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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3283 Introduced in Senate (IS)]

106th CONGRESS
  2d Session
                                S. 3283

 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

           December 15 (legislative day, September 22), 2000

  Mr. Lugar (for himself, Mr. Gramm, Mr. Harkin, Mr. Fitzgerald, Mr. 
 Hagel, and Mr. Johnson) introduced the following bill; which was read 
                             the first time

_______________________________________________________________________

                                 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.
                TITLE I--COMMODITY FUTURES MODERNIZATION

Sec. 101. Definitions.
Sec. 102. Agreements, contracts, and transactions in foreign currency, 
                            government securities, and certain other 
                            commodities.
Sec. 103. Legal certainty for excluded derivative transactions.
Sec. 104. Excluded electronic trading facilities.
Sec. 105. Hybrid instruments; swap transactions.
Sec. 106. Transactions in exempt commodities.
Sec. 107. Application of commodity futures laws.
Sec. 108. Protection of the public interest.
Sec. 109. Prohibited transactions.
Sec. 110. Designation of boards of trade as contract markets.
Sec. 111. Derivatives transaction execution facilities.
Sec. 112. Derivatives clearing.
Sec. 113. Common provisions applicable to registered entities.
Sec. 114. Exempt boards of trade.
Sec. 115. Suspension or revocation of designation as contract market.
Sec. 116. Authorization of appropriations.
Sec. 117. Preemption.
Sec. 118. Predispute resolution agreements for institutional customers.
Sec. 119. Consideration of costs and benefits and antitrust laws.
Sec. 120. Contract enforcement between eligible counterparties.
Sec. 121. Special procedures to encourage and facilitate bona fide 
                            hedging by agricultural producers.
Sec. 122. Rule of construction.
Sec. 123. Technical and conforming amendments.
Sec. 124. Privacy.
Sec. 125. Report to Congress.
Sec. 126. International activities of the Commodity Futures Trading 
                            Commission.
     TITLE II--COORDINATED REGULATION OF SECURITY FUTURES PRODUCTS

                 Subtitle A--Securities Law Amendments

Sec. 201. Definitions under the Securities Exchange Act of 1934.
Sec. 202. Regulatory relief for markets trading security futures 
                            products.
Sec. 203. Regulatory relief for intermediaries trading security futures 
                            products.
Sec. 204. Special provisions for interagency cooperation.
Sec. 205. Maintenance of market integrity for security futures 
                            products.
Sec. 206. Special provisions for the trading of security futures 
                            products.
Sec. 207. Clearance and settlement.
Sec. 208. Amendments relating to registration and disclosure issues 
                            under the Securities Act of 1933 and the 
                            Securities Exchange Act of 1934.
Sec. 209. Amendments to the Investment Company Act of 1940 and the 
                            Investment Advisers Act of 1940.
Sec. 210. Preemption of State laws.
          Subtitle B--Amendments To the Commodity Exchange Act

Sec. 251. Jurisdiction of Securities and Exchange Commission; other 
                            provisions.
Sec. 252. Application of the Commodity Exchange Act to national 
                            securities exchanges and national 
                            securities associations that trade security 
                            futures.
Sec. 253. Notification of investigations and enforcement actions.
             TITLE III--LEGAL CERTAINTY FOR SWAP AGREEMENTS

Sec. 301. Swap agreement.
Sec. 302. Amendments to the Securities Act of 1933.
Sec. 303. Amendments to the Securities Exchange Act of 1934.
Sec. 304. Savings provision.
         TITLE IV--REGULATORY RESPONSIBILITY FOR BANK PRODUCTS

Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Exclusion of identified banking products commonly offered on 
                            or before December 5, 2000.
Sec. 404. Exclusion of certain identified banking products offered by 
                            banks after December 5, 2000.
Sec. 405. Exclusion of certain other identified banking products.
Sec. 406. Administration of the predominance test.
Sec. 407. Exclusion of covered swap agreements.
Sec. 408. Contract enforcement.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reauthorize the appropriation for the Commodity 
        Futures Trading Commission;
            (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 to oversight of the futures markets;
            (4) to provide a statutory and regulatory framework for 
        allowing the trading of futures on securities;
            (5) to clarify the jurisdiction of the Commodity Futures 
        Trading Commission over certain retail foreign exchange 
        transactions and bucket shops that may not be 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 transactions;
            (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.

                TITLE I--COMMODITY FUTURES MODERNIZATION

SEC. 101. DEFINITIONS.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (1) through (7), (8) 
        through (12), (13) through (15), and (16) as paragraphs (2) 
        through (8), (16) through (20), (22) through (24), and (28), 
        respectively;
            (2) by inserting before paragraph (2) (as redesignated by 
        paragraph (1)) the following:
            ``(1) Alternative trading system.--The term `alternative 
        trading system' means an organization, association, or group of 
        persons that--
                    ``(A) is registered as a broker or dealer pursuant 
                to section 15(b) of the Securities Exchange Act of 1934 
                (except paragraph (11) thereof);
                    ``(B) performs the functions commonly performed by 
                an exchange (as defined in section 3(a)(1) of the 
                Securities Exchange Act of 1934);
                    ``(C) does not--
                            ``(i) set rules governing the conduct of 
                        subscribers other than the conduct of such 
                        subscribers' trading on the alternative trading 
                        system; or
                            ``(ii) discipline subscribers other than by 
                        exclusion from trading; and
                    ``(D) is exempt from the definition of the term 
                `exchange' under such section 3(a)(1) by rule or 
                regulation of the Securities and Exchange Commission on 
                terms that require compliance with regulations of its 
                trading functions.'';
            (3) by striking paragraph (2) (as redesignated by paragraph 
        (1)) and inserting the following:
            ``(2) Board of trade.--The term `board of trade' means any 
        organized exchange or other trading facility.'';
            (4) by inserting after paragraph (8) (as redesignated by 
        paragraph (1)) the following:
            ``(9) 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 
                an agreement, contract, or transaction--
                            ``(i) enables each party to the 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 central 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.
            ``(10) Electronic trading facility.--The term `electronic 
        trading facility' means a trading facility that--
                    ``(A) operates by means of an electronic or 
                telecommunications network; and
                    ``(B) maintains an automated audit trail of bids, 
                offers, and the matching of orders or the execution of 
                transactions on the facility.
            ``(11) Eligible commercial entity.--The term `eligible 
        commercial entity' means, with respect to an agreement, 
        contract or transaction in a commodity--
                    ``(A) an eligible contract participant described in 
                clause (i), (ii), (v), (vii), (viii), or (ix) of 
                paragraph (12)(A) that, in connection with its 
                business--
                            ``(i) has a demonstrable ability, directly 
                        or through separate contractual arrangements, 
                        to make or take delivery of the underlying 
                        commodity;
                            ``(ii) incurs risks, in addition to price 
                        risk, related to the commodity; or
                            ``(iii) is a dealer that regularly provides 
                        risk management or hedging services to, or 
                        engages in market-making activities with, the 
                        foregoing entities involving transactions to 
                        purchase or sell the commodity or derivative 
                        agreements, contracts, or transactions in the 
                        commodity;
                    ``(B) an eligible contract participant, other than 
                a natural person or an instrumentality, department, or 
                agency of a State or local governmental entity, that--
                            ``(i) regularly enters into transactions to 
                        purchase or sell the commodity or derivative 
                        agreements, contracts, or transactions in the 
                        commodity; and
                            ``(ii) either--
                                    ``(I) in the case of a collective 
                                investment vehicle whose participants 
                                include persons other than--
                                            ``(aa) qualified eligible 
                                        persons, as defined in 
                                        Commission rule 4.7(a) (17 
                                        C.F.R. 4.7(a));
                                            ``(bb) accredited 
                                        investors, as defined in 
                                        Regulation D of the Securities 
                                        and Exchange Commission under 
                                        the Securities Act of 1933 (17 
                                        C.F.R. 230.501(a)), with total 
assets of $2,000,000; or
                                            ``(cc) qualified 
                                        purchasers, as defined in 
                                        section 2(a)(51)(A) of the 
                                        Investment Company Act of 1940;
                                in each case as in effect on the date 
                                of the enactment of the Commodity 
                                Futures Modernization Act of 2000, has, 
                                or is one of a group of vehicles under 
                                common control or management having in 
                                the aggregate, $1,000,000,000 in total 
                                assets; or
                                    ``(II) in the case of other 
                                persons, has, or is one of a group of 
                                persons under common control or 
                                management having in the aggregate, 
                                $100,000,000 in total assets; or
                    ``(C) such other persons as the Commission shall 
                determine appropriate and shall designate by rule, 
                regulation, or order.
            ``(12) Eligible contract participant.--The term `eligible 
        contract participant' means--
                    ``(A) acting for its own account--
                            ``(i) a financial institution;
                            ``(ii) an insurance company that is 
                        regulated by a State, or that is regulated by a 
                        foreign government and is subject to comparable 
                        regulation as determined by the Commission, 
                        including a regulated subsidiary or affiliate 
                        of such an insurance company;
                            ``(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.), a governmental 
                        employee benefit plan, 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 or commodity trading 
                                        advisor subject to regulation 
                                        under the Investment Advisers 
                                        Act of 1940 (15 U.S.C. 80b-1 et 
                                        seq.) or this Act;
                                            ``(bb) a foreign person 
                                        performing a similar role or 
                                        function subject as such to 
                                        foreign regulation;
                                            ``(cc) a financial 
                                        institution; or
                                            ``(dd) an insurance company 
                                        described in clause (ii), or a 
                                        regulated subsidiary or 
                                        affiliate of such an insurance 
                                        company;
                            ``(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);
                        except that such term does not include an 
                        entity, instrumentality, agency, or department 
                        referred to in subclause (I) or (III) of this 
                        clause unless (aa) the entity, instrumentality, 
                        agency, or department is a person described in 
                        clause (i), (ii), or (iii) of section 
                        1a(11)(A); (bb) the entity, instrumentality, 
                        agency, or department owns and invests on a 
                        discretionary basis $25,000,000 or more in 
                        investments; or (cc) the agreement, contract, 
                        or transaction is offered by, and entered into 
                        with, an entity that is listed in any of 
                        subclauses (I) through (VI) of section 
                        2(c)(2)(B)(ii);
                            ``(viii)(I) 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);
                            ``(II) an associated person of a registered 
                        broker or dealer 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));
                            ``(III) an investment bank holding company 
                        (as defined in section 17(i) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q(i));
                            ``(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 in 
                        connection with any transaction that takes 
                        place on or through the facilities of a 
                        registered entity or an exempt board of trade, 
                        or any affiliate thereof, on which such person 
                        regularly trades; or
                            ``(xi) an individual who has total assets 
                        in an amount in excess of--
                                    ``(I) $10,000,000; or
                                    ``(II) $5,000,000 and who enters 
                                into the agreement, contract, or 
                                transaction in order to manage the risk 
                                associated with an asset owned or 
                                liability incurred, or reasonably 
                                likely to be owned or incurred, by the 
                                individual;
                    ``(B)(i) a person described in clause (i), (ii), 
                (iv), (v), (viii), (ix), or (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) an investment adviser subject to regulation 
                under the Investment Advisers Act of 1940, a commodity 
                trading advisor subject to regulation under this Act, a 
                foreign person performing a similar role or function 
                subject as such to foreign regulation, or a person 
                described in clause (i), (ii), (iv), (v), (viii), (ix), 
                or (x) of subparagraph (A) or in subparagraph (C), in 
                any such case acting as investment manager or fiduciary 
                (but excluding a person acting as broker or performing 
                an equivalent agency function) for another person 
                described in subparagraph (A) or (C) and who is 
                authorized by such person to commit such 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.
            ``(13) Excluded commodity.--The term `excluded commodity' 
        means--
                    ``(A) an interest rate, exchange rate, currency, 
                security, security index, credit risk or measure, debt 
                or equity instrument, index or measure of inflation, or 
                other macroeconomic index or measure;
                    ``(B) any other rate, differential, index, or 
                measure of economic or commercial risk, return, or 
                value that is--
                            ``(i) not based in substantial part on the 
                        value of a narrow group of commodities not 
                        described in clause (A); or
                            ``(ii) based solely on 1 or more 
                        commodities that have no cash market;
                    ``(C) any economic or commercial index based on 
                prices, rates, values, or levels that are not within 
                the control of any party to the relevant contract, 
                agreement, or transaction; or
                    ``(D) an occurrence, extent of an occurrence, or 
                contingency (other than a change in the price, rate, 
                value, or level of a commodity not described in clause 
                (A)) that is--
                            ``(i) beyond the control of the parties to 
                        the relevant contract, agreement, or 
                        transaction; and
                            ``(ii) associated with a financial, 
                        commercial, or economic consequence.
            ``(14) Exempt commodity.--The term `exempt commodity' means 
        a commodity that is not an excluded commodity or an 
        agricultural commodity.
            ``(15) 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) any financial holding company (as defined in 
                section 2 of the Bank Holding Company Act of 1956);
                    ``(H) a trust company; or
                    ``(I) a similarly regulated subsidiary or affiliate 
                of an entity described in any of subparagraphs (A) 
                through (H).'';
            (5) by inserting after paragraph (20) (as redesignated by 
        paragraph (1)) the following:
            ``(21) Hybrid instrument.--The term `hybrid instrument' 
        means a security having 1 or more payments indexed to the 
        value, level, or rate of, or providing for the delivery of, 1 
        or more commodities.'';
            (6) by striking paragraph (24) (as redesignated by 
        paragraph (1)) and inserting the following:
            ``(24) Member of a contract market; member of a derivatives 
        transaction execution facility.--The term `member' means, with 
        respect to a contract market or derivatives transaction 
        execution facility, an individual, association, partnership, 
        corporation, or trust--
                    ``(A) owning or holding membership in, or admitted 
                to membership representation on, the contract market or 
                derivatives transaction execution facility; or
                    ``(B) having trading privileges on the contract 
                market or derivatives transaction execution facility.
            ``(25) Narrow-based security index.--
                    ``(A) The term `narrow-based security index' means 
                an index--
                            ``(i) that has 9 or fewer component 
                        securities;
                            ``(ii) in which a component security 
                        comprises more than 30 percent of the index's 
                        weighting;
                            ``(iii) in which the 5 highest weighted 
                        component securities in the aggregate comprise 
                        more than 60 percent of the index's weighting; 
                        or
                            ``(iv) in which the lowest weighted 
                        component securities comprising, in the 
                        aggregate, 25 percent of the index's weighting 
                        have an aggregate dollar value of average daily 
                        trading volume of less than $50,000,000 (or in 
                        the case of an index with 15 or more component 
                        securities, $30,000,000), except that if there 
                        are two or more securities with equal weighting 
                        that could be included in the calculation of 
                        the lowest weighted component securities 
                        comprising, in the aggregate, 25 percent of the 
                        index's weighting, such securities shall be 
                        ranked from lowest to highest dollar value of 
                        average daily trading volume and shall be 
                        included in the calculation based on their 
                        ranking starting with the lowest ranked 
                        security.
                    ``(B) Notwithstanding subparagraph (A), an index is 
                not a narrow-based security index if--
                            ``(i)(I) it has at least 9 component 
                        securities;
                            ``(II) no component security comprises more 
                        than 30 percent of the index's weighting; and
                            ``(III) each component security is--
                                    ``(aa) registered pursuant to 
                                section 12 of the Securities Exchange 
                                Act of 1934;
                                    ``(bb) 1 of 750 securities with the 
                                largest market capitalization; and
                                    ``(cc) 1 of 675 securities with the 
                                largest dollar value of average daily 
                                trading volume;
                            ``(ii) a board of trade was designated as a 
                        contract market by the Commodity Futures 
                        Trading Commission with respect to a contract 
                        of sale for future delivery on the index, 
                        before the date of enactment of the Commodity 
                        Futures Modernization Act of 2000;
                            ``(iii)(I) a contract of sale for future 
                        delivery on the index traded on a designated 
                        contract market or registered derivatives 
                        transaction execution facility for at least 30 
                        days as a contract of sale for future delivery 
                        on an index that was not a narrow-based 
                        security index; and
                            ``(II) it has been a narrow-based security 
                        index for no more than 45 business days over 3 
                        consecutive calendar months;
                            ``(iv) a contract of sale for future 
                        delivery on the index is traded on or subject 
                        to the rules of a foreign board of trade and 
                        meets such requirements as are jointly 
                        established by rule or regulation by the 
                        Commission and the Securities and Exchange 
                        Commission;
                            ``(v) no more than 18 months have passed 
                        since the date of enactment of the Commodity 
                        Futures Modernization Act of 2000 and--
                                    ``(I) it is traded on or subject to 
                                the rules of a foreign board of trade;
                                    ``(II) the offer and sale in the 
                                United States of a contract of sale for 
                                future delivery on the index was 
                                authorized before the date of the 
                                enactment of the Commodity Futures 
                                Modernization Act of 2000; and
                                    ``(III) the conditions of such 
                                authorization continue to be met; or
                            ``(vi) a contract of sale for future 
                        delivery on the index is traded on or subject 
                        to the rules of a board of trade and meets such 
                        requirements as are jointly established by 
                        rule, regulation, or order by the Commission 
                        and the Securities and Exchange Commission.
                    ``(C) Within 1 year after the date of the enactment 
                of the Commodity Futures Modernization Act of 2000, the 
                Commission and the Securities and Exchange Commission 
                jointly shall adopt rules or regulations that set forth 
                the requirements under subparagraph (B)(iv).
                    ``(D) An index that is a narrow-based security 
                index solely because it was a narrow-based security 
                index for more than 45 business days over 3 consecutive 
                calendar months pursuant to clause (iii) of 
                subparagraph (B) shall not be a narrow-based security 
                index for the 3 following calendar months.
                    ``(E) For purposes of subparagraphs (A) and (B)--
                            ``(i) the dollar value of average daily 
                        trading volume and the market capitalization 
                        shall be calculated as of the preceding 6 full 
                        calendar months; and
                            ``(ii) the Commission and the Securities 
                        and Exchange Commission shall, by rule or 
                        regulation, jointly specify the method to be 
                        used to determine market capitalization and 
                        dollar value of average daily trading volume.
            ``(26) 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'.
            ``(27) Organized exchange.--The term `organized exchange' 
        means a trading facility that--
                    ``(A) permits trading--
                            ``(i) by or on behalf of a person that is 
                        not an eligible contract participant; or
                            ``(ii) by persons other than on a 
                        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 facility; and
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (7) by adding at the end the following:
            ``(29) 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;
                    ``(C) a derivatives clearing organization 
                registered under section 5b; and
                    ``(D) a board of trade designated as a contract 
                market under section 5f.
            ``(30) Security.--The term `security' means a security as 
        defined in section 2(a)(1) of the Securities Act of 1933 (15 
        U.S.C. 77b(a)(1)) or section 3(a)(10) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).
            ``(31) Security future.--The term `security future' means a 
        contract of sale for future delivery of a single security or of 
        a narrow-based security index, including any interest therein 
        or based on the value thereof, except an exempted security 
        under section 3(a)(12) of the Securities Exchange Act of 1934 
        as in effect on the date of enactment of the Futures Trading 
        Act of 1982 (other than any municipal security as defined in 
        section 3(a)(29) of the Securities Exchange Act of 1934 as in 
        effect on the date of enactment of the Futures Trading Act of 
        1982). The term `security future' does not include any 
        agreement, contract, or transaction excluded from this Act 
        under section 2(c), 2(d), 2(f), or 2(g) of this Act (as in 
        effect on the date of the enactment of the Commodity Futures 
        Modernization Act of 2000) or title IV of the Commodity Futures 
        Modernization Act of 2000.
            ``(32) Security futures product.--The term `security 
        futures product' means a security future or any put, call, 
        straddle, option, or privilege on any security future.
            ``(33) 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 
                        constitutes, maintains, or provides an 
                        electronic facility or system that enables 
                        participants to negotiate the terms of and 
                        enter into bilateral transactions as a result 
                        of communications exchanged by the parties and 
                        not from interaction of multiple bids and 
                        multiple offers within a predetermined, 
                        nondiscretionary automated trade matching and 
                        execution algorithm;
                            ``(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) facilities on which bids and 
                        offers, and acceptances of bids and offers 
                        effected on the facility, are not binding.
                Any person, group of persons, dealer, broker, or 
                facility described in clause (i) or (ii) is excluded 
                from the meaning of the term `trading facility' for the 
                purposes of this Act without any prior specific 
                approval, certification, or other action by the 
                Commission.
                    ``(C) Special rule.--A person or group of persons 
                that would not otherwise constitute a trading facility 
                shall not be considered to be a trading facility solely 
                as a result of the submission to a derivatives clearing 
                organization of transactions executed on or through the 
                person or group of persons.''.

SEC. 102. 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 5a (to the extent 
        provided in section 5a(g)), 5b, 5d, 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 an excluded 
                commodity; or
                    ``(G) mortgages or mortgage purchase commitments.
            ``(2) Commission jurisdiction.--
                    ``(A) Agreements, contracts, and transactions 
                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 is--
                            ``(i) a contract of sale of a commodity for 
                        future delivery (or an option on such a 
                        contract), or an option on a commodity (other 
                        than foreign currency or a security or a group 
                        or index of securities), that is executed or 
                        traded on an organized exchange; or
                            ``(ii) an option on foreign currency 
                        executed or traded on an organized exchange 
                        that is not a national securities exchange 
                        registered pursuant to section 6(a) of the 
                        Securities Exchange Act of 1934.
                    ``(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 a contract of sale of a commodity 
                        for future delivery (or an option on such a 
                        contract) or an option (other than an option 
executed or traded on a national securities exchange registered 
pursuant to section 6(a) of the Securities Exchange Act of 1934); 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) or a futures 
                                commission merchant registered under 
                                this Act;
                                    ``(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), or an affiliated person of a 
                                futures commission merchant registered 
                                under this Act, 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)) or 
                                section 4f(c)(2)(B) of this Act;
                                    ``(IV) an insurance company 
                                described in section 1a(12)(A)(ii) of 
                                this Act, or a regulated subsidiary or 
                                affiliate of such an insurance company;
                                    ``(V) a financial holding company 
                                (as defined in section 2 of the Bank 
                                Holding Company Act of 1956); or
                                    ``(VI) an investment bank holding 
                                company (as defined in section 17(i) of 
                                the Securities Exchange Act of 1934).
                    ``(C) Notwithstanding subclauses (II) and (III) of 
                subparagraph (B)(ii), agreements, contracts, or 
                transactions described in subparagraph (B) shall be 
                subject to sections 4b, 4c(b), 6(c) and 6(d) (to the 
                extent that sections 6(c) and 6(d) prohibit 
                manipulation of the market price of any commodity, in 
                interstate commerce, or for future delivery on or 
                subject to the rules of any market), 6c, 6d, and 8(a) 
                if they are entered into by a futures commission 
                merchant or an affiliate of a futures commission 
                merchant that is not also an entity described in 
                subparagraph (B)(ii) of this paragraph.''.

SEC. 103. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is further 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 excluded 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 5a (to the extent provided in 
        section 5a(g)), 5b, 5d, or 12(e)(2)(B)) governs or applies to 
        an agreement, contract, or transaction in an excluded commodity 
        if--
                    ``(A) the agreement, contract, or transaction is 
                entered into on a principal-to-principal basis between 
                parties trading for their own accounts or as described 
                in section 1a(12)(B)(ii);
                    ``(B) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants described in subparagraph (A), 
                (B)(ii), or (C) of section 1a(12)) 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.''.

SEC. 104. EXCLUDED ELECTRONIC TRADING FACILITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is further amended by adding at the end the following:
    ``(e) Excluded 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 its 
facilities to those satisfying the requirements of section 2(d)(2), 
2(g), or 2(h)(3).
            ``(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 operating as an exempt board 
        of trade from establishing and operating an electronic trading 
        facility excluded under this Act pursuant to paragraph (1).
            ``(3) Effect on transactions.--No failure by an electronic 
        trading facility to limit transactions as required by paragraph 
        (1) of this subsection or to comply with section 2(h)(5) shall 
        in itself affect the legality, validity, or enforceability of 
        an agreement, contract, or transaction entered into or traded 
        on the electronic trading facility or cause a participant on 
        the system to be in violation of this Act.
            ``(4) Special rule.--A person or group of persons that 
        would not otherwise constitute a trading facility shall not be 
        considered to be a trading facility solely as a result of the 
        submission to a derivatives clearing organization of 
        transactions executed on or through the person or group of 
        persons.''.

SEC. 105. HYBRID INSTRUMENTS; SWAP TRANSACTIONS.

    (a) Hybrid Instruments.--Section 2 of the Commodity Exchange Act (7 
U.S.C. 2, 2a, 3, 4, 4a) is further 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.
            ``(2) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security 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 of a commodity for future delivery (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.''.
    (b) Swap Transactions.--Section 2 of the Commodity Exchange Act (7 
U.S.C. 2, 2a, 3, 4, 4a) is further amended by adding at the end the 
following:
    ``(g) Excluded Swap Transactions.--No provision of this Act (other 
than section 5a (to the extent provided in section 5a(g)), 5b, 5d, or 
12(e)(2)) shall apply to or govern any agreement, contract, or 
transaction in a commodity other than an agricultural commodity if the 
agreement, contract, or transaction is--
            ``(1) entered into only between persons that are eligible 
        contract participants at the time they enter into the 
        agreement, contract, or transaction;
            ``(2) subject to individual negotiation by the parties; and
            ``(3) not executed or traded on a trading facility.''.
    (c) Study Regarding Retail Swaps.--
            (1) In general.--The Board of Governors of the Federal 
        Reserve System, the Secretary of the Treasury, the Commodity 
        Futures Trading Commission, and the Securities and Exchange 
        Commission shall conduct a study of issues involving the 
        offering of swap agreements to persons other than eligible 
        contract participants (as defined in section 1a of the 
        Commodity Exchange Act).
            (2) Matters to be addressed.--The study shall address--
                    (A) the potential uses of swap agreements by 
                persons other than eligible contract participants;
                    (B) the extent to which financial institutions are 
                willing to offer swap agreements to persons other than 
                eligible contract participants;
                    (C) the appropriate regulatory structure to address 
                customer protection issues that may arise in connection 
                with the offer of swap agreements to persons other than 
                eligible contract participants; and
                    (D) such other relevant matters deemed necessary or 
                appropriate to address.
            (3) Report.--Before the end of the 1-year period beginning 
        on the date of enactment of this Act, a report on the findings 
        and conclusions of the study required by paragraph (1) shall be 
        submitted to Congress, together with such recommendations for 
        legislative action as are deemed necessary and appropriate.

SEC. 106. TRANSACTIONS IN EXEMPT COMMODITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is further amended by adding at the end the following.
    ``(h) Legal Certainty for Certain Transactions in Exempt 
Commodities.--
            ``(1) Except as provided in paragraph (2), nothing in this 
        Act shall apply to a contract, agreement or transaction in an 
        exempt commodity which--
                    ``(A) is entered into solely between persons that 
                are eligible contract participants at the time the 
                persons enter into the agreement, contract, or 
                transaction; and
                    ``(B) is not entered into on a trading facility.
            ``(2) An agreement, contract, or transaction described in 
        paragraph (1) of this subsection shall be subject to--
                    ``(A) sections 5b and 12(e)(2)(B);
                    ``(B) sections 4b, 4o, 6(c), 6(d), 6c, 6d, and 8a, 
                and the regulations of the Commission pursuant to 
                section 4c(b) proscribing fraud in connection with 
                commodity option transactions, to the extent the 
                agreement, contract, or transaction is not between 
                eligible commercial entities (unless 1 of the entities 
                is an instrumentality, department, or agency of a State 
                or local governmental entity) and would otherwise be 
                subject to such sections and regulations; and
                    ``(C) sections 6(c), 6(d), 6c, 6d, 8a, and 9(a)(2), 
                to the extent such sections prohibit manipulation of 
                the market price of any commodity in interstate 
                commerce and the agreement, contract, or transaction 
                would otherwise be subject to such sections.
            ``(3) Except as provided in paragraph (4), nothing in this 
        Act shall apply to an agreement, contract, or transaction in an 
        exempt commodity which is--
                    ``(A) entered into on a principal-to-principal 
                basis solely between persons that are eligible 
                commercial entities at the time the persons enter into 
                the agreement, contract, or transaction; and
                    ``(B) executed or traded on an electronic trading 
                facility.
            ``(4) An agreement, contract, or transaction described in 
        paragraph (3) of this subsection shall be subject to--
                    ``(A) sections 5a (to the extent provided in 
                section 5a(g)), 5b, 5d, and 12(e)(2)(B);
                    ``(B) sections 4b and 4o and the regulations of the 
                Commission pursuant to section 4c(b) proscribing fraud 
                in connection with commodity option transactions to the 
                extent the agreement, contract, or transaction would 
                otherwise be subject to such sections and regulations;
                    ``(C) sections 6(c) and 9(a)(2), to the extent such 
                sections prohibit manipulation of the market price of 
                any commodity in interstate commerce and to the extent 
                the agreement, contract, or transaction would otherwise 
                be subject to such sections; and
                    ``(D) such rules and regulations as the Commission 
                may prescribe if necessary to ensure timely 
                dissemination by the electronic trading facility of 
                price, trading volume, and other trading data to the 
                extent appropriate, if the Commission determines that 
                the electronic trading facility performs a significant 
                price discovery function for transactions in the cash 
                market for the commodity underlying any agreement, 
                contract, or transaction executed or traded on the 
                electronic trading facility.
            ``(5) An electronic trading facility relying on the 
        exemption provided in paragraph (3) shall--
                    ``(A) notify the Commission of its intention to 
                operate an electronic trading facility in reliance on 
                the exemption set forth in paragraph (3), which notice 
                shall include--
                            ``(i) the name and address of the facility 
                        and a person designated to receive 
                        communications from the Commission;
                            ``(ii) the commodity categories that the 
                        facility intends to list or otherwise make 
                        available for trading on the facility in 
                        reliance on the exemption set forth in 
                        paragraph (3);
                            ``(iii) certifications that--
                                    ``(I) no executive officer or 
                                member of the governing board of, or 
                                any holder of a 10 percent or greater 
                                equity interest in, the facility is a 
                                person described in any of 
                                subparagraphs (A) through (H) of 
                                section 8a(2);
                                    ``(II) the facility will comply 
                                with the conditions for exemption under 
                                this paragraph; and
                                    ``(III) the facility will notify 
                                the Commission of any material change 
                                in the information previously provided 
                                by the facility to the Commission 
                                pursuant to this paragraph; and
                            ``(iv) the identity of any derivatives 
                        clearing organization to which the facility 
                        transmits or intends to transmit transaction 
                        data for the purpose of facilitating the 
                        clearance and settlement of transactions 
                        conducted on the facility in reliance on the 
                        exemption set forth in paragraph (3);
                    ``(B)(i)(I) provide the Commission with access to 
                the facility's trading protocols and electronic access 
                to the facility with respect to transactions conducted 
                in reliance on the exemption set forth in paragraph 
                (3); or
                    ``(II) provide such reports to the Commission 
                regarding transactions executed on the facility in 
                reliance on the exemption set forth in paragraph (3) as 
                the Commission may from time to time request to enable 
                the Commission to satisfy its obligations under this 
                Act;
                    ``(ii) maintain for 5 years, and make available for 
                inspection by the Commission upon request, records of 
                activities related to its business as an electronic 
                trading facility exempt under paragraph (3), 
                including--
                            ``(I) information relating to data entry 
                        and transaction details sufficient to enable 
                        the Commission to reconstruct trading activity 
                        on the facility conducted in reliance on the 
                        exemption set forth in paragraph (3); and
                            ``(II) the name and address of each 
                        participant on the facility authorized to enter 
                        into transactions in reliance on the exemption 
                        set forth in paragraph (3); and
                    ``(iii) upon special call by the Commission, 
                provide to the Commission, in a form and manner and 
                within the period specified in the special call, such 
                information related to its business as an electronic 
                trading facility exempt under paragraph (3), including 
                information relating to data entry and transaction 
                details in respect of transactions entered into in 
                reliance on the exemption set forth in paragraph (3), 
                as the Commission may determine appropriate--
                            ``(I) to enforce the provisions specified 
                        in subparagraphs (B) and (C) of paragraph (4);
                            ``(II) to evaluate a systemic market event; 
                        or
                            ``(III) to obtain information requested by 
                        a Federal financial regulatory authority in 
                        order to enable the regulator to fulfill its 
regulatory or supervisory responsibilities;
                    ``(C)(i) upon receipt of any subpoena issued by or 
                on behalf of the Commission to any foreign person who 
                the Commission believes is conducting or has conducted 
                transactions in reliance on the exemption set forth in 
                paragraph (3) on or through the electronic trading 
                facility relating to the transactions, promptly notify 
                the foreign person of, and transmit to the foreign 
                person, the subpoena in a manner reasonable under the 
                circumstances, or as specified by the Commission; and
                    ``(ii) if the Commission has reason to believe that 
                a person has not timely complied with a subpoena issued 
                by or on behalf of the Commission pursuant to clause 
                (i), and the Commission in writing has directed that a 
                facility relying on the exemption set forth in 
                paragraph (3) deny or limit further transactions by the 
                person, the facility shall deny that person further 
                trading access to the facility or, as applicable, limit 
                that person's access to the facility for liquidation 
                trading only;
                    ``(D) comply with the requirements of this 
                paragraph applicable to the facility and require that 
                each participant, as a condition of trading on the 
                facility in reliance on the exemption set forth in 
                paragraph (3), agree to comply with all applicable law;
                    ``(E) have a reasonable basis for believing that 
                participants authorized to conduct transactions on the 
                facility in reliance on the exemption set forth in 
                paragraph (3) are eligible commercial entities; and
                    ``(F) not represent to any person that the facility 
                is registered with, or designated, recognized, licensed 
                or approved by the Commission.
            ``(6) A person named in a subpoena referred to in paragraph 
        (5)(C) that believes the person is or may be adversely affected 
        or aggrieved by action taken by the Commission under this 
        section, shall have the opportunity for a prompt hearing after 
        the Commission acts under procedures that the Commission shall 
        establish by rule, regulation, or order.''.

SEC. 107. APPLICATION OF COMMODITY FUTURES LAWS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is further amended by adding at the end the following:
    ``(i) Application of Commodity Futures Laws.--
            ``(1) No provision of this Act shall be construed as 
        implying or creating any presumption that--
                    ``(A) any agreement, contract, or transaction that 
                is excluded from this Act under section 2(c), 2(d), 
                2(e), 2(f), or 2(g) of this Act or title IV of the 
                Commodity Futures Modernization Act of 2000, or 
                exempted under section 2(h) or 4(c) of this Act; or
                    ``(B) any agreement, contract, or transaction, not 
                otherwise subject to this Act, that is not so excluded 
                or exempted,
        is or would otherwise be subject to this Act.
            ``(2) No provision of, or amendment made by, the Commodity 
        Futures Modernization Act of 2000 shall be construed as 
        conferring jurisdiction on the Commission with respect to any 
        such agreement, contract, or transaction, except as expressly 
        provided in section 5a of this Act (to the extent provided in 
        section 5a(g) of this Act), 5b of this Act, or 5d of this 
        Act.''.

SEC. 108. PROTECTION OF THE PUBLIC INTEREST.

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

``SEC. 3. FINDINGS AND PURPOSE.

    ``(a) Findings.--The transactions subject to this Act are entered 
into regularly in interstate and international commerce and are 
affected with a national public interest by providing a means for 
managing and assuming price risks, discovering prices, or disseminating 
pricing information through trading in liquid, fair and financially 
secure trading facilities.
    ``(b) Purpose.--It is the purpose of this Act to serve the public 
interests 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. To foster these public interests, it is further the purpose 
of this Act to deter and prevent price manipulation or any other 
disruptions to market integrity; to ensure the financial integrity of 
all transactions subject to this Act and the avoidance of systemic 
risk; to protect all market participants from fraudulent or other 
abusive sales practices and misuses of customer assets; and to promote 
responsible innovation and fair competition among boards of trade, 
other markets and market participants.''.

SEC. 109. 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 the purchase 
        or sale of any commodity for future delivery (or any option on 
        such a transaction or option on a 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' 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.''.

SEC. 110. 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. The rules may authorize--
                    ``(A) transfer trades or office trades;
                    ``(B) an exchange of--
                            ``(i) futures in connection with a cash 
                        commodity transaction;
                            ``(ii) futures for cash commodities; or
                            ``(iii) futures for swaps; or
                    ``(C) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the contract market or a derivatives clearing 
                organization.
            ``(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 trade execution 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, including 
        the clearance and settlement of the transactions with a 
        derivatives clearing organization.
            ``(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 board of trade that is 
designated as a contract market on the date of the enactment 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, the board of trade shall comply 
        with the core principles specified in this subsection. The 
        board of trade shall have reasonable discretion in establishing 
        the manner in which it complies with the core principles.
            ``(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 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 the clearance and settlement of the 
        transactions with a derivatives clearing organization), and 
        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 
        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 contract market, 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 maintain 
        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.
            ``(18) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                    ``(A) adopting any rules or taking any actions that 
                result in any unreasonable restraints of trade; or
                    ``(B) imposing any material anticompetitive burden 
                on trading on the contract market.
    ``(e) Current Agricultural Commodities.--
            ``(1) Subject to paragraph (2) of this subsection, a 
        contract for purchase or sale for future delivery of an 
        agricultural commodity enumerated in section 1a(4) that is 
        available for trade on a contract market, as of the date of the 
        enactment of this subsection, may be traded only on a contract 
        market designated under this section.
            ``(2) In order to promote responsible economic or financial 
        innovation and fair competition, the Commission, on application 
        by any person, after notice and public comment and opportunity 
        for hearing, may prescribe rules and regulations to provide for 
        the offer and sale of contracts for future delivery or options 
        on such contracts to be conducted on a derivatives transaction 
        execution facility.''.

SEC. 111. 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 110(2)) the following:

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

    ``(a) In General.--In lieu of compliance with the contract market 
designation requirements of sections 4(a) and 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) of this section.
    ``(b) Requirements for Trading.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility under subsection (a) may trade any contract 
        of sale of a commodity for future delivery (or option on such a 
        contract) 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 contract of sale of a commodity for future delivery (or 
option on such a 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 the threat of 
                manipulation;
                    ``(C) the underlying commodity has no cash market;
                    ``(D)(i) the contract is a security futures 
                product, and (ii) the registered derivatives 
                transaction execution facility is a national securities 
                exchange registered under the Securities Exchange Act 
                of 1934;
                    ``(E) the Commission determines, based on the 
                market characteristics, surveillance history, self-
                regulatory record, and capacity of the facility that 
                trading in the contract (or option) is highly unlikely 
                to be susceptible to the threat of manipulation; or
                    ``(F) except as provided in section 5(e)(2), the 
                underlying commodity is a commodity other than an 
                agricultural commodity enumerated in section 1a(4), and 
                trading access to the facility is limited to eligible 
                commercial entities trading for their own account.
            ``(3) Eligible traders.--To trade on a registered 
        derivatives transaction execution facility, a person shall--
                    ``(A) be an eligible contract participant; or
                    ``(B) 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 or, if the person 
                        trades only security futures products on the 
                        facility, a national securities association 
                        registered under section 15A(a) of the 
                        Securities Exchange Act of 1934;
                            ``(iii) is a clearing member of a 
                        derivatives clearing organization; and
                            ``(iv) has 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 be required to demonstrate to the Commission only that 
        the board of trade meets the criteria specified in subsection 
        (b) and this subsection.
            ``(2) Deterrence of abuses.--The board of trade shall 
        establish and enforce trading and participation 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. The rules may authorize--
                    ``(A) transfer trades or office trades;
                    ``(B) an exchange of--
                            ``(i) futures in connection with a cash 
                        commodity transaction;
                            ``(ii) futures for cash commodities; or
                            ``(iii) futures for swaps; or
                    ``(C) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the registered derivatives transaction 
                execution facility or a derivatives clearing 
                organization.
            ``(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, and 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. The board of trade shall have reasonable 
        discretion in establishing the manner in which the board of 
        trade complies with the core principles.
            ``(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) 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 contracts traded on the facility if the Commission 
        determines that the contracts perform a significant price 
        discovery function for transactions in the cash market for the 
        commodity underlying the contracts.
            ``(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 decision making process of the derivatives transaction 
        execution facility and establish a process for resolving such 
        conflicts of interest.
            ``(8) Recordkeeping.--The board of trade shall maintain 
        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 5 years.
            ``(9) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                    ``(A) adopting any rules or taking any actions that 
                result 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, Depository Institutions, and Farm 
Credit System Institutions as Intermediaries.--
            ``(1) In general.--With respect to transactions other than 
        transactions in security futures products, a registered 
        derivatives transaction execution facility may by rule allow a 
        broker-dealer, depository institution, or institution of the 
        Farm Credit System 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, depository institution, or institution 
                of the Farm Credit System; and
                    ``(B) receive funds of customers to serve as margin 
                or security for the transactions.
            ``(2) Requirements.--The requirements referred to in 
        paragraph (1) are that--
                    ``(A) the broker-dealer be in good standing with 
                the Securities and Exchange Commission, or the 
                depository institution or institution of the Farm 
                Credit System be in good standing with Federal bank 
                regulatory agencies (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if the broker-dealer, depository institution, 
                or institution of the Farm Credit System carries or 
                holds customer accounts or funds for transactions on 
                the derivatives transaction execution facility for more 
                than 1 business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit System 
                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, the 
        Secretary of the Treasury, 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 date of the enactment 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 customer that are carried 
with 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 and Exempt Commodities.--
            ``(1) In general.--Notwithstanding subsection (b)(2) of 
        this section, a board of trade that is or elects to become a 
        registered derivatives transaction execution facility may trade 
        on the facility any agreements, contracts, or transactions 
        involving excluded or exempt commodities other than securities, 
        except contracts of sale for future delivery of exempt 
        securities under section 3(a)(12) of the Securities Exchange 
        Act of 1934 as in effect on the date of enactment of the 
        Futures Trading Act of 1982, that are otherwise excluded from 
        this Act under section 2(c), 2(d), or 2(g) of this Act, or 
        exempt under section 2(h) of this Act.
            ``(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. 112. DERIVATIVES CLEARING.

    (a) In General.--Subtitle A of title IV of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 is amended--
            (1) by inserting before the section heading for section 
        401, the following new heading:

      ``CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING'';

            (2) in section 402, by striking ``this subtitle'' and 
        inserting ``this chapter''; and
            (3) by inserting after section 407, the following new 
        chapter:

            ``CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS

``SEC. 408. DEFINITIONS.

    For purposes of this chapter, the following definitions shall 
apply:
            ``(1) Multilateral clearing organization.--The term 
        `multilateral clearing organization' means a system utilized by 
        more than 2 participants in which the bilateral credit 
        exposures of participants arising from the transactions cleared 
        are effectively eliminated and replaced by a system of 
        guarantees, insurance, or mutualized risk of loss.
            ``(2) Over-the-counter derivative instrument.--The term 
        `over-the-counter derivative instrument' includes--
                    ``(A) any agreement, contract, or transaction, 
                including the terms and conditions incorporated by 
                reference in any such agreement, contract, or 
                transaction, which is an interest rate swap, option, or 
                forward agreement, including a rate floor, rate cap, 
                rate collar, cross-currency rate swap, basis swap, and 
                forward rate agreement; a same day-tomorrow, tomorrow-
                next, forward, or other foreign exchange or precious 
                metals agreement; a currency swap, option, or forward 
                agreement; an equity index or equity swap, option, or 
                forward agreement; a debt index or debt swap, option, 
                or forward agreement; a credit spread or credit swap, 
                option, or forward agreement; a commodity index or 
                commodity swap, option, or forward agreement; and a 
                weather swap, weather derivative, or weather option;
                    ``(B) any agreement, contract or transaction 
                similar to any other agreement, contract, or 
                transaction referred to in this clause that is 
                presently, or in the future becomes, regularly entered 
                into by parties that participate in swap transactions 
                (including terms and conditions incorporated by 
                reference in the agreement) and that is a forward, 
                swap, or option on 1 or more occurrences of any event, 
                rates, currencies, commodities, equity securities or 
                other equity instruments, debt securities or other debt 
                instruments, economic or other indices or measures of 
                economic or other risk or value;
                    ``(C) any agreement, contract, or transaction 
                excluded from the Commodity Exchange Act under section 
                2(c), 2(d), 2(f), or 2(g) of such Act, or exempted 
                under section 2(h) or 4(c) of such Act; and
                    ``(D) any option to enter into any, or any 
                combination of, agreements, contracts or transactions 
                referred to in this subparagraph.
            ``(3) Other definitions.--The terms `insured State 
        nonmember bank', `State member bank', and `affiliate' have the 
        same meanings as in section 3 of the Federal Deposit Insurance 
        Act.

``SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.

    ``(a) In General.--Except with respect to clearing organizations 
described in subsection (b), no person may operate a multilateral 
clearing organization for over-the-counter derivative instruments, or 
otherwise engage in activities that constitute such a multilateral 
clearing organization unless the person is a national bank, a State 
member bank, an insured State nonmember bank, an affiliate of a 
national bank, a State member bank, or an insured State nonmember bank, 
or a corporation chartered under section 25A of the Federal Reserve 
Act.
    ``(b) Clearing Organizations.--Subsection (a) shall not apply to 
any clearing organization that--
            ``(1) is registered as a clearing agency under the 
        Securities Exchange Act of 1934;
            ``(2) is registered as a derivatives clearing organization 
        under the Commodity Exchange Act; or
            ``(3) is supervised by a foreign financial regulator that 
        the Comptroller of the Currency, the Board of Governors of the 
        Federal Reserve System, the Federal Deposit Insurance 
        Corporation, the Securities and Exchange Commission, or the 
        Commodity Futures Trading Commission, as applicable, has 
        determined satisfies appropriate standards.''.
    (b) Resolution of Clearing Banks.--The Federal Reserve Act (12 
U.S.C. 221 et seq.) is amended by inserting after section 9A the 
following new section:

``SEC. 9B. RESOLUTION OF CLEARING BANKS.

    ``(a) Conservatorship or Receivership.--
            ``(1) Appointment.--The Board may appoint a conservator or 
        receiver to take possession and control of any uninsured State 
        member bank which operates, or operates as, a multilateral 
        clearing organization pursuant to section 409 of the Federal 
        Deposit Insurance Corporation Improvement Act of 1991 to the 
        same extent and in the same manner as the Comptroller of the 
        Currency may appoint a conservator or receiver for a national 
        bank.
            ``(2) Powers.--The conservator or receiver for an uninsured 
        State member bank referred to in paragraph (1) shall exercise 
        the same powers, functions, and duties, subject to the same 
        limitations, as a conservator or receiver for a national bank.
    ``(b) Board Authority.--The Board shall have the same authority 
with respect to any conservator or receiver appointed under subsection 
(a), and the uninsured State member bank for which the conservator or 
receiver has been appointed, as the Comptroller of the Currency has 
with respect to a conservator or receiver for a national bank and the 
national bank for which the conservator or receiver has been appointed.
    ``(c) Bankruptcy Proceedings.--The Board (in the case of an 
uninsured State member bank which operates, or operates as, such a 
multilateral clearing organization) may direct a conservator or 
receiver appointed for the bank to file a petition pursuant to title 
11, United States Code, in which case, title 11, United States Code, 
shall apply to the bank in lieu of otherwise applicable Federal or 
State insolvency law.''.
    (c) Technical and Conforming Amendments to Title 11, United States 
Code.--
            (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
        11, United States Code, is amended by striking ``; or'' and 
        inserting the following: ``, except that an uninsured State 
        member bank, or a corporation organized under section 25A of 
        the Federal Reserve Act, which operates, or operates as, a 
        multilateral clearing organization pursuant to section 409 of 
        the Federal Deposit Insurance Corporation Improvement Act of 
        1991 may be a debtor if a petition is filed at the direction of 
        the Board of Governors of the Federal Reserve System; or''.
            (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
        States Code, is amended to read as follows:
    ``(d) Only a railroad, a person that may be a debtor under chapter 
7 of this title (except a stockbroker or a commodity broker), and an 
uninsured State member bank, or a corporation organized under section 
25A of the Federal Reserve Act, which operates, or operates as, a 
multilateral clearing organization pursuant to section 409 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991 may be a 
debtor under chapter 11 of this title.''.
            (3) Definition of financial institution.--Section 101(22) 
        of title 11, United States Code, is amended to read as follows:
            ``(22) the term `financial institution'--
                    ``(A) means--
                            ``(i) a Federal reserve bank or an entity 
                        (domestic or foreign) that is a commercial or 
                        savings bank, industrial savings bank, savings 
                        and loan association, trust company, or 
                        receiver or conservator for such entity and, 
                        when any such Federal reserve bank, receiver, 
                        conservator, or entity is acting as agent or 
                        custodian for a customer in connection with a 
                        securities contract, as defined in section 741 
                        of this title, the customer; or
                            ``(ii) in connection with a securities 
                        contract, as defined in section 741 of this 
                        title, an investment company registered under 
                        the Investment Company Act of 1940; and
                    ``(B) includes any person described in subparagraph 
                (A) which operates, or operates as, a multilateral 
                clearing organization pursuant to section 409 of the 
                Federal Deposit Insurance Corporation Improvement Act 
                of 1991;''.
            (4) Definition of uninsured state member bank.--Section 101 
        of title 11, United States Code, is amended by inserting after 
        paragraph (54) the following new paragraph--
    ``(54A) the term `uninsured State member bank' means a State member 
bank (as defined in section 3 of the Federal Deposit Insurance Act) the 
deposits of which are not insured by the Federal Deposit Insurance 
Corporation; and''.
            (5) Subchapter v of chapter 7.--
                    (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                            (i) by redesignating subsections (e) 
                        through (i) as subsections (f) through (j), 
                        respectively; and
                            (ii) by inserting after subsection (d) the 
                        following new subsection:
    ``(e) Scope of Application.--Subchapter V of chapter 7 of this 
title shall apply only in a case under such chapter concerning the 
liquidation of an uninsured State member bank, or a corporation 
organized under section 25A of the Federal Reserve Act, which operates, 
or operates as, a multilateral clearing organization pursuant to 
section 409 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991.''.
                    (B) Clearing bank liquidation.--Chapter 7 of title 
                11, United States Code, is amended by adding at the end 
                the following new subchapter:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec. 781. Definitions
    ``For purposes of this subchapter, the following definitions shall 
apply:
            ``(1) Board.--The term `Board' means the Board of Governors 
        of the Federal Reserve System.
            ``(2) Depository institution.--The term `depository 
        institution' has the same meaning as in section 3 of the 
        Federal Deposit Insurance Act.
            ``(3) Clearing bank.--The term `clearing bank' means an 
        uninsured State member bank, or a corporation organized under 
        section 25A of the Federal Reserve Act, which operates, or 
        operates as, a multilateral clearing organization pursuant to 
        section 409 of the Federal Deposit Insurance Corporation 
        Improvement Act of 1991.
``Sec. 782. Selection of trustee
    ``(a) In General.--
            ``(1) Appointment.--Notwithstanding any other provision of 
        this title, the conservator or receiver who files the petition 
        shall be the trustee under this chapter, unless the Board 
        designates an alternative trustee.
            ``(2) Successor.--The Board may designate a successor 
        trustee if required.
    ``(b) Authority of Trustee.--Whenever the Board appoints or 
designates a trustee, chapter 3 and sections 704 and 705 of this title 
shall apply to the Board in the same way and to the same extent that 
they apply to a United States trustee.
``Sec. 783. Additional powers of trustee
    ``(a) Distribution of Property Not of the Estate.--The trustee 
under this subchapter has power to distribute property not of the 
estate, including distributions to customers that are mandated by 
subchapters III and IV of this chapter.
    ``(b) Disposition of Institution.--The trustee under this 
subchapter may, after notice and a hearing--
            ``(1) sell the clearing bank to a depository institution or 
        consortium of depository institutions (which consortium may 
        agree on the allocation of the clearing bank among the 
        consortium);
            ``(2) merge the clearing bank with a depository 
        institution;
            ``(3) transfer contracts to the same extent as could a 
        receiver for a depository institution under paragraphs (9) and 
        (10) of section 11(e) of the Federal Deposit Insurance Act;
            ``(4) transfer assets or liabilities to a depository 
        institution;
            ``(5) transfer assets and liabilities to a bridge bank as 
        provided in paragraphs (1), (3)(A), (5), (6), of section 11(n) 
        of the Federal Deposit Insurance Act, paragraphs (9) through 
        (13) of such section, and subparagraphs (A) through (H) and 
        subparagraph (K) of paragraph (4) of such section 11(n), except 
        that--
                    ``(A) the bridge bank to which such assets or 
                liabilities are transferred shall be treated as a 
                clearing bank for the purpose of this subsection; and
                    ``(B) any references in any such provision of law 
                to the Federal Deposit Insurance Corporation shall be 
                construed to be references to the appointing agency and 
                that references to deposit insurance shall be omitted.
    ``(c) Certain Transfers Included.--Any reference in this section to 
transfers of liabilities includes a ratable transfer of liabilities 
within a priority class.
``Sec. 784. Right to be heard
    ``The Board or a Federal reserve bank (in the case of a clearing 
bank that is a member of that bank) may raise and may appear and be 
heard on any issue in a case under this subchapter.''.
            (6) Definitions of clearing organization, contract market, 
        and related definitions.--
                    (A) Section 761(2) of title 11, United States Code, 
                is amended to read as follows:
            ``(2) `clearing organization' means a derivatives clearing 
        organization registered under the Act;''.
                    (B) Section 761(7) of title 11, United States Code, 
                is amended to read as follows:
            ``(7) `contract market' means a registered entity;''.
                    (C) Section 761(8) of title 11, United States Code, 
                is amended to read as follows:
            ``(8) `contract of sale', `commodity', `derivatives 
        clearing organization', `future delivery', `board of trade', 
        `registered entity', and `futures commission merchant' have the 
        meanings assigned to those terms in the Act;''.
    (d) Clerical Amendment.--The table of sections for chapter 7 of 
title 11, United States Code, is amended by adding at the end the 
following new items:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec.
``781. Definitions.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
    (e) Resolution of Edge Act Corporations.--The 16th undesignated 
paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 624) is 
amended to read as follows:
            ``(16) Appointment of receiver or conservator.--
                    ``(A) In general.--The Board may appoint a 
                conservator or receiver for a corporation organized 
                under the provisions of this section to the same extent 
                and in the same manner as the Comptroller of the 
                Currency may appoint a conservator or receiver for a 
                national bank, and the conservator or receiver for such 
                corporation shall exercise the same powers, functions, 
                and duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
                    ``(B) Equivalent authority.--The Board shall have 
                the same authority with respect to any conservator or 
                receiver appointed for a corporation organized under 
                the provisions of this section under this paragraph and 
                any such corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver of a 
                national bank and the national bank for which a 
                conservator or receiver has been appointed.
                    ``(C) Title 11 petitions.--The Board may direct the 
                conservator or receiver of a corporation organized 
                under the provisions of this section to file a petition 
                pursuant to title 11, United States Code, in which 
                case, title 11, United States Code, shall apply to the 
                corporation in lieu of otherwise applicable Federal or 
                State insolvency law.''.
    (f) 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 111 of this Act, the following:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

    ``(a) Registration Requirement.--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(9) of this Act with respect to a contract of sale of a commodity for 
future delivery (or option on such a contract) or option on a 
commodity, in each case unless the contract or option--
            ``(1) is excluded from this Act by section 2(a)(1)(C)(i), 
        2(c), 2(d), 2(f), or 2(g) of this Act or title IV of the 
        Commodity Futures Modernization Act of 2000, or exempted under 
        section 2(h) or 4(c) of this Act; or
            ``(2) is a security futures product cleared by a clearing 
        agency registered under the Securities Exchange Act of 1934.
    ``(b) Voluntary Registration.--A derivatives clearing organization 
that clears agreements, contracts, or transactions excluded from this 
Act by section 2(c), 2(d), 2(f) or 2(g) of this Act or title IV of the 
Commodity Futures Modernization Act of 2000, or exempted under section 
2(h) or 4(c) of this Act, or other over-the-counter derivative 
instruments (as defined in the Federal Deposit Insurance Corporation 
Improvement Act of 1991) may register with the Commission as a 
derivatives clearing organization.
    ``(c) 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. The applicant shall have reasonable 
                discretion in establishing the manner in which it 
                complies with the core principles.
                    ``(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.
                    ``(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 maintain 
                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 5 years.
                    ``(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.
    ``(d) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that 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.
    ``(e) 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.
    ``(f) 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. 113. 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 112(f)) 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 sections 5(d), 
        5a(d), and 5b(d)(2) to describe what would constitute an 
        acceptable business practice under such sections.
            ``(2) Effect of interpretation.--An interpretation issued 
        under paragraph (1) shall not provide the exclusive means for 
        complying with such sections.
    ``(b) Delegation of Functions Under Core Principles.--
            ``(1) In general.--A contract market or derivatives 
        transaction execution facility 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 contract market or derivatives 
        transaction execution facility that delegates a function under 
        paragraph (1) shall remain responsible for carrying out the 
        function.
            ``(3) Noncompliance.--If a contract market or derivatives 
        transaction execution facility that delegates a function under 
        paragraph (1) becomes aware that a delegated function is not 
        being performed as required under this Act, the contract market 
        or derivatives transaction execution facility shall promptly 
        take steps to address the noncompliance.
    ``(c) New Contracts, New Rules, and Rule Amendments.--
            ``(1) In general.--Subject to paragraph (2), a registered 
        entity may elect to list for trading or accept for clearing any 
        new contract or other instrument, or may elect to approve and 
        implement any new rule or rule amendment, by providing to the 
        Commission (and the Secretary of the Treasury, in the case of a 
        contract of sale of a government security for future delivery 
        (or option on such a contract) or a rule or rule amendment 
        specifically related to such a contract) a written 
        certification that the new contract or instrument or clearing 
        of the new contract or instrument, 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) Prior approval required.--Notwithstanding any 
                other provision of this section, a designated contract 
                market shall submit to the Commission for prior 
                approval each rule amendment that materially changes 
                the terms and conditions, as determined by the 
                Commission, in any contract of sale for future delivery 
                of a commodity specifically enumerated in section 1a(4) 
                (or any option thereon) traded through its facilities 
                if the rule amendment applies to contracts and delivery 
                months which have already been listed for trading and 
                have open interest.
                    ``(C) 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.
            ``(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 applicable core principle specified in section 
        5(d), 5a(d), or 5b(d)(2), the Commission shall--
                    ``(A) notify the registered entity in writing 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 comply with the core 
        principles, the Commission may take further action in 
        accordance with this Act.
    ``(e) Reservation of Emergency Authority.--Nothing in this section 
shall limit or in any way affect the emergency powers of the Commission 
provided in section 8a(9).''.

SEC. 114. 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 113) the following:

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

    ``(a) Election To Register With the Commission.--A board of trade 
that meets the requirements of subsection (b) of this section may 
operate as an exempt board of trade on receipt from the board of trade 
of a notice, provided in such manner as the Commission may by rule or 
regulation prescribe, that the board of trade elects to operate as an 
exempt board of trade. Except as otherwise provided in this section, no 
provision of this Act (other than subparagraphs (C) and (D) of section 
2(a)(1) and section 12(e)(2)(B)) shall apply with respect to a contract 
of sale of a commodity for future delivery (or option on such a 
contract) traded on or through the facilities of an exempt board of 
trade.
    ``(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 or on a commodity)--
            ``(1) for which the underlying commodity has--
                    ``(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 the threat of manipulation; or
                    ``(C) no cash market;
            ``(2) that are entered into only between persons that are 
        eligible contract participants at the time at which the persons 
        enter into the contract; and
            ``(3) that are not contracts of sale (or options on such a 
        contract or on a commodity) for future delivery of any 
        security, including any group or index of securities or any 
        interest in, or based on the value of, any security or any 
        group or index of securities.
    ``(c) Antimanipulation Requirements.--A party to a contract of sale 
of a commodity for future delivery (or option on such a contract or on 
a commodity) that is traded on an exempt board of trade shall be 
subject to sections 4b, 4c(b), 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 
transactions in the cash market for the commodity underlying any 
contract, agreement, or 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, contract, or transaction 
involving a contract of sale of a commodity for future delivery, or 
option on such a contract or on a commodity, to the extent that the 
account, agreement, contract, 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.
    ``(g) An exempt board of trade that meets the requirements of 
subsection (b) shall not represent to any person that the board of 
trade is registered with, or designated, recognized, licensed, or 
approved by the Commission.''.

SEC. 115. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

    Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 20(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. 116. 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. 117. PREEMPTION.

    Section 12 of the Commodity Exchange Act (7 U.S.C. 16(e)) is 
amended by striking subsection (e) and inserting the following:
    ``(e) Relation to Other Law, Departments, or Agencies.--
            ``(1) Nothing in this Act shall supersede or preempt--
                    ``(A) criminal prosecution under any Federal 
                criminal statute;
                    ``(B) the application of any Federal or State 
                statute (except as provided in paragraph (2)), 
                including any rule or regulation thereunder, to any 
                transaction in or involving any commodity, product, 
                right, service, or interest--
                            ``(i) that is not conducted on or subject 
                        to the rules of a registered entity or exempt 
                        board of trade;
                            ``(ii) (except as otherwise specified by 
                        the Commission by rule or regulation) that is 
                        not conducted on or subject to the rules of any 
                        board of trade, exchange, or market located 
                        outside the United States, its territories or 
                        possessions; or
                            ``(iii) that is not subject to regulation 
                        by the Commission under section 4c or 19; or
                    ``(C) the application of any Federal or State 
                statute, including any rule or regulation thereunder, 
                to any person required to be registered or designated 
                under this Act who shall fail or refuse to obtain such 
                registration or designation.
            ``(2) This Act shall supersede and preempt the application 
        of 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--
                    ``(A) an electronic trading facility excluded under 
                section 2(e) of this Act;
                    ``(B) an agreement, contract, or transaction that 
                is excluded from this Act under section 2(c), 2(d), 
                2(f), or 2(g) of this Act or title IV of the Commodity 
                Futures Modernization Act of 2000, or exempted under 
                section 2(h) or 4(c) of this Act (regardless of whether 
                any such agreement, contract, or transaction is 
                otherwise subject to this Act).''.

SEC. 118. 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. 119. 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. 120. 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 or persons reasonably believed 
        to be eligible contract participants, and no hybrid instrument 
        sold to any investor, shall be void, voidable, or 
        unenforceable, and no such party shall be entitled to rescind, 
        or recover any payment made with respect to, such an agreement, 
        contract, transaction, or instrument under this section or any 
        other provision of Federal or State law, based solely on the 
        failure of the agreement, contract, transaction, or instrument 
        to comply with the terms or conditions of an exemption or 
        exclusion from any provision of this Act or regulations of the 
        Commission.''.

SEC. 121. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    The Commodity Exchange Act, as otherwise amended by this Act, is 
amended by inserting after section 4o the following:

``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    ``(a) Authority.--The Commission shall consider issuing rules or 
orders which--
            ``(1) prescribe procedures under which each contract market 
        is to provide for orderly delivery, including temporary storage 
        costs, of any agricultural commodity enumerated in section 
        1a(4) which is the subject of a contract for purchase or sale 
        for future delivery;
            ``(2) increase the ease with which domestic agricultural 
        producers may participate in contract markets, including by 
        addressing cost and margin requirements, so as to better enable 
        the producers to hedge price risk associated with their 
        production;
            ``(3) provide flexibility in the minimum quantities of such 
        agricultural commodities that may be the subject of a contract 
        for purchase or sale for future delivery that is traded on a 
        contract market, to better allow domestic agricultural 
        producers to hedge such price risk; and
            ``(4) encourage contract markets to provide information and 
        otherwise facilitate the participation of domestic agricultural 
        producers in contract markets.
    ``(b) Report.--Within 1 year after the date of enactment of this 
section, the Commission shall submit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report on the steps it has 
taken to implement this section and on the activities of contract 
markets pursuant to this section.''.

SEC. 122. RULE OF CONSTRUCTION.

    Except as expressly provided in this Act or an amendment made by 
this Act, nothing in this Act or an amendment made by this Act 
supersedes, affects, or otherwise limits or expands the scope and 
applicability of laws governing the Securities and Exchange Commission.

SEC. 123. 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 101) is amended--
                    (A) in paragraphs (5), (6), (16), (17), (20), and 
                (23), by inserting ``or derivatives transaction 
                execution facility'' after ``contract market'' each 
                place it appears; and
                    (B) in paragraph (24)--
                            (i) in the paragraph heading, by striking 
                        ``contract market'' and inserting ``registered 
                        entity'';
                            (ii) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity''; and
                            (iii) by adding at the end the following:
        ``A participant in an alternative trading system that is 
        designated as a contract market pursuant to section 5f is 
        deemed a member of the contract market for purposes of 
        transactions in security futures products through the contract 
        market.''.
            (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)(1)--
                            (i) in subparagraph (A) (as amended by 
                        subparagraph (A) of this paragraph)--
                                    (II) by striking ``subparagraph (B) 
                                of this subparagraph'' and inserting 
                                ``subparagraphs (C) and (D) of this 
                                paragraph and subsections (c) through 
                                (i) of this section'';
                                    (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''; and
                            (ii) in subparagraph (B)--
                                    (I) by striking ``(B)'' and 
                                inserting ``(C)'';
                                    (II) in clause (v)--
                                            (aa) by striking ``section 
                                        3 of the Securities Act of 
                                        1933''; and
                                            (bb) by inserting ``or 
                                        subparagraph (D)'' after 
                                        ``subparagraph''; and
                                    (III) by moving clauses (i) through 
                                (v) 4 ems to the right;
                    (C) in subsection (a)(7), by striking ``contract 
                market'' and inserting ``registered entity'';
                    (D) in subsection (a)(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 involving transactions for 
                        future delivery referred to in this clause or 
                        in considering possible emergency action under 
                        section 8a(9) of this Act'' 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 involving transactions for future 
                        delivery referred to in this clause or in 
                        considering any possible action under this Act 
                        (including without limitation emergency action 
                        under section 8a(9))'', and by striking 
                        ``designation, suspension, revocation, or 
                        emergency action'' and inserting ``designation, 
                        registration, suspension, revocation, or 
                        action''; and
                    (E) in subsection (a), by moving paragraphs (2) 
                through (9) 2 ems to the right.
            (3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is 
        amended--
                    (A) in subsection (a)--
                            (i) 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'';
                            (ii) in paragraph (2), by striking ``member 
                        of such''; and
                            (iii) 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 
                                ``subparagraphs (C)(ii) and (D) of 
                                section 2(a)(1), except that the 
                                Commission and the Securities and 
                                Exchange Commission may by rule, 
                                regulation, or order jointly exclude 
                                any agreement, contract, or transaction 
                                from section 2(a)(1)(D)''; 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)--
                            (i) in paragraph (1), by inserting ``, or 
                        derivatives transaction execution facility or 
                        facilities,'' after ``markets''; and
                            (ii) in paragraph (2), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; 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 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.
            (11) 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,''.
            (12) 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 contract 
                                market or derivatives transaction 
                                execution facility shall make 
                                application to the Commission for the 
                                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 contract market or 
                        derivatives transaction execution facility 
                        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 contract market or derivatives 
                        transaction execution facility any person that 
                        has made application therefor, the 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 
                                contract market or derivatives 
                                transaction execution facility on'';
                                    (II) by striking ``board of trade'' 
                                each place it appears and inserting 
                                ``contract market or derivatives 
                                transaction execution facility''; 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 5b or section 5f'';
                            (ii) in the second sentence--
                                    (I) by striking ``board of trade'' 
                                the first place it appears and 
                                inserting ``contract market or 
                                derivatives transaction execution 
                                facility''; 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''.
            (13) 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''.
            (14) 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''.
            (15) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 
        13a-1(a)) by striking ``contract market'' and inserting 
        ``registered entity''.
            (16) 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,''.
            (17) 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''.
            (18) 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''.
            (19) 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''.
            (20) 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''.
            (21) Section 8e of the Commodity Exchange Act (7 U.S.C. 
        12e) is repealed.
            (22) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (23) 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''.
            (24) Section 17 of the Commodity Exchange Act (7 U.S.C. 21) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (25) 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(b)(1)(E),''; 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.''.

SEC. 124. PRIVACY.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5f (as added by section 252) the following:

``SEC. 5G. PRIVACY.

    ``(a) Treatment as Financial Institutions.--Notwithstanding section 
509(3)(B) of the Gramm-Leach-Bliley Act, any futures commission 
merchant, commodity trading advisor, commodity pool operator, or 
introducing broker that is subject to the jurisdiction of the 
Commission under this Act with respect to any financial activity shall 
be treated as a financial institution for purposes of title V of such 
Act with respect to such financial activity.
    ``(b) Treatment of CFTC as Federal Functional Regulator.--For 
purposes of title V of such Act, the Commission shall be treated as a 
Federal functional regulator within the meaning of section 509(2) of 
such Act and shall prescribe regulations under such title within 6 
months after the date of enactment of this section.''.

SEC. 125. REPORT TO CONGRESS.

    (a) The Commodity Futures Trading Commission (in this section 
referred to as the ``Commission'') shall undertake and complete a study 
of the Commodity Exchange Act (in this section referred to as ``the 
Act'') and the Commission's rules, regulations and orders governing the 
conduct of persons required to be registered under the Act, not later 
than 1 year after the date of the enactment of this Act. The study 
shall identify--
            (1) the core principles and interpretations of acceptable 
        business practices that the Commission has adopted or intends 
        to adopt to replace the provisions of the Act and the 
        Commission's rules and regulations thereunder;
            (2) the rules and regulations that the Commission has 
        determined must be retained and the reasons therefor;
            (3) the extent to which the Commission believes it can 
        effect the changes identified in paragraph (1) of this 
        subsection through its exemptive authority under section 4(c) 
        of the Act; and
            (4) the regulatory functions the Commission currently 
        performs that can be delegated to a registered futures 
        association (within the meaning of the Act) and the regulatory 
        functions that the Commission has determined must be retained 
        and the reasons therefor.
    (b) In conducting the study, the Commission shall solicit the views 
of the public as well as Commission registrants, registered entities, 
and registered futures associations (all within the meaning of the 
Act).
    (c) The Commission shall transmit to the Committee on Agriculture 
of the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report of the results of its 
study, which shall include an analysis of comments received.

SEC. 126. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING 
              COMMISSION.

    (a) Findings.--The Congress finds that--
            (1) derivatives markets serving United States industry are 
        increasingly global in scope;
            (2) developments in data processing and communications 
        technologies enable users of risk management services to 
        analyze and compare those services on a worldwide basis;
            (3) financial services regulatory policy must be flexible 
        to account for rapidly changing derivatives industry business 
        practices;
            (4) regulatory impediments to the operation of global 
        business interests can compromise the competitiveness of United 
        States businesses;
            (5) events that disrupt financial markets and economies are 
        often global in scope, require rapid regulatory response, and 
        coordinated regulatory effort across international 
        jurisdictions;
            (6) through its membership in the International 
        Organisation of Securities Commissions, the Commodity Futures 
        Trading Commission has promoted beneficial communication among 
        market regulators and international regulatory cooperation; and
            (7) the Commodity Futures Trading Commission and other 
        United States financial regulators and self-regulatory 
        organizations should continue to foster productive and 
        cooperative working relationships with their counterparts in 
        foreign jurisdictions.
    (b) Sense of the Congress.--It is the sense of the Congress that, 
consistent with its responsibilities under the Commodity Exchange Act, 
the Commodity Futures Trading Commission should, as part of its 
international activities, continue to coordinate with foreign 
regulatory authorities, to participate in international regulatory 
organizations and forums, and to provide technical assistance to 
foreign government authorities, in order to encourage--
            (1) the facilitation of cross-border transactions through 
        the removal or lessening of any unnecessary legal or practical 
        obstacles;
            (2) the development of internationally accepted regulatory 
        standards of best practice;
            (3) the enhancement of international supervisory 
        cooperation and emergency procedures;
            (4) the strengthening of international cooperation for 
        customer and market protection; and
            (5) improvements in the quality and timeliness of 
        international information sharing.

     TITLE II--COORDINATED REGULATION OF SECURITY FUTURES PRODUCTS

                 Subtitle A--Securities Law Amendments

SEC. 201. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.

    Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)) is amended--
            (1) in paragraph (10), by inserting ``security future,'' 
        after ``treasury stock,'';
            (2) by striking paragraph (11) and inserting the following:
            ``(11) The term `equity security' means any stock or 
        similar security; or any security future on any such security; 
        or any security convertible, with or without consideration, 
        into such a security, or carrying any warrant or right to 
        subscribe to or purchase such a security; or any such warrant 
        or right; or any other security which the Commission shall deem 
        to be of similar nature and consider necessary or appropriate, 
        by such rules and regulations as it may prescribe in the public 
interest or for the protection of investors, to treat as an equity 
security.'';
            (3) in paragraph (13), by adding at the end the following: 
        ``For security futures products, such term includes any 
        contract, agreement, or transaction for future delivery.'';
            (4) in paragraph (14), by adding at the end the following: 
        ``For security futures products, such term includes any 
        contract, agreement, or transaction for future delivery.''; and
            (5) by adding at the end the following:
            ``(55)(A) The term `security future' means a contract of 
        sale for future delivery of a single security or of a narrow-
        based security index, including any interest therein or based 
        on the value thereof, except an exempted security under section 
        3(a)(12) of the Securities Exchange Act of 1934 as in effect on 
        the date of enactment of the Futures Trading Act of 1982 (other 
        than any municipal security as defined in section 3(a)(29) as 
        in effect on the date of enactment of the Futures Trading Act 
        of 1982). The term `security future' does not include any 
        agreement, contract, or transaction excluded from the Commodity 
        Exchange Act under section 2(c), 2(d), 2(f) or 2(g) of the 
        Commodity Exchange Act (as in effect on the date of enactment 
        of the Commodity Futures Modernization Act of 2000) or title IV 
        of the Commodity Futures Modernization Act of 2000.
            ``(B) The term `narrow-based security index' means an 
        index--
                    ``(i) that has 9 or fewer component securities;
                    ``(ii) in which a component security comprises more 
                than 30 percent of the index's weighting;
                    ``(iii) in which the 5 highest weighted component 
                securities in the aggregate comprise more than 60 
                percent of the index's weighting; or
                    ``(iv) in which the lowest weighted component 
                securities comprising, in the aggregate, 25 percent of 
                the index's weighting have an aggregate dollar value of 
                average daily trading volume of less than $50,000,000 
                (or in the case of an index with 15 or more component 
                securities, $30,000,000), except that if there are two 
                or more securities with equal weighting that could be 
                included in the calculation of the lowest weighted 
                component securities comprising, in the aggregate, 25 
                percent of the index's weighting, such securities shall 
                be ranked from lowest to highest dollar value of 
                average daily trading volume and shall be included in 
                the calculation based on their ranking starting with 
                the lowest ranked security.
            ``(C) Notwithstanding subparagraph (B), an index is not a 
        narrow-based security index if--
                    ``(i)(I) it has at least 9 component securities;
                    ``(II) no component security comprises more than 30 
                percent of the index's weighting; and
                    ``(III) each component security is--
                            ``(aa) registered pursuant to section 12 of 
                        the Securities Exchange Act of 1934;
                            ``(bb) 1 of 750 securities with the largest 
                        market capitalization; and
                            ``(cc) 1 of 675 securities with the largest 
                        dollar value of average daily trading volume;
                    ``(ii) a board of trade was designated as a 
                contract market by the Commodity Futures Trading 
                Commission with respect to a contract of sale for 
                future delivery on the index, before the date of 
                enactment of the Commodity Futures Modernization Act of 
                2000;
                    ``(iii)(I) a contract of sale for future delivery 
                on the index traded on a designated contract market or 
                registered derivatives transaction execution facility 
                for at least 30 days as a contract of sale for future 
                delivery on an index that was not a narrow-based 
                security index; and
                    ``(II) it has been a narrow-based security index 
                for no more than 45 business days over 3 consecutive 
                calendar months;
                    ``(iv) a contract of sale for future delivery on 
                the index is traded on or subject to the rules of a 
                foreign board of trade and meets such requirements as 
                are jointly established by rule or regulation by the 
                Commission and the Commodity Futures Trading 
                Commission;
                    ``(v) no more than 18 months have passed since the 
                date of enactment of the Commodity Futures 
                Modernization Act of 2000 and--
                            ``(I) it is traded on or subject to the 
                        rules of a foreign board of trade;
                            ``(II) the offer and sale in the United 
                        States of a contract of sale for future 
                        delivery on the index was authorized before the 
                        date of the enactment of the Commodity Futures 
                        Modernization Act of 2000; and
                            ``(III) the conditions of such 
                        authorization continue to be met; or
                    ``(vi) a contract of sale for future delivery on 
                the index is traded on or subject to the rules of a 
                board of trade and meets such requirements as are 
                jointly established by rule, regulation, or order by 
                the Commission and the Commodity Futures Trading 
                Commission.
            ``(D) Within 1 year after the enactment of the Commodity 
        Futures Modernization Act of 2000, the Commission and the 
        Commodity Futures Trading Commission jointly shall adopt rules 
        or regulations that set forth the requirements under clause 
        (iv) of subparagraph (C).
            ``(E) An index that is a narrow-based security index solely 
        because it was a narrow-based security index for more than 45 
business days over 3 consecutive calendar months pursuant to clause 
(iii) of subparagraph (C) shall not be a narrow-based security index 
for the 3 following calendar months.
            ``(F) For purposes of subparagraphs (B) and (C) of this 
        paragraph--
                    ``(i) the dollar value of average daily trading 
                volume and the market capitalization shall be 
                calculated as of the preceding 6 full calendar months; 
                and
                    ``(ii) the Commission and the Commodity Futures 
                Trading Commission shall, by rule or regulation, 
                jointly specify the method to be used to determine 
                market capitalization and dollar value of average daily 
                trading volume.
            ``(56) The term `security futures product' means a security 
        future or any put, call, straddle, option, or privilege on any 
        security future.
            ``(57)(A) The term `margin', when used with respect to a 
        security futures product, means the amount, type, and form of 
        collateral required to secure any extension or maintenance of 
        credit, or the amount, type, and form of collateral required as 
        a performance bond related to the purchase, sale, or carrying 
        of a security futures product.
            ``(B) The terms `margin level' and `level of margin', when 
        used with respect to a security futures product, mean the 
        amount of margin required to secure any extension or 
        maintenance of credit, or the amount of margin required as a 
        performance bond related to the purchase, sale, or carrying of 
        a security futures product.
            ``(C) The terms `higher margin level' and `higher level of 
        margin', when used with respect to a security futures product, 
        mean a margin level established by a national securities 
        exchange registered pursuant to section 6(g) that is higher 
        than the minimum amount established and in effect pursuant to 
        section 7(c)(2)(B).''.

SEC. 202. REGULATORY RELIEF FOR MARKETS TRADING SECURITY FUTURES 
              PRODUCTS.

    (a) Expedited Registration and Exemption.--Section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at 
the end the following:
    ``(g) Notice Registration of Security Futures Product Exchanges.--
            ``(1) Registration required.--An exchange that lists or 
        trades security futures products may register as a national 
        securities exchange solely for the purposes of trading security 
        futures products if--
                    ``(A) the exchange is a board of trade, as that 
                term is defined by the Commodity Exchange Act (7 U.S.C. 
                1a(2)), that--
                            ``(i) has been designated a contract market 
                        by the Commodity Futures Trading Commission and 
                        such designation is not suspended by order of 
                        the Commodity Futures Trading Commission; or
                            ``(ii) is registered as a derivative 
                        transaction execution facility under section 5a 
                        of the Commodity Exchange Act and such 
                        registration is not suspended by the Commodity 
                        Futures Trading Commission; and
                    ``(B) such exchange does not serve as a market 
                place for transactions in securities other than--
                            ``(i) security futures products; or
                            ``(ii) futures on exempted securities or 
                        groups or indexes of securities or options 
                        thereon that have been authorized under section 
                        2(a)(1)(C) of the Commodity Exchange Act.
            ``(2) Registration by notice filing.--
                    ``(A) Form and content.--An exchange required to 
                register only because such exchange lists or trades 
                security futures products may register for purposes of 
                this section by filing with the Commission a written 
                notice in such form as the Commission, by rule, may 
                prescribe containing the rules of the exchange and such 
                other information and documents concerning such 
                exchange, comparable to the information and documents 
                required for national securities exchanges under 
                section 6(a), as the Commission, by rule, may prescribe 
                as necessary or appropriate in the public interest or 
                for the protection of investors. If such exchange has 
                filed documents with the Commodity Futures Trading 
                Commission, to the extent that such documents contain 
                information satisfying the Commission's informational 
                requirements, copies of such documents may be filed 
                with the Commission in lieu of the required written 
                notice.
                    ``(B) Immediate effectiveness.--Such registration 
                shall be effective contemporaneously with the 
                submission of notice, in written or electronic form, to 
                the Commission, except that such registration shall not 
                be effective if such registration would be subject to 
                suspension or revocation.
                    ``(C) Termination.--Such registration shall be 
                terminated immediately if any of the conditions for 
                registration set forth in this subsection are no longer 
                satisfied.
            ``(3) Public availability.--The Commission shall promptly 
        publish in the Federal Register an acknowledgment of receipt of 
        all notices the Commission receives under this subsection and 
        shall make all such notices available to the public.
            ``(4) Exemption of exchanges from specified provisions.--
                    ``(A) Transaction exemptions.--An exchange that is 
                registered under paragraph (1) of this subsection shall 
                be exempt from, and shall not be required to enforce 
                compliance by its members with, and its members shall 
                not, solely with respect to those transactions effected 
                on such exchange in security futures products, be 
                required to comply with, the following provisions of 
                this title and the rules thereunder:
                            ``(i) Subsections (b)(2), (b)(3), (b)(4), 
                        (b)(7), (b)(9), (c), (d), and (e) of this 
                        section.
                            ``(ii) Section 8.
                            ``(iii) Section 11.
                            ``(iv) Subsections (d), (f), and (k) of 
                        section 17.
                            ``(v) Subsections (a), (f), and (h) of 
                        section 19.
                    ``(B) Rule change exemptions.--An exchange that 
                registered under paragraph (1) of this subsection shall 
                also be exempt from submitting proposed rule changes 
                pursuant to section 19(b) of this title, except that--
                            ``(i) such exchange shall file proposed 
                        rule changes related to higher margin levels, 
                        fraud or manipulation, recordkeeping, 
                        reporting, listing standards, or decimal 
                        pricing for security futures products, sales 
                        practices for security futures products for 
                        persons who effect transactions in security 
                        futures products, or rules effectuating such 
                        exchange's obligation to enforce the securities 
                        laws pursuant to section 19(b)(7);
                            ``(ii) such exchange shall file pursuant to 
                        sections 19(b)(1) and 19(b)(2) proposed rule 
                        changes related to margin, except for changes 
                        resulting in higher margin levels; and
                            ``(iii) such exchange shall file pursuant 
                        to section 19(b)(1) proposed rule changes that 
                        have been abrogated by the Commission pursuant 
                        to section 19(b)(7)(C).
            ``(5) Trading in security futures products.--
                    ``(A) In general.--Subject to subparagraph (B), it 
                shall be unlawful for any person to execute or trade a 
                security futures product until the later of--
                            ``(i) 1 year after the date of enactment of 
                        the Commodity Futures Modernization Act of 
                        2000; or
                            ``(ii) such date that a futures association 
                        registered under section 17 of the Commodity 
                        Exchange Act has met the requirements set forth 
                        in section 15A(k)(2) of this title.
                    ``(B) Principal-to-principal transactions.--
                Notwithstanding subparagraph (A), a person may execute 
                or trade a security futures product transaction if--
                            ``(i) the transaction is entered into--
                                    ``(I) on a principal-to-principal 
                                basis between parties trading for their 
                                own accounts or as described in section 
                                1a(12)(B)(ii) of the Commodity Exchange 
                                Act; and
                                    ``(II) only between eligible 
                                contract participants (as defined in 
                                subparagraphs (A), (B)(ii), and (C) of 
                                such section 1a(12)) at the time at 
                                which the persons enter into the 
                                agreement, contract, or transaction; 
                                and
                            ``(ii) the transaction is entered into on 
                        or after the later of--
                                    ``(I) 8 months after the date of 
                                enactment of the Commodity Futures 
                                Modernization Act of 2000; or
                                    ``(II) such date that a futures 
                                association registered under section 17 
                                of the Commodity Exchange Act has met 
                                the requirements set forth in section 
                                15A(k)(2) of this title.''.
    (b) Commission Review of Proposed Rule Changes.--
            (1) Expedited review.--Section 19(b) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by adding at 
        the end the following:
            ``(7) Security futures product rule changes.--
                    ``(A) Filing required.--A self-regulatory 
                organization that is an exchange registered with the 
                Commission pursuant to section 6(g) of this title or 
                that is a national securities association registered 
                pursuant to section 15A(k) of this title shall file 
                with the Commission, in accordance with such rules as 
                the Commission may prescribe, copies of any proposed 
                rule change or any proposed change in, addition to, or 
                deletion from the rules of such self-regulatory 
                organization (hereinafter in this paragraph 
                collectively referred to as a `proposed rule change') 
                that relates to higher margin levels, fraud or 
                manipulation, recordkeeping, reporting, listing 
                standards, or decimal pricing for security futures 
                products, sales practices for security futures products 
                for persons who effect transactions in security futures 
                products, or rules effectuating such self-regulatory 
                organization's obligation to enforce the securities 
                laws. Such proposed rule change shall be accompanied by 
                a concise general statement of the basis and purpose of 
                such proposed rule change. The Commission shall, upon 
                the filing of any proposed rule change, promptly 
                publish notice thereof together with the terms of 
                substance of the proposed rule change or a description 
                of the subjects and issues involved. The Commission 
                shall give interested persons an opportunity to submit 
                data, views, and arguments concerning such proposed 
                rule change.
                    ``(B) Filing with cftc.--A proposed rule change 
                filed with the Commission pursuant to subparagraph (A) 
                shall be filed concurrently with the Commodity Futures 
                Trading Commission. Such proposed rule change may take 
                effect upon filing of a written certification with the 
                Commodity Futures Trading Commission under section 
                5c(c) of the Commodity Exchange Act, upon a 
                determination by the Commodity Futures Trading 
                Commission that review of the proposed rule change is 
not necessary, or upon approval of the proposed rule change by the 
Commodity Futures Trading Commission.
                    ``(C) Abrogation of rule changes.--Any proposed 
                rule change of a self-regulatory organization that has 
                taken effect pursuant to subparagraph (B) may be 
                enforced by such self-regulatory organization to the 
                extent such rule is not inconsistent with the 
                provisions of this title, the rules and regulations 
                thereunder, and applicable Federal law. At any time 
                within 60 days of the date of the filing of a written 
                certification with the Commodity Futures Trading 
                Commission under section 5c(c) of the Commodity 
                Exchange Act, the date the Commodity Futures Trading 
                Commission determines that review of such proposed rule 
                change is not necessary, or the date the Commodity 
                Futures Trading Commission approves such proposed rule 
                change, the Commission, after consultation with the 
                Commodity Futures Trading Commission, may summarily 
                abrogate the proposed rule change and require that the 
                proposed rule change be refiled in accordance with the 
                provisions of paragraph (1), if it appears to the 
                Commission that such proposed rule change unduly 
                burdens competition or efficiency, conflicts with the 
                securities laws, or is inconsistent with the public 
                interest and the protection of investors. Commission 
                action pursuant to the preceding sentence shall not 
                affect the validity or force of the rule change during 
                the period it was in effect and shall not be reviewable 
                under section 25 of this title nor deemed to be a final 
                agency action for purposes of section 704 of title 5, 
                United States Code.
                    ``(D) Review of resubmitted abrogated rules.--
                            ``(i) Proceedings.--Within 35 days of the 
                        date of publication of notice of the filing of 
                        a proposed rule change that is abrogated in 
                        accordance with subparagraph (C) and refiled in 
                        accordance with paragraph (1), or within such 
                        longer period as the Commission may designate 
                        up to 90 days after such date if the Commission 
                        finds such longer period to be appropriate and 
                        publishes its reasons for so finding or as to 
                        which the self-regulatory organization 
                        consents, the Commission shall--
                                    ``(I) by order approve such 
                                proposed rule change; or
                                    ``(II) after consultation with the 
                                Commodity Futures Trading Commission, 
                                institute proceedings to determine 
                                whether the proposed rule change should 
                                be disapproved. Proceedings under 
                                subclause (II) shall include notice of 
                                the grounds for disapproval under 
                                consideration and opportunity for 
                                hearing and be concluded within 180 
                                days after the date of publication of 
                                notice of the filing of the proposed 
                                rule change. At the conclusion of such 
                                proceedings, the Commission, by order, 
                                shall approve or disapprove such 
                                proposed rule change. The Commission 
                                may extend the time for conclusion of 
                                such proceedings for up to 60 days if 
                                the Commission finds good cause for 
                                such extension and publishes its 
                                reasons for so finding or for such 
                                longer period as to which the self-
                                regulatory organization consents.
                            ``(ii) Grounds for approval.--The 
                        Commission shall approve a proposed rule change 
                        of a self-regulatory organization under this 
                        subparagraph if the Commission finds that such 
                        proposed rule change does not unduly burden 
                        competition or efficiency, does not conflict 
                        with the securities laws, and is not 
                        inconsistent with the public interest or the 
                        protection of investors. The Commission shall 
                        disapprove such a proposed rule change of a 
                        self-regulatory organization if it does not 
                        make such finding. The Commission shall not 
                        approve any proposed rule change prior to the 
                        30th day after the date of publication of 
                        notice of the filing thereof, unless the 
                        Commission finds good cause for so doing and 
                        publishes its reasons for so finding.''.
            (2) Decimal pricing provisions.--Section 19(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended 
        by inserting after paragraph (7), as added by paragraph (1), 
        the following:
            ``(8) Decimal pricing.--Not later than 9 months after the 
        date on which trading in any security futures product commences 
        under this title, all self-regulatory organizations listing or 
        trading security futures products shall file proposed rule 
        changes necessary to implement decimal pricing of security 
        futures products. The Commission may not require such rules to 
        contain equal minimum increments in such decimal pricing.''.
            (3) Consultation provisions.--Section 19(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended 
        by inserting after paragraph (8), as added by paragraph (2), 
        the following:
            ``(9) Consultation with cftc.--
                    ``(A) Consultation required.--The Commission shall 
                consult with and consider the views of the Commodity 
                Futures Trading Commission prior to approving or 
                disapproving a proposed rule change filed by a national 
                securities association registered pursuant to section 
                15A(a) or a national securities exchange subject to the 
                provisions of subsection (a) that primarily concerns 
                conduct related to transactions in security futures 
                products, except where the Commission determines that 
                an emergency exists requiring expeditious or summary 
                action and publishes its reasons therefor.
                    ``(B) Responses to cftc comments and findings.--If 
                the Commodity Futures Trading Commission comments in 
                writing to the Commission on a proposed rule that has 
                been published for comment, the Commission shall 
                respond in writing to such written comment before 
                approving or disapproving the proposed rule. If the 
                Commodity Futures Trading Commission determines, and 
                notifies the Commission, that such rule, if implemented 
                or as applied, would--
                            ``(i) adversely affect the liquidity or 
                        efficiency of the market for security futures 
                        products; or
                            ``(ii) impose any burden on competition not 
                        necessary or appropriate in furtherance of the 
                        purposes of this section,
                the Commission shall, prior to approving or 
                disapproving the proposed rule, find that such rule is 
                necessary and appropriate in furtherance of the 
                purposes of this section notwithstanding the Commodity 
                Futures Trading Commission's determination.''.
    (c) Review of Disciplinary Proceedings.--Section 19(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78s(d)) is amended by adding 
at the end the following:
    ``(3) The provisions of this subsection shall apply to an exchange 
registered pursuant to section 6(g) of this title or a national 
securities association registered pursuant to section 15A(k) of this 
title only to the extent that such exchange or association imposes any 
final disciplinary sanction for--
            ``(A) a violation of the Federal securities laws or the 
        rules and regulations thereunder; or
            ``(B) a violation of a rule of such exchange or 
        association, as to which a proposed change would be required to 
        be filed under section 19 of this title, except that, to the 
        extent that the exchange or association rule violation relates 
        to any account, agreement, contract, or transaction, this 
        subsection shall apply only to the extent such violation 
        involves a security futures product.''.

SEC. 203. REGULATORY RELIEF FOR INTERMEDIARIES TRADING SECURITY FUTURES 
              PRODUCTS.

    (a) Expedited Registration and Exemptions.--
            (1) Amendment.--Section 15(b) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the end 
        the following:
            ``(11) Broker/dealer registration with respect to 
        transactions in security futures products.--
                    ``(A) Notice registration.--
                            ``(i) Contents of notice.--Notwithstanding 
                        paragraphs (1) and (2), a broker or dealer 
                        required to register only because it effects 
                        transactions in security futures products on an 
                        exchange registered pursuant to section 6(g) 
                        may register for purposes of this section by 
                        filing with the Commission a written notice in 
                        such form and containing such information 
                        concerning such broker or dealer and any 
                        persons associated with such broker or dealer 
                        as the Commission, by rule, may prescribe as 
                        necessary or appropriate in the public interest 
                        or for the protection of investors. A broker or 
                        dealer may not register under this paragraph 
                        unless that broker or dealer is a member of a 
                        national securities association registered 
                        under section 15A(k).
                            ``(ii) Immediate effectiveness.--Such 
                        registration shall be effective 
                        contemporaneously with the submission of 
                        notice, in written or electronic form, to the 
                        Commission, except that such registration shall 
                        not be effective if the registration would be 
                        subject to suspension or revocation under 
                        paragraph (4).
                            ``(iii) Suspension.--Such registration 
                        shall be suspended immediately if a national 
                        securities association registered pursuant to 
                        section 15A(k) of this title suspends the 
                        membership of that broker or dealer.
                            ``(iv) Termination.--Such registration 
                        shall be terminated immediately if any of the 
                        above stated conditions for registration set 
                        forth in this paragraph are no longer 
                        satisfied.
                    ``(B) Exemptions for registered brokers and 
                dealers.--A broker or dealer registered pursuant to the 
                requirements of subparagraph (A) shall be exempt from 
                the following provisions of this title and the rules 
                thereunder with respect to transactions in security 
                futures products:
                            ``(i) Section 8.
                            ``(ii) Section 11.
                            ``(iii) Subsections (c)(3) and (c)(5) of 
                        this section.
                            ``(iv) Section 15B.
                            ``(v) Section 15C.
                            ``(vi) Subsections (d), (e), (f), (g), (h), 
                        and (i) of section 17.''.
            (2) Conforming amendment.--Section 28(e) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78bb(e)) is amended by adding 
        at the end the following:
    ``(4) The provisions of this subsection shall not apply with regard 
to securities that are security futures products.''.
    (b) Floor Brokers and Floor Traders.--Section 15(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by 
inserting after paragraph (11), as added by subsection (a), the 
following:
            ``(12) Exemption for security futures product exchange 
        members.--
                    ``(A) Registration exemption.--A natural person 
                shall be exempt from the registration requirements of 
                this section if such person--
                            ``(i) is a member of a designated contract 
                        market registered with the Commission as an 
                        exchange pursuant to section 6(g);
                            ``(ii) effects transactions only in 
                        securities on the exchange of which such person 
                        is a member; and
                            ``(iii) does not directly accept or solicit 
                        orders from public customers or provide advice 
                        to public customers in connection with the 
                        trading of security futures products.
                    ``(B) Other exemptions.--A natural person exempt 
                from registration pursuant to subparagraph (A) shall 
                also be exempt from the following provisions of this 
                title and the rules thereunder:
                            ``(i) Section 8.
                            ``(ii) Section 11.
                            ``(iii) Subsections (c)(3), (c)(5), and (e) 
                        of this section.
                            ``(iv) Section 15B.
                            ``(v) Section 15C.
                            ``(vi) Subsections (d), (e), (f), (g), (h), 
                        and (i) of section 17.''.
    (c) Limited Purpose National Securities Association.--Section 15A 
of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended by 
adding at the end the following:
    ``(k) Limited Purpose National Securities Association.--
            ``(1) Regulation of members with respect to security 
        futures products.--A futures association registered under 
        section 17 of the Commodity Exchange Act shall be a registered 
        national securities association for the limited purpose of 
        regulating the activities of members who are registered as 
        brokers or dealers in security futures products pursuant to 
        section 15(b)(11).
            ``(2) Requirements for registration.--Such a securities 
        association shall--
                    ``(A) be so organized and have the capacity to 
                carry out the purposes of the securities laws 
                applicable to security futures products and to comply, 
                and (subject to any rule or order of the Commission 
                pursuant to section 19(g)(2)) to enforce compliance by 
                its members and persons associated with its members, 
                with the provisions of the securities laws applicable 
                to security futures products, the rules and regulations 
                thereunder, and its rules;
                    ``(B) have rules that--
                            ``(i) are designed to prevent fraudulent 
                        and manipulative acts and practices, to promote 
                        just and equitable principles of trade, and, in 
                        general, to protect investors and the public 
                        interest, including rules governing sales 
                        practices and the advertising of security 
                        futures products reasonably comparable to those 
                        of other national securities associations 
                        registered pursuant to subsection (a) that are 
                        applicable to security futures products; and
                            ``(ii) are not designed to regulate by 
                        virtue of any authority conferred by this title 
                        matters not related to the purposes of this 
                        title or the administration of the association;
                    ``(C) have rules that provide that (subject to any 
                rule or order of the Commission pursuant to section 
                19(g)(2)) its members and persons associated with its 
                members shall be appropriately disciplined for 
                violation of any provision of the securities laws 
                applicable to security futures products, the rules or 
                regulations thereunder, or the rules of the 
                association, by expulsion, suspension, limitation of 
                activities, functions, and operations, fine, censure, 
                being suspended or barred from being associated with a 
                member, or any other fitting sanction; and
                    ``(D) have rules that ensure that members and 
                natural persons associated with members meet such 
                standards of training, experience, and competence 
                necessary to effect transactions in security futures 
                products and are tested for their knowledge of 
                securities and security futures products.
            ``(3) Exemption from rule change submission.--Such a 
        securities association shall be exempt from submitting proposed 
        rule changes pursuant to section 19(b) of this title, except 
        that--
                    ``(A) the association shall file proposed rule 
                changes related to higher margin levels, fraud or 
                manipulation, recordkeeping, reporting, listing 
                standards, or decimal pricing for security futures 
                products, sales practices for, advertising of, or 
                standards of training, experience, competence, or other 
                qualifications for security futures products for 
                persons who effect transactions in security futures 
                products, or rules effectuating the association's 
                obligation to enforce the securities laws pursuant to 
section 19(b)(7);
                    ``(B) the association shall file pursuant to 
                sections 19(b)(1) and 19(b)(2) proposed rule changes 
                related to margin, except for changes resulting in 
                higher margin levels; and
                    ``(C) the association shall file pursuant to 
                section 19(b)(1) proposed rule changes that have been 
                abrogated by the Commission pursuant to section 
                19(b)(7)(C).
            ``(4) Other exemptions.--Such a securities association 
        shall be exempt from and shall not be required to enforce 
        compliance by its members, and its members shall not, solely 
        with respect to their transactions effected in security futures 
        products, be required to comply, with the following provisions 
        of this title and the rules thereunder:
                    ``(A) Section 8.
                    ``(B) Subsections (b)(1), (b)(3), (b)(4), (b)(5), 
                (b)(8), (b)(10), (b)(11), (b)(12), (b)(13), (c), (d), 
                (e), (f), (g), (h), and (i) of this section.
                    ``(C) Subsections (d), (f), and (k) of section 17.
                    ``(D) Subsections (a), (f), and (h) of section 
                19.''.
    (d) Exemption Under the Securities Investor Protection Act of 
1970.--
            (1) Section 16(14) of the Securities Investor Protection 
        Act of 1970 (15 U.S.C. 78lll(14)) is amended by inserting ``or 
        any security future as that term is defined in section 
        3(a)(55)(A) of the Securities Exchange Act of 1934,'' after 
        ``certificate of deposit for a security,''.
            (2) Section 3(a)(2)(A) of the Securities Investor 
        Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)(A)) is amended--
                    (A) in clause (i), by striking ``and'' after the 
                semicolon;
                    (B) in clause (ii), by striking the period and 
                inserting ``; and''; and
                    (C) by adding at the end the following:
                            ``(iii) persons who are registered as a 
                        broker or dealer pursuant to section 
                        15(b)(11)(A) of the Securities Exchange Act of 
                        1934.''.

SEC. 204. SPECIAL PROVISIONS FOR INTERAGENCY COOPERATION.

    Section 17(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
78q(b)) is amended--
            (1) by striking ``(b) All'' and inserting the following:
    ``(b) Records Subject to Examination.--
            ``(1) Procedures for cooperation with other agencies.--
        All'';
            (2) by striking ``prior to conducting any such examination 
        of a registered clearing'' and inserting the following: ``prior 
        to conducting any such examination of a--
                    ``(A) registered clearing'';
            (3) by redesignating the last sentence as paragraph (4)(C);
            (4) by striking the period at the end of the first sentence 
        and inserting the following: ``; or
                    ``(B) broker or dealer registered pursuant to 
                section 15(b)(11), exchange registered pursuant to 
                section 6(g), or national securities association 
                registered pursuant to section 15A(k) gives notice to 
                the Commodity Futures Trading Commission of such 
                proposed examination and consults with the Commodity 
                Futures Trading Commission concerning the feasibility 
                and desirability of coordinating such examination with 
                examinations conducted by the Commodity Futures Trading 
                Commission in order to avoid unnecessary regulatory 
                duplication or undue regulatory burdens for such broker 
                or dealer or exchange.'';
            (5) by adding at the end the following new paragraphs:
            ``(2) Furnishing data and reports to cftc.--The Commission 
        shall notify the Commodity Futures Trading Commission of any 
        examination conducted of any broker or dealer registered 
        pursuant to section 15(b)(11), exchange registered pursuant to 
        section 6(g), or national securities association registered 
        pursuant to section 15A(k) and, upon request, furnish to the 
        Commodity Futures Trading Commission any examination report and 
        data supplied to, or prepared by, the Commission in connection 
        with such examination.
            ``(3) Use of cftc reports.--Prior to conducting an 
        examination under paragraph (1), the Commission shall use the 
        reports of examinations, if the information available therein 
        is sufficient for the purposes of the examination, of--
                    ``(A) any broker or dealer registered pursuant to 
                section 15(b)(11);
                    ``(B) exchange registered pursuant to section 6(g); 
                or
                    ``(C) national securities association registered 
                pursuant to section 15A(k);
        that is made by the Commodity Futures Trading Commission, a 
        national securities association registered pursuant to section 
        15A(k), or an exchange registered pursuant to section 6(g).
            ``(4) Rules of construction.--
                    ``(A) Notwithstanding any other provision of this 
                subsection, the records of a broker or dealer 
                registered pursuant to section 15(b)(11), an exchange 
                registered pursuant to section 6(g), or a national 
                securities association registered pursuant to section 
                15A(k) described in this subparagraph shall not be 
                subject to routine periodic examinations by the 
                Commission.
                    ``(B) Any recordkeeping rules adopted under this 
                subsection for a broker or dealer registered pursuant 
                to section 15(b)(11), an exchange registered pursuant 
                to section 6(g), or a national securities association 
                registered pursuant to section 15A(k) shall be limited 
                to records with respect to persons, accounts, 
                agreements, contracts, and transactions involving 
                security futures products.''; and
            (6) in paragraph (4)(C) (as redesignated by paragraph (3) 
        of this section), by striking ``Nothing in the proviso to the 
        preceding sentence'' and inserting ``Nothing in the proviso in 
        paragraph (1)''.

SEC. 205. MAINTENANCE OF MARKET INTEGRITY FOR SECURITY FUTURES 
              PRODUCTS.

    (a) Addition of Security Futures Products to Option-Specific 
Enforcement Provisions.--
            (1) Prohibition against manipulation.--Section 9(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended--
                    (A) in paragraph (1)--
                            (i) by inserting ``(A)'' after 
                        ``acquires''; and
                            (ii) by striking ``; or'' and inserting ``; 
                        or (B) any security futures product on the 
                        security; or'';
                    (B) in paragraph (2)--
                            (i) by inserting ``(A)'' after ``interest 
                        in any''; and
                            (ii) by striking ``; or'' and inserting ``; 
                        or (B) such security futures product; or''; and
                    (C) in paragraph (3)--
                            (i) by inserting ``(A)'' after ``interest 
                        in any''; and
                            (ii) by inserting ``; or (B) such security 
                        futures product'' after ``privilege''.
            (2) Manipulation in options and other derivative 
        products.--Section 9(g) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78i(g)) is amended--
                    (A) by inserting ``(1)'' after ``(g)'';
                    (B) by inserting ``other than a security futures 
                product'' after ``future delivery''; and
                    (C) by adding at the end following:
    ``(2) Notwithstanding the Commodity Exchange Act, the Commission 
shall have the authority to regulate the trading of any security 
futures product to the extent provided in the securities laws.''.
            (3) Liability of controlling persons and persons who aid 
        and abet violations.--Section 20(d) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78t(d)) is amended by striking ``or 
        privilege'' and inserting ``, privilege, or security futures 
        product''.
            (4) Liability to contemporaneous traders for insider 
        trading.--Section 21A(a)(1) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78u-1(a)(1)) is amended by striking 
        ``standardized options, the Commission--'' and inserting 
        ``standardized options or security futures products, the 
        Commission--''.
            (5) Enforcement consultation.--Section 21 of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78u) is amended by adding at 
        the end the following:
    ``(i) Information to CFTC.--The Commission shall provide the 
Commodity Futures Trading Commission with notice of the commencement of 
any proceeding and a copy of any order entered by the Commission 
against any broker or dealer registered pursuant to section 15(b)(11), 
any exchange registered pursuant to section 6(g), or any national 
securities association registered pursuant to section 15A(k).''.

SEC. 206. SPECIAL PROVISIONS FOR THE TRADING OF SECURITY FUTURES 
              PRODUCTS.

    (a) Listing Standards and Conditions for Trading.--Section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by inserting 
after subsection (g), as added by section 202, the following:
    ``(h) Trading in Security Futures Products.--
            ``(1) Trading on exchange or association required.--It 
        shall be unlawful for any person to effect transactions in 
        security futures products that are not listed on a national 
        securities exchange or a national securities association 
        registered pursuant to section 15A(a).
            ``(2) Listing standards required.--Except as otherwise 
        provided in paragraph (7), a national securities exchange or a 
        national securities association registered pursuant to section 
        15A(a) may trade only security futures products that (A) 
        conform with listing standards that such exchange or 
        association files with the Commission under section 19(b) and 
        (B) meet the criteria specified in section 2(a)(1)(D)(i) of the 
        Commodity Exchange Act.
            ``(3) Requirements for listing standards and conditions for 
        trading.--Such listing standards shall--
                    ``(A) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to paragraph (4), 
                require that any security underlying the security 
                future, including each component security of a narrow-
                based security index, be registered pursuant to section 
                12 of this title;
                    ``(B) require that if the security futures product 
                is not cash settled, the market on which the security 
                futures product is traded have arrangements in place 
                with a registered clearing agency for the payment and 
                delivery of the securities underlying the security 
                futures product;
                    ``(C) be no less restrictive than comparable 
                listing standards for options traded on a national 
                securities exchange or national securities association 
                registered pursuant to section 15A(a) of this title;
                    ``(D) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to paragraph (4), 
                require that the security future be based upon common 
                stock and such other equity securities as the 
                Commission and the Commodity Futures Trading Commission 
                jointly determine appropriate;
                    ``(E) require that the security futures product is 
                cleared by a clearing agency that has in place 
                provisions for linked and coordinated clearing with 
                other clearing agencies that clear security futures 
                products, which permits the security futures product to 
                be purchased on one market and offset on another market 
                that trades such product;
                    ``(F) require that only a broker or dealer subject 
                to suitability rules comparable to those of a national 
                securities association registered pursuant to section 
                15A(a) effect transactions in the security futures 
                product;
                    ``(G) require that the security futures product be 
                subject to the prohibition against dual trading in 
                section 4j of the Commodity Exchange Act (7 U.S.C. 6j) 
                and the rules and regulations thereunder or the 
                provisions of section 11(a) of this title and the rules 
                and regulations thereunder, except to the extent 
                otherwise permitted under this title and the rules and 
                regulations thereunder;
                    ``(H) require that trading in the security futures 
                product not be readily susceptible to manipulation of 
                the price of such security futures product, nor to 
                causing or being used in the manipulation of the price 
                of any underlying security, option on such security, or 
                option on a group or index including such securities;
                    ``(I) require that procedures be in place for 
                coordinated surveillance among the market on which the 
                security futures product is traded, any market on which 
                any security underlying the security futures product is 
                traded, and other markets on which any related security 
                is traded to detect manipulation and insider trading;
                    ``(J) require that the market on which the security 
                futures product is traded has in place audit trails 
                necessary or appropriate to facilitate the coordinated 
                surveillance required in subparagraph (I);
                    ``(K) require that the market on which the security 
                futures product is traded has in place procedures to 
                coordinate trading halts between such market and any 
                market on which any security underlying the security 
                futures product is traded and other markets on which 
                any related security is traded; and
                    ``(L) require that the margin requirements for a 
                security futures product comply with the regulations 
                prescribed pursuant to section 7(c)(2)(B), except that 
                nothing in this subparagraph shall be construed to 
                prevent a national securities exchange or national 
                securities association from requiring higher margin 
                levels for a security futures product when it deems 
                such action to be necessary or appropriate.
            ``(4) Authority to modify certain listing standard 
        requirements.--
                    ``(A) Authority to modify.--The Commission and the 
                Commodity Futures Trading Commission, by rule, 
                regulation, or order, may jointly modify the listing 
                standard requirements specified in subparagraph (A) or 
                (D) of paragraph (3) to the extent such modification 
                fosters the development of fair and orderly markets in 
                security futures products, is necessary or appropriate 
                in the public interest, and is consistent with the 
                protection of investors.
                    ``(B) Authority to grant exemptions.--The 
                Commission and the Commodity Futures Trading 
                Commission, by order, may jointly exempt any person 
                from compliance with the listing standard requirement 
                specified in subparagraph (E) of paragraph (3) to the 
                extent such exemption fosters the development of fair 
                and orderly markets in security futures products, is 
                necessary or appropriate in the public interest, and is 
                consistent with the protection of investors.
            ``(5) Requirements for other persons trading security 
        future products.--It shall be unlawful for any person (other 
        than a national securities exchange or a national securities 
        association registered pursuant to section 15A(a)) to 
        constitute, maintain, or provide a marketplace or facilities 
        for bringing together purchasers and sellers of security future 
        products or to otherwise perform with respect to security 
        future products the functions commonly performed by a stock 
        exchange as that term is generally understood, unless a 
        national securities association registered pursuant to section 
        15A(a) or a national securities exchange of which such person 
        is a member--
                    ``(A) has in place procedures for coordinated 
                surveillance among such person, the market trading the 
                securities underlying the security future products, and 
                other markets trading related securities to detect 
                manipulation and insider trading;
                    ``(B) has rules to require audit trails necessary 
                or appropriate to facilitate the coordinated 
                surveillance required in subparagraph (A); and
                    ``(C) has rules to require such person to 
                coordinate trading halts with markets trading the 
                securities underlying the security future products and 
                other markets trading related securities.
            ``(6) Deferral of options on security futures trading.--No 
        person shall offer to enter into, enter into, or confirm the 
        execution of any put, call, straddle, option, or privilege on a 
        security future, except that, after 3 years after the date of 
        enactment of this subsection, the Commission and the Commodity 
        Futures Trading Commission may by order jointly determine to 
        permit trading of puts, calls, straddles, options, or 
        privileges on any security future authorized to be traded under 
        the provisions of this Act and the Commodity Exchange Act.
            ``(7) Deferral of linked and coordinated clearing.--
                    ``(A) Notwithstanding paragraph (2), until the 
                compliance date, a national securities exchange or 
                national securities association registered pursuant to 
                section 15A(a) may trade a security futures product 
                that does not--
                            ``(i) conform with any listing standard 
                        promulgated to meet the requirement specified 
                        in subparagraph (E) of paragraph (3); or
                            ``(ii) meet the criterion specified in 
                        section 2(a)(1)(D)(i)(IV) of the Commodity 
                        Exchange Act.
                    ``(B) The Commission and the Commodity Futures 
                Trading Commission shall jointly publish in the Federal 
                Register a notice of the compliance date no later than 
                165 days before the compliance date.
                    ``(C) For purposes of this paragraph, the term 
                `compliance date' means the later of--
                            ``(i) 180 days after the end of the first 
                        full calendar month period in which the average 
                        aggregate comparable share volume for all 
                        security futures products based on single 
                        equity securities traded on all national 
                        securities exchanges, any national securities 
                        associations registered pursuant to section 
                        15A(a), and all other persons equals or exceeds 
                        10 percent of the average aggregate comparable 
                        share volume of options on single equity 
                        securities traded on all national securities 
                        exchanges and any national securities 
                        associations registered pursuant to section 
                        15A(a); or
                            ``(ii) 2 years after the date on which 
                        trading in any security futures product 
                        commences under this title.''.
    (b) Margin.--Section 7 of the Securities Exchange Act of 1934 (15 
U.S.C. 78g) is amended--
            (1) in subsection (a), by inserting ``or a security futures 
        product'' after ``exempted security'';
            (2) in subsection (c)(1)(A), by inserting ``except as 
        provided in paragraph (2),'' after ``security),'';
            (3) by redesignating paragraph (2) of subsection (c) as 
        paragraph (3) of such subsection; and
            (4) by inserting after paragraph (1) of such subsection the 
        following:
            ``(2) Margin regulations.--
                    ``(A) Compliance with margin rules required.--It 
                shall be unlawful for any broker, dealer, or member of 
                a national securities exchange to, directly or 
                indirectly, extend or maintain credit to or for, or 
                collect margin from any customer on, any security 
                futures product unless such activities comply with the 
                regulations--
                            ``(i) which the Board shall prescribe 
                        pursuant to subparagraph (B); or
                            ``(ii) if the Board determines to delegate 
                        the authority to prescribe such regulations, 
                        which the Commission and the Commodity Futures 
                        Trading Commission shall jointly prescribe 
                        pursuant to subparagraph (B).
                If the Board delegates the authority to prescribe such 
                regulations under clause (ii) and the Commission and 
                the Commodity Futures Trading Commission have not 
                jointly prescribed such regulations within a reasonable 
                period of time after the date of such delegation, the 
                Board shall prescribe such regulations pursuant to 
                subparagraph (B).
                    ``(B) Criteria for issuance of rules.--The Board 
                shall prescribe, or, if the authority is delegated 
                pursuant to subparagraph (A)(ii), the Commission and 
                the Commodity Futures Trading Commission shall jointly 
                prescribe, such regulations to establish margin 
                requirements, including the establishment of levels of 
                margin (initial and maintenance) for security futures 
                products under such terms, and at such levels, as the 
                Board deems appropriate, or as the Commission and the 
                Commodity Futures Trading Commission jointly deem 
                appropriate--
                            ``(i) to preserve the financial integrity 
                        of markets trading security futures products;
                            ``(ii) to prevent systemic risk;
                            ``(iii) to require that--
                                    ``(I) the margin requirements for a 
                                security future product be consistent 
                                with the margin requirements for 
                                comparable option contracts traded on 
                                any exchange registered pursuant to 
                                section 6(a) of this title; and
                                    ``(II) initial and maintenance 
                                margin levels for a security future 
                                product not be lower than the lowest 
                                level of margin, exclusive of premium, 
                                required for any comparable option 
                                contract traded on any exchange 
                                registered pursuant to section 6(a) of 
                                this title, other than an option on a 
                                security future;
                        except that nothing in this subparagraph shall 
                        be construed to prevent a national securities 
                        exchange or national securities association 
                        from requiring higher margin levels for a 
                        security future product when it deems such 
                        action to be necessary or appropriate; and
                            ``(iv) to ensure that the margin 
                        requirements (other than levels of margin), 
                        including the type, form, and use of collateral 
                        for security futures products, are and remain 
                        consistent with the requirements established by 
                        the Board, pursuant to subparagraphs (A) and 
                        (B) of paragraph (1).''.
    (c) Incorporation of Security Futures Products Into the National 
Market System.--Section 11A of the Securities Exchange Act of 1934 (15 
U.S.C. 78k-1) is amended by adding at the end the following:
    ``(e) National Markets System for Security Futures Products.--
            ``(1) Consultation and cooperation required.--With respect 
        to security futures products, the Commission and the Commodity 
        Futures Trading Commission shall consult and cooperate so that, 
        to the maximum extent practicable, their respective regulatory 
        responsibilities may be fulfilled and the rules and regulations 
        applicable to security futures products may foster a national 
market system for security futures products if the Commission and the 
Commodity Futures Trading Commission jointly determine that such a 
system would be consistent with the congressional findings in 
subsection (a)(1). In accordance with this objective, the Commission 
shall, at least 15 days prior to the issuance for public comment of any 
proposed rule or regulation under this section concerning security 
futures products, consult and request the views of the Commodity 
Futures Trading Commission.
            ``(2) Application of rules by order of cftc.--No rule 
        adopted pursuant to this section shall be applied to any person 
        with respect to the trading of security futures products on an 
        exchange that is registered under section 6(g) unless the 
        Commodity Futures Trading Commission has issued an order 
        directing that such rule is applicable to such persons.''.
    (d) Incorporation of Security Futures Products Into the National 
System for Clearance and Settlement.--Section 17A(b) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q-1(b)) is amended by adding at the 
end the following:
    ``(7)(A) A clearing agency that is regulated directly or indirectly 
by the Commodity Futures Trading Commission through its association 
with a designated contract market for security futures products that is 
a national securities exchange registered pursuant to section 6(g), and 
that would be required to register pursuant to paragraph (1) of this 
subsection only because it performs the functions of a clearing agency 
with respect to security futures products effected pursuant to the 
rules of the designated contract market with which such agency is 
associated, is exempted from the provisions of this section and the 
rules and regulations thereunder, except that if such a clearing agency 
performs the functions of a clearing agency with respect to a security 
futures product that is not cash settled, it must have arrangements in 
place with a registered clearing agency to effect the payment and 
delivery of the securities underlying the security futures product.
    ``(B) Any clearing agency that performs the functions of a clearing 
agency with respect to security futures products must coordinate with 
and develop fair and reasonable links with any and all other clearing 
agencies that perform the functions of a clearing agency with respect 
to security futures products, in order to permit, as of the compliance 
date (as defined in section 6(h)(6)(C)), security futures products to 
be purchased on one market and offset on another market that trades 
such products.''.
    (e) Market Emergency Powers and Circuit Breakers.--Section 12(k) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78l(k)) is amended--
            (1) in paragraph (1), by adding at the end the following: 
        ``If the actions described in subparagraph (A) or (B) involve a 
        security futures product, the Commission shall consult with and 
        consider the views of the Commodity Futures Trading 
        Commission.''; and
            (2) in paragraph (2)(B), by inserting after the first 
        sentence the following: ``If the actions described in 
        subparagraph (A) involve a security futures product, the 
        Commission shall consult with and consider the views of the 
        Commodity Futures Trading Commission.''.
    (f) Transaction Fees.--Section 31 of the Securities Exchange Act of 
1934 (15 U.S.C. 78ee) is amended--
            (1) in subsection (a), by inserting ``and assessments'' 
        after ``fees'';
            (2) in subsections (b), (c), and (d)(1), by striking ``and 
        other evidences of indebtedness'' and inserting ``other 
        evidences of indebtedness, and security futures products'';
            (3) in subsection (f), by inserting ``or assessment'' after 
        ``fee'';
            (4) in subsection (g), by inserting ``and assessment'' 
        after ``fee'';
            (5) by redesignating subsections (e), (f), and (g) as 
        subsections (f), (g), and (h), respectively; and
            (6) by inserting after subsection (d) the following new 
        subsection:
    ``(e) Assessments on Security Futures Transactions.--Each national 
securities exchange and national securities association shall pay to 
the Commission an assessment equal to $0.02 for each round turn 
transaction (treated as including one purchase and one sale of a 
contract of sale for future delivery) on a security future traded on 
such national securities exchange or by or through any member of such 
association otherwise than on a national securities exchange, except 
that for fiscal year 2007 or any succeeding fiscal year such assessment 
shall be equal to $0.0075 for each such transaction. Assessments 
collected pursuant to this subsection shall be deposited and collected 
as general revenue of the Treasury.''.
    (g) Exemption From Short Sale Provisions.--Section 10(a) of the 
Securities Exchange Act of 1934 (15 U.S.C 78j(a)) is amended--
            (1) by inserting ``(1)'' after ``(a)''; and
            (2) by adding at the end the following:
    ``(2) Paragraph (1) of this subsection shall not apply to security 
futures products.''.
    (h) Rulemaking Authority To Address Duplicative Regulation of Dual 
Registrants.--Section 15(c)(3) of the Securities Exchange Act of 1934 
(15 U.S.C. 78o(c)(3))is amended--
            (1) by inserting ``(A)'' after ``(3)''; and
            (2) by adding at the end the following:
    ``(B) Consistent with this title, the Commission, in consultation 
with the Commodity Futures Trading Commission, shall issue such rules, 
regulations, or orders as are necessary to avoid duplicative or 
conflicting regulations applicable to any broker or dealer registered 
with the Commission pursuant to section 15(b) (except paragraph (11) 
thereof), that is also registered with the Commodity Futures Trading 
Commission pursuant to section 4f(a) of the Commodity Exchange Act 
(except paragraph (2) thereof), with respect to the application of (i) 
the provisions of section 8, section 15(c)(3), and section 17 of this 
title and the rules and regulations thereunder related to the treatment 
of customer funds, securities, or property, maintenance of books and 
records, financial reporting, or other financial responsibility rules, 
involving security futures products and (ii) similar provisions of 
the Commodity Exchange Act and rules and regulations thereunder 
involving security futures products.''.
    (i) Obligation To Address Duplicative Regulation of Dual 
Registrants.--Section 6 of the Securities Exchange Act of 1934 (15 
U.S.C 78f) is amended by inserting after subsection (h), as added by 
subsection (a) of this section, the following:
    ``(i) Consistent with this title, each national securities exchange 
registered pursuant to subsection (a) of this section shall issue such 
rules as are necessary to avoid duplicative or conflicting rules 
applicable to any broker or dealer registered with the Commission 
pursuant to section 15(b) (except paragraph (11) thereof), that is also 
registered with the Commodity Futures Trading Commission pursuant to 
section 4f(a) of the Commodity Exchange Act (except paragraph (2) 
thereof), with respect to the application of--
            (1) rules of such national securities exchange of the type 
        specified in section 15(c)(3)(B) involving security futures 
        products; and
            (2) similar rules of national securities exchanges 
        registered pursuant to section 6(g) and national securities 
        associations registered pursuant to section 15A(k) involving 
        security futures products.''.
    (j) Obligation To Address Duplicative Regulation of Dual 
Registrants.--Section 15A of the Securities Exchange Act of 1934 (15 
U.S.C 78o-3) is amended by inserting after subsection (k), as added by 
section 203, the following:
    ``(l) Consistent with this title, each national securities 
association registered pursuant to subsection (a) of this section shall 
issue such rules as are necessary to avoid duplicative or conflicting 
rules applicable to any broker or dealer registered with the Commission 
pursuant to section 15(b) (except paragraph (11) thereof), that is also 
registered with the Commodity Futures Trading Commission pursuant to 
section 4f(a) of the Commodity Exchange Act (except paragraph (2) 
thereof), with respect to the application of--
            ``(1) rules of such national securities association of the 
        type specified in section 15(c)(3)(B) involving security 
        futures products; and
            ``(2) similar rules of national securities associations 
        registered pursuant to subsection (k) of this section and 
        national securities exchanges registered pursuant to section 
        6(g) involving security futures products.''.
    (k) Obligation To Put in Place Procedures and Adopt Rules.--
            (1) National securities associations.--Section 15A of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended by 
        inserting after subsection (l), as added by subsection (j) of 
        this section, the following new subsection:
    ``(m) Procedures and Rules for Security Future Products.--A 
national securities association registered pursuant to subsection (a) 
shall, not later than 8 months after the date of enactment of the 
Commodity Futures Modernization Act of 2000, implement the procedures 
specified in section 6(h)(5)(A) of this title and adopt the rules 
specified in subparagraphs (B) and (C) of section 6(h)(5) of this 
title.''.
            (2) National securities exchanges.--Section 6 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by 
        inserting after subsection (i), as added by subsection (i) of 
        this section, the following new subsection:
    ``(j) Procedures and Rules for Security Future Products.--A 
national securities exchange registered pursuant to subsection (a) 
shall implement the procedures specified in section 6(h)(5)(A) of this 
title and adopt the rules specified in subparagraphs (B) and (C) of 
section 6(h)(5) of this title not later than 8 months after the date of 
receipt of a request from an alternative trading system for such 
implementation and rules.''.
    (l) Obligation To Address Security Futures Products Traded on 
Foreign Exchanges.--Section 6 of the Securities Exchange Act of 1934 
(15 U.S.C. 78f) is amended by adding after subsection (j), as added by 
subsection (k) of this section, the following--
    ``(k)(1) To the extent necessary or appropriate in the public 
interest, to promote fair competition, and consistent with the 
promotion of market efficiency, innovation, and expansion of investment 
opportunities, the protection of investors, and the maintenance of fair 
and orderly markets, the Commission and the Commodity Futures Trading 
Commission shall jointly issue such rules, regulations, or orders as 
are necessary and appropriate to permit the offer and sale of a 
security futures product traded on or subject to the rules of a foreign 
board of trade to United States persons.
    ``(2) The rules, regulations, or orders adopted under paragraph (1) 
shall take into account, as appropriate, the nature and size of the 
markets that the securities underlying the security futures product 
reflect.''.

SEC. 207. CLEARANCE AND SETTLEMENT.

    Section 17A(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
78q-1(b)) is amended--
            (1) in paragraph (3)(A), by inserting ``and derivative 
        agreements, contracts, and transactions'' after ``prompt and 
        accurate clearance and settlement of securities transactions'';
            (2) in paragraph (3)(F), by inserting ``and, to the extent 
        applicable, derivative agreements, contracts, and 
        transactions'' after ``designed to promote the prompt and 
        accurate clearance and settlement of securities transactions''; 
        and
            (3) by inserting after paragraph (7), as added by section 
        206(d), the following:
    ``(8) A registered clearing agency shall be permitted to provide 
facilities for the clearance and settlement of any derivative 
agreements, contracts, or transactions that are excluded from the 
Commodity Exchange Act, subject to the requirements of this section and 
to such rules and regulations as the Commission may prescribe as 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of this 
title.''.

SEC. 208. AMENDMENTS RELATING TO REGISTRATION AND DISCLOSURE ISSUES 
              UNDER THE SECURITIES ACT OF 1933 AND THE SECURITIES 
              EXCHANGE ACT OF 1934.

    (a) Amendments to the Securities Act of 1933.--
            (1) Treatment of security futures products.--Section 2(a) 
        of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended--
                    (A) in paragraph (1), by inserting ``security 
                future,'' after ``treasury stock,'';
                    (B) in paragraph (3), by adding at the end the 
                following: ``Any offer or sale of a security futures 
                product by or on behalf of the issuer of the securities 
                underlying the security futures product, an affiliate 
                of the issuer, or an underwriter, shall constitute a 
                contract for sale of, sale of, offer for sale, or offer 
                to sell the underlying securities.'';
                    (C) by adding at the end the following:
            ``(16) The terms `security future', `narrow-based security 
        index', and `security futures product' have the same meanings 
        as provided in section 3(a)(55) of the Securities Exchange Act 
        of 1934.''.
            (2) Exemption from registration.--Section 3(a) of the 
        Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding 
        at the end the following:
            ``(14) Any security futures product that is--
                    ``(A) cleared by a clearing agency registered under 
                section 17A of the Securities Exchange Act of 1934 or 
                exempt from registration under subsection (b)(7) of 
                such section 17A; and
                    ``(B) traded on a national securities exchange or a 
                national securities association registered pursuant to 
                section 15A(a) of the Securities Exchange Act of 
                1934.''.
            (3) Conforming amendment.--Section 12(a)(2) of the 
        Securities Act of 1933 (15 U.S.C. 77l(a)(2)) is amended by 
        striking ``paragraph (2)'' and inserting ``paragraphs (2) and 
        (14)''.
    (b) Amendments to the Securities Exchange Act of 1934.--
            (1) Exemption from registration.--Section 12(a) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78l(a)) is amended 
        by adding at the end the following: ``The provisions of this 
        subsection shall not apply in respect of a security futures 
        product traded on a national securities exchange.''.
            (2) Exemptions from reporting requirement.--Section 
        12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78l(g)(5)) is amended by adding at the end the following: ``For 
        purposes of this subsection, a security futures product shall 
        not be considered a class of equity security of the issuer of 
        the securities underlying the security futures product.''.
            (3) Transactions by corporate insiders.--Section 16 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by 
        adding at the end the following:
    ``(f) Treatment of Transactions in Security Futures Products.--The 
provisions of this section shall apply to ownership of and transactions 
in security futures products.''.

SEC. 209. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940 AND THE 
              INVESTMENT ADVISERS ACT OF 1940.

    (a) Definitions Under the Investment Company Act of 1940 and the 
Investment Advisers Act of 1940.--
            (1) Section 2(a)(36) of the Investment Company Act of 1940 
        (15 U.S.C. 80a-2(a)(36)) is amended by inserting ``security 
        future,'' after ``treasury stock,''.
            (2) Section 202(a)(18) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-2(a)(18)) is amended by inserting 
        ``security future,'' after ``treasury stock,''.
            (3) Section 2(a) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-2(a)) is amended by adding at the end the following:
            ``(52) The terms `security future' and `narrow-based 
        security index' have the same meanings as provided in section 
        3(a)(55) of the Securities Exchange Act of 1934.''.
            (4) Section 202(a) of the Investment Advisers Act of 1940 
        (15 U.S.C. 80b-2(a)) is amended by adding at the end the 
        following:
            ``(27) The terms `security future' and `narrow-based 
        security index' have the same meanings as provided in section 
        3(a)(55) of the Securities Exchange Act of 1934.''.
    (b) Other Provision.--Section 203(b) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b-3(b)) is amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; or''; and
            (3) by adding at the end the following:
            ``(6) any investment adviser that is registered with the 
        Commodity Futures Trading Commission as a commodity trading 
        advisor whose business does not consist primarily of acting as 
        an investment adviser, as defined in section 202(a)(11) of this 
        title, and that does not act as an investment adviser to--
                    ``(A) an investment company registered under title 
                I of this Act; or
                    ``(B) a company which has elected to be a business 
                development company pursuant to section 54 of title I 
                of this Act and has not withdrawn its election.''.

SEC. 210. PREEMPTION OF STATE LAWS.

    Section 28(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78bb(a)) is amended--
            (1) in the last sentence--
                    (A) by inserting ``subject to this title'' after 
                ``privilege, or other security''; and
                    (B) by striking ``any such instrument, if such 
                instrument is traded pursuant to rules and regulations 
                of a self-regulatory organization that are filed with 
                the Commission pursuant to section 19(b) of this Act'' 
and inserting ``any such security''; and
            (2) by adding at the end the following new sentence: ``No 
        provision of State law regarding the offer, sale, or 
        distribution of securities shall apply to any transaction in a 
        security futures product, except that this sentence shall not 
        be construed as limiting any State antifraud law of general 
        applicability.''.

          Subtitle B--Amendments to the Commodity Exchange Act

SEC. 251. JURISDICTION OF SECURITIES AND EXCHANGE COMMISSION; OTHER 
              PROVISIONS.

    (a) Jurisdiction of Securities and Exchange Commission.--
            (1) Section 2(a)(1)(C) of the Commodity Exchange Act (7 
        U.S.C. 2a) (as redesignated by section 34(a)(2)(C)) is 
        amended--
                    (A) in clause (ii)--
                            (i) by inserting ``or register a 
                        derivatives transaction execution facility that 
                        trades or executes,'' after ``contract market 
                        in,'';
                            (ii) by inserting after ``contracts) for 
                        future delivery'' the following: ``, and no 
                        derivatives transaction execution facility 
                        shall trade or execute such contracts of sale 
                        (or options on such contracts) for future 
                        delivery,'';
                            (iii) by striking ``making such application 
                        demonstrates and the Commission expressly finds 
                        that the specific contract (or option on such 
                        contract) with respect to which the application 
                        has been made meets'' and inserting ``or the 
                        derivatives transaction execution facility, and 
                        the applicable contract, meet'';
                            (iv) by striking subclause (III) of clause 
                        (ii) and inserting the following:
                    ``(III) Such group or index of securities shall not 
                constitute a narrow-based security index.'';
                    (B) by striking clause (iii);
                    (C) by striking clause (iv) and inserting the 
                following:
            ``(iii) If, in its discretion, the Commission determines 
        that a stock index futures contract, notwithstanding its 
        conformance with the requirements in clause (ii) of this 
        subparagraph, can reasonably be used as a surrogate for trading 
        a security (including a security futures product), it may, by 
        order, require such contract and any option thereon be traded 
        and regulated as security futures products as defined in 
        section 3(a)(56) of the Securities Exchange Act of 1934 and 
        section 1a of this Act subject to all rules and regulations 
        applicable to security futures products under this Act and the 
        securities laws as defined in section 3(a)(47) of the 
        Securities Exchange Act of 1934.''; and
                    (D) by redesignating clause (v) as clause (iv).
            (2) Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 
        2, 2a, 4) is amended by adding at the end the following:
    ``(D)(i) Notwithstanding any other provision of this Act, the 
Securities and Exchange Commission shall have jurisdiction and 
authority over security futures as defined in section 3(a)(55) of the 
Securities Exchange Act of 1934, section 2(a)(16) of the Securities Act 
of 1933, section 2(a)(52) of the Investment Company Act of 1940, and 
section 202(a)(27) of the Investment Advisers Act of 1940, options on 
security futures, and persons effecting transactions in security 
futures and options thereon, and this Act shall apply to and the 
Commission shall have jurisdiction with respect to accounts, agreements 
(including any transaction which 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'), 
contracts, and transactions involving, and may designate a board of 
trade as a contract market in, or register a derivatives transaction 
execution facility that trades or executes, a security futures product 
as defined in section 1a of this Act: Provided, however, That, except 
as provided in clause (vi) of this subparagraph, no board of trade 
shall be designated as a contract market with respect to, or registered 
as a derivatives transaction execution facility for, any such contracts 
of sale for future delivery unless the board of trade and the 
applicable contract meet the following criteria:
            ``(I) Except as otherwise provided in a rule, regulation, 
        or order issued pursuant to clause (v) of this subparagraph, 
        any security underlying the security future, including each 
        component security of a narrow-based security index, is 
        registered pursuant to section 12 of the Securities Exchange 
        Act of 1934.
            ``(II) If the security futures product is not cash settled, 
        the board of trade on which the security futures product is 
        traded has arrangements in place with a clearing agency 
        registered pursuant to section 17A of the Securities Exchange 
        Act of 1934 for the payment and delivery of the securities 
        underlying the security futures product.
            ``(III) Except as otherwise provided in a rule, regulation, 
        or order issued pursuant to clause (v) of this subparagraph, 
        the security future is based upon common stock and such other 
        equity securities as the Commission and the Securities and 
        Exchange Commission jointly determine appropriate.
            ``(IV) The security futures product is cleared by a 
        clearing agency that has in place provisions for linked and 
        coordinated clearing with other clearing agencies that clear 
        security futures products, which permits the security futures 
        product to be purchased on a designated contract market, 
        registered derivatives transaction execution facility, national 
        securities exchange registered under section 6(a) of the 
        Securities Exchange Act of 1934, or national securities 
        association registered pursuant to section 15A(a) of the 
        Securities Exchange Act of 1934 and offset on another 
        designated contract market, registered derivatives transaction 
        execution facility, national securities exchange registered 
        under section 6(a) of the Securities Exchange Act of 1934, or 
        national securities association registered pursuant to section 
15A(a) of the Securities Exchange Act of 1934.
            ``(V) Only futures commission merchants, introducing 
        brokers, commodity trading advisors, commodity pool operators 
        or associated persons subject to suitability rules comparable 
        to those of a national securities association registered 
        pursuant to section 15A(a) of the Securities Exchange Act of 
        1934 solicit, accept any order for, or otherwise deal in any 
        transaction in or in connection with the security futures 
        product.
            ``(VI) The security futures product is subject to a 
        prohibition against dual trading in section 4j of this Act and 
        the rules and regulations thereunder or the provisions of 
        section 11(a) of the Securities Exchange Act of 1934 and the 
        rules and regulations thereunder, except to the extent 
        otherwise permitted under the Securities Exchange Act of 1934 
        and the rules and regulations thereunder.
            ``(VII) Trading in the security futures product is not 
        readily susceptible to manipulation of the price of such 
        security futures product, nor to causing or being used in the 
        manipulation of the price of any underlying security, option on 
        such security, or option on a group or index including such 
        securities;
            ``(VIII) The board of trade on which the security futures 
        product is traded has procedures in place for coordinated 
        surveillance among such board of trade, any market on which any 
        security underlying the security futures product is traded, and 
        other markets on which any related security is traded to detect 
        manipulation and insider trading, except that, if the board of 
        trade is an alternative trading system, a national securities 
        association registered pursuant to section 15A(a) of the 
        Securities Exchange Act of 1934 or national securities exchange 
        registered pursuant to section 6(a) of the Securities Exchange 
        Act of 1934 of which such alternative trading system is a 
        member has in place such procedures.
            ``(IX) The board of trade on which the security futures 
        product is traded has in place audit trails necessary or 
        appropriate to facilitate the coordinated surveillance required 
        in subclause (VIII), except that, if the board of trade is an 
        alternative trading system, a national securities association 
        registered pursuant to section 15A(a) of the Securities 
        Exchange Act of 1934 or national securities exchange registered 
        pursuant to section 6(a) of the Securities Exchange Act of 1934 
        of which such alternative trading system is a member has rules 
        to require such audit trails.
            ``(X) The board of trade on which the security futures 
        product is traded has in place procedures to coordinate trading 
        halts between such board of trade and markets on which any 
        security underlying the security futures product is traded and 
        other markets on which any related security is traded, except 
        that, if the board of trade is an alternative trading system, a 
        national securities association registered pursuant to section 
        15A(a) of the Securities Exchange Act of 1934 or national 
        securities exchange registered pursuant to section 6(a) of the 
        Securities Exchange Act of 1934 of which such alternative 
        trading system is a member has rules to require such 
        coordinated trading halts.
            ``(XI) The margin requirements for a security futures 
        product comply with the regulations prescribed pursuant to 
        section 7(c)(2)(B) of the Securities Exchange Act of 1934, 
        except that nothing in this subclause shall be construed to 
        prevent a board of trade from requiring higher margin levels 
        for a security futures product when it deems such action to be 
        necessary or appropriate.
    ``(ii) It shall be unlawful for any person to offer, to enter into, 
to execute, to confirm the execution of, or to conduct any office or 
business anywhere in the United States, its territories or possessions, 
for the purpose of soliciting, or accepting any order for, or otherwise 
dealing in, any transaction in, or in connection with, a security 
futures product unless--
            ``(I) the transaction is conducted on or subject to the 
        rules of a board of trade that--
                    ``(aa) has been designated by the Commission as a 
                contract market in such security futures product; or
                    ``(bb) is a registered derivatives transaction 
                execution facility for the security futures product 
                that has provided a certification with respect to the 
                security futures product pursuant to clause (vii);
            ``(II) the contract is executed or consummated by, through, 
        or with a member of the contract market or registered 
        derivatives transaction execution facility; and
            ``(III) the security futures product is evidenced by a 
        record in writing which shows the date, the parties to such 
        security futures product and their addresses, the property 
        covered, and its price, and each contract market member or 
        registered derivatives transaction execution facility member 
        shall keep the record for a period of 3 years from the date of 
        the transaction, or for a longer period if the Commission so 
        directs, which record shall at all times be open to the 
        inspection of any duly authorized representative of the 
        Commission.
    ``(iii)(I) Except as provided in subclause (II) but notwithstanding 
any other provision of this Act, no person shall offer to enter into, 
enter into, or confirm the execution of any option on a security 
future.
    ``(II) After 3 years after the date of the enactment of the 
Commodity Futures Modernization Act of 2000, the Commission and the 
Securities and Exchange Commission may by order jointly determine to 
permit trading of options on any security future authorized to be 
traded under the provisions of this Act and the Securities Exchange Act 
of 1934.
    ``(iv)(I) All relevant records of a futures commission merchant or 
introducing broker registered pursuant to section 4f(a)(2), floor 
broker or floor trader exempt from registration pursuant to section 
4f(a)(3), associated person exempt from registration pursuant to 
section 4k(6), or board of trade designated as a contract market in a 
security futures product pursuant to section 5f shall be subject to 
such reasonable periodic or special examinations by representatives of 
the Commission as the Commission deems necessary or appropriate in the 
public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of this Act, and the Commission, before 
conducting any such examination, shall give notice to the Securities 
and Exchange Commission of the proposed examination and consult with 
the Securities and Exchange Commission concerning the feasibility and 
desirability of coordinating the examination with examinations 
conducted by the Securities and Exchange Commission in order to avoid 
unnecessary regulatory duplication or undue regulatory burdens for the 
registrant or board of trade.
    ``(II) The Commission shall notify the Securities and Exchange 
Commission of any examination conducted of any futures commission 
merchant or introducing broker registered pursuant to section 4f(a)(2), 
floor broker or floor trader exempt from registration pursuant to 
section 4f(a)(3), associated person exempt from registration pursuant 
to section 4k(6), or board of trade designated as a contract market in 
a security futures product pursuant to section 5f, and, upon request, 
furnish to the Securities and Exchange Commission any examination 
report and data supplied to or prepared by the Commission in connection 
with the examination.
    ``(III) Before conducting an examination under subclause (I), the 
Commission shall use the reports of examinations, unless the 
information sought is unavailable in the reports, of any futures 
commission merchant or introducing broker registered pursuant to 
section 4f(a)(2), floor broker or floor trader exempt from registration 
pursuant to section 4f(a)(3), associated person exempt from 
registration pursuant to section 4k(6), or board of trade designated as 
a contract market in a security futures product pursuant to section 5f 
that is made by the Securities and Exchange Commission, a national 
securities association registered pursuant to section 15A(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-3(a)), or a national 
securities exchange registered pursuant to section 6(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).
    ``(IV) Any records required under this subsection for a futures 
commission merchant or introducing broker registered pursuant to 
section 4f(a)(2), floor broker or floor trader exempt from registration 
pursuant to section 4f(a)(3), associated person exempt from 
registration pursuant to section 4k(6), or board of trade designated as 
a contract market in a security futures product pursuant to section 5f, 
shall be limited to records with respect to accounts, agreements, 
contracts, and transactions involving security futures products.
    ``(v)(I) The Commission and the Securities and Exchange Commission, 
by rule, regulation, or order, may jointly modify the criteria 
specified in subclause (I) or (III) of clause (i), including the 
trading of security futures based on securities other than equity 
securities, to the extent such modification fosters the development of 
fair and orderly markets in security futures products, is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.
    ``(II) The Commission and the Securities and Exchange Commission, 
by order, may jointly exempt any person from compliance with the 
criterion specified in clause (i)(IV) to the extent such exemption 
fosters the development of fair and orderly markets in security futures 
products, is necessary or appropriate in the public interest, and is 
consistent with the protection of investors.
    ``(vi)(I) Notwithstanding clauses (i) and (vii), until the 
compliance date, a board of trade shall not be required to meet the 
criterion specified in clause (i)(IV).
    ``(II) The Commission and the Securities and Exchange Commission 
shall jointly publish in the Federal Register a notice of the 
compliance date no later than 165 days before the compliance date.
    ``(III) For purposes of this clause, the term `compliance date' 
means the later of--
            ``(aa) 180 days after the end of the first full calendar 
        month period in which the average aggregate comparable share 
        volume for all security futures products based on single equity 
        securities traded on all designated contract markets and 
        registered derivatives transaction execution facilities equals 
        or exceeds 10 percent of the average aggregate comparable share 
        volume of options on single equity securities traded on all 
        national securities exchanges registered pursuant to section 
        6(a) of the Securities Exchange Act of 1934 and any national 
        securities associations registered pursuant to section 15A(a) 
        of such Act; or
            ``(bb) 2 years after the date on which trading in any 
        security futures product commences under this Act.
    ``(vii) It shall be unlawful for a board of trade to trade or 
execute a security futures product unless the board of trade has 
provided the Commission with a certification that the specific security 
futures product and the board of trade, as applicable, meet the 
criteria specified in subclauses (I) through (XI) of clause (i), except 
as otherwise provided in clause (vi).''.
    (b) Margin on Security Futures.--Section 2(a)(1)(C)(vi) of the 
Commodity Exchange Act (7 U.S.C. 2a(vi)) (as redesignated by section 
34) is amended--
            (1) by redesignating subclause (V) as subclause (VI); and
            (2) by striking ``(vi)(I)'' and all that follows through 
        subclause (IV) and inserting the following:
            ``(v)(I) Notwithstanding any other provision of this Act, 
        any contract market in a stock index futures contract (or 
        option thereon) other than a security futures product, or any 
        derivatives transaction execution facility on which such 
        contract or option is traded, shall file with the Board of 
        Governors of the Federal Reserve System any rule establishing 
        or changing the levels of margin (initial and maintenance) for 
        such stock index futures contract (or option thereon) other 
        than security futures products.
            ``(II) The Board may at any time request any contract 
        market or derivatives transaction execution facility to set the 
        margin for any stock index futures contract (or option 
        thereon), other than for any security futures product, at such 
        levels as the Board in its judgment determines are appropriate 
        to preserve the financial integrity of the contract market or 
        derivatives transaction execution facility, or its clearing 
        system, or to prevent systemic risk. If the contract market or 
        derivatives transaction execution facility fails to do so 
        within the time specified by the Board in its request, the 
        Board may direct the contract market or derivatives transaction 
        execution facility to alter or supplement the rules of the 
        contract market or derivatives transaction execution facility 
        as specified in the request.
            ``(III) Subject to such conditions as the Board may 
        determine, the Board may delegate any or all of its authority, 
        relating to margin for any stock index futures contract (or 
        option thereon), other than security futures products, under 
        this clause to the Commission.
            ``(IV) It shall be unlawful for any futures commission 
        merchant to, directly or indirectly, extend or maintain credit 
        to or for, or collect margin from any customer on any security 
        futures product unless such activities comply with the 
        regulations prescribed pursuant to section 7(c)(2)(B) of the 
        Securities Exchange Act of 1934.
            ``(V) Nothing in this clause shall supersede or limit the 
        authority granted to the Commission in section 8a(9) to direct 
        a contract market or registered derivatives transaction 
        execution facility, on finding an emergency to exist, to raise 
        temporary margin levels on any futures contract, or option on 
        the contract covered by this clause, or on any security futures 
        product.''.
    (c) Dual Trading.--Section 4j of the Commodity Exchange Act (7 
U.S.C. 6j) is amended to read as follows:

``SEC. 4J. RESTRICTIONS ON DUAL TRADING IN SECURITY FUTURES PRODUCTS ON 
              DESIGNATED CONTRACT MARKETS AND REGISTERED DERIVATIVES 
              TRANSACTION EXECUTION FACILITIES.

    ``(a) The Commission shall issue regulations to prohibit the 
privilege of dual trading in security futures products on each contract 
market and registered derivatives transaction execution facility. The 
regulations issued by the Commission under this section--
            ``(1) shall provide that the prohibition of dual trading 
        thereunder shall take effect upon issuance of the regulations; 
        and
            ``(2) shall provide exceptions, as the Commission 
        determines appropriate, to ensure fairness and orderly trading 
        in security futures product markets, including--
                    ``(A) exceptions for spread transactions and the 
                correction of trading errors;
                    ``(B) allowance for a customer to designate in 
                writing not less than once annually a named floor 
                broker to execute orders for such customer, 
                notwithstanding the regulations to prohibit the 
                privilege of dual trading required under this section; 
                and
                    ``(C) other measures reasonably designed to 
                accommodate unique or special characteristics of 
                individual boards of trade or contract markets, to 
                address emergency or unusual market conditions, or 
                otherwise to further the public interest consistent 
                with the promotion of market efficiency, innovation, 
                and expansion of investment opportunities, the 
                protection of investors, and with the purposes of this 
                section.
    ``(b) As used in this section, the term `dual trading' means the 
execution of customer orders by a floor broker during the same trading 
session in which the floor broker executes any trade in the same 
contract market or registered derivatives transaction execution 
facility for--
            ``(1) the account of such floor broker;
            ``(2) an account for which such floor broker has trading 
        discretion; or
            ``(3) an account controlled by a person with whom such 
        floor broker has a relationship through membership in a broker 
        association.
    ``(c) As used in this section, the term `broker association' shall 
include two or more contract market members or registered derivatives 
transaction execution facility members with floor trading privileges of 
whom at least one is acting as a floor broker, who--
            ``(1) engage in floor brokerage activity on behalf of the 
        same employer,
            ``(2) have an employer and employee relationship which 
        relates to floor brokerage activity,
            ``(3) share profits and losses associated with their 
        brokerage or trading activity, or
            ``(4) regularly share a deck of orders.''.
    (d) Exemption From Registration for Investment Advisers.--Section 
4m of the Commodity Exchange Act (7 U.S.C. 6m) is amended by adding at 
the end the following:
    ``(3) Subsection (1) of this section shall not apply to any 
commodity trading advisor that is registered with the Securities and 
Exchange Commission as an investment adviser whose business does not 
consist primarily of acting as a commodity trading advisor, as defined 
in section 1a(6), and that does not act as a commodity trading advisor 
to any investment trust, syndicate, or similar form of enterprise that 
is engaged primarily in trading in any commodity for future delivery on 
or subject to the rules of any contract market or registered 
derivatives transaction execution facility.''.
    (e) Exemption From Investigations of Markets in Underlying 
Securities.--Section 16 of the Commodity Exchange Act (7 U.S.C. 20) is 
amended by adding at the end the following:
    ``(e) This section shall not apply to investigations involving any 
security underlying a security futures product.''.
    (f) Rulemaking Authority To Address Duplicative Regulation of Dual 
Registrants.--Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is 
amended--
            (1) by inserting ``(a)'' before the first undesignated 
        paragraph;
            (2) by inserting ``(b)'' before the second undesignated 
        paragraph; and
            (3) by adding at the end the following:
    ``(c) Consistent with this Act, the Commission, in consultation 
with the Securities and Exchange Commission, shall issue such rules, 
regulations, or orders as are necessary to avoid duplicative or 
conflicting regulations applicable to any futures commission merchant 
registered with the Commission pursuant to section 4f(a) (except 
paragraph (2) thereof), that is also registered with the Securities and 
Exchange Commission pursuant to section 15(b) of the Securities 
Exchange Act (except paragraph (11) thereof), involving the application 
of--
            ``(1) section 8, section 15(c)(3), and section 17 of the 
        Securities Exchange Act of 1934 and the rules and regulations 
        thereunder related to the treatment of customer funds, 
        securities, or property, maintenance of books and records, 
        financial reporting or other financial responsibility rules (as 
        defined in section 3(a)(40) of the Securities Exchange Act of 
        1934), involving security futures products; and
            ``(2) similar provisions of this Act and the rules and 
        regulations thereunder involving security futures products.''.
    (g) Obligation To Address Duplicative Regulation of Dual 
Registrants.--Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is 
amended by adding at the end the following:
    ``(r) Consistent with this Act, each futures association registered 
under this section shall issue such rules as are necessary to avoid 
duplicative or conflicting rules applicable to any futures commission 
merchant registered with the Commission pursuant to section 4f(a) of 
this Act (except paragraph (2) thereof), that is also registered with 
the Securities and Exchange Commission pursuant to section 15(b) of the 
Securities and Exchange Act of 1934 (except paragraph (11) thereof), 
with respect to the application of--
            ``(1) rules of such futures association of the type 
        specified in section 4d(3) of this Act involving security 
        futures products; and
            ``(2) similar rules of national securities associations 
        registered pursuant to section 15A(a) of the Securities and 
        Exchange Act of 1934 involving security futures products.''.
    (h) Obligation To Address Duplicative Regulation of Dual 
Registrants.--Section 5c of the Commodity Exchange Act (as added by 
section 114) is amended by adding at the end the following:
    ``(f) Consistent with this Act, each designated contract market and 
registered derivatives transaction execution facility shall issue such 
rules as are necessary to avoid duplicative or conflicting rules 
applicable to any futures commission merchant registered with the 
Commission pursuant to section 4f(a) of this Act (except paragraph (2) 
thereof), that is also registered with the Securities and Exchange 
Commission pursuant to section 15(b) of the Securities Exchange Act of 
1934 (except paragraph (11) thereof) with respect to the application 
of--
            ``(1) rules of such designated contract market or 
        registered derivatives transaction execution facility of the 
        type specified in section 4d(3) of this Act involving security 
        futures products; and
            ``(2) similar rules of national securities associations 
        registered pursuant to section 15A(a) of the Securities 
        Exchange Act of 1934 and national securities exchanges 
        registered pursuant to section 6(g) of such Act involving 
        security futures products.''.
    (i) Obligation To Address Security Futures Products Traded on 
Foreign Exchanges.--Section 2(a)(1) of the Commodity Exchange Act (7 
U.S.C. 2, 2a, and 4)) is amended by adding at the end the following:
    ``(E)(i) To the extent necessary or appropriate in the public 
interest, to promote fair competition, and consistent with promotion of 
market efficiency, innovation, and expansion of investment 
opportunities, the protection of investors, and the maintenance of fair 
and orderly markets, the Commission and the Securities and Exchange 
Commission shall jointly issue such rules, regulations, or orders as 
are necessary and appropriate to permit the offer and sale of a 
security futures product traded on or subject to the rules of a foreign 
board of trade to United States persons.
    ``(ii) The rules, regulations, or orders adopted under clause (i) 
shall take into account, as appropriate, the nature and size of the 
markets that the securities underlying the security futures product 
reflects.''.
    (j) Security Futures Products Traded on Foreign Boards of Trade.--
Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2, 2a, and 4) 
is amended by adding at the end the following:
    ``(F)(i) Nothing in this Act is intended to prohibit a futures 
commission merchant from carrying security futures products traded on 
or subject to the rules of a foreign board of trade in the accounts of 
persons located outside of the United States.
    ``(ii) Nothing in this Act is intended to prohibit any eligible 
contract participant located in the United States from purchasing or 
carrying securities futures products traded on or subject to the rules 
of a foreign board of trade, exchange, or market to the same extent 
such person may be authorized to purchase or carry other securities 
traded on a foreign board of trade, exchange, or market so long as any 
underlying security for such security futures products is traded 
principally on, by, or through any exchange or market located outside 
the United States.''.

SEC. 252. APPLICATION OF THE COMMODITY EXCHANGE ACT TO NATIONAL 
              SECURITIES EXCHANGES AND NATIONAL SECURITIES ASSOCIATIONS 
              THAT TRADE SECURITY FUTURES.

    (a) Notice Designation of National Securities Exchanges and 
National Securities Associations.--The Commodity Exchange Act is 
amended by inserting after section 5e (7 U.S.C. 7b), as redesignated by 
section 21(1), the following:

``SEC. 5F. DESIGNATION OF SECURITIES EXCHANGES AND ASSOCIATIONS AS 
              CONTRACT MARKETS.

    ``(a) Any board of trade that is registered with the Securities and 
Exchange Commission as a national securities exchange, is a national 
securities association registered pursuant to section 15A(a) of the 
Securities Exchange Act of 1934, or is an alternative trading system 
shall be a designated contract market in security futures products if--
            ``(1) such national securities exchange, national 
        securities association, or alternative trading system lists or 
        trades no other contracts of sale for future delivery, except 
        for security futures products;
            ``(2) such national securities exchange, national 
        securities association, or alternative trading system files 
        written notice with the Commission in such form as the 
        Commission, by rule, may prescribe containing such information 
        as the Commission, by rule, may prescribe as necessary or 
        appropriate in the public interest or for the protection of 
        customers; and
            ``(3) the registration of such national securities 
        exchange, national securities association, or alternative 
        trading system is not suspended pursuant to an order by the 
        Securities and Exchange Commission.
Such designation shall be effective contemporaneously with the 
submission of notice, in written or electronic form, to the Commission.
    ``(b)(1) A national securities exchange, national securities 
association, or alternative trading system that is designated as a 
contract market pursuant to section 5f shall be exempt from the 
following provisions of this Act and the rules thereunder:
            ``(A) Subsections (c), (e), and (g) of section 4c.
            ``(B) Section 4j.
            ``(C) Section 5.
            ``(D) Section 5c.
            ``(E) Section 6a.
            ``(F) Section 8(d).
            ``(G) Section 9(f).
            ``(H) Section 16.
    ``(2) An alternative trading system that is a designated contract 
market under this section shall be required to be a member of a futures 
association registered under section 17 and shall be exempt from any 
provision of this Act that would require such alternative trading 
system to--
            ``(A) set rules governing the conduct of subscribers other 
        than the conduct of such subscribers' trading on such 
        alternative trading system; or
            ``(B) discipline subscribers other than by exclusion from 
        trading.
    ``(3) To the extent that an alternative trading system is exempt 
from any provision of this Act pursuant to paragraph (2) of this 
subsection, the futures association registered under section 17 of 
which the alternative trading system is a member shall set rules 
governing the conduct of subscribers to the alternative trading system 
and discipline the subscribers.
    ``(4)(A) Except as provided in subparagraph (B), but 
notwithstanding any other provision of this Act, the Commission, by 
rule, regulation, or order, may conditionally or unconditionally exempt 
any designated contract market in security futures subject to the 
designation requirement of this section from any provision of this Act 
or of any rule or regulation thereunder, to the extent such exemption 
is necessary or appropriate in the public interest and is consistent 
with the protection of investors.
    ``(B) The Commission shall, by rule or regulation, determine the 
procedures under which an exemptive order under this section is granted 
and may, in its sole discretion, decline to entertain any application 
for an order of exemption under this section.
    ``(C) An alternative trading system shall not be deemed to be an 
exchange for any purpose as a result of the designation of such 
alternative trading system as a contract market under this section.''.
    (b) Notice Registration of Certain Securities Broker-Dealers; 
Exemption From Registration for Certain Securities Broker-Dealers.--
Section 4f(a) of the Commodity Exchange Act (7 U.S.C. 6f(a)) is 
amended--
            (1) by inserting ``(1)'' after ``(a)''; and
            (2) by adding at the end the following:
    ``(2) Notwithstanding paragraph (1), and except as provided in 
paragraph (3), any broker or dealer that is registered with the 
Securities and Exchange Commission shall be registered as a futures 
commission merchant or introducing broker, as applicable, if--
            ``(A) the broker or dealer limits its solicitation of 
        orders, acceptance of orders, or execution of orders, or 
        placing of orders on behalf of others involving any contracts 
        of sale of any commodity for future delivery, on or subject to 
        the rules of any contract market or registered derivatives 
        transaction execution facility to security futures products;
            ``(B) the broker or dealer files written notice with the 
        Commission in such form as the Commission, by rule, may 
        prescribe containing such information as the Commission, by 
        rule, may prescribe as necessary or appropriate in the public 
        interest or for the protection of investors;
            ``(C) the registration of the broker or dealer is not 
        suspended pursuant to an order of the Securities and Exchange 
        Commission; and
            ``(D) the broker or dealer is a member of a national 
        securities association registered pursuant to section 15A(a) of 
        the Securities Exchange Act of 1934.
The registration shall be effective contemporaneously with the 
submission of notice, in written or electronic form, to the Commission.
    ``(3) A floor broker or floor trader shall be exempt from the 
registration requirements of section 4e and paragraph (1) of this 
subsection if--
            ``(A) the floor broker or floor trader is a broker or 
        dealer registered with the Securities and Exchange Commission;
            ``(B) the floor broker or floor trader limits its 
        solicitation of orders, acceptance of orders, or execution of 
        orders, or placing of orders on behalf of others involving any 
        contracts of sale of any commodity for future delivery, on or 
        subject to the rules of any contract market to security futures 
        products; and
            ``(C) the registration of the floor broker or floor trader 
        is not suspended pursuant to an order of the Securities and 
        Exchange Commission.''.
    (c) Exemption for Securities Broker-Dealers From Certain Provisions 
of the Commodity Exchange Act.--Section 4f(a) of the Commodity Exchange 
Act (7 U.S.C. 6f(a)) is amended by inserting after paragraph (3), as 
added by subsection (b) of this section, the following:
    ``(4)(A) A broker or dealer that is registered as a futures 
commission merchant or introducing broker pursuant to paragraph (2), or 
that is a floor broker or floor trader exempt from registration 
pursuant to paragraph (3), shall be exempt from the following 
provisions of this Act and the rules thereunder:
            ``(i) Subsections (b), (d), (e), and (g) of section 4c.
            ``(ii) Sections 4d, 4e, and 4h.
            ``(iii) Subsections (b) and (c) of this section.
            ``(iv) Section 4j.
            ``(v) Section 4k(1).
            ``(vi) Section 4p.
            ``(vii) Section 6d.
            ``(viii) Subsections (d) and (g) of section 8.
            ``(ix) Section 16.
    ``(B)(i) Except as provided in clause (ii) of this subparagraph, 
but notwithstanding any other provision of this Act, the Commission, by 
rule, regulation, or order, may conditionally or unconditionally exempt 
any broker or dealer subject to the registration requirement of 
paragraph (2), or any broker or dealer exempt from registration 
pursuant to paragraph (3), from any provision of this Act or of any 
rule or regulation thereunder, to the extent the exemption is necessary 
or appropriate in the public interest and is consistent with the 
protection of investors.
    ``(ii) The Commission shall, by rule or regulation, determine the 
procedures under which an exemptive order under this section shall be 
granted and may, in its sole discretion, decline to entertain any 
application for an order of exemption under this section.
    ``(C)(i) A broker or dealer that is registered as a futures 
commission merchant or introducing broker pursuant to paragraph (2) or 
an associated person thereof, or that is a floor broker or floor trader 
exempt from registration pursuant to paragraph (3), shall not be 
required to become a member of any futures association registered under 
section 17.
    ``(ii) No futures association registered under section 17 shall 
limit its members from carrying an account, accepting an order, or 
transacting business with a broker or dealer that is registered as a 
futures commission merchant or introducing broker pursuant to paragraph 
(2) or an associated person thereof, or that is a floor broker or floor 
trader exempt from registration pursuant to paragraph (3).''.
    (d) Exemptions for Associated Persons of Securities Broker-
Dealers.--Section 4k of the Commodity Exchange Act (7 U.S.C. 6k), is 
amended by inserting after paragraph (4), as added by subsection (c) of 
this section, the following:
    ``(5) Any associated person of a broker or dealer that is 
registered with the Securities and Exchange Commission, and who limits 
its solicitation of orders, acceptance of orders, or execution of 
orders, or placing of orders on behalf of others involving any 
contracts of sale of any commodity for future delivery or any option on 
such a contract, on or subject to the rules of any contract market or 
registered derivatives transaction execution facility to security 
futures products, shall be exempt from the following provisions of this 
Act and the rules thereunder:
            ``(A) Subsections (b), (d), (e), and (g) of section 4c.
            ``(B) Sections 4d, 4e, and 4h.
            ``(C) Subsections (b) and (c) of section 4f.
            ``(D) Section 4j.
            ``(E) Paragraph (1) of this section.
            ``(F) Section 4p.
            ``(G) Section 6d.
            ``(H) Subsections (d) and (g) of section 8.
            ``(I) Section 16.''.

SEC. 253. NOTIFICATION OF INVESTIGATIONS AND ENFORCEMENT ACTIONS.

    (a) Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is 
amended by adding at the end the following:
    ``(3) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission against any futures commission 
merchant or introducing broker registered pursuant to section 4f(a)(2), 
any floor broker or floor trader exempt from registration pursuant to 
section 4f(a)(3), any associated person exempt from registration 
pursuant to section 4k(6), or any board of trade designated as a 
contract market pursuant to section 5f.''.
    (b) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9, 9a, 9b, 
13b, 15) is amended by adding at the end the following:
    ``(g) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission pursuant to subsections (c) and 
(d) of this section against any futures commission merchant or 
introducing broker registered pursuant to section 4f(a)(2), any floor 
broker or floor trader exempt from registration pursuant to section 
4f(a)(3), any associated person exempt from registration pursuant to 
section 4k(6), or any board of trade designated as a contract market 
pursuant to section 5f.''.
    (c) Section 6c of the Commodity Exchange Act (7 U.S.C. 13a-1) is 
amended by adding at the end the following:
    ``(h) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission against any futures commission 
merchant or introducing broker registered pursuant to section 4f(a)(2), 
any floor broker or floor trader exempt from registration pursuant to 
section 4f(a)(3), any associated person exempt from registration 
pursuant to section 4k(6), or any board of trade designated as a 
contract market pursuant to section 5f.''.

             TITLE III--LEGAL CERTAINTY FOR SWAP AGREEMENTS

SEC. 301. SWAP AGREEMENT.

    (a) Amendment.--Title II of the Gramm-Leach-Bliley Act (Public Law 
106-102) is amended by inserting after section 206 the following new 
sections:

``SEC. 206A. SWAP AGREEMENT.

    ``(a) In General.--Except as provided in subsection (b), as used in 
this section, the term `swap agreement' means any agreement, contract, 
or transaction between eligible contract participants (as defined in 
section 1a(12) of the Commodity Exchange Act as in effect on the date 
of enactment of this section), other than a person that is an eligible 
contract participant under section 1a(12)(C) of the Commodity Exchange 
Act, the material terms of which (other than price and quantity) are 
subject to individual negotiation, and that--
            ``(1) is a put, call, cap, floor, collar, or similar option 
        of any kind for the purchase or sale of, or based on the value 
        of, one or more interest or other rates, currencies, 
        commodities, indices, quantitative measures, or other financial 
        or economic interests or property of any kind;
            ``(2) provides for any purchase, sale, payment or delivery 
        (other than a dividend on an equity security) that is dependent 
        on the occurrence, non-occurrence, or the extent of the 
        occurrence of an event or contingency associated with a 
        potential financial, economic, or commercial consequence;
            ``(3) provides on an executory basis for the exchange, on a 
        fixed or contingent basis, of one or more payments based on the 
        value or level of one or more interest or other rates, 
        currencies, commodities, securities, instruments of 
        indebtedness, indices, quantitative measures, or other 
        financial or economic interests or property of any kind, or any 
        interest therein or based on the value thereof, and that 
        transfers, as between the parties to the transaction, in whole 
        or in part, the financial risk associated with a future change 
        in any such value or level without also conveying a current or 
        future direct or indirect ownership interest in an asset 
        (including any enterprise or investment pool) or liability that 
        incorporates the financial risk so transferred, including any 
        such agreement, contract, or transaction commonly known as an 
        interest rate swap, including a rate floor, rate cap, rate 
        collar, cross-currency rate swap, basis swap, currency swap, 
        equity index swap, equity swap, debt index swap, debt swap, 
        credit spread, credit default swap, credit swap, weather swap, 
        or commodity swap;
            ``(4) provides for the purchase or sale, on a fixed or 
        contingent basis, of any commodity, currency, instrument, 
        interest, right, service, good, article, or property of any 
        kind; or
            ``(5) is any combination or permutation of, or option on, 
        any agreement, contract, or transaction described in any of 
        paragraphs (1) through (4).
    ``(b) Exclusions.--The term `swap agreement' does not include--
            ``(1) any put, call, straddle, option, or privilege on any 
        security, certificate of deposit, or group or index of 
        securities, including any interest therein or based on the 
        value thereof;
            ``(2) any put, call, straddle, option, or privilege entered 
        into on a national securities exchange registered pursuant to 
        section 6(a) of the Securities Exchange Act of 1934 relating to 
        foreign currency;
            ``(3) any agreement, contract, or transaction providing for 
        the purchase or sale of one or more securities on a fixed 
        basis;
            ``(4) any agreement, contract, or transaction providing for 
        the purchase or sale of one or more securities on a contingent 
        basis, unless such agreement, contract, or transaction 
        predicates such purchase or sale on the occurrence of a bona 
        fide contingency that might reasonably be expected to affect or 
        be affected by the creditworthiness of a party other than a 
        party to the agreement, contract, or transaction;
            ``(5) any note, bond, or evidence of indebtedness that is a 
        security as defined in section 2(a)(1) of the Securities 
        Exchange Act of 1933 or section 3(a)(10) of the Securities 
        Exchange Act of 1934; or
            ``(6) any agreement, contract, or transaction that is--
                    ``(A) based on a security; and
                    ``(B) entered into directly or through an 
                underwriter (as defined in section 2(a) of the 
                Securities Act of 1933) by the issuer of such security 
                for the purposes of raising capital, unless such 
                agreement, contract, or transaction is entered into to 
                manage a risk associated with capital raising.
    ``(c) Rule of Construction Regarding Master Agreements.--As used in 
this section, the term `swap agreement' shall be construed to include a 
master agreement that provides for an agreement, contract, or 
transaction that is a swap agreement pursuant to subsections (a) and 
(b), together with all supplements to any such master agreement, 
without regard to whether the master agreement contains an agreement, 
contract, or transaction that is not a swap agreement pursuant to 
subsections (a) and (b), except that the master agreement shall be 
considered to be a swap agreement only with respect to each agreement, 
contract, or transaction under the master agreement that is a swap 
agreement pursuant to subsections (a) and (b).

``SEC. 206B. SECURITY-BASED SWAP AGREEMENT.

    ``As used in this section, the term `security-based swap agreement' 
means a swap agreement (as defined in section 206A) of which a material 
term is based on the price, yield, value, or volatility of any security 
or any group or index of securities, or any interest therein.

``SEC. 206C. NON-SECURITY-BASED SWAP AGREEMENT.

    ``As used in this section, the term `non-security-based swap 
agreement' means any swap agreement (as defined in section 206A) that 
is not a security-based swap agreement (as defined in section 206B).''.
    (b) Security Definition.--As used in the amendment made by 
subsection (a), the term ``security'' has the same meaning as in 
section 2(a)(1) of the Securities Act of 1933 or section 3(a)(10) of 
the Securities Exchange Act of 1934.

SEC. 302. AMENDMENTS TO THE SECURITIES ACT OF 1933.

    (a) Enforcement Focus.--The Securities Act of 1933 is amended by 
inserting after section 2 (15 U.S.C.77b) the following new section:

``SEC. 2A. SWAP AGREEMENTS.

    ``(a) Non-Security-Based Swap Agreements.--The definition of 
`security' in section 2(a)(1) of this title does not include any non-
security-based swap agreement (as defined in section 206C of the Gramm-
Leach-Bliley Act).
    ``(b) Security-Based Swap Agreements.--
            ``(1) The definition of `security' in section 2(a)(1) of 
        this title does not include any security-based swap agreement 
        (as defined in section 206B of the Gramm-Leach-Bliley Act).
            ``(2) The Commission is prohibited from registering, or 
        requiring, recommending, or suggesting, the registration under 
        this title of any security-based swap agreement (as defined in 
        section 206B of the Gramm-Leach-Bliley Act). If the Commission 
        becomes aware that a registrant has filed a registration 
        statement with respect to such a swap agreement, the Commission 
        shall promptly so notify the registrant. Any such registration 
        statement with respect to such a swap agreement shall be void 
        and of no force or effect.
            ``(3) The Commission is prohibited from--
                    ``(A) promulgating, interpreting, or enforcing 
                rules; or
                    ``(B) issuing orders of general applicability;
        under this title in a manner that imposes or specifies 
        reporting or recordkeeping requirements, procedures, or 
        standards as prophylactic measures against fraud, manipulation, 
        or insider trading with respect to any security-based swap 
        agreement (as defined in section 206B of the Gramm-Leach-Bliley 
        Act).
            ``(4) References in this title to the `purchase' or `sale' 
        of a security-based swap agreement shall be deemed to mean the 
        execution, termination (prior to its scheduled maturity date), 
        assignment, exchange, or similar transfer or conveyance of, or 
        extinguishing of rights or obligations under, a security-based 
        swap agreement (as defined in section 206B of the Gramm-Leach-
        Bliley Act), as the context may require.''.
    (b) Anti-Fraud and Anti-Manipulation Enforcement Authority.--
Section 17(a) of the Securities Act of 1933 (15 U.S.C. 77q(a)) is 
amended to read as follows:
    ``(a) It shall be unlawful for any person in the offer or sale of 
any securities or any security-based swap agreement (as defined in 
section 206B of the Gramm-Leach-Bliley Act) by the use of any means or 
instruments of transportation or communication in interstate commerce 
or by use of the mails, directly or indirectly--
            ``(1) to employ any device, scheme, or artifice to defraud, 
        or
            ``(2) to obtain money or property by means of any untrue 
        statement of a material fact or any omission to state a 
        material fact necessary in order to make the statements made, 
        in light of the circumstances under which they were made, not 
        misleading; or
            ``(3) to engage in any transaction, practice, or course of 
        business which operates or would operate as a fraud or deceit 
        upon the purchaser.''.
    (c) Limitation.--Section 17 of the Securities Act of 1933 is 
amended by adding at the end the following new subsection:
    ``(d) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 2A(b) of this title.''.

SEC. 303. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

    (a) Enforcement Focus.--The Securities Exchange Act of 1934 is 
amended by inserting after section 3 (15 U.S.C. 78c) the following new 
section:

``SEC. 3A. SWAP AGREEMENTS.

    ``(a) Non-Security-Based Swap Agreements.--The definition of 
`security' in section 3(a)(10) of this title does not include any non-
security-based swap agreement (as defined in section 206C of the Gramm-
Leach-Bliley Act).
    ``(b) Security-Based Swap Agreements.--
            ``(1) The definition of `security' in section 3(a)(10) of 
        this title does not include any security-based swap agreement 
        (as defined in section 206B of the Gramm-Leach-Bliley Act).
            ``(2) The Commission is prohibited from registering, or 
        requiring, recommending, or suggesting, the registration under 
        this title of any security-based swap agreement (as defined in 
        section 206B of the Gramm-Leach-Bliley Act). If the Commission 
        becomes aware that a registrant has filed a registration 
        application with respect to such a swap agreement, the 
        Commission shall promptly so notify the registrant. Any such 
        registration with respect to such a swap agreement shall be 
        void and of no force or effect.
            ``(3) Except as provided in section 16(a) with respect to 
        reporting requirements, the Commission is prohibited from--
                    ``(A) promulgating, interpreting, or enforcing 
                rules; or
                    ``(B) issuing orders of general applicability;
        under this title in a manner that imposes or specifies 
        reporting or recordkeeping requirements, procedures, or 
        standards as prophylactic measures against fraud, manipulation, 
        or insider trading with respect to any security-based swap 
        agreement (as defined in section 206B of the Gramm-Leach-Bliley 
        Act).
            ``(4) References in this title to the `purchase' or `sale' 
        of a security-based swap agreement (as defined in section 206B 
        of the Gramm-Leach-Bliley Act) shall be deemed to mean the 
        execution, termination (prior to its scheduled maturity date), 
        assignment, exchange, or similar transfer or conveyance of, or 
        extinguishing of rights or obligations under, a security-based 
        swap agreement, as the context may require.''.
    (b) Anti-Fraud, Anti-Manipulation Enforcement Authority.--
Paragraphs (2) through (5) of section 9(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78i(a)(2)-(5)) are amended to read as follows:
    ``(2) To effect, alone or with one or more other persons, a series 
of transactions in any security registered on a national securities 
exchange or in connection with any security-based swap agreement (as 
defined in section 206B of the Gramm-Leach-Bliley Act) with respect to 
such security creating actual or apparent active trading in such 
security, or raising or depressing the price of such security, for the 
purpose of inducing the purchase or sale of such security by others.
    ``(3) If a dealer or broker, or other person selling or offering 
for sale or purchasing or offering to purchase the security or a 
security-based swap agreement (as defined in section 206B of the Gramm-
Leach-Bliley Act) with respect to such security, to induce the purchase 
or sale of any security registered on a national securities exchange or 
any security-based swap agreement (as defined in section 206B of the 
Gramm-Leach-Bliley Act) with respect to such security by the 
circulation or dissemination in the ordinary course of business of 
information to the effect that the price of any such security will or 
is likely to rise or fall because of market operations of any one or 
more persons conducted for the purpose of raising or depressing the 
price of such security.
    ``(4) If a dealer or broker, or the person selling or offering for 
sale or purchasing or offering to purchase the security or a security-
based swap agreement (as defined in section 206B of the Gramm-Leach-
Bliley Act) with respect to such security, to make, regarding any 
security registered on a national securities exchange or any security-
based swap agreement (as defined in section 206B of the Gramm-Leach-
Bliley Act) with respect to such security, for the purpose of inducing 
the purchase or sale of such security or such security-based swap 
agreement, any statement which was at the time and in the light of the 
circumstances under which it was made, false or misleading with respect 
to any material fact, and which he knew or had reasonable ground to 
believe was so false or misleading.
    ``(5) For a consideration, received directly or indirectly from a 
dealer or broker, or other person selling or offering for sale or 
purchasing or offering to purchase the security or a security-based 
swap agreement (as defined in section 206B of the Gramm-Leach-Bliley 
Act) with respect to such security, to induce the purchase of any 
security registered on a national securities exchange or any security-
based swap agreement (as defined in section 206B of the Gramm-Leach-
Bliley Act) with respect to such security by the circulation or 
dissemination of information to the effect that the price of any such 
security will or is likely to rise or fall because of the market 
operations of any one or more persons conducted for the purpose of 
raising or depressing the price of such security.''.
    (c) Limitation.--Section 9 of the Securities Exchange Act of 1934 
is amended by adding at the end the following new subsection:
    ``(i) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 3A(b) of this title.''.
    (d) Regulations on the Use of Manipulative and Deceptive Devices.--
Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is 
amended--
            (1) in subsection (b), by inserting ``or any securities-
        based swap agreement (as defined in section 206B of the Gramm-
        Leach-Bliley Act),'' before ``any manipulative or deceptive 
        device''; and
            (2) by adding at the end the following:
``Rules promulgated under subsection (b) that prohibit fraud, 
manipulation, or insider trading (but not rules imposing or specifying 
reporting or recordkeeping requirements, procedures, or standards as 
prophylactic measures against fraud, manipulation, or insider trading), 
and judicial precedents decided under subsection (b) and rules 
promulgated thereunder that prohibit fraud, manipulation, or insider 
trading, shall apply to security-based swap agreements (as defined in 
section 206B of the Gramm-Leach-Bliley Act) to the same extent as they 
apply to securities. Judicial precedents decided under section 17(a) of 
the Securities Act of 1933 and sections 9, 15, 16, 20, and 21A of this 
title, and judicial precedents decided under applicable rules 
promulgated under such sections, shall apply to security-based swap 
agreements (as defined in section 206B of the Gramm-Leach-Bliley Act) 
to the same extent as they apply to securities.''.
    (e) Broker, Dealer Anti-Fraud, Anti-Manipulation Enforcement 
Authority.--Section 15(c)(1) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o(c)(1)) is amended to read as follows:
    ``(c)(1)(A) No broker or dealer shall make use of the mails or any 
means or instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase or sale 
of, any security (other than commercial paper, bankers' acceptances, or 
commercial bills) otherwise than on a national securities exchange of 
which it is a member, or any security-based swap agreement (as defined 
in section 206B of the Gramm-Leach-Bliley Act), by means of any 
manipulative, deceptive, or other fraudulent device or contrivance.
    ``(B) No municipal securities dealer shall make use of the mails or 
any means or instrumentality of interstate commerce to effect any 
transaction in, or to induce or attempt to induce the purchase or sale 
of, any municipal security or any security-based swap agreement (as 
defined in section 206B of the Gramm-Leach-Bliley Act) involving a 
municipal security by means of any manipulative, deceptive, or other 
fraudulent device or contrivance.
    ``(C) No government securities broker or government securities 
dealer shall make use of the mails or any means or instrumentality of 
interstate commerce to effect any transaction in, or to induce or to 
attempt to induce the purchase or sale of, any government security or 
any security-based swap agreement (as defined in section 206B of the 
Gramm-Leach-Bliley Act) involving a government security by means of any 
manipulative, deceptive, or other fraudulent device or contrivance.''.
    (f) Limitation.--Section 15 of the Securities Exchange Act of 1934 
(15 U.S.C. 78o) is amended by adding at the end the following new 
subsection:
    ``(i) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 3A(b) of this title.''.
    (g) Anti-Insider Trading Enforcement Authority.--Subsections (a) 
and (b) of section 16 (15 U.S.C. 78p(a), (b)) of the Securities 
Exchange of 1934 are amended to read as follows:
    ``(a) Every person who is directly or indirectly the beneficial 
owner of more than 10 per centum of any class of any equity security 
(other than an exempted security) which is registered pursuant to 
section 12 of this title, or who is a director or an officer of the 
issuer of such security, shall file, at the time of the registration of 
such security on a national securities exchange or by the effective 
date of a registration statement filed pursuant to section 12(g) of 
this title, or within ten days after he becomes such beneficial owner, 
director, or officer, a statement with the Commission (and, if such 
security is registered on a national securities exchange, also with the 
exchange) of the amount of all equity securities of such issuer of 
which he is the beneficial owner, and within ten days after the close 
of each calendar month thereafter, if there has been a change in such 
ownership or if such person shall have purchased or sold a security-
based swap agreement (as defined in section 206B of the Gramm-Leach-
Bliley Act) involving such equity security during such month, shall 
file with the Commission (and if such security is registered on a 
national securities exchange, shall also file with the exchange), a 
statement indicating his ownership at the close of the calendar month 
and such changes in his ownership and such purchases and sales of such 
security-based swap agreements as have occurred during such calendar 
month.
    ``(b) For the purpose of preventing the unfair use of information 
which may have been obtained by such beneficial owner, director, or 
officer by reason of his relationship to the issuer, any profit 
realized by him from any purchase and sale, or any sale and purchase, 
of any equity security of such issuer (other than an exempted security) 
or a security-based swap agreement (as defined in section 206B of the 
Gramm-Leach-Bliley Act) involving any such equity security within any 
period of less than six months, unless such security or security-based 
swap agreement was acquired in good faith in connection with a debt 
previously contracted, shall inure to and be recoverable by the issuer, 
irrespective of any intention on the part of such beneficial owner, 
director, or officer in entering into such transaction of holding the 
security or security-based swap agreement purchased or of not 
repurchasing the security or security-based swap agreement sold for a 
period exceeding six months. Suit to recover such profit may be 
instituted at law or in equity in any court of competent jurisdiction 
by the issuer, or by the owner of any security of the issuer in the 
name and in behalf of the issuer if the issuer shall fail or refuse to 
bring such suit within sixty days after request or shall fail 
diligently to prosecute the same thereafter; but no such suit shall be 
brought more than two years after the date such profit was realized. 
This subsection shall not be construed to cover any transaction where 
such beneficial owner was not such both at the time of the purchase and 
sale, or the sale and purchase, of the security or security-based swap 
agreement (as defined in section 206B of the Gramm-Leach-Bliley Act) 
involved, or any transaction or transactions which the Commission by 
rules and regulations may exempt as not comprehended within the purpose 
of this subsection.''.
    (h) Limitation.--Section 16 of the Securities Exchange Act of 1934 
(15 U.S.C. 78p) is amended by adding at the end the following new 
subsection:
    ``(g) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 3A(b) of this title.''.
    (i) Material Nonpublic Information.--Section 20(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78t(d)) is amended to read 
as follows:
    ``(d) Wherever communicating, or purchasing or selling a security 
while in possession of, material nonpublic information would violate, 
or result in liability to any purchaser or seller of the security under 
any provisions of this title, or any rule or regulation thereunder, 
such conduct in connection with a purchase or sale of a put, call, 
straddle, option, privilege or security-based swap agreement (as 
defined in section 206B of the Gramm-Leach-Bliley Act) with respect to 
such security or with respect to a group or index of securities 
including such security, shall also violate and result in comparable 
liability to any purchaser or seller of that security under such 
provision, rule, or regulation.''.
    (j) Limitation.--Section 20 of the Securities Exchange Act of 1934 
(15 U.S.C. 78t) is amended by adding at the end the following new 
subsection:
    ``(f) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 3A(b) of this title.''.
    (k) Civil Penalties.--Section 21A(a)(1) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78u-1(a)(1)) is amended by inserting after 
``purchasing or selling a security'' the following: ``or security-based 
swap agreement (as defined in section 206B of the Gramm-Leach-Bliley 
Act)''.
    (l) Limitation.--Section 21A of the Securities Exchange Act of 1934 
(15 U.S.C. 78u-1) is amended by adding at the end the following new 
subsection:
    ``(g) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in section 206B 
of the Gramm-Leach-Bliley Act) shall be subject to the restrictions and 
limitations of section 3A(b) of this title.''.

SEC. 304. SAVINGS PROVISIONS.

    Nothing in this Act or the amendments made by this Act shall be 
construed as finding or implying that any swap agreement is or is not a 
security for any purpose under the securities laws. Nothing in this Act 
or the amendments made by this Act shall be construed as finding or 
implying that any swap agreement is or is not a futures contract or 
commodity option for any purpose under the Commodity Exchange Act.

         TITLE IV--REGULATORY RESPONSIBILITY FOR BANK PRODUCTS

SEC. 401. SHORT TITLE.

    This title may be cited as the ``Legal Certainty for Bank Products 
Act of 2000''.

SEC. 402. DEFINITIONS.

    (a) Bank.--In this title, the term ``bank'' means--
            (1) any depository institution (as defined in section 3(c) 
        of the Federal Deposit Insurance Act);
            (2) any foreign bank or branch or agency of a foreign bank 
        (each as defined in section 1(b) of the International Banking 
        Act of 1978);
            (3) any Federal or State credit union (as defined in 
        section 101 of the Federal Credit Union Act);
            (4) any corporation organized under section 25A of the 
        Federal Reserve Act;
            (5) any corporation operating under section 25 of the 
        Federal Reserve Act;
            (6) any trust company; or
            (7) any subsidiary of any entity described in paragraph (1) 
        through (6) of this subsection, if the subsidiary is regulated 
        as if the subsidiary were part of the entity and is not a 
        broker or dealer (as such terms are defined in section 3 of the 
        Securities Exchange Act of 1934) or a futures commission 
        merchant (as defined in section 1a(20) of the Commodity 
        Exchange Act).
    (b) Identified Banking Product.--In this title, the term 
``identified banking product'' shall have the same meaning as in 
paragraphs (1) through (5) of section 206(a) of the Gramm-Leach-Bliley 
Act, except that in applying such section for purposes of this title--
            (1) the term ``bank'' shall have the meaning given in 
        subsection (a) of this section; and
            (2) the term ``qualified investor'' means eligible contract 
        participant (as defined in section 1a(12) of the Commodity 
        Exchange Act, as in effect on the date of enactment of the 
        Commodity Futures Modernization Act of 2000).
    (c) Hybrid Instrument.--In this title, the term ``hybrid 
instrument'' means an identified banking product not excluded by 
section 403 of this Act, offered by a bank, having 1 or more payments 
indexed to the value, level, or rate of, or providing for the delivery 
of, 1 or more commodities (as defined in section 1a(4) of the Commodity 
Exchange Act).
    (d) Covered Swap Agreement.--In this title, the term ``covered swap 
agreement'' means a swap agreement (as defined in section 206(b) of the 
Gramm-Leach-Bliley Act), including a credit or equity swap, based on a 
commodity other than an agricultural commodity enumerated in section 
1a(4) of the Commodity Exchange Act if--
            (1) the swap agreement--
                    (A) is entered into only between persons that are 
                eligible contract participants (as defined in section 
                1a(12) of the Commodity Exchange Act, as in effect on 
                the date of enactment of the Commodity Futures 
                Modernization Act of 2000) at the time the persons 
                enter into the swap agreement; and
                    (B) is not entered into or executed on a trading 
                facility (as defined in section 1a(33) of the Commodity 
                Exchange Act); or
            (2) the swap agreement--
                    (A) is entered into or executed on an electronic 
                trading facility (as defined in section 1a(10) of the 
                Commodity Exchange Act);
                    (B) is entered into on a principal-to-principal 
                basis between parties trading for their own accounts or 
                as described in section 1a(12)(B)(ii) of the Commodity 
                Exchange Act;
                    (C) is entered into only between persons that are 
                eligible contract participants as described in 
                subparagraphs (A), (B)(ii), or (C) of section 1a(12) of 
                the Commodity Exchange Act, as in effect on the date of 
                enactment of the Commodity Futures Modernization Act of 
                2000, at the time the persons enter into the swap 
                agreement; and
                    (D) is an agreement, contract or transaction in an 
                excluded commodity (as defined in section 1a(13) of the 
                Commodity Exchange Act).

SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCTS COMMONLY OFFERED ON 
              OR BEFORE DECEMBER 5, 2000.

    No provision of the Commodity Exchange Act shall apply to, and the 
Commodity Futures Trading Commission shall not exercise regulatory 
authority with respect to, an identified banking product if--
            (1) an appropriate banking agency certifies that the 
        product has been commonly offered, entered into, or provided in 
        the United States by any bank on or before December 5, 2000, 
        under applicable banking law; and
            (2) the product was not prohibited by the Commodity 
        Exchange Act and not regulated by the Commodity Futures Trading 
        Commission as a contract of sale of a commodity for future 
        delivery (or an option on such a contract) or an option on a 
        commodity, on or before December 5, 2000.

SEC. 404. EXCLUSION OF CERTAIN IDENTIFIED BANKING PRODUCTS OFFERED BY 
              BANKS AFTER DECEMBER 5, 2000.

    No provision of the Commodity Exchange Act shall apply to, and the 
Commodity Futures Trading Commission shall not exercise regulatory 
authority with respect to, an identified banking product which had not 
been commonly offered, entered into, or provided in the United States 
by any bank on or before December 5, 2000, under applicable banking law 
if--
            (1) the product has no payment indexed to the value, level, 
        or rate of, and does not provide for the delivery of, any 
commodity (as defined in section 1a(4) of the Commodity Exchange Act); 
or
            (2) the product or commodity is otherwise excluded from the 
        Commodity Exchange Act.

SEC. 405. EXCLUSION OF CERTAIN OTHER IDENTIFIED BANKING PRODUCTS.

    (a) In General.--No provision of the Commodity Exchange Act shall 
apply to, and the Commodity Futures Trading Commission shall not 
exercise regulatory authority with respect to, a banking product if the 
product is a hybrid instrument that is predominantly a banking product 
under the predominance test set forth in subsection (b).
    (b) Predominance Test.--A hybrid instrument shall be considered to 
be predominantly a banking product for purposes of this section if--
            (1) 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;
            (2) the purchaser or holder of the hybrid instrument is not 
        required to make under the terms of the instrument, or any 
        arrangement referred to in the instrument, any payment to the 
        issuer in addition to the purchase price referred to in 
        paragraph (1), whether as margin, settlement payment, or 
        otherwise during the life of the hybrid instrument or at 
        maturity;
            (3) the issuer of the hybrid instrument is not subject by 
        the terms of the instrument to mark-to-market margining 
        requirements; and
            (4) the hybrid instrument is not marketed as a contract of 
        sale of a commodity for future delivery (or option on such a 
        contract) subject to the Commodity Exchange Act.
    (c) Mark-to-Market Margining Requirement.--For purposes of 
subsection (b)(3), mark-to-market margining requirements shall 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. 406. ADMINISTRATION OF THE PREDOMINANCE TEST.

    (a) In General.--No provision of the Commodity Exchange Act shall 
apply to, and the Commodity Futures Trading Commission shall not 
regulate, a hybrid instrument, unless the Commission determines, by or 
under a rule issued in accordance with this section, that--
            (1) the action is necessary and appropriate in the public 
        interest;
            (2) the action is consistent with the Commodity Exchange 
        Act and the purposes of the Commodity Exchange Act; and
            (3) the hybrid instrument is not predominantly a banking 
        product under the predominance test set forth in section 405(b) 
        of this Act.
    (b) Consultation.--Before commencing a rulemaking or making a 
determination pursuant to a rule issued under this title, the Commodity 
Futures Trading Commission shall consult with and seek the concurrence 
of the Board of Governors of the Federal Reserve System concerning--
            (1) the nature of the hybrid instrument; and
            (2) the history, purpose, extent, and appropriateness of 
        the regulation of the hybrid instrument under the Commodity 
        Exchange Act and under appropriate banking laws.
    (c) Objection to Commission Regulation.--
            (1) Filing of petition for review.--The Board of Governors 
        of the Federal Reserve System may obtain review of any rule or 
        determination referred to in subsection (a) in the United 
        States Court of Appeals for the District of Columbia Circuit by 
        filing in the court, not later than 60 days after the date of 
        publication of the rule or determination, a written petition 
        requesting that the rule or determination be set aside. Any 
        proceeding to challenge any such rule or determination shall be 
        expedited by the court.
            (2) Transmittal of petition and record.--A copy of a 
        petition described in paragraph (1) shall be transmitted as 
        soon as possible by the Clerk of the court to an officer or 
        employee of the Commodity Futures Trading Commission designated 
        for that purpose. Upon receipt of the petition, the Commission 
        shall file with the court the rule or determination under 
        review and any documents referred to therein, and any other 
        relevant materials prescribed by the court.
            (3) Exclusive jurisdiction.--On the date of the filing of a 
        petition under paragraph (1), the court shall have 
        jurisdiction, which shall become exclusive on the filing of the 
        materials set forth in paragraph (2), to affirm and enforce or 
        to set aside the rule or determination at issue.
            (4) Standard of review.--The court shall determine to 
        affirm and enforce or set aside a rule or determination of the 
        Commodity Futures Trading Commission under this section, based 
        on the determination of the court as to whether--
                    (A) the subject product is predominantly a banking 
                product; and
                    (B) making the provision or provisions of the 
                Commodity Exchange Act at issue applicable to the 
                subject instrument is appropriate in light of the 
                history, purpose, and extent of regulation under such 
                Act, this title, and under the appropriate banking 
                laws, giving deference neither to the views of the 
                Commodity Futures Trading Commission nor the Board of 
                Governors of the Federal Reserve System.
            (5) Judicial stay.--The filing of a petition by the Board 
        pursuant to paragraph (1) shall operate as a judicial stay, 
        until the date on which the determination of the court is final 
        (including any appeal of the determination).
            (6) Other authority to challenge.--Any aggrieved party may 
        seek judicial review pursuant to section 6(c) of the Commodity 
        Exchange Act of a determination or rulemaking by the Commodity 
        Futures Trading Commission under this section.

SEC. 407. EXCLUSION OF COVERED SWAP AGREEMENTS.

    No provision of the Commodity Exchange Act (other than section 5b 
of such Act with respect to the clearing of covered swap agreements) 
shall apply to, and the Commodity Futures Trading Commission shall not 
exercise regulatory authority with respect to, a covered swap agreement 
offered, entered into, or provided by a bank.

SEC. 408. CONTRACT ENFORCEMENT.

    (a) Hybrid Instruments.--No hybrid instrument shall be void, 
voidable, or unenforceable, and no party to a hybrid instrument shall 
be entitled to rescind, or recover any payment made with respect to, a 
hybrid instrument under any provision of Federal or State law, based 
solely on the failure of the hybrid instrument to satisfy the 
predominance test set forth in section 405(b) of this Act or to comply 
with the terms or conditions of an exemption or exclusion from any 
provision of the Commodity Exchange Act or any regulation of the 
Commodity Futures Trading Commission.
    (b) Covered Swap Agreements.--No covered swap agreement shall be 
void, voidable, or unenforceable, and no party to a covered swap 
agreement shall be entitled to rescind, or recover any payment made 
with respect to, a covered swap agreement under any provision of 
Federal or State law, based solely on the failure of the covered swap 
agreement to comply with the terms or conditions of an exemption or 
exclusion from any provision of the Commodity Exchange Act or any 
regulation of the Commodity Futures Trading Commission.
    (c) Preemption.--This title shall supersede and preempt the 
application of 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--
            (1) a hybrid instrument that is predominantly a banking 
        product; or
            (2) a covered swap agreement.
                                 <all>
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