II 

111TH CONGRESS 

1ST SESSION S. 1691 

To comprehensively regulate derivatives markets to increase transparency 

and reduce risks in the financial system. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 22, 2009 

Mr. REED introduced the following bill; which was read twice and referred to 

the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To comprehensively regulate derivatives markets to increase 

transparency and reduce risks in the financial system. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Comprehensive Derivatives Regulation Act of 2009’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

TITLE I—REGULATION OF SECURITY-BASED DERIVATIVES 

Sec. 101. Definitions. 

Sec. 102. Rationalization of financial product oversight. 


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Sec. 103. Required clearing of standardized derivative through central counterparties and the use of trade repositories. 

Sec. 104. Prudential supervision and regulation of significant security-based derivatives market participants and incentives for trading on regulated exchanges. 

Sec. 105. Recordkeeping and reporting requirements for derivatives market 

participants. 

Sec. 106. Prohibition of market manipulation, fraud, and other market abuses. 

Sec. 107. Protections for marketing security-based swaps to certain persons. 

Sec. 108. Enforcement. 

Sec. 109. Enforceability of security-based swaps. 

Sec. 110. Transfer and rights of certain CFTC employees. 

TITLE II—REGULATION OF COMMODITY-BASED DERIVATIVES 

Sec. 201. Definitions. 

Sec. 202. Rationalization of financial product oversight. 

Sec. 203. Required clearing of standardized derivatives through central counterparties and use of trade repositories. 

Sec. 204. Prudential supervision and regulation of significant commodity-based 

derivatives market participants and incentives for trading on 

regulated exchanges. 

Sec. 205. Recordkeeping and reporting requirements for derivatives market 

participants. 

Sec. 206. Prohibition of market manipulation, fraud, and other market abuses. 

Sec. 207. Protections for marketing commodity-based swaps to certain persons. 

Sec. 208. Commodity-based swap execution facilities. 

Sec. 209. Enforcement. 

Sec. 210. Enforceability of commodity-based swaps. 

TITLE III—OTHER PROVISIONS 

Sec. 301. Margining and other risk management standards for central counterparties. 

Sec. 302. Determining the status of swaps. 

Sec. 303. Study and report on implementation. 

Sec. 304. Rulemaking. 

Sec. 305. Effective date. 

1 SEC. 2. FINDINGS. 

2 Congress finds that— 

3 (1) in recent years, the over-the-counter deriva4 tives market has grown rapidly, but regulators have 

5 lacked key information and adequate authority to 

6 address systemic and other risks posed by unregu7 lated derivatives trading; 


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1 (2) excessive risk taking among market partici2 pants, combined with limited regulatory oversight of 

3 such products, was a significant cause of the recent 

4 financial crisis; 

5 (3) lack of transparency in the markets has 

6 contributed to market instability and uncertainty, 

7 and has resulted in a less efficient marketplace; 

8 (4) customized derivative products provide key 

9 benefits to certain market participants and should 

10 be permitted under comprehensive regulation, but all 

11 derivatives activities should be accompanied by ap12 propriate risk management and prudential stand13 ards; and 

14 (5) the trading of derivatives on regulated ex15 changes should be encouraged because of the signifi16 cant associated market efficiencies. 

17 TITLE I—REGULATION OF 

18 SECURITY-BASED DERIVATIVES 

19 SEC. 101. DEFINITIONS. 

20 (a) DEFINITIONS UNDER THE SECURITIES EX21 CHANGE ACT OF 1934.—Section 3(a) of the Securities Ex22 change Act of 1934 (15 U.S.C. 78c(a)) is amended— 

23 (1) in paragraph (10), by inserting ‘‘security24 based swap,’’ after ‘‘security future,’’; 


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1 (2) in paragraph (13), by adding at the end the 

2 following: ‘‘For any security-based swap, such terms 

3 include the execution, termination (prior to its 

4 scheduled maturity date), assignment, exchange, or 

5 similar transfer or conveyance of, or extinguishing of 

6 rights or obligations under, a security-based swap, 

7 as the context may require.’’; 

8 (3) in paragraph (14), by adding at the end the 

9 following: ‘‘For any security-based swap, such terms 

10 include the execution, termination (prior to its 

11 scheduled maturity date), assignment, exchange, or 

12 similar transfer or conveyance of, or extinguishing of 

13 rights or obligations under, a security-based swap, 

14 as the context may require.’’; and 

15 (4) by adding at the end the following: 

16 ‘‘(65) DERIVATIVE.—The term ‘derivative’ 

17 means— 

18 ‘‘(A) any future, forward, swap, warrant, 

19 put, call, straddle, option, or privilege on or re20 lated to— 

21 ‘‘(i) any security, or group or index of 

22 securities (including any interest therein or 

23 based on the value thereof); or 

24 ‘‘(ii) any issuer of securities or group 

25 or index of issuers of securities (including 


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1 any interest therein or based on the value 

2 thereof); and 

3 ‘‘(B) any contract of sale for future deliv4 ery of any commodity (or option on such con5 tract). 

6 ‘‘(66) SWAP.— 

7 ‘‘(A) IN GENERAL.—Except as provided in 

8 subparagraph (B), the term ‘swap’ means any 

9 agreement, contract, or transaction that— 

10 ‘‘(i) is a put, call, cap, floor, collar, or 

11 similar option of any kind for the purchase 

12 or sale of, or based on the value of, 1 or 

13 more interest or other rates, currencies, 

14 commodities, indices, quantitative meas15 ures, or other financial or economic inter16 ests or property of any kind; 

17 ‘‘(ii) provides for any purchase, sale, 

18 payment, or delivery (other than a dividend 

19 on an equity security) that is dependent on 

20 the occurrence, nonoccurrence, or the ex21 tent of the occurrence of an event or con22 tingency associated with a potential finan23 cial, economic, or commercial consequence; 

24 ‘‘(iii) provides on an executory basis 

25 for the exchange, on a fixed or contingent 


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1 basis, of 1 or more payments based on the 

2 value or level of 1 or more interest or other 

3 rates, currencies, commodities, securities, 

4 instruments of indebtedness, indices, quan5 titative measures, or other financial or eco6 nomic interests or property of any kind, or 

7 any interest therein or based on the value 

8 thereof, and that transfers, as between the 

9 parties to the transaction, in whole or in 

10 part, the financial risk associated with a 

11 future change in any such value or level 

12 without also conveying a current or future 

13 direct or indirect ownership interest in an 

14 asset (including any enterprise or invest15 ment pool) or liability that incorporates the 

16 financial risk so transferred, any such 

17 agreement, contract, or transaction com18 monly known as an interest rate swap, in19 cluding a rate floor, rate cap, rate collar, 

20 cross-currency rate swap, basis swap, cur21 rency swap, equity index swap, equity 

22 swap, debt index swap, debt swap, credit 

23 spread, credit default swap, credit swap, 

24 weather swap, energy swap, metal swap, 


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1 agricultural swap, emissions swap, or com2 modity swap; 

3 ‘‘(iv) is an agreement, contract, or 

4 transaction that is, or in the future be5 comes, commonly known to the trade as a 

6 swap; or 

7 ‘‘(v) is any combination or permuta8 tion of, or option on, any agreement, con9 tract, or transaction described in any of 

10 clauses (i) through (iv). 

11 ‘‘(B) EXCLUSIONS.—The term ‘swap’ does 

12 not include— 

13 ‘‘(i) any contract of sale for future de14 livery traded on or subject to the rules of 

15 any board of trade designated as a con16 tract market under section 5 of the Com17 modity Exchange Act (7 U.S.C. 7)— 

18 ‘‘(I) on a commodity other than a 

19 security; or 

20 ‘‘(II) that is not based on or sub21 ject to the occurrence of a bona fide 

22 contingency that might reasonably be 

23 expected to affect or be affected by 

24 the creditworthiness of a party other 

25 than a party to such contract; 


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1 ‘‘(ii) any sale of any cash commodity 

2 or security for deferred or delayed ship3 ment or delivery; 

4 ‘‘(iii) any put, call, straddle, option, or 

5 privilege on any security, certificate of de6 posit, or group or index of securities, in7 cluding any interest therein or based, in 

8 whole or in part, on the value thereof, 

9 whether physically or cash settled; 

10 ‘‘(iv) any put, call, straddle, option, or 

11 privilege entered into on a national securi12 ties exchange registered pursuant to sec13 tion 6(a) relating to foreign currency; 

14 ‘‘(v) any agreement, contract, or 

15 transaction providing for the purchase or 

16 sale of 1 or more securities on a fixed 

17 basis, whether physically or cash settled; 

18 ‘‘(vi) any agreement, contract, or 

19 transaction providing for the purchase or 

20 sale of 1 or more securities on a contingent 

21 basis, unless such agreement, contract, or 

22 transaction predicates such purchase or 

23 sale on the occurrence of a bona fide con24 tingency that might reasonably be expected 

25 to affect or be affected by the creditworthiVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 ness of a party other than a party to the 

2 agreement, contract, or transaction; 

3 ‘‘(vii) any note, bond, or evidence of 

4 indebtedness that is a security (as defined 

5 in section 2(a)(1) of the Securities Act of 

6 1933 (15 U.S.C. 77b(a)(1)) or paragraph 

7 (10) of this subsection); 

8 ‘‘(viii) any agreement, contract, or 

9 transaction that is— 

10 ‘‘(I) based on, or references, a se11 curity; and 

12 ‘‘(II) entered into directly or 

13 through an underwriter (as defined in 

14 section 2(a)(11) of the Securities Act 

15 of 1933 (15 U.S.C. 77b(a)(11))) by 

16 the issuer of such security; 

17 ‘‘(ix) any security future product (as 

18 defined in paragraph (56)); 

19 ‘‘(x) any hybrid instrument that is 

20 predominantly a banking product, as pro21 vided in section 405 of the Commodity Fu22 tures Modernization Act of 2000 (Public 

23 Law 106–554; 114 Stat. 2763A–455), or 

24 any hybrid instrument that is predomi25 nantly a security, as provided in section 


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1 2(f) of the Commodity Exchange Act (as 

2 in effect on the day before the date of en3 actment of the Comprehensive Derivatives 

4 Regulation Act of 2009); 

5 ‘‘(xi) any agreement, contract, or 

6 transaction that is an insurance or endow7 ment policy or annuity contract or optional 

8 annuity contract issued by a corporation 

9 that is subject to the supervision of the in10 surance commissioner, bank commissioner, 

11 or any agency or officer performing like 

12 functions, of any State; or 

13 ‘‘(xii) any identified banking product 

14 specified in paragraphs (1) through (5) of 

15 section 206(a) of the Gramm-Leach-Bliley 

16 Act (15 U.S.C. 78c note), mortgage or 

17 mortgage purchase commitment, or any 

18 sale of installment loan contracts or receiv19 ables, if any such product or instrument is 

20 not marketed or sold as an alternative to 

21 a swap. 

22 ‘‘(67) ELIGIBLE CONTRACT PARTICIPANT.—The 

23 term ‘eligible contract participant’ means— 

24 ‘‘(A) acting for its own account— 


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1 ‘‘(i) a financial institution (as defined 

2 in section 1a(15) of the Commodity Ex3 change Act (7 U.S.C. 1(a)(15)), as in ef4 fect on the day before the date of enact5 ment of the Comprehensive Derivatives 

6 Regulation Act of 2009); 

7 ‘‘(ii) an insurance company that is 

8 regulated by a State, or that is regulated 

9 by a foreign government and is subject to 

10 comparable regulation, as determined by 

11 the Commission, including a regulated sub12 sidiary or affiliate of such an insurance 

13 company; 

14 ‘‘(iii) an investment company that is 

15 subject to regulation under the Investment 

16 Company Act of 1940 (15 U.S.C. 80a–1 et 

17 seq.) or a foreign person performing a 

18 similar role or function subject as such to 

19 foreign regulation (regardless of whether 

20 each investor in the investment company or 

21 the foreign person is itself an eligible con22 tract participant); 

23 ‘‘(iv) a commodity pool that— 

24 ‘‘(I) has total net assets exceed25 ing $5,000,000; and 


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1 ‘‘(II) is formed and operated by a 

2 person that is subject to regulation 

3 under the Commodity Exchange Act 

4 (7 U.S.C. 1 et seq.) or a foreign per5 son performing a similar role or func6 tion subject as such to foreign regula7 tion (regardless of whether each inves8 tor in the commodity pool or the for9 eign person is itself an eligible con10 tract participant); 

11 ‘‘(v) a corporation, partnership, pro12 prietorship, organization, trust, or other 

13 entity— 

14 ‘‘(I) that has total net assets ex15 ceeding $10,000,000; or 

16 ‘‘(II) that— 

17 ‘‘(aa) has total net assets 

18 exceeding $5,000,000; and 

19 ‘‘(bb) enters into an agree20 ment, contract, or transaction in 

21 connection with the conduct of 

22 the business of the entity or to 

23 manage the risk associated with 

24 an asset or liability owned or in25 curred or reasonably likely to be 


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1 owned or incurred by the entity 

2 in the conduct of the business of 

3 the entity; 

4 ‘‘(vi) an employee benefit plan that is 

5 subject to the Employee Retirement In6 come Security Act of 1974 (29 U.S.C. 

7 1001 et seq.), a governmental employee 

8 benefit plan, or a foreign person per9 forming a similar role or function that is 

10 subject as such to foreign regulation— 

11 ‘‘(I) that has total assets exceed12 ing $5,000,000; or 

13 ‘‘(II) the investment decisions of 

14 which are made by— 

15 ‘‘(aa) an investment adviser 

16 or commodity trading advisor 

17 that is subject to regulation 

18 under the Investment Advisers 

19 Act of 1940 (15 U.S.C. 80b–1 et 

20 seq.) or the Commodity Ex21 change Act (7 U.S.C. 1 et seq.); 

22 ‘‘(bb) a foreign person per23 forming a similar role or function 

24 that is subject as such to foreign 

25 regulation; 


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1 ‘‘(cc) a financial institution 

2 (as defined in section 1a(15) of 

3 the Commodity Exchange Act (7 

4 U.S.C. 1(a)(15)), as in effect on 

5 the day before the date of enact6 ment of the Comprehensive De7 rivatives Regulation Act of 

8 2009); or 

9 ‘‘(dd) an insurance company 

10 described in clause (ii), or a reg11 ulated subsidiary or affiliate of 

12 such an insurance company; 

13 ‘‘(vii)(I) a governmental entity (in14 cluding the United States, a State, or a 

15 foreign government) or political subdivision 

16 of a governmental entity; 

17 ‘‘(II) a multinational or supranational 

18 government entity; or 

19 ‘‘(III) an instrumentality, agency, or 

20 department of an entity described in sub21 clause (I) or (II), 

22 except that such term does not include an 

23 entity, political subdivision, instrumen24 tality, agency, or department referred to in 

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1 litical subdivision, instrumentality, agency, 

2 or department owns and invests on a dis3 cretionary basis $50,000,000 or more in 

4 investments, provided that, with respect to 

5 any State or entity, political subdivision, 

6 agency, or department of a State, such 

7 amount is exclusive of any proceeds from 

8 any offering of municipal securities; 

9 ‘‘(viii)(I) a broker or dealer that is 

10 subject to regulation under this title or a 

11 foreign person performing a similar role or 

12 function that is subject as such to foreign 

13 regulation, except that, if the broker or 

14 dealer or foreign person is a natural per15 son or proprietorship, the broker or dealer 

16 or foreign person shall not be considered to 

17 be an eligible contract participant, unless 

18 the broker or dealer or foreign person also 

19 meets the requirements of clause (v) or 

20 (xi); 

21 ‘‘(II) an associated person of a reg22 istered broker or dealer concerning the fi23 nancial or securities activities, of which, 

24 the registered person makes and keeps 

25 records under section 15C(b) or 17(h); and 


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1 ‘‘(III) an investment bank holding 

2 company (as defined in section 17(i)); 

3 ‘‘(ix) a futures commission merchant 

4 that is subject to regulation under the 

5 Commodity Exchange Act or a foreign per6 son performing a similar role or function 

7 that is subject as such to foreign regula8 tion, except that, if the futures commission 

9 merchant or foreign person is a natural 

10 person or proprietorship, the futures com11 mission merchant or foreign person shall 

12 not be considered to be an eligible contract 

13 participant, unless the futures commission 

14 merchant or foreign person also meets the 

15 requirements of clause (v) or (xi); 

16 ‘‘(x) a floor broker or floor trader that 

17 is subject to regulation under the Com18 modity Exchange Act in connection with 

19 any transaction that takes place on or 

20 through the facilities of a registered entity 

21 (as defined in section 1a(29) of the Com22 modity Exchange Act (7 U.S.C. 1(a)(29)), 

23 as in effect on the day before the date of 

24 enactment of the Comprehensive Deriva25 tives Regulation Act of 2009, other than 


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1 an electronic trading facility with respect 

2 to a significant price discovery contract), 

3 or an exempt board of trade operating 

4 under section 5d of the Commodity Ex5 change Act (7 U.S.C. 7a–3), or any affil6 iate thereof, on which such person regu7 larly trades; or 

8 ‘‘(xi) a natural person who— 

9 ‘‘(I) owns and invests on a dis10 cretionary basis not less than 

11 $10,000,000; 

12 ‘‘(II) owns and invests on a dis13 cretionary basis not less than 

14 $5,000,000 and who enters into the 

15 agreement, contract, or transaction in 

16 order to manage the risk associated 

17 with an asset owned or liability in18 curred, or reasonably likely to be 

19 owned or incurred, by the individual; 

20 or 

21 ‘‘(III) is an officer or director of 

22 an entity (or a person performing 

23 similar functions) and who enters into 

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1 sociated with the securities of such 

2 entity owned by the individual at the 

3 time of entering into the agreement, 

4 contract, or transaction; 

5 ‘‘(B)(i) a person described in clause (i), 

6 (ii), (iv), (v), (viii), (ix), or (x) of subparagraph 

7 (A) or in subparagraph (C), acting as broker or 

8 performing an equivalent agency function on 

9 behalf of another person described in subpara10 graph (A) or (C); or 

11 ‘‘(ii) an investment adviser that is subject 

12 to regulation under the Investment Advisers 

13 Act of 1940 (15 U.S.C. 80b–1 et seq.), a com14 modity trading advisor that is subject to regula15 tion under the Commodity Exchange Act (7 

16 U.S.C. 1 et seq.), a foreign person performing 

17 a similar role or function that is subject as such 

18 to foreign regulation, or a person described in 

19 clause (i), (ii), (iv), (v), (viii), (ix), or (x) of 

20 subparagraph (A) or in subparagraph (C), in 

21 any such case acting as investment manager or 

22 fiduciary (but excluding a person acting as 

23 broker or performing an equivalent agency 

24 function) for another person described in sub25 paragraph (A) or (C) and who is authorized by 


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1 such person to commit such person to the 

2 transaction; or 

3 ‘‘(C) any other person that the Commis4 sion determines by rule, jointly with the Com5 modity Futures Trading Commission, to be an 

6 eligible contract participant, in light of the fi7 nancial or other qualifications of the person. 

8 ‘‘(68) PERSON ASSOCIATED WITH A SIGNIFI9 CANT SECURITY-BASED DERIVATIVES MARKET PAR10 TICIPANT.— 

11 ‘‘(A) IN GENERAL.—The term ‘person as12 sociated with a significant security-based de13 rivatives market participant’ or ‘associated per14 son of a significant security-based derivatives 

15 market participant’ means— 

16 ‘‘(i) any partner, officer, director, or 

17 branch manager of a significant security18 based derivatives market participant (in19 cluding any individual who holds a similar 

20 status or performs a similar function with 

21 respect to any partner, officer, director, or 

22 branch manager of a significant security23 based derivatives market participant); 

24 ‘‘(ii) any person that directly or indi25 rectly controls, is controlled by, or is under 


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1 common control with a significant security2 based derivatives market participant; and 

3 ‘‘(iii) any employee of a significant se4 curity-based derivatives market partici5 pant. 

6 ‘‘(B) EXCLUSION.—Other than for pur7 poses of section 15F(e)(2), the term ‘person as8 sociated with a significant commodity-based de9 rivatives market participant’ or ‘associated per10 son of a significant security-based derivatives 

11 market participant’ does not include any person 

12 associated with a significant security-based de13 rivatives market participant, the functions of 

14 which are solely clerical or ministerial. 

15 ‘‘(69) SECURITY DERIVATIVE.—The term ‘secu16 rity derivative’ means— 

17 ‘‘(A) any derivative, other than a derivative 

18 instrument swap, on or related to— 

19 ‘‘(i) any security, or group or index of 

20 securities (including any interest therein or 

21 based on the value thereof); or 

22 ‘‘(ii) any issuer of securities or group 

23 or index of issuers of securities (including 

24 any interest therein or based on the value 

25 thereof); and 


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1 ‘‘(B) any security that the Commission by 

2 rule, regulation, or order determines is a secu3 rity derivative. 

4 ‘‘(70) SECURITY-BASED SWAP.—The term ‘se5 curity-based swap’ means a swap, of which a mate6 rial term— 

7 ‘‘(A) is based on the price, yield, value, or 

8 volatility of any security or any group or index 

9 of securities, or any interest therein, other than 

10 interest rate or currency; 

11 ‘‘(B) is dependent on the occurrence, non12 occurrence, or the extent of the occurrence of 

13 an event or contingency associated with a po14 tential financial, economic, or commercial con15 sequence that is related to or based on a secu16 rity, an interest in a security, an issuer of a se17 curity, or group or index of securities, or inter18 ests in securities or issuers of securities, or 

19 based on the value of any of the foregoing; 

20 ‘‘(C) provides for the purchase or sale of 1 

21 or more securities on a contingent basis, wheth22 er physically or cash settled, if such agreement, 

23 contract, or transaction predicates such pur24 chase or sale on the occurrence of a bona fide 

25 contingency that might reasonably be expected 


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1 to affect or be affected by the creditworthiness 

2 of a party other than a party to the agreement, 

3 contract, or transaction; or 

4 ‘‘(D) allows for settlement of the swap by 

5 delivery of, or by reference to, any security. 

6 ‘‘(71) SIGNIFICANT SECURITY-BASED DERIVA7 TIVES MARKET PARTICIPANT.—The term ‘significant 

8 security-based derivatives market participant’ 

9 means— 

10 ‘‘(A) any person (other than an investment 

11 company registered under the Investment Com12 pany Act of 1940) that is engaged in the busi13 ness of purchasing or selling one or more secu14 rity-based swaps (or security derivatives, as the 

15 Commission determines by rule, regulation, or 

16 order) for such person’s own account or for oth17 ers, or making a market in security-based 

18 swaps (or security derivatives, as the Commis19 sion determines by rule, regulation, or order), 

20 the purchases or sales of which are not solely 

21 for the purpose of managing the risk associated 

22 with— 

23 ‘‘(i) an asset that is or is anticipated 

24 to be owned, produced, manufactured, 

25 processed, or merchandised; 


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1 ‘‘(ii) potential changes in the value of 

2 services to be purchased or provided, or 

3 anticipated to be purchased or provided; or 

4 ‘‘(iii) a liability incurred or antici5 pated to be incurred by such person that 

6 is not, or is not related to, a security-based 

7 swap; or 

8 ‘‘(B) any other person designated by the 

9 Commission, by rule, regulation, or order, after 

10 consultation with the Commodity Futures Trad11 ing Commission, as necessary or appropriate in 

12 the public interest, the protection of investors, 

13 or in furtherance of the purposes of this title. 

14 ‘‘(72) TRADE REPOSITORY.—The term ‘trade 

15 repository’ means any person that collects, cal16 culates, processes, or prepares information with re17 spect to transactions or positions in security-based 

18 swaps or security derivatives by the Commission 

19 under section 17C(d)(1)(A)(ii).’’. 

20 (b) DEFINITIONS UNDER THE SECURITIES ACT OF

21 1933.—Section 2(a) of the Securities Act of 1933 (15 

22 U.S.C. 77b(a)) is amended— 

23 (1) in paragraph (1), by inserting ‘‘security24 based swap,’’ after ‘‘security future,’’; 


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1 (2) in paragraph (3), by adding at the end the 

2 following: ‘‘Any offer or sale of a security-based 

3 swap (or other security derivative as the Commission 

4 determines by rule or regulation) by or on behalf of 

5 the issuer of the securities upon which such security6 based swap or security derivative is based or is ref7 erenced, an affiliate of the issuer, or an underwriter, 

8 shall constitute a contract for sale of, sale of, offer 

9 for sale, or offer to sell such securities.’’; and 

10 (3) by adding at the end the following: 

11 ‘‘(17) The terms ‘derivative’, ‘swap’, ‘security 

12 derivative’ and ‘security-based swap’ have the same 

13 meanings as in paragraphs (65), (66), (69), and 

14 (70), respectively, of section 3(a) of the Securities 

15 Exchange Act of 1934. 

16 ‘‘(18) The terms ‘purchase’ or ‘sale’ of a secu17 rity-based swap, shall be deemed to mean the execu18 tion, termination (prior to its scheduled maturity 

19 date), assignment, exchange, or similar transfer or 

20 conveyance of, or extinguishing of rights or obliga21 tions under, a security-based swap, as the context 

22 may require.’’. 

23 SEC. 102. RATIONALIZATION OF FINANCIAL PRODUCT 

24 OVERSIGHT. 

25 (a) REPEAL OF SWAP AGREEMENT EXCLUSION.— 


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1 (1) REPEAL OF LAWS.—The following provi2 sions of law are repealed: 

3 (A) Sections 206A, 206B, and 206C of the 

4 Gramm-Leach-Bliley Act (15 U.S.C. 78c note). 

5 (B) Section 2A of the Securities Act of 

6 1933 (15 U.S.C. 77b–1). 

7 (C) Section 17(d) of the Securities Act of 

8 1933 (15 U.S.C. 77q(d)). 

9 (D) Section 3A of the Securities Exchange 

10 Act of 1934 (15 U.S.C. 78c–1). 

11 (E) Section 9(i) of the Securities Exchange 

12 Act of 1934 (15 U.S.C. 78i(i)). 

13 (F) Section 15(i) of the Securities Ex14 change Act of 1934 (15 U.S.C. 78o(i)), as 

15 added by section 303(f) of the Commodity Fu16 tures Modernization Act of 2000 (Public Law 

17 106–554; 114 Stat. 2763A–455). 

18 (G) Section 16(g) of the Securities Ex19 change Act of 1934 (15 U.S.C. 78p(g)). 

20 (H) Section 20(f) of the Securities Ex21 change Act of 1934 (15 U.S.C. 78t(f)). 

22 (I) Section 21A(g) of the Securities Ex23 change Act of 1934 (15 U.S.C. 78u–1(g)). 

24 (2) CONFORMING AMENDMENT TO THE SECURI25 TIES ACT OF 1933.—Section 17(a) of the Securities 


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•S 1691 IS

1 Act of 1933 (15 U.S.C. 77q(a)) is amended by strik2 ing ‘‘or any security-based swap agreement (as de3 fined in section 206B of the Gramm-Leach-Bliley 

4 Act)’’. 

5 (3) CONFORMING AMENDMENTS TO THE SECU6 RITIES EXCHANGE ACT OF 1934.—The Securities Ex7 change Act of 1934 (15 U.S.C. 78a et seq.) is 

8 amended— 

9 (A) in section 9(a) (15 U.S.C. 78i(a))— 

10 (i) in paragraph (1)— 

11 (I) by striking ‘‘For the’’ and in12 serting ‘‘for the’’; and 

13 (II) by striking the period at the 

14 end an inserting a semicolon; and 

15 (ii) by striking paragraphs (2) 

16 through (5) and inserting the following: 

17 ‘‘(2) to effect, alone or with 1 or more other 

18 persons, a series of transactions in any security reg19 istered on a national securities exchange or in con20 nection with any security-based swap (or security de21 rivative, as the Commission determines by rule, reg22 ulation, or order) with respect to such security cre23 ating actual or apparent active trading in such secu24 rity, or raising or depressing the price of such secuVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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•S 1691 IS

1 rity, for the purpose of inducing the purchase or sale 

2 of such security by others; 

3 ‘‘(3) if a broker or dealer, or other person sell4 ing or offering for sale or purchasing or offering to 

5 purchase the security to induce the purchase or sale 

6 of any security registered on a national securities ex7 change or any security-based swap (or security de8 rivative, as the Commission determines by rule, reg9 ulation, or order) with respect to such security by 

10 the circulation or dissemination in the ordinary 

11 course of business of information to the effect that 

12 the price of any such security will or is likely to rise 

13 or fall because of market operations of any 1 or 

14 more persons conducted for the purpose of raising or 

15 depressing the price of such security; 

16 ‘‘(4) if a broker or dealer, or the person selling 

17 or offering for sale or purchasing or offering to pur18 chase the security, to make, regarding any security 

19 registered on a national securities exchange or any 

20 security-based swap (or security derivative, as the 

21 Commission determines by rule, regulation, or order) 

22 with respect to such security, for the purpose of in23 ducing the purchase or sale of such security or such 

24 security-based swap (or security derivative, as the 

25 Commission determines by rule, regulation, or 


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•S 1691 IS

1 order), any statement which was, at the time and in 

2 the light of the circumstances under which it was 

3 made, false or misleading with respect to any mate4 rial fact, and which the broker, dealer, or such per5 son knew or had reasonable grounds to believe was 

6 false or misleading; 

7 ‘‘(5) for a consideration, received directly or in8 directly from a broker or dealer, or other person sell9 ing or offering for sale or purchasing or offering to 

10 purchase the security, to induce the purchase of any 

11 security registered on a national securities exchange 

12 or any security-based swap (or security derivative, as 

13 the Commission determines by rule, regulation, or 

14 order) with respect to such security by the circula15 tion or dissemination of information to the effect 

16 that the price of any such security will or is likely 

17 to rise or fall because of the market operations of 

18 any one or more persons conducted for the purpose 

19 of raising or depressing the price of such security; 

20 or’’; 

21 (B) in section 10(b) (15 U.S.C. 78j(b))— 

22 (i) by striking ‘‘or any securities23 based swap agreement (as defined in sec24 tion 206B of the Gramm-Leach-Bliley 

25 Act),’’; and 


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•S 1691 IS

1 (ii) by striking ‘‘Rules promulgated 

2 under subsection (b)’’ and all that follows 

3 through ‘‘as they apply to securities’’; 

4 (C) in section 15(c)(1) (15 U.S.C. 

5 78o(c)(1))— 

6 (i) in subparagraph (A) by striking ‘‘, 

7 or any security-based swap agreement (as 

8 defined in section 206B of the Gramm9 Leach-Bliley Act),’’; and 

10 (ii) in each of subparagraphs (B) and 

11 (C), by striking ‘‘swap agreement (as de12 fined in section 206B of the Gramm13 Leach-Bliley Act)’’ each place that term 

14 appears and inserting ‘‘swap’’; 

15 (D) in section 16(a)(2)(C) (15 U.S.C. 

16 78p(a)(2)(C)), by striking ‘‘swap agreement (as 

17 defined in section 206(b) of the Gramm-Leach18 Bliley Act)’’ and inserting ‘‘swap (or security 

19 derivative, as the Commission determines by 

20 rule, regulation, or order)’’; 

21 (E) in section 16(a)(3)(B) (15 U.S.C. 

22 78p(a)(3)(B)), by striking ‘‘security-based swap 

23 agreement’’ and inserting ‘‘swap (or security 

24 derivative, as the Commission determines by 

25 rule, regulation, or order)’’; 


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•S 1691 IS

1 (F) in section 16(b) (15 U.S.C. 78p(b))— 

2 (i) by striking ‘‘(as defined in section 

3 206B of the Gramm-Leach-Bliley Act)’’ 

4 each place that term appears and inserting 

5 ‘‘; (or security derivative, as the Commis6 sion determines by rule, regulation, or 

7 order)’’; and 

8 (ii) by striking ‘‘swap agreement’’ 

9 each place that term appears and inserting 

10 ‘‘swap (or security derivative, as the Com11 mission determines by rule, regulation, or 

12 order)’’; 

13 (G) in section 20(d) (15 U.S.C. 78t(d)), by 

14 striking ‘‘or security-based swap agreement (as 

15 defined in section 206B of the Gramm-Leach16 Bliley Act) with respect to such security’’ and 

17 inserting ‘‘, security futures product or swap’’; 

18 and 

19 (H) in section 21A(a)(1) (15 U.S.C. 78u– 

20 1(a)(1)), by striking ‘‘or security-based swap 

21 agreement (as defined in section 206B of the 

22 Gramm-Leach-Bliley Act)’’. 

23 (b) RATIONALIZATION OF SECURITY FUTURES OVER24 SIGHT.— 


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•S 1691 IS

1 (1) AMENDMENTS TO THE SECURITIES EX2 CHANGE ACT OF 1934.—The Securities Exchange Act 

3 of 1934 (15 U.S.C. 78a et seq.) is amended— 

4 (A) in section 3(a) of (15 U.S.C. 78c(a)), 

5 by striking paragraph (55) and inserting the 

6 following: 

7 ‘‘(55) The term ‘security future’— 

8 ‘‘(A) means a contract of sale for future 

9 delivery of a security or an index of securities, 

10 including any interest therein or based on the 

11 value thereof, or based on any financial, eco12 nomic, or commercial occurrence, extent of an 

13 occurrence, contingency, or consequence that is 

14 related to or based on a security, an interest in 

15 a security, an issuer of a security, or group or 

16 index of securities, or interests in securities or 

17 issuers of securities, or based on the value of 

18 any of the foregoing, other than an exempted 

19 security under paragraph (12), as in effect on 

20 the date of enactment of the Futures Trading 

21 Act of 1982 (other than a municipal security, 

22 under paragraph (29), as in effect on the date 

23 of enactment of the Futures Trading Act of 

24 1982); and 


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•S 1691 IS

1 ‘‘(B) does not include any security-based 

2 swap.’’; 

3 (B) in section 6 (15 U.S.C. 78f)— 

4 (i) by striking subsections (g), (i), and 

5 (k); 

6 (ii) by redesignating subsections (h) 

7 and (j) as subsections (g) and (h), respec8 tively; and 

9 (iii) in subsection (g), as so redesig10 nated— 

11 (I) in paragraph (2)— 

12 (aa) by striking ‘‘(A)’’; and 

13 (bb) by striking ‘‘and (B) 

14 meet the criteria specified in sec15 tion 2(a)(1)(D)(i) of the Com16 modity Exchange Act’’; 

17 (II) in paragraph (3)(A), by 

18 striking ‘‘security of a narrow-based 

19 security’’ and inserting ‘‘of an’’; 

20 (III) in paragraph (3)(D), by 

21 striking ‘‘and the Commodity Futures 

22 Trading Commission jointly deter23 mine’’ and inserting ‘‘determines’’; 

24 (IV) in paragraph (3)(G), by 

25 striking ‘‘the prohibition against dual 


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•S 1691 IS

1 trading in section 4j of the Com2 modity Exchange Act (7 U.S.C. 6j) 

3 and the rules and regulations there4 under or’’; 

5 (V) in paragraph (4)(A), by 

6 striking ‘‘and the Commodity Futures 

7 Trading Commission, by rule, regula8 tion, or order, may jointly’’ and in9 serting ‘‘may, by rule, regulation, or 

10 order,’’; 

11 (VI) in paragraph (4)(B), by 

12 striking ‘‘and the Commodity Futures 

13 Trading Commission, by order, may 

14 jointly’’ and inserting ‘‘may, by 

15 order,’’; 

16 (VII) in paragraph (6)— 

17 (aa) by striking ‘‘and the 

18 Commodity Futures Trading 

19 Commission’’; 

20 (bb) by striking ‘‘jointly’’; 

21 and 

22 (cc) by striking ‘‘and the 

23 Commodity Exchange Act’’; and 

24 (VIII) in paragraph (7)— 


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•S 1691 IS

1 (aa) by striking subpara2 graph (A) and inserting the fol3 lowing: 

4 ‘‘(A) Notwithstanding paragraph (2), until 

5 the compliance date, a national securities ex6 change or national securities association that is 

7 registered pursuant to section 15A(a) may 

8 trade a security futures product that does not 

9 conform with any listing standard promulgated 

10 to meet the requirement specified in subpara11 graph (E) of paragraph (3).’’; and 

12 (bb) in subparagraph (B), 

13 by striking ‘‘and the Commodity 

14 Futures Trading Commission 

15 shall jointly’’ and inserting 

16 ‘‘shall’’; 

17 (C) in section 7 (15 U.S.C. 78g)— 

18 (i) in subsection (c)(2)(A)(ii), by 

19 striking ‘‘and the Commodity Futures 

20 Trading Commission shall jointly’’ and in21 serting ‘‘shall’’; 

22 (ii) in subsection (c)(2)(A), by strik23 ing ‘‘and the Commodity Futures Trading 

24 Commission have not jointly’’ and inserting 

25 ‘‘has not’’; and 


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•S 1691 IS

1 (iii) in subsection (c)(2)(B)— 

2 (I) by striking ‘‘and the Com3 modity Futures Trading Commission 

4 shall jointly’’ and inserting ‘‘shall’’; 

5 and 

6 (II) by striking ‘‘and the Com7 modity Futures Trading Commission 

8 jointly deem’’ and inserting ‘‘deems’’; 

9 (D) in section 11A (15 U.S.C. 78k–1), by 

10 striking subsection (e); 

11 (E) in section 12(k) (15 U.S.C. 78l(k))— 

12 (i) in paragraph (1), by striking ‘‘If 

13 the actions described in subparagraph (A) 

14 or (B) involve a security futures product, 

15 the Commission shall consult with and con16 sider the views of the Commodity Futures 

17 Trading Commission.’’; and 

18 (ii) in paragraph (2)(B), by striking 

19 ‘‘If the actions described in subparagraph 

20 (A) involve a security futures product, the 

21 Commission shall consult with and con22 sider the views of the Commodity Futures 

23 Trading Commission.’’; 

24 (F) in section 15 (15 U.S.C. 78o)— 


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•S 1691 IS

1 (i) in subsection (b), by striking para2 graphs (11) and (12); and 

3 (ii) in subsection (c)(3)— 

4 (I) by striking ‘‘(A) No’’ and in5 serting ‘‘No’’; and 

6 (II) by striking subparagraph 

7 (B); 

8 (G) in section 15A (15 U.S.C. 78o–3), by 

9 striking subsections (k), (l), and (m); 

10 (H) in section 17(b) (15 U.S.C. 78q(b))— 

11 (i) in paragraph (1)— 

12 (I) by striking ‘‘(1)’’ and all that 

13 follows through ‘‘All records’’ and in14 serting ‘‘All records’’; 

15 (II) by striking ‘‘of a—’’ and all 

16 that follows through ‘‘(A) registered’’ 

17 and inserting ‘‘of a registered’’; and 

18 (III) by striking ‘‘; or’’ and all 

19 that follows through the end of sub20 paragraph (B) and inserting a period; 

21 and 

22 (ii) by striking paragraphs (2) 

23 through (4); 

24 (I) in section 17A(b) (15 U.S.C. 78q– 

25 1(b))— 


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•S 1691 IS

1 (i) by striking paragraph (7); and 

2 (ii) by redesignating paragraph (8) as 

3 paragraph (7); 

4 (J) in section 19 (15 U.S.C. 78s)— 

5 (i) in subsection (b)— 

6 (I) by striking paragraphs (7) 

7 and (9); and 

8 (II) by redesignating paragraph 

9 (8) as paragraph (7); and 

10 (ii) in subsection (d), by striking 

11 paragraph (3); 

12 (K) in section 21 (15 U.S.C. 78u), by 

13 striking subsection (i); and 

14 (L) in section 28(e) (15 U.S.C. 78bb(e)), 

15 by striking paragraph (4). 

16 (2) CONFORMING AMENDMENTS TO THE SECU17 RITIES ACT OF 1933.—The Securities Act of 1933 

18 (15 U.S.C. 77 et seq.) is amended— 

19 (A) in section 2(a) (15 U.S.C. 77b(a)), by 

20 striking paragraph (16) and inserting the fol21 lowing: 

22 ‘‘(16) The terms ‘security future’ and ‘security 

23 futures product’ have the same meanings as in sec24 tions 3(a)(55) and 3(a)(56), respectively, of the Se25 curities Exchange Act of 1934.’’; and 


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•S 1691 IS

1 (B) in section 3(a)(14)(A) (15 U.S.C. 

2 77c(a)(14)(A)), by striking ‘‘or exempt from 

3 registration under subsection (b)(7) of such sec4 tion 17A’’. 

5 (3) CONFORMING AMENDMENT TO THE INVEST6 MENT COMPANY ACT OF 1940.—Section 2(a)(52) of 

7 the Investment Company Act of 1940 (15 U.S.C. 

8 80a–2(a)(52)) is amended to read as follows: 

9 ‘‘(52) The term ‘security future’ has the same 

10 meaning as in section 3(a)(55) of the Securities Ex11 change Act of 1934.’’. 

12 (4) CONFORMING AMENDMENT TO THE INVEST13 MENT ADVISERS ACT OF 1940.—Section 202(a)(27) 

14 of the Investment Advisers Act of 1940 (15 U.S.C. 

15 80b–2(a)(27)) is amended to read as follows: 

16 ‘‘(27) The term ‘security future’ has the same 

17 meaning as in section 3(a)(55) of the Securities Ex18 change Act of 1934.’’. 

19 (5) CONFORMING AMENDMENTS TO THE SECU20 RITIES INVESTOR PROTECTION ACT OF 1970.—The 

21 Securities Investor Protection Act of 1970 (15 

22 U.S.C. 78aaa et seq.) is amended— 

23 (A) in section 3(a)(2)(A) (15 U.S.C. 

24 78ccc(a)(2)(A))— 


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•S 1691 IS

1 (i) in clause (i), by inserting ‘‘and’’ 

2 after the semicolon at the end; 

3 (ii) in clause (ii), by striking ‘‘; and’’ 

4 and inserting a period; and 

5 (iii) by striking clause (iii); and 

6 (B) in section 16(14) (15 U.S.C. 

7 78lll(14)), by striking ‘‘section 3(a)(55)(A)’’ 

8 and inserting ‘‘section 3(a)(55)’’. 

9 (c) CLARIFICATION OF THE STATUS OF EVENT CON10 TRACTS.— 

11 (1) AMENDMENTS TO THE SECURITIES EX12 CHANGE ACT OF 1934.—Section (3)(a)(10) of the Se13 curities Exchange Act of 1934 (15 U.S.C. 

14 78c(a)(10) is amended— 

15 (A) by striking ‘‘term ‘security’ means any 

16 note’’ and inserting the following: ‘‘term ‘secu17 rity’— 

18 ‘‘(A) means— 

19 ‘‘(i) any note’’; 

20 (B) by striking ‘‘or any certificate’’ and in21 serting the following: ‘‘; or 

22 ‘‘(ii) any certificate’’; and 

23 (C) by striking ‘‘any of the foregoing, but 

24 shall not’’ and inserting the following: ‘‘any se25 curity described in clause (i); or 


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•S 1691 IS

1 ‘‘(iii) any agreement, contract, or 

2 transaction that is associated with a finan3 cial, economic, or commercial occurrence, 

4 extent of an occurrence, contingency, or 

5 consequence that is related to or based on 

6 a security, an interest in a security, an 

7 issuer of a security, or group or index of 

8 securities, or interests in securities or 

9 issuers of securities, or based on the value 

10 of any of the foregoing or any security de11 scribed in clause (i) or (ii); and 

12 ‘‘(B) does not’’. 

13 (2) AMENDMENTS TO THE SECURITIES ACT OF

14 1933.—Section (2)(a)(1) of the Securities Act of 

15 1933 (15 U.S.C. 77b(a)(1)) is amended— 

16 (A) by striking ‘‘means any note’’ and in17 serting the following: ‘‘means— 

18 ‘‘(A) any note’’; 

19 (B) by striking ‘‘, or any certificate’’ and 

20 inserting the following: ‘‘; or 

21 ‘‘(B) any certificate’’; and 

22 (C) by striking ‘‘any of the foregoing.’’ and 

23 inserting the following: ‘‘any security described 

24 in subparagraph (A); or 


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•S 1691 IS

1 ‘‘(C) any agreement, contract, or trans2 action that is associated with a financial, eco3 nomic, or commercial occurrence, extent of an 

4 occurrence, contingency, or consequence that is 

5 related to or based on a security, an interest in 

6 a security, an issuer of a security, or group or 

7 index of securities, or interests in securities or 

8 issuers of securities, or based on the value of 

9 any of the foregoing or any security described 

10 in subparagraph (A) or (B).’’. 

11 SEC. 103. REQUIRED CLEARING OF STANDARDIZED DE12 RIVATIVES THROUGH CENTRAL COUNTER13 PARTIES AND THE USE OF TRADE REPOSI14 TORIES. 

15 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

16 et seq.) is amended by inserting after section 17B (15 

17 U.S.C. 78q–2) the following new section: 

18 ‘‘SEC. 17C. USE OF CLEARING AGENCIES AND TRADE RE19 POSITORIES FOR DERIVATIVES TRANS20 ACTIONS. 

21 ‘‘(a) FINDINGS.—Congress finds that— 

22 ‘‘(1) the proliferation of over-the-counter secu23 rity-based swaps poses unacceptable risks to the fi24 nancial system; 


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•S 1691 IS

1 ‘‘(2) clearing standardized security-based swaps 

2 through well-regulated central counterparties would 

3 reduce systemic risk in the financial system; 

4 ‘‘(3) the markets for standardized security5 based swaps suffer from a lack of reliable and accu6 rate transaction information that is available to the 

7 public, investors, and regulators; and 

8 ‘‘(4) weaknesses in the regulation of markets 

9 for standardized security-based swaps have detracted 

10 from the efficiency and transparency of trading in 

11 such markets and hampered the surveillance and 

12 oversight of such markets. 

13 ‘‘(b) PURPOSES.—The purposes of this section are— 

14 ‘‘(1) to establish well-regulated markets for 

15 standardized security-based swaps to promote effi16 ciency and transparency of trading and enhance the 

17 surveillance and oversight of such markets; and 

18 ‘‘(2) to promote the public interest, the protec19 tion of investors, and the maintenance of fair and 

20 orderly markets to assure— 

21 ‘‘(A) the prompt and accurate clearance 

22 and settlement of transactions in standardized 

23 security-based swaps; 


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•S 1691 IS

1 ‘‘(B) the prompt and accurate reporting of 

2 transactions in security-based swaps to a trade 

3 repository or a registered clearing agency; 

4 ‘‘(C) the establishment of linked or coordi5 nated facilities for clearance and settlement of 

6 transactions in securities, securities options, 

7 contracts of sale for future delivery and options 

8 thereon, commodity options, and derivatives; 

9 ‘‘(D) availability to the public, investors, 

10 and regulators of reliable and accurate 

11 quotation and transaction information in secu12 rity-based swaps; 

13 ‘‘(E) economically efficient execution of 

14 transactions in security-based swaps; and 

15 ‘‘(F) fair competition among markets in 

16 the trading of security-based swaps. 

17 ‘‘(c) USE OF DERIVATIVES CLEARING AGENCIES.— 

18 ‘‘(1) IN GENERAL.—Any person that is a party 

19 to a security-based swap (or security derivative, as 

20 the Commission determines by rule, regulation, or 

21 order) that the Commission determines is ‘standard22 ized’ shall submit such instrument for clearing to a 

23 registered clearing agency within the period specified 

24 by rule of the Commission. 

25 ‘‘(2) DEFINITION OF ‘STANDARDIZED’.— 


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•S 1691 IS

1 ‘‘(A) IN GENERAL.—The Commission 

2 shall, by rule, define the term ‘standardized’ for 

3 purposes of this section. 

4 ‘‘(B) FACTORS.—In defining the term 

5 ‘standardized’, the Commission shall— 

6 ‘‘(i) be consistent with the public in7 terest, the protection of investors, the safe8 guarding of securities and funds, the main9 tenance of fair competition among market 

10 participants and among clearing agencies, 

11 and the purposes of this section; 

12 ‘‘(ii)(I) consult with, and consider the 

13 views of, the Commodity Futures Trading 

14 Commission and the Board of Governors of 

15 the Federal Reserve System; and 

16 ‘‘(II) seek to maintain comparability, 

17 to the maximum extent practicable, with 

18 the definition of the Commodity Futures 

19 Trading Commission of the term ‘stand20 ardized’ for purposes of section 4r of the 

21 Commodity Exchange Act; and 

22 ‘‘(iii) to the extent applicable to a par23 ticular security-based swap or security de24 rivative or class of security-based swaps or 

25 security derivatives, consider— 


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•S 1691 IS

1 ‘‘(I) whether a clearing agency is 

2 prepared to clear the security-based 

3 swap or security derivative, and such 

4 clearing agency has in place effective 

5 risk management systems; 

6 ‘‘(II) the availability or ability to 

7 facilitate standard documentation of 

8 terms of the security-based swap or 

9 security derivative; 

10 ‘‘(III) the liquidity of the secu11 rity-based swap or security derivative 

12 and its underlying security, security of 

13 a reference entity, or group or index 

14 thereof; 

15 ‘‘(IV) the ability to value the se16 curity-based swap or security deriva17 tive, underlying security, or security 

18 of a reference entity, or group or 

19 index thereof consistently with an ac20 cepted pricing methodology, including 

21 the availability of intraday prices; and 

22 ‘‘(V) such other factors as are 

23 consistent with the purposes of this 

24 section. 

25 ‘‘(3) EXEMPTION AUTHORITY.— 


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•S 1691 IS

1 ‘‘(A) IN GENERAL.—The Commission by 

2 rule or order, as the Commission deems nec3 essary or appropriate in the public interest or 

4 for the protection of investors, may condi5 tionally or unconditionally exempt from the re6 quirements of this subsection and the rules 

7 issued under this subsection, any person, trans8 action, or security. 

9 ‘‘(B) PRIOR CONSULTATION WITH THE

10 COMMODITY FUTURES TRADING COMMISSION

11 AND THE BOARD OF GOVERNORS OF THE FED12 ERAL RESERVE SYSTEM.— 

13 ‘‘(i) CONSULTATION.—Before acting 

14 by rule or order to exempt any person, 

15 transaction, or security from the require16 ments of this subsection or the rules issued 

17 under this subsection, the Commission 

18 shall consult with, and consider the views 

19 of, the Commodity Futures Trading Com20 mission and the Board of Governors of the 

21 Federal Reserve System concerning wheth22 er such exemption is necessary and appro23 priate for the reduction of risk and in the 

24 public interest. 


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•S 1691 IS

1 ‘‘(ii) PROHIBITION ON ISSUANCE.— 

2 Not later than 45 days prior to issuing any 

3 exemption under this subparagraph, the 

4 Commission shall send a notice to the 

5 Commodity Futures Trading Commission 

6 and the Board of Governors describing 

7 such exemption. If either the Commodity 

8 Futures Trading Commission or the Board 

9 of Governors issues a finding under clause 

10 (i) that such an exemption does not meet 

11 the standard described in clause (i), the 

12 Commission may not issue such exemption. 

13 ‘‘(iii) DEADLINE.—Any finding by the 

14 Commodity Futures Trading Commission 

15 or the Board of Governors of the Federal 

16 Reserve System shall be made and pro17 vided in writing to the Commission not 

18 later than 30 days after the date of receipt 

19 of notice of a proposed exemption by the 

20 Commission. 

21 ‘‘(iv) NONDELEGATION.—Action by 

22 the Commodity Futures Trading Commis23 sion or the Board of Governors under this 

24 subparagraph may not be delegated. 

25 ‘‘(d) TRADE REPOSITORIES.— 


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•S 1691 IS

1 ‘‘(1) USE OF TRADE REPOSITORIES.— 

2 ‘‘(A) IN GENERAL.—Any person that en3 ters into or effects a transaction in a security4 based swap (or security derivative, as the Com5 mission determines by rule, regulation, or 

6 order) shall submit such transaction for clear7 ing to a registered clearing agency or report 

8 such transaction to a trade repository registered 

9 in accordance with this subsection within the 

10 period specified by rule of the Commission. 

11 ‘‘(B) REQUIRED REPORTING AUTHOR12 IZED.—The Commission may, by rule, require 

13 any person to report to any registered clearing 

14 agency and registered trade repository such 

15 transaction information as the Commission 

16 deems necessary or appropriate, to permit such 

17 clearing agency or trade repository to meet the 

18 purposes of this section. 

19 ‘‘(C) EXEMPTION AUTHORITY.—The Com20 mission by rule, regulation, or order, as the 

21 Commission deems consistent with the public 

22 interest or the protection of investors, may con23 ditionally or unconditionally exempt from the 

24 requirements of this paragraph and the rules 

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1 action, or security that enters into or effects a 

2 transaction in a security or class of securities. 

3 ‘‘(2) REGISTRATION.—A trade repository may 

4 register for purposes of this subsection by filing with 

5 the Commission an application in such form as the 

6 Commission, by rule, may prescribe, containing the 

7 rules of the trade repository and such other informa8 tion and documentation as the Commission, by rule, 

9 may prescribe as necessary or appropriate in the 

10 public interest, for the protection of investors, or for 

11 the prompt and accurate collection, calculation, proc12 essing, and preparation of information regarding se13 curity-based swaps or security derivatives. 

14 ‘‘(3) COMMISSION PROCEDURES FOR APPLICA15 TIONS.— 

16 ‘‘(A) NOTICE.—On the filing of an applica17 tion for registration pursuant to paragraph (2), 

18 the Commission shall publish notice of the filing 

19 and afford interested persons an opportunity to 

20 submit written data, views, and arguments con21 cerning such application. 

22 ‘‘(B) ACTIONS.—Not later than 90 days 

23 after the date of publication of a notice under 

24 subparagraph (A) (or within such longer period 


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1 as to which the applicant consents), the Com2 mission shall— 

3 ‘‘(i) by order, grant such registration; 

4 or 

5 ‘‘(ii) institute proceedings to deter6 mine whether registration should be de7 nied. 

8 ‘‘(C) PROCEDURE FOR DENIALS.— 

9 ‘‘(i) IN GENERAL.—Proceedings insti10 tuted under subparagraph (B)(ii) shall— 

11 ‘‘(I) include notice of the grounds 

12 for denial under consideration and 

13 provide an opportunity for a hearing; 

14 and 

15 ‘‘(II) be concluded not later than 

16 180 days after the date of publication 

17 of notice of the filing of the applica18 tion for registration under subpara19 graph (A). 

20 ‘‘(ii) ACTIONS.—At the conclusion of 

21 such proceedings, the Commission, by 

22 order, shall grant or deny the subject reg23 istration. 


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1 ‘‘(iii) EXTENSIONS.—The Commission 

2 may extend the time for conclusion of the 

3 proceedings under subparagraph (C) for— 

4 ‘‘(I) not longer than an addi5 tional 60 days, if the Commission 

6 finds good cause for such extension 

7 and publishes its reasons for so find8 ing; or 

9 ‘‘(II) for such longer period as to 

10 which the applicant consents. 

11 ‘‘(D) STANDARDS FOR GRANTING REG12 ISTRATION.—The Commission shall grant the 

13 registration of a trade repository for purposes 

14 of this section if the Commission finds that the 

15 trade repository is so organized, and has the ca16 pacity to be able— 

17 ‘‘(i) to assure the prompt, accurate, 

18 and reliable performance of its functions as 

19 a trade repository; 

20 ‘‘(ii) to comply with the provisions of 

21 this title (including rules and regulations 

22 issued under this title); and 

23 ‘‘(iii) to carry out the functions of a 

24 trade repository in a manner consistent 

25 with the purposes of this section. 


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1 ‘‘(E) STANDARDS FOR DENIAL.—The 

2 Commission shall deny the registration of a 

3 trade repository if the Commission does not 

4 make the findings described in subparagraph 

5 (D). 

6 ‘‘(4) WITHDRAWAL OF REGISTRATION.— 

7 ‘‘(A) IN GENERAL.—A registered trade re8 pository may, upon such terms and conditions 

9 as the Commission deems necessary or appro10 priate in the public interest or for the protec11 tion of investors, withdraw from registration 

12 under this section by filing a written notice of 

13 withdrawal with the Commission. 

14 ‘‘(B) CANCELLATION.—If the Commission 

15 finds that any trade repository is no longer in 

16 existence or has ceased to do business in the ca17 pacity specified in its application for registra18 tion under this section, the Commission, by 

19 order, shall cancel the registration. 

20 ‘‘(5) ACCESS TO TRADE REPOSITORY SERV21 ICES.— 

22 ‘‘(A) NOTICE OF PROHIBITION OR LIMITA23 TION.— 

24 ‘‘(i) IN GENERAL.—If any registered 

25 trade repository prohibits or limits any 


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1 person in respect of access to services of2 fered, directly or indirectly, by the trade 

3 repository, the registered trade repository 

4 shall promptly file notice of the prohibition 

5 with the Commission, in such form and 

6 containing such information as the Com7 mission, by rule, may prescribe as nec8 essary or appropriate in the public interest 

9 or for the protection of investors. 

10 ‘‘(ii) REVIEW BY COMMISSION.—Any 

11 prohibition or limitation on access to serv12 ices with respect to which a registered 

13 trade repository is required by this sub14 paragraph to file notice shall be subject to 

15 review by the Commission, on its own mo16 tion or upon application by any person ag17 grieved thereby, filed not later than 30 

18 days after such notice has been filed with 

19 the Commission and received by such ag20 grieved person, or within such longer pe21 riod as the Commission may determine. 

22 ‘‘(iii) STAYS.—Application to the 

23 Commission for review, or the institution 

24 of review by the Commission on its own 

25 motion, shall not operate as a stay of a 


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1 prohibition or limitation described in clause 

2 (i), unless the Commission otherwise or3 ders, summarily or after notice and oppor4 tunity for hearing on the question of a stay 

5 (which hearing may consist solely of the 

6 submission of affidavits or presentation of 

7 oral arguments). 

8 ‘‘(iv) EXPEDITED PROCEDURE.—The 

9 Commission shall establish for appropriate 

10 cases an expedited procedure for consider11 ation and determination of the question of 

12 a stay. 

13 ‘‘(B) STANDARDS OF REVIEW.—In any 

14 proceeding to review the prohibition or limita15 tion of any person in respect of access to serv16 ices offered by a registered trade repository— 

17 ‘‘(i) if the Commission finds after no18 tice and opportunity for hearing, that such 

19 prohibition or limitation is consistent with 

20 the provisions of this title and the rules 

21 and regulations thereunder, and that such 

22 person has not been discriminated against 

23 unfairly, the Commission, by order, shall 

24 dismiss the proceeding; and 


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1 ‘‘(ii) if the Commission does not make 

2 any such finding, or if it finds that such 

3 prohibition or limitation imposes any bur4 den on competition that is not necessary or 

5 appropriate in furtherance of the purposes 

6 of this title, the Commission, by order, 

7 shall set aside the prohibition or limitation 

8 and require the registered trade repository 

9 to permit such person access to the serv10 ices offered by the registered trade reposi11 tory to which the prohibition or limitation 

12 applied. 

13 ‘‘(6) ADMINISTRATIVE PROCEEDING AUTHOR14 ITY.—If the Commission finds, on the record after 

15 notice and opportunity for hearing, that such action 

16 is necessary or appropriate in the public interest, for 

17 the protection of investors, or otherwise in further18 ance of the purposes of this title and that a reg19 istered trade repository has violated or is unable to 

20 comply with any provision of this title or the rules 

21 or regulations thereunder, the Commission, by order, 

22 may— 

23 ‘‘(A) censure or place limitations upon the 

24 activities, functions, or operations of any reg25 istered trade repository; or 


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1 ‘‘(B) suspend for a period of not longer 

2 than 12 months or revoke the registration of 

3 any such trade repository. 

4 ‘‘(7) RULEMAKING AUTHORITY.—No registered 

5 trade repository shall, directly or indirectly, engage 

6 in any activity as a trade repository in contravention 

7 of such rules and regulations as the Commission 

8 may prescribe as appropriate in the public interest, 

9 for the protection of investors, or otherwise in fur10 therance of the purposes of this title, including to 

11 assure that all persons may obtain on terms that are 

12 fair and reasonable and not unreasonably discrimi13 natory such transaction and position information for 

14 security-based swaps and security derivatives as is 

15 disseminated by any clearing agency or trade reposi16 tory. 

17 ‘‘(8) CONSULTATION.— 

18 ‘‘(A) IN GENERAL.—Prior to adopting any 

19 rules applicable to trade repositories pursuant 

20 to section 17(a), the Commission shall consult 

21 with, and shall consider the views of, the Com22 modity Futures Trading Commission. 

23 ‘‘(B) COMPARABILITY.—The Commission 

24 and the Commodity Futures Trading Commis25 sion shall seek to maintain comparability, to the 


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1 maximum extent practicable, of their respective 

2 recordkeeping and reporting requirements for 

3 trade repositories. 

4 ‘‘(e) TIMING.—The Commission may, by rule, specify 

5 the date by which persons are required— 

6 ‘‘(1) to submit transactions in standardized se7 curity-based swaps and security derivatives for clear8 ing to a clearing agency pursuant to subsection (c); 

9 and 

10 ‘‘(2) to submit transactions in security-based 

11 swaps and security derivatives for clearing to a 

12 clearing agency or report transactions in such in13 struments to a registered trade repository pursuant 

14 to subsection (d). 

15 ‘‘(f) COLLECTION, CONSOLIDATION, AND DISSEMINA16 TION OF INFORMATION ON TRANSACTIONS AND POSI17 TIONS IN SECURITY-BASED SWAPS AND SECURITY DE18 RIVATIVES.— 

19 ‘‘(1) COMMISSION ACTION REQUIRED.—The 

20 Commission shall, consistent with the public inter21 est, the protection of investors, the maintenance of 

22 fair and orderly markets, and the purposes of this 

23 section, use the authority of the Commission under 

24 this title to facilitate— 


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1 ‘‘(A) the collection, consolidation, and dis2 semination of information on transactions and 

3 positions in security-based swaps and security 

4 derivatives; and 

5 ‘‘(B) the establishment of coordinated fa6 cilities for the consolidation of information on 

7 transactions and positions in security-based 

8 swaps and security derivatives. 

9 ‘‘(2) ACTIONS REQUIRED OF REGISTERED ENTI10 TIES.—The Commission, by rule, regulation, or 

11 order is authorized to require each clearing agency 

12 that clears or proposes to clear transactions in secu13 rity-based swaps and security derivatives, and each 

14 trade repository registered or applying to become 

15 registered under this section, in such form and fre16 quency as the Commission shall prescribe as nec17 essary or appropriate in the public interest, for the 

18 protection of investors, or otherwise in furtherance 

19 of the purposes of this title— 

20 ‘‘(A) to disseminate certain transaction or 

21 position information in security-based swaps 

22 and security derivatives; and 

23 ‘‘(B) to assure the prompt, accurate, reli24 able, and fair collection, processing, distribu25 tion, and publication of information with reVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 spect to transactions and positions, as appro2 priate, cleared by such clearing agency or re3 ported to such registered trade repository.’’. 

4 SEC. 104. PRUDENTIAL SUPERVISION AND REGULATION OF 

5 SIGNIFICANT SECURITY-BASED DERIVATIVES 

6 MARKET PARTICIPANTS AND INCENTIVES 

7 FOR TRADING ON REGULATED EXCHANGES. 

8 (a) REGULATION OF SIGNIFICANT SECURITY-BASED

9 DERIVATIVES MARKET PARTICIPANTS.—The Securities 

10 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended 

11 by inserting after section 15E (15 U.S.C. 78o–7) the fol12 lowing: 

13 ‘‘SEC. 15F. REGULATION OF SIGNIFICANT SECURITY-BASED 

14 DERIVATIVES MARKET PARTICIPANTS. 

15 ‘‘(a) REGISTRATION BY SIGNIFICANT SECURITY16 BASED DERIVATIVES MARKET PARTICIPANTS.—It shall 

17 be unlawful for any significant security-based derivatives 

18 market participant to make use of the mails or any means 

19 or instrumentality of interstate commerce to effect any 

20 transactions in, or to induce or attempt to induce the pur21 chase or sale of, any security-based swap (or security de22 rivative, as the Commission determines by rule, regulation, 

23 or order), unless such significant security-based deriva24 tives market participant has registered in accordance with 

25 subsection (b). 


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1 ‘‘(b) MANNER OF REGISTRATION OF SIGNIFICANT

2 SECURITY-BASED DERIVATIVES MARKET PARTICI3 PANTS.— 

4 ‘‘(1) IN GENERAL.—A significant security-based 

5 derivatives market participant may register for pur6 poses of this section by filing with the Commission 

7 an application for registration, in such form and 

8 containing such information and documentation con9 cerning such significant security-based derivatives 

10 market participant and any persons associated with 

11 such significant security-based derivatives market 

12 participant as the Commission, by rule, regulation, 

13 or order may prescribe as necessary or appropriate 

14 in the public interest or for the protection of inves15 tors. 

16 ‘‘(2) COMMISSION ACTION.— 

17 ‘‘(A) TIMING.—Not later than 45 days 

18 after the date of filing of an application under 

19 paragraph (1) (or within such longer period as 

20 to which the applicant consents), the Commis21 sion shall— 

22 ‘‘(i) by order, grant registration; or 

23 ‘‘(ii) institute proceedings to deter24 mine whether registration should be de25 nied. 


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1 ‘‘(B) COMMISSION PROCEEDINGS.—Pro2 ceedings described in subparagraph (A)(ii) 

3 shall— 

4 ‘‘(i) include notice of the grounds for 

5 denial under consideration and opportunity 

6 for hearing; and 

7 ‘‘(ii) be concluded within 120 days of 

8 the date of the filing of the application for 

9 registration. 

10 ‘‘(C) GRANT OR DENIAL.—At the conclu11 sion of proceedings under this paragraph, the 

12 Commission, by order, shall grant or deny any 

13 application for registration. 

14 ‘‘(D) EXTENSION AUTHORIZED.—The 

15 Commission may extend the time for the con16 clusion of proceedings under this paragraph for 

17 not longer than an additional 90 days if the 

18 Commission finds good cause for such extension 

19 and publishes its reasons for so finding, or for 

20 such longer period as to which the applicant 

21 consents. 

22 ‘‘(E) CONDITIONS OF GRANT OR DENIAL

23 OF APPLICATIONS.—The Commission shall— 

24 ‘‘(i) grant an application for registra25 tion of a significant security-based derivaVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00061 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 tives market participant, if the Commission 

2 finds that the requirements of this section 

3 are satisfied; and 

4 ‘‘(ii) deny such registration, if the 

5 Commission does not make a finding de6 scribed in clause (i), or finds that if the 

7 applicant were so registered, its registra8 tion would be subject to suspension or rev9 ocation under subsection (e). 

10 ‘‘(3) WITHDRAWAL AUTHORIZED.—Any person 

11 that has filed an application pursuant to paragraph 

12 (1) may, upon such terms and conditions as the 

13 Commission deems necessary or appropriate in the 

14 public interest, for the protection of investors, or 

15 otherwise in furtherance of the purposes of this title, 

16 withdraw such application by filing a written with17 drawal with the Commission. 

18 ‘‘(c) BUSINESS CONDUCT REQUIREMENTS.— 

19 ‘‘(1) PROHIBITION.—It shall be unlawful for 

20 any significant security-based derivatives market 

21 participant and such other persons as the Commis22 sion may determine, by rule, regulation, or order, to 

23 make use of the mails or any means or instrumen24 tality of interstate commerce to effect any trans25 action in, or to induce or attempt to induce the purVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00062 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 chase or sale of, any security-based swap (or secu2 rity derivative, as the Commission determines by 

3 rule, regulation, or order), unless such person com4 plies with such business conduct requirements as the 

5 Commission and the Commodity Futures Trading 

6 Commission, in consultation with the appropriate 

7 regulatory authorities, may jointly prescribe, by rule, 

8 regulation, or order, as necessary or appropriate in 

9 the public interest, for the protection of investors, 

10 and otherwise in furtherance of the purposes of this 

11 title. 

12 ‘‘(2) CONTENT.—Business conduct require13 ments under paragraph (1) shall— 

14 ‘‘(A) establish the standard of care re15 quired for a significant security-based deriva16 tives market participant and such other persons 

17 to verify that any counterparty meets the eligi18 bility standards for an eligible contract partici19 pant or qualified institutional buyer; 

20 ‘‘(B) require disclosure by the significant 

21 security-based derivatives market participant 

22 and such other persons to any counterparty to 

23 the transaction of— 

24 ‘‘(i) material product-specific informa25 tion about the risks and characteristics of 


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1 the security-based swap (or security deriva2 tive, as the Commission determines by 

3 rule, regulation, or order); 

4 ‘‘(ii) the source and amount of any 

5 fees or other material remuneration that 

6 the significant security-based derivatives 

7 market participant and such other persons 

8 would directly or indirectly expect to re9 ceive in connection with the security-based 

10 swap (or security derivative, as the Com11 mission determines by rule, regulation, or 

12 order); and 

13 ‘‘(iii) any other material incentives or 

14 conflicts of interest that the significant se15 curity-based derivatives market participant 

16 and such other persons may have in con17 nection with the security-based swap (or 

18 security derivative, as the Commission de19 termines by rule, regulation, or order); 

20 ‘‘(C) establish a minimum standard of con21 duct for a significant security-based derivatives 

22 market participant and such other persons with 

23 respect to any counterparty, other than a quali24 fied institutional buyer, for— 


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1 ‘‘(i) providing disclosure of the gen2 eral risks and characteristics of any secu3 rity-based swap (or security derivative, as 

4 the Commission determines by rule, regula5 tion, or order); 

6 ‘‘(ii) communicating in a fair and bal7 anced manner based on principles of fair 

8 dealing and good faith; 

9 ‘‘(iii) assessing the appropriateness of 

10 any security-based swap (or security deriv11 ative, as the Commission determines by 

12 rule, regulation, or order) for the 

13 counterparty, except that, if the 

14 counterparty is an eligible contract partici15 pant, the significant security-based deriva16 tives market participant may rely on a rep17 resentation described in clause (iv)(VI) 

18 that the transaction is appropriate for such 

19 counterparty; and 

20 ‘‘(iv) with respect to a counterparty 

21 that is an eligible contract participant 

22 within the meaning of subclause (I) or (II) 

23 of section 3(a)(67)(A)(vii), having a rea24 sonable basis to believe that the 


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1 counterparty has an independent rep2 resentative that— 

3 ‘‘(I) has sufficient knowledge to 

4 evaluate the transaction and risks; 

5 ‘‘(II) is not subject to a statutory 

6 disqualification; 

7 ‘‘(III) is independent of the sig8 nificant security-based derivatives 

9 market participant; 

10 ‘‘(IV) undertakes a duty to act in 

11 the best interests of the counterparty 

12 it represents; 

13 ‘‘(V) makes appropriate disclo14 sures; and 

15 ‘‘(VI) will provide written rep16 resentations to the eligible contract 

17 participant regarding fair pricing and 

18 the appropriateness of the trans19 action; 

20 ‘‘(D) require the availability of information 

21 about any security or the issuer of any security 

22 referenced in a security-based swap (or security 

23 derivative, as the Commission determines by 

24 rule, regulation, or order), or upon which such 

25 security-based swap (or security derivative, as 


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1 the Commission determines by rule, regulation, 

2 or order) is based; and 

3 ‘‘(E) establish such other standards and 

4 requirements as the Commission, acting jointly 

5 with the Commodity Futures Trading Commis6 sion and in consultation with the appropriate 

7 regulatory authorities, may determine are nec8 essary or appropriate in the public interest, for 

9 the protection of investors, or otherwise in fur10 therance of the purposes of this title. 

11 ‘‘(d) STATUTORY DISQUALIFICATION.—Except to the 

12 extent otherwise specifically provided by rule, regulation, 

13 or order of the Commission, it shall be unlawful for a sig14 nificant derivatives market participant to permit any asso15 ciated person of such significant derivatives market partic16 ipant who is subject to a statutory disqualification to ef17 fect or be involved in effecting transactions in security18 based swaps (or security derivatives, as the Commission 

19 determines by rule, regulation, or order) on behalf of such 

20 significant derivatives market participant, if such signifi21 cant derivatives market participant knew, or in the exer22 cise of reasonable care should have known, of such statu23 tory disqualification. 

24 ‘‘(e) ADMINISTRATIVE PROCEEDING AUTHORITY.— 


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1 ‘‘(1) IN GENERAL.—The Commission, by order, 

2 shall censure, place limitations on the activities, 

3 functions, or operations of, or reject the filing of any 

4 significant security-based derivatives market partici5 pant that has registered with the Commission pursu6 ant to subsection (b) if it finds, on the record after 

7 notice and opportunity for hearing, that such action 

8 is in the public interest and that such significant se9 curity-based derivatives market participant, or any 

10 person associated with such significant security11 based derivatives market participant effecting or in12 volved in effecting transactions in security-based 

13 swaps (or security derivatives, as the Commission 

14 determines by rule, regulation, or order) on behalf of 

15 such significant security-based derivatives market 

16 participant, whether prior or subsequent to becom17 ing so associated— 

18 ‘‘(A) has committed or omitted any act, or 

19 is subject to an order or finding, enumerated in 

20 subparagraph (A), (D), or (E) of section 

21 15(b)(4); 

22 ‘‘(B) has been convicted of any offense 

23 specified in subparagraph (B) of section 

24 15(b)(4) during the 10-year period preceding 


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1 the date of commencement of the proceedings 

2 under this paragraph; 

3 ‘‘(C) is enjoined from any action, conduct, 

4 or practice specified in section 15(b)(4)(C); 

5 ‘‘(D) is subject to an order or a final order 

6 specified in subparagraph (F) or (H), respec7 tively, of section 15(b)(4); or 

8 ‘‘(E) has been found by a foreign financial 

9 regulatory authority to have committed or omit10 ted any act, or violated any foreign statute or 

11 regulation, enumerated in section 15(b)(4)(G). 

12 ‘‘(2) ASSOCIATED PERSONS.—With respect to 

13 any person who is associated, who is seeking to be14 come associated, or at the time of the alleged mis15 conduct, who was associated or was seeking to be16 come associated, with a significant security-based 

17 derivatives market participant for the purpose of ef18 fecting or being involved in effecting any security19 based swaps (or security derivatives, as the Commis20 sion determines by rule, regulation, or order) on be21 half of such significant security-based derivatives 

22 market participant, the Commission, by order, shall 

23 censure, place limitations on the activities or func24 tions of such person, or suspend for a period of not 

25 longer than 12 months, or bar such person from 


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1 being associated with a significant security-based de2 rivatives market participant, if the Commission 

3 finds, on the record after notice and opportunity for 

4 a hearing, that such action is in the public interest, 

5 and that such person— 

6 ‘‘(A) has committed or omitted any act, or 

7 is subject to an order or finding, enumerated in 

8 subparagraph (A), (D), or (E) of section 

9 15(b)(4); 

10 ‘‘(B) has been convicted of any offense 

11 specified in section 15(b)(4)(B) during the 10- 

12 year period preceding the date of commence13 ment of the proceedings under this paragraph; 

14 ‘‘(C) is enjoined from any action, conduct, 

15 or practice specified in section 15(b)(4)(C); 

16 ‘‘(D) is subject to an order or a final order 

17 specified in subparagraph (F) or (H), respec18 tively, of section 15(b)(4); or 

19 ‘‘(E) has been found by a foreign financial 

20 regulatory authority to have committed or omit21 ted any act, or violated any foreign statute or 

22 regulation, enumerated in section 15(b)(4)(G). 

23 ‘‘(3) ADDITIONAL PROHIBITIONS.—It shall be 

24 unlawful— 


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1 ‘‘(A) for any person as to whom an order 

2 under paragraph (2) is in effect, without the 

3 consent of the Commission, willfully to become, 

4 or to be, associated with a significant security5 based derivatives market participant in con6 travention of such order; or 

7 ‘‘(B) for any significant security-based de8 rivatives market participant to permit such a 

9 person, without the consent of the Commission, 

10 to become or remain, a person associated with 

11 the significant security-based derivatives market 

12 participant in contravention of an order under 

13 paragraph (2), if such significant security-based 

14 derivatives market participant knew, or in the 

15 exercise of reasonable care should have known, 

16 of the order. 

17 ‘‘(f) CAPITAL AND MARGIN REQUIREMENTS.— 

18 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

19 person to conduct business as a significant security20 based derivatives market participant, unless such 

21 person meets at all times such minimum capital and 

22 margin requirements as the appropriate regulatory 

23 authorities shall jointly prescribe, by rule or regula24 tion, as necessary or appropriate in the public inter25 est or for the protection of investors and consistent 


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1 with the purposes of this title to provide safeguards 

2 with respect to the financial responsibility and re3 lated practices of the significant security-based de4 rivatives market participant. 

5 ‘‘(2) CAPITAL CONSIDERATIONS.—In setting 

6 capital requirements for significant security-based 

7 derivatives market participants, the appropriate reg8 ulatory authorities shall consider, among other 

9 things— 

10 ‘‘(A) the liquidity of each security-based 

11 swap (or security derivative, as the Commission 

12 determines by rule, regulation, or order), in13 cluding whether such instrument is traded on a 

14 liquid market, and whether it is centrally 

15 cleared; and 

16 ‘‘(B) whether the security-based swap (or 

17 security derivative, as the Commission deter18 mines by rule, regulation, or order) is used to 

19 offset or hedge another instrument or asset 

20 owned by such significant security-based deriva21 tive market participant. 

22 ‘‘(3) MARGIN REQUIREMENTS.—The appro23 priate regulatory authorities shall jointly prescribe 

24 margin requirements, which may permit the use of 

25 non-cash collateral, that apply to security-based 


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1 swaps (or security derivatives, as the Commission 

2 determines by rule, regulation, or order) entered into 

3 by a significant security-based derivatives market 

4 participant, as the appropriate regulatory authorities 

5 jointly deem necessary or appropriate for the pur6 pose of, among other things— 

7 ‘‘(A) preserving the financial integrity of 

8 markets trading security-based swaps (or secu9 rity derivatives); and 

10 ‘‘(B) preventing systemic risk. 

11 ‘‘(4) COMMISSION RULES.—Nothing in this sec12 tion prevents the Commission from prescribing cap13 ital and margin requirements that are higher or 

14 more restrictive than the joint rules adopted under 

15 this subsection for significant security-based deriva16 tives market participants for which it is the appro17 priate regulatory authority. 

18 ‘‘(g) APPROPRIATE REGULATORY AUTHORITY DE19 FINED.—For purposes of this section, the term ‘appro20 priate regulatory authority’ means— 

21 ‘‘(1) the appropriate Federal banking agency 

22 (as defined in section 3 of the Federal Deposit In23 surance Act (12 U.S.C. 1813)) with respect to a sig24 nificant security-based derivatives market partici25 pant that is an insured depository institution (as deVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00073 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 fined in section 3 of the Federal Deposit Insurance 

2 Act (12 U.S.C. 1813)), other than an affiliate of an 

3 insured depository institution; 

4 ‘‘(2) the Federal Housing Finance Agency, with 

5 respect to a significant security-based derivatives 

6 market participant that is a regulated entity (as de7 fined in section 1301 of the Federal Housing Enter8 prises Financial Safety and Soundness Act of 1992 

9 (12 U.S.C. 4502)); 

10 ‘‘(3) the Commodity Futures Trading Commis11 sion, with respect to a significant security-based de12 rivatives market participant that is— 

13 ‘‘(A) a futures commission merchant or an 

14 introducing broker (as defined in paragraphs 

15 (20) and (23) of section 1a of the Commodity 

16 Exchange Act, respectively), other than a 

17 broker or dealer registered pursuant to section 

18 15(b) of this title (other than paragraph (11) 

19 thereof) or an affiliate of an insured depository 

20 institution; or 

21 ‘‘(B) a commodity pool operator or com22 modity trading advisor (as defined in para23 graphs (5) and (6) of section 1a of the Com24 modity Exchange Act, respectively), other than 


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1 an affiliate of an insured depository institution; 

2 and 

3 ‘‘(4) the Commission, with respect to any other 

4 significant security-based derivatives market partici5 pant for which there is not another appropriate reg6 ulatory authority otherwise specified in this sub7 section. 

8 ‘‘(h) ENFORCEMENT AUTHORITY.—Each appropriate 

9 regulatory authority shall have sole authority to enforce 

10 compliance with the rules adopted under subsection (f) in 

11 the case of each significant security-based derivatives mar12 ket participant for which it is the appropriate regulatory 

13 authority, as defined in subsection (g).’’. 

14 (b) EXEMPTION FROM BROKER OR DEALER REG15 ISTRATION.—Section 15(b) of the Securities Exchange Act 

16 of 1934 (15 U.S.C. 78o(b)) is amended by adding at the 

17 end the following: 

18 ‘‘(13) EXEMPTION FOR SIGNIFICANT SECURITY19 BASED DERIVATIVES MARKET PARTICIPANTS.—A 

20 person shall be exempt from the registration require21 ments of this section, to the extent that such person 

22 engages in transactions in security-based swaps, if 

23 such person would otherwise be required to register 

24 under this section only because such person effects 

25 transactions in security-based swaps with eligible 


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1 contract participants and is a significant security2 based derivatives market participant that has reg3 istered in accordance with section 15F(b).’’. 

4 SEC. 105. RECORDKEEPING AND REPORTING REQUIRE5 MENTS FOR DERIVATIVES MARKET PARTICI6 PANTS. 

7 (a) RECORDKEEPING AND EXAMINATION REQUIRE8 MENTS FOR SECURITY-BASED DERIVATIVE MARKET PAR9 TICIPANTS.—Section 17 of the Securities Exchange Act 

10 of 1934 (15 U.S.C. 78q) is amended by adding at the end 

11 the following: 

12 ‘‘(l) RECORDKEEPING BY MARKET PARTICIPANTS IN

13 SECURITY-BASED SWAPS OR SECURITY DERIVATIVES; 

14 EXAMINATIONS.— 

15 ‘‘(1) RECORDKEEPING.— 

16 ‘‘(A) IN GENERAL.—Effective not later 

17 than 180 days after the date of enactment of 

18 this subsection, the Commission shall, by rule, 

19 regulation, or order, require each significant se20 curity-based derivatives market participant, and 

21 such other persons as the Commission, by rule, 

22 regulation, or order, determines, to create, keep 

23 current, and maintain for prescribed periods 

24 such records, furnish such copies thereof (and 

25 make and disseminate such reports) relating to 


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1 security-based swaps (or security derivatives, as 

2 the Commission determines by rule, regulation, 

3 or order) to the Commission, as necessary or 

4 appropriate in the public interest, for the pro5 tection of investors, or otherwise in furtherance 

6 of the purposes of this title. 

7 ‘‘(B) MINIMUM REQUIREMENTS.—At a 

8 minimum, the actions of the Commission under 

9 subparagraph (A) shall require, as applicable, 

10 the creation and maintenance of client informa11 tion records, agreements, client ledger informa12 tion, trade blotters, memoranda of agreements 

13 to enter into confirmations, position records, 

14 and communications relating to transactions in 

15 security-based swaps (or security derivatives, as 

16 the Commission determines by rule, regulation, 

17 or order) and the reporting of transactions and 

18 position data. 

19 ‘‘(2) EXAMINATIONS.—All records of significant 

20 security-based derivatives market participants and 

21 such other persons described in paragraph (1) are 

22 subject at any time, or from time to time, to such 

23 reasonable periodic, special, or other examinations 

24 by representatives of the Commission, as the Com25 mission deems necessary or appropriate in the public 


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1 interest, for the protection of investors, or otherwise 

2 in furtherance of the purposes of this title.’’. 

3 (b) REPORTING BY SIGNIFICANT SECURITY-BASED

4 DERIVATIVES MARKET PARTICIPANTS.—Section 13 of the 

5 Securities Exchange Act of 1934 (15 U.S.C. 78m) is 

6 amended by adding at the end the following new sub7 section: 

8 ‘‘(m) REPORTING BY SIGNIFICANT SECURITY-BASED

9 DERIVATIVES MARKET PARTICIPANTS.— 

10 ‘‘(1) IN GENERAL.—For the purpose of moni11 toring the impact of transactions in security-based 

12 swaps and, as appropriate, security derivatives, and 

13 for the purpose of otherwise assisting the Commis14 sion in the enforcement of this title, any significant 

15 security-based derivatives market participant that 

16 purchases or sells security-based swaps (or security 

17 derivatives, as the Commission determines by rule, 

18 regulation, or order) shall report such information 

19 as the Commission may, by rule, regulation, or 

20 order, prescribe as necessary or appropriate in the 

21 public interest, for the protection of investors, or 

22 otherwise in furtherance of the purposes of this title. 

23 ‘‘(2) CONSIDERATIONS.—In exercising its au24 thority under this subsection, the Commission shall 

25 take into account— 


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1 ‘‘(A) existing reporting systems; 

2 ‘‘(B) the costs associated with reporting 

3 such information; and 

4 ‘‘(C) the relationship between the United 

5 States and international securities and deriva6 tives markets. 

7 ‘‘(3) LIMITATION ON DISCLOSURE.— 

8 ‘‘(A) IN GENERAL.—Notwithstanding any 

9 other provision of law, the Commission may not 

10 be compelled to disclose any information re11 quired by Commission rule, regulation, or order 

12 to be reported to the Commission under this 

13 subsection. 

14 ‘‘(B) EXCEPTION.—Nothing in this sub15 section shall— 

16 ‘‘(i) authorize the Commission to 

17 withhold information from Congress; or 

18 ‘‘(ii) prevent the Commission from 

19 complying with— 

20 ‘‘(I) a request for information 

21 from any other Federal department or 

22 agency requesting information for 

23 purposes within the scope of its juris24 diction; or 


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1 ‘‘(II) an order of a court of the 

2 United States in an action brought by 

3 the United States or the Commission. 

4 ‘‘(C) TREATMENT FOR TITLE 5 PUR5 POSES.—For purposes of section 552 of title 5, 

6 United States Code, this subsection shall be 

7 considered a statute described in subsection 

8 (b)(3)(B) of such section 552.’’. 

9 (c) BENEFICIAL OWNERSHIP REPORTING.—Section 

10 13 of the Securities Exchange Act of 1934 (15 U.S.C. 

11 78m) is amended— 

12 (1) in subsection (d)(1), by inserting after 

13 ‘‘Alaska Native Claims Settlement Act,’’ the fol14 lowing: ‘‘or otherwise becomes or is deemed to be15 come a beneficial owner of any of the foregoing, 

16 upon the purchase or sale of a security-based swap 

17 or security derivative that the Commission may de18 fine, by rule, and’’; 

19 (2) in subsection (g)(1), by inserting after 

20 ‘‘subsection (d)(1) of this section’’ the following: ‘‘or 

21 otherwise becomes or is deemed to become a bene22 ficial owner of any security of a class described in 

23 subsection (d)(1) upon the purchase or sale of a se24 curity-based swap or security derivative that the 

25 Commission may define, by rule’’; and 


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1 (3) in subsection (f)(1), by inserting after ‘‘sec2 tion (13)(d)(1) of this title’’ the following: ‘‘, or oth3 erwise becomes or is deemed to become a beneficial 

4 owner of any security of a class described in sub5 section (d)(1) upon the purchase or sale of a secu6 rity-based swap or security derivative that the Com7 mission may define, by rule,’’. 

8 (d) INSTITUTIONAL INVESTMENT MANAGER RE9 PORTING.—Section 13 of the Securities Exchange Act of 

10 1934 (15 U.S.C. 78m) is amended— 

11 (1) in subsection (f)(1), by inserting before 

12 ‘‘shall file reports’’ the following: ‘‘or security-based 

13 swaps or security derivatives that the Commission 

14 may define by rule, having such values as the Com15 mission may determine, by rule’’; and 

16 (2) in subsection (f)(3), by inserting before 

17 ‘‘updated as’’ the following: ‘‘and security-based 

18 swaps or security derivatives that the Commission 

19 may define, by rule’’. 

20 (e) REPORTING BY CORPORATE INSIDERS.—Section 

21 16(f) of the Securities Exchange Act of 1934 (15 U.S.C. 

22 78p(f)) is amended by inserting ‘‘or security-based swaps’’ 

23 after ‘‘security futures products’’. 

24 (f) RECORDKEEPING BY TRADE REPOSITORIES.— 

25 Section 17(a)(1) of the Securities Exchange Act of 1934 


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1 (15 U.S.C. 78q(a)(1)) is amended by inserting ‘‘registered 

2 trade repository,’’ after ‘‘registered securities information 

3 processor,’’. 

4 SEC. 106. PROHIBITION OF MARKET MANIPULATION, 

5 FRAUD, AND OTHER MARKET ABUSES. 

6 (a) RULEMAKING AUTHORITY TO PREVENT FRAUD, 

7 MANIPULATION, AND DECEPTIVE CONDUCT IN SECURITY8 BASED SWAPS AND SECURITY DERIVATIVES.—Section 9 

9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i), 

10 as amended by this Act, is amended by adding at the end 

11 the following: 

12 ‘‘(j) DECEPTIVE CONDUCT IN SECURITY-BASED

13 SWAPS AND SECURITY DERIVATIVES.— 

14 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

15 person, directly or indirectly, by the use of any 

16 means or instrumentality of interstate commerce or 

17 of the mails, or of any facility of any national securi18 ties exchange, to effect any transaction in, or to in19 duce or attempt to induce the purchase or sale of, 

20 any security-based swap or security derivative, in 

21 connection with which such person engages in any 

22 fraudulent, deceptive, or manipulative act or prac23 tice, makes any fictitious quotation, or engages in 

24 any transaction, practice, or course of business 

25 which operates as a fraud or deceit upon any person. 


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1 ‘‘(2) RULEMAKING REQUIRED.—The Commis2 sion shall, for purposes of this subsection, by rule, 

3 regulation, or order, define and prescribe means rea4 sonably designed to prevent transactions, acts, prac5 tices, and courses of business that are fraudulent, 

6 deceptive, or manipulative, and fictitious quotations. 

7 ‘‘(3) CONSULTATION.—In adopting rules under 

8 this subsection, the Commission shall consult with 

9 the Commodity Futures Trading Commission and 

10 seek to maintain comparability of such rules with 

11 similar rules of the Commodity Futures Trading 

12 Commission.’’. 

13 (b) ADDITIONS OF SECURITY-BASED SWAPS TO CER14 TAIN ANTIMANIPULATION PROVISIONS.—Section 9(b) of 

15 the Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) 

16 is amended by striking paragraphs (1) through (3) and 

17 inserting the following: 

18 ‘‘(1) any transaction in connection with any se19 curity whereby any party to such transaction ac20 quires— 

21 ‘‘(A) any put, call, straddle, or other op22 tion or privilege of buying the security from or 

23 selling the security to another without being 

24 bound to do so; 


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1 ‘‘(B) any security futures product on or re2 lated to the security; or 

3 ‘‘(C) any security-based swap involving the 

4 security or the issuer of the security; 

5 ‘‘(2) any transaction in connection with any se6 curity with relation to which that person has, di7 rectly or indirectly, any interest in any— 

8 ‘‘(A) put, call, straddle, option, or privilege 

9 described in paragraph (1); 

10 ‘‘(B) security futures product described in 

11 paragraph (1); or 

12 ‘‘(C) security-based swap described in 

13 paragraph (1); or 

14 ‘‘(3) any transaction in any security for the ac15 count of any person who that person has reason to 

16 believe has, and who actually has, directly or indi17 rectly, any interest in any— 

18 ‘‘(A) put, call, straddle, option, or privilege 

19 described in paragraph (1); 

20 ‘‘(B) security futures product with relation 

21 to such security described in paragraph (1); or 

22 ‘‘(C) any security-based swap involving 

23 such security or the issuer of such security.’’. 

24 (c) POSITION LIMITS AND POSITION ACCOUNT25 ABILITY FOR SECURITY-BASED SWAPS OR SECURITY DEVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00084 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 RIVATIVES.—The Securities Exchange Act of 1934 (15 

2 U.S.C. 78a et seq.) is amended by inserting after section 

3 10A the following new section: 

4 ‘‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNT5 ABILITY FOR SECURITY-BASED SWAPS OR SE6 CURITY DERIVATIVES. 

7 ‘‘(a) RULEMAKING AUTHORITY.— 

8 ‘‘(1) IN GENERAL.—As a means reasonably de9 signed to prevent fraud or manipulation, the Com10 mission, by rule, regulation, or order, as necessary 

11 or appropriate in the public interest, for the protec12 tion of investors, or otherwise in furtherance of the 

13 purposes of this title, may— 

14 ‘‘(A) prescribe requirements regarding the 

15 size of positions that may be held by or on be16 half of any person or persons in any security17 based swap (or security derivative, as the Com18 mission determines by rule, regulation, or 

19 order) and any security on which such security20 based swap (or security derivative) is based or 

21 referenced, or as to which the issuer of such se22 curity is referenced; and 

23 ‘‘(B) require any person that effects trans24 actions for his own account or the account of 

25 others in any security-based swap (or security 


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1 derivative, as the Commission determines by 

2 rule, regulation, or order) and any security on 

3 which such security-based swap (or security de4 rivative) is based or referenced, or the issuer of 

5 such security is referenced, to report such infor6 mation as the Commission may prescribe re7 garding any position or positions in security8 based swaps (or security derivatives) and any 

9 security on which such security-based swap (or 

10 security derivative) is based or referenced, or as 

11 to which the issuer of such security is ref12 erenced. 

13 ‘‘(2) EXEMPTIONS AUTHORIZED.—The Com14 mission, by rule, regulation, or order, may condi15 tionally or unconditionally exempt any person or 

16 class of persons, any security-based swap (or secu17 rity derivative) or class of security-based swaps (or 

18 security derivatives), or any transaction or class of 

19 transactions from any requirement that the Commis20 sion may establish under this subsection. 

21 ‘‘(b) SELF-REGULATORY ORGANIZATIONS.—As a 

22 means reasonably designed to prevent fraud or manipula23 tion, the Commission, by rule, regulation, or order, as nec24 essary or appropriate in the public interest, for the protec25 tion of investors, or otherwise in furtherance of the purVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00086 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 poses of this title, may direct a self-regulatory organiza2 tion— 

3 ‘‘(1) to adopt rules regarding the size of posi4 tions in any security-based swap (or security deriva5 tive) and any security on which such security-based 

6 swap (or security derivative) is based or referenced, 

7 or as to which the issuer of such security is ref8 erenced that may be held by— 

9 ‘‘(A) any member of such self-regulatory 

10 organization; or 

11 ‘‘(B) any person for whom a member of 

12 such self-regulatory organization effects trans13 actions in such security-based swap, security 

14 derivative, or other security; and 

15 ‘‘(2) to adopt rules reasonably designed to as16 sure compliance with requirements prescribed by the 

17 Commission under subsection (a).’’. 

18 (d) STATE GAMING AND BUCKET SHOP LAWS.—Sec19 tion 28(a) of the Securities Exchange Act of 1934 (15 

20 U.S.C. 78bb(a)) is amended to read as follows: 

21 ‘‘(a) STATE GAMING AND BUCKET SHOP LAWS.— 

22 ‘‘(1) IN GENERAL.—Except as provided in sub23 section (f), the rights and remedies provided by this 

24 title shall be in addition to any and all other rights 

25 and remedies that may exist at law or in equity, but 


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1 no person permitted to maintain a suit for damages 

2 under the provisions of this title shall recover, 

3 through satisfaction of judgment in 1 or more ac4 tions, a total amount in excess of the actual dam5 ages of that person due to the act that is the subject 

6 of the action. 

7 ‘‘(2) RULE OF CONSTRUCTION.—Except as oth8 erwise specifically provided in this title, nothing in 

9 this title shall affect the jurisdiction of the securities 

10 commission (or any agency or officer performing like 

11 functions) of any State over any security or any per12 son, to the extent that the exercise thereof does not 

13 conflict with the provisions of this title or the rules 

14 and regulations thereunder. 

15 ‘‘(3) GAMING LAWS.—No provision of State law 

16 which prohibits or regulates the making or pro17 moting of wagering or gaming contracts, or the op18 eration of ‘bucket shops’ or other similar or related 

19 activities, shall invalidate— 

20 ‘‘(A) any put, call, straddle, option, privi21 lege, or other security that is subject to regula22 tion under this title (except a security-based 

23 swap and any security that has a pari-mutual 

24 payout or otherwise is determined by the Com25 mission, acting by rule, regulation, or order, to 


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1 be appropriately subject to such laws), or apply 

2 to any activity which is incidental or related to 

3 the offer, purchase, sale, exercise, settlement, or 

4 closeout of any such security; 

5 ‘‘(B) any security-based swap between eli6 gible contract participants; or 

7 ‘‘(C) any security-based swap effected on a 

8 national securities exchange that is registered 

9 pursuant to section 6(b). 

10 ‘‘(4) SECURITY FUTURES PRODUCT.—No provi11 sion of State law regarding the offer, sale, or dis12 tribution of securities shall apply to any transaction 

13 in a security futures product, except that this para14 graph may not be construed as limiting any State 

15 antifraud law of general applicability.’’. 

16 SEC. 107. PROTECTIONS FOR MARKETING SECURITY-BASED 

17 SWAPS TO CERTAIN PERSONS. 

18 (a) TRADING IN SECURITY-BASED SWAPS.—Section 

19 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f), 

20 as amended by this Act, is amended by adding at the end 

21 the following: 

22 ‘‘(i) ELIGIBLE CONTRACT PARTICIPANTS.—It shall 

23 be unlawful for any person to effect a transaction in a 

24 security-based swap with or for a person that is not an 

25 eligible contract participant, unless such transaction is efVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00089 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 fected on a national securities exchange registered pursu2 ant to subsection (b).’’. 

3 (b) REGISTRATION OF SECURITY-BASED SWAPS.— 

4 Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) 

5 is amended by adding at the end the following: 

6 ‘‘(d) REGISTRATION OF SECURITY-BASED SWAPS.— 

7 Notwithstanding the provisions of section 3 or 4, unless 

8 a registration statement meeting the requirements of sec9 tion 10(a) is in effect with respect to a security-based 

10 swap, it shall be unlawful for any person, directly or indi11 rectly, to make use of any means or instruments of trans12 portation or communication in interstate commerce or of 

13 the mails to offer to sell, offer to buy, or purchase, sell, 

14 or buy a security-based swap to any person who is not 

15 an eligible contract participant, as defined in section 

16 3(a)(66) of the Securities Exchange Act of 1934.’’. 

17 SEC. 108. ENFORCEMENT. 

18 Section 21 of the Securities Exchange Act of 1934 

19 (15 U.S.C. 78u) is amended by adding at the end the fol20 lowing: 

21 ‘‘(j) ENFORCEMENT OF PROVISIONS APPLICABLE TO

22 DERIVATIVES MARKET PARTICIPANTS.— 

23 ‘‘(1) IN GENERAL.—In addition to enforcement 

24 by the Commission under the securities laws of com25 pliance with sections 6(l), 13(m), 15F(a), 15F(c), 


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1 15F(d), 17(l), 17C(b)(1), and 17C(c)(1), compliance 

2 with such sections shall be enforced under— 

3 ‘‘(A) section 8 of the Federal Deposit In4 surance Act (12 U.S.C. 1818), by the appro5 priate Federal banking agency, in the case of 

6 an insured depository institution, as those 

7 terms are defined in section 3 of that Act (12 

8 U.S.C. 1813), other than an affiliate of an in9 sured depository institution, as defined in sec10 tion 3 of that Act (12 U.S.C. 1813); 

11 ‘‘(B) the Commodity Exchange Act (7 

12 U.S.C. 1 et seq.), by the Commodity Futures 

13 Trading Commission, in the case of a futures 

14 commission merchant, introducing broker, com15 modity pool operator, or commodity trading ad16 visor, as those terms are defined in sections 1a 

17 of the Commodity Exchange Act, other than an 

18 affiliate of an insured depository institution, as 

19 defined in section 3 of the Federal Deposit In20 surance Act (12 U.S.C. 1813); and 

21 ‘‘(C) the Federal Housing Enterprises Fi22 nancial Safety and Soundness Act of 1992 (12 

23 U.S.C. 4501 et seq.), by the Federal Housing 

24 Finance Agency, in the case of a regulated enti25 ty, as defined in section 1303 of the Federal 


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1 Housing Enterprises Financial Safety and 

2 Soundness Act of 1992 (12 U.S.C. 4502). 

3 ‘‘(2) VIOLATIONS TREATED AS VIOLATIONS OF

4 OTHER LAWS.—For purposes of the exercise by any 

5 agency referred to in paragraph (1), a violation of 

6 sections 6(l), 13(m), 15F(a), 15F(c), 15F(d), 17(l), 

7 17C(b)(1), and 17C(c)(1) of this title shall be 

8 deemed to be a violation of a requirement imposed 

9 under that provision of law. In addition to its powers 

10 under any provision of law specifically referred to in 

11 paragraph (1), each of the agencies referred to in 

12 that paragraph may exercise, for the purpose of en13 forcing compliance with sections 6(l), 13(m), 

14 15F(a), 15F(c), 15F(d), 17(l), 17C(b)(1), and 

15 17C(c)(1) of this title, any other authority conferred 

16 on such agency by law.’’. 

17 SEC. 109. ENFORCEABILITY OF SECURITY-BASED SWAPS. 

18 Section 29(b)(2) of the Securities Exchange Act of 

19 1934 (15 U.S.C. 78cc(b)(2)) is amended by striking ‘‘and 

20 (B)’’ and inserting the following: ‘‘, (B) that no agree21 ment, contract, or transaction that is a security-based 

22 swap shall be void, voidable, or unenforceable by either 

23 party to such security-based swap, and no party thereto 

24 shall be entitled to rescind, or recover any payment made 

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1 tion or any other provision of securities laws based solely 

2 on the failure of either party to the agreement, contract, 

3 or transaction to satisfy its respective obligations under 

4 sections 6(l), 10B, 13, 15(b), 15F, 17, and 17C of this 

5 title with respect to such security-based swap, and (C)’’. 

6 SEC. 110. TRANSFER AND RIGHTS OF CERTAIN CFTC EM7 PLOYEES. 

8 (a) TRANSFER.—Each employee of the Commodity 

9 Futures Trading Commission (in this section referred to 

10 as the ‘‘CFTC’’) whose position and responsibilities would 

11 be more effectively utilized at the Securities and Exchange 

12 Commission (in this section referred to as the ‘‘SEC’’), 

13 based on this Act and the amendments made by this Act, 

14 as determined by the Secretary of the Treasury, shall be 

15 transferred to the SEC for employment, not later than 60 

16 days after the date of enactment of this Act. Such transfer 

17 shall be deemed a transfer of function for purposes of sec18 tion 3503 of title 5, United States Code. 

19 (b) GUARANTEED POSITIONS.— 

20 (1) IN GENERAL.—Each employee transferred 

21 under subsection (a) shall be guaranteed a position 

22 with equivalent status, tenure, pay and benefits as 

23 that held on the day immediately preceding the 

24 transfer, subject to paragraph (2). 


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1 (2) NO INVOLUNTARY SEPARATION OR REDUC2 TION.—An employee transferred under subsection 

3 (a) holding a permanent position on the day imme4 diately preceding the transfer may not be involun5 tarily separated or reduced in grade or compensation 

6 during the 12-month period beginning on the date of 

7 transfer, except for cause, or, in the case of a tem8 porary employee, separated in accordance with the 

9 terms of the appointment of the employee. 

10 (c) APPOINTMENT AUTHORITY FOR EXCEPTED AND

11 SENIOR EXECUTIVE SERVICE EMPLOYEES.— 

12 (1) IN GENERAL.—In the case of an employee 

13 of the CFTC occupying a position in the excepted 

14 service or the Senior Executive Service, such em15 ployee shall, on and after the date of transfer to the 

16 SEC, be deemed to be appointed under the appoint17 ment authority of the SEC for filling an equivalent 

18 position at the SEC, subject to paragraph (2). 

19 (2) DECLINING APPLICATION OF EQUIVALENT

20 APPOINTMENT AUTHORITY.—The Chairman of the 

21 SEC may decline the application of the equivalent 

22 appointment authority of the SEC to an employee of 

23 the CFTC occupying a position in the excepted serv24 ice or the Senior Executive Service under paragraph 


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1 (1) to the extent that the authority by which the em2 ployee was appointed by the CFTC relates to— 

3 (A) a position excepted from the competi4 tive service because of its confidential, policy5 making, policy-determining, or policy-advocating 

6 character; or 

7 (B) a noncareer position in the Senior Ex8 ecutive Service (within the meaning of section 

9 3132(a)(7) of title 5, United States Code). 

10 (d) REORGANIZATION.—If the Chairman of the SEC 

11 determines, after the end of the 1-year period beginning 

12 on the date of enactment of this Act, that a reorganization 

13 of the combined workforce is required, that reorganization 

14 shall be deemed a major reorganization for purposes of 

15 affording affected employee retirement under section 

16 8336(d)(2) or 8414(b)(1)(B) of title 5, United States 

17 Code. 

18 TITLE II—REGULATION OF COM19 MODITY-BASED DERIVATIVES 

20 SEC. 201. DEFINITIONS. 

21 Section 1a of the Commodity Exchange Act (7 U.S.C. 

22 1a) is amended— 

23 (1) by striking paragraphs (1), (25), (31), and 

24 (32); 


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1 (2) by redesignating paragraphs (2) through 

2 (4), (5) through (8), (9) through (24), (26) through 

3 (28), (29), (30), (33), and (34) as paragraphs (1) 

4 through (3), (7) through (10), (12) through (27), 

5 (28) through (30), (32), (33), (35), and (37), re6 spectively; 

7 (3) by inserting after paragraph (3) (as redesig8 nated by paragraph (2) of this section) the fol9 lowing: 

10 ‘‘(4) COMMODITY-BASED SWAP.—The term 

11 ‘commodity-based swap’ means a swap that is not a 

12 security-based swap, as defined in section 3(a) of the 

13 Securities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

14 ‘‘(5) COMMODITY-BASED SWAP EXECUTION FA15 CILITY.—The term ‘commodity-based swap execution 

16 facility’ means a trading facility registered under 

17 section 5h. 

18 ‘‘(6) COMMODITY DERIVATIVE.—The term 

19 ‘commodity derivative’ means any derivative that is 

20 a contract of sale for future delivery of any com21 modity (or option on a contract of sale for future de22 livery of any commodity) subject to the exclusive ju23 risdiction of the Commission under this Act, other 

24 than a swap.’’; 


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1 (4) by inserting after paragraph (10) (as redes2 ignated by paragraph (2) of this section) the fol3 lowing: 

4 ‘‘(11) DERIVATIVE.—The term ‘derivative’ has 

5 the meaning given the term in section 3(a) of the 

6 Securities Exchange Act of 1934 (15 U.S.C. 

7 78c(a)).’’; 

8 (5) by inserting after paragraph (30) (as redes9 ignated by paragraph (2) of this section) the fol10 lowing: 

11 ‘‘(31) PERSON ASSOCIATED WITH A SIGNIFI12 CANT COMMODITY-BASED DERIVATIVES MARKET

13 PARTICIPANT.— 

14 ‘‘(A) IN GENERAL.—The term ‘person as15 sociated with a significant commodity-based de16 rivatives market participant’ means— 

17 ‘‘(i) any partner, officer, director, or 

18 branch manager of a significant com19 modity-based derivatives market partici20 pant (including any individual who holds a 

21 similar status or performs a similar func22 tion with respect to any partner, officer, 

23 director, or branch manager of a signifi24 cant commodity-based derivatives market 

25 participant); 


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1 ‘‘(ii) any person that directly or indi2 rectly controls, is controlled by, or is under 

3 common control with a significant com4 modity-based derivatives market partici5 pant; and 

6 ‘‘(iii) any employee of a significant 

7 commodity-based derivatives market partic8 ipant. 

9 ‘‘(B) EXCLUSION.—Other than for pur10 poses of section 4s, the term ‘person associated 

11 with a significant commodity-based derivatives 

12 market participant’ does not include any person 

13 associated with a significant commodity-based 

14 derivatives market participant the functions of 

15 which are solely clerical or ministerial.’’; 

16 (6) in paragraph (32) (as redesignated by para17 graph (2) of this section)— 

18 (A) by striking subparagraph (D) and in19 serting the following: 

20 ‘‘(D) a commodity-based swap execution 

21 facility registered under section 5h;’’; 

22 (B) in subparagraph (E), by striking the 

23 period and inserting a semicolon; and 

24 (C) by adding at the end the following: 


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1 ‘‘(F) a significant commodity-based deriva2 tives market participant; and 

3 ‘‘(G) a trade repository under section 4r.’’; 

4 (7) by inserting after paragraph (33) (as redes5 ignated by paragraph (2) of this section) the fol6 lowing: 

7 ‘‘(34) SIGNIFICANT COMMODITY-BASED DERIVA8 TIVES MARKET PARTICIPANT.— 

9 ‘‘(A) IN GENERAL.—The term ‘significant 

10 commodity-based derivatives market partici11 pant’ means— 

12 ‘‘(i) any person that is engaged in the 

13 business of purchasing or selling 1 or more 

14 commodity-based swaps for the account of 

15 the person or for any other individual or 

16 entity, or making a market in commodity17 based swaps, and the 1 or more purchases 

18 or sales of which are not solely for the pur19 pose of managing the risk associated 

20 with— 

21 ‘‘(I) an asset that is, or is antici22 pated to be, owned, produced, manu23 factured, processed, or merchandised; 

24 ‘‘(II) potential changes in the 

25 value of services to be purchased or 


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1 provided, or anticipated to be pur2 chased or provided; or 

3 ‘‘(III) a liability incurred or an4 ticipated to be incurred by a person 

5 that is not, or is not related to, a 

6 commodity-based swap; or 

7 ‘‘(ii) any other person designated by 

8 the Commission, after consultation with 

9 the Securities and Exchange Commission, 

10 by rule, regulation, or order as is appro11 priate to further— 

12 ‘‘(I) the interests of the public; 

13 ‘‘(II) the protection of market 

14 participants; or 

15 ‘‘(III) the purposes of this Act. 

16 ‘‘(B) EXCLUSION.—The term ‘significant 

17 commodity-based derivatives market partici18 pant’ does not include an investment company 

19 registered under the Investment Company Act 

20 of 1940 (15 U.S.C. 80a–1 et seq.).’’; 

21 (8) by inserting after paragraph (35) (as redes22 ignated by paragraph (2) of this section) the fol23 lowing: 


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1 ‘‘(36) SWAP.—The term ‘swap’ has the mean2 ing given the term in section 3(a) of the Securities 

3 Exchange Act of 1934 (15 U.S.C. 78c(a)).’’; and 

4 (9) by adding at the end the following: 

5 ‘‘(38) TRADE REPOSITORY.—The term ‘trade 

6 repository’ means any person that collects, cal7 culates, processes, or prepares information with re8 spect to 1 or more transactions or positions in 1 or 

9 more commodity-based swaps.’’. 

10 SEC. 202. RATIONALIZATION OF FINANCIAL PRODUCT 

11 OVERSIGHT. 

12 (a) CFTC AUTHORITY OVER COMMODITY-BASED

13 SWAPS.— 

14 (1) AMENDMENTS TO COMMODITY FUTURES

15 MODERNIZATION ACT OF 2000.— 

16 (A) DEFINITIONS.—Section 402 of the 

17 Commodity Futures Modernization Act of 2000 

18 (7 U.S.C. 27) is amended by striking subsection 

19 (d). 

20 (B) EXCLUSION OF COVERED SWAP

21 AGREEMENTS.—Section 407 of the Commodity 

22 Futures Modernization Act of 2000 (7 U.S.C. 

23 27e) is repealed. 

24 (C) CONTRACT ENFORCEMENT.—Section 

25 408 of the Commodity Futures Modernization 


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1 Act of 2000 (7 U.S.C. 27f) is amended by 

2 striking subsections (b) and (c) and inserting 

3 the following: 

4 ‘‘(b) PREEMPTION.—This title shall supersede and 

5 preempt the application of any State or local law that pro6 hibits or regulates gaming or the operation of bucket 

7 shops (other than antifraud provisions of general applica8 bility) in the case of a hybrid instrument that is predomi9 nantly a banking product.’’. 

10 (2) AMENDMENTS TO COMMODITY EXCHANGE

11 ACT.— 

12 (A) IN GENERAL.—Section 2 of the Com13 modity Exchange Act (7 U.S.C. 2) is amend14 ed— 

15 (i) in subsection (a)(1)— 

16 (I) in the first sentence of sub17 paragraph (A), by striking ‘‘subpara18 graphs (C) and (D) of this paragraph 

19 and subsections (c) through (i) of this 

20 section’’ and inserting ‘‘subparagraph 

21 (C) and subsections (c) through (e)’’; 

22 (II) in subparagraph (C), by 

23 striking clauses (ii) through (v) and 

24 inserting the following: 


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1 ‘‘(ii) CONTRACTS OF SALE FOR FU2 TURE DELIVERY.—This Act shall not apply 

3 to, and the Commission shall have no ju4 risdiction to designate a board of trade as 

5 a contract market for any contract of sale 

6 (or option on such contract) for future de7 livery— 

8 ‘‘(I) of any security, or interest 

9 in a security or based on the value of 

10 a security (other than an exempted 

11 security under section 3(a) of the Se12 curities Exchange Act of 1934 (15 

13 U.S.C. 78c(a)), as in effect on the 

14 date of enactment of the Futures 

15 Trading Act of 1982 (other than any 

16 municipal security, as defined in that 

17 section 3(a), as in effect on the date 

18 of enactment of the Futures Trading 

19 Act of 1982), or any group or index 

20 of such securities or any interest in a 

21 security or based on the value of a se22 curity; or 

23 ‘‘(II) based on any financial, eco24 nomic, or commercial occurrence, ex25 tent of an occurrence, contingency, or 


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1 consequence that is related to or 

2 based on a security, an interest in a 

3 security, or an issuer of a security, or 

4 based on the value of any of the fore5 going (other than an exempted secu6 rity under section 3(a) of the Securi7 ties Exchange Act of 1934 (15 U.S.C. 

8 78c(a)), as in effect on the date of en9 actment of the Futures Trading Act 

10 of 1982 (other than any municipal se11 curity, as defined in that section 3(a), 

12 as in effect on the date of enactment 

13 of the Futures Trading Act of 1982), 

14 or any group or index of such securi15 ties, or interests in such securities or 

16 issuers of such securities, or based on 

17 the value of any of the foregoing.’’; 

18 and 

19 (III) by striking subparagraphs 

20 (D), (E), and (F); 

21 (ii) by striking subsections (d), (e), 

22 (g), (h), and (i); 

23 (iii) by inserting after subsection (c) 

24 the following: 


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1 ‘‘(d) COMMODITY-BASED SWAPS.—Nothing in this 

2 Act (other than subsections (a)(1)(B), (a)(1)(C), (e) and 

3 (f), sections 4a, 4b, 4b–1, 4c(a), 4c(b), 4o, 4r, 4s, 4t, 5b, 

4 5c, 5h, 6(c), 6(d), 6c, 6d, 8, 8a, 9, 12(e)(2), 12(f), 13(a), 

5 13(b), 21, and 22(a)(4) and such other provisions of this 

6 Act as are applicable by the terms of the provisions to 

7 registered entities and Commission registrants) governs or 

8 applies to a commodity-based swap.’’; and 

9 (iv) by redesignating subsection (f) as 

10 subsection (e). 

11 (B) CONFORMING AMENDMENTS.— 

12 (i) Section 1a of the Commodity Ex13 change Act (7 U.S.C. 1a) (as amended by 

14 section 201(2)) is amended in paragraph 

15 (35) by inserting before the period at the 

16 end the following: ‘‘(as in effect on the day 

17 before the date of enactment of the Com18 prehensive Derivatives Regulation Act of 

19 2009)’’. 

20 (ii) Section 5c(a)(1) of the Commodity 

21 Exchange Act (7 U.S.C. 7a–2(a)(1)) is 

22 amended by striking ‘‘, and section 2(h)(7) 

23 with respect to significant price discovery 

24 contracts,’’. 


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1 (iii) Section 5d(a) of the Commodity 

2 Exchange Act (7 U.S.C. 7a–3(a)) is 

3 amended in the second sentence by striking 

4 ‘‘subparagraphs (C) and (D) of section 

5 2(a)(1)’’ and inserting ‘‘section 

6 2(a)(1)(C)’’. 

7 (iv) Section 5e of the Commodity Ex8 change Act (7 U.S.C. 7b) is amended by 

9 striking ‘‘, or revocation of the right’’ and 

10 all that follows through ‘‘significant price 

11 discovery contract,’’. 

12 (v) Section 6(b) of the Commodity 

13 Exchange Act (7 U.S.C. 8(b)) is amended 

14 in the first sentence by striking ‘‘, or to re15 voke the right’’ and all that follows 

16 through ‘‘significant price discovery con17 tract,’’. 

18 (vi) Section 22(b)(1)(A) of the Com19 modity Exchange Act (7 U.S.C. 

20 25(b)(1)(A)) is amended by striking ‘‘sec21 tion 2(h)(7) or’’. 

22 (vii) Section 408(2)(C) of the Federal 

23 Deposit Insurance Corporation Improve24 ment Act of 1991 (12 U.S.C. 4421(2)(C)) 

25 is amended— 


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1 (I) by striking ‘‘, 2(d), 2(f), or 

2 2(g)’’; and 

3 (II) by striking ‘‘2(h) or’’. 

4 (3) AMENDMENTS TO THE GRAMM-LEACH-BLI5 LEY ACT.—Section 206 of the Gramm-Leach-Bliley 

6 Act (15 U.S.C. 78c note) is amended— 

7 (A) in subsection (a)— 

8 (i) in paragraph (4), by inserting ‘‘or’’ 

9 after the semicolon at the end; 

10 (ii) in paragraph (5) by striking ‘‘; 

11 or’’ at the end and inserting a period; and 

12 (iii) by striking paragraph (6); 

13 (B) by striking subsection (b); and 

14 (C) by redesignating subsections (c) and 

15 (d) as subsections (b) and (c), respectively. 

16 (b) RATIONALIZATION OF SECURITY FUTURES OVER17 SIGHT.— 

18 (1) IN GENERAL.— 

19 (A) RULEMAKING AUTHORITY TO ADDRESS

20 DUPLICATIVE REGULATIONS OF DUAL REG21 ISTRANTS.—Section 4d of the Commodity Ex22 change Act (7 U.S.C. 6d) is amended by strik23 ing subsection (c). 

24 (B) REGISTRATION OF FUTURES COMMIS25 SION MERCHANTS, INTRODUCING BROKERS, 


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1 AND FLOOR BROKERS.—Section 4f(a) of the 

2 Commodity Exchange Act (7 U.S.C. 6f(a)) is 

3 amended— 

4 (i) in paragraph (1), by striking 

5 ‘‘(1)’’; and 

6 (ii) by striking paragraphs (2) 

7 through (4). 

8 (C) DUAL TRADING.—Section 4j of the 

9 Commodity Exchange Act (7 U.S.C. 6j) is re10 pealed. 

11 (D) EXEMPTIONS FOR ASSOCIATED PER12 SONS OR SECURITIES BROKER-DEALERS.—Sec13 tion 4k of the Commodity Exchange Act (7 

14 U.S.C. 6k) is amended by striking paragraph 

15 (5) (as added by section 252(d) of the Com16 modity Futures Modernization Act of 2000 

17 (114 Stat. 2763A–448)). 

18 (E) ELECTION TO TRADE EXCLUDED AND

19 EXEMPT COMMODITIES.—Section 5a of the 

20 Commodity Exchange Act (7 U.S.C. 7a) is 

21 amended by striking subsection (g). 

22 (F) OBLIGATION TO ADDRESS DUPLICA23 TIVE REGULATION OF DUAL REGISTRANTS.— 

24 Section 5c of the Commodity Exchange Act (7 


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1 U.S.C. 7a–2) is amended by striking subsection 

2 (f). 

3 (G) DESIGNATION OF SECURITIES EX4 CHANGES AND ASSOCIATIONS AS CONTRACT

5 MARKETS.—Section 5f of the Commodity Ex6 change Act (7 U.S.C. 7b–1) is repealed. 

7 (H) NOTIFICATION OF INVESTIGATIONS

8 AND ENFORCEMENT ACTIONS.—Section 6 of the 

9 Commodity Exchange Act is amended by strik10 ing subsection (g) (7 U.S.C. 9c). 

11 (I) ACTION TO ENJOIN OR RESTRAIN VIO12 LATIONS.—Section 6c of the Commodity Ex13 change Act (7 U.S.C. 13a–1) is amended by 

14 striking subsection (h). 

15 (J) PUBLIC DISCLOSURE.—Section 8(a) of 

16 the Commodity Exchange Act (7 U.S.C. 12(a)) 

17 is amended by striking paragraph (3). 

18 (K) MARKET REPORTS.—Section 16 of the 

19 Commodity Exchange Act (7 U.S.C. 20) is 

20 amended by striking subsection (e). 

21 (L) OBLIGATION TO ADDRESS DUPLICA22 TIVE REGULATION OF DUAL REGISTRANTS.— 

23 Section 17 of the Commodity Exchange Act (7 

24 U.S.C. 21) is amended— 

25 (i) by striking subsection (r); and 


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1 (ii) by redesignating subsection (q) 

2 (as added by section 233(5) of Public Law 

3 97–444 (96 Stat. 2320)) as subsection (r). 

4 (2) CONFORMING AMENDMENTS TO THE COM5 MODITY EXCHANGE ACT.— 

6 (A) Section 1a of the Commodity Ex7 change Act (7 U.S.C. 1a) (as amended by sec8 tion 201(2)) is amended in paragraph (28), by 

9 striking the second sentence. 

10 (B) Section 4(c)(1) of the Commodity Ex11 change Act (7 U.S.C. 6(c)(1)) is amended by 

12 striking ‘‘(except subparagraphs (C)(ii) and (D) 

13 of section 2(a)(1), except that the Commission 

14 and the Securities and Exchange Commission 

15 may by rule, regulation, or order jointly exclude 

16 any agreement, contract, or transaction from 

17 section 2(a)(1)(D))’’. 

18 (C) Section 5a of the Commodity Ex19 change Act (7 U.S.C. 7a) is amended— 

20 (i) in subsection (b)— 

21 (I) in paragraph (2)— 

22 (aa) by striking subpara23 graph (D); and 

24 (bb) by redesignating sub25 paragraphs (E) and (F) as subVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00110 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 paragraphs (D) and (E), respec2 tively; and 

3 (II) in paragraph (3)(B)(ii), by 

4 striking ‘‘or, if the person trades only 

5 security futures products on the facil6 ity, a national securities association 

7 registered under section 15A(a) of the 

8 Securities Exchange Act of 1934’’; 

9 and 

10 (ii) in subsection (e)(1), by striking 

11 ‘‘With respect to transactions other than 

12 transactions in security futures products, 

13 a’’ and inserting ‘‘A’’. 

14 (D) Section 6(b) of the Commodity Ex15 change Act (7 U.S.C. 8(b)) is amended in the 

16 first sentence by striking ‘‘or section 5f’’. 

17 (E) Section 12(e)(2) of the Commodity Ex18 change Act (7 U.S.C. 16(e)(2)) is amended— 

19 (i) in subparagraph (A), by striking 

20 ‘‘an electronic trading facility excluded 

21 under section 2(e) of this Act’’ and insert22 ing ‘‘a commodity-based swap execution fa23 cility’’; 

24 (ii) in subparagraph (B)— 


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1 (I) by striking ‘‘, 2(d), 2(f), or 

2 2(g)’’ and inserting ‘‘or 2(e)’’; 

3 (II) by striking ‘‘2(h) or’’; and 

4 (III) by striking the period at the 

5 end and inserting ‘‘; and’’; and 

6 (iii) by inserting after subparagraph 

7 (B) the following: 

8 ‘‘(C) a commodity-based swap.’’. 

9 SEC. 203. REQUIRED CLEARING OF STANDARDIZED DE10 RIVATIVES THROUGH CENTRAL COUNTER11 PARTIES AND USE OF TRADE REPOSITORIES. 

12 (a) IN GENERAL.—The Commodity Exchange Act is 

13 amended by inserting after section 4q (7 U.S.C. 6o–1) the 

14 following: 

15 ‘‘SEC. 4r. REQUIRED CLEARING OF STANDARDIZED DERIVA16 TIVES THROUGH CENTRAL COUNTERPAR17 TIES AND USE OF TRADE REPOSITORIES. 

18 ‘‘(a) FINDINGS.—Congress finds that— 

19 ‘‘(1) the proliferation of over-the-counter com20 modity-based swaps poses unacceptable risks to the 

21 financial system; 

22 ‘‘(2) clearing standardized commodity-based 

23 swaps through well-regulated central counterparties 

24 would reduce systemic risk in the financial system; 


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1 ‘‘(3) the markets for standardized commodity2 based swaps suffer from a lack of reliable and accu3 rate transaction information that is available to the 

4 public, market participants, producers, and regu5 lators; and 

6 ‘‘(4) weaknesses in the regulation of markets 

7 for standardized commodity-based swaps have de8 tracted from the efficiency and transparency of trad9 ing in the markets and hampered the surveillance 

10 and oversight of the markets. 

11 ‘‘(b) PURPOSES.—The purposes of this section are— 

12 ‘‘(1) to establish well-regulated markets for 

13 standardized commodity-based swaps that promote 

14 efficiency and transparency of trading and enhance 

15 the surveillance and oversight of the markets; and 

16 ‘‘(2) to promote the public interest, the protec17 tion of market participants, and the maintenance of 

18 fair and orderly markets by ensuring— 

19 ‘‘(A) the prompt and accurate clearance 

20 and settlement of transactions in standardized 

21 commodity-based swaps; 

22 ‘‘(B) the prompt and accurate reporting of 

23 transactions in commodity-based derivative in24 struments to a trade repository or a derivatives 

25 clearing organization; 


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1 ‘‘(C) the establishment of linked or coordi2 nated facilities for clearance and settlement of 

3 transactions in securities, securities options, 

4 contracts of sale for future delivery and options 

5 on the contracts, commodity options, and de6 rivatives; 

7 ‘‘(D) the availability to the public, market 

8 participants, producers, and regulators of reli9 able and accurate quotation and transaction in10 formation in commodity-based swaps; 

11 ‘‘(E) economically efficient execution of 

12 transactions in commodity-based swaps; and 

13 ‘‘(F) fair competition among markets in 

14 the trading of commodity-based swaps. 

15 ‘‘(c) USE OF DERIVATIVES CLEARING ORGANIZA16 TIONS.— 

17 ‘‘(1) IN GENERAL.—Any person that is a party 

18 to a commodity-based swap that the Commission de19 termines is ‘standardized’ shall submit such instru20 ment for clearing to a derivatives clearing organiza21 tion within the period specified by the rules of the 

22 Commission. 

23 ‘‘(2) DEFINITION OF ‘STANDARDIZED’.— 


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1 ‘‘(A) IN GENERAL.—The Commission shall 

2 by rule, define the term ‘standardized’ for pur3 poses of this section. 

4 ‘‘(B) FACTORS.—In defining the term 

5 ‘standardized’, the Commission shall— 

6 ‘‘(i) be consistent with— 

7 ‘‘(I) the public interest; 

8 ‘‘(II) the protection of market 

9 participants; 

10 ‘‘(III) the safeguarding of com11 modity-based swap transactions and 

12 funds; 

13 ‘‘(IV) the maintenance of fair 

14 competition among market partici15 pants and among derivatives clearing 

16 organizations; and 

17 ‘‘(V) the purposes of this section; 

18 ‘‘(ii)(I) consult with, and consider the 

19 views of, the Securities and Exchange 

20 Commission and the Board of Governors of 

21 the Federal Reserve System; and 

22 ‘‘(II) seek to maintain comparability, 

23 to the maximum extent practicable, with 

24 the Securities and Exchange Commission 

25 definition of ‘standardized’ for purposes of 


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1 section 17C of the Securities Exchange Act 

2 of 1934; and 

3 ‘‘(iii) to the extent it is applicable to 

4 a particular commodity-based swap or 

5 class of commodity-based derivative swaps, 

6 consider— 

7 ‘‘(I) whether a derivatives clear8 ing organization is prepared to clear 

9 the commodity-based swap and the 

10 derivatives clearing organization has 

11 effective risk management systems; 

12 ‘‘(II) the availability or ability to 

13 facilitate standard documentation of 

14 the terms of the commodity-based 

15 swap; 

16 ‘‘(III) the liquidity of the com17 modity-based swap and the underlying 

18 commodity or group or index of the 

19 commodity-based swap; 

20 ‘‘(IV) the ability to value the 

21 commodity-based swap, or underlying 

22 commodity, consistently with an ac23 cepted pricing methodology, including 

24 the availability of intraday prices; and 


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1 ‘‘(V) such other factors as are 

2 consistent with the purposes of this 

3 section. 

4 ‘‘(3) EXEMPTIONS.— 

5 ‘‘(A) IN GENERAL.—The Commission, by 

6 rule or order, as the Commission considers ap7 propriate in the public interest or the protection 

8 of market participants, may conditionally or un9 conditionally exempt from the requirements of 

10 this subsection and the rules issued under this 

11 subsection any person, transaction, or standard12 ized commodity-based swap. 

13 ‘‘(B) PRIOR CONSULTATION WITH SECURI14 TIES AND EXCHANGE COMMISSION AND BOARD

15 OF GOVERNORS OF THE FEDERAL RESERVE

16 SYSTEM.— 

17 ‘‘(i) CONSULTATION.—Before acting 

18 by rule or order to exempt any person, 

19 transaction, or standardized commodity20 based swap from this subsection, the Com21 mission shall consult with, and consider 

22 the views of, the Securities and Exchange 

23 Commission and the Board of Governors of 

24 the Federal Reserve System concerning 

25 whether the exemption is appropriate for 


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1 the reduction of risk and in the public in2 terest. 

3 ‘‘(ii) NOTICE REQUIRED.—Forty-five 

4 days prior to issuing any exemption, the 

5 Commission shall send a notice to the Se6 curities and Exchange Commission and the 

7 Board of Governors of the Federal Reserve 

8 System describing such exemption. 

9 ‘‘(iii) PROHIBITION ON ISSUANCE.—If 

10 either the Securities and Exchange Com11 mission or the Board of Governors of the 

12 Federal Reserve System issues a finding 

13 that such an exemption does not meet the 

14 standard in clause (i), the Commission 

15 shall not grant the exemption. 

16 ‘‘(iv) DEADLINE.—Any finding by the 

17 Securities and Exchange Commission or 

18 the Board of Governors of the Federal Re19 serve System shall be made and received in 

20 writing by the Commission not later than 

21 30 days after the date of receipt of a no22 tice of a proposed exemption by the Com23 mission. 

24 ‘‘(v) NONDELEGATION.—Action by 

25 the Securities and Exchange Commission 


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1 or the Board of Governors under this sub2 paragraph may not be delegated. 

3 ‘‘(d) TRADE REPOSITORIES.— 

4 ‘‘(1) USE OF TRADE REPOSITORIES.— 

5 ‘‘(A) IN GENERAL.—Any person that en6 ters into or effects a transaction in a com7 modity-based swap shall submit the transaction 

8 for clearing to a derivatives clearing organiza9 tion or report the transaction to a trade reposi10 tory registered in accordance with this sub11 section within the period specified by any rule 

12 adopted under subsection (e). 

13 ‘‘(B) INFORMATION.—The Commission 

14 may, by rule, require any person to report to 

15 derivatives clearing organizations and registered 

16 trade repositories such transaction information 

17 as the Commission considers appropriate to 

18 permit the derivatives clearing organizations 

19 and trade repositories to meet the purposes of 

20 this section. 

21 ‘‘(2) REGISTRATION.—A trade repository may 

22 register for purposes of this subsection by filing with 

23 the Commission an application in such form as the 

24 Commission, by rule, may prescribe containing the 

25 rules of the trade repository and such other informaVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00119 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 tion and documents as the Commission, by rule, may 

2 prescribe as appropriate in the public interest, for 

3 the protection of market participants, or for the 

4 prompt and accurate collection, calculation, proc5 essing, and preparation of information regarding 

6 transactions and positions in commodity-based swap. 

7 ‘‘(3) COMMISSION PROCEDURES FOR APPLICA8 TIONS.— 

9 ‘‘(A) IN GENERAL.—On the filing of an 

10 application for registration pursuant to para11 graph (2), the Commission shall publish notice 

12 of the filing and afford interested persons an 

13 opportunity to submit written data, views, and 

14 arguments concerning the application. 

15 ‘‘(B) ACTIONS.—Not later than 90 days 

16 after the date of the publication of the notice 

17 (or, with the consent of the applicant, a longer 

18 period), the Commission shall— 

19 ‘‘(i) by order grant the registration; or 

20 ‘‘(ii) institute proceedings to deter21 mine whether the registration should be 

22 denied. 

23 ‘‘(C) PROCEDURE FOR DENIALS.— 

24 ‘‘(i) IN GENERAL.—The proceedings 

25 described in subparagraph (B)(ii) shall— 


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1 ‘‘(I) include notice of the grounds 

2 for denial under consideration and an 

3 opportunity for a hearing; and 

4 ‘‘(II) be concluded not later than 

5 180 days after the date of publication 

6 of notice of the filing of the applica7 tion for registration. 

8 ‘‘(ii) ACTIONS.—At the conclusion of 

9 the proceedings the Commission, by order, 

10 shall grant or deny the registration. 

11 ‘‘(iii) EXTENSIONS.—The Commission 

12 may extend the time for the conclusion of 

13 the proceedings for— 

14 ‘‘(I) not more than 60 days if the 

15 Commission— 

16 ‘‘(aa) finds good cause for 

17 the extension; and 

18 ‘‘(bb) publishes a description 

19 of the reasons of the Commission 

20 for the finding; or 

21 ‘‘(II) with the consent of the ap22 plicant, a longer period. 

23 ‘‘(D) STANDARDS FOR GRANTING REG24 ISTRATION.—The Commission shall grant the 

25 registration of a trade repository for purposes 


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1 of this section if the Commission finds that the 

2 trade repository is so organized, and has the ca3 pacity— 

4 ‘‘(i) to assure the prompt, accurate, 

5 and reliable performance of the functions 

6 of a trade repository; 

7 ‘‘(ii) to comply with this Act (includ8 ing rules and regulations issued under this 

9 Act); and 

10 ‘‘(iii) to carry out the functions of a 

11 trade repository in a manner consistent 

12 with the purposes of this section. 

13 ‘‘(E) STANDARD FOR DENIAL OF REG14 ISTRATION.—The Commission shall deny the 

15 registration of a trade repository if the Com16 mission does not make a finding described in 

17 subparagraph (D). 

18 ‘‘(4) WITHDRAWAL OF REGISTRATION.— 

19 ‘‘(A) IN GENERAL.—A registered trade re20 pository may, on such terms and conditions as 

21 the Commission considers appropriate in the 

22 public interest or for the protection of market 

23 participants, withdraw from registration by fil24 ing a written notice of withdrawal with the 

25 Commission. 


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1 ‘‘(B) CANCELLATION.—If the Commission 

2 finds that any trade repository is no longer in 

3 existence or has ceased to do business in the ca4 pacity specified in the application of the trade 

5 repository for registration, the Commission, by 

6 order, shall cancel the registration. 

7 ‘‘(5) ACCESS TO TRADE REPOSITORY SERV8 ICES.— 

9 ‘‘(A) NOTICE OF PROHIBITION OR LIMITA10 TION ON ACCESS.— 

11 ‘‘(i) IN GENERAL.—If any registered 

12 trade repository prohibits or limits any 

13 person access to services offered, directly 

14 or indirectly, by the trade repository, the 

15 registered trade repository shall promptly 

16 file notice of the prohibition or limitation 

17 with the Commission. 

18 ‘‘(ii) CONTENT.—A notice under 

19 clause (i) shall be in such form and contain 

20 such information as the Commission, by 

21 rule, may prescribe as appropriate in the 

22 public interest or for the protection of in23 vestors. 

24 ‘‘(B) REVIEW BY COMMISSION.—Any pro25 hibition or limitation on access to services with 


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1 respect to which a registered trade repository is 

2 required by subparagraph (A) to file notice 

3 shall be subject to review by the Commission 

4 on— 

5 ‘‘(i) the motion of the Commission; or 

6 ‘‘(ii) application by any person ag7 grieved by the prohibition or limitation 

8 filed— 

9 ‘‘(I) not later than 30 days after 

10 the date on which the notice described 

11 in subparagraph (A) has been filed 

12 with the Commission and received by 

13 the aggrieved person; or 

14 ‘‘(II) within such longer period 

15 as the Commission may determine. 

16 ‘‘(C) STAYS.— 

17 ‘‘(i) IN GENERAL.—Application to the 

18 Commission for review, or the institution 

19 of review by the Commission on the motion 

20 of the Commission, shall not operate as a 

21 stay of the prohibition or limitation, unless 

22 the Commission otherwise orders, sum23 marily or after notice and opportunity for 

24 hearing on the question of a stay. 


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1 ‘‘(ii) HEARING.—A hearing under 

2 clause (i) may consist solely of the submis3 sion of affidavits or presentation of oral ar4 guments. 

5 ‘‘(iii) EXPEDITED PROCEDURE.—The 

6 Commission shall establish for appropriate 

7 cases an expedited procedure for consider8 ation and determination of the question of 

9 a stay. 

10 ‘‘(D) STANDARDS OF REVIEW.— 

11 ‘‘(i) DISMISSAL OF PROCEEDINGS.—In 

12 any proceeding to review the prohibition or 

13 limitation of any person to access to serv14 ices offered by a registered trade reposi15 tory, the Commission, by order, shall dis16 miss the proceeding if the Commission 

17 finds, after notice and opportunity for 

18 hearing, that— 

19 ‘‘(I) the prohibition or limitation 

20 is consistent with this Act (including 

21 rules and regulations); and 

22 ‘‘(II) the person has not been 

23 discriminated against unfairly. 

24 ‘‘(ii) ACCESS TO SERVICES.—If the 

25 Commission does not make a finding deVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00125 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 scribed in clause (i) or the Commission 

2 finds that the prohibition or limitation im3 poses any burden on competition that is 

4 not appropriate in furtherance of the pur5 poses of this Act, the Commission, by 

6 order, shall— 

7 ‘‘(I) set aside the prohibition or 

8 limitation; and 

9 ‘‘(II) require the registered trade 

10 repository to permit the person access 

11 to the services offered by the reg12 istered trade repository to which the 

13 prohibition or limitation applied. 

14 ‘‘(6) ADMINISTRATIVE PROCEEDING AUTHOR15 ITY.—The Commission, by order, may censure or 

16 place limitations on the activities, functions, or oper17 ations of any registered trade repository or suspend 

18 for a period not exceeding 12 months or revoke the 

19 registration of any trade repository, if the Commis20 sion finds, on the record after notice and oppor21 tunity for hearing, that— 

22 ‘‘(A) the censure, placing of limitations, 

23 suspension, or revocation is appropriate in the 

24 public interest, for the protection of market 


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1 participants, or otherwise in furtherance of the 

2 purposes of this Act; and 

3 ‘‘(B) the trade repository has violated or is 

4 unable to comply with any provision of this Act 

5 (including rules or regulations). 

6 ‘‘(7) RULEMAKING AUTHORITY.—No registered 

7 trade repository shall, directly or indirectly, engage 

8 in any activity as a trade repository in contravention 

9 of such rules and regulations as the Commission 

10 may prescribe— 

11 ‘‘(A) as appropriate in the public interest; 

12 ‘‘(B) for the protection of market partici13 pants; or 

14 ‘‘(C) otherwise in furtherance of the pur15 poses of this Act, including to ensure that all 

16 persons may obtain on terms that are fair and 

17 reasonable and not unreasonably discriminatory 

18 such transaction and position information for 

19 commodity-based swaps as is disseminated by 

20 any derivatives clearing organization or trade 

21 repository. 

22 ‘‘(8) CONSULTATION.— 

23 ‘‘(A) IN GENERAL.—Prior to adopting any 

24 rules applicable to trade repositories pursuant 

25 to subsection (g), the Commission shall consult 


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•S 1691 IS

1 with and consider the views of the Securities 

2 and Exchange Commission. 

3 ‘‘(B) COMPARABILITY.—The Commission 

4 and the Securities and Exchange Commission 

5 shall seek to maintain comparability, to the 

6 maximum extent practicable, of applicable re7 spective recordkeeping and reporting require8 ments for trade repositories. 

9 ‘‘(e) TIMING.—The Commission may by rule specify 

10 the date by which persons are required— 

11 ‘‘(1) to submit transactions in standardized 

12 commodity-based swaps for clearing to a derivatives 

13 clearing organization pursuant to subsection (c); and 

14 ‘‘(2)(A) to submit transactions in commodity15 based swaps for clearing to a derivatives clearing or16 ganization; or 

17 ‘‘(B) to report transactions in the commodity18 based derivative instruments to a registered trade 

19 repository pursuant to subsection (d). 

20 ‘‘(f) COLLECTION, CONSOLIDATION, AND DISSEMINA21 TION OF INFORMATION ON TRANSACTIONS AND POSI22 TIONS IN COMMODITY-BASED SWAPS.— 

23 ‘‘(1) COMMISSION ACTION REQUIRED.—The 

24 Commission shall, consistent with the public inter25 est, the protection of market participants, the mainVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00128 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 tenance of fair and orderly markets, and the pur2 poses of this section, use the authority of the Com3 mission under this Act to facilitate— 

4 ‘‘(A) the collection, consolidation, and dis5 semination of information on transactions and 

6 positions in commodity-based swaps; and 

7 ‘‘(B) the establishment of coordinated fa8 cilities for the consolidation of information on 

9 transactions and positions in commodity-based 

10 swaps. 

11 ‘‘(2) ACTIONS REQUIRED BY REGISTERED ENTI12 TIES.—The Commission, by rule, regulation, or 

13 order, may require each derivatives clearing organi14 zation that clears transactions in commodity-based 

15 swaps, and each registered trade repository reg16 istered or applying to become registered, in such 

17 form and frequency as the Commission shall pre18 scribe as appropriate in the public interest, for the 

19 protection of market participants, or otherwise in 

20 furtherance of the purposes of this Act— 

21 ‘‘(A) to disseminate certain transaction or 

22 position information concerning commodity23 based swaps; and 

24 ‘‘(B) to ensure the prompt, accurate, reli25 able, and fair collection, processing, distribuVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00129 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 tion, and publication of information with re2 spect to transactions and positions, as appro3 priate, cleared by or reported to the derivatives 

4 clearing organization or the registered trade re5 pository. 

6 ‘‘(g) RECORDS, REPORTS, AND EXAMINATIONS.— 

7 ‘‘(1) IN GENERAL.—Each registered trade re8 pository shall make and keep for prescribed periods 

9 such records, furnish such copies of the records, and 

10 make and disseminate such reports as the Commis11 sion, by rule, prescribes as appropriate in the public 

12 interest, or otherwise in furtherance of the purposes 

13 of this Act. 

14 ‘‘(2) EXAMINATIONS.—All records with regard 

15 to commodity-based swaps of a registered trade re16 pository shall be subject at any time to such reason17 able periodic, special, or other examinations by rep18 resentatives of the Commission as the Commission 

19 considers appropriate in the public interest, for the 

20 protection of market participants, or otherwise in 

21 furtherance of the purposes of this Act.’’. 

22 (b) DERIVATIVES CLEARING ORGANIZATIONS.—Sec23 tion 5b of the Commodity Exchange Act (7 U.S.C. 7a– 

24 1) is amended— 


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1 (1) by striking subsections (a) and (b) and in2 serting the following: 

3 ‘‘(a) REGISTRATION REQUIREMENT.—It shall be un4 lawful for a derivatives clearing organization, unless reg5 istered with the Commission, directly or indirectly to make 

6 use of the mails or any means or instrumentality of inter7 state commerce to perform the functions of a derivatives 

8 clearing organization with respect to a contract of sale of 

9 a commodity for future delivery (or option on such a con10 tract) or option on a commodity, or a commodity-based 

11 swap, in each case unless the contract, option, or com12 modity-based swap is not required to be cleared under this 

13 Act. 

14 ‘‘(b) VOLUNTARY REGISTRATION.—A derivatives 

15 clearing organization that clears agreements, contracts, or 

16 transactions that are not required to be cleared under this 

17 Act may register with the Commission as a derivatives 

18 clearing organization.’’. 

19 (2) in subsection (c)— 

20 (A) by striking paragraph (1) and insert21 ing the following: 

22 ‘‘(1) APPLICATION.—A person desiring to reg23 ister as a derivatives clearing organization shall sub24 mit to the Commission an application in such form 

25 and containing the rules of the derivatives clearing 


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1 organization and such other information and docu2 ments as the Commission, by rule, may prescribe as 

3 appropriate in the public interest or for the purpose 

4 of making the determinations required for approval 

5 under this section.’’; 

6 (B) in paragraph (2)— 

7 (i) by striking subparagraph (B) and 

8 inserting the following: 

9 ‘‘(B) FINANCIAL RESOURCES.—The appli10 cant shall demonstrate that the applicant has 

11 adequate financial, operational, and managerial 

12 resources to discharge the responsibilities of a 

13 derivatives clearing organization and to manage 

14 all associated risks.’’; and 

15 (ii) by adding at the end the fol16 lowing: 

17 ‘‘(O) MARKET PARTICIPANT ACCESS.—The 

18 applicant shall establish appropriate standards 

19 to ensure open and fair access to all persons 

20 that meet the ongoing and continuing partici21 pant eligibility standards of the organization 

22 with respect to commodity-based swaps and to 

23 accept for clearing from the participants all 

24 commodity-based swaps that meet the product 

25 eligibility standards of the organization, regardVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00132 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 less of where the transactions are executed.’’; 

2 and 

3 (C) by adding at the end the following: 

4 ‘‘(4) COMMISSION PROCEDURES FOR GRANTING

5 REGISTRATION TO DERIVATIVES CLEARING ORGANI6 ZATIONS FOR CLEARING COMMODITY-BASED

7 SWAPS.— 

8 ‘‘(A) IN GENERAL.—The Commission 

9 shall, on the filing of an application for reg10 istration pursuant to paragraph (2) for pur11 poses of clearing commodity-based swaps, pub12 lish notice of the filing and afford interested 

13 persons an opportunity to submit written data, 

14 views, and arguments concerning the applica15 tion. 

16 ‘‘(B) ACTIONS.—Not later than 90 days 

17 after the date of the publication of the notice 

18 (or, with the consent of the applicant, a longer 

19 period), the Commission shall— 

20 ‘‘(i) by order grant the registration; or 

21 ‘‘(ii) institute proceedings to deter22 mine whether registration should be de23 nied. 

24 ‘‘(C) PROCEEDINGS.— 


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1 ‘‘(i) IN GENERAL.—The proceedings 

2 described in subparagraph (B)(ii) shall— 

3 ‘‘(I) include notice of the grounds 

4 for denial under consideration and op5 portunity for hearing; and 

6 ‘‘(II) be concluded not later than 

7 180 days after the date of publication 

8 of notice of the filing of the applica9 tion for registration. 

10 ‘‘(ii) ACTIONS.—At the conclusion of 

11 the proceedings the Commission, by order, 

12 shall grant or deny the registration. 

13 ‘‘(iii) EXTENSIONS.—The Commission 

14 may extend the time for the conclusion of 

15 the proceedings for— 

16 ‘‘(I) not more than 60 days if the 

17 Commission— 

18 ‘‘(aa) finds good cause for 

19 the extension; and 

20 ‘‘(bb) publishes the reasons 

21 of the Commission for the find22 ing; or 

23 ‘‘(II) with the consent of the ap24 plicant, a longer period. 


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1 ‘‘(iv) STANDARD FOR REGISTRA2 TION.— 

3 ‘‘(I) IN GENERAL.—The Commis4 sion shall grant the registration of a 

5 derivatives clearing organization if the 

6 Commission finds that the derivatives 

7 clearing organization is so organized, 

8 and has the capacity, to be able— 

9 ‘‘(aa) to ensure the prompt, 

10 accurate, and reliable perform11 ance of the functions of a deriva12 tives clearing organization; 

13 ‘‘(bb) to comply with this 

14 Act (including rules and regula15 tions); and 

16 ‘‘(cc) to carry out the func17 tions of a derivatives clearing or18 ganization in a manner con19 sistent with the purposes and 

20 core principles of this section. 

21 ‘‘(II) DENIAL.—The Commission 

22 shall deny the registration of a deriva23 tives clearing organization if the Com24 mission does not make a finding de25 scribed in subclause (I). 


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1 ‘‘(5) WITHDRAWAL OF REGISTRATION.—For 

2 purposes of clearing commodity-based swaps, a de3 rivatives clearing organization may, on such terms 

4 and conditions as the Commission considers appro5 priate in the public interest or for the protection of 

6 market participants, withdraw from registration by 

7 filing a written notice of withdrawal with the Com8 mission. 

9 ‘‘(6) ACCESS TO DERIVATIVES CLEARING ORGA10 NIZATION TO CLEAR COMMODITY-BASED SWAPS.— 

11 ‘‘(A) NOTICE OF PROHIBITION OR LIMITA12 TION.— 

13 ‘‘(i) IN GENERAL.—For purposes of 

14 clearing commodity-based swaps, if any de15 rivatives clearing organization prohibits or 

16 limits any person access to services offered, 

17 directly or indirectly, by the derivatives 

18 clearing organization, the derivatives clear19 ing organization shall promptly file notice 

20 of the prohibition or denial with the Com21 mission. 

22 ‘‘(ii) CONTENTS.—The notice shall be 

23 in such form and contain such information 

24 as the Commission, by rule, may prescribe 

25 as appropriate in the public interest. 


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1 ‘‘(B) REVIEW BY COMMISSION.—Any pro2 hibition or limitation on access to services with 

3 respect to which a derivatives clearing organiza4 tion is required by subparagraph (A) to file no5 tice shall be subject to review by the Commis6 sion on— 

7 ‘‘(i) the motion of the Commission; or 

8 ‘‘(ii) application by any person ag9 grieved by the prohibition or limitation 

10 filed— 

11 ‘‘(I) not later than 30 days after 

12 the date the notice described in sub13 paragraph (A) has been filed with the 

14 Commission and received by the ag15 grieved person; or 

16 ‘‘(II) within such longer period 

17 as the Commission may determine. 

18 ‘‘(C) STAYS.— 

19 ‘‘(i) IN GENERAL.—Application to the 

20 Commission for review, or the institution 

21 of review by the Commission on the motion 

22 of the Commission, shall not operate as a 

23 stay of the prohibition or limitation, unless 

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•S 1691 IS

1 marily or after notice and opportunity for 

2 hearing on the question of a stay. 

3 ‘‘(ii) HEARING.—A hearing under 

4 clause (i) may consist solely of the submis5 sion of affidavits or presentation of oral ar6 guments. 

7 ‘‘(iii) EXPEDITED PROCEDURE.—The 

8 Commission shall establish for appropriate 

9 cases an expedited procedure for consider10 ation and determination of the question of 

11 a stay. 

12 ‘‘(D) ACTIONS.— 

13 ‘‘(i) DISMISSAL OF PROCEEDINGS.— 

14 For purposes of clearing commodity-based 

15 swaps, in any proceeding to review the pro16 hibition or limitation of any person in re17 spect of access to services offered by a de18 rivatives clearing organization, the Com19 mission, by order, shall dismiss the pro20 ceeding if the Commission finds, after no21 tice and opportunity for hearing, that— 

22 ‘‘(I) the prohibition or limitation 

23 is consistent with this Act (including 

24 rules and regulations); and 


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1 ‘‘(II) the person has not been 

2 discriminated against unfairly. 

3 ‘‘(ii) ACCESS TO SERVICES.—If the 

4 Commission does not make a finding de5 scribed in clause (i), or if the Commission 

6 finds that the prohibition or limitation im7 poses any burden on competition not ap8 propriate in furtherance of the purposes of 

9 this Act, the Commission, by order, shall— 

10 ‘‘(I) set aside the prohibition or 

11 limitation; and 

12 ‘‘(II) require the registered trade 

13 repository to permit the person access 

14 to the services offered by the deriva15 tives clearing organization to which 

16 the prohibition or limitation applied. 

17 ‘‘(7) ADMINISTRATIVE PROCEEDING AUTHOR18 ITY.—The Commission, by order, may censure or 

19 place limitations on the activities, functions, or oper20 ations of any derivatives clearing organization that 

21 is clearing commodity-based swaps, or suspend for a 

22 period not exceeding 12 months or revoke the reg23 istration of any derivatives clearing organization, if 

24 the Commission finds, on the record after notice and 

25 opportunity for hearing, that— 


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1 ‘‘(A) the censure, placing of limitations, 

2 suspension, or revocation is appropriate in the 

3 public interest and for the protection of market 

4 participants or otherwise in furtherance of the 

5 purposes of this Act; and 

6 ‘‘(B) the derivatives clearing organization 

7 has violated or is unable to comply with any 

8 provision of this Act (including rules or regula9 tions). 

10 ‘‘(8) RULEMAKING AUTHORIZATION.—For pur11 poses of clearing commodity-based swaps, no deriva12 tives clearing organization shall, directly or indi13 rectly, engage in any activity as a derivatives clear14 ing organization in contravention of such rules and 

15 regulations as the Commission may prescribe— 

16 ‘‘(A) as appropriate in the public interest; 

17 ‘‘(B) for the protection of market partici18 pants; or 

19 ‘‘(C) otherwise in furtherance of the pur20 poses of this Act. 

21 ‘‘(9) RECORDS, REPORTS, AND EXAMINA22 TIONS.— 

23 ‘‘(A) IN GENERAL.—Each derivatives 

24 clearing organization shall, for purposes of 

25 clearing commodity-based swaps, make and 


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1 keep for prescribed periods such records, fur2 nish such copies of the records, and make and 

3 disseminate such reports as the Commission, by 

4 rule, prescribes as appropriate in the public in5 terest, or otherwise in furtherance of the pur6 poses of this Act. 

7 ‘‘(B) EXAMINATIONS.—For purposes of 

8 clearing commodity-based derivative instru9 ments, all records of a derivatives clearing orga10 nization shall be subject at any time to such 

11 reasonable periodic, special, or other examina12 tions by representatives of the Commission as 

13 the Commission considers appropriate in the 

14 public interest, for the protection of market 

15 participants, or otherwise in furtherance of the 

16 purposes of this Act.’’. 

17 SEC. 204. PRUDENTIAL SUPERVISION AND REGULATION OF 

18 SIGNIFICANT COMMODITY-BASED DERIVA19 TIVES MARKET PARTICIPANTS AND INCEN20 TIVES FOR TRADING ON REGULATED EX21 CHANGES. 

22 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

23 is amended by inserting after section 4r (as added by sec24 tion 203(a)) the following: 


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1 ‘‘SEC. 4s. REGULATION OF SIGNIFICANT COMMODITY2 BASED DERIVATIVES MARKET PARTICI3 PANTS. 

4 ‘‘(a) DEFINITION OF APPROPRIATE REGULATORY

5 AUTHORITY.—In this section, the term ‘appropriate regu6 latory authority’ means— 

7 ‘‘(1) the appropriate Federal banking agency 

8 (as defined in section 1813(q) of title 12, United 

9 States Code), with respect to a significant com10 modity-based derivatives market participant that is 

11 an insured depository institution (as defined in sec12 tion 1813(c) of title 12, United States Code), but 

13 not an affiliate of an insured depository institution; 

14 ‘‘(2) the Federal Housing Finance Agency, with 

15 respect to a significant commodity-based derivatives 

16 market participant that is a regulated entity (as de17 fined in section 4502 of title 12, United States 

18 Code); 

19 ‘‘(3) the Commission, with respect to a signifi20 cant commodity-based derivatives market participant 

21 that is— 

22 ‘‘(A) a futures commission merchant or an 

23 introducing broker, other than a futures com24 mission merchant or an introducing broker reg25 istered pursuant to section 4f(a) or an affiliate 

26 of an insured depository institution; or 


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1 ‘‘(B) a commodity pool operator or com2 modity trading advisor, other than an affiliate 

3 of an insured depository institution; and 

4 ‘‘(4) the Securities and Exchange Commission, 

5 with respect to a significant commodity-based de6 rivatives market participant— 

7 ‘‘(A) that is a broker or dealer, as those 

8 terms are defined in section 3(a) of the Securi9 ties Exchange Act of 1934 (15 U.S.C. 78c(a)) 

10 (other than a broker or dealer registered under 

11 section 15(b)(11) of that Act (15 U.S.C. 

12 78o(b)(11)) that is not an affiliate of an in13 sured depository institution); or 

14 ‘‘(B) for which there is not another appro15 priate regulatory authority otherwise specified 

16 in this subsection. 

17 ‘‘(b) REGISTRATION BY SIGNIFICANT COMMODITY18 BASED DERIVATIVES MARKET PARTICIPANTS.—It shall 

19 be unlawful for any significant commodity-based deriva20 tives market participant to make use of the mails or any 

21 means or instrumentality of interstate commerce to effect 

22 any transactions in, or to induce or attempt to induce a 

23 transaction in, any commodity-based swap unless the sig24 nificant commodity-based derivatives market participant 

25 has registered in accordance with subsection (c). 


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1 ‘‘(c) MANNER OF REGISTRATION OF SIGNIFICANT

2 COMMODITY-BASED DERIVATIVES MARKET PARTICI3 PANTS.— 

4 ‘‘(1) IN GENERAL.—A significant commodity5 based derivatives market participant subject to the 

6 registration requirement of subsection (b) may reg7 ister by filing with the Commission an application 

8 for registration in such form and containing such in9 formation and documents concerning the significant 

10 commodity-based derivatives market participant and 

11 any persons associated with the significant com12 modity-based derivatives market participant as the 

13 Commission, by rule, regulation, or order, may pre14 scribe as appropriate in the public interest or for the 

15 protection of market participants. 

16 ‘‘(2) ACTION BY THE COMMISSION.— 

17 ‘‘(A) IN GENERAL.—Not later than 45 

18 days after the date of filing of an application 

19 under paragraph (1) (or, with the consent of 

20 the applicant, a longer period), the Commission 

21 shall— 

22 ‘‘(i) by order grant registration; or 

23 ‘‘(ii) institute proceedings in accord24 ance with subparagraph (B) to determine 

25 whether the registration should be denied. 


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1 ‘‘(B) PROCEEDINGS.— 

2 ‘‘(i) IN GENERAL.—Proceedings initi3 ated under subparagraph (B)(ii) shall in4 clude notice of the grounds for denial 

5 under consideration and opportunity for 

6 hearing. 

7 ‘‘(ii) CONCLUSION.—Not later than 

8 120 days after the date of the filing of the 

9 application for registration, the Commis10 sion shall conclude the proceedings and, by 

11 order, grant or deny the registration. 

12 ‘‘(iii) EXTENSION.—The Commission 

13 may extend the time for the conclusion of 

14 a proceedings for up to 90 days (or, with 

15 the consent of the applicant, a longer pe16 riod) if the Commission finds good cause 

17 for the extension and publishes the reasons 

18 for the extension. 

19 ‘‘(C) BASIS FOR DETERMINATION.— 

20 ‘‘(i) IN GENERAL.—The Commission 

21 shall grant the registration of a significant 

22 commodity-based derivatives market partic23 ipant if the Commission finds that the re24 quirements of this section are satisfied. 


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1 ‘‘(ii) DENIAL.—The Commission shall 

2 deny the registration if the Commission 

3 does not make a finding under clause (i) or 

4 if the Commission finds that if the appli5 cant were registered, the registration of 

6 the applicant would be subject to suspen7 sion or revocation under subsection (f). 

8 ‘‘(3) WITHDRAWAL.—Any person that has filed 

9 an application pursuant to paragraph (1) may, on 

10 such terms and conditions as the Commission deter11 mines appropriate in the public interest, for the pro12 tection of market participants, or otherwise in fur13 therance of the purposes of this Act, withdraw the 

14 application by filing a written withdrawal with the 

15 Commission. 

16 ‘‘(d) BUSINESS CONDUCT REQUIREMENTS.— 

17 ‘‘(1) DEFINITION OF REGULATED PERSON.—In 

18 this subsection, the term ‘regulated person’ means— 

19 ‘‘(A) a significant commodity-based deriva20 tives market participant; and 

21 ‘‘(B) any other class of persons that the 

22 Commission may determine by rule, regulation, 

23 or order to be subject to this subsection. 

24 ‘‘(2) PROHIBITION.—It shall be unlawful for 

25 any regulated person to make use of the mails or 


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1 any means or instrumentality of interstate commerce 

2 to effect any transaction in, or to induce or attempt 

3 to induce a transaction in, any commodity-based 

4 swap, unless the regulated person complies with such 

5 business conduct requirements as the Commission 

6 and the Securities and Exchange Commission, in 

7 consultation with the appropriate regulatory authori8 ties, may jointly prescribe by rule, regulation, or 

9 order, as appropriate in the public interest, for the 

10 protection of market participants, and otherwise in 

11 furtherance of the purposes of this Act. 

12 ‘‘(3) REQUIREMENTS.—Business conduct re13 quirements prescribed under this subsection shall— 

14 ‘‘(A) establish the standard of care re15 quired for a regulated person to verify that any 

16 counterparty meets the eligibility standards for 

17 an eligible contract participant or qualified in18 stitutional buyer (as defined in section 3(a) of 

19 the Securities Exchange Act of 1934 (15 

20 U.S.C. 78c(a))); 

21 ‘‘(B) require disclosure by the regulated 

22 person to any counterparty to the transaction 

23 of— 


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1 ‘‘(i) material product-specific informa2 tion about the risks and characteristics of 

3 the commodity-based swap; 

4 ‘‘(ii) the source and amount of any 

5 fees or other material remuneration that 

6 the regulated person would directly or indi7 rectly expect to receive in connection with 

8 the commodity-based swap; and 

9 ‘‘(iii) any other material incentives or 

10 conflicts of interest that the regulated per11 son may have in connection with the com12 modity-based swap; 

13 ‘‘(C) establish a minimum standard of con14 duct for a regulated person with respect to any 

15 counterparty, other than a qualified institu16 tional buyer (as defined in section 3(a) of the 

17 Securities Exchange Act of 1934 (15 U.S.C. 

18 78c(a))), for— 

19 ‘‘(i) providing disclosure of the gen20 eral risks and characteristics of any com21 modity-based swap; 

22 ‘‘(ii) communicating in a fair and bal23 anced manner based on principles of fair 

24 dealing and good faith; 


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1 ‘‘(iii) assessing the appropriateness of 

2 any commodity-based swap for the 

3 counterparty, except that in the case of a 

4 counterparty that is an eligible contract 

5 participant specified in clause (iv), the reg6 ulated person may rely on the representa7 tions described in clause (iv)(VI) that the 

8 transaction is appropriate for the 

9 counterparty; and 

10 ‘‘(iv) with respect to a counterparty 

11 that is an eligible contract participant 

12 (within the meaning of subclause (I) or 

13 (II) of section 1a(15)(A)(vii)), having a 

14 reasonable basis to believe that the 

15 counterparty has an independent rep16 resentative that— 

17 ‘‘(I) has sufficient knowledge to 

18 evaluate the transaction and risks; 

19 ‘‘(II) is not subject to a statutory 

20 disqualification; 

21 ‘‘(III) is independent of the regu22 lated person; 

23 ‘‘(IV) undertakes a duty to act in 

24 the best interests of the counterparty 


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1 that the independent representative 

2 represents; 

3 ‘‘(V) makes appropriate disclo4 sures; and 

5 ‘‘(VI) will provide written rep6 resentations to the eligible contract 

7 participant regarding fair pricing and 

8 the appropriateness of the trans9 action; 

10 ‘‘(D) require the availability of information 

11 about any commodity referenced in a com12 modity-based swap or on which the commodity13 based swap is based; and 

14 ‘‘(E) establish such other standards and 

15 requirements as the Commission, acting jointly 

16 with the Securities and Exchange Commission 

17 and in consultation with the appropriate regu18 latory authorities, may determine are appro19 priate in the public interest, for the protection 

20 of market participants, or otherwise in further21 ance of the purposes of this Act. 

22 ‘‘(e) STATUTORY DISQUALIFICATION.—Except to the 

23 extent otherwise specifically provided by rule, regulation, 

24 or order of the Commission, it shall be unlawful for a sig25 nificant commodity-based derivatives market participant 


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1 to permit any associated person of the significant com2 modity-based derivatives market participant who is subject 

3 to a statutory disqualification to effect or be involved in 

4 effecting transactions in commodity-based swaps on behalf 

5 of the significant commodity-based derivatives market par6 ticipant, if the significant commodity-based derivatives 

7 market participant knew, or in the exercise of reasonable 

8 care should have known, of the statutory disqualification. 

9 ‘‘(f) ADMINISTRATIVE PROCEEDING AUTHORITY.— 

10 ‘‘(1) IN GENERAL.—The Commission, by order, 

11 shall censure, place limitations on the activities, 

12 functions, or operations of, or reject the filing of any 

13 significant commodity-based derivatives market par14 ticipant that has registered with the Commission 

15 pursuant to subsection (d) if the Commission finds, 

16 on the record after notice and opportunity for hear17 ing, that— 

18 ‘‘(A) the censure, placing of limitations, or 

19 rejection is in the public interest; and 

20 ‘‘(B) the significant commodity-based de21 rivatives market participant, or any person as22 sociated with the significant commodity-based 

23 derivatives market participant effecting or in24 volved in effecting transactions in commodity25 based swaps on behalf of the significant comVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00151 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 modity-based derivatives market participant, 

2 whether prior or subsequent to becoming so as3 sociated, has committed or omitted any act, or 

4 is subject to an order or finding, described in 

5 paragraphs (2) and (3) of section 8a. 

6 ‘‘(2) ASSOCIATED PERSONS.—With respect to 

7 any person who is associated, who is seeking to be8 come associated, or who, at the time of the alleged 

9 misconduct, was associated or was seeking to become 

10 associated with a significant commodity-based de11 rivatives market participant for the purpose of ef12 fecting or being involved in effecting commodity13 based swaps on behalf of the significant commodity14 based derivatives market participant, the Commis15 sion, by order, shall censure, place limitations on the 

16 activities or functions of the person, or suspend for 

17 a period not exceeding 12 months, or bar the person 

18 from being associated with a significant commodity19 based derivatives market participant, if the Commis20 sion finds, on the record after notice and oppor21 tunity for a hearing, that— 

22 ‘‘(A) the censure, placing of limitations, 

23 suspension, or bar is in the public interest; and 


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1 ‘‘(B) the person has committed or omitted 

2 any act, or is subject to an order or finding, de3 scribed in paragraphs (2) and (3) of section 8a. 

4 ‘‘(3) PROHIBITION.—It shall be unlawful— 

5 ‘‘(A) for any person with respect to whom 

6 an order under paragraph (2) is in effect, with7 out the consent of the Commission, willfully to 

8 become, or to be, associated with a significant 

9 commodity-based derivatives market participant 

10 in contravention of the order; or 

11 ‘‘(B) for any significant commodity-based 

12 derivatives market participant to permit a per13 son described in subparagraph (A), without the 

14 consent of the Commission, to become or re15 main, a person associated with the significant 

16 commodity-based derivatives market participant 

17 in contravention of an order under paragraph 

18 (2), if the significant commodity-based deriva19 tives market participant knew, or in the exer20 cise of reasonable care should have known, of 

21 the order. 

22 ‘‘(g) CAPITAL AND MARGIN REQUIREMENTS.— 

23 ‘‘(1) IN GENERAL.—It shall be unlawful for any 

24 person to conduct business as a significant com25 modity-based derivatives market participant unless 


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1 the person meets at all times such minimum capital 

2 and margin requirements as the appropriate regu3 latory authorities shall jointly prescribe, not later 

4 than 180 days after the enactment of this section, 

5 by rule or regulation as appropriate in the public in6 terest or for the maintenance of fair and orderly 

7 markets and consistent with the purposes of this Act 

8 to provide safeguards with respect to the financial 

9 responsibility and related practices of the significant 

10 commodity-based derivatives market participant. 

11 ‘‘(2) CAPITAL REQUIREMENTS.—In setting cap12 ital requirements for significant commodity-based 

13 derivatives market participants, the appropriate reg14 ulatory authorities shall consider among other 

15 things— 

16 ‘‘(A) the liquidity of each commodity-based 

17 swap, including whether the commodity-based 

18 swap— 

19 ‘‘(i) is traded on a liquid market; and 

20 ‘‘(ii) is centrally cleared; and 

21 ‘‘(B) whether the commodity-based swap is 

22 used to offset or hedge another instrument or 

23 asset owned by such significant commodity24 based derivatives market participant. 


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1 ‘‘(3) MARGIN REQUIREMENTS.—The appro2 priate regulatory authorities shall jointly prescribe 

3 margin requirements, which may permit the use of 

4 noncash collateral, that apply to commodity-based 

5 swaps entered into by a significant commodity-based 

6 derivatives market participant, as the appropriate 

7 regulatory authorities jointly determine to be appro8 priate for the purpose of, at a minimum— 

9 ‘‘(A) preserving the financial integrity of 

10 markets trading commodity-based swaps; and 

11 ‘‘(B) preventing systemic risk. 

12 ‘‘(4) COMMISSION RULES.—Nothing in this Act 

13 prevents the Commission from prescribing capital 

14 and margin requirements that are higher or more 

15 restrictive than the joint rules adopted under this 

16 subsection for significant commodity-based deriva17 tives market participants for which the Commission 

18 is the appropriate regulatory authority. 

19 ‘‘(h) ENFORCEMENT AUTHORITY.—Each appropriate 

20 regulatory authority shall have sole authority to enforce 

21 compliance with the rules adopted under subsection (g) 

22 in the case of each significant derivatives market partici23 pant for which the regulatory authority is the appropriate 

24 regulatory authority, as defined in subsection (a).’’. 


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1 SEC. 205. RECORDKEEPING AND REPORTING REQUIRE2 MENTS FOR DERIVATIVES MARKET PARTICI3 PANTS. 

4 (a) IN GENERAL.—Section 4g of the Commodity Ex5 change Act (7 U.S.C. 6g) is amended by striking ‘‘SEC. 

6 4g.’’ and all that follows through the end of subsection 

7 (a) and inserting the following: 

8 ‘‘SEC. 4g. RECORDKEEPING AND REPORTING REQUIRE9 MENTS FOR COMMODITY-BASED DERIVA10 TIVES MARKET PARTICIPANTS. 

11 ‘‘(a) IN GENERAL.—Each person registered under 

12 this Act as a futures commission merchant, introducing 

13 broker, floor broker, floor trader, or significant com14 modity-based derivatives market participant (or any other 

15 person that engages in transactions in commodity-based 

16 swaps as the Commission, by rule, regulation or order, 

17 designates) shall— 

18 ‘‘(1) make such reports as are required by the 

19 Commission regarding the transactions and positions 

20 of the person, and the transactions and positions of 

21 the customers of the person, in commodities for fu22 ture delivery on any board of trade in the United 

23 States or elsewhere, in any significant price dis24 covery contract traded or executed on an electronic 

25 trading facility, in any agreement, contract, or 

26 transaction that is treated by a derivatives clearing 


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1 organization, whether registered or not registered, as 

2 fungible with a significant price discovery contract, 

3 and in any commodity-based swap; 

4 ‘‘(2) keep books and records pertaining to those 

5 transactions and positions in such form and manner 

6 and for such period as may be required by the Com7 mission; and 

8 ‘‘(3) make those books and records available for 

9 inspection by any representative of the Commission 

10 or the Department of Justice.’’. 

11 (b) DAILY TRADING RECORD.—Section 4g of the 

12 Commodity Exchange Act (7 U.S.C. 6g) is amended— 

13 (1) by striking subsections (c) and (d) and in14 serting the following: 

15 ‘‘(c) DAILY TRADING RECORDS.— 

16 ‘‘(1) IN GENERAL.—Each floor broker, intro17 ducing broker, futures commission merchant, signifi18 cant commodity-based derivatives market partici19 pant, and any other person designated by the Com20 mission pursuant to subsection (a) shall maintain 

21 daily trading records for each customer in such man22 ner and form as to be identifiable with the trades re23 ferred to in subsection (b). 

24 ‘‘(2) FORM AND REPORTS.— 


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1 ‘‘(A) IN GENERAL.—Daily trading records 

2 shall be maintained in a form suitable to the 

3 Commission for such period as may be required 

4 by the Commission. 

5 ‘‘(B) REPORTS.—Reports shall be made 

6 from the records maintained at such time, in 

7 such manner, and at such places as the Com8 mission may prescribe by rule, order, or regula9 tion in order to protect the public interest and 

10 the interest of persons trading in commodity fu11 tures or commodity-based swaps.’’; and 

12 (2) by redesignating subsections (e) and (f) as 

13 subsections (d) and (e), respectively. 

14 SEC. 206. PROHIBITION OF MARKET MANIPULATION, 

15 FRAUD, AND OTHER MARKET ABUSES. 

16 (a) POSITION LIMITS.— 

17 (1) IN GENERAL.—Section 4a(a) of the Com18 modity Exchange Act (7 U.S.C. 6a(a)) is amended— 

19 (A) by striking ‘‘SEC. 4a. (a) Excessive’’ 

20 and inserting the following: 

21 ‘‘SEC. 4a. EXCESSIVE SPECULATION AS BURDEN ON INTER22 STATE COMMERCE. 

23 ‘‘(a) EXCESSIVE SPECULATION.— 

24 ‘‘(1) IN GENERAL.—Excessive’’; 


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1 (B) by designating the first through sixth 

2 sentences as paragraphs (1) through (6), re3 spectively; 

4 (C) in paragraph (1) (as so designated), by 

5 striking ‘‘on electronic trading facilities with re6 spect to a significant price discovery contract’’ 

7 and inserting ‘‘commodity-based swaps that 

8 perform or affect a significant price discovery 

9 function’’; 

10 (D) in paragraph (2) (as so designated)— 

11 (i) by inserting ‘‘, including any group 

12 or class of traders,’’ after ‘‘held by any 

13 person’’; and 

14 (ii) by striking ‘‘on an electronic trad15 ing facility with respect to a significant 

16 price discovery contract,’’ and inserting 

17 ‘‘commodity-based swaps that perform or 

18 affect a significant price discovery func19 tion,’’; and 

20 (E) by adding at the end the following: 

21 ‘‘(7) AGGREGATE POSITION LIMITS AND POSI22 TION REPORTING FOR COMMODITY-BASED SWAPS.— 

23 The Commission may, by rule or regulation, estab24 lish limits (including related hedge exemption provi25 sions) on, or otherwise prescribe requirements reVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00159 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 garding, the aggregate number of positions in com2 modity-based swaps based on the same underlying 

3 commodity that may be held by any person, includ4 ing any group or class of traders, for each month 

5 across— 

6 ‘‘(A) contracts listed by designated con7 tract markets; 

8 ‘‘(B) contracts traded on a foreign board 

9 of trade; and 

10 ‘‘(C) commodity-based swaps that perform 

11 or affect a significant price discovery function. 

12 ‘‘(8) CONSIDERATIONS.—In making a deter13 mination whether a commodity-based swap performs 

14 or affects a significant price discovery function, the 

15 Commission shall consider the extent to which the 

16 commodity-based swap has a significant price link17 age, price discovery relationship, or other significant 

18 price relationship with 1 or more contracts listed by 

19 designated contract markets. 

20 ‘‘(9) REPORTS.—The Commission may, by rule 

21 or regulation, require any person that effects trans22 actions for the account of the person or the account 

23 of others in any commodity-based swap to report 

24 such information as the Commission may prescribe 


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1 regarding any position or positions in the com2 modity-based swaps. 

3 ‘‘(10) EXEMPTIONS.—The Commission, by rule 

4 or regulation, may conditionally or unconditionally 

5 exempt any person or class of persons, any com6 modity-based swap or class of commodity-based 

7 swaps, or any transaction or class of transactions 

8 from any requirement the Commission establishes 

9 under this section with respect to position limits for 

10 commodity-based swaps.’’. 

11 (2) CONFORMING AMENDMENTS.—Section 

12 4a(b) of the Commodity Exchange Act (7 U.S.C. 

13 6a(b)) is amended— 

14 (A) in paragraph (1), by striking ‘‘or elec15 tronic trading facility’’ and inserting ‘‘or 1 or 

16 more regulated electronic transparent trade exe17 cution systems’’; and 

18 (B) in paragraph (2), by striking ‘‘or elec19 tronic trading facility’’ and inserting ‘‘or regu20 lated electronic transparent trade execution sys21 tem’’. 

22 (b) PROHIBITIONS.—Section 4b of the Commodity 

23 Exchange Act (7 U.S.C. 6b) is amended— 

24 (1) in subsection (a)— 


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1 (A) in paragraph (1), by striking ‘‘or’’ 

2 after the semicolon at the end; 

3 (B) in paragraph (2)(D)(ii), by striking 

4 the period at the end and inserting ‘‘; or’’; and 

5 (C) by adding at the end the following: 

6 ‘‘(3) for any person, directly or indirectly, by 

7 the use of any means or instrumentality of interstate 

8 commerce or of the mails, to effect any transaction 

9 in, or to induce or attempt to induce a transaction 

10 in, any commodity-based swap, in connection with 

11 which the person— 

12 ‘‘(A) engages in any fraudulent, deceptive, 

13 or manipulative act or practice; 

14 ‘‘(B) makes any fictitious quotation; or 

15 ‘‘(C) engages in any transaction, practice, 

16 or course of business that operates as a fraud 

17 or deceit on any person.’’; and 

18 (2) in subsection (b)— 

19 (A) by striking ‘‘Subsection (a)(2) of this 

20 section’’ and inserting the following: 

21 ‘‘(1) IN GENERAL.—Subsection (a)(2)’’; and 

22 (B) by adding at the end the following: 

23 ‘‘(2) COMMODITY-BASED SWAPS.— 

24 ‘‘(A) IN GENERAL.—For the purposes of 

25 subsection (a)(3), the Commission shall, by 


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1 rule, regulation, or order, define and prescribe 

2 means reasonably designed to prevent— 

3 ‘‘(i) such transactions, acts, practices, 

4 and courses of business as are fraudulent, 

5 deceptive, or manipulative; and 

6 ‘‘(ii) such quotations as are fictitious. 

7 ‘‘(B) REQUIREMENTS.—In adopting rules, 

8 regulations, or orders under subparagraph (A), 

9 the Commission shall— 

10 ‘‘(i) consult with the Securities and 

11 Exchange Commission; and 

12 ‘‘(ii) seek to maintain comparability of 

13 the rules, regulations, or orders with simi14 lar rules of the Securities and Exchange 

15 Commission.’’. 

16 SEC. 207. PROTECTIONS FOR MARKETING COMMODITY17 BASED SWAPS TO CERTAIN PERSONS. 

18 (a) DEFINITION OF ELIGIBLE CONTRACT PARTICI19 PANT.—Paragraph (15) of section 1a of the Commodity 

20 Exchange Act (7 U.S.C. 1a) (as redesignated by section 

21 201(2)) is amended— 

22 (1) in subparagraph (A)— 

23 (A) in clause (i), by inserting ‘‘(as defined 

24 in paragraph (18) as in effect on the date of 

25 enactment of the Comprehensive Derivatives 


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1 Regulation Act of 2009)’’ after ‘‘financial insti2 tution’’; 

3 (B) in clause (iv)(I), by striking ‘‘total as4 sets’’ and inserting ‘‘total net assets’’; 

5 (C) in clause (v)— 

6 (i) in subclause (I), by striking ‘‘total 

7 assets exceeding $10,000,000’’ and insert8 ing ‘‘total net assets exceeding 

9 $10,000,000; or’’; 

10 (ii) by striking subclause (II); 

11 (iii) by redesignating subclause (III) 

12 as subclause (II); and 

13 (iv) in item (aa) of subclause (II) (as 

14 so designated), by striking ‘‘a net worth 

15 exceeding $1,000,000’’ and inserting ‘‘total 

16 net assets exceeding $5,000,000’’; 

17 (D) in clause (vii), by striking subclause 

18 (III) and the undesignated matter following 

19 that subclause and inserting the following: 

20 ‘‘(III) an instrumentality, agency, 

21 or department of an entity described 

22 in subclause (I) or (II); 

23 except that the term does not include 

24 an entity, political subdivision, instru25 mentality, agency, or department deVerDate Nov 24 2008 01:27 Sep 23, 2009 Jkt 079200 PO 00000 Frm 00164 Fmt 6652 Sfmt 6201 E:\BILLS\S1691.IS S1691

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1 scribed in subclause (I) or (III) unless 

2 the entity, political subdivision, instru3 mentality, agency, or department 

4 owns and invests on a discretionary 

5 basis $50,000,000 or more in invest6 ments, except that, with respect to 

7 any State or entity, political subdivi8 sion, agency or department of a State, 

9 that amount is exclusive of any pro10 ceeds from any offering of municipal 

11 securities;’’; and 

12 (E) by striking clause (xi) and inserting 

13 the following: 

14 ‘‘(xi) an individual who— 

15 ‘‘(I) owns and invests on a dis16 cretionary basis not less than 

17 $10,000,000; 

18 ‘‘(II) owns and invests on a dis19 cretionary basis not less than 

20 $5,000,000 and who enters into the 

21 agreement, contract, or transaction in 

22 order to manage the risk associated 

23 with an asset owned or liability in24 curred, or reasonably likely to be 


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1 owned or incurred, by the individual; 

2 or 

3 ‘‘(III) is an officer or director of 

4 an entity (or a person performing 

5 similar functions) and who enters into 

6 the agreement, contract, or trans7 action in order to manage the risk as8 sociated with the securities of the en9 tity owned by the individual at the 

10 time of entering into the agreement, 

11 contract, or transaction;’’; and 

12 (2) in subparagraph (C), by inserting ‘‘by rule, 

13 jointly with the Securities and Exchange Commis14 sion,’’ after ‘‘determines’’. 

15 (b) LIMITATION ON PARTICIPATION IN COMMODITY16 BASED SWAPS.—Section 2 of the Commodity Exchange 

17 Act (7 U.S.C. 2) (as amended by section 202(a)(2)(A)) 

18 is amended by adding at the end the following: 

19 ‘‘(f) LIMITATION ON PARTICIPATION IN COMMODITY20 BASED SWAPS.—It shall be unlawful for any person, other 

21 than an eligible contract participant, to enter into a com22 modity-based swap.’’. 


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1 SEC. 208. COMMODITY-BASED SWAP EXECUTION FACILI2 TIES. 

3 The Commodity Exchange Act is amended by insert4 ing after section 5g (7 U.S.C. 7b–2) the following: 

5 ‘‘SEC. 5h. COMMODITY-BASED SWAP EXECUTION FACILI6 TIES. 

7 ‘‘(a) REGISTRATION.—No person may operate a trad8 ing facility for commodity-based swaps, unless the trading 

9 facility is registered as a commodity-based swap execution 

10 facility under this section. 

11 ‘‘(b) CRITERIA FOR REGISTRATION.— 

12 ‘‘(1) IN GENERAL.—To be registered as a com13 modity-based swap execution facility, a facility shall 

14 demonstrate to the Commission that the facility 

15 meets the criteria specified in this section. 

16 ‘‘(2) TRADING AND PARTICIPATION RULES.— 

17 The commodity-based swap execution facility shall— 

18 ‘‘(A) establish and enforce trading and 

19 participation rules that will deter abuses; and 

20 ‘‘(B) have the capacity to detect, inves21 tigate, and enforce the rules, including the ca22 pacity— 

23 ‘‘(i) to obtain information necessary to 

24 perform the functions required under this 

25 section; 


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1 ‘‘(ii) to provide market participants 

2 with impartial access to the market; and 

3 ‘‘(iii) to obtain information that may 

4 be used in establishing whether rule viola5 tions have occurred. 

6 ‘‘(3) TRADING PROCEDURES.—The commodity7 based swap execution facility shall establish and en8 force rules or terms and conditions defining, or spec9 ifications detailing, trading procedures to be used in 

10 entering and executing orders for commodity-based 

11 swaps on the facilities of the commodity-based swap 

12 execution facility. 

13 ‘‘(4) FINANCIAL INTEGRITY.—The commodity14 based swap execution facility shall establish and en15 force rules and procedures to ensure the financial in16 tegrity of commodity-based swaps entered on or 

17 through the facilities of the commodity-based swap 

18 execution facility, including the clearance and settle19 ment of commodity-based swaps pursuant to section 

20 2(f). 

21 ‘‘(c) PRINCIPLES FOR COMMODITY-BASED SWAP

22 EXECUTION FACILITIES.— 

23 ‘‘(1) COMPLIANCE.— 

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1 ity, the facility shall comply with the principles 

2 specified in this subsection. 

3 ‘‘(B) DISCRETION.—Except in cases in 

4 which the Commission adopts rules or regula5 tions pursuant to section 8a(5), the commodity6 based swap execution facility shall have reason7 able discretion in establishing the manner in 

8 which the facility complies with this subsection. 

9 ‘‘(2) RULES.—The commodity-based swap exe10 cution facility shall monitor and enforce compliance 

11 with any of the rules of the facility, including— 

12 ‘‘(A) the terms and conditions of the com13 modity-based swaps traded on or through the 

14 facility; and 

15 ‘‘(B) any limitations on access to the facil16 ity. 

17 ‘‘(3) PREVENTION OF MANIPULATION.— 

18 ‘‘(A) IN GENERAL.—The commodity-based 

19 swap execution facility shall permit trading only 

20 in commodity-based swaps that are not readily 

21 susceptible to manipulation. 

22 ‘‘(B) MONITORING.—The commodity-based 

23 swap execution facility shall monitor trading in 

24 commodity-based swaps to prevent price manip25 ulation, price distortion through surveillance, 


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1 compliance, and disciplinary practices and pro2 cedures, including methods for conducting real3 time monitoring of trading and comprehensive 

4 and accurate trade reconstructions. 

5 ‘‘(4) POSITION LIMITATIONS AND ACCOUNT6 ABILITY.— 

7 ‘‘(A) IN GENERAL.—To reduce the poten8 tial threat of market manipulation or conges9 tion, and to eliminate or prevent excessive spec10 ulation (as described in section 4a(a)), the com11 modity-based swap execution facility shall adopt 

12 for each of the contracts of the facility, as ap13 propriate, position limitations or position ac14 countability for speculators. 

15 ‘‘(B) LIMITATION LEVEL.—For any con16 tract that is subject to a position limitation es17 tablished by the Commission pursuant to sec18 tion 4a(a), the commodity-based derivative exe19 cution facility shall set the position limitations 

20 of the facility at a level that is not higher than 

21 the Commission limitation. 

22 ‘‘(5) INFORMATION SHARING.—The commodity23 based swap execution facility shall— 

24 ‘‘(A) establish and enforce rules that will 

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1 mation to perform any of the functions de2 scribed in this subsection; 

3 ‘‘(B) provide the information to the Com4 mission on request; and 

5 ‘‘(C) have the capacity to carry out such 

6 international information-sharing agreements as 

7 the Commission may require. 

8 ‘‘(6) ACCESSIBILITY.—The commodity-based 

9 swap trade execution facility shall make public time10 ly information on price, trading volume, and other 

11 trading data to the extent appropriate for com12 modity-based swaps. 

13 ‘‘(7) MAINTENANCE OF RECORDS.—The com14 modity-based derivative instrument execution facility 

15 shall— 

16 ‘‘(A) maintain records of all activities re17 lated to the business of the facility, including a 

18 complete audit trail, in a form and manner ac19 ceptable to the Commission for a period of at 

20 least 5 years; and 

21 ‘‘(B) submit to the Commission such re22 ports as the Committee may require, at such 

23 time, in such manner, and containing such in24 formation as is determined by the Commission 


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1 to be necessary for the Commission to perform 

2 the responsibilities of the Commission. 

3 ‘‘(8) EMERGENCY AUTHORITY.—The com4 modity-based swap execution facility shall adopt 

5 rules to provide for the exercise of emergency au6 thority, in consultation or cooperation with the Com7 mission, as appropriate, including the authority to 

8 suspend or curtail trading in a commodity-based 

9 swap. 

10 ‘‘(9) CONFLICTS OF INTEREST.—The com11 modity-based derivative instrument execution facility 

12 shall— 

13 ‘‘(A) establish and enforce rules to mini14 mize conflicts of interest in the decisionmaking 

15 process of the facility; and 

16 ‘‘(B) establish a process for resolving the 

17 conflicts of interest. 

18 ‘‘(d) TRADING BY CONTRACT MARKETS.—A board of 

19 trade that operates a contract market shall, to the extent 

20 that the board of trade also operates a commodity-based 

21 swap execution facility and uses the same electronic trade 

22 execution system for trading on the contract market and 

23 the commodity-based swap execution facility, identify 

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1 tract market or the commodity-based swap execution facil2 ity.’’. 

3 SEC. 209. ENFORCEMENT. 

4 Section 6c of the Commodity Exchange Act (7 U.S.C. 

5 13a–1) (as amended by section 202(b)(1)(I)) is amended 

6 by adding at the end the following: 

7 ‘‘(h) ENFORCEMENT OF PROVISIONS APPLICABLE TO

8 DERIVATIVES MARKET PARTICIPANTS.— 

9 ‘‘(1) DEFINITION OF APPLICABLE PROVISION.— 

10 In this subsection, the term ‘applicable provision’ 

11 means any of section 4a(a), subsections (a), (c), and 

12 (d) of section 4g, sections 4r and 4s, and sub13 sections (a) through (c)(1), (2), and (4) of section 

14 5b. 

15 ‘‘(2) ENFORCEMENT BY OTHER AGENCIES.—In 

16 addition to enforcement by the Commission under 

17 this Act of compliance with applicable provisions, to 

18 the extent applicable to commodity-based swaps, 

19 such compliance shall be enforced under— 

20 ‘‘(A) section 8 of the Federal Deposit In21 surance Act (12 U.S.C. 1818), by the appro22 priate Federal banking agency, in the case of 

23 an insured depository institution, as those 

24 terms are defined in section 3 of that Act (12 


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1 U.S.C. 1813), but not an affiliate of such an in2 sured depository institution; 

3 ‘‘(B) the securities laws, as defined in sec4 tion 3(a) of the Securities Exchange Act of 

5 1934 (15 U.S.C. 78c(a)), by the Securities and 

6 Exchange Commission, in the case of— 

7 ‘‘(i) a broker or dealer, as defined in 

8 section 3(a) of the Securities Exchange Act 

9 of 1934 (15 U.S.C. 78c(a)) (other than a 

10 broker or dealer registered under section 

11 15(b)(11) of that Act (15 U.S.C. 

12 78o(b)(11)) that is not an affiliate of an 

13 insured depository institution, as defined 

14 in section 3 of the Federal Deposit Insur15 ance Act (12 U.S.C. 1813)); 

16 ‘‘(ii) an investment adviser, as defined 

17 in section 202(a) of the Investment Advis18 ers Act of 1940 (15 U.S.C. 80b–2(a)); 

19 ‘‘(iii) an investment company, as de20 fined in section 3 of the Investment Com21 pany Act of 1940 (15 U.S.C. 80a–3); 

22 ‘‘(iv) any other entity for which the 

23 Securities and Exchange Commission is a 

24 primary regulator; 


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1 ‘‘(v) any affiliate of an insured deposi2 tory institution; or 

3 ‘‘(vi) any other person that is not— 

4 ‘‘(I) a futures commission mer5 chant or an introducing broker (ex6 cept a futures commission merchant 

7 or an introducing broker registered 

8 pursuant to section 4f(a) of this Act 

9 or an affiliate of an insured depository 

10 institution); 

11 ‘‘(II) a commodity pool operator 

12 or commodity trading advisor (except 

13 an affiliate of an insured depository 

14 institution); or 

15 ‘‘(III) a person specified in sub16 paragraph (A) or (C); and 

17 ‘‘(C) the Federal Housing Enterprises Fi18 nancial Safety and Soundness Act of 1992 (12 

19 U.S.C. 4501 et seq.), by the Federal Housing 

20 Finance Agency, in the case of a regulated enti21 ty, as defined in section 1303 of the Federal 

22 Housing Enterprises Financial Safety and 

23 Soundness Act of 1992 (12 U.S.C. 4502). 

24 ‘‘(3) VIOLATIONS TREATED AS VIOLATIONS OF

25 OTHER LAWS.— 


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1 ‘‘(A) IN GENERAL.—For purposes of the 

2 exercise by any agency referred to in paragraph 

3 (2) of the powers of the agency under any pro4 vision of law referred to in that paragraph, a 

5 violation of any applicable provision, as the pro6 vision applies to commodity-based swaps, shall 

7 be considered to be a violation of a requirement 

8 imposed under that provision of law. 

9 ‘‘(B) ADDITIONAL AUTHORITY.—In addi10 tion to its powers under any provision of law 

11 specifically referred to in paragraph (2), each of 

12 the agencies referred to in that paragraph may 

13 exercise, for the purpose of enforcing compli14 ance with applicable provisions, as the applica15 ble provisions apply to commodity-based swaps, 

16 any other authority conferred on the agency by 

17 law.’’. 

18 SEC. 210. ENFORCEABILITY OF COMMODITY-BASED SWAPS. 

19 Section 22(a) of the Commodity Exchange Act (7 

20 U.S.C. 25(a)) is amended by striking paragraph (4) and 

21 inserting the following: 

22 ‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI23 GIBLE COUNTERPARTIES.—No agreement, contract, 

24 or transaction that is a commodity-based swap shall 

25 be void, voidable, or unenforceable by either party to 


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1 the commodity-based swap, and no party to the com2 modity-based swap shall be entitled to rescind, or re3 cover any payment made with respect to, the com4 modity-based swap under this section or any other 

5 provision of this Act based solely on the failure of 

6 either party to the agreement, contract, or trans7 action to satisfy its respective obligations under sec8 tion 4a(a), subsections (a), (c), and (d) of section 

9 4g, sections 4r and 4s, and subsections (a) through 

10 (c)(1), (2), and (4) of section 5b with respect to the 

11 commodity-based swap.’’. 

12 TITLE III—OTHER PROVISIONS 

13 SEC. 301. MARGINING AND OTHER RISK MANAGEMENT 

14 STANDARDS FOR CENTRAL COUNTERPAR15 TIES. 

16 (a) AGENCY ACTIONS.—The Securities and Exchange 

17 Commission and the Commodity Futures Trading Com18 mission shall each promulgate rules requiring each clear19 ing agency (as defined in section 3(a)(23) of the Securities 

20 Exchange Act of 1934 (15 U.S.C. 78c(a)(23))) and de21 rivatives clearing organization (as defined in section 

22 1a(13) of the Commodity Exchange Act (7 U.S.C. 

23 1a(13))) to have robust risk management controls, includ24 ing risk margin collateral requirements, to assure the abil25 ity to meet their settlement obligations. 


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1 (b) CONSULTATION REQUIRED.—To assure regula2 tion of risk management controls, the Securities and Ex3 change Commission and the Commodity Futures Trading 

4 Commission shall consult with each other and the Board 

5 of Governors of the Federal Reserve System, shall seek 

6 to maintain comparability of such rules, and shall give 

7 consideration to the recommendations of the Board of 

8 Governors of the Federal Reserve System before adopting 

9 rules under this section. 

10 SEC. 302. DETERMINING THE STATUS OF SWAPS. 

11 (a) PROCESS FOR DETERMINING THE STATUS OF A

12 SWAP.— 

13 (1) RULEMAKING.—The Securities and Ex14 change Commission and the Commodity Futures 

15 Trading Commission shall jointly issue rules estab16 lishing a process for resolving any disagreement be17 tween the agencies regarding the status of a deriva18 tive as a security-based swap, a commodity-based 

19 swap, a security derivative, or a commodity deriva20 tive. 

21 (2) CONTENT.—The rules adopted under this 

22 section shall— 

23 (A) include a method for determining the 

24 status of a derivative as a security-based swap, 

25 a commodity-based swap, a security derivative, 


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1 or a commodity derivative within 90 days after 

2 the date of the commencement of the deter3 mination process; and 

4 (B) require the agencies to consider, in 

5 making such determination, the nature of the 

6 derivative, the extent to which the derivative is 

7 economically similar to instruments that are 

8 subject to regulation by the Securities and Ex9 change Commission or the Commodity Futures 

10 Trading Commission, the appropriateness of 

11 regulation of the derivative under either the se12 curities laws or the Commodity Exchange Act, 

13 and such other factors as the Securities and 

14 Exchange Commission and the Commodity Fu15 tures Trading Commission may prescribe. 

16 (b) JUDICIAL RESOLUTION.— 

17 (1) IN GENERAL.—If the Securities and Ex18 change Commission and the Commodity Futures 

19 Trading Commission are unable to determine the 

20 status of a derivative as a security-based swap, a 

21 commodity-based swap, a security derivative, or a 

22 commodity derivative pursuant to the process estab23 lished in subsection (a), either agency may petition 

24 the United States Court of Appeals for the District 

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1 tus of the derivative as a security-based swap, a 

2 commodity-based swap, a security derivative, or a 

3 commodity derivative. 

4 (2) EXPEDITED REVIEW.—The United States 

5 Court of Appeals for the District of Columbia Cir6 cuit shall complete all action on a petition filed in 

7 accordance with paragraph (1), including rendering 

8 a final determination of the status of the derivative 

9 as a security-based swap, a commodity-based swap, 

10 a security derivative, or a commodity derivative be11 fore the end of the 60-day period beginning on the 

12 date on which such petition is filed, unless all parties 

13 to such proceeding agree to any extension of such 

14 period. 

15 (3) STANDARD OF REVIEW.—The court shall 

16 determine the status of a new derivative instrument 

17 as either a security-based derivative, a security18 based swap, a commodity-based swap, a security de19 rivative, or a commodity derivative, based upon the 

20 factors described in subsection (a)(2), giving def21 erence neither to the views of the Securities and Ex22 change Commission nor the Commodity Futures 

23 Trading Commission. 

24 (4) SUPREME COURT REVIEW.—Any request for 

25 certiorari to the Supreme Court of the United States 


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1 of any determination of the United States Court of 

2 Appeals for the District of Columbia Circuit with re3 spect to a petition for review under this subsection 

4 shall be filed with the Supreme Court of the United 

5 States as soon as practicable after such determina6 tion is made. 

7 (5) JUDICIAL STAY.—The filing of a petition 

8 pursuant to paragraph (1) shall operate as a judicial 

9 stay of the identification of a derivative as a secu10 rity-based swap, a commodity-based swap, a security 

11 derivative, or a commodity derivative until the date 

12 on which the determination of the court is final, in13 cluding any appeal of such determination. 

14 SEC. 303. STUDY AND REPORT ON IMPLEMENTATION. 

15 (a) STUDY REQUIRED.—The Comptroller General of 

16 the United States shall conduct a study of— 

17 (1) how the Commodity Futures Trading Com18 mission and the Securities and Exchange Commis19 sion have implemented this Act and the amendments 

20 made by this Act; 

21 (2) the extent to which jurisdictional disputes 

22 have created challenges in the process of imple23 menting this Act and the amendments made by this 

24 Act; and 


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1 (3) the benefits and drawbacks of harmonizing 

2 laws implemented by the Commodity Futures Trad3 ing Commission and the Securities and Exchange 

4 Commission, and merging those agencies. 

5 (b) REPORT REQUIRED.—Not later than 1 year after 

6 the date on which all rules are issued under section 304, 

7 the Comptroller General shall submit a report on the re8 sults of the study required by this section to Congress, 

9 the Commodity Futures Trading Commission, and the Se10 curities and Exchange Commission. 

11 SEC. 304. RULEMAKING. 

12 The Securities and Exchange Commission, the Com13 modity Futures Trading Commission, and the appropriate 

14 regulatory authorities (as that term is defined in section 

15 15F(g) of the Securities Exchange Act of 1934, as added 

16 by this Act, or section 4s(a) of the Commodity Exchange 

17 Act, as added by this Act), as applicable, shall issue rules 

18 under sections 15F(b), 15F(c), 15F(f), 17(l), 17C(c)(2), 

19 and 17C(d)(2) of the Securities Exchange Act of 1934 (as 

20 added by this Act), sections 4r(c)(2), 4r(d)(2), 4s(c), 

21 4s(d), and 4s(g) of the Commodity Exchange Act (as 

22 added by this Act), and sections 301 and 302 of this Act, 

23 not later than 180 days after the date of enactment of 

24 this Act. 


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1 SEC. 305. EFFECTIVE DATE. 

2 (a) IN GENERAL.—Except as provided in subsection 

3 (b) or as specifically provided in the amendments made 

4 by this Act, this Act and the amendments made by this 

5 Act, shall become effective on the date of enactment of 

6 this Act. 

7 (b) OTHER EFFECTIVE DATES.—The amendments 

8 made by sections 102(b) and 202(b) of this Act and the 

9 provisions of section 15F(a) of the Securities Exchange 

10 Act of 1934 (as added by this Act) and section 4s(b) of 

11 the Commodity Exchange Act (as added by this Act) shall 

12 become effective 6 months after the date of enactment of 

13 this Act. 

Æ 


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