bank, or a corporation 
        organized under section 25A of the Federal Reserve Act, 
        which operates, or operates as, a multilateral clearing 
        organization pursuant to section 409 of the Federal 
        Deposit Insurance Corporation Improvement Act of 1991.

Sec. 782. Selection of trustee

  (a) In General.--
          (1) Appointment.--Notwithstanding any other provision 
        of this title, the conservator or receiver who files 
        the petition shall be the trustee under this chapter, 
        unless the Board designates an alternative trustee.
          (2) Successor.--The Board may designate a successor 
        trustee if required.
  (b) Authority of Trustee.--Whenever the Board appoints or 
designates a trustee, chapter 3 and sections 704 and 705 of 
this title shall apply to the Board in the same way and to the 
same extent that they apply to a United States trustee.

Sec. 783. Additional powers of trustee

  (a) Distribution of Property Not of the Estate.--The trustee 
under this subchapter has power to distribute property not of 
the estate, including distributions to customers that are 
mandated by subchapters III and IV of this chapter.
  (b) Disposition of Institution.--The trustee under this 
subchapter may, after notice and a hearing--
          (1) sell the clearing bank to a depository 
        institution or consortium of depository 
institutions(which consortium may agree on the allocation of the 
clearing bank among the consortium);
          (2) merge the clearing bank with a depository 
        institution;
          (3) transfer contracts to the same extent as could a 
        receiver for a depository institution under paragraphs 
        (9) and (10) of section 11(e) of the Federal Deposit 
        Insurance Act;
          (4) transfer assets or liabilities to a depository 
        institution;
          (5) transfer assets and liabilities to a bridge bank 
        as provided in paragraphs (1), (3)(A), (5), (6), of 
        section 11(n) of the Federal Deposit Insurance Act, 
        paragraphs (9) through (13) of such section, and 
        subparagraphs (A) through (H) and subparagraph (K) of 
        paragraph (4) of such section 11(n), except that--
                  (A) the bridge bank to which such assets or 
                liabilities are transferred shall be treated as 
                a clearing bank for the purpose of this 
                subsection; and
                  (B) any references in any such provision of 
                law to the Federal Deposit Insurance 
                Corporation shall be construed to be references 
                to the appointing agency and that references to 
                deposit insurance shall be omitted.
  (c) Certain Transfers Included.--Any reference in this 
section to transfers of liabilities includes a ratable transfer 
of liabilities within a priority class.

Sec. 784. Right to be heard

  The Board or a Federal reserve bank (in the case of a 
clearing bank that is a member of that bank) may raise and may 
appear and be heard on any issue in a case under this 
subchapter.

           *       *       *       *       *       *       *

CHAPTER 9--ADJUSTMENT OF DEBTS OF A MUNICIPALITY

           *       *       *       *       *       *       *

Sec. 901. Applicability of other sections of this title

  (a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c), 
364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506, 
507(a)(1), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 
548, 549(a), 549(c), 549(d), 550, 551, 552, 553, 555, 556, 557, 
559, 560, 561, 562, 1102, 1103, 1109, 1111(b), 1122, 
1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5), 
1123(b), 1124, 1125, 1126(a), 1126(b), 1126(c), 1126(e), 
1126(f), 1126(g), 1127(d), 1128, 1129(a)(2), 1129(a)(3), 
1129(a)(6), 1129(a)(8), 1129(a)(10), 1129(b)(1), 1129(b)(2)(A), 
1129(b)(2)(B), 1142(b), 1143, 1144, and 1145 of this title 
apply in a case under this chapter.

           *       *       *       *       *       *       *

                              ----------                              

FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *

  Sec. 11. (a)  * * *

           *       *       *       *       *       *       *

  (e) Provisions Relating to Contracts Entered Into Before 
Appointment of Conservator or Receiver.--
          (1)  * * *

           *       *       *       *       *       *       *

          (8) Certain qualified financial contracts.--
                  (A) Rights of parties to contracts.--Subject 
                to [paragraph (10)] paragraphs (9) and (10) of 
                this subsection and notwithstanding any other 
                provision of this Act (other than subsection 
                (d)(9) of this section and section 13(e)), any 
                other Federal law, or the law of any State, no 
                person shall be stayed or prohibited from 
                exercising--
                          (i) any right [to cause the 
                        termination or liquidation] such person 
                        has to cause the termination, 
                        liquidation, or acceleration of any 
                        qualified financial contract with an 
                        insured depository institution which 
                        arises upon the appointment of the 
                        Corporation as receiver for such 
                        institution at any time after such 
                        appointment;
                          [(ii) any right under any security 
                        arrangement relating to any contract or 
                        agreement described in clause (i); or]
                          (ii) any right under any security 
                        agreement or arrangement or other 
                        credit enhancement related to 1 or more 
                        qualified financial contracts described 
                        in clause (i);

           *       *       *       *       *       *       *

                  (C) Certain transfers not avoidable.--
                          (i) In general.--Notwithstanding 
                        paragraph [(11)] (12), section 5242 of 
                        the Revised Statutes of the United 
                        States (12 U.S.C. 91) or any other 
                        Federal or State law relating to the 
                        avoidance of preferential or fraudulent 
                        transfers, the Corporation, whether 
                        acting as such or as conservator or 
                        receiver of an insured depository 
                        institution, may not avoid any transfer 
                        of money or other property in 
                        connection with any qualified financial 
                        contract with an insured depository 
                        institution.

           *       *       *       *       *       *       *

                  (D) Certain contracts and agreements 
                defined.--For purposes of this subsection--
                          (i) Qualified financial contract.--
                        The term ``qualified financial 
                        contract'' means any securities 
                        contract, commodity contract, forward 
                        contract, repurchase agreement, swap 
                        agreement, and any similar agreement 
                        that the Corporation determines by 
                        regulation, resolution or order to be a 
                        qualified financial contract for 
                        purposes of this paragraph.
                          [(ii) Securities contract.--The term 
                        ``securities contract''--
                                  [(I) has the meaning given to 
                                such term in section 741 of 
                                title 11, United States Code, 
                                except that the term 
                                ``security'' (as used in such 
                                section) shall be deemed to 
                                include any mortgage loan, any 
                                mortgage-related security (as 
                                defined in section 3(a)(41) of 
                                the Securities Exchange Act of 
                                1934), and any interest in any 
                                mortgage loan or mortgage-
                                related security; and
                                  [(II) does not include any 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                participation within the 
                                meaning of such term.
                          [(iii) Commodity contract.--The term 
                        ``commodity contract'' has the meaning 
                        given to such term in section 761 of 
                        title 11, United States Code.
                          [(iv) Forward contract.--The term 
                        ``forward contract'' has the meaning 
                        given to such term in section 101 of 
                        title 11, United States Code.
                          [(v) Repurchase agreement.--The term 
                        ``repurchase agreement''--
                                  [(I) has the meaning given to 
                                such term in section 101 of 
                                title 11, the United States 
                                Code, except that the items (as 
                                described in such section) 
                                which may be subject to any 
                                such agreement shall be deemed 
                                to include mortgage-related 
                                securities (as such term is 
                                defined in section 3(a)(41) of 
                                the Securities Exchange Act of 
                                1934), any mortgage loan, and 
                                any interest in any mortgage 
                                loan; and
                                  [(II) does not include any 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                participation within the 
                                meaning of such term.
                          [(vi) Swap agreement.--The term 
                        ``swap agreement''--
                                  [(I) means any agreement, 
                                including the terms and 
                                conditions incorporated by 
                                reference in any such 
                                agreement, which is a rate swap 
                                agreement, basis swap, 
                                commodity swap, forward rate 
                                agreement, interest rate 
                                future, interest rate option 
                                purchased, forward foreign 
                                exchange agreement, rate cap 
                                agreement, rate floor 
                                agreement, rate collar 
                                agreement, currency swap 
                                agreement, cross-currency rate 
                                swap agreement, currency 
                                future, or currency option 
                                purchased or any other similar 
                                agreement, and
                                  [(II) includes any 
                                combination of such agreements 
                                and any option to enter into 
                                any such agreement.
                          [(vii) Treatment of master agreement 
                        as 1 swap agreement.--Any master 
                        agreement for any agreements described 
                        in clause (vi)(I) together with all 
                        supplements to such master agreement 
                        shall be treated as 1 swap agreement.
                          [(viii) Transfer.--The term 
                        ``transfer'' has the meaning given to 
                        such term in section 101 of title 11, 
                        United States Code.]
                          (ii) Securities contract.--The term 
                        ``securities contract''--
                                  (I) means a contract for the 
                                purchase, sale, or loan of a 
                                security, a certificate of 
                                deposit, a mortgage loan, or 
                                any interest in a mortgage 
                                loan, a group or index of 
                                securities, certificates of 
                                deposit, or mortgage loans or 
                                interests therein (including 
                                any interest therein or based 
                                on the value thereof) or any 
                                option on any of the foregoing, 
                                including any option to 
                                purchase or sell any such 
                                security, certificate of 
                                deposit, loan, interest, group 
                                or index, or option;
                                  (II) does not include any 
                                purchase, sale, or repurchase 
                                obligation under a 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                agreement within the meaning of 
                                such term;
                                  (III) means any option 
                                entered into on a national 
                                securities exchange relating to 
                                foreign currencies;
                                  (IV) means the guarantee by 
                                or to any securities clearing 
                                agency of any settlement of 
                                cash, securities, certificates 
                                of deposit, mortgage loans or 
                                interests therein, group or 
                                index of securities, 
                                certificates of deposit, or 
                                mortgage loans or interests 
                                therein (including any interest 
                                therein or based on the value 
                                thereof) or option on any of 
                                the foregoing, including any 
                                option to purchase or sell any 
                                such security, certificate of 
                                deposit, loan, interest, group 
                                or index, or option;
                                  (V) means any margin loan;
                                  (VI) means any other 
                                agreement or transaction that 
                                is similar to any agreement or 
                                transaction referred to in this 
                                clause;
                                  (VII) means any combination 
                                of the agreements or 
                                transactions referred to in 
                                this clause;
                                  (VIII) means any option to 
                                enter into any agreement or 
                                transaction referred to in this 
                                clause;
                                  (IX) means a master agreement 
                                that provides for an agreement 
                                or transaction referred to in 
                                subclause (I), (III), (IV), 
                                (V), (VI), (VII), or (VIII), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a securities 
                                contract under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a securities contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (III), (IV), 
                                (V), (VI), (VII), or (VIII); 
                                and
                                  (X) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in this 
                                clause.
                          (iii) Commodity contract.--The term 
                        ``commodity contract'' means--
                                  (I) with respect to a futures 
                                commission merchant, a contract 
                                for the purchase or sale of a 
                                commodity for future delivery 
                                on, or subject to the rules of, 
                                a contract market or board of 
                                trade;
                                  (II) with respect to a 
                                foreign futures commission 
                                merchant, a foreign future;
                                  (III) with respect to a 
                                leverage transaction merchant, 
                                a leverage transaction;
                                  (IV) with respect to a 
                                clearing organization, a 
                                contract for the purchase or 
                                sale of a commodity for future 
                                delivery on, or subject to the 
                                rules of, a contract market or 
                                board of trade that is cleared 
                                by such clearing organization, 
                                or commodity option traded on, 
                                or subject to the rules of, a 
                                contract market or board of 
                                trade that is cleared by such 
                                clearing organization;
                                  (V) with respect to a 
                                commodity options dealer, a 
                                commodity option;
                                  (VI) any other agreement or 
                                transaction that is similar to 
                                any agreement or transaction 
                                referred to in this clause;
                                  (VII) any combination of the 
                                agreements or transactions 
                                referred to in this clause;
                                  (VIII) any option to enter 
                                into any agreement or 
                                transaction referred to in this 
                                clause;
                                  (IX) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), (III), 
                                (IV), (V), (VI), (VII), or 
                                (VIII), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                provides for an agreement or 
                                transaction that is not a 
                                commodity contract under this 
                                clause, except that the master 
                                agreement shall be considered 
                                to be a commodity contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), (III), 
                                (IV), (V), (VI), (VII), or 
                                (VIII); or
                                  (X) any security agreement or 
                                arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in this clause.
                          (iv) Forward contract.--The term 
                        ``forward contract'' means--
                                  (I) a contract (other than a 
                                commodity contract) for the 
                                purchase, sale, or transfer of 
                                a commodity or any similar 
                                good, article, service, right, 
                                or interest which is presently 
                                or in the future becomes the 
                                subject of dealing in the 
                                forward contract trade, or 
                                product or byproduct thereof, 
                                with a maturity date more than 
                                2 days after the date the 
                                contract is entered into, 
                                including a repurchase 
                                transaction, reverse repurchase 
                                transaction, consignment, 
                                lease, swap, hedge transaction, 
                                deposit, loan, option, 
                                allocated transaction, 
                                unallocated transaction, or any 
                                other similar agreement;
                                  (II) any combination of 
                                agreements or transactions 
                                referred to in subclauses (I) 
                                and (III);
                                  (III) any option to enter 
                                into any agreement or 
                                transaction referred to in 
                                subclause (I) or (II);
                                  (IV) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), or (III), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a forward contract 
                                under this clause, except that 
                                the master agreement shall be 
                                considered to be a forward 
                                contract under this clause only 
                                with respect to each agreement 
                                or transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), or 
                                (III); or
                                  (V) any security agreement or 
                                arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in subclause (I), 
                                (II), (III), or (IV).
                          (v) Repurchase agreement.--The term 
                        ``repurchase agreement'' (which 
                        definition also applies to the term 
                        ``reverse repurchase agreement'')--
                                  (I) means an agreement, 
                                including related terms, which 
                                provides for the transfer of 1 
                                or more certificates of 
                                deposit, mortgage-related 
                                securities (as such term is 
                                defined in the Securities 
                                Exchange Act of 1934), mortgage 
                                loans, interests in mortgage-
                                related securities or mortgage 
                                loans, eligible bankers' 
                                acceptances, qualified foreign 
                                government securities or 
                                securities that are direct 
                                obligations of, or that are 
                                fully guaranteed by, the United 
                                States or any agency of the 
                                United States against the 
                                transfer of funds by the 
                                transferee of such certificates 
                                of deposit, eligible bankers' 
                                acceptances, securities, loans, 
                                or interests with a 
                                simultaneous agreement by such 
                                transferee to transfer to the 
                                transferor thereof certificates 
                                of deposit, eligible bankers' 
                                acceptances, securities, loans, 
                                or interests as described 
                                above, at a date certain not 
                                later than 1 year after such 
                                transfers or on demand, against 
                                the transfer of funds, or any 
                                other similar agreement;
                                  (II) does not include any 
                                repurchase obligation under a 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                participation within the 
                                meaning of such term;
                                  (III) means any combination 
                                of agreements or transactions 
                                referred to in subclauses (I) 
                                and (IV);
                                  (IV) means any option to 
                                enter into any agreement or 
                                transaction referred to in 
                                subclause (I) or (III);
                                  (V) means a master agreement 
                                that provides for an agreement 
                                or transaction referred to in 
                                subclause (I), (III), or (IV), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a repurchase 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a repurchase agreement 
                                under this subclause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (III), or 
                                (IV); and
                                  (VI) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in 
                                subclause (I), (III), (IV), or 
                                (V).
                        For purposes of this clause, the term 
                        ``qualified foreign government 
                        security'' means a security that is a 
                        direct obligation of, or that is fully 
                        guaranteed by, the central government 
                        of a member of the Organization for 
                        Economic Cooperation and Development 
                        (as determined by regulation or order 
                        adopted by the appropriate Federal 
                        banking authority).
                          (vi) Swap agreement.--The term ``swap 
                        agreement'' means--
                                  (I) any agreement, including 
                                the terms and conditions 
                                incorporated by reference in 
                                any such agreement, which is an 
                                interest rate swap, option, 
                                future, or forward agreement, 
                                including a rate floor, rate 
                                cap, rate collar, cross-
                                currency rate swap, and basis 
                                swap; a spot, same day-
                                tomorrow, tomorrow-next, 
                                forward, or other foreign 
                                exchange or precious metals 
                                agreement; a currency swap, 
                                option, future, or forward 
                                agreement; an equity index or 
                                equity swap, option, future, or 
                                forward agreement; a debt index 
                                or debt swap, option, future, 
                                orforward agreement; a credit 
spread or credit swap, option, future, or forward agreement; a 
commodity index or commodity swap, option, future, or forward 
agreement; or a weather swap, weather derivative, or a weather option;
                                  (II) any agreement or 
                                transaction similar to any 
                                other agreement or transaction 
                                referred to in this clause that 
                                is presently, or in the future 
                                becomes, regularly entered into 
                                in the swap market (including 
                                terms and conditions 
                                incorporated by reference in 
                                such agreement) and that is a 
                                forward, swap, future, or 
                                option on 1 or more rates, 
                                currencies, commodities, equity 
                                securities or other equity 
                                instruments, debt securities or 
                                other debt instruments, or 
                                economic indices or measures of 
                                economic risk or value;
                                  (III) any combination of 
                                agreements or transactions 
                                referred to in this clause;
                                  (IV) any option to enter into 
                                any agreement or transaction 
                                referred to in this clause;
                                  (V) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), (III), or 
                                (IV), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                contains an agreement or 
                                transaction that is not a swap 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a swap agreement under 
                                this clause only with respect 
                                to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), (III), 
                                or (IV); and
                                  (VI) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreements or transactions 
                                referred to in subparagraph 
                                (I), (II), (III), (IV), or (V).
                        Such term is applicable for purposes of 
                        this title only and shall not be 
                        construed or applied so as to challenge 
                        or affect the characterization, 
                        definition, or treatment of any swap 
                        agreement under any other statute, 
                        regulation, or rule, including the 
                        Securities Act of 1933, the Securities 
                        Exchange Act of 1934, the Public 
                        Utility Holding Company Act of 1935, 
                        the Trust Indenture Act of 1939, the 
                        Investment Company Act of 1940, the 
                        Investment Advisers Act of 1940, the 
                        Securities Investor Protection Act of 
                        1970, the Commodity Exchange Act, and 
                        the regulations promulgated by the 
                        Securities and Exchange Commission or 
                        the Commodity Futures Trading 
                        Commission.
                          (vii) Treatment of master agreement 
                        as 1 agreement.--Any master agreement 
                        for any contract or agreement described 
                        in any preceding clause of this 
                        subparagraph (or any master agreement 
                        for such master agreement or 
                        agreements), together with all 
                        supplements to such master agreement, 
                        shall be treated as a single agreement 
                        and a single qualified financial 
                        contract. If a master agreement 
                        contains provisions relating to 
                        agreements or transactions that are not 
                        themselves qualified financial 
                        contracts, the master agreement shall 
                        be deemed to be a qualified financial 
                        contract only with respect to those 
                        transactions that are themselves 
                        qualified financial contracts.
                          (viii) Transfer.--The term 
                        ``transfer'' means every mode, direct 
                        or indirect, absolute or conditional, 
                        voluntary or involuntary, of disposing 
                        of or parting with property or with an 
                        interest in property, including 
                        retention of title as a security 
                        interest and foreclosure of the 
                        depository institutions's equity of 
                        redemption.
                  (E) Certain protections in event of 
                appointment of conservator.--Notwithstanding 
                any other provision of this Act ([other than 
                paragraph (12) of this subsection, subsection 
                (d)(9)] other than subsections (d)(9) and 
                (e)(10) of this section, and section 13(e) of 
                this Act), any other Federal law, or the law of 
                any State, no person shall be stayed or 
                prohibited from exercising--
                          (i) any right such person has to 
                        cause the termination, liquidation, or 
                        acceleration of any qualified financial 
                        contract with a depository institution 
                        in a conservatorship based upon a 
                        default under such financial contract 
                        which is enforceable under applicable 
                        noninsolvency law;
                          [(ii) any right under any security 
                        arrangement relating to such qualified 
                        financial contracts; or]
                          (ii) any right under any security 
                        agreement or arrangement or other 
                        credit enhancement related to 1 or more 
                        qualified financial contracts described 
                        in clause (i);

           *       *       *       *       *       *       *

                  (F) Clarification.--No provision of law shall 
                be construed as limiting the right or power of 
                the Corporation, or authorizing any court or 
                agency to limit or delay, in any manner, the 
                right or power of the Corporation to transfer 
                any qualified financial contract in accordance 
                with paragraphs (9) and (10) of this subsection 
                or to disaffirm or repudiate any such contract 
                in accordance with paragraph (1).
                  (G) Walkaway clauses not effective.--
                          (i) In general.--Notwithstanding the 
                        provisions of subparagraphs (A) and 
                        (E), and sections 403 and 404 of the 
                        Federal Deposit Insurance Corporation 
                        Improvement Act of 1991, no walkaway 
                        clause shall be enforceable in a 
                        qualified financial contract of an 
                        insured depository institution in 
                        default.
                          (ii) Walkaway clause defined.--For 
                        purposes of this subparagraph, the term 
                        ``walkaway clause'' means a provision 
                        in a qualified financial contract that, 
                        after calculation of a value of a 
                        party's position or an amount due to or 
                        from 1 of the parties in accordance 
                        with its terms upon termination, 
                        liquidation, or acceleration of the 
                        qualified financial contract, either 
                        does not create a payment obligation of 
                        a party or extinguishes a payment 
                        obligation of a party in whole or in 
                        part solely because of such party's 
                        status as a nondefaulting party.
                  (H) Recordkeeping requirements.--The 
                Corporation, in consultation with the 
                appropriate Federal banking agencies, may 
                prescribe regulations requiring more detailed 
                recordkeeping with respect to qualified 
                financial contracts (including market 
                valuations) by insured depository institutions.
          [(9) Transfer of qualified financial contracts.--In 
        making any transfer of assets or liabilities of a 
        depository institution in default which includes any 
        qualified financial contract, the conservator or 
        receiver for such depository institution shall either--
                  [(A) transfer to 1 depository institution 
                (other than a depository institution in 
                default)--
                          [(i) all qualified financial 
                        contracts between--
                                  [(I) any person or any 
                                affiliate of such person; and
                                  [(II) the depository 
                                institution in default;
                          [(ii) all claims of such person or 
                        any affiliate of such person against 
                        such depository institution under any 
                        such contract (other than any claim 
                        which, under the terms of any such 
                        contract, is subordinated to the claims 
                        of general unsecured creditors of such 
                        institution);
                          [(iii) all claims of such depository 
                        institution against such person or any 
                        affiliate of such person under any such 
                        contract; and
                          [(iv) all property securing any claim 
                        described in clause (ii) or (iii) under 
                        any such contract; or
                  [(B) transfer none of the financial 
                contracts, claims, or property referred to in 
                subparagraph (A) (with respect to such person 
                and any affiliate of such person).]
          (9) Transfer of qualified financial contracts.--
                  (A) In general.--In making any transfer of 
                assets or liabilities of a depository 
                institution in default which includes any 
                qualified financial contract, the conservator 
                or receiver for such depository institution 
                shall either--
                          (i) transfer to 1 financial 
                        institution, other than a financial 
                        institution for which a conservator, 
                        receiver, trustee in bankruptcy, or 
                        other legal custodian has been 
                        appointed or which is otherwise the 
                        subject of a bankruptcy or insolvency 
                        proceeding--
                                  (I) all qualified financial 
                                contracts between any person or 
                                any affiliate of such person 
                                and the depository institution 
                                in default;
                                  (II) all claims of such 
                                person or any affiliate of such 
                                person against such depository 
                                institution under any such 
                                contract (other than any claim 
                                which, under the terms of any 
                                such contract, issubordinated 
to the claims of general unsecured creditors of such institution);
                                  (III) all claims of such 
                                depository institution against 
                                such person or any affiliate of 
                                such person under any such 
                                contract; and
                                  (IV) all property securing or 
                                any other credit enhancement 
                                for any contract described in 
                                subclause (I) or any claim 
                                described in subclause (II) or 
                                (III) under any such contract; 
                                or
                          (ii) transfer none of the qualified 
                        financial contracts, claims, property 
                        or other credit enhancement referred to 
                        in clause (i) (with respect to such 
                        person and any affiliate of such 
                        person).
                  (B) Transfer to foreign bank, foreign 
                financial institution, or branch or agency of a 
                foreign bank or financial institution.--In 
                transferring any qualified financial contracts 
                and related claims and property pursuant to 
                subparagraph (A)(i), the conservator or 
                receiver for such depository institution shall 
                not make such transfer to a foreign bank, 
                financial institution organized under the laws 
                of a foreign country, or a branch or agency of 
                a foreign bank or financial institution unless, 
                under the law applicable to such bank, 
                financial institution, branch or agency, to the 
                qualified financial contracts, and to any 
                netting contract, any security agreement or 
                arrangement or other credit enhancement related 
                to 1 or more qualified financial contracts, the 
                contractual rights of the parties to such 
                qualified financial contracts, netting 
                contracts, security agreements or arrangements, 
                or other credit enhancements are enforceable 
                substantially to the same extent as permitted 
                under this section.
                  (C) Transfer of contracts subject to the 
                rules of a clearing organization.--In the event 
                that a conservator or receiver transfers any 
                qualified financial contract and related 
                claims, property and credit enhancements 
                pursuant to subparagraph (A)(i) and such 
                contract is subject to the rules of a clearing 
                organization, the clearing organization shall 
                not be required to accept the transferee as a 
                member by virtue of the transfer.
                  (D) Definition.--For purposes of this 
                section, the term ``financial institution'' 
                means a broker or dealer, a depository 
                institution, a futures commission merchant, or 
                any other institution as determined by the 
                Corporation by regulation to be a financial 
                institution.
          (10) Notification of transfer.--
                  (A) In general.--If--
                          (i) the conservator or receiver for 
                        an insured depository institution in 
                        default makes any transfer of the 
                        assets and liabilities of such 
                        institution; and
                          (ii) the transfer includes any 
                        qualified financial contract,
                [the conservator or receiver shall use such 
                conservator's or receiver's best efforts to 
                notify any person who is a party to any such 
                contract of such transfer by 12:00, noon (local 
                time) on the business day following such 
                transfer] the conservator or receiver shall 
                notify any person who is a party to any such 
                contract of such transfer by 5:00 p.m. (eastern 
                time) on the business day following the date of 
                the appointment of the receiver, in the case of 
                a receivership, or the business day following 
                such transfer, in the case of a 
                conservatorship.
                  (B) Certain rights not enforceable.--
                          (i) Receivership.--A person who is a 
                        party to a qualified financial contract 
                        with an insured depository institution 
                        may not exercise any right such person 
                        has to terminate, liquidate, or net 
                        such contract under paragraph (8)(A) or 
                        section 403 or 404 of the Federal 
                        Deposit Insurance Corporation 
                        Improvement Act of 1991 solely by 
                        reason of or incidental to the 
                        appointment of a receiver for the 
                        depository institution (or the 
                        insolvency or financial condition of 
                        the depository institution for which 
                        the receiver has been appointed)--
                                  (I) until 5:00 p.m. (eastern 
                                time) on the business day 
                                following the date of the 
                                appointment of the receiver; or
                                  (II) after the person has 
                                received notice that the 
                                contract has been transferred 
                                pursuant to paragraph (9)(A).
                          (ii) Conservatorship.--A person who 
                        is a party to a qualified financial 
                        contract with an insured depository 
                        institution may not exercise any right 
                        such person has to terminate, 
                        liquidate, or net such contract under 
                        paragraph (8)(E) or section 403 or 404 
                        of the Federal Deposit Insurance 
                        Corporation Improvement Act of 1991, 
                        solely by reason of or incidental to 
                        the appointment of a conservator for 
                        the depository institution (or the 
                        insolvency or financial condition of 
                        the depository institution for which 
                        the conservator has been appointed).
                          (iii) Notice.--For purposes of this 
                        subsection, the Corporation as receiver 
                        or conservator of an insured depository 
                        institution shall be deemed to have 
                        notified a person who is a party to a 
                        qualified financial contract with such 
                        depository institution if the 
                        Corporation has taken steps reasonably 
                        calculated to provide notice to such 
                        person by the time specified in 
                        subparagraph (A) of this subsection.
                  (C) Treatment of bridge banks.--The following 
                institutions shall not be considered a 
                financial institution for which a conservator, 
                receiver, trustee in bankruptcy, or other legal 
                custodian has been appointed or which is 
                otherwise the subject of a bankruptcy or 
                insolvency proceeding for purposes of paragraph 
                (9)--
                          (i) a bridge bank; or
                          (ii) a depository institution 
                        organized by the Corporation, for which 
                        a conservator is appointed either--
                                  (I) immediately upon the 
                                organization of the 
                                institution; or
                                  (II) at the time of a 
                                purchase and assumption 
                                transaction between such 
                                institution and the Corporation 
                                as receiver for a depository 
                                institution in default.
                  [(B)] (D) Business day defined.--For purposes 
                of this paragraph, the term ``business day'' 
                means any day other than any Saturday, Sunday, 
                or any day on which either the New York Stock 
                Exchange or the Federal Reserve Bank of New 
                York is closed.
          (11) Disaffirmance or repudiation of qualified 
        financial contracts.--In exercising the rights of 
        disaffirmance or repudiation of a conservator or 
        receiver with respect to any qualified financial 
        contract to which an insured depository institution is 
        a party, the conservator or receiver for such 
        institution shall either--
                  (A) disaffirm or repudiate all qualified 
                financial contracts between--
                          (i) any person or any affiliate of 
                        such person; and
                          (ii) the depository institution in 
                        default; or
                  (B) disaffirm or repudiate none of the 
                qualified financial contracts referred to in 
                subparagraph (A) (with respect to such person 
                or any affiliate of such person).
          [(11)] (12) Certain security interests not 
        avoidable.--No provision of this subsection shall be 
        construed as permitting the avoidance of any legally 
        enforceable or perfected security interest in any of 
        the assets of any depository institution except where 
        such an interest is taken in contemplation of the 
        institution's insolvency or with the intent to hinder, 
        delay, or defraud the institution or the creditors of 
        such institution.
          [(12)] (13) Authority to enforce contracts.--
                  (A) In general.--The conservator or receiver 
                may enforce any contract, other than a 
                director's or officer's liability insurance 
                contract or a depository institution bond, 
                entered into by the depository institution 
                notwithstanding any provision of the contract 
                providing for termination, default, 
                acceleration, or exercise of rights upon, or 
                solely by reason of, insolvency or the 
                appointment or the exercise of rights or powers 
                of a conservator or receiver.

           *       *       *       *       *       *       *

          [(13)] (14) Exception for federal reserve and federal 
        home loan banks.--No provision of this subsection shall 
        apply with respect to--
                  (A) any extension of credit from any Federal 
                home loan bank or Federal Reserve bank to any 
                insured depository institution; or

           *       *       *       *       *       *       *

          [(14)] (15) Selling credit card accounts 
        receivable.--
                  (A) Notification required.--An 
                undercapitalized insured depository institution 
                (as defined in section 38) shall notify the 
                Corporation in writing before entering into an 
                agreement to sell credit card accounts 
                receivable.

           *       *       *       *       *       *       *

          [(15)] (16) Certain credit card customer lists 
        protected.--
                  (A) In general.--If any insured depository 
                institution sells credit card accounts 
                receivable under an agreement negotiated at 
                arm's length that provides for the sale of the 
                institution's credit card customer list, the 
                Corporation shall prohibit any party to a 
                transaction with respect to the institution 
                under this section or section 13 from using the 
                list, except as permitted under the agreement.

           *       *       *       *       *       *       *

  Sec. 13. (a)  * * *

           *       *       *       *       *       *       *

  (e) Agreements Against Interests of Corporation.--
          (1)  * * *

           *       *       *       *       *       *       *

          [(2) Public deposits.--An agreement to provide for 
        the lawful collateralization of deposits of a Federal, 
        State, or local governmental entity or of any depositor 
        referred to in section 11(a)(2) shall not be deemed to 
        be invalid pursuant to paragraph (1)(B) solely because 
        such agreement was not executed contemporaneously with 
        the acquisition of the collateral or with any changes 
        in the collateral made in accordance with such 
        agreement.]
          (2) Exemptions from contemporaneous execution 
        requirement.--An agreement to provide for the lawful 
        collateralization of--
                  (A) deposits of, or other credit extension 
                by, a Federal, State, or local governmental 
                entity, or of any depositor referred to in 
                section 11(a)(2), including an agreement to 
                provide collateral in lieu of a surety bond;
                  (B) bankruptcy estate funds pursuant to 
                section 345(b)(2) of title 11, United States 
                Code;
                  (C) extensions of credit, including any 
                overdraft, from a Federal reserve bank or 
                Federal home loan bank; or
                  (D) 1 or more qualified financial contracts, 
                as defined in section 11(e)(8)(D),
        shall not be deemed invalid pursuant to paragraph 
        (1)(B) solely because such agreement was not executed 
        contemporaneously with the acquisition of the 
        collateral or because of pledges, delivery, or 
        substitution of the collateral made in accordance with 
        such agreement.

           *       *       *       *       *       *       *

SEC. 49. RETAIL SWAP CUSTOMER PROTECTIONS.

  (a) Regulations Authorized.--The Board of Governors of the 
Federal Reserve System and the Secretary of the Treasury may, 
in consultation with appropriate Federal banking agencies, the 
Securities and Exchange Commission, and the Commodity Futures 
Trading Commission, jointly prescribe customer protection 
regulations that apply to sales practices relating to swap 
agreements (as defined in section 206(b) of the Gramm-Leach-
Bliley Act) between financial institutions and retail 
customers.
  (b) Sales Practice Regulations.--The regulations prescribed 
under subsection (a) may address--
          (1) the information that financial institutions shall 
        obtain from retail customers in order to determine 
        whether swap agreements recommended by the financial 
        institution to retail customers are appropriate in 
        light of the retail customer's net worth, ability and 
        willingness to incur losses, risk management needs, 
        financial goals, investment experience and history, and 
        other indicia of appropriateness;
          (2) information that financial institutions shall 
        provide to retail customers to help the retail 
        customers understand the economic characteristics and 
        risks of swap agreements recommended by financial 
        institutions;
          (3) measures to protect retail customers against 
        fraudulent, deceptive, and manipulative acts and 
        practices;
          (4) the extent to which access of retail customers to 
        particular classes of swap agreements should be 
        restricted; and
          (5) such other matters as the Secretary of the 
        Treasury and the Board of Governors of the Federal 
        Reserve System determine are necessary or appropriate 
        for the protection of retail customers of swap 
        agreements.
  (c) Definitions.--
          (1) Financial institution.--The term ``financial 
        institution'' means a person described in subclause 
        (I), (II), (III), (IV), (V), or (VI) of section 
        2(c)(2)(B)(ii) of the Commodity Exchange Act.
          (2) Retail customer.--The term ``retail customer'' 
        means a person other than an eligible contract 
        participant (as defined in section 1a(11) of the 
        Commodity Exchange Act).
  (d) Enforcement.--The regulations prescribed under subsection 
(a) shall be enforced as follows:
          (1) Subject to section 45 of the Federal Deposit 
        Insurance Act, under section 8 of the Federal Deposit 
        Insurance Act, in the case of--
                  (A) any national bank, Federal branch or 
                Federal agency of a foreign bank, or any 
                subsidiary of a national bank (other than any 
                broker, dealer, investment company or 
                investment adviser) by the Comptroller of the 
                Currency;
                  (B) any member bank (other than a national 
                bank), branch or agency of a foreign bank 
                (other than a Federal branch, Federal agency, 
                or insured State branch of a foreign bank), 
                commercial lending company owned or controlled 
                by a foreign bank, organization operating under 
                section 25 or 25A of the Federal Reserve Act, 
                any subsidiary of any such entity (other than 
                any broker, dealer, investment company or 
                investment adviser) and any bank holding 
                company and any nonbank affiliate of any such 
                company (other than any broker, dealer, 
                investment company or investment adviser) by 
                the Board of Governors of the Federal Reserve 
                System;
                  (C) any insured State nonmember bank, insured 
                State branch of a foreign bank, or any 
                subsidiary of any such entity (other than any 
                broker, dealer, investment company, 
orinvestment adviser) by the Board of Directors of the Federal Deposit 
Insurance Corporation; and
                  (D) any savings association the deposits of 
                which are insured by the Corporation, any 
                savings and loan holding company, or any 
                subsidiary of any such savings association or 
                holding company (other than any broker, dealer, 
                investment company or investment adviser) by 
                the Director of the Office of Thrift 
                Supervision.
          (2) Under the Federal Credit Union Act, by the 
        National Credit Union Administration Board with respect 
        to any federally insured credit union, and any 
        subsidiaries of such an entity.
          (3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to any 
        registered broker or dealer, or any associated person 
        thereof that is not otherwise regulated.
          (4) Under the Commodity Exchange Act, by the 
        Commodity Futures Trading Commission, with respect to 
        any registered futures commission merchant, or any 
        affiliated person of any such futures commission 
        merchant that is not otherwise regulated.
          (5) Under State insurance law, in the case of any 
        person engaged in providing insurance, or any affiliate 
        of any such person that is not otherwise regulated, by 
        the applicable State insurance authority of the State 
        in which the person is domiciled.

           *       *       *       *       *       *       *

                              ----------                              

      SECTION 5 OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970

SEC. 5. PROTECTION OF CUSTOMERS.

  (a)  * * *

           *       *       *       *       *       *       *

  (b) Court Action.--
          (1)  * * *

           *       *       *       *       *       *       *

          (2) Jurisdiction and powers of court.--
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) Exception from stay.--
                          (i) Notwithstanding section 362 of 
                        title 11, United States Code, neither 
                        the filing of an application under 
                        subsection (a)(3) nor any order or 
                        decree obtained by the Securities 
                        Investor Protection Corporation from 
                        the court shall operate as a stay of 
                        any contractual rights of a creditor to 
                        liquidate, terminate, or accelerate a 
                        securities contract, commodity 
                        contract, forward contract, repurchase 
                        agreement, swap agreement, or master 
                        netting agreement, each as defined in 
                        title 11, United States Code, to offset 
                        or net termination values, payment 
                        amounts, or other transfer obligations 
                        arising under or in connection with 1 
                        or more of such contracts or 
                        agreements, or to foreclose on any cash 
                        collateral pledged by the debtor 
                        whether or not with respect to 1 or 
                        more of such contracts or agreements.
                          (ii) Notwithstanding clause (i), such 
                        application, order, or decree may 
                        operate as a stay of the foreclosure on 
                        or disposition of securities collateral 
                        pledged by the debtor, whether or not 
                        with respect to 1 or more of such 
                        contracts or agreements, securities 
                        sold by the debtor under a repurchase 
                        agreement or securities lent under a 
                        securities lending agreement.
                          (iii) As used in this section, the 
                        term ``contractual right'' includes a 
                        right set forth in a rule or bylaw of a 
                        national securities exchange, a 
                        national securities association, or a 
                        securities clearing agency, a right set 
                        forth in a bylaw of a clearing 
                        organization or contract market or in a 
                        resolution of the governing board 
                        thereof, and a right, whether or not in 
                        writing, arising under common law, 
                        under law merchant, or by reason of 
                        normal business practice.

           *       *       *       *       *       *       *

                            ADDITIONAL VIEWS

    When combined, Sections 107 and 133 of H.R. 4541, as 
reported by the Committee on Banking and Financial Services, 
have the effect of preventing parties who are not otherwise 
``eligible contract participants'' from engaging in swaps 
agreements unless and until the Department of the Treasury and 
the Federal Reserve Board jointly promulgate rules to protect 
such now ineligible parties in such participation. This means 
most retail customers, including many small businesses, will be 
ineligible absent such rules. No mandates, time constraints, or 
other limitations have been placed upon the Treasury or the 
Federal Reserve in formulating such rules, including rules of 
classification of such customers and rules of participatory 
exclusion. Although the Department of the Treasury and the 
Federal Reserve are required to report to the Congress if they 
have not completed such rules within one year of enactment of 
H.R. 4541, this reporting requirement does not limit the 
discretion of these two entities in any manner.
    The rationale for the treatment in Sections 107 and 133 is 
that swaps can be complex instruments requiring a variety of 
protections for financially unsophisticated consumers, such as 
plain disclosures; ``know your customer'' benchmarks for 
permitted purchases and sales; and warnings as to potential 
liability. Moreover, swaps come in a great variety of tailored 
obligations, some of which might, indeed, be so complex as to 
be inappropriate for all but the most seasoned of investors. It 
is this very variety which has suggested the delegation of 
authority to the Department of the Treasury and the Federal 
Reserve Board to design protections for consumer and small 
business swaps, since all possible combinations of terms to 
comprise a swap cannot be addressed by the innately more 
general capacities of legislation.
    In voting for this broad grant to the Department of the 
Treasury and the Federal Reserve Board, this Member realizes 
that the swaps market can be a valuable development for the 
evolving financial world, but cautions that without meaningful 
consumer protections, this market could fall into disrepute and 
be the subject of concerted criticism, possibly resulting in 
crippling legislation. There is already a history involving 
large corporations in which litigation and regulatory fines 
were imposed even though the investors were highly experienced. 
Every effort should be made to assure that any consumer 
protection rules to be promulgated would prevent repeated 
incidents for consumers, especially since it is likely the 
alleged wrongs would be for widely marketed consumer products 
which are open to class actions.

                                                   John J. LaFalce.

                                
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