89–006 

111TH CONGRESS REPT. 111–385 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

DERIVATIVES MARKETS TRANSPARENCY AND 

ACCOUNTABILITY ACT OF 2009 

DECEMBER 19, 2009.—Ordered to be printed 

Mr. PETERSON of Minnesota, from the Committee on Agriculture, 

submitted the following 

R E P O R T 

[To accompany H.R. 977] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Agriculture, to whom was referred the bill 

(H.R. 977) to amend the Commodity Exchange Act to bring greater 

transparency and accountability to commodity markets, and for 

other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended 

do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Derivatives Markets Transparency and Accountability Act of 2009’’. 

SEC. 2. TABLE OF CONTENTS. 

The table of contents of this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

Sec. 3. Speculative limits and transparency of off-shore trading. 

Sec. 4. Detailed reporting and disaggregation of market data. 

Sec. 5. Transparency and recordkeeping authorities. 

Sec. 6. Trading limits to prevent excessive speculation. 

Sec. 7. CFTC Administration. 

Sec. 8. Review of prior actions. 

Sec. 9. Review of over-the-counter markets. 

Sec. 10. Study relating to international regulation of energy commodity markets. 

Sec. 11. Over-the-counter authority. 

Sec. 12. Expedited process. 

Sec. 13. Certain exclusions and exemptions available only for certain transactions settled and cleared through 

registered derivatives clearing organizations. 

Sec. 14. Treatment of emission allowances and offset credits. 

Sec. 15. Inspector General of the Commodity Futures Trading Commission. 

Sec. 16. Authority of Commodity Futures Trading Commission to suspend trading in credit default swaps. 

Sec. 17. Authority of Commodity Futures Trading Commission to prosecute criminal violations of the Commodity Exchange Act. 

Sec. 18. Diversity of directors of boards of trade. 


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SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF-SHORE TRADING. 

(a) IN GENERAL.—Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is 

amended by adding at the end the following: 

‘‘(e) FOREIGN BOARDS OF TRADE.— 

‘‘(1) IN GENERAL.—The Commission may not permit a foreign board of trade 

to provide to the members of the foreign board of trade or other participants 

located in the United States direct access to the electronic trading and order 

matching system of the foreign board of trade with respect to an agreement, 

contract, or transaction that settles against any price (including the daily or 

final settlement price) of 1 or more contracts listed for trading on a registered 

entity, unless— 

‘‘(A) the foreign board of trade makes public daily trading information regarding the agreement, contract, or transaction that is comparable to the 

daily trading information published by the registered entity for the 1 or 

more contracts against which the agreement, contract, or transaction traded 

on the foreign board of trade settles; and 

‘‘(B) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade)— 

‘‘(i) adopts position limits (including related hedge exemption provisions) for the agreement, contract, or transaction that are comparable, 

taking into consideration the relative sizes of the respective markets, 

to the position limits (including related hedge exemption provisions) 

adopted by the registered entity for the 1 or more contracts against 

which the agreement, contract, or transaction traded on the foreign 

board of trade settles; 

‘‘(ii) has the authority to require or direct market participants to 

limit, reduce, or liquidate any position the foreign board of trade (or the 

foreign futures authority that oversees the foreign board of trade) determines to be necessary to prevent or reduce the threat of price manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; 

‘‘(iii) agrees to promptly notify the Commission, with regard to the 

agreement, contract, or transaction, of any change regarding— 

‘‘(I) the information that the foreign board of trade will make 

publicly available; 

‘‘(II) the position limits that the foreign board of trade or foreign 

futures authority will adopt and enforce; 

‘‘(III) the position reductions required to prevent manipulation, 

excessive speculation as described in section 4a, price distortion, or 

disruption of delivery or the cash settlement process; and 

‘‘(IV) any other area of interest expressed by the Commission to 

the foreign board of trade or foreign futures authority; 

‘‘(iv) provides information to the Commission regarding large trader 

positions in the agreement, contract, or transaction that is comparable 

to the large trader position information collected by the Commission for 

the 1 or more contracts against which the agreement, contract, or 

transaction traded on the foreign board of trade settles; and 

‘‘(v) provides the Commission with information necessary to publish 

reports on aggregate trader positions for the agreement, contract, or 

transaction traded on the foreign board of trade that are comparable 

to such reports on aggregate trading positions for 1 or more contracts 

against which the agreement, contract, or transaction traded on the foreign board of trade settles. 

‘‘(2) EXISTING FOREIGN BOARDS OF TRADE.—Paragraph (1) shall not be effective 

with respect to any agreement, contract, or transaction executed on a foreign 

board of trade to which the Commission had granted direct access permission 

before the date of the enactment of this subsection until the date that is 180 

days after such date of enactment.’’. 

(b) LIABILITY OF REGISTERED PERSONS TRADING ON A FOREIGN BOARD OF TRADE.— 

(1) Section 4(a) of such Act (7 U.S.C. 6(a)) is amended by inserting ‘‘or by subsection (f)’’ after ‘‘Unless exempted by the Commission pursuant to subsection 

(c)’’. 

(2) Section 4 of such Act (7 U.S.C. 6) is further amended by adding at the 

end the following: 

‘‘(f)(1) A person registered with the Commission, or exempt from registration by 

the Commission, under this Act may not be found to have violated subsection (a) 

with respect to a transaction in, or in connection with, a contract of sale of a commodity for future delivery if the person— 


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‘‘(A) has reason to believe the transaction and the contract is made on or subject to the rules of a board of trade that is— 

‘‘(i) legally organized under the laws of a foreign country; 

‘‘(ii) authorized to act as a board of trade by a foreign futures authority; 

and 

‘‘(iii) subject to regulation by the foreign futures authority; and 

‘‘(B) has not been determined by the Commission to be operating in violation 

of subsection (a). 

‘‘(2) Nothing in this subsection shall be construed as implying or creating any presumption that a board of trade, exchange, or market is located outside the United 

States, or its territories or possessions, for purposes of subsection (a).’’. 

(c) CONTRACT ENFORCEMENT FOR FOREIGN FUTURES CONTRACTS.—Section 22(a) of 

such Act (7 U.S.C. 25(a)) is amended by adding at the end the following: 

‘‘(5) A contract of sale of a commodity for future delivery traded or executed 

on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes of section 4(a) shall not be void, voidable, 

or unenforceable, and a party to such a contract shall not be entitled to rescind 

or recover any payment made with respect to the contract, based on the failure 

of the foreign board of trade to comply with any provision of this Act.’’. 

SEC. 4. DETAILED REPORTING AND DISAGGREGATION OF MARKET DATA. 

Section 4 of the Commodity Exchange Act (7 U.S.C. 6), as amended by section 3 

of this Act, is amended by adding at the end the following: 

‘‘(g) DETAILED REPORTING AND DISAGGREGATION OF MARKET DATA.— ‘‘(1) INDEX TRADERS AND SWAP DEALERS REPORTING.—The Commission shall 

issue a proposed rule defining and classifying index traders and swap dealers 

(as those terms are defined by the Commission) for purposes of data reporting 

requirements and setting routine detailed reporting requirements for any positions of such entities in contracts traded on designated contract markets, derivatives transaction execution facilities, foreign boards of trade subject to section 4(e), and electronic trading facilities with respect to significant price discovery contracts not later than 90 days after the date of the enactment of this 

subsection, and issue a final rule within 180 days after such date of enactment. 

‘‘(2) DISAGGREGATION OF INDEX FUNDS AND OTHER DATA IN MARKETS.—Subject 

to section 8 and beginning within 60 days of the issuance of the final rule required by paragraph (1), the Commission shall disaggregate and make public 

monthly— 

‘‘(A) the number of positions and total notional value of index funds and 

other passive, long-only and short-only positions (as defined by the Commission) in all markets to the extent such information is available; and 

‘‘(B) data on speculative positions relative to bona fide hedgers in those 

markets to the extent such information is available.’’. 

SEC. 5. TRANSPARENCY AND RECORDKEEPING AUTHORITIES. 

(a) IN GENERAL.—Section 4g(a) of the Commodity Exchange Act (7 U.S.C. 6g(a)) 

is amended— 

(1) by inserting ‘‘a’’ before ‘‘futures commission merchant’’; and 

(2) by inserting ‘‘and transactions and positions traded pursuant to subsection 

(d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued by the Commission 

by rule, regulation or order,’’ after ‘‘United States or elsewhere,’’. 

(b) REPORTS OF DEALS EQUAL TO OR IN EXCESS OF TRADING LIMITS.— 

(1) IN GENERAL.—Section 4i of such Act (7 U.S.C. 6i) is amended— 

(A) in the first sentence— 

(i) by inserting ‘‘(a)’’ before ‘‘It shall’’; and 

(ii) by inserting ‘‘in the United States or elsewhere, and of transactions and positions in any such commodity entered into pursuant to 

subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued 

by the Commission by rule, regulation or order’’ before ‘‘, and of cash 

or spot’’; and 

(B) by striking all that follows the 1st sentence and inserting the following: 

‘‘(b) Upon special call by the Commission, any person shall provide to the Commission, in a form and manner and within the period specified in the special call, books 

and records of all transactions and positions traded on or subject to the rules of any 

board of trade or electronic trading facility in the United States or elsewhere, or 

pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued 

by the Commission by rule, regulation, or order, as the Commission may determine 

appropriate to deter and prevent price manipulation or any other disruption to market integrity or to diminish, eliminate, or prevent excessive speculation as described 

in section 4a(a). 


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‘‘(c) Such books and records described in subsections (a) and (b) shall show complete details concerning all such transactions, positions, inventories, and commitments, including the names and addresses of all persons having any interest therein, shall be kept for a period of 5 years, and shall be open at all times to inspection 

by any representative of the Commission or the Department of Justice. For the purposes of this section, the futures and cash or spot transactions and positions of any 

person shall include such transactions and positions of any persons directly or indirectly controlled by the person.’’. 

(2) NOTICE AND COMMENT.—Within 60 days after the date of the enactment 

of this subsection, the Commodity Futures Trading Commission shall conduct 

rulemaking, including an opportunity for notice and comment, on implementing 

the amendments made by paragraph (1). 

(c) CONFORMING AMENDMENTS.— 

(1) Section 2(d)(1) of such Act (7 U.S.C. 2(d)(1)) is amended by striking ‘‘5b 

or 12(e)(2)(B)’’ and inserting ‘‘4g(a), 4i, 5b, or 12(e)(2)(B), and the regulations of 

the Commission pursuant to section 4i(b) requiring reporting in connection with 

commodity option transactions)’’. 

(2) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended— 

(A) by inserting ‘‘4g(a), 4i,’’ before ‘‘5a (to’’; and 

(B) by inserting ‘‘, and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions’’ after ‘‘12(e)(2)(B)’’. 

(3) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended— 

(A) by inserting ‘‘4g(a), 4i,’’ before ‘‘5a (to’’; and 

(B) by inserting ‘‘, and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with commodity option transactions’’ after ‘‘12(e)(2)’’. 

(4) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)) is amended to read as 

follows: 

‘‘(A) sections 4g(a), 4i, 5b and 12(e)(2)(B), and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with 

commodity option transactions;’’. 

(5) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)) is amended to read as 

follows: 

‘‘(A) sections 4g(a), 4i, 5a (to the extent provided in section 5a(g)), 5b, 5d, 

and 12(e)(2)(B), and the regulations of the Commission pursuant to section 

4i(b) requiring reporting in connection with commodity option transactions;’’. 

SEC. 6. TRADING LIMITS TO PREVENT EXCESSIVE SPECULATION. 

(a) POSITION LIMITS.—Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) 

is amended— 

(1) in subsection (a)— 

(A) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 

(B) by adding after and below the end the following: 

‘‘(2)(A) In accordance with the standards set forth in paragraph (1) of this subsection and consistent with the good faith exception cited in subsection (b)(2), with 

respect to physical commodities other than excluded commodities as defined by the 

Commission, the Commission shall by rule, regulation, or order establish limits on 

the amount of positions, as appropriate, other than bona fide hedge positions, that 

may be held by any person with respect to contracts of sale for future delivery or 

with respect to options on such contracts or commodities traded on or subject to the 

rules of a contract market or derivatives transaction execution facility, or on an electronic trading facility as a significant price discovery contract. 

‘‘(B)(i) For exempt commodities, the limits shall be established within 180 days 

after the date of the enactment of this paragraph. 

‘‘(ii) For agricultural commodities, the limits shall be established within 270 days 

after the date of the enactment of this paragraph. 

‘‘(3) In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits— 

‘‘(A) on the number of positions that may be held by any person for the spot 

month, each other month, and the aggregate number of positions that may be 

held by any person for all months; 

‘‘(B) to the maximum extent practicable, in its discretion— 

‘‘(i) to diminish, eliminate, or prevent excessive speculation as described 

under this section; 

‘‘(ii) to deter and prevent market manipulation, squeezes, and corners; 

‘‘(iii) to ensure sufficient market liquidity for bona fide hedgers; and 


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‘‘(iv) to ensure that the price discovery function of the underlying market 

is not disrupted; and 

‘‘(C) to the maximum extent practicable, in its discretion, take into account 

the total number of positions in fungible agreements, contracts, or transactions 

that a person can hold in other markets. 

‘‘(4)(A) Not later than 150 days after the establishment of position limits pursuant 

to paragraph (2), and biannually thereafter, the Commission shall hold 2 public 

hearings, 1 for agriculture commodities and 1 for energy commodities as such terms 

are defined by the Commission, in order to receive recommendations regarding the 

position limits to be established in paragraph (2). 

‘‘(B) Each public hearing held pursuant to subparagraph (A) shall, at a minimum 

providing there is sufficient interest, receive recommendations from— 

‘‘(i) 7 predominantly commercial short hedgers of the actual physical commodity for future delivery; 

‘‘(ii) 7 predominantly commercial long hedgers of the actual physical commodity for future delivery; 

‘‘(iii) 4 non-commercial participants in markets for commodities for future delivery; and 

‘‘(iv) each designated contract market or derivatives transaction execution facility upon which a contract in the commodity for future delivery is traded, and 

each electronic trading facility that has a significant price discovery contract in 

the commodity. 

‘‘(C) Within 60 days after each public hearing held pursuant to subparagraph (A), 

the Commission shall publish in the Federal Register its response to the recommendations regarding position limits heard at the hearing.’’; and 

(2) in subsection (c)— 

(A) by inserting ‘‘(1)’’ after ‘‘(c)’’; and 

(B) by adding after and below the end the following: 

‘‘(2) For the purposes of implementation of subsection (a)(2) for contracts of sale 

for future delivery and options on such contracts or commodities, the Commission 

shall define what constitutes a bona fide hedging transaction or position as a transaction or position that— 

‘‘(A)(i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel; 

‘‘(ii) is economically appropriate to the reduction of risks in the conduct and 

management of a commercial enterprise; and 

‘‘(iii) arises from the potential change in the value of— 

‘‘(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or 

merchandising; 

‘‘(II) liabilities that a person owns or anticipates incurring; or 

‘‘(III) services that a person provides, purchases, or anticipates providing 

or purchasing; or 

‘‘(B) reduces risks attendant to a position resulting from a transaction that— 

‘‘(i) was executed pursuant to subsection (g), (h)(1), or (h)(3) of section 2, 

or an exemption issued by the Commission by rule, regulation or order; and 

‘‘(ii)(I) was executed opposite a counterparty for which the transaction 

would qualify as a bona fide hedging transaction pursuant to subparagraph 

(A); or 

‘‘(II) meets the requirements of subparagraph (A).’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 5(d)(5) of such Act (7 U.S.C. 7(d)(5)) is amended to read as follows: 

‘‘(5) To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, the board of trade shall adopt for 

each of its contracts, where necessary and appropriate, position limitations or 

position accountability standards for speculators. For any contract that is subject to a position limitation established by the Commission pursuant to section 

4a(a), the board of trade shall set its position limitation at a level no higher 

than the Commission-established limitation.’’. 

(2) Section 5a(d)(4) of such Act (7 U.S.C. 7a(d)(4)) is amended to read as follows: 

‘‘(4) To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, the board of trade shall adopt for 

each of its contracts, where necessary and appropriate, position limitations or 

position accountability standards for speculators. For any contract that is subject to a position limitation established by the Commission pursuant to section 

4a(a), the board of trade shall set its position limitation at a level no higher 

than the Commission-established limitation.’’. 


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(3) Section 2(h)(7)(C)(ii)(IV) of such Act (7 U.S.C. 2(h)(7)(C)(ii)(IV)) is amended 

to read as follows: 

‘‘(IV) The electronic trading facility shall adopt, where necessary 

and appropriate, position limitations or position accountability 

standards for speculators in significant price discovery contracts, 

taking into account positions in other agreements, contracts, and 

transactions that are treated by a derivatives clearing organization, whether registered or not registered, as fungible with such 

significant price discovery contracts to reduce the potential threat 

of market manipulation or congestion, especially during trading in 

the delivery month. For any contract that is subject to a position 

limitation established by the Commission pursuant to section 4a(a), 

the electronic trading facility shall set its position limitation at a 

level no higher than the Commission-established limitation.’’. 

SEC. 7. CFTC ADMINISTRATION. 

Section 2(a)(7) of the Commodity Exchange Act (7 U.S.C. 2(a)(7)) is amended by 

adding at the end the following: 

‘‘(D) ADDITIONAL EMPLOYEES.—As soon as practicable after the date of the 

enactment of this subparagraph, subject to appropriations, the Commission 

shall appoint a sufficient number of full-time employees (in addition to the 

employees employed by the Commission as of the date of the enactment of 

this subparagraph)— 

‘‘(i) to increase the public transparency of operations in markets; 

‘‘(ii) to improve the enforcement of this Act in those markets; 

‘‘(iii) to enhance oversight of the trading and clearing of contracts, 

agreements, and transactions; and 

‘‘(iv) to carry out the provisions of the Derivatives Markets Transparency and Accountability Act of 2009 and such other duties as are 

prescribed by the Commission.’’. 

SEC. 8. REVIEW OF PRIOR ACTIONS. 

Notwithstanding any other provision of the Commodity Exchange Act, the Commodity Futures Trading Commission shall review, as appropriate, all regulations, 

rules, exemptions, exclusions, guidance, no action letters, orders, other actions taken 

by or on behalf of the Commission, and any action taken pursuant to the Commodity Exchange Act by an exchange, self-regulatory organization, or any other registered entity, that are currently in effect, to ensure that such prior actions are in 

compliance with the provisions of this Act. 

SEC. 9. REVIEW OF OVER-THE-COUNTER MARKETS. 

(a) STUDY.—The Commodity Futures Trading Commission shall conduct a study— 

(1) to determine the efficacy, practicality, and consequences of establishing 

limits on the size of a position, other than bona fide hedge positions, that may 

be held by any person with respect to agreements, contracts, or transactions involving an agricultural or energy commodity, conducted in reliance on section 

2(g) or 2(h) of the Commodity Exchange Act and of any exemption issued by 

the Commission by rule, regulation or order, that are fungible (as defined by 

the Commission) with agreements, contracts, or transactions traded on or subject to the rules of any board of trade or of any electronic trading facility with 

respect to a significant price discovery contract, as a means to deter and prevent price manipulation or any other disruption to market integrity or to diminish, eliminate, or prevent excessive speculation as described in section 4a of 

such Act for physical-based agricultural or energy commodities; and 

(2) to determine the efficacy, practicality, and consequences of establishing 

aggregate position limits for similar agreements, contracts, or transactions for 

physical-based agricultural or energy commodities traded— 

(A) on designated contract markets; 

(B) on derivatives transaction execution facilities; and 

(C) in reliance on such section 2(g) or 2(h) and of any exemption issued 

by the Commission by rule, regulation or order. 

(b) PUBLIC HEARINGS.—The Commission shall provide for not less than 2 public 

hearings to take testimony, on the record, as part of the fact- gathering process in 

preparation of the report. 

(c) REPORT AND RECOMMENDATIONS.—Not less than 12 months after the date of 

the enactment of this section, the Commission shall provide to the Committee on 

Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that— 

(1) describes the results of the study; and 


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(2) provides recommendations on any actions necessary to deter and prevent 

price manipulation or any other disruption to market integrity or to diminish, 

eliminate, or prevent excessive speculation as described in section 4a of the 

Commodity Exchange Act for physical-based commodities, including— 

(A) any additional statutory authority that the Commission determines to 

be necessary to implement the recommendations; and 

(B) a description of the resources that the Commission considers to be 

necessary to implement the recommendations. 

SEC. 10. STUDY RELATING TO INTERNATIONAL REGULATION OF ENERGY COMMODITY MARKETS. 

(a) IN GENERAL.—The Comptroller General of the United States shall conduct a 

study of the international regime for regulating the trading of energy commodity futures and derivatives. 

(b) ANALYSIS.—The study shall include an analysis of, at a minimum— 

(1) key common features and differences among countries in the regulation 

of energy commodity trading, including with respect to market oversight and 

enforcement standards and activities; 

(2) variations among countries with respect to the use of position limits, position accountability levels, or other thresholds to detect and prevent price manipulation, excessive speculation as described in section 4a of the Commodity Exchange Act, or other unfair trading practices; 

(3) variations in practices regarding the differentiation of commercial and 

noncommercial trading; 

(4) agreements and practices for sharing market and trading data among futures authorities and between futures authorities and the entities that the futures authorities oversee; and 

(5) agreements and practices for facilitating international cooperation on market oversight, compliance, and enforcement. 

(c) REPORT.—Not later than 1 year after the date of the enactment of this Act, 

the Comptroller General 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 that— 

(1) describes the results of the study; 

(2) addresses whether there is excessive speculation, and if so, the effects of 

any such speculation and energy price volatility on energy futures; and 

(3) provides recommendations to improve openness, transparency, and other 

necessary elements of a properly functioning market in a manner that protects 

consumers in the United States. 

SEC. 11. OVER-THE-COUNTER AUTHORITY. 

(a) IN GENERAL.—Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is 

amended by adding at the end the following: 

‘‘(j) OVER-THE-COUNTER AUTHORITY.— 

‘‘(1) Notwithstanding subsections (d), (g), (h)(1), and (h)(3) of section 2, and 

any exemption issued by the Commission by rule, regulation, or order, the Commission shall assess and issue a finding on whether agreements, contracts, or 

transactions entered into in reliance on subsection (d), (g), (h)(1), or (h)(3) of section 2 or any other exemption issued by the Commission by rule, regulation, or 

order, that are fungible (as defined by the Commission) with agreements, contracts, or transactions traded on or subject to the rules of any board of trade 

or electronic trading facility with respect to a significant price discovery contract, alone or in conjunction with other similar agreements, contracts, or transactions, have the potential to— 

‘‘(A) disrupt the liquidity or price discovery function on a registered entity; 

‘‘(B) cause a severe market disturbance in the underlying cash or futures 

market; or 

‘‘(C) prevent or otherwise impair the price of a contract listed for trading 

on a registered entity from reflecting the forces of supply and demand in 

any market. 

‘‘(2) If the Commission makes a finding pursuant to paragraph (1) of this subsection, the Commission may, in its discretion, utilize its authority under section 8a(9) to impose position limits (including, as appropriate and in its discretion, related hedge exemption provisions for bona fide hedging comparable to 

bona fide hedge provisions of section 4a(c)(2)) on agreements, contracts, or 

transactions involved, and take corrective actions to enforce the limits.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) Section 2(d)(1) of such Act (7 U.S.C. 2(d)(1)) is amended by inserting ‘‘subsection (j) of this section, and’’ after ‘‘(other than’’. 


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(2) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended by inserting ‘‘subsection (j) of this section, and’’ after ‘‘(other than’’. 

(3) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended by inserting ‘‘subsection 

(j) of this section, and’’ after ‘‘(other than’’. 

(4) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)), as amended by section 

5(c)(4) of this Act, is amended by inserting ‘‘subsection (j) of this section and’’ 

before ‘‘sections’’. 

(5) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)), as amended by section 

5(c)(5) of this Act, is amended by inserting ‘‘subsection (j) of this section and’’ 

before ‘‘sections’’. 

(6) Section 8a(9) of such Act (7 U.S.C. 12a(a)(9)) is amended— 

(A) by striking ‘‘(9)’’ and inserting ‘‘(9)(A)’’; and 

(B) by striking ‘‘action.’’ and inserting ‘‘action; and (B) to direct any person to abide by any position limits to agreements, contracts, or transactions 

subject to section 2(j)(1) that are imposed pursuant to section 2(j)(2).’’. 

SEC. 12. EXPEDITED PROCESS. 

The Commodity Futures Trading Commission may use emergency and expedited 

procedures (including any administrative or other procedure as appropriate) to carry 

out this Act if, in its discretion, it deems it necessary to do so. 

SEC. 13. CERTAIN EXCLUSIONS AND EXEMPTIONS AVAILABLE ONLY FOR CERTAIN TRANSACTIONS SETTLED AND CLEARED THROUGH REGISTERED DERIVATIVES CLEARING ORGANIZATIONS. 

(a) IN GENERAL.— 

(1) EXCLUSION OF CERTAIN DERIVATIVE TRANSACTIONS.— 

(A) Section 2(d)(1) of the Commodity Exchange Act (7 U.S.C. 2(d)(1)) is 

amended— 

(i) by striking ‘‘and’’ at the end of subparagraph (A); 

(ii) by striking the period at the end of subparagraph (B) and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(C) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a derivatives clearing organization 

registered with the Commission.’’. 

(B) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is amended— 

(i) by striking ‘‘and’’ at the end of subparagraph (B); 

(ii) by striking the period at the end of subparagraph (C) and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(D) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a derivatives clearing organization 

registered with the Commission.’’. 

(2) EXCLUSION FOR CERTAIN SWAP TRANSACTIONS.—Section 2(g) of such Act (7 

U.S.C. 2(g)) is amended— 

(A) by striking ‘‘and’’ at the end of paragraph (2); 

(B) by striking the period at the end of paragraph (3) and inserting ‘‘; 

and’’; and 

(C) by adding at the end the following: 

‘‘(4) except as provided in section 4(h), settled and cleared through a derivatives clearing organization registered with the Commission.’’. 

(3) EXEMPTION FOR CERTAIN TRANSACTIONS IN EXEMPT COMMODITIES.— 

(A) Section 2(h)(1) of such Act ( 7 U.S.C. 2(h)(1)) is amended— 

(i) by striking ‘‘and’’ at the end of subparagraph (A); 

(ii) by striking the period at the end of subparagraph (B) and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(C) except as provided in section 4(h), is settled and cleared through a 

derivatives clearing organization registered with the Commission.’’. 

(B) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3)) is amended— 

(i) by striking ‘‘and’’ at the end of subparagraph (A); 

(ii) by striking the period at the end of subparagraph (B) and inserting ‘‘; and’’; and 

(iii) by adding at the end the following: 

‘‘(C) except as provided in section 4(h), settled and cleared through a derivatives clearing organization registered with the Commission.’’. 

(4) GENERAL EXEMPTIVE AUTHORITY.—Section 4(c)(1) of such Act (7 U.S.C. 

6(c)(1)) is amended by inserting ‘‘the agreement, contract, or transaction, except 

as provided in section 4(h), will be settled and cleared through a derivatives 


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clearing organization registered with the Commission and’’ before ‘‘the Commission determines’’. 

(b) ALTERNATIVES TO CLEARING THROUGH DERIVATIVES CLEARING ORGANIZATIONS.—Section 4 of such Act (7 U.S.C. 6), as amended by sections 3 and 4 of this 

Act, is amended by adding at the end the following: 

‘‘(h) ALTERNATIVES TO CLEARING THROUGH DERIVATIVES CLEARING ORGANIZATIONS.— 

‘‘(1) SETTLEMENT AND CLEARING THROUGH CERTAIN OTHER REGULATED ENTITIES.— 

‘‘(A) An agreement, contract, or transaction, or class thereof, relating to 

an excluded commodity, that would otherwise be required to be settled and 

cleared by section 2(d)(1)(C), 2(d)(2)(D), or 2(g)(4) of this Act, or subsection 

(c)(1) of this section may be settled and cleared through an entity listed in 

section 409(b)(1) of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

‘‘(B) An agreement, contract, or transaction, or class thereof, that would 

otherwise be required to be settled and cleared by section 2(d)(1)(C), 

2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or subsection (c)(1) of 

this section may be settled and cleared through an entity listed in section 

409(b)(3) of the Federal Deposit Insurance Corporation Improvement Act of 

1991. 

‘‘(2) WAIVER OF CLEARING REQUIREMENT.— 

‘‘(A) The Commission, in its discretion, may exempt an agreement, contract, or transaction, or class thereof, that would otherwise be required by 

section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or 

subsection (c)(1) of this section to be settled and cleared through a derivatives clearing organization registered with the Commission from such requirement. 

‘‘(B) In granting exemptions pursuant to subparagraph (A), the Commission shall consult with the Securities and Exchange Commission and the 

Board of Governors of the Federal Reserve System regarding exemptions 

that relate to excluded commodities or entities for which the Securities Exchange Commission or the Board of Governors of the Federal Reserve System serve as the primary regulator. 

‘‘(C) Before granting an exemption pursuant to subparagraph (A), the 

Commission shall find that the agreement, contract, or transaction, or class 

thereof— 

‘‘(i) is highly customized as to its material terms and conditions; 

‘‘(ii) is transacted infrequently; 

‘‘(iii) does not serve a significant price-discovery function in the marketplace; and 

‘‘(iv) is being entered into by parties who can demonstrate the financial integrity of the agreement, contract, or transaction and their own 

financial integrity, as such terms and standards are determined by the 

Commission. The standards shall include a net capital requirement associated with any agreement, contract, or transaction subject to an exemption from the clearing requirement that recognizes the risks associated with the absence of clearing. 

‘‘(D) Any agreement, contract, or transaction, or class thereof, which is exempted pursuant to subparagraph (A) shall be reported in a manner designated by the Commission to the Commission, the Securities and Exchange 

Commission, the Board of Governors of the Federal Reserve System, or 

such other entity the Commission deems appropriate. 

‘‘(i) SPOT AND FORWARD EXCLUSION.—The settlement and clearing requirements 

of section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), or 4(c)(1) shall not 

apply to an agreement, contract, or transaction of any cash commodity for immediate or deferred shipment or delivery, as defined by the Commission.’’. 

(c) ADDITIONAL REQUIREMENTS APPLICABLE TO APPLICANTS FOR REGISTRATION AS

A DERIVATIVES CLEARING ORGANIZATION.—Section 5b(c)(2) of such Act (7 U.S.C. 7a– 

1(c)(2)) is amended by adding at the end the following: 

‘‘(O) DISCLOSURE OF GENERAL INFORMATION.—The applicant shall disclose 

publicly and to the Commission information concerning— 

‘‘(i) the terms and conditions of contracts, agreements, and transactions cleared and settled by the applicant; 

‘‘(ii) the conventions, mechanisms, and practices applicable to the 

contracts, agreements, and transactions; 

‘‘(iii) the margin-setting methodology and the size and composition of 

the financial resource package of the applicant; and 


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‘‘(iv) other information relevant to participation in the settlement and 

clearing activities of the applicant. 

‘‘(P) DAILY PUBLICATION OF TRADING INFORMATION.—The applicant shall 

make public daily information on settlement prices, volume, and open interest for contracts settled or cleared pursuant to the requirements of section 

2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C) or 4(c)(1) of this Act by 

the applicant if the Commission determines that the contracts perform a 

significant price discovery function for transactions in the cash market for 

the commodity underlying the contracts. 

‘‘(Q) FITNESS STANDARDS.—The applicant shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, and members of the applicant, and any other persons with direct 

access to the settlement or clearing activities of the applicant, including any 

parties affiliated with any of the persons described in this subparagraph.’’. 

(d) AMENDMENTS.— 

(1) Section 409 of the Federal Deposit Insurance Corporation Improvement 

Act of 1991 (12 U.S.C. 4422) is amended— 

(A) in subsection (a), by inserting after ‘‘Federal Reserve Act’’ the following: ‘‘, and the person is registered as a clearing agency under the Securities Exchange Act of 1934 or as a derivatives clearing organization under 

the Commodity Exchange Act’’; and 

(B) in subsection (b)(3), by striking ‘‘the Comptroller of the Currency, the 

Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation,’’. 

(2) Section 407 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 

27e) is amended by inserting ‘‘and the settlement and clearing requirements of 

sections 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of such 

Act’’ after ‘‘the clearing of covered swap agreements’’. 

(3) Section 10 of the Federal Reserve Act is amended by adding at the end 

the following new provision: 

‘‘The Board shall have no power to issue any rule, regulation, or order, or otherwise to establish the standards of regulation of any entity in its capacity as a multilateral clearing organization as defined in section 408 of the Federal Deposit Insurance Corporation Improvement Act of 1991.’’. 

(4) Section 5b(b) of the Commodity Exchange Act (7 U.S.C. 7a–1(b)) is amended— 

(A) by striking ‘‘(b) VOLUNTARY REGISTRATION.—A derivatives clearing organization’’ and inserting the following: 

‘‘(b) VOLUNTARY REGISTRATION.— 

‘‘(1) A derivatives clearing organization’’; and 

(B) by adding at the end the following: 

‘‘(2)(A) A national bank, a State member bank, an insured State nonmember 

bank, an affiliate of a national bank, a State member bank, an insured State 

nonmember bank, or a corporation chartered under section 25A of the Federal 

Reserve Act may register with the Commission as a derivatives clearing organization. 

‘‘(B) The Commission shall expedite the application of any institution referred 

to in subparagraph (A) to the extent that, as of the date of enactment of this 

paragraph, the institution had received the approval of the Board of Governors 

of the Federal Reserve System to act as a multilateral clearing organization.’’. 

(e) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendments made by this section shall take effect 150 

days after the date of the enactment of this Act. 

(2) PUBLICATION OF GUIDELINES.—Before the amendments made by this section take effect, the Commission shall through rulemaking, after notice and 

comment, establish and publish guidelines outlining the terms and conditions 

that must apply for an agreement, contract, transaction, or class thereof, to 

qualify for the exemption cited in section 4(h)(2) of the Commodity Exchange 

Act. 

(f) TRANSITION RULE.—Any agreement, contract, or transaction entered into before 

the date of the enactment of this Act or within 150 days after such date of enactment, in reliance on subsection (d), (g), (h)(1), or (h)(3) of section 2 of the Commodity 

Exchange Act or any other exemption issued by the Commodity Futures Trading 

Commission by rule, regulation, or order shall, within 150 days after such date of 

enactment, unless settled and cleared through an entity registered with the Commission as a derivatives clearing organization or another clearing entity pursuant 

to section 4(h) of such Act, be reported to the Commission in a manner designated 

by the Commission, or to such other entity as the Commission deems appropriate. 


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SEC. 14. TREATMENT OF EMISSION ALLOWANCES AND OFFSET CREDITS. 

(a) Section 1a(14) of the Commodity Exchange Act (7 U.S.C. 1a(14)) is amended 

by striking ‘‘or an agricultural commodity’’ and inserting ‘‘, an agricultural commodity, any allowance authorized under law to emit a greenhouse gas, and any 

credit authorized under law toward the reduction in greenhouse gas emissions or 

an increase in carbon sequestration’’. 

(b) Within 180 days after the date of the enactment of this section, the Commodity 

Futures Trading Commission shall enter into a memorandum of understanding with 

the Secretary of Agriculture which shall include provisions, consistent with section 

1245 of the Food Security Act of 1985, ensuring that the development of any procedures and protocols for a market-based greenhouse gas contract on a board of trade 

designated as a contract market under section 5 of the Commodity Exchange Act 

are properly constructed and coordinated to maximize credits for carbon sequestration. 

SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FUTURES TRADING COMMISSION. 

(a) ELEVATION OF OFFICE.— (1) INCLUSION OF CFTC IN DEFINITION OF ESTABLISHMENT.— (A) Section 12(1) of the Inspector General Act of 1978 (5 U.S.C. App.) is 

amended by striking ‘‘or the Federal Cochairpersons of the Commissions established under section 15301 of title 40, United States Code;’’ and inserting ‘‘the Federal Cochairpersons of the Commissions established under section 15301 of title 40, United States Code; or the Chairman of the Commodity Futures Trading Commission;’’. 

(B) Section 12(2) of the Inspector General Act of 1978 (5 U.S.C. App.) is 

amended by striking ‘‘or the Commissions established under section 15301 

of title 40, United States Code,’’ and inserting ‘‘the Commissions established 

under section 15301 of title 40, United States Code, or the Commodity Futures Trading Commission,’’. 

(2) EXCLUSION OF CFTC FROM DEFINITION OF DESIGNATED FEDERAL ENTITY.— Section 8G(a)(2) of the Inspector General Act of 1978 (5 U.S.C. App.) is amended by striking ‘‘the Commodity Futures Trading Commission,’’. 

(b) EFFECTIVE DATE; TRANSITION RULE.— 

(1) EFFECTIVE DATE.—The amendments made by this section shall take effect 

30 days after the date of the enactment of this Act. 

(2) TRANSITION RULE.—An individual serving as Inspector General of the 

Commodity Futures Trading Commission on the effective date of this section 

pursuant to an appointment made under section 8G of the Inspector General 

Act of 1978 (5 U.S.C. App.)— 

(A) may continue so serving until the President makes an appointment 

under section 3(a) of such Act consistent with the amendments made by 

this section; and 

(B) shall, while serving under subparagraph (A), remain subject to the 

provisions of section 8G of such Act which apply with respect to the Commodity Futures Trading Commission. 

SEC. 16. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO SUSPEND TRADING 

IN CREDIT DEFAULT SWAPS. 

(a) IN GENERAL.—Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is 

amended by adding at the end the following: 

‘‘(h) AUTHORITY OF COMMISSION TO SUSPEND TRADING OF CREDIT DEFAULT

SWAPS.— 

‘‘(1) IN GENERAL.—If, in the opinion of the Commission, the public interest 

and the protection of investors so require, the Commission may, by order— 

‘‘(A) summarily suspend trading in any credit default swap; and 

‘‘(B) summarily suspend all trading on any contract market, derivatives 

transaction execution facility, or otherwise, in credit default swaps. 

‘‘(2) LIMITATION.—An action described in paragraph (1) shall— 

‘‘(A) not take effect unless the Commission notifies the President of its 

decision, and the President notifies the Commission that the President does 

not disapprove of the decision; 

‘‘(B) only apply to credit default swaps that are related to securities subject to a short selling suspension order by the Securities and Exchange 

Commission, and such action must terminate when such suspension order 

terminates; and 

‘‘(C) only apply to credit default swaps purchased by persons who are not 

purchasing the credit default swap to reduce an existing credit risk directly 

related to the reference entity or its obligations.’’. 

(b) DEFINITION OF CREDIT DEFAULT SWAP.—Section 1a of such Act (7 U.S.C. 1a) 

is amended by adding at the end the following: 


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‘‘(34) CREDIT DEFAULT SWAP.—The term ‘credit default swap’ means a contract 

which hedges a party to the contract against the risk that an entity may experience a loss of value as a result of an event specified in the contract, such as 

a default or credit downgrade. A credit default swap that is proposed to be traded or is traded on or proposed to be or is cleared by a registered entity pursuant 

to this Act shall be excluded from the definition of a security as defined in this 

Act and in section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of the 

Securities Exchange Act of 1934, except as necessary solely for purposes of enforcing prohibitions against insider trading in sections 10 and 16 of the Securities Exchange Act of 1934.’’. 

(c) EFFECTIVE DATE.—The amendment made by subsection (b) shall be effective 

for credit default swaps entered into after 90 days after the date of the enactment 

of this section. 

SEC. 17. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO PROSECUTE CRIMINAL VIOLATIONS OF THE COMMODITY EXCHANGE ACT. 

Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended by adding at 

the end the following: 

‘‘(f) Notwithstanding section 516 of title 28, United States Code, the Commission 

may initiate and conduct criminal litigation relating to a violation of this Act, and 

secure evidence therefor, if the Attorney General has declined to do so.’’. 

SEC. 18. DIVERSITY OF DIRECTORS OF BOARDS OF TRADE. 

Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is amended by adding 

at the end the following: 

‘‘(19) DIVERSITY OF BOARDS OF DIRECTORS.—The board of trade of a publicly 

traded company shall endeavor to recruit individuals to serve on the board of 

directors and the other decision-making bodies (as determined by the Commission) of the board of trade from among, and to have the composition of such bodies reflect, a broad and culturally diverse pool of qualified candidates.’’. 

BRIEF EXPLANATION

The bill requires that over-the-counter transactions—as a condition for eligibility for exceptions to Commodity Exchange Act requirements—be settled and cleared through a Commodity Futures 

Trading Commission (CFTC)-regulated designated clearing organization, unless exempted by the CFTC in accordance with specified 

criteria. In some cases, the clearing requirement could be met 

through a Securities and Exchange Commission (SEC) regulated 

clearing agency or a properly regulated foreign clearinghouse. The 

bill also gives CFTC the authority, with the President’s consent, to 

suspend naked credit default swap trading whenever a SEC short 

selling suspension order is in effect. The bill also requires foreign 

boards of trade that offer direct electronic access to U.S. traders to 

share trading data and adopt speculative position limits on certain 

contracts. The bill further requires CFTC to set trading limits for 

physical commodities other than excluded commodities. The bill 

also provides CFTC authority to criminally prosecute people who 

violate commodities legislation. It also limits eligibility for hedge 

exemptions to bona-fide hedgers, improves transparency by requiring that CFTC disaggregate and separately report the trading activity of index funds and swap dealers in agriculture and energy 

markets, authorizes new CFTC employees to enforce manipulation 

and prevent fraud, and authorizes CFTC to take corrective action 

if it finds disruption in over-the-counter markets for energy and 

gas. 

PURPOSE AND NEED

Exchange-traded and over-the-counter derivatives markets are 

crucial components of the nation’s financial system. Ensuring that 

the structure of the regulatory system reflects market growth and 


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changes in the practices of participants is crucial to safeguarding 

the national interest. 

During the 110th Congress, the Committee became increasingly 

concerned about the dramatic rise in the price of oil, gasoline, and 

other energy commodities traded on regulated U.S. futures exchanges. From 2002 to 2006, inflation-adjusted energy prices in 

both the futures and physical markets for crude oil, gasoline, and 

heating oil increased by over 200 percent and for natural gas over 

140 percent. Volatility in these markets was also above historical 

averages. At a 2007 hearing before the Subcommittee on General 

Farm Commodities and Risk Management, the U.S. Government 

Accounting Office (GAO) testified it observed that at the same time 

that prices were rising and that volatility was generally above or 

near long-term averages, futures markets saw an increase in the 

number of noncommercial traders such as managed money traders, 

including hedge funds, participating in the regulated markets. 

GAO also testified to an apparently significant, though difficult to 

quantify, increase in the amount of energy derivatives traded outside exchanges. 

One segment of this off-exchange trading became the focus of legislation during the Committee’s recent work to reauthorize the 

Commodity Futures Trading Commission (CFTC). In December of 

2007, the Committee recommended a draft bill, which ultimately 

became H.R. 4626. This legislation contained provisions amending 

the Commodity Exchange Act (CEA) to provide for greater regulation and oversight by the CFTC over ‘‘exempt commercial markets’’ 

where energy commodities could be traded between sophisticated 

traders outside the more retail-focused regulated exchanges. A 

modified version of that legislation was ultimately included as part 

of P.L. 110–246, the 2008 farm bill. 

During 2007 and into 2008, commodity prices for both energy 

and now agriculture products experienced record breaking heights. 

West Texas Intermediate Crude Oil trading in the $50 range in 

January 2007 was around $90 by December and hit a record $147 

during the summer of 2008. Hard red spring wheat hit $25 a bushel; soybeans almost $16 a bushel; corn—$6.77 a bushel. The Committee and its General Farm Commodities Subcommittee together 

held six hearings with 44 witnesses to look into these developments. Members heard from the airline industry, industrial energy 

users, farmers and other consumers how spiking energy prices 

were affecting their ability to transport, manufacture, and grow for 

America. Agriculture interests testified that producers were not 

benefitting from high futures prices for agricultural commodities 

because farmgate prices were much lower. 

Out of these hearings came a general concern that new sources 

of funding for investments in commodity markets are having a negative impact on the price discovery function of U.S. futures markets. These inflows were presented by witnesses as primarily coming from index investors, hedge funds, pension funds and other 

sources which were looking at the commodity markets as new investment alternatives to the poorly performing equity markets. 

While the 2008 farm bill addressed some witnesses’ concerns by 

bringing transparency and oversight to one segment of the overthe-counter (OTC) market, there were objections to other so-called 

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lated exchange-traded environment. One was the ‘‘London Loophole’’: there was concern that a U.S. commodity could be traded on 

an overseas exchange without limit or oversight. Another was the 

‘‘Swaps Loophole’’: commodities could be traded with a swap dealer 

without limit or oversight. There was also concern that the speculative position limit regime, designed to prevent manipulation of futures markets, had become riddled with holes through the granting 

of exemptions. These loopholes allowed funding to pour into commodity markets without limit. Advocates of reform sought to eliminate all loopholes by prohibiting any form of OTC trading and requiring commodity trading to take place only on U.S. regulated futures markets. Absent that, they called for aggregate speculative 

position limits for commodities, regardless of the market on which 

trading takes place—regulated, OTC, or foreign—with exemptions 

to those limits being granted to only bona fide hedgers, (i.e. those 

who have an underlying interest in the commodity being traded). 

Some of the testimony heard at these hearings challenged this 

notion that investor money was harming commodity markets. Witnesses testified that supply and demand only were the culprits responsible for the dramatic move in commodity prices. They opposed 

all the proposals from the advocates of reform and warned against 

legislation that would drive commodity trading to overseas markets, outside the jurisdiction of the Commodity Futures Trading 

Commission (CFTC). They advocated primarily for greater transparency of markets. 

Ultimately, the Committee responded to witness testimony and 

high commodity prices in July of 2008 by passing the Commodity 

Markets Transparency and Accountability Act. The U.S. House of 

Representatives followed in September by passing the bill, H.R. 

6604, by a vote of 283 to 133. Among other things, this legislation 

would have: 

• Prohibited the CFTC from permitting a foreign board of trade 

(FBOT) from providing its members or participants located in the 

U.S. direct access to its electronic trading system with respect to 

energy or agricultural transactions linked to contracts for U.S. commodities on a U.S. futures exchange unless the FBOT: 

» publicly provided daily trading information that is comparable to that published by the U.S. exchange, 

» adopted position limits that are comparable to those 

adopted by the U.S. exchange, 

» provided information to the CFTC regarding large trader 

positions in the FBOT transactions comparable to large trader 

position information provided by the U.S. exchange, and 

» provided information on aggregate trader positions on the 

FBOT comparable to that provided in reports for the U.S.-listed contract. 

• Required the CFTC to disaggregate and publicly provide the 

number of positions and total value of index funds—and other passive, long-only and short-only investors—in energy and agriculture 

markets, and data on speculative positions relative to their bona 

fide physical hedgers. 

• Required the CFTC to define and classify index traders and 

swap dealers for data reporting requirements. 


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• Subjected excluded swap transactions and transactions for agricultural and energy commodities to reporting and recordkeeping 

requirements. • Mandated the CFTC to set speculative position limits for trading in agricultural and energy commodities and establish conditions for the granting of hedge exemptions from such limits. • Required the CFTC to determine whether such fungible agriculture and energy OTC agreements have the potential to disrupt 

market liquidity and price discovery functions, cause severe, market disturbance or prevent prices from reflecting supply and demand. • Authorized the Commission, if it found any of the above, to impose and enforce speculative position limits on the involved agreements. 

It was in September of 2008, as the House of Representatives 

was considering H.R. 6604, that another crisis struck with equal, 

if not greater, harm to the U.S. economy. The nation’s financial 

system started teetering on the brink of collapse. Wall Street institutions, from banks to investment houses, started experiencing a 

major credit crunch. One potential culprit for this calamity was 

identified as credit derivatives, specifically credit default swaps 

(CDSs). A CDS is contract, like other credit derivatives, whose 

value is based on underlying debt obligations. By their very nature, 

CDSs transfer risk rather than directly raise capital in the way a 

bond or stock does. In a CDS contract, the buyer is seeking protection and the seller is willing to provide protection in exchange for 

a series of payments from the buyer. The protection being transacted is against a default or other credit event with respect to the 

underlying obligation. Like most OTC transactions, CDSs are bilateral contracts and unregulated by any Federal government agency. 

As multiple financial markets deteriorated, CDSs became payable. 

As more firms had to either pay out or put up additional collateral 

for their CDS holdings, their own financial stability was threatened. Ultimately, some firms could not meet their obligations and 

were forced into bankruptcy, government receivership, or into accepting loans or other assistance from the Federal government. 

The Committee held three hearings on the topic of credit derivatives in the late fall of 2008, hearing from government and industry witnesses. The hearings revealed that many market observers 

did not consider the CDSs the ultimate cause of the nation’s financial crisis. The underlying problem started with the housing market. For years, a significant portion of the nation’s banking system 

became involved with subprime loans, mortgages to individuals 

with questionable ability to repay the loans. Banks, not wanting to 

keep such loans on their balance sheets, merged these loans with 

higher quality loans, securitized the package at a high credit rating, then sold the package to investors. To help market these 

collateralized debt obligations (CDOs), dealers sold credit default 

swaps so investors would believe their investment was protected. 

For at least three years, there has been growing concern about 

the growth of the CDS market, particularly in the light that many 

holders and sellers of CDS did not have a full understanding of all 

the CDSs they entered into. This led to a realization that many 

participants in the CDS market might not fully appreciate the level 

of their counterparties’ risk. In addition, it was apparent that marVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6602 E:\HR\OC\HR385P1.XXX HR385P1

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ket-making firms were better at marketing CDS contracts than 

they were at completing routine necessary documentation and settlement steps. A troubling settlement backlog had developed as a 

result. Consequently, interest in establishing a central 

counterparty (CCP) or clearinghouse for these instruments arose 

both within the market and within the Federal Reserve System 

(FRS). Much of the testimony gathered at the hearings was from 

witnesses in support of a clearing solution. In fact, most of the sellside CDS institutions wanted to create a CCP under Federal Reserve oversight. However, there was disagreement as to whether 

the clearing of CDSs would need to be mandatory or not and just 

how much of the CDS market was appropriate for clearing. 

From the information gathered in the hearings, the Committee 

became greatly concerned about the prospect of a Federal Reserve 

(Fed) regulated CCP. The Committee questioned whether it was 

appropriate for an organization with a self-admitted lack of experience in overseeing institutions that clear derivative instruments to 

have such a responsibility when other regulators—the CFTC and 

the Securities and Exchange Commission (SEC)—have substantial 

experience regulating such entities. At the Committee’s hearing on 

November 20, 2008, a representative of the FRS testified that while 

it has never been the primary regulatory of a central counterparty 

clearing service, the dealers backing the ICE US Trust (which is 

a special purpose bank for the purpose of clearing derivatives) proposal are organized as banks and have a long history of dealing 

with the Federal Reserve. It is not an appealing argument to the 

Committee that the Fed should enter into a new activity—one that 

is already carried out by a Federal regulator—merely because the 

entity to be regulated would like it to do so. Additionally, there is 

concern that a CCP overseen by the Fed would create the impression that it has Federal Reserve backing and would be bailed out 

if defaults occur, giving the CCP an advantage over other clearing 

institutions regulated by other government agencies, and creating 

the concern that taxpayers are directly exposed to its operation. 

The Committee also questioned whether a completely voluntary 

clearing system would succeed, although it did appreciate the concern of some witnesses that not every CDS is appropriate for clearing. 

On February 12, 2009, after two hearings to review the legislative draft, the Committee considered H.R. 977, the Derivatives 

Markets Transparency and Accountability Act. This Act was modeled after the provisions in H.R. 6604 from the previous Congress. 

It contained almost the identical provisions of that Act with regard 

to foreign boards of trade; transparency, recording-keeping, and reporting requirements; and oversight of fungible OTC transactions. 

The primary difference between these provisions in H.R. 977 and 

H.R. 6604 is that the provisions in H.R. 977 apply to all commodities, not just those pertaining to agriculture and energy. With regard to provisions authorizing the CFTC to establish position limits 

and implement a revised hedge exemption regime, the two bills are 

very similar. The primary differences are that H.R. 977’s application is broader than H.R. 6604 in that it now applies to all physical 

commodities, not just agriculture and energy. In addition, the Advisory Committee structure that was included in H.R. 6604 has been 

replaced with a CFTC hearing process. 


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The Committee fully understands and is appreciative of the intent of the advisory committees as a vehicle for consumer, producer, user, and other groups to comment to the CFTC in its role 

as the setter of speculative position limits. However, the Committee 

is concerned, given the history advisory committees operating 

under the Federal Advisory Committee Act, these advisory committees may never get off the ground. Given the nation’s fiscal constraints, it is feared that funding for the advisory committees may 

never be provided, making this provision a hollow promise to the 

organizations and individuals seeking to provide input to the speculative position limit process. Additionally, the Committee had concerns that the make-up of the advisory committees could hinder 

recommendations to the CFTC given that only one or two parties 

interested in a particular commodity could serve on a committee. 

It was viewed a more democratic approach to establish a CFTC 

hearing process whereby a much larger number of participants 

could provide comments and suggestions than the committee process. The requirement that the CFTC respond to the views expressed collectively at the hearing serves not only as a means to 

prevent suggestions from being ignored, but also provide interested 

parties with insight into the CFTC’s views on where and how speculative position limits should be set. 

H.R. 977 also includes several new provisions not included in 

H.R. 6604. Among other things, the legislation: • Requires that all prospective over-the-counter transactions 

must be settled and cleared through a CFTC-regulated derivative 

clearing organization (DCO) in order to qualify for exceptions to 

provisions of the CEA that would otherwise apply. • Allows OTC transactions relating to an excluded commodity 

(i.e. financials) to be settled and cleared through a SEC-regulated 

clearing agency. • Denies the Board of Governors of the Federal Reserve System 

the authority to establish regulations or rules with regard to clearing OTC transactions. The bill directs the CFTC to expedite the application for derivatives clearing organization registration of any 

bank that has received the approval of the Fed to act as a central 

counterparty. 

• Allows, as an alternative to clearing, parties to seek an exemption from the clearing requirement from the CFTC. 

• Provides that trading in futures contracts on greenhouse gases, 

and any credit authorized under law for a reduction in greenhouse 

gas emissions or increase in carbon sequestration may only occur 

on a designated contract market. 

• Makes the Inspector General position at the CFTC a Presidential appointment, confirmed by the Senate. 

• Grants the CFTC the authority to suspend ‘‘naked’’ credit default swap trading, with the concurrence of the President, and only 

with respect to securities that are subject to a short selling suspension ordered by the SEC. 

• Defines credit defaults swaps traded or cleared by registered 

entity as shall not be considered securities except as necessary for 

enforcing insider trading prohibitions. 

• Grants the CFTC the authority to initiate and conduct criminal litigation relating to violations of the Act if the Attorney General has declined such litigation. 


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SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

Section 1 provides that the short title of the bill is the ‘‘Derivatives Markets Transparency and Accountability Act of 2009.’’ 

Section 2. Table of contents 

Section 3. Speculative limits and transparency of offshore trading 

Section 3(a) prohibits the CFTC from permitting a foreign board 

of trade (FBOT) to provide its members or participants located in 

the U.S. direct access to its electronic trading system with respect 

to all transactions that settle against any price of a contract listed 

on a registered entity unless the FBOT: 

» Publicly provides comparable daily trading information. 

» Adopts comparable position limits that take into account the 

relative market size. 

» Has comparable authority to prevent price manipulation or 

distortion, excessive speculation, or the disruption of physical delivery or cash settlement. 

» Agrees to notify the CFTC of any changes to the information, 

position limits and accountability provisions, position reductions, or 

any other area of interest to the CFTC. 

» Provides comparable information to the CFTC regarding large 

trader positions. 

» Provides comparable information on aggregate trader positions. 

Section 3(b) provides that a person registered with the CFTC or 

exempt from registration shall not be found in violation of the exchange-trading requirement of the Commodity Exchange Act (CEA) 

if the person has reason to believe that the futures contract in 

question is traded on an FBOT that is authorized and regulated by 

a foreign futures authority and that the CFTC has not been determined by the CEA to be operating in violation of that requirement. 

Section 3(c) provides that if an FBOT fails to comply with any 

requirements under the CEA, a futures contract executed through 

that facility will still be enforceable. 

Section 4. Detailed reporting and disaggregation of market data 

Section 4 requires the CFTC to issue a proposed rule defining 

and classifying index traders and swap dealers for data reporting 

requirements and setting reporting requirements for transactions 

in designated contracts markets, derivative transaction execution 

facilities, FBOTs, and electronic trading facilities with respect to 

significant price discovery contracts. 

Section 4 also requires the CFTC to disaggregate and publicly 

provide the number and total value of positions of index funds, and 

other passive, long-only and short-only investors, in all regulated 

markets, and data on speculative positions relative to their bona 

fide hedgers. 

Section 5. Transparency and recordkeeping authorities 

Section 5(a) subjects over-the-counter transactions for all commodities to reporting and recordkeeping requirements as determined by CFTC. 


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Section 5(b)(1) requires rulemaking within 60 days of enactment 

to implement the following new requirements: inclusion of over-thecounter (OTC) contracts, as determined by CFTC, as part of large 

trader reporting requirements of section 4i of the CEA; CFTC special call authority to obtain any OTC market positions held by any 

person pursuant to exemptive provisions of the CEA; and requirement that records must be kept for 5 years. 

Section 5(c) makes conforming changes. 

Section 6. Trading limits to prevent excessive speculation 

Section 6(a) requires the CFTC to set appropriate position limits 

for all physical commodities other than excluded commodities. It 

provides that position limit requirements shall apply to spot 

month, each month and aggregate positions held by a person for all 

months, taking into account the availability of other markets. It 

sets criteria for the CFTC to consider when establishing position 

limits. 

Section 6(a) also requires CFTC to biannually hold public hearings on position limits for agriculture and energy commodities, and 

to publish its response to the recommendations regarding position 

limits heard at the hearing. It also establishes conditions for the 

granting of hedge exemptions from position limits to limit exemptions to bona fide hedgers of the commodity. 

Section 6(b) makes conforming amendments to the core principals in the CEA. 

Section 7. CFTC administration 

Section 7 requires the CFTC to appoint new full time employees 

necessary to implement this Act. 

Section 8. Review of prior actions 

Section 8 requires the CFTC to review all prior actions to ensure 

compliance with this Act. 

Section 9. Review of over-the-counter markets 

Section 9 requires the CFTC to study and report on the effects 

of potential position limits on OTC trading and aggregate limits 

across the OTC market, designated contract markets, and derivative transaction execution facilities for agriculture and energy commodities. 

Section 10. Studies; Reports 

Section 10 requires a GAO study and report of the international 

regulatory regime for energy commodity futures and derivatives 

trading. 

Section 11. Over-the-counter authority 

Section 11(a) requires the CFTC to determine whether fungible 

OTC agreements have the potential to disrupt market liquidity and 

price discovery functions, cause severe market disturbance, or prevent prices from reflecting supply and demand. If the CFTC finds 

any of the above, it is authorized to impose and enforce position 

limits for speculators trading the involved agreements. Section 

11(b) makes conforming amendments. 


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Section 12. Expedited process 

Section 12 provides that the CFTC may use emergency and expedited procedures to carry out this Act. 

Section 13. Clearing of over-the-counter transactions 

Section 13(a) amends provisions of sections 2(d), and 2(g), and 

2(h) of the CEA to add in each case a condition that the relevant 

exclusion or exemption only applies in cases where the prospective 

over-the-counter transactions are settled and cleared through a 

CFTC-regulated derivatives clearing organization (DCO). 

Section 13(b) provides that as an alternative OTC transactions 

may be settled and cleared by clearinghouses supervised by foreign 

financial regulators, or, if they relate to an excluded commodity 

(generally contracts based on financial instruments), may be settled and cleared through a SEC-regulated clearing agency. The 

CFTC may exempt a transaction from the clearing requirement. In 

granting exemptions, the CFTC must consult with the SEC and 

Fed regarding exemptions that relate to excluded commodities or 

any entity for which the SEC and Fed is the primary regulator. Exemptions may be granted only for transactions for which the Commission finds that they are highly customized, transacted infrequently, do not serve a significant price discovery function in the 

marketplace, and are entered into by parties that can demonstrate 

their financial integrity. Exempted transactions must be reported 

to a regulator as determined by the CFTC. Clearing and reporting 

requirements do not apply to spot and forward transactions, as defined by CFTC. 

Section 13(c) adds to the Core Principles with which DCOs must 

comply, including (1) daily publication of pricing, volume, and open 

interest information when the Commission determines that a contract performs a significant price discovery function, (2) fitness 

standards, and (3) disclosure of operational information. 

Section 13(d) amends bank law provisions included the Commodity Futures Modernization Act to: clarify that only DCOs and 

SEC-regulated multilateral clearing agencies can clear OTC transactions; provide that the Federal Reserve does not have authority 

to establish regulations or rules or to otherwise establish the standards of regulation of any entity in its capacity as a multilateral 

clearing organization; and make other conforming changes. Section 

13(d) also amends the CEA to: stipulate that a bank may register 

with the CFTC as a derivatives clearing organization; and direct 

the CFTC to expedite the application for such a registration submitted by a bank which has already received the approval of the 

Board of Governors of the Federal Reserve System to act as a multilateral clearing organization. 

Section 13(e) provides that the effective date for the section is 

150 days after enactment of the Act and requires the CFTC to establish guidelines on terms and conditions that must apply for an 

agreement, contract, or transaction to qualify for the exemption 

from clearing. 

Section 13(f) requires that all OTC transactions in effect prior to 

date of enactment must be either cleared as stated above or reported to CFTC. 


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Section 14. Treatment of carbon offset credits and emission allowances 

Section 14(a) amends the definition of ‘‘exempt commodity’’ to exclude allowances authorized under law to emit a greenhouse gas, 

and any credit authorized under law for a reduction in greenhouse 

gas emissions or increase in carbon sequestration. Any such contract could only be traded on a designated contract market. 

Section 14(b) directs the CFTC to establish an MOU with USDA 

on development of procedures and protocols for market-based 

greenhouse gas contract. 

Section 15. Inspector General of CFTC 

Section 15 makes the Inspector General position at the CFTC a 

Presidential appointment, confirmed by the Senate. 

Section 16. CFTC authority to suspend trading in credit default 

swaps 

Section 16(a) grants the CFTC the authority to suspend trading 

of naked credit default swaps that are related to securities subject 

to a short selling suspension order by the SEC, with the concurrence of the President. 

Section 16(b) amends the CEA to add a definition of the term 

‘‘credit default swap’’. Credit default swaps traded or cleared by 

registered entities shall not be considered securities except as necessary for enforcing insider trading prohibitions. 

Section 17. CFTC authority to prosecute criminal violations of Commodity Exchange Act 

Section 17 grants the CFTC the authority to initiate and conduct 

criminal litigation relating to violations of the Act if the Attorney 

General has declined such litigation. 

Section 18. Diversity of directors of Boards of Trade 

Section 18 amends the core principles to require publicly traded 

Boards of Trade regulated by the CEA to strive for cultural diversity in membership. 

COMMITTEE CONSIDERATION

I. HEARINGS

On February 3 and February 4, 2009 the Committee held hearings to review derivatives legislation. During the 110th Congress, 

the Committee also held a number of hearings. A series of full committee hearings in October, November, and December of 2008 was 

held to review the role of credit derivatives in the U.S. economy. 

On July 9, 10, and 11, 2008, the Committee held hearings to review legislation amending the Commodity Exchange Act. The Committee also held a hearing to review dramatic movements in agriculture and energy commodity markets on September 11, 2008, and 

a hearing to review trading in energy markets on June 24, 2008. 

On May 15, 2008, the Subcommittee on General Farm Commodities and Risk Management held a hearing to review the source of 

dramatic movements in commodity markets (agriculture and energy). 


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At the hearings the Committee heard testimony from various 

government agencies, academics, clearing institutions, exchanges, 

financial services industry associations, commercial commodity associations, commercial commodity users, and consumer protection 

groups. The information presented at these hearings prepared the 

Committee to draft a bill that would bring greater transparency 

and oversight to futures and OTC derivatives markets. 

II. FULL COMMITTEE CONSIDERATION

On February 12, 2009 the Committee on Agriculture met, pursuant to notice, with a quorum present to consider H.R. 977. Mr. Peterson offered an opening statement, as did Ranking Member 

Lucas. 

The bill, H.R. 977 was placed before the Committee for consideration and without objection a first reading of the bill was waived 

and it was opened for amendment at any point. Counsel was recognized for a brief explanation of the bill. The chairman offered a 

Manager’s Amendment to the bill, H.R. 977 and counsel provided 

a brief explanation of that amendment. By voice vote, the Manager’s Amendment was adopted. 

Mr. Kissell was recognized to offer and explain an amendment to 

strengthen CEA regarding the composition of the boards of trade. 

Discussion occurred and Chairman Peterson offered a secondary 

amendment to the amendment to clarify that it only applied to 

publicly traded companies. By a voice vote the Peterson secondary 

amendment was adopted. More discussion occurred and by voice 

vote the Kissell amendment was adopted as amended. 

Mr. Lucas was recognized to offer and explain an amendment to 

provisions in the bill that require CFTC to impose position limits. 

The amendment would have limited application of those provisions 

to the spot month for physical commodities. Discussion occurred 

and by a roll call vote of 16 yeas to 27 nays, the amendment failed. 

See Roll Call Vote #1. 

Mr. Moran was recognized to offer and explain an amendment to 

restructure how CFTC must define a bona fide hedging transaction. 

Discussion occurred and by a roll call vote of 16 yeas to 27 nays, 

the amendment failed. See Roll Call Vote #2. 

Mr. Pomeroy was recognized to offer and explain an amendment 

requiring CFTC to hold two annual public meetings and publish in 

the Federal Register its response to the recommendations regarding position limits heard at those meetings. Discussion occurred 

and by voice vote the amendment was adopted. 

Mr. Boswell was recognized to offer and explain an amendment 

to strike the provisions in the bill that require either the clearing 

or reporting of over-the-counter transactions and replaces them 

with provisions that require a clearing or exception from the CFTC 

not to clear OTC transactions. Discussion occurred and by voice 

vote the amendment was adopted. 

Mr. Lucas moved that the bill, H.R. 977 as amended be reported 

favorably to the House with the recommendation that it do pass. 

By voice vote the Lucas motion was adopted. 

During the proceedings Mr. Terry Arbit, General Counsel of 

CFTC was recognized to answer questions posed by a member. 

Without objection, the usual instructions were given to staff that 

consist of making such technical, clarifying or conforming changes 


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as are appropriate without changing the substance of the legislation. 

ROLL CALL VOTES

In compliance with clause 3(b) of Rule XIII of the House of Representatives, the Committee sets forth the record of the following 

roll call votes taken with respect to H.R. 977. 

Roll Call No. 1 

Summary: Amendment to H.R. 977 that limits application of the 

requirement for CFTC to impose position limits to the spot month. 

Offered By: Representative Frank D. Lucas. 

Results: Amendment failed by a vote of 16 yeas, 27 nays, and 2 

not voting. 

YEAS

1. Mr. Lucas 9. Mrs. Schmidt 

2. Mr. Goodlatte 10. Mr. Smith 

3. Mr. Moran 11. Mr. Latta 

4. Mr. Graves 12. Mr. Roe 

5. Mr. Rogers 13. Mr. Luetkemeyer 

6. Mr. King 14. Mr. Thompson 

7. Mr. Neugebauer 15. Mr. Cassidy 

8. Mr. Conaway 16. Mrs. Lummis 

NAYS

1. Mr. Peterson 15. Mrs. Halvorson 

2. Mr. Holden 16. Mrs. Dahlkemper 

3. Mr. McIntyre 17. Mr. Massa 

4. Mr. Boswell 18. Mr. Bright 

5. Mr. Baca 19. Ms. Markey 

6. Mr. Scott 20. Mr. Kratovil 

7. Mr. Marshall 21. Mr. Schauer 

8. Ms. Herseth Sandlin 22. Mr. Kissell 

9. Mr. Cuellar 23. Mr. Boccieri 

10. Mr. Costa 24. Mr. Pomeroy 

11. Mr. Ellsworth 25. Mr. Childers 

12. Mr. Walz 26. Mr. Minnick 

13. Mr. Kagen 27. Mr. Fortenberry 

14. Mr. Schrader 

NOT VOTING

1. Mr. Cardoza 2. Mr. Johnson 

Roll Call No. 2 

Summary: Amendment to H.R. 977 that restructures how CFTC 

must define bona fide hedging transactions. 

Offered By: Representative Jerry Moran. 

Results: Amendment failed by a vote of 16 yeas, 27 nays, and 2 

not voting. 

YEAS

1. Mr. Cuellar 9. Mrs. Schmidt 

2. Mr. Lucas 10. Mr. Smith 


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3. Mr. Goodlatte 11. Mr. Latta 

4. Mr. Moran 12. Mr. Roe 

5. Mr. Graves 13. Mr. Luetkemeyer 

6. Mr. King 14. Mr. Thompson 

7. Mr. Neugebauer 15. Mr. Cassidy 

8. Mr. Conaway 16. Mrs. Lummis 

NAYS

1. Mr. Peterson 15. Mrs. Halvorson 

2. Mr. Holden 16. Mrs. Dahlkemper 

3. Mr. McIntyre 17. Mr. Massa 

4. Mr. Boswell 18. Mr. Bright 

5. Mr. Baca 19. Ms. Markey 

6. Mr. Cardoza 20. Mr. Kratovil 

7. Mr. Scott 21. Mr. Schauer 

8. Mr. Marshall 22. Mr. Kissell 

9. Ms. Herseth Sandlin 23. Mr. Boccieri 

10. Mr. Costa 24. Mr. Pomeroy 

11. Mr. Ellsworth 25. Mr. Childers 

12. Mr. Walz 26. Mr. Minnick 

13. Mr. Kagen 27. Mr. Fortenberry 

14. Mr. Schrader 

NOT VOTING

1. Mr. Johnson 2. Mr. Rogers 

COMMITTEE OVERSIGHT FINDINGS

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

of Representatives, the Committee on Agriculture’s oversight findings and recommendations are reflected in the body of this report. 

BUDGET ACT COMPLIANCE (SECTIONS 308, 402, AND 423) 

The provisions of clause 3(c)(2) of Rule XIII of the Rules of the 

House of Representatives and section 308(a)(1) of the Congressional 

Budget Act of 1974 (relating to estimates of new budget authority, 

new spending authority, new credit authority, or increased or decreased revenues or tax expenditures) are not considered applicable. The estimate and comparison required to be prepared by the 

Director of the Congressional Budget Office under clause 3(c)(3) of 

Rule XIII of the Rules of the House of Representatives and sections 

402 and 423 of the Congressional Budget Act of 1974 submitted to 

the Committee prior to the filing of this report are as follows: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, February 23, 2009. 

Hon. COLLIN C. PETERSON, 

Chairman, Committee on Agriculture, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 977, the Derivatives Markets Transparency and Accountability Act of 2009. 


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

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

Sincerely, 

ROBERT A. SUNSHINE

(For Douglas W. Elmendorf, Director). 

Enclosure. 

H.R. 977—Derivatives Markets Transparency and Accountability 

Act of 2009 

Summary: H.R. 977 would expand the authority of the Commodity Futures Trading Commission (CFTC) to regulate transactions and activities of various commodity markets. It also would 

authorize an increase in staffing for the CFTC and require the 

CFTC and the Government Accountability Office (GAO) to prepare 

several reports. 

CBO estimates that implementing the provisions of H.R. 977 

would cost $225 million over the 2009–2014 period, assuming appropriation of the necessary amounts. Enacting H.R. 977 could affect revenues because of provisions that would affect the regulation 

of banks by the Federal Reserve, but CBO estimates that any such 

impact would not be significant. Further, enacting the bill could affect both revenue and direct spending because additional criminal 

and civil penalties could be imposed for violations of new regulations, but we expect that any such increases also would not be significant because of the relatively small number of violations likely 

to occur. 

H.R. 977 would impose intergovernmental and private-sector 

mandates, as defined in the Unfunded Mandates Reform Act 

(UMRA), on participants in certain commodities markets. CBO cannot determine whether the costs to comply with the mandates in 

the bill would exceed the annual thresholds established in UMRA 

for intergovernmental or private-sector mandates ($69 million and 

$139 million in 2009, respectively, adjusted annually for inflation). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 977 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— 

2009 2010 2011 2012 2013 2014 2009– 

2014 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ....................... 15 34 46 46 46 47 234 

Estimated Outlays ......................................... 13 32 44 45 45 46 225 

Basis of estimate: For this estimate, CBO assumes that the bill 

will be enacted during fiscal year 2009, that the necessary amounts 

will be appropriated each year, and that spending will follow historical patterns for the CFTC. 

Spending subject to appropriation 

Section 7 would authorize the CFTC to hire a sufficient number 

of full-time employees to improve enforcement activities and to increase the transparency of activities in various regulated commodity markets. 


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With regard to transactions in over-the-counter (OTC) markets, 

H.R. 977 would require the CFTC to develop new reporting requirements, study the effect of setting limits on the number of contracts 

that can be held in OTC markets, and set limits on the number of 

contracts that can be held by speculators in certain situations. The 

bill also would require that certain OTC transactions be settled 

and cleared through organizations regulated by either the CFTC or, 

with respect to financial commodities, by the Securities and Exchange Commission (SEC). 

Other sections of the bill would: • Establish limits on certain transactions to diminish or prevent excessive speculation and market manipulation; • Require foreign boards of trade to meet certain requirements to allow domestic participants to have direct access to 

the foreign trading systems; • Require that agreements to trade allowances to emit 

greenhouse gas and credits for reductions in greenhouse gas 

emissions be executed on regulated markets; • Authorize the CFTC to suspend trading of credit default 

swaps (contracts that hedge the risk borne by a party to a contract that an entity may experience a loss of value as a result 

of an event specified in the contract) in certain situations; and • Authorize the CFTC to conduct criminal litigation relating 

to violations of the Commodity Exchange Act. 

Based on information from the CFTC, CBO estimates that the 

agency would add an additional 190 full-time employees by fiscal 

year 2011 to write regulations and undertake the additional oversight and enforcement activities required in the bill. In fiscal year 

2008, CFTC received an appropriation of $111 million that funded 

a staff of about 450 full-time employees. Assuming appropriations 

of the necessary amounts, CBO estimates that implementing H.R. 

977 would increase spending by $13 million in 2009 and $225 million over the 2009–2014 period for the cost of salaries, overhead, 

reports, and upgrades to the agency’s information technology systems. 

Revenues and direct spending 

H.R. 977 would limit the authority of the Federal Reserve to regulate banking institutions that process certain OTC transactions. 

Based on information from the Federal Reserve, it appears that few 

banks currently act as clearinghouses for such transactions. The 

budgetary effects of Federal Reserve activities are recorded as a 

change in revenues, and CBO estimates that the limitations included in the bill would not have a significant effect on revenues 

over the 2009–2019 period. 

Enacting H.R. 977 could affect both revenue and direct spending 

because additional criminal and civil penalties could be imposed for 

violations of new regulations, but we expect that any such increases would not be significant because of the relatively small 

number of violations likely to occur. 

Intergovernmental and private-sector impact: H.R. 977 would impose intergovernmental and private-sector mandates, as defined in 

UMRA, on participants in certain commodities markets. The bill 

would impose limits on the number of contracts that can be held 

(known as ‘‘position limits’’), as well as transaction and reporting 


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requirements, with respect to energy and certain agricultural commodities, on public and private entities such as pension funds, utilities, and swap dealers. The bill also would allow the CFTC to suspend trading in credit default swaps in some circumstances and 

impose new requirements on exchanges and derivatives clearing organizations. Because of limited information about the transactions 

in the affected markets, the position limits that CFTC would establish, and the extent to which position limits would result in lower 

returns, CBO has no basis to estimate the cost of the mandates on 

public or private-sector entities. Consequently, CBO cannot determine whether the costs to comply with the mandates in the bill 

would exceed the annual thresholds established in UMRA for intergovernmental or private-sector mandates ($69 million and $139 

million in 2009, respectively, adjusted annually for inflation). 

Estimate prepared by: Federal costs: Susan Willie; Impact on 

state, local and tribal governments: Elizabeth Cove Delisle; Impact 

on the private sector: Amy Petz. 

Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

PERFORMANCE GOALS AND OBJECTIVES

With respect to the requirement of clause 3(c)(4) of Rule XIII of 

the Rules of the House of Representatives, the performance goals 

and objections of this legislation are to bring greater transparency 

and accountability to commodity markets. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the House 

of Representatives, the Committee finds the Constitutional authority for this legislation in Article I, clause 8, section 18, that grants 

Congress the power to make all laws necessary and proper for carrying out the powers vested by Congress in the Constitution of the 

United States or in any department or officer thereof. 

COMMITTEE COST ESTIMATE

Pursuant to clause 3(d)(2) of Rule XIII of the Rules of the House 

of Representatives, the Committee report incorporates the cost estimate prepared by the Director of the Congressional Budget Office 

pursuant to sections 402 and 423 of the Congressional Budget Act 

of 1974. 

ADVISORY COMMITTEE STATEMENT

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

Federal Advisory Committee Act was created by this legislation. 

APPLICABILITY TO THE LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act (Public Law 104–1). 


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FEDERAL MANDATES STATEMENT

The Committee adopted as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act 

(Public Law 104–4). 

EARMARK STATEMENT REQUIRED BY CLAUSE 9 OF RULE XXI OF THE

RULES OF THE HOUSE OF REPRESENTATIVES

H.R. 977 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), 

or 9(f) of rule XXI of the Rules of the House of Representatives. 

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) * * * 

* * * * * * * 

(14) EXEMPT COMMODITY.—The term ‘‘exempt commodity’’ 

means a commodity that is not an excluded commodity øor an 

agricultural commodity¿, an agricultural commodity, any allowance authorized under law to emit a greenhouse gas, and 

any credit authorized under law toward the reduction in greenhouse gas emissions or an increase in carbon sequestration. 

* * * * * * * 

(34) CREDIT DEFAULT SWAP.—The term ‘‘credit default swap’’ 

means a contract which hedges a party to the contract against 

the risk that an entity may experience a loss of value as a result 

of an event specified in the contract, such as a default or credit 

downgrade. A credit default swap that is proposed to be traded 

or is traded on or proposed to be or is cleared by a registered 

entity pursuant to this Act shall be excluded from the definition 

of a security as defined in this Act and in section 2(a)(1) of the 

Securities Act of 1933 or section 3(a)(10) of the Securities Exchange Act of 1934, except as necessary solely for purposes of 

enforcing prohibitions against insider trading in sections 10 

and 16 of the Securities Exchange Act of 1934. 

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) * * * 

* * * * * * * 


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(7) APPOINTMENT AND COMPENSATION.— (A) * * * 

* * * * * * * 

(D) ADDITIONAL EMPLOYEES.—As soon as practicable 

after the date of the enactment of this subparagraph, subject to appropriations, the Commission shall appoint a sufficient number of full-time employees (in addition to the 

employees employed by the Commission as of the date of the 

enactment of this subparagraph)— 

(i) to increase the public transparency of operations 

in markets; 

(ii) to improve the enforcement of this Act in those 

markets; 

(iii) to enhance oversight of the trading and clearing 

of contracts, agreements, and transactions; and 

(iv) to carry out the provisions of the Derivatives 

Markets Transparency and Accountability Act of 2009 

and such other duties as are prescribed by the Commission. 

* * * * * * * 

(d) EXCLUDED DERIVATIVE TRANSACTIONS.— (1) IN GENERAL.—Nothing in this Act (other than subsection 

(j) of this section, and section ø5b or 12(e)(2)(B)¿ 4g(a), 4i, 5b, 

or 12(e)(2)(B), and the regulations of the Commission pursuant 

to section 4i(b) requiring reporting in connection with commodity option transactions) 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; øand¿ 

(B) the agreement, contract, or transaction is not executed or traded on a trading facilityø.¿ ; and 

(C) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a derivatives clearing organization registered with the Commission. 

(2) ELECTRONIC TRADING FACILITY EXCLUSION.—Nothing in 

this Act (other than subsection (j) of this section, and section 

4g(a), 4i, 5a (to the extent provided in section 5a(g)), 5b, 5d, 

or 12(e)(2)(B), and the regulations of the Commission pursuant 

to section 4i(b) requiring reporting in connection with commodity option transactions) governs or applies to an agreement, 

contract, or transaction in an excluded commodity if— 

(A) * * * 

(B) the agreement, contract, or transaction is entered 

into only between persons that are eligible contract participants described in subparagraph (A), (B)(ii), or (C) of section 1a(12)) at the time at which the persons enter into the 

agreement, contract, or transaction; øand¿ 

(C) the agreement, contract, or transaction is executed or 

traded on an electronic trading facilityø.¿; and 

(D) except as provided in section 4(h), the agreement, contract, or transaction is settled and cleared through a deVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00029 Fmt 6659 Sfmt 6603 E:\HR\OC\HR385P1.XXX HR385P1

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rivatives clearing organization registered with the Commission. 

* * * * * * * 

(g) EXCLUDED SWAP TRANSACTIONS.—No provision of this Act 

(other than subsection (j) of this section, and section 4g(a), 4i, 5a 

(to the extent provided in section 5a(g)), 5b, 5d, or 12(e)(2), and the 

regulations of the Commission pursuant to section 4i(b) requiring 

reporting in connection with commodity option transactions) shall 

apply to or govern any agreement, contract, or transaction in a 

commodity other than an agricultural commodity if the agreement, 

contract, or transaction is— 

(1) * * * 

(2) subject to individual negotiation by the parties; øand¿ 

(3) not executed or traded on a trading facilityø.¿; and 

(4) except as provided in section 4(h), settled and cleared 

through a derivatives clearing organization registered with the 

Commission. 

(h) LEGAL CERTAINTY FOR CERTAIN TRANSACTIONS IN EXEMPT

COMMODITIES.— (1) Except as provided in paragraph (2), 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 the persons enter into 

the agreement, contract, or transaction; øand¿ 

(B) is not entered into on a trading facilityø.¿; and 

(C) except as provided in section 4(h), is settled and 

cleared through a derivatives clearing organization registered with the Commission. 

(2) An agreement, contract, or transaction described in paragraph (1) of this subsection shall be subject to— 

ø(A) subsection (j) of this section and sections 5b and 

12(e)(2)(B);¿ 

(A) subsection (j) of this section and sections 4g(a), 4i, 5b 

and 12(e)(2)(B), and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with 

commodity option transactions; 

* * * * * * * 

(3) Except as provided in paragraphs (4) and (7), nothing in 

this Act shall apply to an agreement, contract, or transaction 

in an exempt commodity which is— 

(A) entered into on a principal-to-principal basis solely 

between persons that are eligible commercial entities at 

the time the persons enter into the agreement, contract, or 

transaction; øand¿ 

(B) executed or traded on an electronic trading 

facilityø.¿; and 

(C) except as provided in section 4(h), settled and cleared 

through a derivatives clearing organization registered with 

the Commission. 

(4) An agreement, contract, or transaction described in paragraph (3) of this subsection shall be subject to— 

ø(A) subsection (j) of this section and sections 5a (to the 

extent provided in section 5a(g)), 5b, 5d, and 12(e)(2)(B);¿ 


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(A) subsection (j) of this section and sections 4g(a), 4i, 5a 

(to the extent provided in section 5a(g)), 5b, 5d, and 

12(e)(2)(B), and the regulations of the Commission pursuant to section 4i(b) requiring reporting in connection with 

commodity option transactions; 

* * * * * * * 

(7) SIGNIFICANT PRICE DISCOVERY CONTRACTS.— (A) * * * 

* * * * * * * 

(C) CORE PRINCIPLES APPLICABLE TO SIGNIFICANT PRICE

DISCOVERY CONTRACTS.— (i) * * * 

(ii) CORE PRINCIPLES.—The electronic trading facility 

shall have reasonable discretion (including discretion 

to account for differences between cleared and 

uncleared significant price discovery contracts) in establishing the manner in which it complies with the 

following core principles: 

(I) * * * 

* * * * * * * 

ø(IV) POSITION LIMITATIONS OR ACCOUNT- ABILITY.—The electronic trading facility shall 

adopt, where necessary and appropriate, position 

limitations or position accountability for speculators in significant price discovery contracts, taking into account positions in other agreements, 

contracts, and transactions that are treated by a 

derivatives clearing organization, whether registered or not registered, as fungible with such 

significant price discovery contracts to reduce the 

potential threat of market manipulation or congestion, especially during trading in the delivery 

month.¿ 

(IV) The electronic trading facility shall adopt, 

where necessary and appropriate, position limitations or position accountability standards for speculators in significant price discovery contracts, 

taking into account positions in other agreements, 

contracts, and transactions that are treated by a 

derivatives clearing organization, whether registered or not registered, as fungible with such significant price discovery contracts to reduce the potential threat of market manipulation or congestion, especially during trading in the delivery 

month. For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the electronic trading facility shall set its position limitation at a level no 

higher than the Commission-established limitation. 

* * * * * * * 

(j) OVER-THE-COUNTER AUTHORITY.— 


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(1) Notwithstanding subsections (d), (g), (h)(1), and (h)(3) of 

section 2, and any exemption issued by the Commission by rule, 

regulation, or order, the Commission shall assess and issue a 

finding on whether agreements, contracts, or transactions entered into in reliance on subsection (d), (g), (h)(1), or (h)(3) of 

section 2 or any other exemption issued by the Commission by 

rule, regulation, or order, that are fungible (as defined by the 

Commission) with agreements, contracts, or transactions traded 

on or subject to the rules of any board of trade or electronic 

trading facility with respect to a significant price discovery contract, alone or in conjunction with other similar agreements, 

contracts, or transactions, have the potential to— 

(A) disrupt the liquidity or price discovery function on a 

registered entity; 

(B) cause a severe market disturbance in the underlying 

cash or futures market; or 

(C) prevent or otherwise impair the price of a contract 

listed for trading on a registered entity from reflecting the 

forces of supply and demand in any market. 

(2) If the Commission makes a finding pursuant to paragraph (1) of this subsection, the Commission may, in its discretion, utilize its authority under section 8a(9) to impose position 

limits (including, as appropriate and in its discretion, related 

hedge exemption provisions for bona fide hedging comparable to 

bona fide hedge provisions of section 4a(c)(2)) on agreements, 

contracts, or transactions involved, and take corrective actions 

to enforce the limits. 

* * * * * * * 

SEC. 4. (a) Unless exempted by the Commission pursuant to subsection (c) or by subsection (f), 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) * * * 

* * * * * * * 

(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 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 reVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00032 Fmt 6659 Sfmt 6601 E:\HR\OC\HR385P1.XXX HR385P1

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quirements of subsection (a), or from any other provision of this Act 

(except subparagraphs (C)(ii) and (D) of section 2(a)(1), except that 

the Commission and the Securities and Exchange Commission may 

by rule, regulation, or order jointly exclude any agreement, contract, or transaction from section 2(a)(1)(D)), if the agreement, contract, or transaction, except as provided in section 4(h), will be settled and cleared through a derivatives clearing organization registered with the Commission and the Commission determines that 

the exemption would be consistent with the public interest. 

* * * * * * * 

(e) FOREIGN BOARDS OF TRADE.— (1) IN GENERAL.—The Commission may not permit a foreign 

board of trade to provide to the members of the foreign board 

of trade or other participants located in the United States direct 

access to the electronic trading and order matching system of 

the foreign board of trade with respect to an agreement, contract, or transaction that settles against any price (including 

the daily or final settlement price) of 1 or more contracts listed 

for trading on a registered entity, unless— 

(A) the foreign board of trade makes public daily trading 

information regarding the agreement, contract, or transaction that is comparable to the daily trading information 

published by the registered entity for the 1 or more contracts against which the agreement, contract, or transaction 

traded on the foreign board of trade settles; and 

(B) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade)— 

(i) adopts position limits (including related hedge exemption provisions) for the agreement, contract, or 

transaction that are comparable, taking into consideration the relative sizes of the respective markets, to the 

position limits (including related hedge exemption provisions) adopted by the registered entity for the 1 or 

more contracts against which the agreement, contract, 

or transaction traded on the foreign board of trade settles; 

(ii) has the authority to require or direct market participants to limit, reduce, or liquidate any position the 

foreign board of trade (or the foreign futures authority 

that oversees the foreign board of trade) determines to 

be necessary to prevent or reduce the threat of price 

manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the 

cash settlement process; 

(iii) agrees to promptly notify the Commission, with 

regard to the agreement, contract, or transaction, of 

any change regarding— 

(I) the information that the foreign board of 

trade will make publicly available; 

(II) the position limits that the foreign board of 

trade or foreign futures authority will adopt and 

enforce; 

(III) the position reductions required to prevent 

manipulation, excessive speculation as described in 


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section 4a, price distortion, or disruption of delivery or the cash settlement process; and 

(IV) any other area of interest expressed by the 

Commission to the foreign board of trade or foreign futures authority; 

(iv) provides information to the Commission regarding large trader positions in the agreement, contract, or 

transaction that is comparable to the large trader position information collected by the Commission for the 1 

or more contracts against which the agreement, contract, or transaction traded on the foreign board of 

trade settles; and 

(v) provides the Commission with information necessary to publish reports on aggregate trader positions 

for the agreement, contract, or transaction traded on 

the foreign board of trade that are comparable to such 

reports on aggregate trading positions for 1 or more 

contracts against which the agreement, contract, or 

transaction traded on the foreign board of trade settles. 

(2) EXISTING FOREIGN BOARDS OF TRADE.—Paragraph (1) 

shall not be effective with respect to any agreement, contract, or 

transaction executed on a foreign board of trade to which the 

Commission had granted direct access permission before the 

date of the enactment of this subsection until the date that is 

180 days after such date of enactment. 

(f)(1) A person registered with the Commission, or exempt from 

registration by the Commission, under this Act may not be found to 

have violated subsection (a) with respect to a transaction in, or in 

connection with, a contract of sale of a commodity for future delivery if the person— 

(A) has reason to believe the transaction and the contract is 

made on or subject to the rules of a board of trade that is— 

(i) legally organized under the laws of a foreign country; 

(ii) authorized to act as a board of trade by a foreign futures authority; and 

(iii) subject to regulation by the foreign futures authority; 

and 

(B) has not been determined by the Commission to be operating in violation of subsection (a). 

(2) Nothing in this subsection shall be construed as implying or 

creating any presumption that a board of trade, exchange, or market is located outside the United States, or its territories or possessions, for purposes of subsection (a). 

(g) DETAILED REPORTING AND DISAGGREGATION OF MARKET

DATA.— 

(1) INDEX TRADERS AND SWAP DEALERS REPORTING.—The 

Commission shall issue a proposed rule defining and 

classifying index traders and swap dealers (as those terms are 

defined by the Commission) for purposes of data reporting requirements and setting routine detailed reporting requirements 

for any positions of such entities in contracts traded on designated contract markets, derivatives transaction execution facilities, foreign boards of trade subject to section 4(e), and electronic trading facilities with respect to significant price discovery contracts not later than 90 days after the date of the enVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6603 E:\HR\OC\HR385P1.XXX HR385P1

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actment of this subsection, and issue a final rule within 180 

days after such date of enactment. 

(2) DISAGGREGATION OF INDEX FUNDS AND OTHER DATA IN

MARKETS.—Subject to section 8 and beginning within 60 days 

of the issuance of the final rule required by paragraph (1), the 

Commission shall disaggregate and make public monthly— 

(A) the number of positions and total notional value of 

index funds and other passive, long-only and short-only positions (as defined by the Commission) in all markets to the 

extent such information is available; and 

(B) data on speculative positions relative to bona fide 

hedgers in those markets to the extent such information is 

available. 

(h) ALTERNATIVES TO CLEARING THROUGH DERIVATIVES CLEARING

ORGANIZATIONS.— 

(1) SETTLEMENT AND CLEARING THROUGH CERTAIN OTHER

REGULATED ENTITIES.— 

(A) An agreement, contract, or transaction, or class thereof, relating to an excluded commodity, that would otherwise 

be required to be settled and cleared by section 2(d)(1)(C), 

2(d)(2)(D), or 2(g)(4) of this Act, or subsection (c)(1) of this 

section may be settled and cleared through an entity listed 

in section 409(b)(1) of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

(B) An agreement, contract, or transaction, or class thereof, that would otherwise be required to be settled and 

cleared by section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 

or 2(h)(3)(C) of this Act, or subsection (c)(1) of this section 

may be settled and cleared through an entity listed in section 409(b)(3) of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

(2) WAIVER OF CLEARING REQUIREMENT.— 

(A) The Commission, in its discretion, may exempt an 

agreement, contract, or transaction, or class thereof, that 

would otherwise be required by section 2(d)(1)(C), 

2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or 

subsection (c)(1) of this section to be settled and cleared 

through a derivatives clearing organization registered with 

the Commission from such requirement. 

(B) In granting exemptions pursuant to subparagraph 

(A), the Commission shall consult with the Securities and 

Exchange Commission and the Board of Governors of the 

Federal Reserve System regarding exemptions that relate to 

excluded commodities or entities for which the Securities 

Exchange Commission or the Board of Governors of the 

Federal Reserve System serve as the primary regulator. 

(C) Before granting an exemption pursuant to subparagraph (A), the Commission shall find that the agreement, 

contract, or transaction, or class thereof— 

(i) is highly customized as to its material terms and 

conditions; 

(ii) is transacted infrequently; 

(iii) does not serve a significant price-discovery function in the marketplace; and 


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(iv) is being entered into by parties who can demonstrate the financial integrity of the agreement, contract, or transaction and their own financial integrity, 

as such terms and standards are determined by the 

Commission. The standards shall include a net capital 

requirement associated with any agreement, contract, 

or transaction subject to an exemption from the clearing requirement that recognizes the risks associated 

with the absence of clearing. 

(D) Any agreement, contract, or transaction, or class 

thereof, which is exempted pursuant to subparagraph (A) 

shall be reported in a manner designated by the Commission to the Commission, the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, or such other entity the Commission deems appropriate. 

(i) SPOT AND FORWARD EXCLUSION.—The settlement and clearing 

requirements of section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 

2(h)(3)(C), or 4(c)(1) shall not apply to an agreement, contract, or 

transaction of any cash commodity for immediate or deferred shipment or delivery, as defined by the Commission. 

SEC. 4a. (a)(1) 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, or on electronic trading facilities with respect 

to a significant price discovery contract 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, or on an electronic trading facility with respect to a significant price discovery contract, 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 posiVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00036 Fmt 6659 Sfmt 6601 E:\HR\OC\HR385P1.XXX HR385P1

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tions 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’’. 

(2)(A) In accordance with the standards set forth in paragraph (1) 

of this subsection and consistent with the good faith exception cited 

in subsection (b)(2), with respect to physical commodities other than 

excluded commodities as defined by the Commission, the Commission shall by rule, regulation, or order establish limits on the 

amount of positions, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to contracts of 

sale for future delivery or with respect to options on such contracts 

or commodities traded on or subject to the rules of a contract market or derivatives transaction execution facility, or on an electronic 

trading facility as a significant price discovery contract. 

(B)(i) For exempt commodities, the limits shall be established 

within 180 days after the date of the enactment of this paragraph. 

(ii) For agricultural commodities, the limits shall be established 

within 270 days after the date of the enactment of this paragraph. 

(3) In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits— 

(A) on the number of positions that may be held by any person for the spot month, each other month, and the aggregate 

number of positions that may be held by any person for all 

months; 

(B) to the maximum extent practicable, in its discretion— 

(i) to diminish, eliminate, or prevent excessive speculation 

as described under this section; 

(ii) to deter and prevent market manipulation, squeezes, 

and corners; 

(iii) to ensure sufficient market liquidity for bona fide 

hedgers; and 

(iv) to ensure that the price discovery function of the underlying market is not disrupted; and 

(C) to the maximum extent practicable, in its discretion, take 

into account the total number of positions in fungible agreements, contracts, or transactions that a person can hold in 

other markets. 

(4)(A) Not later than 150 days after the establishment of position 

limits pursuant to paragraph (2), and biannually thereafter, the 

Commission shall hold 2 public hearings, 1 for agriculture commodities and 1 for energy commodities as such terms are defined by the 

Commission, in order to receive recommendations regarding the position limits to be established in paragraph (2). 

(B) Each public hearing held pursuant to subparagraph (A) shall, 

at a minimum providing there is sufficient interest, receive recommendations from— 

(i) 7 predominantly commercial short hedgers of the actual 

physical commodity for future delivery; 

(ii) 7 predominantly commercial long hedgers of the actual 

physical commodity for future delivery; 

(iii) 4 non-commercial participants in markets for commodities for future delivery; and 

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modity for future delivery is traded, and each electronic trading 

facility that has a significant price discovery contract in the 

commodity. 

(C) Within 60 days after each public hearing held pursuant to 

subparagraph (A), the Commission shall publish in the Federal 

Register its response to the recommendations regarding position 

limits heard at the hearing. 

* * * * * * * 

(c)(1) No rule, regulation, or order issued under subsection (a) of 

this section shall apply to transactions or positions which are 

shown to be bona fide hedging transactions or positions, as such 

terms shall be defined by the Commission by rule, regulation, or 

order consistent with the purposes of this Act. Such terms may be 

defined to permit producers, purchasers, sellers, middlemen, and 

users of a commodity or a product derived therefrom to hedge their 

legitimate anticipated business needs for that period of time into 

the future for which an appropriate futures contract is open and 

available on an exchange. To determine the adequacy of this Act 

and the powers of the Commission acting thereunder to prevent 

unwarranted price pressures by large hedgers, the Commission 

shall monitor and analyze the trading activities of the largest hedgers, as determined by the Commission, operating in the cattle, hog, 

or pork belly markets and shall report its findings and recommendations to the Senate Committee on Agriculture, Nutrition, 

and Forestry and the House Committee on Agriculture in its annual reports for at least two years following the date of enactment 

of the Futures Trading Act of 1982. 

(2) For the purposes of implementation of subsection (a)(2) for 

contracts of sale for future delivery and options on such contracts 

or commodities, the Commission shall define what constitutes a 

bona fide hedging transaction or position as a transaction or position that— 

(A)(i) represents a substitute for transactions made or to be made 

or positions taken or to be taken at a later time in a physical marketing channel; 

(ii) is economically appropriate to the reduction of risks in the 

conduct and management of a commercial enterprise; and 

(iii) arises from the potential change in the value of— 

(I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising; 

(II) liabilities that a person owns or anticipates incurring; or 

(III) services that a person provides, purchases, or anticipates 

providing or purchasing; or 

(B) reduces risks attendant to a position resulting from a transaction that— 

(i) was executed pursuant to subsection (g), (h)(1), or (h)(3) of 

section 2, or an exemption issued by the Commission by rule, 

regulation or order; and 

(ii)(I) was executed opposite a counterparty for which the 

transaction would qualify as a bona fide hedging transaction 

pursuant to subparagraph (A); or 

(II) meets the requirements of subparagraph (A). 

* * * * * * * 


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SEC. 4c. PROHIBITED TRANSACTIONS. 

(a) * * * 

* * * * * * * 

(h) AUTHORITY OF COMMISSION TO SUSPEND TRADING OF CREDIT

DEFAULT SWAPS.— (1) IN GENERAL.—If, in the opinion of the Commission, the 

public interest and the protection of investors so require, the 

Commission may, by order— 

(A) summarily suspend trading in any credit default 

swap; and 

(B) summarily suspend all trading on any contract market, derivatives transaction execution facility, or otherwise, 

in credit default swaps. 

(2) LIMITATION.—An action described in paragraph (1) 

shall— 

(A) not take effect unless the Commission notifies the 

President of its decision, and the President notifies the 

Commission that the President does not disapprove of the 

decision; 

(B) only apply to credit default swaps that are related to 

securities subject to a short selling suspension order by the 

Securities and Exchange Commission, and such action 

must terminate when such suspension order terminates; 

and 

(C) only apply to credit default swaps purchased by persons who are not purchasing the credit default swap to reduce an existing credit risk directly related to the reference 

entity or its obligations. 

* * * * * * * 

SEC. 4g. (a) Every person registered hereunder as a futures commission merchant, introducing broker, floor broker, or floor trader 

shall make such reports as are required by the Commission regarding the transactions and positions of such person, and the transactions and positions of the customer thereof, in commodities for 

future delivery on any board of trade in the United States or elsewhere, and transactions and positions traded pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption issued 

by the Commission by rule, regulation or order, and in any significant price discovery contract traded or executed on an electronic 

trading facility or any agreement, contract, or transaction that is 

treated by a derivatives clearing organization, whether registered 

or not registered, as fungible with a significant price discovery contract; shall keep books and records pertaining to such transactions 

and positions in such form and manner and for such period as may 

be required by the Commission; and shall keep such books and 

records open to inspection by any representative of the Commission 

or the United States Department of Justice. 

* * * * * * * 

SEC. 4i. (a) 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, or any significant price discovery 

contract traded or executed on an electronic trading facility or any 

agreement, contract, or transaction that is treated by a derivatives 


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clearing organization, whether registered or not registered, as fungible with a significant price discovery contract— 

(1) * * * 

* * * * * * * 

unless such person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in clauses (1) and (2) hereof as the 

Commission may by rule or regulation require and unless, in accordance with rules and regulations of the Commission, such person shall keep books and records of all such transactions and positions and transactions and positions in any such commodity traded 

on or subject to the rules of any other board of trade or electronic 

trading facility in the United States or elsewhere, and of transactions and positions in any such commodity entered into pursuant 

to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any exemption 

issued by the Commission by rule, regulation or order, and of cash 

or spot transactions in, and inventories and purchase and sale commitments of such commodity. øSuch books and records shall show 

complete details concerning all such transactions, positions, inventories, and commitments, including the names and addresses of all 

persons having any interest therein, and shall be open at all times 

to inspection by any representative of the Commission or the Department of Justice. For the purposes of this section, the futures 

and cash or spot transactions and positions of any person shall include such transactions and positions of any persons directly or indirectly controlled by such person.¿ 

(b) Upon special call by the Commission, any person shall provide 

to the Commission, in a form and manner and within the period 

specified in the special call, books and records of all transactions 

and positions traded on or subject to the rules of any board of trade 

or electronic trading facility in the United States or elsewhere, or 

pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any 

exemption issued by the Commission by rule, regulation, or order, 

as the Commission may determine appropriate to deter and prevent 

price manipulation or any other disruption to market integrity or to 

diminish, eliminate, or prevent excessive speculation as described in 

section 4a(a). 

(c) Such books and records described in subsections (a) and (b) 

shall show complete details concerning all such transactions, positions, inventories, and commitments, including the names and addresses of all persons having any interest therein, shall be kept for 

a period of 5 years, and shall be open at all times to inspection by 

any representative of the Commission or the Department of Justice. 

For the purposes of this section, the futures and cash or spot transactions and positions of any person shall include such transactions 

and positions of any persons directly or indirectly controlled by the 

person. 

* * * * * * * 

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

(a) * * * 

* * * * * * * 

(d) CORE PRINCIPLES FOR CONTRACT MARKETS.— 


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(1) * * * 

* * * * * * * 

ø(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.¿ 

(5) To reduce the potential threat of market manipulation or 

congestion, especially during trading in the delivery month, the 

board of trade shall adopt for each of its contracts, where necessary and appropriate, position limitations or position accountability standards for speculators. For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the board of trade shall set its position 

limitation at a level no higher than the Commission-established 

limitation. 

* * * * * * * 

(19) DIVERSITY OF BOARDS OF DIRECTORS.—The board of 

trade of a publicly traded company shall endeavor to recruit individuals to serve on the board of directors and the other decision-making bodies (as determined by the Commission) of the 

board of trade from among, and to have the composition of such 

bodies reflect, a broad and culturally diverse pool of qualified 

candidates. 

* * * * * * * 

SEC. 5a. DERIVATIVES TRANSACTION EXECUTION FACILITIES. 

(a) * * * 

* * * * * * * 

(d) CORE PRINCIPLES FOR REGISTERED DERIVATIVES TRANSACTION

EXECUTION FACILITIES.— 

(1) * * * 

* * * * * * * 

ø(4) POSITION LIMITATIONS OR ACCOUNTABILITY.—To reduce 

the potential threat of market manipulation or congestion, especially during trading in the delivery month, the derivatives 

transaction execution facility shall adopt position limits or position accountability for speculators, where necessary and appropriate for a contract, agreement or transaction with an underlying commodity that has a physically deliverable supply.¿ 

(4) To reduce the potential threat of market manipulation or 

congestion, especially during trading in the delivery month, the 

board of trade shall adopt for each of its contracts, where necessary and appropriate, position limitations or position accountability standards for speculators. For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), the board of trade shall set its position 

limitation at a level no higher than the Commission-established 

limitation. 

* * * * * * * 

SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS. 

(a) * * * 


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ø(b) VOLUNTARY REGISTRATION.—A derivatives clearing organization¿ 

(b) VOLUNTARY REGISTRATION.— 

(1) A derivatives clearing organization that clears agreements, contracts, or transactions excluded from this Act by section 2(c), 2(d), 2(f), or 2(g) of this Act or title IV of the Commodity Futures Modernization Act of 2000, or exempted under 

section 2(h) or 4(c) of this Act, or other over-the-counter derivative instruments (as defined in the Federal Deposit Insurance 

Corporation Improvement Act of 1991) may register with the 

Commission as a derivatives clearing organization. 

(2)(A) A national bank, a State member bank, an insured 

State nonmember bank, an affiliate of a national bank, a State 

member bank, an insured State nonmember bank, or a corporation chartered under section 25A of the Federal Reserve Act 

may register with the Commission as a derivatives clearing organization. 

(B) The Commission shall expedite the application of any institution referred to in subparagraph (A) to the extent that, as 

of the date of enactment of this paragraph, the institution had 

received the approval of the Board of Governors of the Federal 

Reserve System to act as a multilateral clearing organization. 

(c) REGISTRATION OF DERIVATIVES CLEARING ORGANIZATIONS.— 

(1) * * * 

(2) CORE PRINCIPLES.— 

(A) * * * 

* * * * * * * 

(O) DISCLOSURE OF GENERAL INFORMATION.—The applicant shall disclose publicly and to the Commission information concerning— 

(i) the terms and conditions of contracts, agreements, 

and transactions cleared and settled by the applicant; 

(ii) the conventions, mechanisms, and practices applicable to the contracts, agreements, and transactions; 

(iii) the margin-setting methodology and the size and 

composition of the financial resource package of the applicant; and 

(iv) other information relevant to participation in the 

settlement and clearing activities of the applicant. 

(P) DAILY PUBLICATION OF TRADING INFORMATION.—The 

applicant shall make public daily information on settlement prices, volume, and open interest for contracts settled 

or cleared pursuant to the requirements of section 

2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C) or 4(c)(1) 

of this Act by the applicant if the Commission determines 

that the contracts perform a significant price discovery 

function for transactions in the cash market for the commodity underlying the contracts. 

(Q) FITNESS STANDARDS.—The applicant shall establish 

and enforce appropriate fitness standards for directors, 

members of any disciplinary committee, and members of 

the applicant, and any other persons with direct access to 

the settlement or clearing activities of the applicant, includVerDate Nov 24 2008 00:53 Dec 27, 2009 Jkt 089006 PO 00000 Frm 00042 Fmt 6659 Sfmt 6603 E:\HR\OC\HR385P1.XXX HR385P1

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ing any parties affiliated with any of the persons described 

in this subparagraph. 

* * * * * * * 

SEC. 8a. The Commission is authorized— 

(1) * * * 

* * * * * * * 

ø(9)¿ (9)(A) to direct the 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 øaction.¿ action; and (B) to direct any person to abide by any position limits to agreements, contracts, or transactions subject to 

section 2(j)(1) that are imposed pursuant to section 2(j)(2). 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 registered entity to the terms ‘‘market emergency’’, ‘‘emergency’’, 

or equivalent language in its own bylaws, rules, regulations, or 

resolutions; 

* * * * * * * 

SEC. 9. (a) * * * 

* * * * * * * 

(f) Notwithstanding section 516 of title 28, United States Code, 

the Commission may initiate and conduct criminal litigation relating to a violation of this Act, and secure evidence therefor, if the Attorney General has declined to do so. 

* * * * * * * 

SEC. 22. (a)(1) * * * 

* * * * * * * 

(5) A contract of sale of a commodity for future delivery traded 

or executed on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes of 


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section 4(a) shall not be void, voidable, or unenforceable, and a 

party to such a contract shall not be entitled to rescind or recover 

any payment made with respect to the contract, based on the failure 

of the foreign board of trade to comply with any provision of this 

Act. 

* * * * * * * 

FEDERAL DEPOSIT INSURANCE CORPORATION 

IMPROVEMENT ACT OF 1991 

* * * * * * * 

TITLE IV—MISCELLANEOUS 

PROVISIONS 

Subtitle A—Payment System Risk 

Reduction 

* * * * * * * 

CHAPTER 2—MULTILATERAL CLEARING 

ORGANIZATIONS 

* * * * * * * 

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, a State 

member bank, an insured State nonmember bank, an affiliate of a 

national bank, a State member bank, or an insured State nonmember bank, or a corporation chartered under section 25A of the 

Federal Reserve Act, and the person is registered as a clearing 

agency under the Securities Exchange Act of 1934 or as a derivatives clearing organization under the Commodity Exchange Act. (b) CLEARING ORGANIZATIONS.—Subsection (a) shall not apply to 

any clearing organization that— 

(1) * * * 

* * * * * * * 

(3) is supervised by a foreign financial regulator that øthe 

Comptroller of the Currency, the Board of Governors of the 

Federal Reserve System, the Federal Deposit Insurance Corporation,¿ the Securities and Exchange Commission, or the 

Commodity Futures Trading Commission, as applicable, has 

determined satisfies appropriate standards. 

* * * * * * * 

LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 

* * * * * * * 


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TITLE IV—REGULATORY 

RESPONSIBILITY FOR BANK PRODUCTS 

* * * * * * * 

SEC. 407. EXCLUSION OF COVERED SWAP AGREEMENTS. 

No provision of the Commodity Exchange Act (other than section 

5b of such Act with respect to the clearing of covered swap agreements and the settlement and clearing requirements of sections 

2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of 

such Act) shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, a 

covered swap agreement offered, entered into, or provided by a 

bank. 

* * * * * * * 

FEDERAL RESERVE ACT 

* * * * * * * 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SEC. 10. The Board of Governors of the Federal Reserve System 

(hereinafter referred to as the ‘‘Board’’) shall be composed of seven 

members, to be appointed by the President, by and with the advice 

and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter 

provided, but each appointive member of the Federal Reserve 

Board in office on such date shall continue to serve as a member 

of the Board until February 1, 1936, and the Secretary of the 

Treasury and the Comptroller of the Currency shall continue to 

serve as members of the Board until February 1, 1936. In selecting 

the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall 

have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. The members of the Board shall devote their 

entire time to the business of the Board and shall each receive and 

annual salary of $15,000, payable monthly, together with actual 

necessary traveling expenses. 

* * * * * * * 

The Board shall have no power to issue any rule, regulation, or 

order, or otherwise to establish the standards of regulation of any 

entity in its capacity as a multilateral clearing organization as defined in section 408 of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

* * * * * * * 

INSPECTOR GENERAL ACT OF 1978 

* * * * * * * 


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REQUIREMENTS FOR FEDERAL ENTITIES AND DESIGNATED FEDERAL

ENTITIES

SEC. 8G. (a) Notwithstanding section 12 of this Act, as used in 

this section— 

(1) * * * 

(2) the term ‘‘designated Federal entity’’ means Amtrak, the 

Appalachian Regional Commission, the Board of Governors of 

the Federal Reserve System, the Board for International 

Broadcasting, øthe Commodity Futures Trading Commission,¿ 

the Consumer Product Safety Commission, the Corporation for 

Public Broadcasting, the Equal Employment Opportunity Commission, the Farm Credit Administration, the Federal Communications Commission, the Federal Deposit Insurance Corporation , the Federal Election Commission, the Election Assistance 

Commission, the Federal Housing Finance Board, the Federal 

Labor Relations Authority, the Federal Maritime Commission, 

the Federal Trade Commission, the Legal Services Corporation, 

the National Archives and Records Administration, the National Credit Union Administration, the National Endowment 

for the Arts, the National Endowment for the Humanities, the 

National Labor Relations Board, the National Science Foundation, the Panama Canal Commission, the Peace Corps, the 

Pension Benefit Guaranty Corporation, the Securities and Exchange Commission, the Smithsonian Institution, the United 

States International Trade Commission, the Postal Regulatory 

Commission, and the United States Postal Service; 

* * * * * * * 

DEFINITIONS

SEC. 12. As used in this Act— 

(1) the term ‘‘head of the establishment’’ means the Secretary of Agriculture, Commerce, Defense, Education, Energy, 

Health and Human Services, Housing and Urban Development, the Interior, Labor, State, Transportation, Homeland Security, or the Treasury; the Attorney General; the Administrator of the Agency for International Development, Environmental Protection, General Services, National Aeronautics and 

Space, or Small Business, or Veterans’ Affairs; the Director of 

the Federal Emergency Management Agency, or the Office of 

Personnel Management; the Chairman of the Nuclear Regulatory Commission or the Railroad Retirement Board; the 

Chairperson of the Thrift Depositor Protection Oversight 

Board; the Chief Executive Officer of the Corporation for National and Community Service; the Administrator of the Community Development Financial Institutions Fund; the chief executive officer of the Resolution Trust Corporation; the Chairperson of the Federal Deposit Insurance Corporation; the Commissioner of Social Security, Social Security Administration; 

the Director of the Federal Housing Finance Agency; the Board 

of Directors of the Tennessee Valley Authority; the President 

of the Export-Import Bank; øor the Federal Cochairpersons of 

the Commissions established under section 15301 of title 40, 

United States Code;¿ the Federal Cochairpersons of the Commissions established under section 15301 of title 40, United 


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States Code; or the Chairman of the Commodity Futures Trading Commission; as the case may be; 

(2) the term ‘‘establishment’’ means the Department of Agriculture, Commerce, Defense, Education, Energy, Health and 

Human Services, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, Homeland Security, 

or the Treasury; the Agency for International Development, the 

Community Development Financial Institutions Fund, the Environmental Protection Agency, the Federal Emergency Management Agency, the General Services Administration, the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, the Office of Personnel Management, the 

Railroad Retirement Board, the Resolution Trust Corporation, 

the Federal Deposit Insurance Corporation, the Small Business 

Administration, the Corporation for National and Community 

Service, or the Veterans’ Administration, the Social Security 

Administration, the Federal Housing Finance Agency, the Tennessee Valley Authority, the Export-Import Bank, øor the 

Commissions established under section 15301 of title 40, 

United States Code,¿ the Commissions established under section 15301 of title 40, United States Code, or the Commodity 

Futures Trading Commission, as the case may be; 

* * * * * * * 

Æ 


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