II 

111TH CONGRESS 

1ST SESSION S. 1399 

To amend the Commodity Exchange Act to establish a market for the trading 

of greenhouse gases, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 6, 2009 

Mrs. FEINSTEIN (for herself and Ms. SNOWE) introduced the following bill; 

which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry 

A BILL 

To amend the Commodity Exchange Act to establish a market for the trading of greenhouse gases, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Carbon Market Over5 sight Act of 2009’’. 

6 SEC. 2. REGULATION OF CARBON MARKETS. 

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

8 U.S.C. 1 et seq.) is amended by adding at the end the 

9 following: 


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1 ‘‘TITLE II—REGULATION OF 

2 CARBON MARKETS 

3 ‘‘SEC. 201. PURPOSES. 

4 ‘‘The purposes of this title are— 

5 ‘‘(1) to ensure that the greenhouse gas market 

6 established by this title— 

7 ‘‘(A) is formed in a manner consistent with 

8 the public interest; 

9 ‘‘(B) is formed in a manner consistent 

10 with the goal of reducing greenhouse gas emis11 sions in the United States; 

12 ‘‘(C) is designed to prevent fraud and ma13 nipulation, which could potentially arise from 

14 many sources, including— 

15 ‘‘(i) the concentration of market 

16 power within the control of a limited num17 ber of individuals or entities; 

18 ‘‘(ii) the abuse of material, nonpublic 

19 information; and 

20 ‘‘(iii) the unique nature of the allow21 ance markets in which supply is known 

22 and declining over time, but demand is un23 known, which can create an inherent po24 tential for scarcity; 


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1 ‘‘(D)(i) is appropriately transparent, with 

2 real-time reporting of quotes and trades; 

3 ‘‘(ii) makes information on price, volume, 

4 and supply, and other important statistical in5 formation, available to the public on fair, rea6 sonable, and nondiscriminatory terms; 

7 ‘‘(iii) is subject to appropriate record8 keeping and reporting requirements regarding 

9 transactions; and 

10 ‘‘(iv) has the confidence of investors; 

11 ‘‘(E) functions smoothly and efficiently, 

12 generating prices that accurately reflect supply 

13 and demand for emission allowances; 

14 ‘‘(F) promotes just and equitable principles 

15 of trade; and 

16 ‘‘(G) establishes an equitable system for 

17 the best execution of customer orders; 

18 ‘‘(2) to minimize transaction costs for regulated 

19 entities so that the cost of abatement is reduced for 

20 those entities and customers of those entities; 

21 ‘‘(3) to establish a cost-effective capability for 

22 real-time monitoring of the market in order to avoid 

23 manipulation and market failure; 

24 ‘‘(4) to minimize the volatility induced by the 

25 structure of the marketplace itself in the interest of 


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1 providing an accurate price signal for regulated enti2 ties; and 

3 ‘‘(5) to ensure that the markets will function in 

4 a stable and efficient manner to promote the envi5 ronmental and economic objectives of the United 

6 States. 

7 ‘‘SEC. 202. DEFINITIONS. 

8 ‘‘In this title: 

9 ‘‘(1) CARBON CLEARING ORGANIZATION.—The 

10 term ‘Carbon Clearing Organization’ means the enti11 ty established under section 206(a). 

12 ‘‘(2) CARBON DIOXIDE EQUIVALENT.—The 

13 term ‘carbon dioxide equivalent’ means for each 

14 greenhouse gas, the quantity of the greenhouse gas 

15 that the Administrator of the Environmental Protec16 tion Agency determines makes the same contribution 

17 to global warming as 1 metric ton of carbon dioxide. 

18 ‘‘(3) DEALER.—The term ‘dealer’ means an in19 dividual, association, partnership, corporation, or 

20 trust that— 

21 ‘‘(A) is engaged in soliciting or in accept22 ing orders for the purchase or sale of a regu23 lated instrument on or subject to the rules of 

24 a registered carbon trading facility; and 


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1 ‘‘(B) in or in connection with the solicita2 tion or acceptance of such an order, accepts 

3 money, securities, or property (or extends credit 

4 in lieu of such an acceptance) to margin, guar5 antee, or secure any trade or contract that re6 sults or may result from such an acceptance. 

7 ‘‘(4) DIRECTOR.—The term ‘Director’ means 

8 the Director of the Office. 

9 ‘‘(5) ELECTRONIC MARKET TRADER.—The term 

10 ‘electronic market trader’ means a person who exe11 cutes a trade on an electronic trading facility. 

12 ‘‘(6) ELECTRONIC TRADING FACILITY.—The 

13 term ‘electronic trading facility’ means a trading fa14 cility that— 

15 ‘‘(A) operates by means of an electronic or 

16 telecommunications network; and 

17 ‘‘(B) maintains an automated audit trail of 

18 bids, offers, and the matching of orders or the 

19 execution of transactions on the facility. 

20 ‘‘(7) EMISSION ALLOWANCE.—The term ‘emis21 sion allowance’ means a Government-issued or Gov22 ernment-accredited authorization to emit 1 carbon 

23 dioxide equivalent of greenhouse gas. 

24 ‘‘(8) GREENHOUSE GAS.—The term ‘greenhouse 

25 gas’ means any of— 


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1 ‘‘(A) carbon dioxide; 

2 ‘‘(B) methane; 

3 ‘‘(C) nitrous oxide; 

4 ‘‘(D) sulfur hexafluoride; 

5 ‘‘(E) a perfluorocarbon; or 

6 ‘‘(F) a hydrofluorocarbon. 

7 ‘‘(9) INTRODUCING BROKER.— 

8 ‘‘(A) IN GENERAL.—The term ‘introducing 

9 broker’ means any person engaged in soliciting 

10 or in accepting orders for the purchase or sale 

11 of a regulated instrument on or subject to the 

12 rules of a registered carbon trading facility, 

13 who does not accept money, securities, or prop14 erty (or extend credit in lieu of such an accept15 ance) to margin, guarantee, or secure any trade 

16 or contract that results or may result from such 

17 a solicitation or acceptance. 

18 ‘‘(B) EXCLUSION.—The term ‘introducing 

19 broker’ does not include an individual who 

20 elects to be and is registered as an associated 

21 person of a dealer. 

22 ‘‘(10) MEMBER.—The term ‘member’ means, 

23 with respect to a trading facility, an individual, asso24 ciation, partnership, corporation, or trust owning or 

25 holding membership in, admitted to membership repVerDate Nov 24 2008 01:11 Jul 07, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1399.IS S1399

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1 resentation on, or having trading privileges on the 

2 trading facility. 

3 ‘‘(11) OFFICE.—The term ‘Office’ means the 

4 Office of Carbon Market Oversight established by 

5 section 203(a)(1). 

6 ‘‘(12) PRIVATE BILATERAL CONTRACT.—The 

7 term ‘private bilateral contract’ means a non8 standard contract that lacks each of the following 

9 characteristics: 

10 ‘‘(A) The applicable transaction or class of 

11 transactions settles against any price (including 

12 the daily or final settlement price) of 1 or more 

13 contracts listed for trading on a registered trad14 ing facility. 

15 ‘‘(B) The price of the applicable trans16 action or class of transactions is reported to a 

17 third party, published, or otherwise dissemi18 nated. 

19 ‘‘(C) The price of the applicable trans20 action or class of transactions is referenced in 

21 another transaction. 

22 ‘‘(D) There is a significant volume of the 

23 applicable transaction or class of transactions. 


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1 ‘‘(E) The value of the applicable trans2 action is significant in comparison to the value 

3 of the underlying carbon derivative market. 

4 ‘‘(F) The contract or applicable trans5 actions meets other criteria that the Commis6 sion determines to be appropriate. 

7 ‘‘(13) REGISTERED CARBON TRADER.—The 

8 term ‘registered carbon trader’ means a member, in 

9 good standing, of a registered carbon trading facility 

10 who has registered with the Commission under sec11 tion 205(b). 

12 ‘‘(14) REGISTERED CARBON TRADING FACIL13 ITY.—The term ‘registered carbon trading facility’ 

14 means a facility that meets standards established by 

15 the Commission under section 203(d)(1). 

16 ‘‘(15) REGULATED ALLOWANCE.—The term 

17 ‘regulated allowance’ means— 

18 ‘‘(A) an emission allowance; or 

19 ‘‘(B) a Government-issued unit of reduc20 tion in the quantity of emissions, or an increase 

21 in sequestration, equal to 1 carbon dioxide 

22 equivalent. 

23 ‘‘(16) REGULATED ALLOWANCE DERIVATIVE.— 

24 The term ‘regulated allowance derivative’ means an 

25 instrument that is or includes— 


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1 ‘‘(A) any instrument, contract, or other ob2 ligation (or guaranty or indemnity of such an 

3 obligation), the value of which, in whole or in 

4 part, is linked to the price of a regulated allow5 ance or another regulated allowance derivative; 

6 ‘‘(B) any contract for future delivery (in7 cluding an option, a swap agreement, or a fu8 tures contract) of— 

9 ‘‘(i) a regulated allowance; or 

10 ‘‘(ii) any obligation described in sub11 paragraph (A); or 

12 ‘‘(C) any other contract— 

13 ‘‘(i) the value of which is derived from 

14 the existence of a market for regulated al15 lowances; and 

16 ‘‘(ii) that the Commission has not de17 termined to be a private bilateral contract. 

18 ‘‘(17) REGULATED INSTRUMENT.—The term 

19 ‘regulated instrument’ means— 

20 ‘‘(A) a regulated allowance; or 

21 ‘‘(B) a regulated allowance derivative. 

22 ‘‘(18) SHORT SALE.—The term ‘short sale’ 

23 means— 

24 ‘‘(A) any sale of a regulated allowance that 

25 the seller does not own; and 


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1 ‘‘(B) any sale that is consummated by the 

2 delivery of a regulated allowance borrowed by, 

3 or for the account of, the seller. 

4 ‘‘(19) TRADING FACILITY.— 

5 ‘‘(A) IN GENERAL.—The term ‘trading fa6 cility’ means 1 or more individuals or entities 

7 that constitute, maintain, or provide a physical 

8 or electronic facility or system in which multiple 

9 participants have the ability to execute or trade 

10 agreements, contracts, or transactions involving 

11 a regulated instrument by accepting bids and 

12 offers made by other participants that are open 

13 to multiple participants in the facility or sys14 tem. 

15 ‘‘(B) INCLUSION.—The term ‘trading facil16 ity’ includes a telephone voice brokerage that 

17 executes multiple, largely offsetting, bilateral 

18 transactions. 

19 ‘‘(20) UNITED STATES.—The term ‘United 

20 States’ includes the territories and possessions of the 

21 United States. 

22 ‘‘SEC. 203. OFFICE OF CARBON MARKET OVERSIGHT; JURIS23 DICTION. 

24 ‘‘(a) ESTABLISHMENT OF OFFICE OF CARBON MAR25 KET OVERSIGHT.— 


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1 ‘‘(1) IN GENERAL.—There is established within 

2 the Commission an Office of Carbon Market Over3 sight. 

4 ‘‘(2) DIRECTOR.— 

5 ‘‘(A) IN GENERAL.—The Office shall be 

6 headed by a Director for Carbon Market Over7 sight. 

8 ‘‘(B) ADDITIONAL NATURE OF POSI9 TION.—The position of Director for Carbon 

10 Market Oversight shall be in addition to the di11 rectors of other offices of the Commission. 

12 ‘‘(C) APPOINTMENT; QUALIFICATIONS.— 

13 The Director shall be— 

14 ‘‘(i) appointed by the Commission; 

15 and 

16 ‘‘(ii) an individual who is, by reason 

17 of background and experience in the regu18 lation of commodities, securities, or other 

19 financial markets, especially qualified to di20 rect a program of oversight of the market 

21 in regulated instruments. 

22 ‘‘(b) ADMINISTRATION OF THIS TITLE.—The Com23 mission, acting through the Director, shall administer this 

24 title. 


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1 ‘‘(c) DUTY OF COMMISSION.—The Commission shall 

2 regulate all contracts of sale involving regulated instru3 ments under the jurisdiction of the Commission. 

4 ‘‘(d) REGULATIONS.—The Commission shall, not 

5 later than 1 year after the date of enactment of this title, 

6 promulgate regulations governing the implementation of 

7 this title, and periodically thereafter, revise the regulations 

8 as necessary, including regulations that relate to— 

9 ‘‘(1) specific initial and ongoing standards for 

10 qualification as a registered carbon trading facility; 

11 ‘‘(2) position limits for individual market par12 ticipants, adjusted as necessary based on market 

13 conditions; 

14 ‘‘(3) margin requirements for the instruments 

15 traded by registered carbon trading facilities; 

16 ‘‘(4) suitability standards for the solicitation by 

17 members of carbon instruments to retail investors; 

18 ‘‘(5) a best execution standard for regulated al19 lowance trading, such as the standard used in the 

20 national securities markets; 

21 ‘‘(6) approval of— 

22 ‘‘(A) specific protocols of the central limit 

23 order books of carbon trading facilities; and 

24 ‘‘(B) the connection of those facilities to— 


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1 ‘‘(i) Carbon Clearing Organizations 

2 established under section 206; and 

3 ‘‘(ii) the automated quotation system 

4 established under section 207; 

5 ‘‘(7) the establishment of baseline initial and 

6 ongoing membership standards for registered carbon 

7 trading facilities; 

8 ‘‘(8) subject to section 204(a)(4), specific 

9 standards for short sale transactions involving regu10 lated instruments; 

11 ‘‘(9) such other matters as are necessary for 

12 the carbon market to operate with the highest stand13 ards of fairness and efficiency; and 

14 ‘‘(10) the establishment and operation of a car15 bon clearing organization. 

16 ‘‘(e) MEMORANDUM OF UNDERSTANDING.— 

17 ‘‘(1) IN GENERAL.—Not later than 180 days 

18 after the date of enactment of this title, the Com19 mission shall enter into a memorandum of under20 standing with the Federal Energy Regulatory Com21 mission, the Environmental Protection Agency, and 

22 any State or regional organization operating a mar23 ket-based greenhouse gas emissions control program 

24 relating to information-sharing and coordination of 

25 oversight roles regarding— 


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1 ‘‘(A) trading facilities; 

2 ‘‘(B) registered carbon traders; 

3 ‘‘(C) carbon clearing organizations; and 

4 ‘‘(D) derivative clearing organizations. 

5 ‘‘(2) INCLUSIONS.—The memorandum of un6 derstanding shall include, at a minimum, provi7 sions— 

8 ‘‘(A) ensuring that information requests to 

9 markets within the respective jurisdictions of 

10 each agency are properly coordinated to mini11 mize duplicative information requests; and 

12 ‘‘(B) regarding the treatment of propri13 etary trading information. 

14 ‘‘(f) COORDINATION FOR FOREIGN REGULATORS.— 

15 Not later than 180 days after the date of enactment of 

16 this title, the Commission shall, to the maximum extent 

17 practicable, enter into agreements with foreign regulatory 

18 bodies to ensure that foreign boards of trade do not offer 

19 for sale allowance derivatives beyond the jurisdiction of 

20 the Commission that would undermine the authority of the 

21 carbon market regulators in the United States or reduce 

22 the effectiveness of Commission oversight. 

23 ‘‘(g) REGULATIONS.—The regulations issued to carry 

24 out this section shall take into account impacts on liquid25 ity, flexibility, and robust participation in carbon markets, 


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1 in order to maximize cost-effective and efficient reductions 

2 in carbon emissions. 

3 ‘‘SEC. 204. REGULATION OF CARBON TRADING. 

4 ‘‘(a) LIMITATION OF CERTAIN ACTIVITIES TO REG5 ISTERED ENTITIES.— 

6 ‘‘(1) CARBON ALLOWANCE TRADING FACILITY

7 ACTIVITIES.—It shall be unlawful for a person to 

8 offer to enter into, execute, confirm the execution of, 

9 or conduct an office or a business for the purpose 

10 of soliciting, accepting an order for, or otherwise 

11 dealing in, an agreement, contract, or transaction in12 volving a contract for the purchase or sale of a regu13 lated allowance, unless— 

14 ‘‘(A) the transaction is conducted through 

15 the carbon allowance trading facility established 

16 under section 205(a); 

17 ‘‘(B) the contract for the purchase or sale 

18 is evidenced by a record in writing (or other 

19 form acceptable to the Commission) that in20 cludes— 

21 ‘‘(i) the date; 

22 ‘‘(ii) the names of the parties to the 

23 contract (including the addresses of those 

24 parties); 


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1 ‘‘(iii) a description of the property 

2 covered by the contract (including the price 

3 of the property); 

4 ‘‘(iv) the terms of delivery; and 

5 ‘‘(v) all other nonstandardized terms 

6 and conditions; and 

7 ‘‘(C) the contract is cleared through the 

8 Carbon Clearing Organization. 

9 ‘‘(2) CARBON DERIVATIVE TRADING FACILITY

10 ACTIVITIES.—It shall be unlawful for a person to 

11 offer to enter into, execute, confirm the execution of, 

12 or conduct an office or a business for the purpose 

13 of soliciting, accepting an order for, or otherwise 

14 dealing in, an agreement, contract, or transaction in15 volving a contract for the purchase or sale of a regu16 lated allowance derivative, unless— 

17 ‘‘(A) the Commission has determined that 

18 the contract is a private bilateral contract that 

19 has been reported to the Commission and in20 cluded as part of the total market risk exposure 

21 of a participant; or 

22 ‘‘(B)(i) the transaction is conducted 

23 through a trading facility designated as a reg24 istered carbon derivative trading facility under 

25 section 205(a); 


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1 ‘‘(ii) the contract for the purchase or sale 

2 is evidenced by a record in writing (or other 

3 form acceptable to the Commission) that in4 cludes— 

5 ‘‘(I) the date; 

6 ‘‘(II) the names of the parties to the 

7 contract (including the addresses of those 

8 parties); 

9 ‘‘(III) a description of the property 

10 covered by the contract (including the price 

11 of the property); 

12 ‘‘(IV) the terms of delivery; and 

13 ‘‘(V) all other nonstandardized terms 

14 and conditions; and 

15 ‘‘(iii) the contract is cleared through a de16 rivatives clearing organization registered with 

17 the Commission pursuant to section 5b. 

18 ‘‘(3) BROKER OR DEALER ACTIVITIES.—It shall 

19 be unlawful for a person to act in the capacity of an 

20 introducing broker, dealer, floor broker, electronic 

21 market trader, or floor trader in connection with the 

22 purchase or sale of a regulated instrument, unless— 

23 ‘‘(A) the person is a registered carbon 

24 trader; and 


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1 ‘‘(B) the registration of the person is not 

2 suspended, revoked, or expired. 

3 ‘‘(4) SHORT SALE TRANSACTIONS.—A short 

4 sale transaction involving a regulated instrument 

5 that occurs without the borrowing of a regulated al6 lowance shall be unlawful unless the Commission de7 termines that the transaction is in the best interest 

8 of regulated entities and the public. 

9 ‘‘(b) PROHIBITION ON PRICE OR MARKET MANIPU10 LATION, FRAUD, AND FALSE OR MISLEADING STATE11 MENTS OR REPORTS.—It shall be unlawful for a person, 

12 directly or indirectly— 

13 ‘‘(1) to use or employ, or attempt to use or em14 ploy, in connection with a transaction involving the 

15 purchase or sale of a regulated instrument or private 

16 bilateral contract, in violation of such rules and reg17 ulations as the Commission may promulgate to pro18 tect the public interest or consumers, including— 

19 ‘‘(A) any manipulative or deceptive device 

20 or contrivance (within the meaning of section 

21 10(b) of the Securities Exchange Act of 1934 

22 (15 U.S.C. 78j(b))); 

23 ‘‘(B) any corner; or 

24 ‘‘(C) any device or contrivance that cheats 

25 or defrauds any other person; 


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1 ‘‘(2) for the purpose of creating a false or mis2 leading appearance of active trading in a regulated 

3 instrument or private bilateral contract, or a false or 

4 misleading appearance with respect to the market 

5 for such an instrument— 

6 ‘‘(A) to effect any transaction in the in7 strument that involves no change in the bene8 ficial ownership of the instrument; 

9 ‘‘(B) to enter an order for the purchase of 

10 the instrument, with the knowledge that 1 or 

11 more orders of substantially the same size, at 

12 substantially the same time, and at substan13 tially the same price, for the sale of any such 

14 instrument, has been or will be entered by or 

15 for the same or different parties; or 

16 ‘‘(C) to enter an order for the sale of the 

17 instrument with the knowledge that 1 or more 

18 orders of substantially the same size, at sub19 stantially the same time, and at substantially 

20 the same price, for the purchase of the instru21 ment, has been or will be entered by or for the 

22 same or different parties; 

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1 cerning information or conditions that affect or tend 

2 to affect the price of a regulated instrument; 

3 ‘‘(4)(A) to make, or cause to be made, in an ap4 plication, report, or document required to be filed 

5 under this title or any regulation promulgated under 

6 this title, a statement that is false or misleading 

7 with respect to a material fact; or 

8 ‘‘(B) to omit any material fact that is required 

9 to be stated in such an application, report, or docu10 ment, or that is necessary to make the statements 

11 in such an application, report, or document not mis12 leading; or 

13 ‘‘(5) to falsify, conceal, or cover up by any 

14 trick, scheme, or artifice a material fact, make any 

15 false, fictitious, or fraudulent statements or rep16 resentations, or make or use any false writing or 

17 document that contains a false, fictitious, or fraudu18 lent statement or entry, to an entity registered 

19 under this title acting in furtherance of the official 

20 duties of the entity under this title. 

21 ‘‘(c) PREVENTION OF EXCESSIVE SPECULATION.— 

22 ‘‘(1) IN GENERAL.—To prevent, decrease, or 

23 eliminate burdens associated with excessive specula24 tion relating to regulated instruments (which may be 

25 more severe in markets in which supply is known 


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1 and declining and demand is unknown), the Com2 mission shall promulgate regulations establishing 

3 such position or transaction limitations, in the ag4 gregate, as the Commission determines to be nec5 essary to prevent potential upward bias in price with 

6 respect to any regulated instrument. 

7 ‘‘(2) AGGREGATE POSITIONS.—In carrying out 

8 paragraph (1), the Commission shall, to the max9 imum extent practicable, aggregate carbon dioxide 

10 equivalent positions in natural gas, electricity, and 

11 regulated instruments. 

12 ‘‘(3) INAPPLICABILITY TO BONA FIDE HEDGING

13 TRANSACTIONS AND POSITIONS.—The limitations 

14 and requirements established under paragraph (1) 

15 shall not apply to a position or transaction that is 

16 a bona fide hedging position or transaction, as de17 fined by the Commission in accordance with the pur18 poses of this title. 

19 ‘‘(d) RECORDKEEPING; REPORTING; ACCESS TO

20 BOOKS AND RECORDS.— 

21 ‘‘(1) MEMBERS OF REGISTERED ENTITIES.— 

22 Each member of an entity registered under this title 

23 shall— 

24 ‘‘(A) keep books and records, and make 

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1 sion, regarding the transactions and positions 

2 of the member, and the transactions and posi3 tions of the customer involved, in regulated in4 struments and private bilateral contracts, in 

5 such form and manner, and for such period, as 

6 may be required by the Commission; and 

7 ‘‘(B) make the books and records available 

8 for inspection by any representative of the Com9 mission or the Department of Justice. 

10 ‘‘(2) REGISTERED ENTITIES.—Each entity reg11 istered under this title shall— 

12 ‘‘(A) maintain daily trading records (in13 cluding a time-stamped audit trail), that in14 clude such information, in such form, and for 

15 such period as the Commission may require by 

16 regulation; 

17 ‘‘(B) before the beginning of trading each 

18 day, insofar as is practicable and under terms 

19 and conditions specified by the Commission, 

20 make public the volume of trading on each type 

21 of contract for the previous day and such other 

22 information as the Commission considers nec23 essary in the public interest and prescribes by 

24 rule, order, or regulation; and 


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1 ‘‘(C) make such reports from the records, 

2 at such times and places, and in such form, as 

3 the Commission may require by regulation to 

4 protect the public interest and the interest of 

5 persons trading in regulated instruments. 

6 ‘‘(e) FOREIGN TRANSACTIONS.— 

7 ‘‘(1) IN GENERAL.—Any United States person 

8 or corporation shall be subject to this section for all 

9 contracts executed by the United States person or 

10 corporation, including contracts executed outside of 

11 the United States. 

12 ‘‘(2) FOREIGN PERSONS AND CORPORATIONS.— 

13 A foreign person or corporation shall be subject to 

14 this section for all contracts executed by the foreign 

15 person or corporation within the United States. 

16 ‘‘SEC. 205. ESTABLISHMENT AND REGISTRATION OF A CAR17 BON TRADING FACILITIES; REGISTRATION OF 

18 TRADERS, BROKERS, AND DEALERS. 

19 ‘‘(a) CARBON TRADING FACILITIES.— 

20 ‘‘(1) ESTABLISHMENT OF A CARBON ALLOW21 ANCE TRADING FACILITY.—The Commission may es22 tablish a carbon allowance trading facility in accord23 ance with this section to process trades of regulated 

24 allowances. 


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1 ‘‘(2) REGISTRATION OF CARBON TRADING FA2 CILITIES.— 

3 ‘‘(A) IN GENERAL.—A trading facility may 

4 apply to the Commission for designation as a 

5 registered carbon allowance trading facility or a 

6 registered carbon allowance derivative trading 

7 facility by submitting to the Commission an ap8 plication that contains such information and 

9 commitments as the Commission may require. 

10 ‘‘(B) REVIEW.—A designation under this 

11 paragraph shall be reviewed by the Commission 

12 from time to time, but not less frequently than 

13 once every 3 years. 

14 ‘‘(3) OPERATION OF THE CARBON TRADING FA15 CILITIES.— 

16 ‘‘(A) IN GENERAL.—To obtain or maintain 

17 designation and continue operating as a reg18 istered carbon allowance trading facility or a 

19 registered carbon allowance derivative trading 

20 facility under this title, a carbon allowance 

21 trading facility established by the Commission 

22 or registered with the Commission under this 

23 section shall comply with the requirements and 

24 principles described in this paragraph. 


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1 ‘‘(B) PREVENTION OF MARKET MANIPULA2 TION.—The trading facility shall demonstrate 

3 capability to prevent market manipulation 

4 through market surveillance, compliance, and 

5 enforcement practices and procedures, including 

6 methods for conducting real-time monitoring of 

7 trading and comprehensive and accurate trade 

8 reconstructions. 

9 ‘‘(C) ELECTRONIC MONITORING OF TRAD10 ING.—The trading facility shall demonstrate— 

11 ‘‘(i) that the trading facility monitors 

12 trading on or through the facility to pre13 vent manipulation, price distortion, and 

14 disruptions of the delivery or cash-settle15 ment process; and 

16 ‘‘(ii) in addition to traditional meth17 ods, a capability to monitor market activi18 ties electronically on a real-time basis and, 

19 if appropriate, by algorithm and other such 

20 means as are determined to be appropriate 

21 by the Commission. 

22 ‘‘(D) FAIR AND EQUITABLE TRADING.— 

23 The trading facility shall establish and enforce 

24 rules to ensure— 


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1 ‘‘(i) fair and equitable trading 

2 through the trading facility; 

3 ‘‘(ii) the capacity to detect, inves4 tigate, and discipline any person that vio5 lates the rules; 

6 ‘‘(iii) the operation of any electronic 

7 matching platform; 

8 ‘‘(iv) the terms and conditions of any 

9 contracts to be traded on or through the 

10 trading facility; 

11 ‘‘(v) any limitations on access to the 

12 trading facility; 

13 ‘‘(vi) the financial integrity of trans14 actions and contracts entered into by or 

15 through the trading facility, including the 

16 clearance and settlement of the trans17 actions; 

18 ‘‘(vii) the financial integrity of bro19 kers, dealers, and traders doing business 

20 on or through the trading facility; 

21 ‘‘(viii) the protection of customer 

22 funds; 

23 ‘‘(ix) that the trading facility is able 

24 to discipline, suspend, or expel members or 

25 market participants that violate the rules 


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1 of the trading facility, or similar methods 

2 for performing the same functions, includ3 ing delegation of the functions to third 

4 parties; and 

5 ‘‘(x) that market participants are pro6 tected from abusive practices committed by 

7 any party acting as an agent for the par8 ticipants. 

9 ‘‘(E) AGGREGATE POSITION LIMITATIONS

10 OR ACCOUNTABILITY.—The trading facility 

11 shall— 

12 ‘‘(i) adopt and enforce aggregate posi13 tion limitations or position accountability 

14 for speculators, as necessary and appro15 priate, to reduce the potential threat of 

16 market manipulation and excessive specu17 lation in a marketplace in which supply is 

18 fixed by government policy and demand is 

19 set by market prices; 

20 ‘‘(ii) facilitate netting of members’ po21 sitions across all of the instruments 

22 through the trading facility, in order to 

23 minimize the cost of trading while ensuring 

24 adequate risk management; and 


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•S 1399 IS

1 ‘‘(iii) monitor and enforce any limita2 tions on leverage or position size that 

3 might be imposed by the Commission. 

4 ‘‘(F) EMERGENCY AUTHORITY.—The trad5 ing facility shall adopt and enforce rules to pro6 vide for the exercise of emergency authority, in 

7 consultation or cooperation with the Commis8 sion, as necessary and appropriate, including 

9 the authority— 

10 ‘‘(i) to liquidate or transfer open posi11 tions in any contract; 

12 ‘‘(ii) to suspend or curtail trading in 

13 any regulated instrument; and 

14 ‘‘(iii) in the case of a regulated deriva15 tive, to require market participants to meet 

16 special margin requirements. 

17 ‘‘(G) AVAILABILITY OF GENERAL INFOR18 MATION.—The trading facility shall make avail19 able to market authorities, market participants, 

20 and the public information concerning— 

21 ‘‘(i) the terms, conditions, and speci22 fications of the contracts traded on or 

23 through the trading facility; 


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1 ‘‘(ii) the mechanisms for executing 

2 transactions on or through the trading fa3 cility; and 

4 ‘‘(iii) the rules and regulations of the 

5 trading facility. 

6 ‘‘(H) PUBLICATION OF TRADING INFORMA7 TION.— 

8 ‘‘(i) IN GENERAL.—The trading facil9 ity shall, in real time, to the maximum ex10 tent practicable, provide the public with in11 formation on bids, offers, settlement 

12 prices, volume, open interest, and opening 

13 and closing ranges for all regulated instru14 ments traded on the trading facility. 

15 ‘‘(ii) CENTRALIZED ENTITY.—The 

16 Commission may by regulation permit 

17 compliance with this subparagraph through 

18 the provision of pricing information de19 scribed in clause (i) to a centralized entity 

20 that will simultaneously post that informa21 tion to the public. 

22 ‘‘(I) EXECUTION OF TRANSACTIONS.—The 

23 trading facility shall provide a competitive, 

24 open, and efficient market and mechanism for 


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•S 1399 IS

1 executing transactions on or through the trad2 ing facility. 

3 ‘‘(J) SECURITY OF TRADE INFORMA4 TION.—The trading facility shall maintain rules 

5 and procedures to provide for the recording and 

6 safe storage of all identifying trade information 

7 in a manner that enables the trading facility to 

8 use the information— 

9 ‘‘(i) to assist the prevention of cus10 tomer and market abuses; and 

11 ‘‘(ii) provide evidence of violations of 

12 the rules of the trading facility. 

13 ‘‘(K) DISPUTE RESOLUTION.—The trading 

14 facility shall establish and enforce rules regard15 ing and provide facilities for alternative dispute 

16 resolution as appropriate for market partici17 pants and any market intermediaries. 

18 ‘‘(L) GOVERNANCE FITNESS STAND19 ARDS.—The trading facility shall establish and 

20 enforce appropriate fitness standards for direc21 tors, members of any disciplinary committee, 

22 members of the trading facility, and any other 

23 person with direct access to the trading facility 

24 (including any parties affiliated with any of the 

25 persons described in this subparagraph). 


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1 ‘‘(M) CONFLICTS OF INTEREST.—The 

2 trading facility shall— 

3 ‘‘(i) establish and enforce rules to 

4 minimize conflicts of interest in the deci5 sionmaking process of the trading facility; 

6 and 

7 ‘‘(ii) establish a process for resolving 

8 any such conflict of interest. 

9 ‘‘(N) COMPOSITION OF BOARDS OF MUTU10 ALLY OWNED TRADING FACILITIES.—In the 

11 case of a mutually owned trading facility, the 

12 trading facility shall ensure that the composi13 tion of the governing board reflects market par14 ticipants. 

15 ‘‘(O) RECORDKEEPING.—The trading facil16 ity shall maintain records of all activities relat17 ing to the business of the trading facility in a 

18 form and manner acceptable to the Commission 

19 for a period of at least 5 years. 

20 ‘‘(P) ANTITRUST CONSIDERATIONS.—Un21 less necessary or appropriate to achieve the 

22 purposes of this title, the trading facility shall 

23 endeavor to avoid— 


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1 ‘‘(i) adopting any rules or taking any 

2 actions that result in any unreasonable re3 straint of trade; or 

4 ‘‘(ii) imposing any material anti5 competitive burden on trading on or 

6 through the trading facility. 

7 ‘‘(Q) TRADING FEES.—The trading facility 

8 shall establish and enforce rules requiring the 

9 payment of fees for the purpose of funding 

10 Commission oversight, as established under sec11 tion 208(h). 

12 ‘‘(R) CENTRAL LIMIT ORDER BOOK.—The 

13 trading facility shall operate an electronic cen14 tral limit order book as the trading mechanism 

15 for regulated derivatives and regulated alloca16 tions and share sufficient information, in a 

17 timely manner, with the automated quotation 

18 system to allow implementation of section 207. 

19 ‘‘(S) NATIONAL MARKET SYSTEM.—The 

20 trading facility shall participate, along with the 

21 Commission, in the formation and operation of 

22 a national market system that allows for best 

23 execution in the trading of regulated instru24 ments among registered carbon trading facili25 ties. 


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1 ‘‘(T) SCREENING.—The trading facility 

2 shall establish and enforce rules to screen mem3 bers based on capital, systems, and standards 

4 of compliance, and other such membership 

5 standards as the Commission determines to be 

6 appropriate. 

7 ‘‘(U) USE OF CLEARING.—The trading fa8 cility shall facilitate the clearing of all trades of 

9 regulated allowances through the Carbon Clear10 ing Organization and the clearing of all trades 

11 of regulated allowance derivatives through a 

12 Derivatives Clearing Organization registered 

13 with the Commission. 

14 ‘‘(V) ENFORCEMENT.—The trading facility 

15 shall establish and enforce rules that allow the 

16 trading facility to obtain any necessary infor17 mation to perform any of the functions de18 scribed in this paragraph, including the capac19 ity to carry out such international information20 sharing agreements as the Commission may re21 quire. 

22 ‘‘(b) BROKERS, DEALERS, TRADERS, AND THEIR AS23 SOCIATES.—The Commission shall promulgate regulations 

24 governing— 


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1 ‘‘(1) the eligibility of a person to act in the ca2 pacity of an introducing broker, a dealer, a floor 

3 broker, an electronic market trader, or a floor trader 

4 of regulated instruments in the United States; 

5 ‘‘(2) the registration of introducing brokers, 

6 dealers, floor brokers, electronic market traders, and 

7 floor traders as registered carbon traders with the 

8 Commission; 

9 ‘‘(3) the conduct of a person registered pursu10 ant to regulations promulgated under paragraph (2), 

11 and of a partner, officer, employee, or agent of the 

12 registered person, in connection with transactions in13 volving a regulated instrument; and 

14 ‘‘(4) minimum standards for eligibility of a per15 son to register as a registered carbon trader, includ16 ing the requirements that an applicant for such a 

17 position— 

18 ‘‘(A) has never had an applicable license or 

19 registration revoked in any governmental juris20 diction; 

21 ‘‘(B) has never been convicted of, or pled 

22 guilty or nolo contendere to, a felony in a do23 mestic, foreign, or military court; 

24 ‘‘(C) has demonstrated such financial re25 sponsibility, character, and general fitness as to 


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1 command the confidence of the community and 

2 to warrant a determination that the applicant 

3 will operate honestly, fairly, and efficiently 

4 within the purposes of this title; 

5 ‘‘(D) has completed the preregistration 

6 education requirement described in paragraph 

7 (5); and 

8 ‘‘(E) has passed a written test that meets 

9 the test requirement described in paragraph 

10 (6). 

11 ‘‘(5) PREREGISTRATION EDUCATION OF A CAR12 BON TRADER.— 

13 ‘‘(A) MINIMUM EDUCATIONAL REQUIRE14 MENTS.—In order to meet the preregistration 

15 education requirement referred to in paragraph 

16 (4)(D), a person shall complete at least 20 

17 hours of education approved in accordance with 

18 subparagraph (B), which shall include at 

19 least— 

20 ‘‘(i) 6 hours of instruction on applica21 ble Federal law (including regulations); 

22 ‘‘(ii) 10 hours of instruction in ethics, 

23 which shall include instruction on fraud, 

24 manipulation, excessive speculation, and 

25 consumer protection; and 


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1 ‘‘(iii) 2 hours of training relating to 

2 reporting requirements under this title. 

3 ‘‘(B) APPROVED EDUCATIONAL

4 COURSES.— 

5 ‘‘(i) IN GENERAL.—For the purpose 

6 of subparagraph (A), preregistration edu7 cational courses shall be reviewed and ap8 proved by the Commission. 

9 ‘‘(ii) PROHIBITION.—To maintain the 

10 independence of the approval process, the 

11 Commission shall not directly or indirectly 

12 offer preregistration educational courses 

13 for loan originators. 

14 ‘‘(C) STANDARDS.—In approving courses 

15 under this paragraph, the Commission shall 

16 apply reasonable standards in the review and 

17 approval of courses. 

18 ‘‘(6) TESTING OF A CARBON TRADER.— 

19 ‘‘(A) IN GENERAL.—In order to meet the 

20 written test requirement referred to in para21 graph (4)(E), an individual shall pass, in ac22 cordance with the standards established under 

23 this paragraph, a qualified written test devel24 oped by the Commission and administered by 

25 an approved test provider. 


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1 ‘‘(B) QUALIFIED TEST.—A written test 

2 shall not be treated as a qualified written test 

3 for purposes of subparagraph (A) unless— 

4 ‘‘(i) the test consists of a minimum of 

5 100 questions; and 

6 ‘‘(ii) the test adequately measures the 

7 knowledge and comprehension of the indi8 vidual taking the test in appropriate sub9 ject areas, including— 

10 ‘‘(I) ethics; 

11 ‘‘(II) Federal law (including reg12 ulations) pertaining to trading regu13 lated instruments; and 

14 ‘‘(III) Federal law (including reg15 ulations) on fraud, manipulation, ex16 cessive speculation, and reporting. 

17 ‘‘(C) MINIMUM COMPETENCE.— 

18 ‘‘(i) PASSING SCORE.—An individual 

19 shall not be considered to have passed a 

20 qualified written test under this paragraph 

21 unless the individual achieves a test score 

22 of not less than 75 percent correct answers 

23 to questions on the test. 

24 ‘‘(ii) INITIAL RETESTS.—An indi25 vidual may retake a test 3 consecutive 


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•S 1399 IS

1 times, with each consecutive taking occur2 ring not later than 14 days after the pre3 ceding test. 

4 ‘‘(iii) SUBSEQUENT RETESTS.—After 

5 3 consecutive tests, an individual shall be 

6 required to wait at least 14 days before re7 taking the test. 

8 ‘‘(iv) RETEST AFTER LAPSE OF REG9 ISTRATION.—A registered carbon trader 

10 who fails to maintain a valid registration 

11 for a period of 5 years or longer shall re12 take the test. 

13 ‘‘(7) BACKGROUND CHECKS.—An applicant for 

14 registration shall, at a minimum, provide to the 

15 Commission— 

16 ‘‘(A) fingerprints for submission to the 

17 Federal Bureau of Investigation for a State and 

18 national criminal history background check; 

19 ‘‘(B) a description of personal history and 

20 experience, including an independent credit re21 port obtained from a consumer reporting agen22 cy described in section 603(p) of the Fair Cred23 it Reporting Act (15 U.S.C. 1681a(p)); and 


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1 ‘‘(C) information relating to any adminis2 trative, civil, or criminal findings by any gov3 ernmental jurisdiction. 

4 ‘‘SEC. 206. CARBON CLEARING ORGANIZATION. 

5 ‘‘(a) ESTABLISHMENT.— 

6 ‘‘(1) IN GENERAL.—The Commission shall es7 tablish an entity to be known as the ‘Carbon Clear8 ing Organization’ for the purpose of creating a com9 mon clearing platform for regulated allowances. 

10 ‘‘(2) APPLICATION BY DERIVATIVES CLEARING

11 ORGANIZATION.—A derivatives clearing organization 

12 registered with the Commission pursuant to section 

13 5b may apply to the Commission for designation as 

14 the Carbon Clearing Organization by submitting to 

15 the Commission an application that contains such 

16 information and commitments as the Commission 

17 may require. 

18 ‘‘(b) OPERATION.— 

19 ‘‘(1) REQUIREMENTS.— 

20 ‘‘(A) IN GENERAL.—The Carbon Clearing 

21 Organization shall comply with the require22 ments described in this paragraph. 

23 ‘‘(B) FINANCIAL RESOURCES.—The Car24 bon Clearing Organization shall demonstrate 

25 adequate financial, operational, and managerial 


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•S 1399 IS

1 resources to discharge the responsibilities of a 

2 clearing organization. 

3 ‘‘(C) PARTICIPANT AND PRODUCT ELIGI4 BILITY.—The Carbon Clearing Organization 

5 shall establish— 

6 ‘‘(i) appropriate admission and con7 tinuing eligibility standards (including ap8 propriate minimum financial requirements) 

9 for members of and participants in the 

10 Carbon Clearing Organization; and 

11 ‘‘(ii) appropriate standards for deter12 mining eligibility of agreements, contracts, 

13 or transactions submitted to the Carbon 

14 Clearing Organization. 

15 ‘‘(D) RISK MANAGEMENT.—The Carbon 

16 Clearing Organization shall manage the risks 

17 associated with discharging the responsibilities 

18 of a clearing organization through the use of 

19 appropriate tools and procedures. 

20 ‘‘(E) SETTLEMENT PROCEDURES.—The 

21 Carbon Clearing Organization shall— 

22 ‘‘(i) complete settlements on a timely 

23 basis under varying circumstances; and 

24 ‘‘(ii) maintain an adequate record of 

25 the flow of funds associated with each 


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•S 1399 IS

1 transaction that the Carbon Clearing Or2 ganization clears. 

3 ‘‘(F) TREATMENT OF FUNDS.—The Car4 bon Clearing Organization shall have standards 

5 and procedures designed to protect and ensure 

6 the safety of member and participant funds. 

7 ‘‘(G) DEFAULT RULES AND PROCE8 DURES.—The Carbon Clearing Organization 

9 shall have rules and procedures designed to 

10 allow for efficient, fair, and safe management of 

11 events if members or participants become insol12 vent or otherwise default on obligations to the 

13 Carbon Clearing Organization. 

14 ‘‘(H) RULE ENFORCEMENT.—The Carbon 

15 Clearing Organization shall— 

16 ‘‘(i) maintain adequate arrangements 

17 and resources for the effective monitoring 

18 and enforcement of compliance with rules 

19 of Carbon Clearing Organization and for 

20 resolution of disputes; and 

21 ‘‘(ii) have the authority and ability to 

22 discipline, limit, suspend, or terminate the 

23 activities of a member or participant for 

24 violations of rules of the Carbon Clearing 

25 Organization. 


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1 ‘‘(I) SYSTEM SAFEGUARDS.—The Carbon 

2 Clearing Organization shall— 

3 ‘‘(i) establish and maintain a program 

4 of oversight and risk analysis to ensure 

5 that the automated systems of the Carbon 

6 Clearing Organization function properly 

7 and have adequate capacity and security; 

8 and 

9 ‘‘(ii) establish and maintain emer10 gency procedures and a plan for disaster 

11 recovery, and will periodically test backup 

12 facilities sufficient to ensure daily proc13 essing, clearing, and settlement of trans14 actions. 

15 ‘‘(J) PUBLIC INFORMATION.—The Carbon 

16 Clearing Organization shall make information 

17 concerning the rules and operating procedures 

18 governing the clearing and settlement systems 

19 (including default procedures) available to mar20 ket participants. 

21 ‘‘(K) INFORMATION-SHARING.—The Car22 bon Clearing Organization shall— 

23 ‘‘(i) enter into and abide by the terms 

24 of all appropriate and applicable domestic 


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1 and international information-sharing 

2 agreements; and 

3 ‘‘(ii) use relevant information obtained 

4 from the agreements in carrying out the 

5 risk management program of the Carbon 

6 Clearing Organization. 

7 ‘‘SEC. 207. AUTOMATED QUOTATION SYSTEMS. 

8 ‘‘(a) IN GENERAL.—The Commission shall facilitate 

9 the widespread dissemination of reliable and accurate last10 sale and quotation information with respect to regulated 

11 instruments, short sales, and private bilateral contracts 

12 the value of which, in whole or in part, is linked to the 

13 price of a regulated instrument by establishing an auto14 mated quotation system that will collect and disseminate 

15 information regarding all regulated instruments. 

16 ‘‘(b) CHARACTERISTICS OF SYSTEM.—The auto17 mated quotation system shall— 

18 ‘‘(1) collect and disseminate quotation and 

19 transaction information; 

20 ‘‘(2) provide bid and ask quotations of partici21 pating brokers or dealers; and 

22 ‘‘(3) provide for the reporting of information on 

23 bids, offers, settlement prices, volume, open interest, 

24 and opening and closing ranges for all regulated in25 strument transactions, including last-sale reporting. 


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1 ‘‘(c) ELECTRONIC LINKAGE.—The carbon allowance 

2 trading facility and all registered carbon derivative trading 

3 facilities shall be linked electronically with the automated 

4 quotation system. 

5 ‘‘(d) MISSING.—All registered carbon trading facili6 ties shall share sufficient information with the automated 

7 quotation system to allow the implementation of this sec8 tion. 

9 ‘‘SEC. 208. ADMINISTRATIVE ENFORCEMENT. 

10 ‘‘(a) INVESTIGATIONS.—The Commission may con11 duct such investigations as the Commission determines to 

12 be necessary to carry out this title, in accordance with this 

13 Act. 

14 ‘‘(b) REVIEW OF ADVERSE ACTION BY REGISTERED

15 CARBON TRADING FACILITY.— 

16 ‘‘(1) IN GENERAL.— 

17 ‘‘(A) DISCIPLINARY ACTIONS.—The Com18 mission may, in accordance with such standards 

19 and procedures as the Commission determines 

20 to be appropriate, review a decision by a reg21 istered carbon trading facility— 

22 ‘‘(i) to suspend, expel, or otherwise 

23 discipline a member of the trading facility; 

24 or 


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1 ‘‘(ii) to deny access to the trading fa2 cility. 

3 ‘‘(B) OTHER ACTIONS.—On application of 

4 any person who is adversely affected by any de5 cision by a registered carbon trading facility de6 scribed in subparagraph (A), the Commission 

7 may— 

8 ‘‘(i) review the decision; and 

9 ‘‘(ii) issue such order with respect to 

10 the decision as the Commission determines 

11 to be appropriate to protect the public in12 terest. 

13 ‘‘(2) SCOPE OF AUTHORITY.—The Commission 

14 may affirm, modify, set aside, or remand a trading 

15 facility decision reviewed under paragraph (1), after 

16 a determination on the record as to whether the de17 cision was made in accordance with the rules of the 

18 trading facility. 

19 ‘‘(c) COMPLAINTS.—The Commission shall enforce 

20 this title in accordance with this Act. 

21 ‘‘(d) AUTHORITY TO SUSPEND OR REVOKE REG22 ISTERED CARBON TRADING FACILITY DESIGNATION.— 

23 The Commission may suspend for a period of not more 

24 than 180 days, or revoke, the designation of a trading fa25 cility as a registered carbon trading facility if, after notice 


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•S 1399 IS

1 and opportunity for a hearing on the record, the Commis2 sion finds that— 

3 ‘‘(1) the trading facility or the entity, as the 

4 case may be, has not complied with a requirement 

5 of subsection (a)(3) or (c) of section 205, as the case 

6 may be; or 

7 ‘‘(2) a director, officer, employee, or agent of 

8 the trading facility or entity, as the case may be, has 

9 violated this title or a regulation or order promul10 gated or issued under this title. 

11 ‘‘(e) INJUNCTIVE RELIEF.—If the Commission finds 

12 that a person has violated this title or a regulation or 

13 order promulgated or issued under this title, the Commis14 sion may seek injunctive relief in accordance with this Act. 

15 ‘‘(f) TRADING SUSPENSIONS; EMERGENCY AUTHOR16 ITY.— 

17 ‘‘(1) DEFINITION OF EMERGENCY.—In this 

18 subsection, the term ‘emergency’ means— 

19 ‘‘(A) a major market disturbance charac20 terized by or constituting— 

21 ‘‘(i) sudden and excessive fluctuations 

22 of prices of regulated instruments gen23 erally (or a substantial threat of such sud24 den and excessive fluctuations) that threat25 en fair and orderly markets; or 


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•S 1399 IS

1 ‘‘(ii) a substantial disruption of the 

2 safe or efficient operation of the national 

3 system for clearance and settlement of 

4 transactions in regulated instruments (or a 

5 substantial threat of such a disruption); or 

6 ‘‘(B) a major disturbance that substan7 tially disrupts, or threatens to substantially dis8 rupt— 

9 ‘‘(i) the functioning of markets in reg10 ulated instruments, or any significant por11 tion or segment of the markets; or 

12 ‘‘(ii) the transmission or processing of 

13 transactions in regulated instruments. 

14 ‘‘(2) TRADING SUSPENSIONS.— 

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B), if the Commission determines that 

17 the public interest so requires, the Commission 

18 may, by order, summarily suspend all trading of 

19 regulated instruments on any trading facility or 

20 otherwise, for a period not exceeding 90 cal21 endar days. 

22 ‘‘(B) NOTIFICATION OF DECISION.—An 

23 order issued by the Commission under subpara24 graph (A) shall not take effect unless— 


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•S 1399 IS

1 ‘‘(i) the Commission notifies the 

2 President of the decision of the Commis3 sion; and 

4 ‘‘(ii) the President notifies the Com5 mission that the President does not dis6 approve of the decision. 

7 ‘‘(3) EMERGENCY ORDERS.— 

8 ‘‘(A) IN GENERAL.—The Commission, in 

9 an emergency, may by order summarily take 

10 such action to alter, supplement, suspend, or 

11 impose requirements or restrictions with respect 

12 to any matter or action subject to regulation by 

13 the Commission or an entity registered under 

14 this title, as the Commission determines is nec15 essary in the public interest— 

16 ‘‘(i) to maintain or restore fair and 

17 orderly markets in regulated instruments; 

18 or 

19 ‘‘(ii) to ensure prompt, accurate, and 

20 safe clearance and settlement of trans21 actions in regulated instruments. 

22 ‘‘(B) EFFECTIVE PERIOD.—An order of 

23 the Commission under this paragraph— 

24 ‘‘(i) shall continue in effect for the pe25 riod specified by the Commission; 


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•S 1399 IS

1 ‘‘(ii) may be extended in accordance 

2 with subparagraph (C); and 

3 ‘‘(iii) except as provided in subpara4 graph (C), may not continue in effect for 

5 more than 10 business days, including ex6 tensions. 

7 ‘‘(C) EXTENSION.—An order of the Com8 mission under this paragraph may be extended 

9 to continue in effect for more than 10 business 

10 days, but in no event may continue in effect for 

11 more than 30 calendar days, if, at the time of 

12 the extension, the Commission determines 

13 that— 

14 ‘‘(i) the emergency situation still ex15 ists; and 

16 ‘‘(ii) the continuation of the order be17 yond 10 business days is necessary in the 

18 public interest and for the protection of in19 vestors to attain an objective described in 

20 clause (i) or (ii) of subparagraph (A). 

21 ‘‘(D) EXEMPTION.—In exercising the au22 thority provided by this paragraph, the Com23 mission shall not be required to comply with 

24 section 553 of title 5, United States Code. 


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•S 1399 IS

1 ‘‘(4) TERMINATION OF EMERGENCY ACTIONS

2 BY PRESIDENT.—The President may direct that ac3 tion taken by the Commission under paragraph (3) 

4 shall not continue in effect. 

5 ‘‘(5) COMPLIANCE WITH ORDERS.—A member 

6 of a trading facility, introducing broker, dealer, floor 

7 broker, or floor trader shall not effect any trans8 action in, or induce the purchase or sale of, any reg9 ulated instrument in contravention of an order of 

10 the Commission under this subsection, unless the 

11 order— 

12 ‘‘(A) has been stayed, modified, or set 

13 aside as provided in paragraph (6); or 

14 ‘‘(B) has ceased to be effective on direction 

15 of the President as provided in paragraph (4). 

16 ‘‘(6) LIMITATIONS ON REVIEW OF ORDERS.— 

17 ‘‘(A) IN GENERAL.—An order of the Com18 mission pursuant to this subsection shall be 

19 subject to review by the United States Court of 

20 Appeals for the District of Columbia Circuit. 

21 ‘‘(B) BASIS.—A review of an order under 

22 subparagraph (A) shall be based on an exam23 ination of all the information before the Com24 mission at the time the order was issued. 


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1 ‘‘(C) STANDARD FOR FINDINGS.—The re2 viewing court shall not enter a stay, writ of 

3 mandamus, or similar relief unless the court 

4 finds, after notice and hearing before a panel of 

5 the court, that the action of the Commission is 

6 arbitrary, capricious, an abuse of discretion, or 

7 otherwise not in accordance with law. 

8 ‘‘(g) OTHER AUTHORITY TO ISSUE ORDERS.—The 

9 Commission may issue such other orders as are necessary 

10 to ensure compliance with this title (including regulations 

11 promulgated under this title). 

12 ‘‘(h) TRADING FEES TO SUPPORT COMMISSION AC13 TIVITIES.— 

14 ‘‘(1) IN GENERAL.—To support oversight by 

15 the Commission of markets under this title, each 

16 registered trading facility shall charge a trading fee, 

17 per transaction, to be established by the Commission 

at a level not to exceed 1 18 ⁄2 of 1 percent of the value 

19 of the contract being executed. 

20 ‘‘(2) REMITTANCE OF FEES.—Each registered 

21 trading facility shall submit fees charged under this 

22 subsection to the Commission on such schedule as 

23 the Commission shall designate. 


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1 ‘‘SEC. 209. CIVIL JUDICIAL ENFORCEMENT. 

2 ‘‘(a) IN GENERAL.—If it appears to the Commission 

3 that a person has engaged, is engaging, or is about to en4 gage in any act or practice constituting a violation of this 

5 title (including a regulation promulgated or order issued 

6 under this title), the Commission may bring a civil action 

7 in the appropriate United States district court or United 

8 States court of any territory or other place subject to the 

9 jurisdiction of the United States— 

10 ‘‘(1) to enjoin the act or practice; or 

11 ‘‘(2) to enforce compliance with this title (or a 

12 regulation or order promulgated or issued under this 

13 title). 

14 ‘‘(b) FORMS OF RELIEF.— 

15 ‘‘(1) INJUNCTIVE RELIEF; RESTRAINING

16 ORDER.—On a proper showing, a court described in 

17 subsection (a) shall grant a permanent or temporary 

18 injunction or issue a restraining order, without bond. 

19 ‘‘(2) CIVIL MONEY PENALTY.— 

20 ‘‘(A) IN GENERAL.—The Commission may 

21 seek and the court, on a proper showing, shall 

22 have jurisdiction to impose on any person found 

23 in the civil action brought under this section to 

24 have committed a violation, a civil penalty in an 

25 amount that is not more than the greater of— 

26 ‘‘(i) $100,000; or 


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1 ‘‘(ii) triple the monetary gain to the 

2 person for the violation. 

3 ‘‘(B) ENFORCEMENT OF PENALTY BY THE

4 ATTORNEY GENERAL.—If a person on whom 

5 such a penalty is imposed fails to pay the pen6 alty within the time prescribed in the order of 

7 the court, the Commission may refer the matter 

8 to the Attorney General, who shall recover the 

9 penalty by action in the appropriate United 

10 States district court. 

11 ‘‘SEC. 210. CRIMINAL ENFORCEMENT. 

12 ‘‘(a) VIOLATIONS GENERALLY.—A person that know13 ingly violates section 204 (or any regulation promulgated 

14 under section 204), or willfully violates any other provision 

15 of this title (or a regulation promulgated under this title) 

16 the violation of which is made unlawful or the observance 

17 of which is required by or under this title, shall— 

18 ‘‘(1) be fined not more than $1,000,000 (or not 

19 more than $500,000, if the violator is an individual), 

20 imprisoned not more than 5 years, or both; and 

21 ‘‘(2) shall pay the costs of prosecution. 

22 ‘‘(b) FAILURE TO COMPLY WITH CEASE AND DESIST

23 ORDER.— 

24 ‘‘(1) IN GENERAL.—If, after the period allowed 

25 for appeal of an order issued under section 206(e) 


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1 or after the affirmance of such an order, a person 

2 subject to the order fails or refuses to comply with 

3 the order, the person shall be— 

4 ‘‘(A) fined not more than the greater of 

5 $100,000 or triple the monetary gain to the 

6 person, imprisoned not less than 180 days nor 

7 more than 1 year, or both; or 

8 ‘‘(B) if the failure or refusal to comply in9 volves a violation referred to in subsection (a), 

10 subject to the penalties provided in that sub11 section for the violation. 

12 ‘‘(2) SPECIAL RULE.—Each day during which a 

13 failure or refusal to comply with such an order con14 tinues shall be considered to be a separate offense 

15 for purposes of paragraph (1). 

16 ‘‘SEC. 211. MARKET REPORTS. 

17 ‘‘(a) COLLECTION AND ANALYSIS OF INFORMA18 TION.—The Commission shall, on a continuous basis, col19 lect and analyze the following information on the func20 tioning of the markets for regulated instruments estab21 lished under this title: 

22 ‘‘(1) The status of, and trends in, the markets, 

23 including prices, trading volumes, transaction types, 

24 and trading channels and mechanisms. 


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1 ‘‘(2) Spikes, collapses, and volatility in prices of 

2 regulated instruments, and the causes of the spikes, 

3 collapses, and volatility. 

4 ‘‘(3) The relationship between the market for 

5 emission allowances, offset credits, and allowance de6 rivatives, and the spot and futures markets for en7 ergy commodities, including electricity. 

8 ‘‘(4) Evidence of fraud or manipulation in any 

9 such market, the effects on any such market of any 

10 such fraud or manipulation (or threat of fraud or 

11 manipulation) that the Commission has identified, 

12 and the effectiveness of corrective measures under13 taken by the Commission to address the fraud or 

14 manipulation, or threat. 

15 ‘‘(5) The economic effects of the markets, in16 cluding to the macro- and micro-economic effects of 

17 unexpected significant increases and decreases in the 

18 price of regulated instruments. 

19 ‘‘(6) Any changes in the roles, activities, or 

20 strategies of various market participants. 

21 ‘‘(7) Regional, industrial, and consumer re22 sponses to the market, and energy investment re23 sponses to the markets. 

24 ‘‘(8) Any other issue relating to the markets 

25 that the Commission determines to be appropriate. 


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1 ‘‘(b) QUARTERLY REPORTS TO CONGRESS.—Not 

2 later than 30 days after the end of each calendar quarter, 

3 the Commission shall submit to the President, the Com4 mittee on Energy and Commerce of the House of Rep5 resentatives, the Committee on Energy and Natural Re6 sources of the Senate, and the Committee on Environment 

7 and Public Works of the Senate, and make available to 

8 the public, a report on the matters described in subsection 

9 (a) with respect to the quarter, including recommenda10 tions for any administrative or statutory measures the 

11 Commission considers necessary to address any threats to 

12 the transparency, fairness, or integrity of the markets in 

13 regulated instruments. 

14 ‘‘SEC. 212. AUTHORIZATION OF APPROPRIATIONS. 

15 ‘‘In addition to any fees collected by the Commission 

16 under this Act, there are authorized to be appropriated 

17 such sums as are necessary to carry out this title.’’. 

18 (b) CONFORMING AMENDMENT.—The Commodity 

19 Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting 

20 after section 1a (7 U.S.C. 1a) the following: 

21 ‘‘TITLE I—REGULATION OF 

22 COMMODITY EXCHANGES’’. 

Æ 


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