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[DOCID: f:hr385p1.111]
From the House Reports Online via GPO Access
[wais.access.gpo.gov]



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.

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--
          ``(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).
  ``(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
                  ``(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.''.
          (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
          (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''.
          (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 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
                          ``(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.

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:
          ``(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 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 
over-the-counter (OTC) market, there were objections to other 
so-called ``loopholes'' to allow for trading in commodities 
outside the regulated 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:
    <bullet> 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:
          <ctr-circle> publicly provided daily trading 
        information that is comparable to that published by the 
        U.S. exchange,
          <ctr-circle> adopted position limits that are 
        comparable to those adopted by the U.S. exchange,
          <ctr-circle> 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
          <ctr-circle> provided information on aggregate trader 
        positions on the FBOT comparable to that provided in 
        reports for the U.S.-listed contract.
    <bullet> 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.
    <bullet> Required the CFTC to define and classify index 
traders and swap dealers for data reporting requirements.
    <bullet> Subjected excluded swap transactions and 
transactions for agricultural and energy commodities to 
reporting and recordkeeping requirements.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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 market-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 sell-side 
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.
    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:
    <bullet> 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.
    <bullet> Allows OTC transactions relating to an excluded 
commodity (i.e. financials) to be settled and cleared through a 
SEC-regulated clearing agency.
    <bullet> 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.
    <bullet> Allows, as an alternative to clearing, parties to 
seek an exemption from the clearing requirement from the CFTC.
    <bullet> 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.
    <bullet> Makes the Inspector General position at the CFTC a 
Presidential appointment, confirmed by the Senate.
    <bullet> 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.
    <bullet> Defines credit defaults swaps traded or cleared by 
registered entity as shall not be considered securities except 
as necessary for enforcing insider trading prohibitions.
    <bullet> 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-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:
    <ctr-circle> Publicly provides comparable daily trading 
information.
    <ctr-circle> Adopts comparable position limits that take 
into account the relative market size.
    <ctr-circle> Has comparable authority to prevent price 
manipulation or distortion, excessive speculation, or the 
disruption of physical delivery or cash settlement.
    <ctr-circle> 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.
    <ctr-circle> Provides comparable information to the CFTC 
regarding large trader positions.
    <ctr-circle> 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.
    Section 5(b)(1) requires rulemaking within 60 days of 
enactment to implement the following new requirements: 
inclusion of over-the-counter (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.

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.

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).
    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 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
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.
    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.
    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:
          <bullet> Establish limits on certain transactions to 
        diminish or prevent excessive speculation and market 
        manipulation;
          <bullet> Require foreign boards of trade to meet 
        certain requirements to allow domestic participants to 
        have direct access to the foreign trading systems;
          <bullet> Require that agreements to trade allowances 
        to emit greenhouse gas and credits for reductions in 
        greenhouse gas emissions be executed on regulated 
        markets;
          <bullet> 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
          <bullet> 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 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).

                       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 [or 
        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) * * *

           *       *       *       *       *       *       *

          (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 [5b 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; [and]
                  (B) the agreement, contract, or transaction 
                is not executed or traded on a trading 
                facility[.] ; 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; 
                [and]
                  (C) the agreement, contract, or transaction 
                is executed or traded on an electronic trading 
                facility[.]; and
                  (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.

           *       *       *       *       *       *       *

  (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; 
        [and]
          (3) not executed or traded on a trading facility[.]; 
        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; [and]
                  (B) is not entered into on a trading 
                facility[.]; 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--
                  [(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; [and]
                  (B) executed or traded on an electronic 
                trading facility[.]; 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--
                  [(A) subsection (j) of this section and 
                sections 5a (to the extent provided in section 
                5a(g)), 5b, 5d, and 12(e)(2)(B);]
                  (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) * * *

           *       *       *       *       *       *       *

                                  [(IV) Position limitations or 
                                accountability.--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.--
          (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 requirements 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 
                                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 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.
  (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.
  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 positions different from limits fixed for other 
transactions or positions. The word ``arbitrage'' in domestic 
markets shall be defined to mean the same as a ``spread'' or 
``straddle''. The Commission is authorized to define the term 
``international arbitrage''.
  (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
          (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.

           *       *       *       *       *       *       *

  (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).

           *       *       *       *       *       *       *


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 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. [Such 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.--
          (1) * * *

           *       *       *       *       *       *       *

          [(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) * * *

           *       *       *       *       *       *       *

          [(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) * * *
  [(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, including any parties 
                affiliated with any of the persons described in 
                this subparagraph.

           *       *       *       *       *       *       *

  Sec. 8a. The Commission is authorized--
          (1) * * *

           *       *       *       *       *       *       *

          [(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 [action.] 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 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 [the 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



           *       *       *       *       *       *       *
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



           *       *       *       *       *       *       *
   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, [the 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; [or 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 
        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, [or 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;
          * * * * * * *

                                  <all>
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