II 

111TH CONGRESS 

1ST SESSION S. 1682 

To provide the Commodity Futures Trading Commission with clear 

antimarket manipulation authority, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 17, 2009 

Ms. CANTWELL (for herself and Mr. NELSON of Florida) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry 

A BILL 

To provide the Commodity Futures Trading Commission with 

clear antimarket manipulation authority, and for other 

purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Derivatives Market 

5 Manipulation Prevention Act of 2009’’. 

6 SEC. 2. CIVIL PENALTIES FOR MARKET MANIPULATION. 

7 Subsection (c) of section 6 of the Commodity Ex8 change Act (7 U.S.C. 9, 15) is amended to read as follows: 


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1 ‘‘(c) PROHIBITION REGARDING MARKET MANIPULA2 TION AND FALSE INFORMATION.— 

3 ‘‘(1) PROHIBITION REGARDING MARKET MANIP4 ULATION.—It shall be unlawful for any person, di5 rectly or indirectly, to use or employ, or attempt to 

6 use or employ, in connection with a swap, or a con7 tract of sale of a commodity, in interstate commerce, 

8 or for future delivery on or subject to the rules of 

9 any registered entity, any manipulative or deceptive 

10 device or contrivance, in contravention of such rules 

11 and regulations as the Commission shall promulgate 

12 by not later than 1 year after the date of enactment 

13 of the Derivatives Market Manipulation Prevention 

14 Act of 2009. 

15 ‘‘(2) PROHIBITION REGARDING FALSE INFOR16 MATION.—It shall be unlawful for any person to re17 port information relating to any registration applica18 tion, any report filed with the Commission, or any 

19 other information relating to a swap, or a contract 

20 of sale of a commodity, in interstate commerce, or 

21 for future delivery on or subject to the rules of any 

22 registered entity, or to omit any material fact that 

23 is required to be stated in any application or report 

24 if the person knew, or reasonably should have 

25 known, the information to be false or misleading. 


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1 ‘‘(3) ENFORCEMENT.— 

2 ‘‘(A) AUTHORITY OF COMMISSION.—If the 

3 Commission has reason to believe that any per4 son is violating or has violated this subsection, 

5 or any other provision of this Act (including 

6 any rule, regulation, or order promulgated in 

7 accordance with this subsection or any other 

8 provision of this Act), the Commission may 

9 serve upon the person a complaint. 

10 ‘‘(B) CONTENTS OF COMPLAINT.—A com11 plaint under subparagraph (A) shall— 

12 ‘‘(i) contain a description of the 

13 charges against the person that is the sub14 ject of the complaint; and 

15 ‘‘(ii) have attached or contain a notice 

16 of hearing that specifies the date and loca17 tion of the hearing regarding the com18 plaint. 

19 ‘‘(C) HEARING.—A hearing described in 

20 subparagraph (B)(ii)— 

21 ‘‘(i) shall be held not later than 3 

22 days after the date on which the person 

23 described in subparagraph (A) receives the 

24 complaint; 


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1 ‘‘(ii) shall require the person to show 

2 cause regarding why— 

3 ‘‘(I) an order should not be 

4 made— 

5 ‘‘(aa) to prohibit the person 

6 from trading on, or subject to the 

7 rules of, any registered entity; 

8 and 

9 ‘‘(bb) to direct all registered 

10 entities to refuse all privileges to 

11 the person until further notice of 

12 the Commission; and 

13 ‘‘(II) the registration of the per14 son, if registered with the Commission 

15 in any capacity, should not be sus16 pended or revoked; and 

17 ‘‘(iii) may be held before— 

18 ‘‘(I) the Commission; or 

19 ‘‘(II) an administrative law judge 

20 designated by the Commission, under 

21 which the administrative law judge 

22 shall ensure that all evidence is re23 corded in written form and submitted 

24 to the Commission. 


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1 ‘‘(4) SUBPOENA.—For the purpose of securing 

2 effective enforcement of the provisions of this chap3 ter, for the purpose of any investigation or pro4 ceeding under this chapter, and for the purpose of 

5 any action taken under section 12(f) of this title, 

6 any member of the Commission or any Administra7 tive Law Judge or other officer designated by the 

8 Commission (except as provided in paragraph (6)) 

9 may administer oaths and affirmations, subpoena 

10 witnesses, compel their attendance, take evidence, 

11 and require the production of any books, papers, 

12 correspondence, memoranda, or other records that 

13 the Commission deems relevant or material to the 

14 inquiry. 

15 ‘‘(5) WITNESSES.—The attendance of witnesses 

16 and the production of any such records may be re17 quired from any place in the United States, any 

18 State, or any foreign country or jurisdiction at any 

19 designated place of hearing. 

20 ‘‘(6) SERVICE.—A subpoena issued under this 

21 section may be served upon any person who is not 

22 to be found within the territorial jurisdiction of any 

23 court of the United States in such manner as the 

24 Federal Rules of Civil Procedure prescribe for serv25 ice of process in a foreign country, except that a 


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1 subpoena to be served on a person who is not to be 

2 found within the territorial jurisdiction of any court 

3 of the United States may be issued only on the prior 

4 approval of the Commission. 

5 ‘‘(7) REFUSAL TO OBEY.—In case of contumacy 

6 by, or refusal to obey a subpoena issued to, any per7 son, the Commission may invoke the aid of any 

8 court of the United States within the jurisdiction in 

9 which the investigation or proceeding is conducted, 

10 or where such person resides or transacts business, 

11 in requiring the attendance and testimony of wit12 nesses and the production of books, papers, cor13 respondence, memoranda, and other records. Such 

14 court may issue an order requiring such person to 

15 appear before the Commission or member or Admin16 istrative Law Judge or other officer designated by 

17 the Commission, there to produce records, if so or18 dered, or to give testimony touching the matter 

19 under investigation or in question. 

20 ‘‘(8) FAILURE TO OBEY.—Any failure to obey 

21 such order of the court may be punished by the 

22 court as a contempt thereof. All process in any such 

23 case may be served in the judicial district wherein 

24 such person is an inhabitant or transacts business or 

25 wherever such person may be found. 


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1 ‘‘(9) EVIDENCE.—On the receipt of evidence 

2 under paragraph (3)(C)(iii)(II), the Commission 

3 may— 

4 ‘‘(A) prohibit the person that is the subject 

5 of the hearing from trading on, or subject to 

6 the rules of, any registered entity and require 

7 all registered entities to refuse the person all 

8 privileges on the registered entities for such pe9 riod as the Commission may require in the 

10 order; 

11 ‘‘(B) if the person is registered with the 

12 Commission in any capacity, suspend, for a pe13 riod not to exceed 180 days, or revoke, the reg14 istration of the person; 

15 ‘‘(C) assess such person— 

16 ‘‘(i) a civil penalty of not more than 

17 an amount equal to the greater of— 

18 ‘‘(I) $140,000; or 

19 ‘‘(II) triple the monetary gain to 

20 such person for each such violation; or 

21 ‘‘(ii) in any case of manipulation or 

22 attempted manipulation in violation of this 

23 subsection, subsection (d), or section 

24 9(a)(2), a civil penalty of not more than an 

25 amount equal to the greater of— 


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1 ‘‘(I) $1,000,000; or 

2 ‘‘(II) triple the monetary gain to 

3 the person for each such violation; 

4 and 

5 ‘‘(D) through an order of the Commission, 

6 require restitution to customers of damages 

7 proximately caused by violations of the person. 

8 ‘‘(10) ORDERS.— 

9 ‘‘(A) NOTICE.—The Commission shall pro10 vide to a person described in paragraph (9)(A) 

11 and the appropriate governing board of the reg12 istered entity notice of the order described in 

13 paragraph (9)(A) by— 

14 ‘‘(i) registered mail; 

15 ‘‘(ii) certified mail; or 

16 ‘‘(iii) personal delivery. 

17 ‘‘(B) REVIEW.— 

18 ‘‘(i) IN GENERAL.—A person that has 

19 received notice of an order by the Commis20 sion may obtain a review of the order or 

21 such other equitable relief as determined to 

22 be appropriate by a court described in 

23 clause (ii). 

24 ‘‘(ii) PETITION.—To obtain a review 

25 or other relief under clause (i), a person 


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1 may, not later than 15 days after the date 

2 of receipt of a notice under clause (i), file 

3 a written petition to set aside the order 

4 with the United States Court of Appeals— 

5 ‘‘(I) for the circuit in which the 

6 petitioner carries out the business of 

7 the petitioner; or 

8 ‘‘(II) in the case of an order de9 nying registration, the circuit in which 

10 the principal place of business of the 

11 petitioner is located, as listed on the 

12 application of the petitioner. 

13 ‘‘(C) PROCEDURE.— 

14 ‘‘(i) DUTY OF CLERK OF APPRO15 PRIATE COURT.—The clerk of the appro16 priate court under subparagraph (B)(ii) 

17 shall transmit to the Commission a copy of 

18 a petition filed under subparagraph (B)(ii). 

19 ‘‘(ii) DUTY OF COMMISSION.—In ac20 cordance with section 2112 of title 28, 

21 United States Code, the Commission shall 

22 file in the appropriate court described in 

23 subparagraph (B)(ii) the record theretofore 

24 made. 


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1 ‘‘(iii) JURISDICTION OF APPROPRIATE

2 COURT.—Upon the filing of a petition 

3 under subparagraph (B)(ii), the appro4 priate court described in subparagraph 

5 (B)(ii) shall have jurisdiction to affirm, set 

6 aside, or modify the order of the Commis7 sion, and the findings of the Commission 

8 as to the facts, if supported by the weight 

9 of evidence, shall in like manner be conclu10 sive.’’. 

11 SEC. 3. CEASE AND DESIST ORDERS, FINES. 

12 Section 6(d) of the Commodity Exchange Act (7 

13 U.S.C. 13b) is amended to read as follows: 

14 ‘‘(d) If any person (other than a registered entity), 

15 directly or indirectly, is using or employing, or attempting 

16 to use or employ, in connection with a swap, or a contract 

17 of sale of a commodity, in interstate commerce, or for fu18 ture delivery on or subject to the rules of any registered 

19 entity, any manipulative or deceptive device or contriv20 ance, in contravention of such rules and regulations as the 

21 Commission shall promulgate by not later than 1 year 

22 after the date of enactment of the Derivatives Market Ma23 nipulation Prevention Act of 2009, the Commission may, 

24 upon notice and hearing, and subject to appeal as in other 

25 cases provided for in sections 9 and 15 of this title, make 


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1 and enter an order directing that such person shall cease 

2 and desist therefrom and, if such person thereafter and 

3 after the lapse of the period allowed for appeal of such 

4 order or after the affirmance of such order, shall fail or 

5 refuse to obey or comply with such order, such person 

6 shall be guilty of a misdemeanor and, upon conviction 

7 thereof, shall be fined not more than the higher of 

8 $140,000 or triple the monetary gain to such person, or 

9 imprisoned for not less than six months nor more than 

10 one year, or both, except that if such failure or refusal 

11 to obey or comply with such order involves any offense 

12 within subsection (a) or (b) of section 13 of this title, such 

13 person shall be guilty of a felony and, upon conviction 

14 thereof, shall be subject to the penalties of said subsection 

15 (a) or (b): Provided, That any such cease and desist order 

16 against any respondent in any case of under this sub17 section shall be issued only in conjunction with an order 

18 issued against such respondent under sections 9 and 15 

19 of this title. Each day during which such failure or refusal 

20 to obey or comply with such order continues shall be 

21 deemed a separate offense.’’. 

22 SEC. 4. MANIPULATIONS; PRIVATE RIGHTS OF ACTION. 

23 Section 22(a)(1) of the Commodity Exchange Act (7 

24 U.S.C. 25(a)(1)) is amended by striking subparagraph 

25 (D) and inserting the following: 


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1 ‘‘(D) who purchased or sold a contract re2 ferred to in subparagraph (B) hereof if the vio3 lation constitutes the use or employment of, or 

4 an attempt to use or employ, in connection with 

5 a swap, or a contract of sale of a commodity, 

6 in interstate commerce, or for future delivery 

7 on or subject to the rules of any registered enti8 ty, any manipulative device or contrivance in 

9 contravention of such rules and regulations as 

10 the Commission shall promulgate by not later 

11 than 1 year after the date of enactment of the 

12 Derivatives Market Manipulation Prevention 

13 Act of 2009.’’. 

14 SEC. 5. DEFINITION OF SWAP. 

15 Section 1a of the Commodity Exchange Act (7 U.S.C. 

16 1a) is amended by adding at the end the following: 

17 ‘‘(35) SWAP.— 

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

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

20 agreement, contract, or transaction that— 

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

22 similar option of any kind for the purchase 

23 or sale of, or based on the value of, one or 

24 more interest or other rates, currencies, 

25 commodities, securities, instruments of inVerDate Nov 24 2008 23:09 Sep 17, 2009 Jkt 079200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1682.IS S1682

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1 debtedness, indices, quantitative measures, 

2 or other financial or economic interests or 

3 property of any kind; 

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

5 payment, or delivery (other than a dividend 

6 on an equity security) that is dependent on 

7 the occurrence, non-occurrence, or the ex8 tent of the occurrence of an event or con9 tingency associated with a potential finan10 cial, economic, or commercial consequence; 

11 ‘‘(iii) provides on an executory basis 

12 for the exchange, on a fixed or contingent 

13 basis, of one or more payments based on 

14 the value or level of one or more interest 

15 or other rates, currencies, commodities, se16 curities, instruments of indebtedness, indi17 ces, quantitative measures, or other finan18 cial or economic interests or property of 

19 any kind, or any interest therein or based 

20 on the value thereof, and that transfers, as 

21 between the parties to the transaction, in 

22 whole or in part, the financial risk associ23 ated with a future change in any such 

24 value or level without also conveying a cur25 rent or future direct or indirect ownership 


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1 interest in an asset (including any enter2 prise or investment pool) or liability that 

3 incorporates the financial risk so trans4 ferred, including any agreement, contract, 

5 or transaction commonly known as an in6 terest rate swap, a rate floor, rate cap, 

7 rate collar, cross-currency rate swap, basis 

8 swap, currency swap, foreign exchange 

9 swap, total return swap, equity index swap, 

10 equity swap, debt index swap, debt swap, 

11 credit spread, credit default swap, credit 

12 swap, weather swap, energy swap, metal 

13 swap, agricultural swap, emissions swap, 

14 or commodity swap; 

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

16 transaction that is, or in the future be17 comes, commonly known to the trade as a 

18 swap; or 

19 ‘‘(v) is any combination or permuta20 tion of, or option on, any agreement, con21 tract, or transaction described in any of 

22 clauses (i) through (iv). 

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

24 not include: 


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1 ‘‘(i) any contract of sale of a com2 modity for future delivery or security fu3 tures product traded on or subject to the 

4 rules of any board of trade designated as 

5 a contract market under section 5 or 5f; 

6 ‘‘(ii) any sale of a nonfinancial com7 modity for deferred shipment or delivery, 

8 so long as such transaction is physically 

9 settled; 

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

11 privilege on any security, certificate of de12 posit, or group or index of securities, in13 cluding any interest therein or based on 

14 the value thereof, that is subject to the Se15 curities Act of 1933 (15 U.S.C. 77a et 

16 seq.) and the Securities Exchange Act of 

17 1934 (15 U.S.C. 78a et seq.); 

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

19 privilege relating to foreign currency en20 tered into on a national securities exchange 

21 registered pursuant to section 6(a) of the 

22 Securities Exchange Act of 1934 (15 

23 U.S.C. 78f(a)); 

24 ‘‘(v) any agreement, contract, or 

25 transaction providing for the purchase or 


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1 sale of one or more securities on a fixed 

2 basis that is subject to the Securities Act 

3 of 1933 (15 U.S.C. 77a et seq.) and the 

4 Securities Exchange Act of 1934 (15 

5 U.S.C. 78a et seq.); 

6 ‘‘(vi) any agreement, contract, or 

7 transaction providing for the purchase or 

8 sale of one or more securities on a contin9 gent basis that is subject to the Securities 

10 Act of 1933 (15 U.S.C. 77a et seq.) and 

11 the Securities Exchange Act of 1934 (15 

12 U.S.C. 78a et seq.), unless such agree13 ment, contract, or transaction predicates 

14 such purchase or sale on the occurrence of 

15 a bona fide contingency that might reason16 ably be expected to affect or be affected by 

17 the creditworthiness of a party other than 

18 a party to the agreement, contract, or 

19 transaction; 

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

21 indebtedness that is a security as defined 

22 in section 2(a) of the Securities Act of 

23 1933 (15 U.S.C. 77b(a)); 

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

25 transaction that is— 


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1 ‘‘(I) based on a security; and 

2 ‘‘(II) entered into directly or 

3 through an underwriter (as defined in 

4 section 2(a) of the Securities Act of 

5 1933) (15 U.S.C. 77b(a)) by the 

6 issuer of such security for the pur7 poses of raising capital, unless such 

8 agreement, contract, or transaction is 

9 entered into to manage a risk associ10 ated with capital raising; or 

11 ‘‘(ix) any agreement, contract, or 

12 transaction a counterparty of which is a 

13 Federal Reserve bank, the United States 

14 Government or an agency of the United 

15 States Government that is expressly 

16 backed by the full faith and credit of the 

17 United States. 

18 ‘‘(C) RULE OF CONSTRUCTION REGARDING

19 MASTER AGREEMENTS.—The term ‘swap’ shall 

20 be construed to include a master agreement 

21 that provides for an agreement, contract, or 

22 transaction that is a swap pursuant to subpara23 graph (A), together with all supplements to any 

24 such master agreement, without regard to 

25 whether the master agreement contains an 


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1 agreement, contract, or transaction that is not 

2 a swap pursuant to subparagraph (A), except 

3 that the master agreement shall be considered 

4 to be a swap only with respect to each agree5 ment, contract, or transaction under the master 

6 agreement that is a swap pursuant to subpara7 graph (A).’’. 

8 SEC. 6. EFFECTIVE DATE. 

9 (a) IN GENERAL.—The amendments made by sec10 tions 2, 3, and 4 shall take effect on the date on which 

11 the final rule promulgated by the Commodity Futures 

12 Trading Commission pursuant to the Derivatives Market 

13 Manipulation Prevention Act of 2009 takes effect. 

14 (b) DEFINITION OF SWAP.—The amendment made 

15 by section 5 shall take effect on the date of enactment 

16 of this Act. 

Æ 


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