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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2697 Introduced in Senate (IS)]

106th CONGRESS
  2d Session
                                S. 2697

 To reauthorize and amend the Commodity Exchange Act to promote legal 
certainty, enhance competition, and reduce systemic risk in markets for 
   futures and over-the-counter derivatives, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              June 8, 2000

 Mr. Lugar (for himself, Mr. Gramm, and Mr. Fitzgerald) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL

 
 To reauthorize and amend the Commodity Exchange Act to promote legal 
certainty, enhance competition, and reduce systemic risk in markets for 
   futures and over-the-counter derivatives, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Commodity Futures 
Modernization Act of 2000''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
Sec. 4. Agreements, contracts, and transactions in foreign currency, 
                            government securities, and certain other 
                            commodities.
Sec. 5. Legal certainty for excluded derivative transactions.
Sec. 6. Electronic trading facilities.
Sec. 7. Hybrid instruments.
Sec. 8. Futures on securities.
Sec. 9. Finding and purposes.
Sec. 10. Prohibited transactions.
Sec. 11. Designation of boards of trade as contract markets.
Sec. 12. Derivatives transaction execution facilities.
Sec. 13. Derivatives clearing organizations.
Sec. 14. Common provisions applicable to registered entities.
Sec. 15. Exempt boards of trade.
Sec. 16. Suspension or revocation of designation as contract market.
Sec. 17. Authorization of appropriations.
Sec. 18. Preemption.
Sec. 19. Predispute resolution agreements for institutional customers.
Sec. 20. Consideration of costs and benefits and antitrust laws.
Sec. 21. Contract enforcement between eligible counterparties.
Sec. 22. Legal certainty for swap agreements.
Sec. 23. Technical and conforming amendments.
Sec. 24. Effective date.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reauthorize the Commodity Exchange Act (7 U.S.C. 1 
        et seq.);
            (2) to streamline and eliminate unnecessary regulation for 
        the commodity futures exchanges and other entities regulated 
        under the Commodity Exchange Act;
            (3) to transform the role of the Commodity Futures Trading 
        Commission in its oversight of the futures markets;
            (4) to provide a legislative and regulatory framework for 
        allowing the trading of futures on securities;
            (5) to clarify the jurisdiction of the Commission over 
        certain retail foreign exchange transactions and bucket shops 
        that are not otherwise regulated;
            (6) to promote innovation for futures and derivatives and 
        to reduce systemic risk by enhancing legal certainty in the 
        markets for certain futures and derivatives;
            (7) to reduce systemic risk and provide greater stability 
        to markets during times of market disorder by allowing the 
        clearing of transactions in over-the-counter derivatives 
        through appropriately regulated clearing organizations; and
            (8) to enhance the competitive position of United States 
        financial institutions and financial markets.

SEC. 3. DEFINITIONS.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (8) through (12), (13) 
        through (15), and (16) as paragraphs (17) through (21), (23) 
        through (25), and (29), respectively;
            (2) by inserting after paragraph (7) the following:
            ``(8) Derivatives clearing organization.--
                    ``(A) In general.--The term `derivatives clearing 
                organization' means a clearinghouse, clearing 
                association, clearing corporation, or similar entity, 
                facility, system, or organization that, with respect to 
                a derivative agreement, contract, or transaction (other 
                than a security)--
                            ``(i) enables each party to the derivative 
                        agreement, contract, or transaction to 
                        substitute, through novation or otherwise, the 
                        credit of the derivatives clearing organization 
                        for the credit of the parties;
                            ``(ii) arranges or provides, on a 
                        multilateral basis, for the settlement or 
                        netting of obligations resulting from such 
                        agreements, contracts, or transactions executed 
                        by participants in the derivatives clearing 
                        organization; or
                            ``(iii) otherwise provides clearing 
                        services or arrangements that mutualize or 
                        transfer among participants in the derivatives 
                        clearing organization the credit risk arising 
                        from such agreements, contracts, or 
                        transactions executed by the participants.
                    ``(B) Exclusions.--The term `derivatives clearing 
                organization' does not include an entity, facility, 
                system, or organization solely because it arranges or 
                provides for--
                            ``(i) settlement, netting, or novation of 
                        obligations resulting from agreements, 
                        contracts, or transactions, on a bilateral 
                        basis and without a centralized counterparty;
                            ``(ii) settlement or netting of cash 
                        payments through an interbank payment system; 
                        or
                            ``(iii) settlement, netting, or novation of 
                        obligations resulting from a sale of a 
                        commodity in a transaction in the spot market 
                        for the commodity.
            ``(9) Designated future on a security.--The term 
        `designated future on a security' means a contract of sale (or 
        option on such a contract) for future delivery of--
                    ``(A) a single nonexempted security;
                    ``(B) an index based on fewer than 5 nonexempted 
                securities; or
                    ``(C) an index in which a single nonexempted 
                security accounts for 30 percent or more of the value 
                of the index.
            ``(10) Electronic trading facility.--The term `electronic 
        trading facility' means a trading facility that--
                    ``(A) operates by means of an electronic network; 
                and
                    ``(B) maintains a real-time audit trail of bids, 
                offers, and the matching of orders or the execution of 
                transactions.
            ``(11) Eligible contract participant.--The term `eligible 
        contract participant' means--
                    ``(A) acting for its own account--
                            ``(i) a financial institution;
                            ``(ii) an insurance company (as defined in 
                        section 2 of the Bank Holding Company Act of 
                        1956 (12 U.S.C. 1841));
                            ``(iii) an investment company subject to 
                        regulation under the Investment Company Act of 
                        1940 (15 U.S.C. 80a-1 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation 
                        (regardless of whether each investor in the 
                        investment company or the foreign person is 
                        itself an eligible contract participant);
                            ``(iv) a commodity pool that--
                                    ``(I) has total assets exceeding 
                                $5,000,000; and
                                    ``(II) is formed and operated by a 
                                person subject to regulation under this 
                                Act or a foreign person performing a 
                                similar role or function subject as 
                                such to foreign regulation (regardless 
                                of whether each investor in the 
                                commodity pool or the foreign person is 
                                itself an eligible contract 
                                participant);
                            ``(v) a corporation, partnership, 
                        proprietorship, organization, trust, or other 
                        entity--
                                    ``(I) that has total assets 
                                exceeding $10,000,000;
                                    ``(II) the obligations of which 
                                under an agreement, contract, or 
                                transaction are guaranteed or otherwise 
                                supported by a letter of credit or 
                                keepwell, support, or other agreement 
                                by an entity described in subclause 
                                (I), in clause (i), (ii), (iii), (iv), 
                                or (vii), or in subparagraph (C); or
                                    ``(III) that--
                                            ``(aa) has a net worth 
                                        exceeding $1,000,000; and
                                            ``(bb) enters into an 
                                        agreement, contract, or 
                                        transaction in connection with 
                                        the conduct of the entity's 
                                        business or to manage the risk 
                                        associated with an asset or 
                                        liability owned or incurred or 
                                        reasonably likely to be owned 
                                        or incurred by the entity in 
                                        the conduct of the entity's 
                                        business;
                            ``(vi) an employee benefit plan subject to 
                        the Employee Retirement Income Security Act of 
                        1974 (29 U.S.C. 1001 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation--
                                    ``(I) that has total assets 
                                exceeding $5,000,000; or
                                    ``(II) the investment decisions of 
                                which are made by--
                                            ``(aa) an investment 
                                        adviser subject to regulation 
                                        under the Investment Advisers 
                                        Act of 1940 (15 U.S.C. 80b-1 et 
                                        seq.) or a commodity trading 
                                        advisor subject to regulation 
                                        under this Act;
                                            ``(bb) a foreign person 
                                        performing a role or function 
                                        similar to that of such an 
                                        investment adviser or commodity 
                                        trading advisor subject to 
                                        foreign regulation in the 
                                        performance of that role or 
                                        function;
                                            ``(cc) a financial 
                                        institution; or
                                            ``(dd) an insurance company 
                                        (as defined in section 2 of the 
                                        Bank Holding Company Act of 
                                        1956 (12 U.S.C. 1841));
                            ``(vii)(I) a governmental entity (including 
                        the United States, a State, or a foreign 
                        government) or political subdivision of a 
                        governmental entity;
                            ``(II) a multinational or supranational 
                        government entity; or
                            ``(III) an instrumentality, agency, or 
                        department of an entity described in subclause 
                        (I) or (II);
                            ``(viii) a broker or dealer subject to 
                        regulation under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation, except 
                        that, if the broker or dealer or foreign person 
                        is a natural person or proprietorship, the 
                        broker or dealer or foreign person shall not be 
                        considered to be an eligible contract 
                        participant unless the broker or dealer or 
                        foreign person also meets the requirements of 
                        clause (v) or (xi);
                            ``(ix) a futures commission merchant 
                        subject to regulation under this Act or a 
                        foreign person performing a similar role or 
                        function subject as such to foreign regulation, 
                        except that, if the futures commission merchant 
                        or foreign person is a natural person or 
                        proprietorship, the futures commission merchant 
                        or foreign person shall not be considered to be 
                        an eligible contract participant unless the 
                        futures commission merchant or foreign person 
                        also meets the requirements of clause (v) or 
                        (xi);
                            ``(x) a floor broker or floor trader 
                        subject to regulation under this Act, to the 
                        extent that the floor broker or floor trader 
                        trades on or through the facilities of a 
                        registered entity or exempt board of trade or 
                        any affiliate of a registered entity or exempt 
                        board of trade; or
                            ``(xi) a natural person with total assets 
                        exceeding $10,000,000;
                    ``(B)(i) a person described in any of clauses (i) 
                through (x) of subparagraph (A) or in subparagraph (C), 
                acting as broker or performing an equivalent agency 
                function on behalf of another person described in 
                subparagraph (A) or (C); or
                    ``(ii)(I) an investment adviser subject to 
                regulation under the Investment Advisers Act of 1940 
                (15 U.S.C. 80b-1 et seq.);
                    ``(II) a commodity trading advisor subject to 
                regulation under this Act;
                    ``(III) a foreign person performing a role or 
                function similar to that of such an investment adviser 
                or commodity trading advisor subject to foreign 
                regulation in the performance of that role or function; 
                or
                    ``(IV) a person described in any of clauses (i) 
                through (x) of subparagraph (A) or in subparagraph (C), 
                that is acting as an investment manager or fiduciary 
                (but excluding a person acting as a broker or 
                performing an equivalent agency function) for another 
                person described in subparagraph (A) or (C) and that is 
                authorized by the other person to commit the other 
                person to the transaction; or
                    ``(C) any other person that the Commission 
                determines to be eligible in light of the financial or 
                other qualifications of the person.
            ``(12) Energy commodity.--The term `energy commodity' 
        includes crude oil, condensates, natural gas, natural gas 
        liquids, electricity, and coal.
            ``(13) Exclusion-eligible commodity.--
                    ``(A) In general.--The term `exclusion-eligible 
                commodity' means--
                            ``(i) a financial commodity;
                            ``(ii) an energy commodity; and
                            ``(iii) a commodity that has no cash 
                        market.
                    ``(B) Exclusion.--The term `exclusion-eligible 
                commodity' does not include any commodity described in 
                paragraph (3) that is an agricultural commodity.
            ``(14) Exempted security.--
                    ``(A) In general.--The term `exempted security' 
                means a security that is an exempted security under 
                section 3(a) of the Securities Act of 1933 (15 U.S.C. 
                77c(a)) or section 3(a) of the Securities Exchange Act 
                of 1934 (15 U.S.C. 78c(a)).
                    ``(B) Exclusion.--The term `exempted security' does 
                not include a municipal security (as defined in section 
                3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
                78c(a))).
            ``(15) Financial commodity.--The term `financial commodity' 
        means--
                    ``(A) an interest rate, exchange rate, currency, 
                security, security index, credit risk, debt or equity 
                instrument, or index or measure of inflation; or
                    ``(B) any other rate, differential, index, or 
                measure of economic risk, return, or value (excluding 
                any rate, differential, index, or measure based on a 
                commodity not described in subparagraph (A) that has a 
                finite supply).
            ``(16) Financial institution.--The term `financial 
        institution' means--
                    ``(A) a corporation operating under the fifth 
                undesignated paragraph of section 25 of the Federal 
                Reserve Act (12 U.S.C. 603), commonly known as `an 
                agreement corporation';
                    ``(B) a corporation organized under section 25A of 
                the Federal Reserve Act (12 U.S.C. 611 et seq.), 
                commonly known as an `Edge Act corporation';
                    ``(C) an institution that is regulated by the Farm 
                Credit Administration;
                    ``(D) a Federal credit union or State credit union 
                (as defined in section 101 of the Federal Credit Union 
                Act (12 U.S.C. 1752));
                    ``(E) a depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813));
                    ``(F) a foreign bank or a branch or agency of a 
                foreign bank (each as defined in section 1(b) of the 
                International Banking Act of 1978 (12 U.S.C. 3101(b)));
                    ``(G) a trust company; or
                    ``(H) a regulated subsidiary or affiliate of an 
                entity described in any of subparagraphs (A) through 
                (G).'';
            (3) by inserting after paragraph (21) (as redesignated by 
        paragraph (1)) the following:
            ``(22) Hybrid instrument.--The term `hybrid instrument' 
        means a deposit (as defined in section 3 of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813)) offered by a financial 
        institution, or a security, having 1 or more payments indexed 
        to the value, level, or rate of 1 or more commodities.'';
            (4) by inserting after paragraph (25) (as redesignated by 
        paragraph (1)) the following:
            ``(26) National securities exchange.--The term `national 
        securities exchange' means--
                    ``(A) an exchange that is registered as a national 
                securities exchange under section 6 of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78f); or
                    ``(B) an association that is registered as a 
                national securities association under section 15A of 
                the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
            ``(27) Option.--The term `option' means an agreement, 
        contract, or transaction that is of the character of, or is 
commonly known to the trade as, an `option', `privilege', `indemnity', 
`bid', `offer', `put', `call', `advance guaranty', or `decline 
guaranty'.
            ``(28) Organized exchange.--The term `organized exchange' 
        means a trading facility that--
                    ``(A) permits--
                            ``(i) trading by or on behalf of a person 
                        that is not an eligible contract participant; 
                        or
                            ``(ii) trading by persons other than on a 
                        bona fide principal-to-principal basis; or
                    ``(B) has adopted (directly or through another 
                nongovernmental entity) rules that--
                            ``(i) govern the conduct of participants, 
                        other than rules that govern the submission of 
                        orders or execution of transactions on the 
                        trading system; or
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (5) by adding at the end the following:
            ``(30) Registered entity.--The term `registered entity' 
        means--
                    ``(A) a board of trade designated as a contract 
                market under section 5;
                    ``(B) a derivatives transaction execution facility 
                registered under section 5a; or
                    ``(C) a derivatives clearing organization 
                registered under section 5b.
            ``(31) Security.--The term `security' has the meaning given 
        the term in section 3(a) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)).
            ``(32) Trading facility.--
                    ``(A) In general.--The term `trading facility' 
                means a person or group of persons that constitutes, 
                maintains, or provides a physical or electronic 
                facility or system in which multiple participants have 
                the ability to execute or trade agreements, contracts, 
                or transactions by accepting bids and offers made by 
                other participants that are open to multiple 
                participants in the facility or system.
                    ``(B) Exclusions.--The term `trading facility' does 
                not include--
                            ``(i) a person or group of persons solely 
                        because the person or group of persons--
                                    ``(I) constitutes, maintains, or 
                                provides an electronic facility or 
                                system that enables participants to 
                                negotiate the terms of and enter into 
                                bilateral transactions with other 
                                participants as a result of the 
                                communications exchanged between the 
                                participants and not from interaction 
                                of multiple orders within a 
                                centralized, predetermined, 
                                nondiscretionary, automated trade 
                                matching algorithm; or
                                    ``(II)(aa) is a derivatives 
                                clearing organization; or
                                    ``(bb) permits participants to 
                                submit agreements, contracts, or 
                                transactions to a derivatives clearing 
                                organization;
                            ``(ii) a government securities dealer or 
                        government securities broker, to the extent 
                        that the dealer or broker executes or trades 
                        agreements, contracts, or transactions in 
                        government securities, or assists persons in 
                        communicating about, negotiating, entering 
                        into, executing, or trading an agreement, 
                        contract, or transaction in government 
                        securities (as the terms `government securities 
                        dealer', `government securities broker', and 
                        `government securities' are defined in section 
                        3(a) of the Securities Exchange Act of 1934 (15 
                        U.S.C. 78c(a))); or
                            ``(iii) a facility on which bids and offers 
                        and acceptances of bids and offers effected on 
                        the facility are not binding.''.

SEC. 4. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN CURRENCY, 
              GOVERNMENT SECURITIES, AND CERTAIN OTHER COMMODITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is amended by adding at the end the following:
    ``(c) Agreements, Contracts, and Transactions in Foreign Currency, 
Government Securities, and Certain Other Commodities.--
            ``(1) In general.--Except as provided in paragraph (2), 
        nothing in this Act (other than section 5b or 12(e)(2)(B)) 
        governs or applies to an agreement, contract, or transaction 
        in--
                    ``(A) foreign currency;
                    ``(B) government securities;
                    ``(C) security warrants;
                    ``(D) security rights;
                    ``(E) resales of installment loan contracts;
                    ``(F) repurchase transactions in a financial 
                commodity; or
                    ``(G) mortgages or mortgage purchase commitments.
            ``(2) Commission jurisdiction.--
                    ``(A) Agreements, contracts, and transactions that 
                are futures traded on an organized exchange.--This Act 
                applies to, and the Commission shall have jurisdiction 
                over, an agreement, contract, or transaction described 
                in paragraph (1) that--
                            ``(i)(I) is a contract of sale of a 
                        commodity for future delivery (or an option on 
                        such a contract); and
                            ``(II) is executed or traded on an 
                        organized exchange;
                            ``(ii)(I) is an option on a commodity other 
                        than foreign currency or a security; and
                            ``(II is executed or traded on an organized 
                        exchange; or
                            ``(iii)(I) is an option on foreign 
                        currency; and
                            ``(II) is executed or traded on an 
                        organized exchange that is not a national 
                        securities exchange.
                    ``(B) Agreements, contracts, and transactions in 
                retail foreign currency.--This Act applies to, and the 
                Commission shall have jurisdiction over, an agreement, 
                contract, or transaction in foreign currency that--
                            ``(i) is--
                                    ``(I) a contract of sale for future 
                                delivery; or
                                    ``(II) an option; and
                            ``(ii) is offered to, or entered into with, 
                        a person that is not an eligible contract 
                        participant, unless the counterparty, or the 
                        person offering to be the counterparty, of the 
                        person is--
                                    ``(I) a financial institution;
                                    ``(II) a broker or dealer 
                                registered under section 15(b) or 15C 
                                of the Securities Exchange Act of 1934 
                                (15 U.S.C. 78o(b), 78o-5);
                                    ``(III) an associated person of a 
                                broker or dealer registered under 
                                section 15(b) or 15C of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78o(b), 
                                78o-5) concerning the financial or 
                                securities activities of which the 
                                registered person makes and keeps 
                                records under section 15C(b) or 17(h) 
                                of the Securities Exchange Act of 1934 
                                (15 U.S.C. 78o-5(b), 78q(h));
                                    ``(IV) an insurance company (as 
                                defined in section 2 of the Bank 
                                Holding Company Act of 1956 (12 U.S.C. 
                                1841));
                                    ``(V) a financial holding company 
                                (as defined in section 2 of the Bank 
                                Holding Company Act of 1956 (12 U.S.C. 
                                1841)); or
                                    ``(VI) an investment bank holding 
                                company (as defined in section 17(i) of 
                                the Securities Exchange Act of 1934 (15 
                                U.S.C. 78q(i))).''.

SEC. 5. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 4) is amended by adding at the end the 
following:
    ``(d) Excluded Derivative Transactions.--
            ``(1) In general.--Nothing in this Act (other than section 
        5b or 12(e)(2)(B)) governs or applies to an agreement, 
        contract, or transaction in an exclusion-eligible commodity 
        if--
                    ``(A) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants at the time at which the persons 
                enter into the agreement, contract, or transaction; and
                    ``(B) the agreement, contract, or transaction is 
                not executed or traded on a trading facility.
            ``(2) Electronic trading facility exclusion.--Nothing in 
        this Act (other than section 5b or 12(e)(2)(B)) governs or 
        applies to an agreement, contract, or transaction in an 
        exclusion-eligible commodity if--
                    ``(A) the agreement, contract, or transaction is 
                entered into on a bona fide principal-to-principal 
                basis between parties trading for their own accounts or 
                as described in section 1a(11)(B)(ii);
                    ``(B) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
contract participants (as defined in subparagraph (A), (B)(ii), or (C) 
of section 1a(11)) at the time at which the persons enter into the 
agreement, contract, or transaction; and
                    ``(C) the agreement, contract, or transaction is 
                executed or traded on an electronic trading facility.
            ``(3) Exception to prevent manipulation.--Notwithstanding 
        paragraphs (1) and (2), any agreement, contract, or transaction 
        in an exclusion-eligible commodity (other than a financial 
        commodity) that is an energy commodity or is susceptible to a 
        material risk of manipulation shall be subject to sections 6(c) 
        and 9(a)(2).''.

SEC. 6. ELECTRONIC TRADING FACILITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 5) is amended by adding at the end the 
following:
    ``(e) Electronic Trading Facilities.--
            ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to an electronic trading 
        facility that limits transactions authorized to be conducted on 
        the facility to transactions that satisfy the requirements of 
        subsection (d)(2).
            ``(2) Effect on authority to establish and operate.--
        Nothing in this Act shall prohibit a board of trade designated 
        by the Commission as a contract market or derivatives 
        transaction execution facility, or an exempt board of trade, 
        from establishing and operating an electronic trading facility 
        excluded under this Act by paragraph (1).''.

SEC. 7. HYBRID INSTRUMENTS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 6) is amended by adding at the end the 
following:
    ``(f) Exclusion for Qualifying Hybrid Instruments.--
            ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to a hybrid instrument 
        that is predominantly a security or depository instrument.
            ``(2) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security or depository 
        instrument if--
                    ``(A) the issuer of the hybrid instrument receives 
                payment in full of the purchase price of the hybrid 
                instrument, substantially contemporaneously with 
                delivery of the hybrid instrument;
                    ``(B) the purchaser or holder of the hybrid 
                instrument is not required to make any payment to the 
                issuer in addition to the purchase price paid under 
                subparagraph (A), whether as margin, settlement 
                payment, or otherwise, during the life of the hybrid 
                instrument or at maturity;
                    ``(C) the issuer of the hybrid instrument is not 
                subject by the terms of the instrument to mark-to-
                market margining requirements; and
                    ``(D) the hybrid instrument is not marketed as a 
                contract of sale for future delivery of a commodity (or 
                option on such a contract) subject to this Act.
            ``(3) Mark-to-market margining requirements.--For the 
        purposes of paragraph (2)(C), mark-to-market margining 
        requirements do not include the obligation of an issuer of a 
        secured debt instrument to increase the amount of collateral 
        held in pledge for the benefit of the purchaser of the secured 
        debt instrument to secure the repayment obligations of the 
        issuer under the secured debt instrument.''.

SEC. 8. FUTURES ON SECURITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 7) is amended by adding at the end the 
following:
    ``(g) Futures on Securities.--
            ``(1) Exclusions.--
                    ``(A) Exclusion of over-the-counter equity 
                instruments.--Nothing in this subsection governs or 
                applies to--
                            ``(i) an agreement, contract, or 
                        transaction in a commodity that is excluded 
                        under subsection (c) or (d);
                            ``(ii) an electronic trading facility that 
                        is excluded under subsection (e); or
                            ``(iii) a hybrid instrument that is covered 
                        by an exclusion under subsection (f) or an 
                        exemption granted by the Commission under 
                        section 4(c) (whether or not the hybrid 
                        instrument is otherwise subject to this Act).
                    ``(B) Exclusion of security options.--This Act does 
                not apply to, and the Commission shall have no 
                jurisdiction to designate a board of trade as a 
                contract market or register a derivatives transaction 
                execution facility for, any transaction under which a 
                party to the transaction acquires an option on 1 or 
                more securities, group or index of securities, or 
                interest in, or interest that is based on the value of, 
                a security.
            ``(2) Inclusion of trading of nondesignated futures on 
        securities on a contract market.--
                    ``(A) In general.--This Act applies to, and the 
                Commission shall have exclusive jurisdiction with 
                respect to and may designate a board of trade as a 
                contract market in, accounts, agreements, and 
                transactions involving a contract of sale (or option on 
                such a contract) for future delivery of a group or 
                index of nonexempted securities (or an interest in, or 
                interest that is based on the value of, such 
                securities), none of which is a designated future on a 
                security.
                    ``(B) Requirements for designation.--
                            ``(i) In general.--No board of trade shall 
                        be designated as a contract market with respect 
                        to any contract of sale (or option on such a 
                        contract) for future delivery under 
                        subparagraph (A) unless--
                                    ``(I) the board of trade files with 
                                the Commission an application for 
                                designation; and
                                    ``(II) the board of trade 
                                demonstrates and the Commission 
                                expressly finds that the specific 
                                contract (or option on such a contract) 
                                with respect to which the application 
                                is made meets the minimum requirements 
                                of clauses (ii) and (iii).
                            ``(ii) Means of effectuation of settlement 
                        or delivery.--Settlement of or delivery on a 
                        contract (or option on such a contract) 
                        described in subparagraph (A) shall be effected 
                        in cash or by means other than the transfer or 
                        receipt of a security other than an exempted 
                        security.
                            ``(iii) Susceptibility to price 
                        manipulation.--Trading in a contract (or option 
                        on such a contract) described in subparagraph 
                        (A) shall not be readily susceptible to--
                                    ``(I) manipulation of the price of 
                                the contract (or option on such a 
                                contract); or
                                    ``(II) causing or being used in the 
                                manipulation of the price of any 
                                underlying security, option on a 
                                security, or option on a group or index 
                                that includes a security.
            ``(3) Trading of designated futures on securities on a 
        contract market or national securities exchange.--No person 
        shall offer to enter into, enter into, or confirm the execution 
        of a designated future on a security, or an interest in or 
        interest that is based on the value of a designated future on a 
        security, unless--
                    ``(A) the contract--
                            ``(i) is transacted on or subject to the 
                        rules of a board of trade that has been 
                        designated by the Commission as a contract 
                        market for the commodity that is the subject of 
                        the contract; and
                            ``(ii) meets the requirements of paragraph 
                        (4); or
                    ``(B) the contract is transacted on or subject to 
                the rules of a securities exchange that is registered 
                with the Securities and Exchange Commission as a 
                national securities exchange.
            ``(4) Minimum requirements for designated futures on 
        securities traded on a contract market.--
                    ``(A) In general.--Subject to paragraph (5), this 
                Act applies to, and the Commission shall have 
                jurisdiction with respect to and may designate a board 
                of trade as a contract market in, accounts, agreements, 
                and transactions involving a designated future on a 
                security.
                    ``(B) Requirements for designation.--
                            ``(i) In general.--No board of trade shall 
                        be designated as a contract market with respect 
                        to any contract of sale (or option on such a 
                        contract) under subparagraph (A) unless--
                                    ``(I) the board of trade files with 
                                the Commission an application for 
                                designation; and
                                    ``(II) the board of trade 
                                demonstrates and the Commission 
                                expressly finds that the specific 
                                contract (or option on such a contract) 
                                with respect to which the application 
                                is made meets the minimum requirements 
                                of clauses (ii) through (viii).
                            ``(ii) Means of effectuation of settlement 
                        or delivery.--Settlement of or delivery on a 
                        contract (or option on such a contract) 
                        described in subparagraph (A) shall be effected 
                        in cash or by means other than the transfer or 
                        receipt of a security other than an exempted 
                        security.
                            ``(iii) Real-time audit trail.--Trading in 
                        a contract (or option on such a contract) 
                        described in subparagraph (A) shall occur on a 
                        contract market that executes trades by means 
                        of a system that provides a real-time audit 
                        trail.
                            ``(iv) Susceptibility to price 
                        manipulation.--Trading in a contract (or option 
                        on such a contract) described in subparagraph 
                        (A) shall not be readily susceptible to--
                                    ``(I) manipulation of the price of 
                                the contract (or option on such a 
                                contract); or
                                    ``(II) causing or being used in the 
                                manipulation of the price of any 
                                underlying security, option on a 
                                security, or option on a group or index 
                                that includes a security.
                            ``(v) Underlying security approved for 
                        listing on national securities exchange.--Each 
                        security that underlies a designated future on 
                        a security shall--
                                    ``(I) meet all requirements for the 
                                listing of an option on that security 
                                on a national securities exchange: or
                                    ``(II) be the subject of options 
                                trading on a national securities 
                                exchange.
                            ``(vi) Margins for futures contracts.--The 
                        contract described in subparagraph (A) shall be 
                        traded on a board of trade that establishes and 
                        maintains margin levels for designated futures 
                        on securities that are consistent with the 
                        margin levels established and maintained on an 
                        option contract on the same underlying security 
                        that is listed on any national securities 
                        exchange.
                            ``(vii) Conflicts of interest.--The 
                        contract described in subparagraph (A) shall be 
                        traded on a board of trade that establishes and 
                        enforces rules that protect the customer from 
                        conflicts of interest and related trading 
                        abuses on the part of brokers or any other 
                        person performing similar roles or functions.
                            ``(viii) Provision of information necessary 
                        for enforcement.--The contract described in 
                        subparagraph (A) shall be traded on a board of 
                        trade that, in accordance with regulations 
                        promulgated by the Commission, collects, 
                        maintains, and promptly provides to the 
                        Securities and Exchange Commission on request 
                        such information as the Commission and the 
                        Securities and Exchange Commission jointly 
                        determine to be appropriate for the performance 
                        of the enforcement responsibilities described 
                        in paragraph (5).
            ``(5) SEC enforcement authority for designated futures on 
        securities contracts listed on a contract market.--
                    ``(A) In general.--With the concurrence of the 
                Commission, the Securities and Exchange Commission may 
                enforce the provisions of the securities laws specified 
                in subparagraph (B) against any person that purchases 
                or sells a designated future on a security to the same 
                extent as if the person had purchased or sold an option 
                on a security.
                    ``(B) Provisions of the securities laws.--The 
                provisions of the securities laws referred to in 
                subparagraph (A) are--
                            ``(i) section 16 of the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78p); and
                            ``(ii) section 10(b) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78j(b)).
                    ``(C) Authority of sec.--Nothing in this paragraph 
                expands the authority of the Securities and Exchange 
                Commission with respect to registered entities or 
                contracts of sale of a commodity for future delivery 
                (or options on such contracts) except as specifically 
                provided in this paragraph.
                    ``(D) Report.--Not earlier than the date that is 3 
                years after the date of enactment of this subsection, 
                the Commission and the Securities and Exchange 
                Commission shall begin to compile, and not later than 
                the date that is 4 years after the date of enactment of 
                this subsection, the Commission and the Securities and 
                Exchange Commission shall submit to Congress, a report 
                on the implementation of this subsection.
            ``(6) CFTC enforcement authority for designated futures on 
        securities listed on a national securities exchange.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the Securities and Exchange 
                Commission shall have jurisdiction over a designated 
                future on a security to the extent that the designated 
                future on a security is traded on a national securities 
                exchange.
                    ``(B) Large trader reporting, antifraud, and 
                antimanipulation authority.--With the concurrence of 
                the Securities and Exchange Commission, the Commission 
                shall enforce sections 4b, 4i, 4o, 6(c), and 9(a)(2) 
                against any person that purchases or sells a designated 
                future on a security on a national securities exchange.
                    ``(C) Provision of information necessary for 
                enforcement.--A designated future on a security shall 
                be traded on a national securities exchange that, in 
                accordance with regulations promulgated by the 
                Securities and Exchange Commission, collects, 
                maintains, and promptly provides to the Commission on 
                request such information as the Securities and Exchange 
                Commission and the Commission jointly determine to be 
                appropriate for the performance of the enforcement 
                responsibilities described in subparagraph (B).
            ``(7) Process for listing futures on a security.--
                    ``(A) Contract market process.--
                            ``(i) In general.--The Commission shall 
                        transmit to the Securities and Exchange 
                        Commission a copy of any application that is 
                        submitted by a board of trade for designation 
                        as a contract market with respect to a contract 
                        of sale (or option on such a contract) for 
                        future delivery of a nonexempted security or a 
                        group or index of nonexempted securities.
                            ``(ii) Hearing.--
                                    ``(I) Objection by sec.--If, not 
                                later than 15 days following 
                                transmittal of an application under 
                                clause (i), the Securities and Exchange 
                                Commission submits to the Commission an 
                                objection to designation of the board 
                                of trade as a contract market in the 
                                contract (or option on such a contract) 
                                based on evidence (including an 
                                economic analysis of relevant factors 
                                including benefits and costs) that any 
                                minimum requirement under paragraph 
                                (2)(B) or (4)(B) is not met, the 
                                Commission shall afford the Securities 
                                and Exchange Commission an opportunity 
                                for a hearing on the record before the 
                                Commission.
                                    ``(II) Timing.--A hearing under 
                                subclause (I) shall be held before the 
                                Commission takes action on the 
                                application, and not less than 30 nor 
                                more than 45 days after the Securities 
                                and Exchange Commission submits the 
                                objection.
                    ``(B) National securities exchange process.--
                            ``(i) In general.--The Securities and 
                        Exchange Commission shall transmit to the 
                        Commission a copy of any application that is 
                        submitted by a person for listing of a 
                        designated future on a security on a national 
                        securities exchange.
                            ``(ii) Objection by the commission.--If, 
                        not later than 15 days following transmittal of 
                        an application under clause (i), the Commission 
                        submits to the Securities and Exchange 
                        Commission an objection to listing of a 
                        designated future on a security on a national 
                        securities exchange based on evidence 
                        (including an economic analysis of relevant 
                        factors including benefits and costs) that any 
                        minimum requirement under paragraph (4)(B) is 
                        not met, the Securities and Exchange Commission 
                        shall afford the Commission an opportunity for 
                        a hearing on the record before the Securities 
                        and Exchange Commission.
            ``(8) Margin.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this Act, any designated contract market 
                in a contract for sale of future delivery of a 
                nonexempted security or nonexempted securities index 
                (or option on such a contract) shall file with the 
                Board of Governors of the Federal Reserve System any 
                rule establishing or changing the level of initial 
                margin or maintenance margin for the nonexempted 
                security or nonexempted securities index futures 
                contract (or option on such a contract).
                    ``(B) Request to set margin.--
                            ``(i) In general.--The Board may at any 
                        time request a contract market to set the 
                        margin for a nonexempted security or 
                        nonexempted securities index futures contract 
                        (or option on a nonexempted security or 
                        nonexempted securities index futures contract) 
                        at a level that the Board determines is 
                        appropriate to--
                                    ``(I) preserve the financial 
                                integrity of the contract market or of 
                                the clearing system of the contract 
                                market; or
                                    ``(II) prevent systemic risk.
                            ``(ii) Failure to set margin.--If the 
                        contract market fails to comply with a request 
                        under clause (i) within the time specified by 
                        the Board in the request, the Board may direct 
                        the contract market to alter or supplement the 
                        rules of the contract market as specified in 
                        the request.
                    ``(C) Delegation of authority to the commission.--
                Subject to such conditions as the Board may determine, 
                the Board may delegate any or all of its authority with 
                respect to margin levels--
                            ``(i) in the case of a designated future on 
                        a security or other stock index futures 
                        contract or related option, to the Commission, 
                        if the contract or option is traded on a 
                        designated contract market or derivatives 
                        transaction execution facility; or
                            ``(ii) in the case of a designated future 
                        on a security--
                                    ``(I) to the Securities and 
                                Exchange Commission, if the designated 
                                future on a security is listed on a 
                                national securities exchange; or
                                    ``(II) to the intermarket margin 
                                board established under subparagraph 
                                (D).
                    ``(D) Intermarket margin board.--
                            ``(i) Establishment.--With the concurrence 
                        of the Securities and Exchange Commission and 
                        the Commission, the Board may establish an 
                        intermarket margin board consisting of 
                        representatives of each of those 3 entities.
                            ``(ii) Duties.--The intermarket margin 
                        board established under clause (i) may set and 
                        maintain margin levels and rules pertaining to 
                        margin for a designated future on a security 
                        listed on a contract market or on a national 
                        securities exchange.
                    ``(E) Relationship to other authority.--Nothing in 
                this section supersedes or limits the authority of the 
                Commission under section 8a(9).
                    ``(F) Judicial review.--
                            ``(i) In general.--Any action taken by the 
                        Board (or by the Commission acting under the 
                        delegation of authority under subparagraph (C) 
                        or by the intermarket margin board established 
under subparagraph (D)) under this paragraph directing a contract 
market to alter or supplement a contract market rule shall be subject 
to review only in the United States Court of Appeals for the judicial 
circuit in which the party seeking review resides or has its principal 
place of business, or in the United States Court of Appeals for the 
District of Columbia Circuit.
                            ``(ii) Basis for review.--Review under 
                        clause (i) shall be based on the examination of 
                        all information before the Board (or the 
                        Commission, Securities and Exchange Commission, 
                        or intermarket margin board) at the time at 
                        which the action was taken.
                            ``(iii) Standard of review.--The court 
                        reviewing an action of the Board (or the 
                        Commission, Securities and Exchange Commission, 
                        or intermarket margin board) shall not enter a 
                        stay or order of mandamus unless the court 
                        determines, after notice and hearing, that the 
                        action was arbitrary, capricious, an abuse of 
                        discretion, or otherwise not in accordance with 
                        law.''.

SEC. 9. FINDING AND PURPOSES.

    The Commodity Exchange Act is amended by striking section 3 (7 
U.S.C. 5) and inserting the following:

``SEC. 3. FINDING AND PURPOSES.

    ``(a) Finding.--Congress finds that the futures contracts and 
options contracts that are subject to this Act are entered into 
regularly in interstate and international commerce and are affected 
with a national public interest, in that such futures contracts and 
options contracts provide a means for managing and assuming price 
risks, discovering prices, and disseminating pricing information 
through trading in liquid, fair, and financially secure trading 
facilities.
    ``(b) Purposes.--The purposes of this Act are--
            ``(1) to serve the public interest described in subsection 
        (a) through a system of effective self-regulation of trading 
        facilities, clearing systems, market participants, and market 
        professionals under the oversight of the Commission; and
            ``(2) to authorize the Commission--
                    ``(A) to deter and prevent price manipulation or 
                any other disruptions to market integrity;
                    ``(B) to ensure the financial integrity of all 
                transactions subject to this Act and the avoidance of 
                systemic risk;
                    ``(C) to protect all market participants from 
                fraudulent or other abusive sales practices and misuse 
                of customer assets; and
                    ``(D) to promote responsible innovation and fair 
                competition among boards of trade, other markets, and 
                market participants.''.

SEC. 10. PROHIBITED TRANSACTIONS.

    Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended 
by striking ``Sec. 4c.'' and all that follows through subsection (a) 
and inserting the following:

``SEC. 4C. PROHIBITED TRANSACTIONS.

    ``(a) In General.--
            ``(1) Prohibition.--It shall be unlawful for any person to 
        offer to enter into, enter into, or confirm the execution of a 
        transaction described in paragraph (2) involving any commodity 
        if the transaction is used or may be used to--
                    ``(A) hedge any transaction in interstate commerce 
                in the commodity or the product or byproduct of the 
                commodity;
                    ``(B) determine the price basis of any such 
                transaction in interstate commerce in the commodity; or
                    ``(C) deliver any such commodity sold, shipped, or 
                received in interstate commerce for the execution of 
                the transaction.
            ``(2) Transaction.--A transaction referred to in paragraph 
        (1) is a transaction that--
                    ``(A)(i) is, is of the character of, or is commonly 
                known to the trade as, a `wash sale', `cross trade', or 
                `accommodation trade'; or
                    ``(ii) is a fictitious sale; or
                    ``(B) is used to cause any price to be reported, 
                registered, or recorded that is not a true and bona 
                fide price.
            ``(3) Effect of subsection.--Nothing in this subsection--
                    ``(A) makes unlawful an exchange of--
                            ``(i) futures in connection with a cash 
                        commodity transaction;
                            ``(ii) futures for cash commodities;
                            ``(iii) transfer trades or office trades; 
                        or
                            ``(iv) futures for swaps;
                if the exchange is made in accordance with rules of the 
                contract market or derivatives transaction execution 
                facility that apply to such transactions, and those 
                rules have been approved by the Commission; or
                    ``(B) makes it unlawful for a futures commission 
                merchant, acting as principal or agent, to enter into, 
                execute, or confirm the execution of a contract for the 
                purchase or sale of a commodity for future delivery if 
                the contract is entered into, executed, reported, 
                recorded, or cleared in accordance with the rules of a 
                contract market or derivatives transaction execution 
                facility.''.

SEC. 11. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

    The Commodity Exchange Act is amended--
            (1) by redesignating section 5b (7 U.S.C. 7b) as section 
        5e; and
            (2) by striking sections 5 and 5a (7 U.S.C. 7, 7a) and 
        inserting the following:

``SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

    ``(a) Applications.--A board of trade applying to the Commission 
for designation as a contract market shall submit an application to the 
Commission that includes any relevant materials and records the 
Commission may require consistent with this Act.
    ``(b) Criteria for Designation.--
            ``(1) In general.--To be designated as a contract market, 
        the board of trade shall demonstrate to the Commission that the 
        board of trade meets the criteria specified in this subsection.
            ``(2) Prevention of market manipulation.--The board of 
        trade shall have the capacity to prevent market manipulation 
        through market surveillance, compliance, and enforcement 
        practices and procedures, including methods for conducting 
        real-time monitoring of trading and comprehensive and accurate 
        trade reconstructions.
            ``(3) Fair and equitable trading.--The board of trade shall 
        establish and enforce trading rules to ensure fair and 
        equitable trading through the facilities of the contract 
        market, and the capacity to detect, investigate, and discipline 
        any person that violates the rules.
            ``(4) Trade execution facility.--The board of trade shall--
                    ``(A) establish and enforce rules defining, or 
                specifications detailing, the manner of operation of 
                the trade execution facility maintained by the board of 
                trade, including rules or specifications describing the 
                operation of any electronic matching platform; and
                    ``(B) demonstrate that the trading facility 
                operates in accordance with the rules or 
                specifications.
            ``(5) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules and procedures for 
        ensuring the financial integrity of transactions entered into 
        by or through the facilities of the contract market.
            ``(6) Disciplinary procedures.--The board of trade shall 
        establish and enforce disciplinary procedures that authorize 
        the board of trade to discipline, suspend, or expel members or 
        market participants that violate the rules of the board of 
        trade, or similar methods for performing the same functions, 
        including delegation of the functions to third parties.
            ``(7) Public access.--The board of trade shall provide the 
        public with access to the rules, regulations, and contract 
        specifications of the board of trade.
            ``(8) Ability to obtain information.--The board of trade 
        shall establish and enforce rules that will allow the board of 
        trade to obtain any necessary information to perform any of the 
        functions described in this subsection, including the capacity 
        to carry out such international information-sharing agreements 
        as the Commission may require.
    ``(c) Existing Contract Markets.--A designated contract market on 
the effective date of the Commodity Futures Modernization Act of 2000 
shall be considered to be a designated contract market under this 
section.
    ``(d) Core Principles for Contract Markets.--
            ``(1) In general.--To maintain the designation of a board 
        of trade as a contract market, a board of trade shall comply 
        with the core principles specified in this subsection.
            ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce compliance with the rules of the contract 
        market, including the terms and conditions of any contracts to 
        be traded and any limitations on access to the contract market.
            ``(3) Contracts not readily subject to manipulation.--The 
        board of trade shall list on the contract market only contracts 
        that are not readily susceptible to manipulation.
            ``(4) Monitoring of trading.--The board of trade shall 
        monitor trading to prevent manipulation, price distortion, and 
        disruptions of the delivery or cash-settlement process.
            ``(5) Position limitations or accountability.--To reduce 
        the potential threat of market manipulation or congestion, 
        especially during trading in the delivery month, the board of 
        trade shall adopt position limitations or position 
        accountability for speculators, where necessary and 
        appropriate.
            ``(6) Emergency authority.--The board of trade shall adopt 
        rules to provide for the exercise of emergency authority, in 
        consultation or cooperation with the Commission, where 
        necessary and appropriate, including the authority to--
                    ``(A) liquidate or transfer open positions in any 
                contract;
                    ``(B) suspend or curtail trading in any contract; 
                and
                    ``(C) require market participants in any contract 
                to meet special margin requirements.
            ``(7) Availability of general information.--The board of 
        trade shall make available to market authorities, market 
        participants, and the public information concerning--
                    ``(A) the terms and conditions of the contracts of 
                the contract market; and
                    ``(B) the mechanisms for executing transactions on 
                or through the facilities of the contract market.
            ``(8) Daily publication of trading information.--The board 
        of trade shall make public daily information on settlement 
        prices, volume, open interest, and opening and closing ranges 
        for actively traded contracts on the contract market.
            ``(9) Execution of transactions.--The board of trade shall 
        provide a competitive, open, and efficient market and mechanism 
        for executing transactions.
            ``(10) Trade information.--The board of trade shall 
        maintain rules and procedures to provide for the recording and 
        safe storage of all identifying data entry and trade 
        information in a manner that enables the contract market to use 
        the information for purposes of assisting in the prevention of 
        customer and market abuses and providing evidence of any 
        violations of the rules of the contract market.
            ``(11) Financial integrity of contracts.--The board of 
        trade shall establish and enforce rules providing for the 
        financial integrity of any contracts traded on the contract 
market, including rules to ensure the financial integrity of any 
futures commission merchants and introducing brokers and the protection 
of customer funds.
            ``(12) Protection of market participants.--The board of 
        trade shall establish and enforce rules to protect market 
        participants from abusive practices committed by any party 
        (including a party acting as an agent for the participants).
            ``(13) Dispute resolution.--The board of trade shall 
        establish and enforce rules regarding and provide facilities 
        for alternative dispute resolution as appropriate for market 
        participants and any market intermediaries.
            ``(14) Governance fitness standards.--The board of trade 
        shall establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, members of 
        the board of trade, and any other persons with direct access to 
        the facility (including any parties affiliated with any of the 
        persons described in this paragraph).
            ``(15) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the contract market and 
        establish a process for resolving such conflicts of interest.
            ``(16) Composition of boards of mutually owned contract 
        markets.--In the case of a mutually owned contract market, the 
        board of trade shall ensure that the composition of the 
        governing board reflects market participants.
            ``(17) Recordkeeping.--The board of trade shall--
                    ``(A) maintain full records of all activities 
                related to the business of the contract market in a 
                form and manner acceptable to the Commission for a 
                period of 5 years;
                    ``(B) make the records readily available during at 
                least the first 2-years of the 5-year period and 
                provide the records to the Commission during that 2-
                year period at the expense of the person required to 
                maintain the records; and
                    ``(C) keep the records open to inspection by any 
                representative of the Commission or the Department of 
                Justice.
            ``(18) Antitrust considerations.--Unless appropriate to 
        achieve the purposes of this Act, the board of trade shall 
        avoid--
                    ``(A) adopting any rule or taking any action that 
                results in any unreasonable restraint of trade; or
                    ``(B) imposing any material anticompetitive burden 
                on trading on the contract market.''.

SEC. 12. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5 (as amended by section 11(2)) the following:

``SEC. 5A. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

    ``(a) In General.--In lieu of compliance with the contract market 
designation requirements of section 5, a board of trade may elect to 
operate as a registered derivatives transaction execution facility if 
the facility is--
            ``(1) designated as a contract market and meets the 
        requirements of this section; or
            ``(2) registered as a derivatives transaction execution 
        facility under subsection (c).
    ``(b) Requirements for Trading Futures Contracts or Other 
Derivatives Transactions.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility under subsection (a) may trade any futures 
        contract (or option on such a contract) that is not a 
        designated future on a security on or through the facility only 
        by satisfying the requirements of this section.
            ``(2) Requirements for underlying commodities.--A 
        registered derivatives transaction execution facility may trade 
        any futures contract only if--
                    ``(A) the underlying commodity has a nearly 
                inexhaustible deliverable supply;
                    ``(B) the underlying commodity has a deliverable 
                supply that is sufficiently large that the contract is 
                highly unlikely to be susceptible to manipulation;
                    ``(C) the underlying commodity has no cash market; 
                or
                    ``(D) the Commission determines, based on the 
                market characteristics, surveillance history, self-
                regulatory record, and capacity of the facility that 
                trading in the futures contract is highly unlikely to 
                be susceptible to manipulation.
            ``(3) Eligible traders.--To trade on a registered 
        derivatives transaction execution facility, a person shall--
                    ``(A) be authorized by the board of trade to trade 
                on the facility; and
                    ``(B)(i) be an eligible contract participant; or
                    ``(ii) be a person trading through a futures 
                commission merchant that--
                            ``(I) is registered with the Commission;
                            ``(II) is a member of a futures self-
                        regulatory organization;
                            ``(III) is a clearing member of a 
                        derivatives clearing organization; and
                            ``(IV) has adjusted net capital of at least 
                        $20,000,000.
            ``(4) Trading by contract markets.--A board of trade that 
        is designated as a contract market shall, to the extent that 
        the contract market also operates a registered derivatives 
        transaction execution facility--
                    ``(A) provide a physical location for the contract 
                market trading of the board of trade that is separate 
                from trading on the derivatives transaction execution 
                facility of the board of trade; or 
                    ``(B) if the board of trade uses the same 
                electronic trading system for trading on the contract 
                market and derivatives transaction execution facility 
                of the board of trade, identify whether the electronic 
                trading is taking place on the contract market or the 
                derivatives transaction execution facility.
    ``(c) Criteria for Registration.--
            ``(1) In general.--To be registered as a registered 
        derivatives transaction execution facility, the board of trade 
        shall demonstrate to the Commission that the board of trade 
        meets the criteria specified in this paragraph.
            ``(2) Deterrence of abuses.--The board of trade shall 
        establish and enforce trading rules that will deter abuses and 
        has the capacity to detect, investigate, and enforce those 
        rules, including means to--
                    ``(A) obtain information necessary to perform the 
                functions required under this section; or
                    ``(B) use technological means to--
                            ``(i) provide market participants with 
                        impartial access to the market; and
                            ``(ii) capture information that may be used 
                        in establishing whether rule violations have 
                        occurred.
            ``(3) Trading procedures.--The board of trade shall 
        establish and enforce rules or terms and conditions defining, 
        or specifications detailing, trading procedures to be used in 
        entering and executing orders traded on the facilities of the 
        board of trade.
            ``(4) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules or terms and conditions 
        providing for the financial integrity of transactions entered 
        on or through the facilities of the board of trade, including 
        rules or terms and conditions to ensure the financial integrity 
        of any futures commission merchants and introducing brokers and 
        the protection of customer funds.
    ``(d) Core Principles for Registered Derivatives Transaction 
Execution Facilities.--
            ``(1) In general.--To maintain the registration of a board 
        of trade as a derivatives transaction execution facility, a 
        board of trade shall comply with the core principles specified 
        in this subsection.
            ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce the rules of the facility, including any 
        terms and conditions of any contracts traded on or through the 
        facility and any limitations on access to the facility.
            ``(3) Monitoring of trading.--The board of trade shall 
        monitor trading in the contracts of the facility to ensure 
        orderly trading in the contract and to maintain an orderly 
        market while providing any necessary trading information to the 
        Commission to allow the Commission to discharge the 
        responsibilities of the Commission under the Act.
            ``(4) Disclosure of general information.--The board of 
        trade shall disclose publicly and to the Commission information 
        concerning--
                    ``(A) contract terms and conditions;
                    ``(B) trading conventions, mechanisms, and 
                practices;
                    ``(C) financial integrity protections; and
                    ``(D) other information relevant to participation 
                in trading on the facility.
            ``(5) Provision of trading information.--The board of trade 
        shall provide to market participants on a fair, equitable, and 
        timely basis--
                    ``(A) information regarding prices, bids, and 
                offers; and
                    ``(B) for actively traded contracts, daily 
                information on settlement prices, volume, open 
                interest, and opening and closing ranges.
            ``(6) Fitness standards.--The board of trade shall 
        establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, members, and 
        any other persons with direct access to the facility, including 
        any parties affiliated with any of the persons described in 
        this paragraph.
            ``(7) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the derivatives transaction 
        execution facility and establish a process for resolving such 
        conflicts of interest.
            ``(8) Recordkeeping.--The board of trade shall--
                    ``(A) maintain full records of all activities 
                related to the business of the derivatives transaction 
                execution facility in a form and manner acceptable to 
                the Commission for a period of at least 5 years;
                    ``(B) make the records readily available during at 
                least the first 2 years of the 5-year period and 
                provide the records to the Commission at the expense of 
                the person required to maintain the records; and
                    ``(C) keep the records open to inspection by any 
                representative of the Commission or the Department of 
                Justice.
            ``(9) Antitrust considerations.--Unless appropriate to 
        achieve the purposes of this Act, the board of trade shall 
        avoid--
                    ``(A) adopting any rule or taking any action that 
                results in any unreasonable restraint of trade; or
                    ``(B) imposing any material anticompetitive burden 
                on trading on the derivatives transaction execution 
                facility.
    ``(e) Use of Broker-Dealers and Depository Institutions as 
Intermediaries.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer or 
        depository institution that meets the requirements of paragraph 
        (2) to--
                    ``(A) act as an intermediary in transactions 
                executed on the facility on behalf of customers of the 
                broker-dealer or depository institution; and 
                    ``(B) receive funds of customers to serve as margin 
                or security for such transactions.
            ``(2) Requirements.--The requirements referred to in 
        paragraph (1) are that--
                    ``(A) a broker-dealer be in good standing with the 
                Securities and Exchange Commission and a depository 
                institution be in good standing, as determined by the 
                appropriate Federal banking agency (as defined in 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813)) (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if a broker-dealer or depository institution 
                carries or holds customer accounts or funds for 
                transactions on the derivatives transaction execution 
                facility for more than 1 business day, the broker-
                dealer or depository institution is registered as a 
                futures commission merchant and is a member of a 
                registered futures association.
            ``(3) Implementation.--The Commission shall cooperate and 
        coordinate with the Securities and Exchange Commission and 
        Federal banking regulatory agencies (including the Farm Credit 
        Administration) in adopting rules and taking any other 
        appropriate action to facilitate the implementation of this 
        subsection.
    ``(f) Segregation of Customer Funds.--Not later than 180 days after 
the effective date of the Commodity Futures Modernization Act of 2000, 
consistent with regulations adopted by the Commission, a registered 
derivatives transaction execution facility may authorize a futures 
commission merchant to offer any customer of the futures commission 
merchant that is an eligible contract participant the right to not 
segregate the customer funds of the futures commission merchant for 
purposes of trading on or through the facilities of the registered 
derivatives transaction execution facility.
    ``(g) Election To Trade Excluded Transactions.--
            ``(1) In general.--A board of trade that is a registered 
        derivatives transaction execution facility may trade on the 
        facility any agreements, contracts, or transactions that are 
        excluded from this Act under subsection (c) or (d) of section 
        2.
            ``(2) Exclusive jurisdiction of the commission.--The 
        Commission shall have exclusive jurisdiction over agreements, 
        contracts, or transactions described in paragraph (1) to the 
        extent that the agreements, contracts, or transactions are 
        traded on a derivatives transaction execution facility.''.

SEC. 13. DERIVATIVES CLEARING ORGANIZATIONS.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5a (as added by section 12) the following:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

    ``(a) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for a derivatives clearing organization, 
unless registered with the Commission, directly or indirectly to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a derivatives clearing organization 
described in section 1a(8).
    ``(b) Exclusion of Derivatives Clearing Organizations Subject to 
Other Regulatory Authorities.--A derivatives clearing organization 
shall not be required to register with the Commission, and the 
Commission shall have no jurisdiction with respect to the derivatives 
clearing organization, if the derivatives clearing organization--
            ``(1)(A) is registered as a clearing agency under the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
            ``(B) is subject to the supervisory jurisdiction of a 
        Federal banking agency (as defined in section 3 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813)) or the National Credit 
        Union Administration; or
            ``(C) is subject to the supervisory jurisdiction of a 
        foreign regulatory authority that is recognized by the 
        Securities and Exchange Commission, the Board of Governors of 
        the Federal Reserve System, the Comptroller of the Currency, or 
        the Commission as overseeing a system of consolidated 
        supervision comparable to that provided under applicable United 
        States law; and
            ``(2) does not clear a contract of sale for future 
        delivery, option on a contract of sale for future delivery, or 
        option on a commodity that is not a security (unless the 
        contract or option is excluded under subsection (c) or (d) of 
        section 2).
    ``(c) Voluntary Registration.--A derivatives clearing organization 
that is exempt from registration under subsection (b) may register with 
the Commission as a derivatives clearing organization.
    ``(d) Registration of Derivatives Clearing Organizations.--
            ``(1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing such 
        information as the Commission may require for the purpose of 
        making the determinations required for approval under paragraph 
        (2).
            ``(2) Core principles.--
                    ``(A) In general.--To be registered and to maintain 
                registration as a derivatives clearing organization, an 
                applicant shall demonstrate to the Commission that the 
                applicant complies with the core principles specified 
                in this paragraph. 
                    ``(B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate financial, 
                operational, and managerial resources to discharge the 
                responsibilities of a derivatives clearing organization 
                without interruption in various market conditions.
                    ``(C) Participant and product eligibility.--The 
                applicant shall establish--
                            ``(i) appropriate admission and continuing 
                        eligibility standards (including appropriate 
                        minimum financial requirements) for members of 
and participants in the organization; and
                            ``(ii) appropriate standards for 
                        determining eligibility of agreements, 
                        contracts, or transactions submitted to the 
                        applicant.
                    ``(D) Risk management.--The applicant shall have 
                the ability to manage the risks associated with 
                discharging the responsibilities of a derivatives 
                clearing organization through the use of appropriate 
                tools and procedures.
                    ``(E) Settlement procedures.--The applicant shall 
                have the ability to--
                            ``(i) complete settlements on a timely 
                        basis under varying circumstances;
                            ``(ii) maintain an adequate record of the 
                        flow of funds associated with each transaction 
                        that the applicant clears; and
                            ``(iii) comply with the terms and 
                        conditions of any permitted netting or offset 
                        arrangements with other clearing organizations.
                    ``(F) Treatment of funds.--The applicant shall have 
                standards and procedures designed to protect and ensure 
                the safety of member and participant funds.
                    ``(G) Default rules and procedures.--The applicant 
                shall have rules and procedures designed to allow for 
                efficient, fair, and safe management of events when 
                members or participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                    ``(H) Rule enforcement.--The applicant shall--
                            ``(i) maintain adequate arrangements and 
                        resources for the effective monitoring and 
                        enforcement of compliance with rules of the 
                        applicant and for resolution of disputes; and
                            ``(ii) have the authority and ability to 
                        discipline, limit, suspend, or terminate a 
                        member's or participant's activities for 
                        violations of rules of the applicant.
                    ``(I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                            ``(i) has established and will maintain a 
                        program of oversight and risk analysis to 
                        ensure that the automated systems of the 
                        applicant function properly and have adequate 
                        capacity and security; and
                            ``(ii) has established and will maintain 
                        emergency procedures and a plan for disaster 
                        recovery, and will periodically test backup 
                        facilities sufficient to ensure daily 
                        processing, clearing, and settlement of 
                        transactions.
                    ``(J) Reporting.--The applicant shall provide to 
                the Commission all information necessary for the 
                Commission to conduct the oversight function of the 
                applicant with respect to the activities of the 
                derivatives clearing organization.
                    ``(K) Recordkeeping.--The applicant shall--
                            ``(i) maintain full records of all 
                        activities related to the business of the 
                        applicant as a derivatives clearing 
                        organization in a form and manner acceptable to 
                        the Commission for a period of at least 5 
                        years;
                            ``(ii) make the records readily available 
                        during at least the first 2 years of the 5-year 
                        period and provide the records to the 
                        Commission at the expense of the person 
                        required to maintain the records; and
                            ``(iii) keep the records open to inspection 
                        by any representative of the Commission or the 
                        Department of Justice.
                    ``(L) Public information.--The applicant shall make 
                information concerning the rules and operating 
                procedures governing the clearing and settlement 
                systems (including default procedures) available to 
                market participants.
                    ``(M) Information sharing.--The applicant shall--
                            ``(i) enter into and abide by the terms of 
                        all appropriate and applicable domestic and 
                        international information-sharing agreements; 
                        and
                            ``(ii) use relevant information obtained 
                        from the agreements in carrying out the 
                        clearing organization's risk management 
                        program.
                    ``(N) Antitrust considerations.--Unless appropriate 
                to achieve the purposes of this Act, the derivatives 
                clearing organization shall avoid--
                            ``(i) adopting any rule or taking any 
                        action that results in any unreasonable 
                        restraint of trade; or
                            ``(ii) imposing any material 
                        anticompetitive burden on trading on the 
                        contract market.
            ``(3) Orders concerning competition.--A derivatives 
        clearing organization may request the Commission to issue an 
        order concerning whether a rule or practice of the applicant is 
        the least anticompetitive means of achieving the objectives, 
        purposes, and policies of this Act.
    ``(e) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that--
            ``(1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of trade 
        that has been designated by the Commission as a contract market 
        for such agreements, contracts, or transactions before the date 
        of enactment of this section; and
            ``(2) the Commission has reviewed and approved the rules of 
        the derivatives clearing organization before that date.
    ``(f) Appointment of Trustee.--
            ``(1) In general.--If a proceeding under section 5e results 
        in the suspension or revocation of the registration of a 
        derivatives clearing organization, or if a derivatives clearing 
        organization withdraws from registration, the Commission, on 
        notice to the derivatives clearing organization, may apply to 
        the appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
            ``(2) Assumption of jurisdiction.--If the Commission 
        applies for appointment of a trustee under paragraph (1)--
                    ``(A) the court may take exclusive jurisdiction 
                over the derivatives clearing organization and the 
                records and assets of the derivatives clearing 
                organization, wherever located; and
                    ``(B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the Commission, 
                as trustee with power to take possession and continue 
                to operate or terminate the operations of the 
                derivatives clearing organization in an orderly manner 
                for the protection of participants, subject to such 
                terms and conditions as the court may prescribe.
    ``(g) Linking of Regulated Clearing Facilities.--
            ``(1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing organizations 
        registered under this Act with other regulated clearance 
        facilities for the coordinated settlement of cleared 
        transactions.
            ``(2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking agencies 
        and the Securities and Exchange Commission.''.

SEC. 14. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5b (as added by section 13) the following:

``SEC. 5C. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

    ``(a) Acceptable Business Practices Under Core Principles.--
            ``(1) In general.--Consistent with the purposes of this 
        Act, the Commission may issue interpretations, or approve 
        interpretations submitted to the Commission, of the core 
        principles for registered entities specified in sections 5(d), 
        5a(d), and 5b(d)(2) to describe what would constitute an 
        acceptable business practice under the core principles.
            ``(2) Timing.--If any person submits to the Commission a 
        request for an interpretation or for approval of an 
        interpretation under paragraph (1), the Commission shall issue 
        the interpretation or shall approve or disapprove the 
        interpretation not later than 45 days after receiving the 
        request.
            ``(3) Effect of interpretation.--An interpretation issued 
        under paragraph (1) shall not provide the exclusive means for 
        complying with the core principles.
    ``(b) Delegation of Functions Under Core Principles.--
            ``(1) In general.--A registered entity may comply with any 
        applicable core principle through delegation of any relevant 
        function to a registered futures association or another 
        registered entity.
            ``(2) Responsibility.--A registered entity that delegates a 
        function under paragraph (1) shall remain responsible for 
        carrying out the function.
    ``(c) New Contracts, New Rules, and Rule Amendments.--
            ``(1) In general.--Subject to paragraph (2), a registered 
        entity may elect to list for trading any new contract or other 
        instrument, or may elect to approve and implement any new rule 
        or rule amendment, by providing to the Commission a written 
        certification that the new contract, new rule, or rule 
        amendment complies with this Act (including regulations under 
        this Act).
            ``(2) Prior approval.--
                    ``(A) In general.--A registered entity may request 
                that the Commission grant prior approval to any new 
                contract or other instrument, new rule, or rule 
                amendment.
                    ``(B) Deadline.--If prior approval is requested 
                under subparagraph (A), the Commission shall take final 
                action on the request not later than 90 days after 
                submission of the request, unless the person submitting 
                the request agrees to an extension of the time 
                limitation established under this subparagraph.
                    ``(C) Agricultural contracts.--Notwithstanding any 
                other provision of this section, a designated contract 
                market shall submit for prior approval by the 
                Commission each rule amendment that materially changes 
                a term or condition in any contract of sale of a 
                commodity for future delivery or related option traded 
                through the facilities of the designated contract 
                market, if--
                            ``(i) the commodity is specifically listed 
                        in section 1a(3); and
                            ``(ii) the rule amendment applies to 
                        contracts and delivery months that have 
                        previously been listed for trading and have 
                        open interest.
            ``(3) Approval.--The Commission shall approve any such new 
        contract or instrument, new rule, or rule amendment unless the 
        Commission finds that the new contract or instrument, new rule, 
        or rule amendment would violate this Act.
    ``(d) Violation of Core Principles.--
            ``(1) In general.--If the Commission determines, on the 
        basis of substantial evidence, that a registered entity is 
        violating any of the applicable core principles specified in 
        sections 5(d), 5a(d), and 5b(d)(2), the Commission shall--
                    ``(A) notify the registered entity of the 
                determination; and
                    ``(B) afford the registered entity an opportunity 
                to make appropriate changes to bring the registered 
entity into compliance with the core principles.
            ``(2) Failure to make changes.--If, not later than 30 days 
        after receiving a notification under paragraph (1), a 
        registered entity fails to make changes that, in the opinion of 
        the Commission, are necessary to accomplish the objectives of 
        the core principles, the Commission may take further action in 
        accordance with this Act.
    ``(e) Reservation of Emergency Authority.--Notwithstanding any 
other provision of this section, the Commission shall retain the full 
scope of its emergency powers under section 8a(9) to direct any 
contract market to take emergency action in compliance with the 
provisions and standards of section 8a(9).''.

SEC. 15. EXEMPT BOARDS OF TRADE.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5c (as added by section 14) the following:

``SEC. 5D. EXEMPT BOARDS OF TRADE.

    ``(a) In General.--Except as otherwise provided in this section, a 
contract of sale (or option on such a contract) of a commodity for 
future delivery traded on or through the facilities of an exempt board 
of trade shall be exempt from all provisions of this Act, other than 
section 2(g).
    ``(b) Criteria for Exemption.--To qualify for an exemption under 
subsection (a), a board of trade shall limit trading on or through the 
facilities of the board of trade to contracts of sale of a commodity 
for future delivery (or options on such contracts)--
            ``(1) that have--
                    ``(A) a nearly inexhaustible deliverable supply;
                    ``(B) a deliverable supply that is sufficiently 
                large, and a cash market sufficiently liquid, to render 
                any contract traded on the commodity highly unlikely to 
                be susceptible to manipulation; or
                    ``(C) no cash market; and
            ``(2) that are entered into only between persons that--
                    ``(A) are eligible contract participants at the 
                time at which the persons enter into the contract; or
                    ``(B) enter into the contract or option for the 
                benefit only of eligible contract participants.
    ``(c) Antimanipulation Requirements.--A party to a futures contract 
or related option that is traded on an exempt board of trade shall be 
subject to sections 4b, 4o, 6(c), and 9(a)(2), and the Commission shall 
enforce those provisions with respect to any such trading.
    ``(d) Price Discovery.--If the Commission finds that an exempt 
board of trade is a significant source of price discovery for any 
underlying commodity in any transaction traded on or through the 
facilities of the board of trade, the board of trade shall disseminate 
publicly on a daily basis trading volume, opening and closing price 
ranges, open interest, and other trading data as appropriate to the 
market.
    ``(e) Jurisdiction.--The Commission shall have exclusive 
jurisdiction over any account, agreement, or transaction involving a 
contract of sale of a commodity for future delivery, or related option, 
to the extent that such an account, agreement, or transaction is traded 
on an exempt board of trade.
    ``(f) Subsidiaries.--A board of trade that is designated as a 
contract market or registered as a derivatives transaction execution 
facility may operate an exempt board of trade by establishing a 
separate subsidiary or other legal entity and otherwise satisfying the 
requirements of this section.''.

SEC. 16. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

    Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 11(1)) is amended to read as follows:

``SEC. 5E. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED 
              ENTITY.

    ``The failure of a registered entity to comply with any provision 
of this Act, or any regulation or order of the Commission under this 
Act, shall be cause for the suspension of the registered entity for a 
period not to exceed 180 days, or revocation of designation as a 
registered entity in accordance with the procedures and subject to the 
judicial review provided in section 6(b).''.

SEC. 17. AUTHORIZATION OF APPROPRIATIONS.

    Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is 
amended by striking ``2000'' and inserting ``2005''.

SEC. 18. PREEMPTION.

    Section 12(e) of the Commodity Exchange Act (7 U.S.C. 16(e)) is 
amended by striking paragraph (2) and inserting the following:
            ``(2) the application of any Federal or State law 
        (including any regulation) to an agreement, contract, or 
        transaction in or involving any commodity, product, right, 
        service, or interest, except that this Act shall supersede and 
        preempt--
                    ``(A) any Federal or State law (including any 
                regulation), in the case of any such agreement, 
                contract, or transaction--
                            ``(i) that is conducted on or subject to 
                        the rules of a registered entity or exempt 
                        board of trade;
                            ``(ii) that is conducted on or subject to 
                        the rules of any board of trade, exchange, or 
                        market located outside the United States, or 
                        any territory or possession of the United 
                        States (in accordance with any terms or 
                        conditions specified by the Commission by 
                        regulation); and
                            ``(iii) that is subject to regulation by 
                        the Commission under section 4c or 19; and
                    ``(B) any State or local law that prohibits or 
                regulates gaming or the operation of bucket shops 
                (other than antifraud provisions of general 
                applicability) in the case of--
                            ``(i) an excluded trading facility under 
                        section 2(e); or
                            ``(ii) an agreement, contract, or 
                        transaction that--
                                    ``(I) is excluded under subsection 
                                (c), (d), or (f) of section 2; or
                                    ``(II) is covered by the terms of 
                                an exemption granted by the Commission 
                                under section 4(c) (regardless of 
                                whether any such agreement, contract, 
                                or transaction is otherwise subject to 
                                this Act); or''.

SEC. 19. PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS.

    Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended 
by striking subsection (g) and inserting the following:
    ``(g) Predispute Resolution Agreements for Institutional 
Customers.--Nothing in this section prohibits a registered futures 
commission merchant from requiring a customer that is an eligible 
contract participant, as a condition to the commission merchant's 
conducting a transaction for the customer, to enter into an agreement 
waiving the right to file a claim under this section.''.

SEC. 20. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

    Section 15 of the Commodity Exchange Act (7 U.S.C. 19) is amended 
by striking ``Sec. 15. The Commission'' and inserting the following:

``SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

    ``(a) Costs and Benefits.--
            ``(1) In general.--Before promulgating a regulation under 
        this Act or issuing an order (except as provided in paragraph 
        (3)), the Commission shall consider the costs and benefits of 
        the action of the Commission.
            ``(2) Considerations.--The costs and benefits of the 
        proposed Commission action shall be evaluated in light of--
                    ``(A) considerations of protection of market 
                participants and the public;
                    ``(B) considerations of the efficiency, 
                competitiveness, and financial integrity of futures 
                markets;
                    ``(C) considerations of price discovery;
                    ``(D) considerations of sound risk management 
                practices; and
                    ``(E) other public interest considerations.
            ``(3) Applicability.--This subsection does not apply to the 
        following actions of the Commission:
                    ``(A) An order that initiates, is part of, or is 
                the result of an adjudicatory or investigative process 
                of the Commission.
                    ``(B) An emergency action.
                    ``(C) A finding of fact regarding compliance with a 
                requirement of the Commission.
    ``(b) Antitrust Laws.--The Commission''.

SEC. 21. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.

    Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is 
amended by adding at the end the following:
            ``(4) Contract enforcement between eligible 
        counterparties.--No agreement, contract, or transaction between 
        eligible contract participants shall be void, voidable, or 
        unenforceable, and no such eligible contract participant shall 
        be entitled to rescind, or recover any payment made with 
        respect to, such an agreement, contract, or transaction, under 
        this section based solely on the failure of the agreement, 
        contract, or transaction to comply with the terms or conditions 
        of an exemption or exclusion from any provision of this Act or 
        regulations of the Commission.''.

SEC. 22. LEGAL CERTAINTY FOR SWAP AGREEMENTS.

    (a) Definition of Swap Agreement.--In this section, the term ``swap 
agreement'' has the meaning given the term in section 5220 of the 
Revised Statutes.
    (b) Legal Certainty.--
            (1) In general.--Nothing in this Act or any amendment made 
        by this Act authorizes the Securities and Exchange Commission 
        to regulate, supervise, or otherwise subject to oversight any 
        activity, agreement, instrument, transaction, or product over 
        which the Securities and Exchange Commission is not granted 
        specific jurisdiction under this Act, any amendment made by 
        this Act, or any other law.
            (2) Swap agreements.--Nothing in this Act or any amendment 
        made by this Act grants the Commodity Futures Trading 
        Commission or the Securities and Exchange Commission any 
        jurisdiction over any swap agreement, except that a registered 
        entity may voluntarily submit to the jurisdiction of the 
        Commodities Futures Trading Commission under section 12 or 13 
        of the Commodities Exchange Act (7 U.S.C. 16, 13c).
    (c) Moratorium on Retail Swap Agreements.--
            (1) In general.--During the 1-year period beginning on the 
        date of enactment of this Act, no financial institution engaged 
        in activities authorized or permitted under section 4(k) of the 
        Bank Holding Company Act (12 U.S.C. 1843(k)) may initiate 
        through a widespread offering the opportunity for individuals 
        other than accredited investors to enter into swap agreements. 
        In the preceding sentence, the term ``accredited investor'' 
        means an individual with net worth of at least $5,000,000.
            (2) Report.--Not later than the date that is 1 year after 
        the date of enactment of this Act, the Federal banking agencies 
        (as defined in section 3 of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813)), the Department of the Treasury, the 
        Commodity Futures Trading Commission, and the Securities and 
        Exchange Commission shall submit to the Committee on 
        Agriculture, Nutrition, and Forestry and the Committee on 
        Banking, Housing, and Urban Affairs of the Senate, and the 
        Committee on Agriculture and the Committee on Banking and 
        Financial Services of the House of Representatives a report 
        on--
                    (A) the regulatory framework under which swap 
                agreements identified in paragraph (1) should be 
                supervised;
                    (B) the jurisdictional issues relating to swap 
                agreements identified in paragraph (1); and
                    (C) investor protection concerns in connection with 
                swap agreements identified in paragraph (1).

SEC. 23. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Commodity Exchange Act.--
            (1) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) 
        (as amended by section 3(1)) is amended--
                    (A) in paragraphs (4), (5), (17), (18), (21), and 
                (24), by inserting ``or derivatives transaction 
                execution facility'' after ``contract market'' each 
                place it appears; and
                    (B) in paragraph (25)--
                            (i) in the paragraph heading, by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                            (ii) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity''.
            (2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 
        2a, 4, 4a, 3) is amended--
                    (A) by striking ``Sec. 2. (a)(1)(A)(i) The'' and 
                inserting the following:

``SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF 
              AGENT; COMMODITY FUTURES TRADING COMMISSION; TRANSACTION 
              IN INTERSTATE COMMERCE.

    ``(a) Jurisdiction of Commission; Commodity Futures Trading 
Commission.--
            ``(1) Jurisdiction of commission.--
                    ``(A) In general.--The''; and
                    (B) in subsection (a)--
                            (i) in paragraph (1) (as amended by 
                        subparagraph (A))--
                                    (I) by striking subparagraph (B);
                                    (II) by striking ``subparagraph (B) 
                                of this subparagraph'' and inserting 
                                ``subsection (g)'';
                                    (III) by striking ``contract market 
                                designated pursuant to section 5 of 
                                this Act'' and inserting ``contract 
                                market designated or derivatives 
                                transaction execution facility 
                                registered pursuant to section 5 or 
                                5a'';
                                    (IV) by striking clause (ii); and
                                    (V) in clause (iii), by striking 
                                ``(iii) The'' and inserting the 
                                following:
                    ``(B) Liability of principal for act of agent.--
                The'';
                            (ii) in paragraph (7), by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                            (iii) in paragraph (8)(B)(ii)--
                                    (I) in the first sentence, by 
                                striking ``designation as a contract 
                                market'' and inserting ``designation or 
                                registration as a contract market or 
                                derivatives transaction execution 
                                facility'';
                                    (II) in the second sentence, by 
                                striking ``designate a board of trade 
                                as a contract market'' and inserting 
                                ``designate or register a board of 
                                trade as a contract market or 
                                derivatives transaction execution 
                                facility''; and
                                    (III) in the fourth sentence, by 
                                striking ``designating, or refusing, 
                                suspending, or revoking the designation 
                                of, a board of trade as a contract 
                                market'' and inserting ``designating, 
                                registering, or refusing, suspending, 
                                or revoking the designation or 
                                registration of, a board of trade as a 
                                contract market or derivatives 
                                transaction execution facility''.
            (3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is 
        amended--
                    (A) in subsection (a)--
                            (i) by inserting ``exempted by operation of 
                        section 5d or unless'' after ``Unless'';
                            (ii) in paragraph (1), by striking 
                        ``designated by the Commission as a `contract 
                        market' for'' and inserting ``designated or 
                        registered by the Commission as a contract 
                        market or derivatives transaction execution 
                        facility for'';
                            (iii) in paragraph (2), by striking 
                        ``member of such''; and
                            (iv) in paragraph (3), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) by striking ``designated as a 
                                contract market'' and inserting 
                                ``designated or registered as a 
                                contract market or derivatives 
                                transaction execution facility''; and
                                    (II) by striking ``section 
                                2(a)(1)(B)'' and inserting ``section 
                                2(g)''; and
                            (ii) in paragraph (2)(B)(ii), by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market''.
            (4) Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) 
        is amended--
                    (A) in subsection (a)--
                            (i) in the first sentence, by inserting 
                        ``or derivatives transaction execution 
                        facilities'' after ``contract markets''; and
                            (ii) in the second sentence, by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market'';
                    (B) in subsection (b), by inserting ``or 
                derivatives transaction execution facility'' after 
                ``contract market'' each place it appears; and
                    (C) in subsection (e)--
                            (i) by striking ``contract market or'' each 
                        place it appears and inserting ``contract 
                        market, derivatives transaction execution 
                        facility, or'';
                            (ii) by striking ``licensed or designated'' 
                        each place it appears and inserting ``licensed, 
                        designated, or registered''; and
                            (iii) by striking ``contract market, or'' 
                        and inserting ``contract market or derivatives 
                        transaction execution facility, or''.
            (5) Section 4b(a) of the Commodity Exchange Act (7 U.S.C. 
        6b(a)) is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (6) Sections 4c(g), 4d, 4e, and 4f of the Commodity 
        Exchange Act (7 U.S.C. 6c(g), 6d, 6e, 6f) are amended by 
        inserting ``or derivatives transaction execution facility'' 
        after ``contract market'' each place it appears.
            (7) Section 4g of the Commodity Exchange Act (7 U.S.C. 6g) 
        is amended--
                    (A) in subsection (b), by striking ``clearinghouse 
                and contract market'' and inserting ``registered 
                entity''; and
                    (B) in subsection (f), by striking 
                ``clearinghouses, contract markets, and exchanges'' and 
                inserting ``registered entities''.
            (8) Section 4h of the Commodity Exchange Act (7 U.S.C. 6h) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (9) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i) 
        is amended in the first sentence by inserting ``or derivatives 
        transaction execution facility'' after ``contract market''.
            (10) Section 4j of the Commodity Exchange Act (7 U.S.C. 6j) 
        is repealed.
            (11) Section 4l of the Commodity Exchange Act (7 U.S.C. 6l) 
        is amended by inserting ``or derivatives transaction execution 
        facilities'' after ``contract markets'' each place it appears.
            (12) Section 4p of the Commodity Exchange Act (7 U.S.C. 6p) 
        is amended--
                    (A) in the third sentence of subsection (a), by 
                striking ``Act or contract markets'' and inserting 
                ``Act, contract markets, or derivatives transaction 
                execution facilities''; and
                    (B) in subsection (b), by inserting ``derivatives 
                transaction execution facility,'' after ``contract 
                market,''.
            (13) The Commodity Exchange Act (as amended by paragraphs 
        (10), (11), and (12)) is amended by redesignating section 4k 
        through 4p (7 U.S.C. 6k through 6p) as sections 4j through 4o, 
        respectively.
            (14) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 
        9, 9a, 9b, 13b, 15) is amended--
                    (A) in subsection (a)--
                            (i) in the first sentence--
                                    (I) by striking ``board of trade 
                                desiring to be designated a `contract 
                                market' shall make application to the 
                                Commission for such designation'' and 
                                inserting ``person desiring to be 
                                designated or registered as a 
                                registered entity shall make 
                                application to the Commission for such 
                                designation or registration'';
                                    (II) by striking ``above 
                                conditions'' and inserting ``conditions 
                                set forth in this Act''; and
                                    (III) by striking ``above 
                                requirements'' and inserting ``the 
                                requirements of this Act'';
                            (ii) in the second sentence, by striking 
                        ``designation as a contract market within one 
                        year'' and inserting ``designation or 
                        registration as a registered entity within 180 
                        days'';
                            (iii) in the third sentence--
                                    (I) by striking ``board of trade'' 
                                and inserting ``person''; and
                                    (II) by striking ``one-year 
                                period'' and inserting ``180-day 
                                period''; and
                            (iv) in the last sentence, by striking 
                        ``designate as a `contract market' any board of 
                        trade that has made application therefor, such 
                        board of trade'' and inserting ``designate or 
                        register as a registered entity any person that 
                        has made application therefor, such person'';
                    (B) in subsection (b)--
                            (i) in the first sentence--
                                    (I) by striking ``designation of 
                                any board of trade as a `contract 
                                market' upon'' and inserting 
                                ``designation or registration of any 
                                registered entity on'';
                                    (II) by striking ``board of trade'' 
                                each place it appears and inserting 
                                ``registered entity''; and
                                    (III) by striking ``designation as 
                                set forth in section 5 of this Act'' 
                                and inserting ``designation or 
                                registration as set forth in sections 5 
                                through 5c'';
                            (ii) in the second sentence--
                                    (I) by striking ``board of trade'' 
                                the first place it appears and 
                                inserting ``registered entity''; and
                                    (II) by striking ``board of trade'' 
                                the second and third places it appears 
                                and inserting ``person''; and
                            (iii) in the last sentence, by striking 
                        ``board of trade'' each place it appears and 
                        inserting ``person'';
                    (C) in subsection (c)--
                            (i) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                            (ii) by striking ``contract markets'' each 
                        place it appears and inserting ``registered 
                        entities''; and
                            (iii) by striking ``trading privileges'' 
                        each place it appears and inserting 
                        ``privileges'';
                    (D) in subsection (d), by striking ``contract 
                market'' each place it appears and inserting 
                ``registered entity''; and
                    (E) in subsection (e), by striking ``trading on all 
                contract markets'' each place it appears and inserting 
                ``the privileges of all registered entities''.
            (15) Section 6a of the Commodity Exchange Act (7 U.S.C. 
        10a) is amended--
                    (A) in the first sentence of subsection (a), by 
                striking ``designated as a `contract market' shall'' 
                and inserting ``designated or registered as a contract 
                market or a derivatives transaction execution 
                facility''; and
                    (B) in subsection (b), by striking ``designated as 
                a contract market'' and inserting ``designated or 
                registered as a contract market or a derivatives 
                transaction execution facility''.
            (16) Section 6b of the Commodity Exchange Act (7 U.S.C. 
        13a) is amended--
                    (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity'';
                    (B) in the first sentence, by striking 
                ``designation as set forth in section 5 of this Act'' 
                and inserting ``designation or registration as set 
                forth in sections 5 through 5c''; and
                    (C) in the last sentence, by striking ``the 
                contract market's ability'' and inserting ``the ability 
                of the registered entity''.
            (17) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 
        13a-1(a)) by striking ``contract market'' and inserting 
        ``registered entity''.
            (18) Section 6d(1) of the Commodity Exchange Act (7 U.S.C. 
        13a-2(1)) is amended by inserting ``derivatives transaction 
        execution facility,'' after ``contract market,''.
            (19) Section 7 of the Commodity Exchange Act (7 U.S.C. 11) 
        is amended--
                    (A) in the first sentence--
                            (i) by striking ``board of trade'' and 
                        inserting ``person'';
                            (ii) by inserting ``or registered'' after 
                        ``designated'';
                            (iii) by inserting ``or registration'' 
                        after ``designation'' each place it appears; 
                        and
                            (iv) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                    (B) in the second sentence--
                            (i) by striking ``designation of such board 
                        of trade as a contract market'' and inserting 
                        ``designation or registration of the registered 
                        entity''; and
                            (ii) by striking ``contract markets'' and 
                        inserting ``registered entities''; and
                    (C) in the last sentence--
                            (i) by striking ``board of trade'' and 
                        inserting ``person''; and
                            (ii) by striking ``designated again a 
                        contract market'' and inserting ``designated or 
                        registered again a registered entity''.
            (20) Section 8(c) of the Commodity Exchange Act (7 U.S.C. 
        12(c)) is amended in the first sentence by striking ``board of 
        trade'' and inserting ``registered entity''.
            (21) Section 8a of the Commodity Exchange Act (7 U.S.C. 
        12a) is amended--
                    (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity''; and
                    (B) in paragraph (2)(F), by striking ``trading 
                privileges'' and inserting ``privileges''.
            (22) Sections 8b and 8c(e) of the Commodity Exchange Act (7 
        U.S.C. 12b, 12c(e)) are amended by striking ``contract market'' 
        each place it appears and inserting ``registered entity''.
            (23) Section 8e of the Commodity Exchange Act (7 U.S.C. 
        12e) is amended--
                    (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity'';
                    (B) in subsection (a), by striking ``section 
                5a(b)'' and inserting ``sections 5 through 5c'';
                    (C) in subsection (b)--
                            (i) in paragraph (1), by striking ``a 
                        contract market's trade monitoring system 
                        implemented pursuant to section 5a(b)'' and 
                        inserting ``the trade monitoring system of a 
                        registered entity implemented pursuant to 
                        sections 5 through 5c'';
                            (ii) by striking paragraph (3) and 
                        inserting the following:
            ``(3) Remedies.--On becoming final, the Commission 
        deficiency order may require the registered entity to--
                    ``(A) institute appropriate improvements in its 
                trade monitoring system necessary to correct the 
                deficiencies in the order;
                    ``(B) satisfy stated objective performance criteria 
                to correct the deficiencies; or
                    ``(C) upgrade or reconfigure existing systems for 
                collecting or processing relevant data on trading and 
                trader or broker activity, including, where 
                appropriate, the commitment of additional resources.''; 
                and
                            (iii) in paragraph (5)--
                                    (I) in the paragraph heading, by 
                                striking ``Designation as contract 
                                market'' and inserting ``Designation or 
                                registration as registered entity'';
                                    (II) by inserting ``or 
                                registration'' after ``designation''; 
                                and
                                    (III) by striking ``board of 
                                trade'' and inserting ``person'';
                    (D) in subsection (d)(2), by striking ``section 
                5b'' and inserting ``section 5e''; and
                    (E) in the paragraph heading of subsection (e)(2), 
                by striking ``Contract markets'' and inserting 
                ``Registered entities''.
            (24) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) 
        is amended--
                    (A) by striking ``contract market'' each place it 
                appears and inserting ``registered entity''; and
                    (B) in subsection (a)(2), by striking ``section 
                4o(1),'' and inserting ``section 4n(1),''.
            (25) Section 14 of the Commodity Exchange Act (7 U.S.C. 18) 
        is amended--
                    (A) in subsection (a)(1)(B), by striking ``contract 
                market'' and inserting ``registered entity''; and
                    (B) in subsection (f), by striking ``contract 
                markets'' and inserting ``registered entities''.
            (26) Sections 15 and 17 of the Commodity Exchange Act (7 
        U.S.C. 19, 21) are amended by striking ``contract market'' each 
        place it appears and inserting ``registered entity''.
            (27) Section 22 of the Commodity Exchange Act (7 U.S.C. 25) 
        is amended--
                    (A) in subsection (a)--
                            (i) in paragraph (1)--
                                    (I) by striking ``contract market, 
                                clearing organization of a contract 
                                market, licensed board of trade,'' and 
                                inserting ``registered entity''; and
                                    (II) in subparagraph (C)(i), by 
                                striking ``contract market'' and 
                                inserting ``registered entity'';
                            (ii) in paragraph (2), by striking 
                        ``sections 5a(11),'' and inserting ``sections 
                        5(d)(13), 5b(d)(2)(H)(i),''; and
                            (iii) in paragraph (3), by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                    (B) in subsection (b)--
                            (i) in paragraph (1)--
                                    (I) by striking ``contract market 
                                or clearing organization of a contract 
                                market'' and inserting ``registered 
                                entity'';
                                    (II) by striking ``section 5a(8) 
                                and section 5a(9) of this Act'' and 
                                inserting ``sections 5 through 5c'';
                                    (III) by striking ``contract 
                                market, clearing organization of a 
                                contract market, or licensed board of 
                                trade'' and inserting ``registered 
                                entity''; and
                                    (IV) by striking ``contract market 
                                or licensed board of trade'' and 
                                inserting ``registered entity'';
                            (ii) in paragraph (3)--
                                    (I) by striking ``a contract 
                                market, clearing organization, licensed 
                                board of trade,'' and inserting 
                                ``registered entity''; and
                                    (II) by striking ``contract market, 
                                licensed board of trade'' and inserting 
                                ``registered entity'';
                            (iii) in paragraph (4), by striking 
                        ``contract market, licensed board of trade, 
                        clearing organization,'' and inserting 
                        ``registered entity''; and
                            (iv) in paragraph (5), by striking 
                        ``contract market, licensed board of trade, 
                        clearing organization,'' and inserting 
                        ``registered entity''.
    (b) Federal Deposit Insurance Corporation Improvement Act of 
1991.--Section 402(2) of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (12 U.S.C. 4402(2)) is amended by striking 
subparagraph (B) and inserting the following:
                    ``(B) that is registered as a derivatives clearing 
                organization under section 5b of the Commodity Exchange 
                Act.''.
    (c) Revised Statutes.--Chapter three of title LXII of the Revised 
Statutes is amended by adding at the end the following:

``SEC. 5220. SWAP AGREEMENTS.

    ``(a) In General.--The term `swap agreement' means--
            ``(1) an individually negotiated contract, agreement, 
        warrant, note, option, or transaction that is based, in whole 
        or in part, on the occurrence of any event, or on the value of, 
        any interest in, or any quantitative measure relating to, 1 or 
        more commodities, securities, currencies, interest rates, 
        indices, other rates, or other assets;
            ``(2) any other agreement or combination of agreements that 
        is similar to a contract, agreement, warrant, note, option, or 
        transaction described in paragraph (1); and
            ``(3) an option to enter into a contract, agreement, 
        warrant, note, or option described in paragraph (1) or an 
        agreement described in paragraph (2).
    ``(b) Inclusions.--The term `swap agreement' includes a master swap 
agreement, and all supplements to a master swap agreement, without 
regard to whether the master swap agreement contains a contract, 
agreement, warrant, note, option, or transaction that is not a swap 
agreement described in subsection (a), but only to the extent that the 
master swap agreement contains such a contract, agreement, warrant, 
note, option, or transaction.''.
    (d) Gramm-Leach-Bliley Act.--Section 206 of the Gramm-Leach-Bliley 
Act (15 U.S.C. 78c note; Public Law 106-102) is amended--
            (1) in subsection (a), by striking paragraph (6) and 
        inserting the following:
            ``(6) a swap agreement (as defined in section 5220 of the 
        Revised Statutes).'';
            (2) by striking subsection (b); and
            (3) by redesignating subsections (c) and (d) as subsections 
        (b) and (c), respectively.
    (e) Securities Act of 1933.--The Securities Act of 1933 (15 U.S.C. 
77a et seq.) is amended by inserting after section 3 the following:

``SEC. 3A. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (f) Securities Exchange Act of 1934.--The Securities Exchange Act 
of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 3 
the following:

``SEC. 3A. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (g) Trust Indenture Act of 1939.--The Trust Indenture Act of 1939 
(15 U.S.C. 77aaa et seq.) is amended by inserting after section 304 the 
following:

``SEC. 304A. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (h) Investment Company Act of 1940.--The Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) is amended by inserting after section 6 
the following:

``SEC. 6A. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (i) Investment Advisers Act of 1940.--The Investment Advisers Act 
of 1940 (15 U.S.C. 80b-1 et seq.) is amended by inserting after section 
206A the following:

``SEC. 206B. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (j) Public Utility Holding Company Act of 1935.--The Public Utility 
Holding Company Act of 1935 (15 U.S.C. 79 et seq.) is amended by 
inserting after section 34 the following:

``SEC. 34A. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.
    (k) Securities Investor Protection Act of 1970.--The Securities 
Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) is amended by 
adding at the end the following:

``SEC. 17. SWAP AGREEMENTS.

    ``Nothing in this Act (including regulations under this Act) 
authorizes the Commission to regulate, supervise, or otherwise subject 
to oversight--
            ``(1) an activity, agreement, instrument, transaction, or 
        product over which the Commission is not explicitly granted 
        jurisdiction or enforcement authority under this Act; or
            ``(2) a swap agreement (as defined in section 5220 of the 
        Revised Statutes), without regard to whether the swap agreement 
        is entered into or engaged in by a depository institution (as 
        defined in section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813)).''.

SEC. 24. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act 
takes effect on the date of enactment of this Act.
    (b) Jurisdiction of Commodities Futures Trading Commission.--
Section 8, and the amendments made by that section, take effect 1 year 
after the date of enactment of this Act.
                                 <all>
```