II 

111TH CONGRESS 

1ST SESSION S. 1412 

To amend the Commodity Exchange Act to clarify the treatment of purchases 

of certain commodity futures contracts and financial instruments with 

respect to limits established by the Commodity Futures Trading Commission relating to excessive speculation, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 8, 2009 

Ms. COLLINS 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 clarify the treatment of purchases of certain commodity futures contracts and financial instruments with respect to limits 

established by the Commodity Futures Trading Commission relating to excessive speculation, 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 ‘‘Commodity Specula5 tion Reform Act of 2009’’. 


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1 SEC. 2. AUTHORITY OF COMMODITY FUTURES TRADING 

2 COMMISSION TO ISSUE NO ACTION LETTERS. 

3 Section 2(a)(1) of the Commodity Exchange Act (7 

4 U.S.C. 2(a)(1)) is amended by adding at the end the fol5 lowing: 

6 ‘‘(G) AUTHORITY TO ISSUE NO ACTION

7 LETTERS TO FOREIGN BOARDS OF TRADE.— 

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), the Commission may 

10 not issue a no action letter to any foreign 

11 board of trade that lists a contract the 

12 price of which settles on the price of a con13 tract traded on an exchange regulated by 

14 the Commission. 

15 ‘‘(ii) EXCEPTION.—The Commission 

16 may issue a no action letter to a foreign 

17 board of trade described in clause (i) if the 

18 foreign board of trade provides to the 

19 Commission information and data accessi20 bility the scope of which is comparable to 

21 the information and data accessibility pro22 vided to the Commission by entities under 

23 the jurisdiction of the Commission.’’. 


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1 SEC. 3. TREATMENT OF PURCHASES OF CERTAIN COM2 MODITY FUTURES CONTRACTS AND FINAN3 CIAL INSTRUMENTS. 

4 Section 4a of the Commodity Exchange Act (7 U.S.C. 

5 6a) is amended— 

6 (1) by striking ‘‘SEC. 4a. (a) Excessive specula7 tion’’ and inserting the following: 

8 ‘‘SEC. 4a. EXCESSIVE SPECULATION. 

9 ‘‘(a) BURDEN ON INTERSTATE COMMERCE; TRADING

10 OR POSITION LIMITS.— 

11 ‘‘(1) IN GENERAL.—Excessive speculation and’’; 

12 and 

13 (2) in subsection (a) (as amended by paragraph 

14 (1)), by adding at the end the following: 

15 ‘‘(2) TREATMENT OF PURCHASES OF CERTAIN

16 COMMODITY FUTURES CONTRACTS AND FINANCIAL

17 INSTRUMENTS.— 

18 ‘‘(A) DEFINITIONS.—In this paragraph: 

19 ‘‘(i) BONA FIDE HEDGING TRANS20 ACTION.— 

21 ‘‘(I) IN GENERAL.—The term 

22 ‘bona fide hedging transaction’ means 

23 a transaction that— 

24 ‘‘(aa) represents a substitute 

25 for a transaction to be made or a 

26 position to be taken at a later 


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1 time in a physical marketing 

2 channel; 

3 ‘‘(bb) is economically appro4 priate for the reduction of risks 

5 in the conduct and management 

6 of a commercial enterprise; and 

7 ‘‘(cc) arises from the poten8 tial change in the value of— 

9 ‘‘(AA) assets that a 

10 person owns, produces, man11 ufactures, possesses, or mer12 chandises (or anticipates 

13 owning, producing, manufac14 turing, possessing, or mer15 chandising); 

16 ‘‘(BB) liabilities that a 

17 person incurs or anticipates 

18 incurring; or 

19 ‘‘(CC) services that a 

20 person provides or purchases 

21 (or anticipates providing or 

22 purchasing). 

23 ‘‘(II) EXCLUSION.—The term 

24 ‘bona fide hedging transaction’ does 

25 not include a transaction entered into 


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1 on a designated contract market for 

2 the purpose of offsetting a financial 

3 risk arising from an over-the-counter 

4 commodity derivative. 

5 ‘‘(ii) OVER-THE-COUNTER COMMODITY

6 DERIVATIVE.—The term ‘over-the-counter 

7 commodity derivative’ means any agree8 ment, contract, or transaction that— 

9 ‘‘(I)(aa) is traded or executed in 

10 the United States; or 

11 ‘‘(bb) is held by a person located 

12 in the United States; 

13 ‘‘(II) is not traded on a des14 ignated contract market or derivatives 

15 transaction execution facility; and 

16 ‘‘(III)(aa) is a put, call, cap, 

17 floor, collar, or similar option of any 

18 kind for the purchase or sale of, or 

19 substantially based on the value of, 1 

20 or more qualifying commodities or an 

21 economic or financial index or meas22 ure of economic or financial risk pri23 marily associated with 1 or more 

24 qualifying commodities; 


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1 ‘‘(bb) provides on an executory 

2 basis for the applicable transaction, 

3 on a fixed or contingent basis, of 1 or 

4 more payments substantially based on 

5 the value of 1 or more qualifying com6 modities or an economic or financial 

7 index or measure of economic or fi8 nancial risk primarily associated with 

9 1 or more qualifying commodities, and 

10 that transfers between the parties to 

11 the transaction, in whole or in part, 

12 the economic or financial risk associ13 ated with a future change in any such 

14 value without also conveying a current 

15 or future direct or indirect ownership 

16 interest in an asset or liability that in17 corporates the financial risk that is 

18 transferred; or 

19 ‘‘(cc) is any combination or per20 mutation of, or option on, any agree21 ment, contract, or transaction de22 scribed in item (aa) or (bb). 

23 ‘‘(iii) OVER-THE-COUNTER COM24 MODITY DERIVATIVE DEALER.—The term 

25 ‘over-the-counter commodity derivative 


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1 dealer’ means a person that regularly of2 fers to enter into, assume, offset, assign, 

3 or otherwise terminate positions in over4 the-counter commodity derivatives with 

5 customers in the ordinary course of a trade 

6 or business of the person. 

7 ‘‘(iv) QUALIFYING COMMODITY.—The 

8 term ‘qualifying commodity’ means— 

9 ‘‘(I) an agricultural commodity; 

10 and 

11 ‘‘(II) an energy commodity. 

12 ‘‘(B) REGULATIONS.— 

13 ‘‘(i) IN GENERAL.—Not later than 90 

14 days after the date of enactment of this 

15 paragraph, in accordance with clauses (ii) 

16 and (iii), the Commission shall promulgate 

17 regulations to establish and enforce— 

18 ‘‘(I) speculative position limits 

19 for qualifying commodities; 

20 ‘‘(II) a methodology— 

21 ‘‘(aa) to enable persons to 

22 aggregate the positions held or 

23 controlled by the persons on des24 ignated contract markets, on de25 rivatives transaction execution faVerDate Nov 24 2008 00:31 Jul 09, 2009 Jkt 079200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1412.IS S1412

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1 cilities, and in over-the-counter 

2 commodity derivatives; and 

3 ‘‘(bb) to ensure, to the max4 imum extent practicable, that the 

5 determinations made by the 

6 Commission with respect to each 

7 person examined under subpara8 graph (C) accurately reflect the 

9 net long and net short positions 

10 held or controlled by the person 

11 in the underlying qualifying com12 modity; and 

13 ‘‘(III) information reporting rules 

14 to facilitate the monitoring and en15 forcement by the Commission of the 

16 speculative position limits established 

17 under subclause (I), including the 

18 monitoring of positions held in over19 the-counter commodity derivatives. 

20 ‘‘(ii) APPLICABILITY.— 

21 ‘‘(I) POSITION LIMITS.—The 

22 speculative position limits established 

23 under clause (i)(I) shall apply to posi24 tion limits that, with respect to each 


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1 applicable position limit, expire dur2 ing— 

3 ‘‘(aa) the spot month; 

4 ‘‘(bb) each separate futures 

5 trading month (other than the 

6 spot month); or 

7 ‘‘(cc) the sum of each trad8 ing month (including the spot 

9 month). 

10 ‘‘(II) SUM OF POSITIONS.—The 

11 speculative position limits established 

12 under clause (i)(I) shall apply to the 

13 sum of the positions held by a per14 son— 

15 ‘‘(aa) on designated contract 

16 markets; 

17 ‘‘(bb) on derivatives trans18 action execution facilities; and 

19 ‘‘(cc) in over-the-counter 

20 commodity derivatives. 

21 ‘‘(iii) MAXIMUM LEVEL OF POSITION

22 LIMITS.—In establishing the speculative 

23 position limits under clause (i)(I), the 

24 Commission shall set the speculative posi25 tion limits at the minimum level pracVerDate Nov 24 2008 00:31 Jul 09, 2009 Jkt 079200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1412.IS S1412

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1 ticable to ensure sufficient market liquidity 

2 for the conduct of bona fide hedging activi3 ties. 

4 ‘‘(C) PROHIBITION RELATING TO CERTAIN

5 POSITIONS.— 

6 ‘‘(i) IN GENERAL.—Notwithstanding 

7 any other provision of this Act, no person 

8 may hold or control a position, separately 

9 or in combination, net long or net short, 

10 for the purchase or sale of a commodity for 

11 future delivery or, on a futures-equivalent 

12 basis, any option, or an over-the-counter 

13 commodity derivative that exceeds a specu14 lative position limit established by the 

15 Commission under subparagraph (B)(i)(I). 

16 ‘‘(ii) BONA FIDE HEDGING TRANS17 ACTIONS.—In determining whether the 

18 sum of a position held or controlled by a 

19 person has exceeded the applicable specula20 tive position limit established by the Com21 mission under subparagraph (B)(i)(I), the 

22 Commission shall not consider positions at23 tributable to a bona fide hedging trans24 action. 


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1 ‘‘(iii) DETERMINATION OF POSITION

2 LIMITS FOR OVER-THE-COUNTER COM3 MODITY DERIVATIVE DEALERS.—To deter4 mine the position of an over-the-counter 

5 commodity derivative dealer, the sum of 

6 the positions held or controlled by the over7 the-counter commodity derivative dealer 

8 shall be— 

9 ‘‘(I) calculated on the last day of 

10 each month; and 

11 ‘‘(II) considered, for the monthly 

12 period covered by the determination, 

13 to be the average daily net position 

14 held or controlled by the over-the15 counter commodity derivative dealer 

16 for the period beginning on the first 

17 day of the month and ending on the 

18 last day of the month.’’. 

Æ 


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