I 

111TH CONGRESS 

1ST SESSION H. R. 3795 

To enact the Over-the-Counter Derivatives Markets Act of 2009. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 13, 2009 

Mr. FRANK of Massachusetts introduced the following bill; which was referred 

to the Committee on Financial Services, and in addition to the Committee 

on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To enact the Over-the-Counter Derivatives Markets Act of 

2009. 

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

3 TITLE I—IMPROVEMENTS TO 

4 REGULATION OF OVER-THE5 COUNTER DERIVATIVES MAR6 KETS 

7 SECTION 101. SHORT TITLE. 

8 This title may be cited as the ‘‘Over-the-Counter De9 rivatives Markets Act of 2009’’. 


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1 Subtitle A—Regulation of Swap 

2 Markets 

3 SEC. 111. DEFINITIONS. 

4 (a) AMENDMENTS TO DEFINITIONS IN THE COM5 MODITY EXCHANGE ACT.—Section 1a of the Commodity 

6 Exchange Act (7 U.S.C. 1a) is amended— 

7 (1) by redesignating paragraphs (9) through 

8 (34) as paragraphs (10) through (35), respectively; 

9 (2) by adding after paragraph (8) the following: 

10 ‘‘(9) DERIVATIVE.—The term ‘derivative’ 

11 means— 

12 ‘‘(A) a contract of sale of a commodity for 

13 future delivery; or 

14 ‘‘(B) a swap.’’; 

15 (3) by redesignating paragraph (35) (as redes16 ignated by subsection (a)) as paragraph (36); 

17 (4) by adding after paragraph (34) (as redesig18 nated by subsection (a)) the following: 

19 ‘‘(35) SWAP.— 

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

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

22 agreement, contract, or transaction that— 

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

24 similar option of any kind for the purchase 

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


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1 more interest or other rates, currencies, 

2 commodities, securities, instruments of in3 debtedness, indices, quantitative measures, 

4 or other financial or economic interests or 

5 property of any kind; 

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

7 payment, or delivery (other than a dividend 

8 on an equity security) that is dependent on 

9 the occurrence, non-occurrence, or the ex10 tent of the occurrence of an event or con11 tingency associated with a potential finan12 cial, economic, or commercial consequence; 

13 ‘‘(iii) provides on an executory basis 

14 for the exchange, on a fixed or contingent 

15 basis, of one or more payments based on 

16 the value or level of one or more interest 

17 or other rates, currencies, commodities, se18 curities, instruments of indebtedness, indi19 ces, quantitative measures, or other finan20 cial or economic interests or property of 

21 any kind, or any interest therein or based 

22 on the value thereof, and that transfers, as 

23 between the parties to the transaction, in 

24 whole or in part, the financial risk associ25 ated with a future change in any such 


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1 value or level without also conveying a cur2 rent or future direct or indirect ownership 

3 interest in an asset (including any enter4 prise or investment pool) or liability that 

5 incorporates the financial risk so trans6 ferred, including any agreement, contract, 

7 or transaction commonly known as an in8 terest rate swap, a rate floor, rate cap, 

9 rate collar, cross-currency rate swap, basis 

10 swap, currency swap, total return swap, 

11 equity index swap, equity swap, debt index 

12 swap, debt swap, credit spread, credit de13 fault swap, credit swap, weather swap, en14 ergy swap, metal swap, agricultural swap, 

15 emissions swap, or commodity swap; 

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

17 transaction that is, or in the future be18 comes, commonly known to the trade as a 

19 swap; or 

20 ‘‘(v) is any combination or permuta21 tion of, or option on, any agreement, con22 tract, or transaction described in any of 

23 clauses (i) through (iv). 

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

25 not include: 


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

4 rules of any board of trade designated as 

5 a contract market under section 5 or 5f; 

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

8 so long as such transaction is physically 

9 settled; 

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

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

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

16 seq.) and the Securities Exchange Act of 

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

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

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

21 registered pursuant to section 6(a) of the 

22 Securities Exchange Act of 1934 (15 

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

24 ‘‘(v) any agreement, contract, or 

25 transaction providing for the purchase or 


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1 sale of one or more securities on a fixed 

2 basis that is subject to the Securities Act 

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

4 Securities Exchange Act of 1934 (15 

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

6 ‘‘(vi) any agreement, contract, or 

7 transaction providing for the purchase or 

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

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

11 the Securities Exchange Act of 1934 (15 

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

14 such purchase or sale on the occurrence of 

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

17 the creditworthiness of a party other than 

18 a party to the agreement, contract, or 

19 transaction; 

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

21 indebtedness that is a security as defined 

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

23 1933 (15 U.S.C. 77b(a)(1)); 

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

25 transaction that is— 


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1 ‘‘(I) based on a security; and 

2 ‘‘(II) entered into directly or 

3 through an underwriter (as defined in 

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

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

6 the issuer of such security for the 

7 purposes of raising capital, unless 

8 such agreement, contract, or trans9 action is entered into to manage a 

10 risk associated with capital raising; 

11 ‘‘(ix) any foreign exchange swap; 

12 ‘‘(x) any foreign exchange forward; 

13 ‘‘(xi) any agreement, contract, or 

14 transaction a counterparty of which is a 

15 Federal Reserve bank or the United States 

16 Government, or an agency of the United 

17 States Government that is expressly 

18 backed by the full faith and credit of the 

19 United States; and 

20 ‘‘(xii) any security-based swap, other 

21 than a security-based swap as described in 

22 paragraph (38)(C). 

23 ‘‘(C) RULE OF CONSTRUCTION REGARDING

24 MASTER AGREEMENTS.—The term ‘swap’ shall 

25 be construed to include a master agreement 


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1 that provides for an agreement, contract, or 

2 transaction that is a swap pursuant to subpara3 graph (A), together with all supplements to any 

4 such master agreement, without regard to 

5 whether the master agreement contains an 

6 agreement, contract, or transaction that is not 

7 a swap pursuant to subparagraph (A), except 

8 that the master agreement shall be considered 

9 to be a swap only with respect to each agree10 ment, contract, or transaction under the master 

11 agreement that is a swap pursuant to subpara12 graph (A).’’; 

13 (5) in paragraph (13) (as redesignated by sub14 section (a))— 

15 (A) in subparagraph (A)— 

16 (i) in clause (vii), by striking 

17 ‘‘$25,000,000’’ and inserting 

18 ‘‘$50,000,000’’; and 

19 (ii) in clause (xi), by striking ‘‘total 

20 assets in an amount’’ and inserting 

21 ‘‘amounts invested on a discretionary 

22 basis’’; and 

23 (B) in paragraph (C), by striking ‘‘deter24 mines’’ and inserting ‘‘and the Securities and 

25 Exchange Commission may jointly determine’’; 


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1 (6) in paragraph (30) (as redesignated by sub2 section (a)), by— 

3 (A) redesignating subparagraph (E) as 

4 subparagraph (G); 

5 (B) in subparagraph (D), by striking 

6 ‘‘and’’; and 

7 (C) inserting after subparagraph (D) the 

8 following: 

9 ‘‘(E) a swap execution facility registered 

10 under section 5h; 

11 ‘‘(F) a swap repository; and’’; 

12 (7) by adding after paragraph (36) (as redesig13 nated by subsection (c)) the following: 

14 ‘‘(37) BOARD.—The term ‘Board’ means the 

15 Board of Governors of the Federal Reserve Sys16 tem.’’; 

17 (8) by adding after paragraph (37) the fol18 lowing: 

19 ‘‘(38) SECURITY-BASED SWAP.— 

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

21 subparagraph (B), the term ‘security-based 

22 swap’ means any agreement, contract, or trans23 action that would be a swap under paragraph 

24 (35) (without regard to paragraph 

25 (35)(B)(xii)), and that— 


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1 ‘‘(i) is based on an index that is a 

2 narrow-based security index, including any 

3 interest therein or based on the value 

4 thereof; 

5 ‘‘(ii) is based on a single security or 

6 loan, including any interest therein or 

7 based on the value thereof; or 

8 ‘‘(iii) is based on the occurrence, non9 occurrence, or extent of the occurrence of 

10 an event relating to a single issuer of a se11 curity or the issuers of securities in a nar12 row-based security index, provided that 

13 such event must directly affect the finan14 cial statements, financial condition, or fi15 nancial obligations of the issuer. 

16 ‘‘(B) EXCLUSION.—The term ‘security17 based swap’ does not include any agreement, 

18 contract, or transaction that meets the defini19 tion of security-based swap only because it ref20 erences or is based upon a government security. 

21 ‘‘(C) MIXED SWAP.—The term ‘security22 based swap’ includes any agreement, contract, 

23 or transaction that is as described in subpara24 graph (A) and also is based on the value of one 

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1 modities, instruments of indebtedness, indices, 

2 quantitative measures, other financial or eco3 nomic interest or property of any kind (other 

4 than a single security or a narrow-based secu5 rity index), or the occurrence, non-occurrence, 

6 or the extent of the occurrence of an event or 

7 contingency associated with a potential finan8 cial, economic, or commercial consequence 

9 (other than an event described in subparagraph 

10 (A)(iii)). 

11 ‘‘(D) RULE OF CONSTRUCTION REGARDING

12 MASTER AGREEMENTS.—The term ‘security13 based swap’ shall be construed to include a 

14 master agreement that provides for an agree15 ment, contract, or transaction that is a secu16 rity-based swap pursuant to subparagraph (A), 

17 together with all supplements to any such mas18 ter agreement, without regard to whether the 

19 master agreement contains an agreement, con20 tract, or transaction that is not a security-based 

21 swap pursuant to subparagraph (A), except 

22 that the master agreement shall be considered 

23 to be a security-based swap only with respect to 

24 each agreement, contract, or transaction under 


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1 the master agreement that is a security-based 

2 swap pursuant to subparagraph (A).’’; 

3 (9) by adding after paragraph (38) the fol4 lowing: 

5 ‘‘(39) SWAP DEALER.— 

6 ‘‘(A) IN GENERAL.—The term ‘swap deal7 er’ means any person engaged in the business 

8 of buying and selling swaps for such person’s 

9 own account, through a broker or otherwise. 

10 ‘‘(B) EXCEPTION.—The term ‘swap dealer’ 

11 does not include a person that buys or sells 

12 swaps for such person’s own account, either in13 dividually or in a fiduciary capacity, but not as 

14 a part of a regular business.’’; 

15 (10) by adding after paragraph (39) the fol16 lowing: 

17 ‘‘(40) MAJOR SWAP PARTICIPANT.— 

18 ‘‘(A) IN GENERAL.—The term ‘major swap 

19 participant’ means any person who is not a 

20 swap dealer and who maintains a substantial 

21 net position in outstanding swaps, excluding po22 sitions held primarily for hedging (including 

23 balance sheet hedging) or risk management 

24 purposes. A person may be designated as a 


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1 major swap participant for 1 or more individual 

2 types of swaps. 

3 ‘‘(B) DEFINITION OF ‘SUBSTANTIAL NET

4 POSITION’.—The Commission and the Securi5 ties and Exchange Commission shall jointly de6 fine by rule or regulation the term ‘substantial 

7 net position’ at a threshold that the regulators 

8 determine prudent for the effective monitoring, 

9 management and oversight of the financial sys10 tem. In the event that the regulators are unable 

11 to agree upon a level within 60 days of the 

12 commencement of such consultations, the Sec13 retary of the Treasury shall make such deter14 mination, which shall be binding on and adopt15 ed by such regulators.’’; 

16 (11) by adding after paragraph (40) the fol17 lowing: 

18 ‘‘(41) MAJOR SECURITY-BASED SWAP PARTICI19 PANT.— 

20 ‘‘(A) IN GENERAL.—The term ‘major secu21 rity-based swap participant’ means any person 

22 who is not a security-based swap dealer and 

23 who maintains a substantial net position in out24 standing security-based swaps, excluding posi25 tions held primarily for hedging (including balVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 ance sheet hedging) or risk management pur2 poses. A person may be designated as a major 

3 security-based swap participant for 1 or more 

4 individual types of security-based swaps. 

5 ‘‘(B) DEFINITION OF ‘SUBSTANTIAL NET

6 POSITION’.—The Commission and the Securi7 ties and Exchange Commission shall jointly de8 fine by rule or regulation the term ‘substantial 

9 net position’ at a threshold that the regulators 

10 determine prudent for the effective monitoring, 

11 management and oversight of the financial sys12 tem. In the event that the regulators are unable 

13 to agree upon a level within 60 days of the 

14 commencement of such consultations, the Sec15 retary of the Treasury shall make such deter16 mination, which shall be binding on and adopt17 ed by such regulators.’’; 

18 (12) by adding after paragraph (41) the fol19 lowing: 

20 ‘‘(42) APPROPRIATE FEDERAL BANKING AGEN21 CY.—The term ‘appropriate Federal banking agency’ 

22 has the same meaning as in section 3(q) of the Fed23 eral Deposit Insurance Act (12 U.S.C. 1813(q)).’’; 

24 (13) by adding after paragraph (42) the fol25 lowing: 


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1 ‘‘(43) PRUDENTIAL REGULATOR.—The term 

2 ‘Prudential Regulator’ means— 

3 ‘‘(A) the Board in the case of a swap deal4 er, major swap participant, security-based swap 

5 dealer or major security-based swap participant 

6 that is— 

7 ‘‘(i) a State-chartered bank that is a 

8 member of the Federal Reserve System; or 

9 ‘‘(ii) a State-chartered branch or 

10 agency of a foreign bank; 

11 ‘‘(B) the Office of the Comptroller of the 

12 Currency in the case of a swap dealer, major 

13 swap participant, security-based swap dealer or 

14 major security-based swap participant that is— 

15 ‘‘(i) a national bank; or 

16 ‘‘(ii) a federally chartered branch or 

17 agency of a foreign bank; and 

18 ‘‘(C) the Federal Deposit Insurance Cor19 poration in the case of a swap dealer, major 

20 swap participant, security-based swap dealer or 

21 major security-based swap participant that is a 

22 State-chartered bank that is not a member of 

23 the Federal Reserve System.’’; 

24 (14) by adding after paragraph (43) the fol25 lowing: 


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1 ‘‘(44) SECURITY-BASED SWAP DEALER.— 

2 ‘‘(A) IN GENERAL.—The term ‘security3 based swap dealer’ means any person engaged 

4 in the business of buying and selling security5 based swaps for such person’s own account, 

6 through a broker or otherwise. 

7 ‘‘(B) EXCEPTION.—The term ‘security8 based swap dealer’ does not include a person 

9 that buys or sells security-based swaps for such 

10 person’s own account, either individually or in 

11 a fiduciary capacity, but not as a part of a reg12 ular business.’’; 

13 (15) by adding after paragraph (44) the fol14 lowing: 

15 ‘‘(45) GOVERNMENT SECURITY.—The term 

16 ‘government security’ has the same meaning as in 

17 section 3(a)(42) of the Securities Exchange Act of 

18 1934 (15 U.S.C. 78c(a)(42)).’’; 

19 (16) by adding after paragraph (45) the fol20 lowing: 

21 ‘‘(46) FOREIGN EXCHANGE FORWARD.—The 

22 term ‘foreign exchange forward’ means a transaction 

23 that solely involves the exchange of 2 different cur24 rencies on a specific future date at a fixed rate 

25 agreed at the inception of the contract.’’; 


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1 (17) by adding after paragraph (46) the fol2 lowing: 

3 ‘‘(47) FOREIGN EXCHANGE SWAP.—The term 

4 ‘foreign exchange swap’ means a transaction that 

5 solely involves the exchange of 2 different currencies 

6 on a specific date at a fixed rate agreed at the incep7 tion of the contract, and a reverse exchange of the 

8 same 2 currencies at a date further in the future 

9 and at a fixed rate agreed at the inception of the 

10 contract.’’; 

11 (18) by adding after paragraph (47) the fol12 lowing: 

13 ‘‘(48) PERSON ASSOCIATED WITH A SECURITY14 BASED SWAP DEALER OR MAJOR SECURITY-BASED

15 SWAP PARTICIPANT.—The term ‘person associated 

16 with a security-based swap dealer or major security17 based swap participant’ or ‘associated person of a 

18 security-based swap dealer or major security-based 

19 swap participant’ means any partner, officer, direc20 tor, or branch manager of such security-based swap 

21 dealer or major security-based swap participant (or 

22 any person occupying a similar status or performing 

23 similar functions), any person directly or indirectly 

24 controlling, controlled by, or under common control 

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1 rity-based swap participant, or any employee of such 

2 security-based swap dealer or major security-based 

3 swap participant, except that any person associated 

4 with a security-based swap dealer or major security5 based swap participant whose functions are solely 

6 clerical or ministerial shall not be included in the 

7 meaning of such term other than for purposes of 

8 section 15F(e)(2) of the Securities Exchange Act of 

9 1934 (15 U.S.C. 78o–10).’’; 

10 (19) by adding after paragraph (48) the fol11 lowing: 

12 ‘‘(49) PERSON ASSOCIATED WITH A SWAP

13 DEALER OR MAJOR SWAP PARTICIPANT.—The term 

14 ‘person associated with a swap dealer or major swap 

15 participant’ or ‘associated person of a swap dealer or 

16 major swap participant’ means any partner, officer, 

17 director, or branch manager of such swap dealer or 

18 major swap participant (or any person occupying a 

19 similar status or performing similar functions), any 

20 person directly or indirectly controlling, controlled 

21 by, or under common control with such swap dealer 

22 or major swap participant, or any employee of such 

23 swap dealer or major swap participant, except that 

24 any person associated with a swap dealer or major 

25 swap participant whose functions are solely clerical 


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1 or ministerial shall not be included in the meaning 

2 of such term other than for purposes of section 

3 4s(b)(6).’’; and 

4 (20) by adding after paragraph (49) the fol5 lowing: 

6 ‘‘(50) SWAP REPOSITORY.—The term ‘swap re7 pository’ means an entity that collects and maintains 

8 the records of the terms and conditions of swaps or 

9 security-based swaps entered into by third parties.’’. 

10 (b) JOINT RULEMAKING ON FURTHER DEFINITION

11 OF TERMS.— 

12 (1) IN GENERAL.—The Commodity Futures 

13 Trading Commission and the Securities and Ex14 change Commission shall jointly adopt a rule further 

15 defining the terms ‘‘swap’’, ‘‘security-based swap’’, 

16 ‘‘swap dealer’’, ‘‘security-based swap dealer’’, ‘‘major 

17 swap participant’’,‘‘major security-based swap par18 ticipant’’, and ‘‘eligible contract participant’’ no 

19 later than 180 days after the effective date of this 

20 Act. 

21 (2) PREVENTION OF EVASIONS.—The Com22 modity Futures Trading Commission and the Securi23 ties and Exchange Commission may prescribe rules 

24 defining the term ‘‘swap’’ or ‘‘security-based swap’’ 


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1 to include transactions that have been structured to 

2 evade this Act. 

3 (c) JOINT RULEMAKING UNDER THIS ACT.— 

4 (1) UNIFORM RULES.—Rules and regulations 

5 prescribed jointly under this Act by the Commodity 

6 Futures Trading Commission and the Securities and 

7 Exchange Commission shall be uniform. 

8 (2) TREASURY DEPARTMENT.—In the event 

9 that the Commodity Futures Trading Commission 

10 and the Securities and Exchange Commission fail to 

11 jointly prescribe uniform rules and regulations under 

12 any provision of this Act in a timely manner, the 

13 Secretary of the Treasury, in consultation with the 

14 Commodity Futures Trading Commission and the 

15 Securities and Exchange Commission, shall prescribe 

16 rules and regulations under such provision. A rule 

17 prescribed by the Secretary of the Treasury shall be 

18 enforced as if prescribed jointly by the Commodity 

19 Futures Trading Commission and the Securities and 

20 Exchange Commission and shall remain in effect 

21 until the Secretary rescinds the rule or until the ef22 fective date of a corresponding rule prescribed joint23 ly by the Commodity Futures Trading Commission 

24 and the Securities and Exchange Commission in ac25 cordance with this section, whichever is later. 


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1 (3) DEADLINE.—The Secretary of the Treasury 

2 shall adopt rules and regulations under paragraph 

3 (2) within 180 days of the time that the Commodity 

4 Futures Trading Commission and the Securities and 

5 Exchange Commission failed to adopt uniform rules 

6 and regulations. 

7 (4) TREATMENT OF SIMILAR PRODUCTS.—In 

8 adopting joint rules and regulations under this Act, 

9 the Commodity Futures Trading Commission and 

10 the Securities and Exchange Commission shall pre11 scribe requirements to treat functionally or economi12 cally similar products similarly. 

13 (5) TREATMENT OF DISSIMILAR PRODUCTS.— 

14 Nothing in this Act shall be construed to require the 

15 Commodity Futures Trading Commission and the 

16 Securities and Exchange Commission to adopt joint 

17 rules that treat functionally or economically different 

18 products identically. 

19 (6) JOINT INTERPRETATION.—Any interpreta20 tion of, or guidance regarding, a provision of this 

21 Act, shall be effective only if issued jointly by the 

22 Commodity Futures Trading Commission and the 

23 Securities and Exchange Commission if this Act re24 quires the Commodity Futures Trading Commission 


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1 and the Securities and Exchange Commission to 

2 issue joint regulations to implement the provision. 

3 (d) EXEMPTIONS.—Section 4(c) of the Commodity 

4 Exchange Act (7 U.S.C. 4(c)) is amended by adding at 

5 the end the following: ‘‘The Commission shall not have 

6 the authority to grant exemptions from the swap-related 

7 provisions of the Over-the-Counter Derivatives Markets 

8 Act of 2009, except as expressly authorized under the pro9 visions of that Act.’’. 

10 SEC. 112. JURISDICTION. 

11 (a) EXCLUSIVE JURISDICTION.—The first sentence 

12 of section 2(a)(1)(A) of the Commodity Exchange Act (7 

13 U.S.C. 2(a)(1)(A)) is amended— 

14 (1) by striking ‘‘(C) and (D)’’ and inserting 

15 ‘‘(C), (D), and (G)’’; 

16 (2) by striking ‘‘subsections (c) through (i)’’ 

17 and inserting ‘‘subsections (c) and (f)’’; and 

18 (3) by striking ‘‘involving contracts of sale’’ and 

19 inserting ‘‘involving swaps or contracts of sale’’. 

20 (b) NO LIMITATION.—Section 2(a)(1) of the Com21 modity Exchange Act (7 U.S.C. 2(a)(1)) is amended by 

22 inserting after subparagraph (F) the following: 

23 ‘‘(G) Nothing contained in this paragraph 

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1 sion or other regulatory authority by, or other2 wise restrict the authority of the Securities and 

3 Exchange Commission or other regulatory au4 thority under, the Over-the-Counter Derivatives 

5 Markets Act of 2009, including with respect to 

6 a security-based swap as described in section 

7 1a(38)(C) of this Act.’’. 

8 (c) ADDITIONS.—Section 2(c)(2)(A) of the Com9 modity Exchange Act (7 U.S.C. 2(c)(2)(A)) is amended— 

10 (1) in clause (i), by striking ‘‘or’’ at the end; 

11 (2) by redesignating clause (ii) as clause (iii); 

12 and 

13 (3) by inserting after clause (i) the following: 

14 ‘‘(ii) a swap; or’’. 

15 SEC. 113. CLEARING. 

16 (a) CLEARING REQUIREMENT.— 

17 (1) Sections 2(d), 2(e), 2(g), and 2(h) of the 

18 Commodity Exchange Act (7 U.S.C. 2(d), 2(e), 2(g), 

19 and 2(h)) are repealed. 

20 (2) Section 2 of the Commodity Exchange Act 

21 (7 U.S.C. 2) is further amended by inserting after 

22 subsection (c) the following: 

23 ‘‘(d) SWAPS.—Nothing in this Act (other than sub24 sections (a)(1)(A), (a)(1)(B), (f), and (j), sections 4a, 4b, 

25 4b-1, 4c(a), 4c(b), 4o, 4r, 4s, 4t, 4u, 5b, 5c, 5h, 6(c), 6(d), 


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1 6c, 6d, 8, 8a, 9, 12(e)(2), 12(f), 13(a), 13(b), 21, and 

2 22(a)(4) and such other provisions of this Act as are appli3 cable by their terms to registered entities and Commission 

4 registrants) governs or applies to a swap. 

5 ‘‘(e) LIMITATION ON PARTICIPATION.—It shall be 

6 unlawful for any person, other than an eligible contract 

7 participant, to enter into a swap unless the swap is en8 tered into on or subject to the rules of a board of trade 

9 designated as a contract market under section 5.’’. 

10 (3) Section 2 of the Commodity Exchange Act 

11 (7 U.S.C. 2) is further amended by inserting after 

12 subsection (i) the following: 

13 ‘‘(j) CLEARING OF SWAPS.— 

14 ‘‘(1) CLEARING REQUIREMENT.—The Commis15 sion shall monitor swap activity and transaction data 

16 and by rule or regulation identify specific swap con17 tracts that it determines are required to be cleared 

18 consistent with the public interest, after taking into 

19 account the following factors: 

20 ‘‘(A) the existence of significant out21 standing notional exposures, trading liquidity 

22 and adequate pricing data; 

23 ‘‘(B) the availability of one or more swap 

24 clearinghouses with the rule framework, capac25 ity, operational expertise and resources, and 


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1 credit support infrastructure to clear the con2 tract on terms that are consistent with the ma3 terial terms and trading conventions on which 

4 the contract is then traded; 

5 ‘‘(C) the impact on the mitigation of sys6 temic risk, taking into account the size of the 

7 market for such contract and the resources of 

8 the swap clearinghouses available to clear the 

9 contract; 

10 ‘‘(D) the impact on competition; and 

11 ‘‘(E) the existence of reasonable legal cer12 tainty in the event of the insolvency of the rel13 evant swap clearinghouse or one or more of its 

14 clearing members with regard to the treatment 

15 of customer and swap counterparty positions, 

16 funds, and property. 

17 ‘‘(2) SCOPE OF CLEARING FUNCTIONS.—The 

18 Commission shall by rule or regulation define the 

19 scope of the clearing functions that are necessary to 

20 satisfy the requirements of paragraph (1). 

21 ‘‘(3) PREVENTION OF EVASION.—The Commis22 sion and the Securities and Exchange Commission 

23 shall have authority to prescribe rules under this 

24 subsection, or issue interpretations of such rules, as 

25 necessary to prevent evasions of this Act provided 


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1 that any such rules or interpretations must be issued 

2 jointly to be effective. 

3 ‘‘(4) REQUIRED REPORTING.— 

4 ‘‘(A) IN GENERAL.—All swap transactions 

5 that are not accepted for clearing by any de6 rivatives clearing organization shall be reported 

7 to either a swap repository described in section 

8 21 or, if there is no repository that would ac9 cept the swap, to the Commission pursuant to 

10 section 4r within such time period as the Com11 mission may by rule or regulation prescribe. 

12 ‘‘(B) AUTHORITY OF SWAP DEALER TO RE13 PORT.—Counterparties may agree which 

14 counterparty will report the swap transaction. 

15 In transactions where only 1 counterparty is a 

16 swap dealer, the swap dealer will report the 

17 transaction. 

18 ‘‘(5) TRANSITION RULES.—Rules adopted by 

19 the Commission under this section shall provide for 

20 the reporting of data, as follows: 

21 ‘‘(A) Swaps that were entered into before 

22 the date of enactment of the Over-the-Counter 

23 Derivatives Markets Act of 2009 shall be re24 ported to a registered swap repository or the 

25 Commission no later than 180 days after the 


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1 effective date of the Over-the-Counter Deriva2 tives Markets Act of 2009. 

3 ‘‘(B) Swaps that were entered into on or 

4 after the date of enactment of the Over-the5 Counter Derivatives Markets Act of 2009 shall 

6 be reported to a registered swap repository or 

7 the Commission no later than the later of— 

8 ‘‘(i) 90 days after the effective date of 

9 the Over-the-Counter Derivatives Markets 

10 Act of 2009; or 

11 ‘‘(ii) such other time after entering 

12 into the swap as the Commission may pre13 scribe by rule or regulation. 

14 ‘‘(6) TRADE EXECUTION.—With respect to 

15 transactions involving swaps subject to the require16 ment of paragraph (1) and where both counterpar17 ties are either swap dealers or major swap partici18 pants, such counterparties must either: 

19 ‘‘(A) Execute the transaction on a board of 

20 trade designated as a contract market under 

21 section 5 (in which event, such transaction shall 

22 be subject to regulation under this Act as a 

23 transaction in a contract of sale of a commodity 

24 for future delivery or commodity option, as ap25 plicable); 


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1 ‘‘(B) Execute the transaction on a swap 

2 execution facility registered with the Commis3 sion; 

4 ‘‘(C) Execute the transaction on a foreign 

5 swap execution facility that is subject to regula6 tion as such under the laws of a foreign juris7 diction; or 

8 ‘‘(D) If the transaction is not executed on 

9 an entity listed in subparagraph (A), (B), or 

10 (C), comply with any recordkeeping and end-of11 day transaction reporting requirements— 

12 ‘‘(i) as may be prescribed by the Com13 mission with respect to commodity swaps 

14 subject to the requirements of paragraph 

15 (3); or 

16 ‘‘(ii) as may be prescribed by the rel17 evant foreign regulator in the case of com18 modity swaps subject to the requirements 

19 of paragraph (3) entered into by— 

20 ‘‘(I) a foreign swap dealer or a 

21 foreign swap market participant; or 

22 ‘‘(II) a U.S. swap dealer or U.S. 

23 major swap participant that is enter24 ing into the commodity swap either 

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1 tories and possessions or with a for2 eign counterparty. 

3 ‘‘(7) EXCHANGE TRADING.—In adopting rules 

4 and regulations, the Commission shall endeavor to 

5 eliminate unnecessary impediments to the trading on 

6 boards of trade designated as contract markets 

7 under section 5 of contracts, agreements or trans8 actions that would be security-based swaps but for 

9 the trading of such contracts, agreements or trans10 actions on such a designated contract market. 

11 ‘‘(8) EXCEPTIONS.—The requirements of para12 graph (1) shall not apply to a swap if— 

13 ‘‘(A) no derivatives clearing organization 

14 registered under this Act will accept the swap 

15 for clearing; or 

16 ‘‘(B) one of the counterparties to the swap 

17 is not a swap dealer or major swap partici18 pant.’’. 

19 (b) DERIVATIVES CLEARING ORGANIZATIONS.— 

20 (1) Subsections (a) and (b) of section 5b of the 

21 Commodity Exchange Act (7 U.S.C. 7a–1) are 

22 amended to read as follows: 

23 ‘‘(a) REGISTRATION REQUIREMENT.—It shall be un24 lawful for a derivatives clearing organization, unless reg25 istered with the Commission, directly or indirectly to make 


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1 use of the mails or any means or instrumentality of inter2 state commerce to perform the functions of a derivatives 

3 clearing organization described in section 1a(10) of this 

4 Act with respect to— 

5 ‘‘(1) a contract of sale of a commodity for fu6 ture delivery (or option on such a contract) or option 

7 on a commodity, in each case unless the contract or 

8 option is— 

9 ‘‘(A) excluded from this Act by section 

10 2(a)(1)(C)(i), 2(c), or 2(f); or 

11 ‘‘(B) a security futures product cleared by 

12 a clearing agency registered with the Securities 

13 and Exchange Commission under the Securities 

14 Exchange Act of 1934 (15 U.S.C. 78a et seq.); 

15 or 

16 ‘‘(2) a swap. 

17 ‘‘(b) VOLUNTARY REGISTRATION.— 

18 ‘‘(1) DERIVATIVES CLEARING ORGANIZA19 TIONS.—A person that clears agreements, contracts, 

20 or transactions that are not required to be cleared 

21 under this Act may register with the Commission as 

22 a derivatives clearing organization. 

23 ‘‘(2) CLEARING AGENCIES.—A derivatives clear24 ing organization may clear security-based swaps that 

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1 istered as a clearing agency under the Securities Ex2 change Act of 1934 (15 U.S.C. 78a et seq.).’’. 

3 (2) Section 5b of the Commodity Exchange Act 

4 (7 U.S.C. 7a–1) is amended by adding at the end 

5 the following: 

6 ‘‘(g) REQUIRED REGISTRATION FOR BANKS AND

7 CLEARING AGENCIES.—A person that is required to be 

8 registered as a derivatives clearing organization under this 

9 section shall register with the Commission regardless of 

10 whether the person is also a bank or a clearing agency 

11 registered with the Securities and Exchange Commission 

12 under the Securities Exchange Act of 1934 (15 U.S.C. 

13 78a et seq.). 

14 ‘‘(h) HARMONIZATION OF RULES.—Not later than 

15 180 days after the effective date of the Over-the-Counter 

16 Derivatives Markets Act of 2009, the Commission and the 

17 Securities and Exchange Commission shall jointly adopt 

18 uniform rules governing persons that are registered as de19 rivatives clearing organizations for swaps under this sub20 section and persons that are registered as clearing agen21 cies for security-based swaps under the Securities Ex22 change Act of 1934 (15 U.S.C. 78a et seq.). 

23 ‘‘(i) CONSULTATION.—The Commission and the Se24 curities and Exchange Commission shall consult with the 


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1 appropriate Federal banking agencies prior to adopting 

2 rules under this section with respect to swaps. 

3 ‘‘(j) EXEMPTIONS.—The Commission may exempt, 

4 conditionally or unconditionally, a derivatives clearing or5 ganization from registration under this section for the 

6 clearing of swaps if the Commission finds that such de7 rivatives clearing organization is subject to comparable, 

8 comprehensive supervision and regulation on a consoli9 dated basis by the Securities and Exchange Commission, 

10 a Prudential Regulator or the appropriate governmental 

11 authorities in the organization’s home country. 

12 ‘‘(k) DESIGNATION OF COMPLIANCE OFFICER.— 

13 ‘‘(1) IN GENERAL.—Each derivatives clearing 

14 organization shall designate an individual to serve as 

15 a compliance officer. 

16 ‘‘(2) DUTIES.—The compliance officer— 

17 ‘‘(A) shall report directly to the board or 

18 to the senior officer of the derivatives clearing 

19 organization; and 

20 ‘‘(B) shall— 

21 ‘‘(i) review compliance with the core 

22 principles in section 5b(c)(2); 

23 ‘‘(ii) in consultation with the board of 

24 the derivatives clearing organization, a 

25 body performing a function similar to that 


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1 of a board, or the senior officer of the de2 rivatives clearing organization, resolve any 

3 conflicts of interest that may arise; 

4 ‘‘(iii) be responsible for administering 

5 the policies and procedures required to be 

6 established pursuant to this section; and 

7 ‘‘(iv) ensure compliance with com8 modity laws and the rules and regulations 

9 issued thereunder, including rules pre10 scribed by the Commission pursuant to 

11 this section; and 

12 ‘‘(C) shall establish procedures for remedi13 ation of noncompliance issues found during 

14 compliance office reviews, lookbacks, internal or 

15 external audit findings, self-reported errors, or 

16 through validated complaints. Procedures will 

17 establish the handling, management response, 

18 remediation, retesting, and closing of non19 compliant issues. 

20 ‘‘(3) ANNUAL REPORTS REQUIRED.—The com21 pliance officer shall annually prepare and sign a re22 port on the compliance of the derivatives clearing or23 ganization with the commodity laws and its policies 

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1 scribed by the Commission. Such compliance report 

2 shall accompany the financial reports of the deriva3 tives clearing organization that are required to be 

4 furnished to the Commission pursuant to this sec5 tion and shall include a certification that, under pen6 alty of law, the report is accurate and complete.’’. 

7 (3) Section 5b(c)(2) of the Commodity Ex8 change Act (7 U.S.C. 7a–1(c)(2)) is amended to 

9 read as follows: 

10 ‘‘(2) CORE PRINCIPLES FOR DERIVATIVES

11 CLEARING ORGANIZATIONS.— 

12 ‘‘(A) IN GENERAL.—To be registered and 

13 to maintain registration as a derivatives clear14 ing organization, a derivatives clearing organi15 zation shall comply with the core principles 

16 specified in this paragraph, and any require17 ment that the Commission may impose by rule 

18 or regulation pursuant to section 8a(5). The 

19 Commission may conform the core principles to 

20 reflect evolving United States and international 

21 standards. Except where the Commission deter22 mines otherwise by rule or regulation, a deriva23 tives clearing organization shall have reasonable 

24 discretion in establishing the manner in which 

25 it complies with the core principles. 


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1 ‘‘(B) FINANCIAL RESOURCES.— 

2 ‘‘(i) The derivatives clearing organiza3 tion shall have adequate financial, oper4 ational, and managerial resources to dis5 charge its responsibilities. 

6 ‘‘(ii) Financial resources shall at a 

7 minimum exceed the total amount that 

8 would— 

9 ‘‘(I) enable the derivatives clear10 ing organization to meet its financial 

11 obligations to its members and par12 ticipants notwithstanding a default by 

13 the member or participant creating 

14 the largest financial exposure for that 

15 derivatives clearing organization in ex16 treme but plausible market conditions; 

17 and 

18 ‘‘(II) enable the derivatives clear19 ing organization to cover its operating 

20 costs for a period of one year, cal21 culated on a rolling basis. 

22 ‘‘(C) PARTICIPANT AND PRODUCT ELIGI23 BILITY.— 

24 ‘‘(i) The derivatives clearing organiza25 tion shall establish— 


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1 ‘‘(I) appropriate admission and 

2 continuing eligibility standards (in3 cluding sufficient financial resources 

4 and operational capacity to meet obli5 gations arising from participation in 

6 the derivatives clearing organization) 

7 for members of and participants in 

8 the organization; and 

9 ‘‘(II) appropriate standards for 

10 determining eligibility of agreements, 

11 contracts, or transactions submitted 

12 to the derivatives clearing organiza13 tion for clearing. 

14 ‘‘(ii) The derivatives clearing organi15 zation shall have procedures in place to 

16 verify that participation and membership 

17 requirements are met on an ongoing basis. 

18 ‘‘(iii) The derivatives clearing organi19 zation’s participation and membership re20 quirements shall be objective, publicly dis21 closed, and permit fair and open access. 

22 ‘‘(iv) The rules of the derivatives 

23 clearing organization shall provide for ac24 ceptance of a standardized swap regardless 


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1 of the system on which the transaction was 

2 executed. 

3 ‘‘(D) RISK MANAGEMENT.— 

4 ‘‘(i) The derivatives clearing organiza5 tion shall have the ability to manage the 

6 risks associated with discharging the re7 sponsibilities of a derivatives clearing orga8 nization through the use of appropriate 

9 tools and procedures. 

10 ‘‘(ii) The derivatives clearing organi11 zation shall measure its credit exposures to 

12 its members and participants at least once 

13 each business day and shall monitor such 

14 exposures throughout the business day. 

15 ‘‘(iii) Through margin requirements 

16 and other risk control mechanisms, a de17 rivatives clearing organization shall limit 

18 its exposures to potential losses from de19 faults by its members and participants so 

20 that the operations of the derivatives clear21 ing organization would not be disrupted 

22 and nondefaulting members or participants 

23 would not be exposed to losses that they 

24 cannot anticipate or control. 


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1 ‘‘(iv) Margin required from all mem2 bers and participants shall be sufficient to 

3 cover potential exposures in normal market 

4 conditions. 

5 ‘‘(v) The models and parameters used 

6 in setting margin requirements shall be 

7 risk-based and reviewed regularly. 

8 ‘‘(E) SETTLEMENT PROCEDURES.—The 

9 derivatives clearing organization shall— 

10 ‘‘(i) complete money settlements on a 

11 timely basis, and not less than once each 

12 business day; 

13 ‘‘(ii) employ money settlement ar14 rangements that eliminate or strictly limit 

15 the derivatives clearing organization’s ex16 posure to settlement bank risks, such as 

17 credit and liquidity risks from the use of 

18 banks to effect money settlements; 

19 ‘‘(iii) ensure money settlements are 

20 final when effected; 

21 ‘‘(iv) maintain an accurate record of 

22 the flow of funds associated with each 

23 money settlement; 

24 ‘‘(v) have the ability to comply with 

25 the terms and conditions of any permitted 


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1 netting or offset arrangements with other 

2 clearing organizations; and 

3 ‘‘(vi) for physical settlements, estab4 lish rules that clearly state the derivatives 

5 clearing organization’s obligations with re6 spect to physical deliveries. The risks from 

7 these obligations shall be identified and 

8 managed. 

9 ‘‘(F) TREATMENT OF FUNDS.— 

10 ‘‘(i) The derivatives clearing organiza11 tion shall have standards and procedures 

12 designed to protect and ensure the safety 

13 of member and participant funds and as14 sets. 

15 ‘‘(ii) The derivatives clearing organi16 zation shall hold member and participant 

17 funds and assets in a manner whereby risk 

18 of loss or of delay in the derivatives clear19 ing organization’s access to the assets and 

20 funds is minimized. 

21 ‘‘(iii) Assets and funds invested by the 

22 derivatives clearing organization shall be 

23 held in instruments with minimal credit, 

24 market, and liquidity risks. 


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1 ‘‘(G) DEFAULT RULES AND PROCE2 DURES.— 

3 ‘‘(i) The derivatives clearing organiza4 tion shall have rules and procedures de5 signed to allow for the efficient, fair, and 

6 safe management of events when members 

7 or participants become insolvent or other8 wise default on their obligations to the de9 rivatives clearing organization. 

10 ‘‘(ii) The derivatives clearing organi11 zation’s default procedures shall be clearly 

12 stated, and they shall ensure that the de13 rivatives clearing organization can take 

14 timely action to contain losses and liquidity 

15 pressures and to continue meeting its obli16 gations. 

17 ‘‘(iii) The default procedures shall be 

18 publicly available. 

19 ‘‘(H) RULE ENFORCEMENT.—The deriva20 tives clearing organization shall— 

21 ‘‘(i) maintain adequate arrangements 

22 and resources for the effective monitoring 

23 and enforcement of compliance with rules 

24 of the derivatives clearing organization and 

25 for resolution of disputes; and 


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1 ‘‘(ii) have the authority and ability to 

2 discipline, limit, suspend, or terminate a 

3 member’s or participant’s activities for vio4 lations of rules of the derivatives clearing 

5 organization. 

6 ‘‘(I) SYSTEM SAFEGUARDS.—The deriva7 tives clearing organization shall— 

8 ‘‘(i) establish and maintain a program 

9 of risk analysis and oversight to identify 

10 and minimize sources of operational risk 

11 through the development of appropriate 

12 controls and procedures, and the develop13 ment of automated systems, that are reli14 able, secure, and have adequate scalable 

15 capacity; 

16 ‘‘(ii) establish and maintain emer17 gency procedures, backup facilities, and a 

18 plan for disaster recovery that allows for 

19 the timely recovery and resumption of op20 erations and the fulfillment of the deriva21 tives clearing organization’s responsibilities 

22 and obligations; and 

23 ‘‘(iii) periodically conduct tests to 

24 verify that backup resources are sufficient 

25 to ensure continued order processing and 


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1 trade matching, price reporting, market 

2 surveillance, and maintenance of a com3 prehensive and accurate audit trail. 

4 ‘‘(J) REPORTING.—The derivatives clear5 ing organization shall provide to the Commis6 sion all information necessary for the Commis7 sion to conduct oversight of the derivatives 

8 clearing organization. 

9 ‘‘(K) RECORDKEEPING.—The derivatives 

10 clearing organization shall maintain records of 

11 all activities related to the business of the de12 rivatives clearing organization as a derivatives 

13 clearing organization in a form and manner ac14 ceptable to the Commission for a period of 5 

15 years. 

16 ‘‘(L) PUBLIC INFORMATION.— 

17 ‘‘(i) The derivatives clearing organiza18 tion shall provide market participants with 

19 sufficient information to identify and 

20 evaluate accurately the risks and costs as21 sociated with using the derivatives clearing 

22 organization’s services. 

23 ‘‘(ii) The derivatives clearing organi24 zation shall make information concerning 

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1 erning its clearing and settlement systems 

2 (including default procedures) available to 

3 market participants. 

4 ‘‘(iii) The derivatives clearing organi5 zation shall disclose publicly and to the 

6 Commission information concerning— 

7 ‘‘(I) the terms and conditions of 

8 contracts, agreements, and trans9 actions cleared and settled by the de10 rivatives clearing organization; 

11 ‘‘(II) clearing and other fees that 

12 the derivatives clearing organization 

13 charges its members and participants; 

14 ‘‘(III) the margin-setting method15 ology and the size and composition of 

16 the financial resource package of the 

17 derivatives clearing organization; 

18 ‘‘(IV) other information relevant 

19 to participation in the settlement and 

20 clearing activities of the derivatives 

21 clearing organization; and 

22 ‘‘(V) daily settlement prices, vol23 ume, and open interest for all con24 tracts settled or cleared by it. 


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1 ‘‘(M) INFORMATION-SHARING.—The de2 rivatives clearing organization shall— 

3 ‘‘(i) enter into and abide by the terms 

4 of all appropriate and applicable domestic 

5 and international information-sharing 

6 agreements; and 

7 ‘‘(ii) use relevant information obtained 

8 from the agreements in carrying out the 

9 clearing organization’s risk management 

10 program. 

11 ‘‘(N) ANTITRUST CONSIDERATIONS.—Un12 less appropriate to achieve the purposes of this 

13 chapter, the derivatives clearing organization 

14 shall avoid— 

15 ‘‘(i) adopting any rule or taking any 

16 action that results in any unreasonable re17 straint of trade; or 

18 ‘‘(ii) imposing any material anti19 competitive burden. 

20 ‘‘(O) GOVERNANCE FITNESS STAND21 ARDS.— 

22 ‘‘(i) The derivatives clearing organiza23 tion shall establish governance arrange24 ments that are transparent in order to ful25 fill public interest requirements and to 


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1 support the objectives of owners and par2 ticipants. 

3 ‘‘(ii) The derivatives clearing organi4 zation shall establish and enforce appro5 priate fitness standards for directors, 

6 members of any disciplinary committee, 

7 and members of the derivatives clearing or8 ganization, and any other persons with di9 rect access to the settlement or clearing ac10 tivities of the derivatives clearing organiza11 tion, including any parties affiliated with 

12 any of the persons described in this sub13 paragraph. 

14 ‘‘(P) CONFLICTS OF INTEREST.—The de15 rivatives clearing organization shall establish 

16 and enforce rules to minimize conflicts of inter17 est in the decisionmaking process of the deriva18 tives clearing organization and establish a proc19 ess for resolving such conflicts of interest. 

20 ‘‘(Q) COMPOSITION OF THE BOARDS.—The 

21 derivatives clearing organization shall ensure 

22 that the composition of the governing board or 

23 committee includes market participants. 

24 ‘‘(R) LEGAL RISK.—The derivatives clear25 ing organization shall have a well-founded, 


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1 transparent, and enforceable legal framework 

2 for each aspect of its activities.’’. 

3 (4) Section 5b of the Commodity Exchange Act 

4 (7 U.S.C. 7a–1) is further amended by adding after 

5 subsection (k), as added by paragraph (2), the fol6 lowing: 

7 ‘‘(l) REPORTING.— 

8 ‘‘(1) IN GENERAL.—A derivatives clearing orga9 nization that clears swaps shall provide to the Com10 mission all information determined by the Commis11 sion to be necessary to perform its responsibilities 

12 under this Act. The Commission shall adopt data 

13 collection and maintenance requirements for swaps 

14 cleared by derivatives clearing organizations that are 

15 comparable to the corresponding requirements for 

16 swaps accepted by swap repositories and swaps trad17 ed on swap execution facilities. Subject to section 8, 

18 the Commission shall share such information, upon 

19 request, with the Board, the Securities and Ex20 change Commission, the appropriate Federal bank21 ing agencies, the Financial Services Oversight Coun22 cil, and the Department of Justice or to other per23 sons the Commission deems appropriate, including 

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1 tures authorities), foreign central banks, and foreign 

2 ministries. 

3 ‘‘(2) PUBLIC INFORMATION.—A derivatives 

4 clearing organization that clears swaps shall provide 

5 to the Commission, or its designee, such information 

6 as is required by, and in a form and at a frequency 

7 to be determined by, the Commission, in order to 

8 comply with the public reporting requirements con9 tained in section 8(j).’’. 

10 (5) Section 8(e) of the Commodity Exchange 

11 Act (7 U.S.C. 12(e)) is amended in the last sentence 

12 by adding ‘‘central bank and ministries’’ after ‘‘de13 partment’’ each place it appears. 

14 (c) LEGAL CERTAINTY FOR IDENTIFIED BANKING

15 PRODUCTS.— 

16 (1) REPEAL.—Sections 402(d), 404, 407, 

17 408(b), and 408(c)(2) of the Legal Certainty for 

18 Bank Products Act of 2000 (7 U.S.C. 27(d), 27b, 

19 27e, 27f(b), and 27f(c)(2)) are repealed. 

20 (2) LEGAL CERTAINTY.—Section 403 of the 

21 Legal Certainty for Bank Products Act of 2000 (7 

22 U.S.C. 27a) is amended to read as follows: 

23 ‘‘SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT. 

24 ‘‘(a) EXCLUSION.—Except as provided in subsection 

25 (b), no provisions of the Commodity Exchange Act (7 


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1 U.S.C. 1 et seq.) shall apply to, and the Commodity Fu2 tures Trading Commission and the Securities and Ex3 change Commission shall not exercise regulatory authority 

4 under the Commodity Exchange Act with respect to, an 

5 identified banking product. 

6 ‘‘(b) EXCEPTION.—An appropriate Federal banking 

7 agency may except an identified banking product from the 

8 exclusion in subsection (a) if the agency determines, in 

9 consultation with the Commodity Futures Trading Com10 mission and the Securities and Exchange Commission, 

11 that the product— 

12 ‘‘(1) would meet the definition of swap in sec13 tion 1a(35) of the Commodity Exchange Act (7 

14 U.S.C. 1a(35)) or security-based swap in section 

15 1a(38) of the Commodity Exchange Act (7 U.S.C. 

16 1a(38)); and 

17 ‘‘(2) has become known to the trade as a swap 

18 or security-based swap, or otherwise has been struc19 tured as an identified banking product for the pur20 pose of evading the provisions of the Commodity Ex21 change Act (7 U.S.C. 1 et seq.), the Securities Act 

22 of 1933 (15 U.S.C. 77a et seq.), or the Securities 

23 Exchange Act of 1934 (15 U.S.C. 78a et seq.).’’. 


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1 SEC. 114. PUBLIC REPORTING OF AGGREGATE SWAP DATA. 

2 Section 8 of the Commodity Exchange Act (7 U.S.C. 

3 12) is amended by adding after subsection (i) the fol4 lowing: 

5 ‘‘(j) PUBLIC REPORTING OF AGGREGATE SWAP

6 DATA.— 

7 ‘‘(1) IN GENERAL.—The Commission, or a per8 son designated by the Commission pursuant to para9 graph (2), shall make available to the public, in a 

10 manner that does not disclose the business trans11 actions and market positions of any person, aggre12 gate data on swap trading volumes and positions 

13 from the sources set forth in paragraph (3). 

14 ‘‘(2) DESIGNEE OF THE COMMISSION.—The 

15 Commission may designate a derivatives clearing or16 ganization or a swap repository to carry out the 

17 public reporting described in paragraph (1). 

18 ‘‘(3) SOURCES OF INFORMATION.—The sources 

19 of the information to be publicly reported as de20 scribed in paragraph (1) are— 

21 ‘‘(A) derivatives clearing organizations 

22 pursuant to section 5b(k)(2); 

23 ‘‘(B) swap repositories pursuant to section 

24 21(c)(3); and 

25 ‘‘(C) reports received by the Commission 

26 pursuant to section 4r.’’. 


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1 SEC. 115. SWAP REPOSITORIES. 

2 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

3 is amended by inserting after section 20 the following: 

4 ‘‘SEC. 21. SWAP REPOSITORIES. 

5 ‘‘(a) REGISTRATION REQUIREMENT.— 

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

7 person, unless registered with the Commission, di8 rectly or indirectly to make use of the mails or any 

9 means or instrumentality of interstate commerce to 

10 perform the functions of a swap repository. 

11 ‘‘(2) INSPECTION AND EXAMINATION.—Reg12 istered swap repositories shall be subject to inspec13 tion and examination by any representative of the 

14 Commission. 

15 ‘‘(b) STANDARD SETTING.— 

16 ‘‘(1) DATA IDENTIFICATION.—The Commission 

17 shall prescribe standards that specify the data ele18 ments for each swap that shall be collected and 

19 maintained by each registered swap repository. 

20 ‘‘(2) DATA COLLECTION AND MAINTENANCE.— 

21 The Commission shall prescribe data collection and 

22 data maintenance standards for swap repositories. 

23 ‘‘(3) COMPARABILITY.—The standards pre24 scribed by the Commission under this subsection 

25 shall be comparable to the data standards imposed 


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1 by the Commission on derivatives clearing organiza2 tions that clear swaps. 

3 ‘‘(c) DUTIES.—A swap repository shall— 

4 ‘‘(1) accept data prescribed by the Commission 

5 for each swap under subsection (b); 

6 ‘‘(2) maintain such data in such form and man7 ner and for such period as may be required by the 

8 Commission; 

9 ‘‘(3) provide to the Commission, or its designee, 

10 such information as is required by, and in a form 

11 and at a frequency to be determined by, the Com12 mission, in order to comply with the public reporting 

13 requirements contained in section 8(j); and 

14 ‘‘(4) make available, on a confidential basis 

15 pursuant to section 8, all data obtained by the swap 

16 repository, including individual counterparty trade 

17 and position data, to the Commission, the appro18 priate Federal banking agencies, the Financial Serv19 ices Oversight Council, the Securities and Exchange 

20 Commission, and the Department of Justice or to 

21 other persons the Commission deems appropriate, 

22 including foreign financial supervisors (including for23 eign futures authorities), foreign central banks, and 

24 foreign ministries. 


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1 ‘‘(d) REQUIRED REGISTRATION FOR SECURITY2 BASED SWAP REPOSITORIES.—Any person that is re3 quired to be registered as a swap repository under this 

4 section shall register with the Commission regardless of 

5 whether that person also is registered with the Securities 

6 and Exchange Commission as a security-based swap re7 pository. 

8 ‘‘(e) HARMONIZATION OF RULES.—Not later than 

9 180 days after the effective date of the Over-the-Counter 

10 Derivatives Markets Act of 2009, the Commission and the 

11 Securities and Exchange Commission shall jointly adopt 

12 uniform rules governing persons that are registered under 

13 this section and persons that are registered as security14 based swap repositories under the Securities Exchange 

15 Act of 1934 (15 U.S.C. 78a et seq.), including uniform 

16 rules that specify the data elements that shall be collected 

17 and maintained by each repository. 

18 ‘‘(f) EXEMPTIONS.—The Commission may exempt, 

19 conditionally or unconditionally, a swap repository from 

20 the requirements of this section if the Commission finds 

21 that such swap repository is subject to comparable, com22 prehensive supervision and regulation on a consolidated 

23 basis by the Securities and Exchange Commission, a Pru24 dential Regulator or the appropriate governmental au25 thorities in the organization’s home country.’’. 


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1 SEC. 116. REPORTING AND RECORDKEEPING. 

2 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

3 is amended by inserting after section 4q the following: 

4 ‘‘SEC. 4r. REPORTING AND RECORDKEEPING FOR CERTAIN 

5 SWAPS. 

6 ‘‘(a) IN GENERAL.—Any person who enters into a 

7 swap and— 

8 ‘‘(1) did not clear the swap in accordance with 

9 section 2(j)(1); and 

10 ‘‘(2) did not have data regarding the swap ac11 cepted by a swap repository in accordance with rules 

12 (including time frames) adopted by the Commission 

13 under section 21, 

14 shall meet the requirements in subsection (b). 

15 ‘‘(b) REPORTS.—Any person described in subsection 

16 (a) shall— 

17 ‘‘(1) make such reports in such form and man18 ner and for such period as the Commission shall pre19 scribe by rule or regulation regarding the swaps held 

20 by the person; and 

21 ‘‘(2) keep books and records pertaining to the 

22 swaps held by the person in such form and manner 

23 and for such period as may be required by the Com24 mission, which books and records shall be open to 

25 inspection by any representative of the Commission, 

26 an appropriate Federal banking agency, the SecuriVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00053 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 ties and Exchange Commission, the Financial Serv2 ices Oversight Council, and the Department of Jus3 tice. 

4 ‘‘(c) IDENTICAL DATA.—In adopting rules under this 

5 section, the Commission shall require persons described in 

6 subsection (a) to report the same or a more comprehensive 

7 set of data than the Commission requires swap reposi8 tories to collect under section 21.’’. 

9 SEC. 117. REGISTRATION AND REGULATION OF SWAP DEAL10 ERS AND MAJOR SWAP PARTICIPANTS. 

11 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

12 is amended by inserting after section 4r (as added by sec13 tion 116) the following: 

14 ‘‘SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEAL15 ERS AND MAJOR SWAP PARTICIPANTS. 

16 ‘‘(a) REGISTRATION.— 

17 ‘‘(1) It shall be unlawful for any person to act 

18 as a swap dealer unless such person is registered as 

19 a swap dealer with the Commission. 

20 ‘‘(2) It shall be unlawful for any person to act 

21 as a major swap participant unless such person shall 

22 have registered as a major swap participant with the 

23 Commission. 

24 ‘‘(b) REQUIREMENTS.— 


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1 ‘‘(1) IN GENERAL.—A person shall register as 

2 a swap dealer or major swap participant by filing a 

3 registration application with the Commission. 

4 ‘‘(2) CONTENTS.—The application shall be 

5 made in such form and manner as prescribed by the 

6 Commission, giving any information and facts as the 

7 Commission may deem necessary concerning the 

8 business in which the applicant is or will be engaged. 

9 Such person, when registered as a swap dealer or 

10 major swap participant, shall continue to report and 

11 furnish to the Commission such information per12 taining to such person’s business as the Commission 

13 may require. 

14 ‘‘(3) EXPIRATION.—Each registration shall ex15 pire at such time as the Commission may by rule or 

16 regulation prescribe. 

17 ‘‘(4) RULES.—Except as provided in sub18 sections (c), (d) and (e), the Commission may pre19 scribe rules applicable to swap dealers and major 

20 swap participants, including rules that limit the ac21 tivities of swap dealers and major swap participants. 

22 ‘‘(5) TRANSITION.—Rules adopted under this 

23 section shall provide for the registration of swap 

24 dealers and major swap participants no later than 


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1 one year after the effective date of the Over-the2 Counter Derivatives Markets Act of 2009. 

3 ‘‘(6) STATUTORY DISQUALIFICATION.—Except 

4 to the extent otherwise specifically provided by rule, 

5 regulation, or order, it shall be unlawful for a swap 

6 dealer or a major swap participant to permit any 

7 person associated with a swap dealer or a major 

8 swap participant who is subject to a statutory dis9 qualification to effect or be involved in effecting 

10 swaps on behalf of such swap dealer or major swap 

11 participant, if such swap dealer or major swap par12 ticipant knew, or in the exercise of reasonable care 

13 should have known, of such statutory disqualifica14 tion. 

15 ‘‘(c) DUAL REGISTRATION.— 

16 ‘‘(1) SWAP DEALER.—Any person that is re17 quired to be registered as a swap dealer under this 

18 section shall register with the Commission regardless 

19 of whether that person also is a bank or is registered 

20 with the Securities and Exchange Commission as a 

21 security-based swap dealer. 

22 ‘‘(2) MAJOR SWAP PARTICIPANT.—Any person 

23 that is required to be registered as a major swap 

24 participant under this section shall register with the 

25 Commission regardless of whether that person also 


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1 is a bank or is registered with the Securities and 

2 Exchange Commission as a major security-based 

3 swap participant. 

4 ‘‘(d) JOINT RULES.— 

5 ‘‘(1) IN GENERAL.—Not later than 180 days 

6 after the effective date of the Over-the-Counter De7 rivatives Markets Act of 2009, the Commission and 

8 the Securities and Exchange Commission shall joint9 ly adopt uniform rules for persons that are reg10 istered as swap dealers or major swap participants 

11 under this section and persons that are registered as 

12 security-based swap dealers or major security-based 

13 swap participants under the Securities Exchange Act 

14 of 1934 (15 U.S.C. 78a et seq.). 

15 ‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIRE16 MENTS.—The Commission and the Securities and 

17 Exchange Commission shall not prescribe rules im18 posing prudential requirements (including activity 

19 restrictions) on swap dealers, major swap partici20 pants, security-based swap dealers, or major secu21 rity-based swap participants for which there is a 

22 Prudential Regulator. This provision shall not be 

23 construed as limiting the authority of the Commis24 sion and the Securities and Exchange Commission to 


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1 prescribe appropriate business conduct, reporting, 

2 and recordkeeping requirements to protect investors. 

3 ‘‘(e) CAPITAL AND MARGIN REQUIREMENTS.— 

4 ‘‘(1) IN GENERAL.— 

5 ‘‘(A) BANK SWAP DEALERS AND MAJOR

6 SWAP PARTICIPANTS.—Each registered swap 

7 dealer and major swap participant for which 

8 there is a Prudential Regulator shall meet such 

9 minimum capital requirements and minimum 

10 initial and variation margin requirements as the 

11 Prudential Regulators shall by rule or regula12 tion jointly prescribe to help ensure the safety 

13 and soundness of the swap dealer or major 

14 swap participant. 

15 ‘‘(B) NONBANK SWAP DEALERS AND

16 MAJOR SWAP PARTICIPANTS.—Each registered 

17 swap dealer and major swap participant for 

18 which there is not a Prudential Regulator shall 

19 meet such minimum capital requirements and 

20 minimum initial and variation margin require21 ments as the Commission and the Securities 

22 and Exchange Commission shall by rule or reg23 ulation jointly prescribe to help ensure the safe24 ty and soundness of the swap dealer or major 

25 swap participant. 


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1 ‘‘(2) JOINT RULES.— 

2 ‘‘(A) BANK SWAP DEALERS AND MAJOR

3 SWAP PARTICIPANTS.—Within 180 days of the 

4 enactment of the Over-the-Counter Derivatives 

5 Markets Act of 2009, the Prudential Regu6 lators, in consultation with the Commission and 

7 the Securities and Exchange Commission, shall 

8 jointly adopt rules imposing capital and margin 

9 requirements under this subsection for swap 

10 dealers and major swap participants. 

11 ‘‘(B) NONBANK SWAP DEALERS AND

12 MAJOR SWAP PARTICIPANTS.—Within 180 days 

13 of the enactment of the Over-the-Counter De14 rivatives Markets Act of 2009, the Commission 

15 and the Securities and Exchange Commission, 

16 in consultation with the Prudential Regulators, 

17 shall jointly adopt rules imposing capital and 

18 margin requirements under this subsection for 

19 swap dealers and major swap participants for 

20 which there is no Prudential Regulator. 

21 ‘‘(3) CAPITAL.— 

22 ‘‘(A) BANK SWAP DEALERS AND MAJOR

23 SWAP PARTICIPANTS.—In setting capital re24 quirements under this subsection, the Pruden25 tial Regulators shall impose: 


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1 ‘‘(i) a capital requirement that is 

2 greater than zero for swaps that are 

3 cleared by a derivatives clearing organiza4 tion; and 

5 ‘‘(ii) to offset the greater risk to the 

6 swap dealer or major swap participant and 

7 to the financial system arising from the 

8 use of swaps that are not centrally cleared, 

9 higher capital requirements for swaps that 

10 are not cleared by a registered derivatives 

11 clearing organization than for swaps that 

12 are centrally cleared. 

13 ‘‘(B) NONBANK SWAP DEALERS AND

14 MAJOR SWAP PARTICIPANTS.—Capital require15 ments set by the Commission and the Securities 

16 and Exchange Commission under this sub17 section shall be as strict as or stricter than the 

18 capital requirements set by the Prudential Reg19 ulators under this subsection. 

20 ‘‘(C) BANK HOLDING COMPANIES.—Capital 

21 requirements set by the Board for swaps of 

22 bank holding companies and Tier 1 financial 

23 holding companies on a consolidated basis shall 

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1 quirements set by the Prudential Regulators 

2 under this subsection. 

3 ‘‘(D) A futures commission merchant, in4 troducing broker, broker or dealer shall main5 tain sufficient capital to comply with the strict6 er of any applicable capital requirements to 

7 which it is subject. 

8 ‘‘(4) MARGIN.— 

9 ‘‘(A) BANK SWAP DEALERS AND MAJOR

10 SWAP PARTICIPANTS.—The Prudential Regu11 lators shall impose both initial and variation 

12 margin requirements under this subsection on 

13 all swaps that are not cleared by a registered 

14 derivatives clearing organization. 

15 ‘‘(B) NON-SWAP DEALERS OR MAJOR SWAP

16 PARTICIPANTS.—The Prudential Regulators 

17 may, but are not required to, impose margin re18 quirements with respect to swaps in which one 

19 of the counterparties is neither a swap dealer, 

20 major swap participant, security-based swap 

21 dealer nor a major security-based swap partici22 pant. Margin requirements for swaps set by the 

23 Commission and the Securities and Exchange 

24 Commission shall provide for the use of non25 cash assets as collateral. 


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1 ‘‘(C) NONBANK SWAP DEALERS AND

2 MAJOR SWAP PARTICIPANTS.—Margin require3 ments for swaps set by the Commission and the 

4 Securities and Exchange Commission under this 

5 subsection shall be as strict as or stricter than 

6 margin requirements for swaps set by the Pru7 dential Regulators. 

8 ‘‘(f) REPORTING AND RECORDKEEPING.— 

9 ‘‘(1) IN GENERAL.—Each registered swap deal10 er and major swap participant— 

11 ‘‘(A) shall make such reports as are pre12 scribed by the Commission by rule or regulation 

13 regarding the transactions and positions and fi14 nancial condition of such person; 

15 ‘‘(B) for which— 

16 ‘‘(i) there is a Prudential Regulator 

17 shall keep books and records of all activi18 ties related to its business as a swap dealer 

19 or major swap participant in such form 

20 and manner and for such period as may be 

21 prescribed by the Commission by rule or 

22 regulation; 

23 ‘‘(ii) there is no Prudential Regulator 

24 shall keep books and records in such form 

25 and manner and for such period as may be 


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1 prescribed by the Commission by rule or 

2 regulation; 

3 ‘‘(C) shall keep such books and records 

4 open to inspection and examination by any rep5 resentative of the Commission; and 

6 ‘‘(D) shall keep any such books and 

7 records relating to transactions in swaps based 

8 on one or more securities open to inspection 

9 and examination by the Securities and Ex10 change Commission. 

11 ‘‘(2) RULES.—Within 365 days of the enact12 ment of the Over-the-Counter Derivatives Markets 

13 Act of 2009, the Commission and the Securities and 

14 Exchange Commission, in consultation with the ap15 propriate Federal banking agencies, shall jointly 

16 adopt rules governing reporting and recordkeeping 

17 for swap dealers, major swap participants, security18 based swap dealers, and major security-based swap 

19 participants. 

20 ‘‘(g) DAILY TRADING RECORDS.— 

21 ‘‘(1) IN GENERAL.—Each registered swap deal22 er and major swap participant shall maintain daily 

23 trading records of its swaps and all related records 

24 (including related cash or forward transactions) and 

25 recorded communications including but not limited 


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1 to electronic mail, instant messages, and recordings 

2 of telephone calls, for such period as may be pre3 scribed by the Commission by rule or regulation. 

4 ‘‘(2) INFORMATION REQUIREMENTS.—The daily 

5 trading records shall include such information as the 

6 Commission shall prescribe by rule or regulation. 

7 ‘‘(3) CUSTOMER RECORDS.—Each registered 

8 swap dealer and major swap participant shall main9 tain daily trading records for each customer or 

10 counterparty in such manner and form as to be 

11 identifiable with each swap transaction. 

12 ‘‘(4) AUDIT TRAIL.—Each registered swap deal13 er and major swap participant shall maintain a com14 plete audit trail for conducting comprehensive and 

15 accurate trade reconstructions. 

16 ‘‘(5) RULES.—Within 365 days of the enact17 ment of the Over-the-Counter Derivatives Markets 

18 Act of 2009, the Commission and the Securities and 

19 Exchange Commission, in consultation with the ap20 propriate Federal banking agencies, shall jointly 

21 adopt rules governing daily trading records for swap 

22 dealers, major swap participants, security-based 

23 swap dealers, and major security-based swap partici24 pants. 

25 ‘‘(h) BUSINESS CONDUCT STANDARDS.— 


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1 ‘‘(1) IN GENERAL.—Each registered swap deal2 er and major swap participant shall conform with 

3 business conduct standards as may be prescribed by 

4 the Commission by rule or regulation addressing— 

5 ‘‘(A) fraud, manipulation, and other abu6 sive practices involving swaps (including swaps 

7 that are offered but not entered into); 

8 ‘‘(B) diligent supervision of its business as 

9 a swap dealer; 

10 ‘‘(C) adherence to all applicable position 

11 limits; and 

12 ‘‘(D) such other matters as the Commis13 sion shall determine to be necessary or appro14 priate. 

15 ‘‘(2) BUSINESS CONDUCT REQUIREMENTS.— 

16 Business conduct requirements adopted by the Com17 mission shall— 

18 ‘‘(A) establish the standard of care for a 

19 swap dealer or major swap participant to verify 

20 that any counterparty meets the eligibility 

21 standards for an eligible contract participant; 

22 ‘‘(B) require disclosure by the swap dealer 

23 or major swap participant to any counterparty 

24 to the transaction (other than a swap dealer, 

25 major swap participant, security-based swap 


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1 dealer or major security-based swap partici2 pant) of— 

3 ‘‘(i) information about the material 

4 risks and characteristics of the swap; 

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

6 fees or other material remuneration that 

7 the swap dealer or major swap participant 

8 would directly or indirectly expect to re9 ceive in connection with the swap; and 

10 ‘‘(iii) any other material incentives or 

11 conflicts of interest that the swap dealer or 

12 major swap participant may have in con13 nection with the swap; and 

14 ‘‘(C) establish such other standards and 

15 requirements as the Commission may determine 

16 are necessary or appropriate in the public inter17 est, for the protection of investors, or otherwise 

18 in furtherance of the purposes of this Act. 

19 ‘‘(3) RULES.—The Commission and the Securi20 ties and Exchange Commission, in consultation with 

21 the appropriate Federal banking agencies, shall 

22 jointly prescribe rules under this subsection gov23 erning business conduct standards for swap dealers, 

24 major swap participants, security-based swap deal25 ers, and major security-based swap participants 


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1 within 365 days of the enactment of the Over-the2 Counter Derivatives Markets Act of 2009. 

3 ‘‘(i) DOCUMENTATION AND BACK OFFICE STAND4 ARDS.— 

5 ‘‘(1) IN GENERAL.—Each registered swap deal6 er and major swap participant shall conform with 

7 standards, as may be prescribed by the Commission 

8 by rule or regulation, addressing timely and accurate 

9 confirmation, processing, netting, documentation, 

10 and valuation of all swaps. 

11 ‘‘(2) RULES.—Within 365 days of the enact12 ment of the Over-the-Counter Derivatives Markets 

13 Act of 2009, the Commission and the Securities and 

14 Exchange Commission, in consultation with the ap15 propriate Federal banking agencies, shall adopt rules 

16 governing documentation and back office standards 

17 for swap dealers, major swap participants, security18 based swap dealers, and major security-based swap 

19 participants. 

20 ‘‘(j) DEALER RESPONSIBILITIES.—Each registered 

21 swap dealer and major swap participant at all times shall 

22 comply with the following requirements: 

23 ‘‘(1) MONITORING OF TRADING.—The swap 

24 dealer or major swap participant shall monitor its 


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1 trading in swaps to prevent violations of applicable 

2 position limits. 

3 ‘‘(2) DISCLOSURE OF GENERAL INFORMA4 TION.—The swap dealer or major swap participant 

5 shall disclose to the Commission and to the Pruden6 tial Regulator for such swap dealer or major swap 

7 participant, as applicable, information concerning— 

8 ‘‘(A) terms and conditions of its swaps; 

9 ‘‘(B) swap trading operations, mechanisms, 

10 and practices; 

11 ‘‘(C) financial integrity protections relating 

12 to swaps; and 

13 ‘‘(D) other information relevant to its trad14 ing in swaps. 

15 ‘‘(3) ABILITY TO OBTAIN INFORMATION.—The 

16 swap dealer or major swap participant shall— 

17 ‘‘(A) establish and enforce internal systems 

18 and procedures to obtain any necessary infor19 mation to perform any of the functions de20 scribed in this section; and 

21 ‘‘(B) provide the information to the Com22 mission and to the Prudential Regulator for 

23 such swap dealer or major swap participant, as 

24 applicable, upon request. 


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1 ‘‘(4) CONFLICTS OF INTEREST.—The swap 

2 dealer and major swap participant shall implement 

3 conflict-of-interest systems and procedures that— 

4 ‘‘(A) establish structural and institutional 

5 safeguards to assure that the activities of any 

6 person within the firm relating to research or 

7 analysis of the price or market for any com8 modity are separated by appropriate informa9 tional partitions within the firm from the re10 view, pressure, or oversight of those whose in11 volvement in trading or clearing activities might 

12 potentially bias their judgment or supervision; 

13 and 

14 ‘‘(B) address such other issues as the 

15 Commission determines appropriate. 

16 ‘‘(5) ANTITRUST CONSIDERATIONS.—Unless 

17 necessary or appropriate to achieve the purposes of 

18 this Act, the swap dealer or major swap participant 

19 shall avoid— 

20 ‘‘(A) adopting any processes or taking any 

21 actions that result in any unreasonable re22 straints of trade; or 

23 ‘‘(B) imposing any material anticompeti24 tive burden on trading. 


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1 ‘‘(k) RULES.—The Commission, the Securities and 

2 Exchange Commission, and the Prudential Regulators 

3 shall consult with each other prior to adopting any rules 

4 under the Over-the-Counter Derivatives Markets Act of 

5 2009. 

6 ‘‘(l) RECOGNITION OF COMPARABLE NON-U.S. REGU7 LATION.—The Commission, in consultation with the Sec8 retary of the Treasury, the Securities and Exchange Com9 mission and the Prudential Regulators, shall adopt rules 

10 exempting from registration and the other requirements 

11 of the Over-the-Counter Derivatives Market Act of 2009 

12 foreign financial institutions that the Commission finds 

13 are subject to comparable regulation in the financial insti14 tution’s home country.’’. 

15 SEC. 118. SEGREGATION OF ASSETS HELD AS COLLATERAL 

16 IN SWAP TRANSACTIONS. 

17 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

18 is further amended by inserting after section 4s the fol19 lowing: 

20 ‘‘SEC. 4t. SEGREGATION OF ASSETS HELD AS COLLATERAL 

21 IN SWAP TRANSACTIONS. 

22 ‘‘(a) CLEARED SWAPS.—A swap dealer, futures com23 mission merchant, or derivatives clearing organization by 

24 or through which funds or other property are held as mar25 gin or collateral to secure the obligations of a counterparty 


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1 under a swap to be cleared by or through a derivatives 

2 clearing organization shall segregate, maintain, and use 

3 the funds or other property for the benefit of the 

4 counterparty, in accordance with such rules and relations 

5 as the Commission or Prudential Regulator shall pre6 scribe. Any such funds or other property shall be treated 

7 as customer property under this Act. 

8 ‘‘(b) OVER-THE-COUNTER SWAPS.—At the request of 

9 a swap counterparty who provides funds or other property 

10 to a swap dealer as margin or collateral to secure the obli11 gations of the counterparty under a swap between the 

12 counterparty and the swap dealer that is not submitted 

13 for clearing to a derivatives clearing organization, the 

14 swap dealer shall segregate the funds or other property 

15 for the benefit of the counterparty, and maintain the funds 

16 or other property in an account which is carried by a 

17 third-party custodian and designated as a segregated ac18 count for the counterparty, in accordance with such rules 

19 and regulations as the Commission or Prudential Regu20 lator may prescribe. This subsection shall not be inter21 preted to preclude commercial arrangements regarding the 

22 investment of the segregated funds or other property and 

23 the related allocation of gains and losses resulting from 

24 any such investment.’’. 


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1 SEC. 119. CONFLICTS OF INTEREST. 

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

3 6d) is amended by— 

4 (1) redesignating subsection (c) as subsection 

5 (d); and 

6 (2) inserting after subsection (b) the following: 

7 ‘‘(c) CONFLICTS OF INTEREST.—The Commission 

8 shall require that futures commission merchants and in9 troducing brokers implement conflict-of-interest systems 

10 and procedures that— 

11 ‘‘(1) establish structural and institutional safe12 guards to assure that the activities of any person 

13 within the firm relating to research or analysis of 

14 the price or market for any commodity are separated 

15 by appropriate informational partitions within the 

16 firm from the review, pressure, or oversight of those 

17 whose involvement in trading or clearing activities 

18 might potentially bias their judgment or supervision; 

19 and 

20 ‘‘(2) address such other issues as the Commis21 sion determines appropriate.’’. 

22 SEC. 120. SWAP EXECUTION FACILITIES. 

23 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

24 is amended by inserting after section 5g the following: 

25 ‘‘SEC. 5h. SWAP EXECUTION FACILITIES. 

26 ‘‘(a) REGISTRATION.— 


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1 ‘‘(1) IN GENERAL.—No person may operate a 

2 facility for the trading of swaps unless the facility is 

3 registered as a swap execution facility under this 

4 section. 

5 ‘‘(2) DUAL REGISTRATION.—Any person that is 

6 required to be registered as a swap execution facility 

7 under this section shall register with the Commis8 sion regardless of whether that person also is reg9 istered with the Securities and Exchange Commis10 sion as a swap execution facility. 

11 ‘‘(b) REQUIREMENTS FOR TRADING.—A swap execu12 tion facility that is registered under subsection (a) may 

13 trade any swap. 

14 ‘‘(c) TRADING BY CONTRACT MARKETS.—A board of 

15 trade that operates a contract market shall, to the extent 

16 that the board of trade also operates a swap execution fa17 cility and uses the same electronic trade execution system 

18 for trading on the contract market and the swap execution 

19 facility, identify whether the electronic trading is taking 

20 place on the contract market or the swap execution facil21 ity. 

22 ‘‘(d) CRITERIA FOR REGISTRATION.— 

23 ‘‘(1) IN GENERAL.—To be registered as a swap 

24 execution facility, the facility shall be required to 


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1 demonstrate to the Commission that it meets the 

2 criteria specified herein. 

3 ‘‘(2) DETERRENCE OF ABUSES.—The swap exe4 cution facility shall establish and enforce trading 

5 and participation rules that will deter abuses and 

6 have the capacity to detect, investigate, and enforce 

7 those rules, including means to— 

8 ‘‘(A) obtain information necessary to per9 form the functions required under this section; 

10 or 

11 ‘‘(B) use means to— 

12 ‘‘(i) provide market participants with 

13 impartial access to the market; and 

14 ‘‘(ii) capture information that may be 

15 used in establishing whether rule violations 

16 have occurred. 

17 ‘‘(3) TRADING PROCEDURES.—The swap execu18 tion facility shall establish and enforce rules or 

19 terms and conditions defining, or specifications de20 tailing, trading procedures to be used in entering 

21 and executing orders traded on or through its facili22 ties. 

23 ‘‘(4) FINANCIAL INTEGRITY OF TRANS24 ACTIONS.—The swap execution facility shall estab25 lish and enforce rules and procedures for ensuring 


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1 the financial integrity of swaps entered on or 

2 through its facilities, including the clearance and 

3 settlement of the swaps pursuant to section 2(j)(1). 

4 ‘‘(e) CORE PRINCIPLES FOR SWAP EXECUTION FA5 CILITIES.— 

6 ‘‘(1) IN GENERAL.—To maintain its registra7 tion as a swap execution facility, the facility shall 

8 comply with the core principles specified in this sub9 section and any requirement that the Commission 

10 may impose by rule or regulation pursuant to section 

11 8a(5). Except where the Commission determines 

12 otherwise by rule or regulation, the facility shall 

13 have reasonable discretion in establishing the man14 ner in which it complies with these core principles. 

15 ‘‘(2) COMPLIANCE WITH RULES.—The swap 

16 execution facility shall monitor and enforce compli17 ance with any of the rules of the facility, including 

18 the terms and conditions of the swaps traded on or 

19 through the facility and any limitations on access to 

20 the facility. 

21 ‘‘(3) SWAPS NOT READILY SUSCEPTIBLE TO MA22 NIPULATION.—The swap execution facility shall per23 mit trading only in swaps that are not readily sus24 ceptible to manipulation. 


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1 ‘‘(4) MONITORING OF TRADING.—The swap 

2 execution facility shall monitor trading in swaps to 

3 prevent manipulation, price distortion, and disrup4 tions of the delivery or cash settlement process 

5 through surveillance, compliance, and disciplinary 

6 practices and procedures, including methods for con7 ducting real-time monitoring of trading and com8 prehensive and accurate trade reconstructions. 

9 ‘‘(5) ABILITY TO OBTAIN INFORMATION.—The 

10 swap execution facility shall— 

11 ‘‘(A) establish and enforce rules that will 

12 allow the facility to obtain any necessary infor13 mation to perform any of the functions de14 scribed in this subsection; 

15 ‘‘(B) provide the information to the Com16 mission upon request; and 

17 ‘‘(C) have the capacity to carry out such 

18 international information-sharing agreements as 

19 the Commission may require. 

20 ‘‘(6) EMERGENCY AUTHORITY.—The swap exe21 cution facility shall adopt rules to provide for the ex22 ercise of emergency authority, in consultation or co23 operation with the Commission, where necessary and 

24 appropriate, including the authority to liquidate or 


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1 transfer open positions in any swap or to suspend or 

2 curtail trading in a swap. 

3 ‘‘(7) TIMELY PUBLICATION OF TRADING INFOR4 MATION.—The swap execution facility shall make 

5 public timely information on price, trading volume, 

6 and other trading data on swaps to the extent pre7 scribed by the Commission. 

8 ‘‘(8) RECORDKEEPING AND REPORTING.—The 

9 swap execution facility shall maintain records of all 

10 activities related to the business of the facility, in11 cluding a complete audit trail, in a form and manner 

12 acceptable to the Commission for a period of 5 

13 years, and report to the Commission all information 

14 determined by the Commission to be necessary or 

15 appropriate for the Commission to perform its re16 sponsibilities under this Act in a form and manner 

17 acceptable to the Commission. The Commission shall 

18 adopt data collection and reporting requirements for 

19 swap execution facilities that are comparable to cor20 responding requirements for derivatives clearing or21 ganizations and swap repositories. 

22 ‘‘(9) ANTITRUST CONSIDERATIONS.—Unless 

23 necessary or appropriate to achieve the purposes of 

24 this Act, the swap execution facility shall avoid— 


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1 ‘‘(A) adopting any rules or taking any ac2 tions that result in any unreasonable restraints 

3 of trade; or 

4 ‘‘(B) imposing any material anticompeti5 tive burden on trading on the swap execution 

6 facility. 

7 ‘‘(10) CONFLICTS OF INTEREST.—The swap 

8 execution facility shall— 

9 ‘‘(A) establish and enforce rules to mini10 mize conflicts of interest in its decisionmaking 

11 process; and 

12 ‘‘(B) establish a process for resolving the 

13 conflicts of interest. 

14 ‘‘(11) DESIGNATION OF COMPLIANCE OFFI15 CER.— 

16 ‘‘(A) IN GENERAL.—Each swap execution 

17 facility shall designate an individual to serve as 

18 a compliance officer. 

19 ‘‘(B) DUTIES.—The compliance officer 

20 shall— 

21 ‘‘(i) report directly to the board or to 

22 the senior officer of the facility; and 

23 ‘‘(ii) shall— 

24 ‘‘(I) review compliance with the 

25 core principles in this subsection; 


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1 ‘‘(II) in consultation with the 

2 board of the facility, a body per3 forming a function similar to that of 

4 a board, or the senior officer of the 

5 facility, resolve any conflicts of inter6 est that may arise; 

7 ‘‘(III) be responsible for admin8 istering the policies and procedures 

9 required to be established pursuant to 

10 this section; and 

11 ‘‘(IV) ensure compliance with 

12 commodity laws and the rules and 

13 regulations issued thereunder, includ14 ing rules prescribed by the Commis15 sion pursuant to this section; and 

16 ‘‘(iii) establish procedures for remedi17 ation of non-compliance issues found dur18 ing compliance office reviews, lookbacks, 

19 internal or external audit findings, self-re20 ported errors, or through validated com21 plaints. Procedures will establish the han22 dling, management response, remediation, 

23 re-testing, and closing of non-compliant 

24 issues. 


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1 ‘‘(C) ANNUAL REPORTS REQUIRED.—The 

2 compliance officer shall annually prepare and 

3 sign a report on the compliance of the facility 

4 with the commodity laws and its policies and 

5 procedures, including its code of ethics and con6 flict of interest policies, in accordance with 

7 rules prescribed by the Commission. Such com8 pliance report shall accompany the financial re9 ports of the facility that are required to be fur10 nished to the Commission pursuant to this sec11 tion and shall include a certification that, under 

12 penalty of law, the report is accurate and com13 plete. 

14 ‘‘(f) EXEMPTIONS.—The Commission may exempt, 

15 conditionally or unconditionally, a swap execution facility 

16 from registration under this section if the Commission 

17 finds that such facility is subject to comparable, com18 prehensive supervision and regulation on a consolidated 

19 basis by the Securities and Exchange Commission, a Pru20 dential Regulator or the appropriate governmental au21 thorities in the organization’s home country. 

22 ‘‘(g) HARMONIZATION OF RULES.—Within 180 days 

23 of the enactment of the Over-the-Counter Derivatives 

24 Markets Act of 2009, the Commission and the Securities 

25 and Exchange Commission shall jointly prescribe rules 


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1 governing the regulation of swap execution facilities under 

2 this section and section 3B of the Securities Exchange Act 

3 of 1934 (15 U.S.C. 78c–2).’’. 

4 SEC. 121. DERIVATIVES TRANSACTION EXECUTION FACILI5 TIES AND EXEMPT BOARDS OF TRADE. 

6 Sections 5a and 5d of the Commodity Exchange Act 

7 (7 U.S.C. 7 and 7a–3) are repealed. 

8 SEC. 122. DESIGNATED CONTRACT MARKETS. 

9 (a) Section 5(d) of the Commodity Exchange Act (7 

10 U.S.C. 7(d)) is amended by striking paragraph (9) and 

11 inserting the following: 

12 ‘‘(9) EXECUTION OF TRANSACTIONS.— 

13 ‘‘(A) The board of trade shall provide a 

14 competitive, open, and efficient market and 

15 mechanism for executing transactions that pro16 tects the price discovery process of trading in 

17 the board of trade’s centralized market. 

18 ‘‘(B) The rules may authorize, for bona 

19 fide business purposes— 

20 ‘‘(i) transfer trades or office trades; 

21 ‘‘(ii) an exchange of— 

22 ‘‘(I) futures in connection with a 

23 cash commodity transaction; 

24 ‘‘(II) futures for cash commod25 ities; or 


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1 ‘‘(III) futures for swaps; or 

2 ‘‘(iii) a futures commission merchant, 

3 acting as principal or agent, to enter into 

4 or confirm the execution of a contract for 

5 the purchase or sale of a commodity for fu6 ture delivery if the contract is reported, re7 corded, or cleared in accordance with the 

8 rules of the contract market or a deriva9 tives clearing organization.’’. 

10 (b) Section 5(d) of the Commodity Exchange Act (7 

11 U.S.C. 7(d)) is amended by adding after paragraph (18) 

12 the following: 

13 ‘‘(19) FINANCIAL RESOURCES.—The board of 

14 trade shall demonstrate that it has adequate finan15 cial, operational, and managerial resources to dis16 charge the responsibilities of a contract market. For 

17 the board of trade’s financial resources to be consid18 ered adequate, their value shall exceed the total 

19 amount that would enable the contract market to 

20 cover its operating costs for a period of one year, 

21 calculated on a rolling basis. 

22 ‘‘(20) SYSTEM SAFEGUARDS.—The board of 

23 trade shall— 

24 ‘‘(A) establish and maintain a program of 

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1 mize sources of operational risk through the de2 velopment of appropriate controls and proce3 dures, and the development of automated sys4 tems, that are reliable, secure, and give ade5 quate scalable capacity; 

6 ‘‘(B) establish and maintain emergency 

7 procedures, backup facilities, and a plan for dis8 aster recovery that allow for the timely recovery 

9 and resumption of operations and the fulfill10 ment of the board of trade’s responsibilities and 

11 obligations; and 

12 ‘‘(C) periodically conduct tests to verify 

13 that back-up resources are sufficient to ensure 

14 continued order processing and trade matching, 

15 price reporting, market surveillance, and main16 tenance of a comprehensive and accurate audit 

17 trail.’’. 

18 SEC. 123. MARGIN. 

19 Section 8a of the Commodity Exchange Act (7 U.S.C. 

20 12a) is amended in paragraph (7)(C), by striking ‘‘, ex21 cepting the setting of levels of margin’’. 

22 SEC. 124. POSITION LIMITS. 

23 (a) Section 4a(a) of the Commodity Exchange Act (7 

24 U.S.C. 6a(a)) is amended by— 

25 (1) inserting ‘‘(1)’’ after ‘‘(a)’’; 


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1 (2) striking ‘‘on electronic trading facilities with 

2 respect to a significant price discovery contract’’ in 

3 the first sentence and inserting ‘‘swaps that perform 

4 or affect a significant price discovery function with 

5 respect to regulated markets’’; 

6 (3) inserting ‘‘, including any group or class of 

7 traders,’’ in the second sentence after ‘‘held by any 

8 person’’; 

9 (4) striking ‘‘on an electronic trading facility 

10 with respect to a significant price discovery con11 tract,’’ in the second sentence and inserting ‘‘swaps 

12 that perform or affect a significant price discovery 

13 function with respect to regulated markets,’’; and 

14 (5) inserting at the end the following: 

15 ‘‘(2) AGGREGATE POSITION LIMITS.—The Com16 mission may, by rule or regulation, establish limits 

17 (including related hedge exemption provisions) on 

18 the aggregate number or amount of positions in con19 tracts based upon the same underlying commodity 

20 (as defined by the Commission) that may be held by 

21 any person, including any group or class of traders, 

22 for each month across— 

23 ‘‘(A) contracts listed by designated con24 tract markets; 


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1 ‘‘(B) contracts traded on a foreign board 

2 of trade that provides members or other partici3 pants located in the United States with direct 

4 access to its electronic trading and order 

5 matching system; and 

6 ‘‘(C) swap contracts that perform or affect 

7 a significant price discovery function with re8 spect to regulated markets. 

9 ‘‘(3) SIGNIFICANT PRICE DISCOVERY FUNC10 TION.—In making a determination whether a swap 

11 performs or affects a significant price discovery 

12 function with respect to regulated markets, the Com13 mission shall consider, as appropriate: 

14 ‘‘(A) PRICE LINKAGE.—The extent to 

15 which the swap uses or otherwise relies on a 

16 daily or final settlement price, or other major 

17 price parameter, of another contract traded on 

18 a regulated market based upon the same under19 lying commodity, to value a position, transfer or 

20 convert a position, financially settle a position, 

21 or close out a position. 

22 ‘‘(B) ARBITRAGE.—The extent to which 

23 the price for the swap is sufficiently related to 

24 the price of another contract traded on a regu25 lated market based upon the same underlying 


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1 commodity so as to permit market participants 

2 to effectively arbitrage between the markets by 

3 simultaneously maintaining positions or exe4 cuting trades in the swaps on a frequent and 

5 recurring basis. 

6 ‘‘(C) MATERIAL PRICE REFERENCE.—The 

7 extent to which, on a frequent and recurring 

8 basis, bids, offers, or transactions in a contract 

9 traded on a regulated market are directly based 

10 on, or are determined by referencing, the price 

11 generated by the swap. 

12 ‘‘(D) MATERIAL LIQUIDITY.—The extent 

13 to which the volume of swaps being traded in 

14 the commodity is sufficient to have a material 

15 effect on another contract traded on a regulated 

16 market. 

17 ‘‘(E) OTHER MATERIAL FACTORS.—Such 

18 other material factors as the Commission speci19 fies by rule or regulation as relevant to deter20 mine whether a swap serves a significant price 

21 discovery function with respect to a regulated 

22 market. 

23 ‘‘(4) EXEMPTIONS.—The Commission, by rule, 

24 regulation, or order, may exempt, conditionally or 

25 unconditionally, any person or class of persons, any 


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1 swap or class of swaps, or any transaction or class 

2 of transactions from any requirement it may estab3 lish under this section with respect to position lim4 its.’’. 

5 (b) Section 4a(b) of the Commodity Exchange Act 

6 (7 U.S.C. 6a(b)) is amended— 

7 (1) in paragraph (1), by striking ‘‘or derivatives 

8 transaction execution facility or facilities or elec9 tronic trading facility’’ and inserting ‘‘or swap exe10 cution facility or facilities’’; and 

11 (2) in paragraph (2), by striking ‘‘or derivatives 

12 transaction execution facility or facilities or elec13 tronic trading facility’’ and inserting ‘‘or swap exe14 cution facility’’. 

15 SEC. 125. ENHANCED AUTHORITY OVER REGISTERED ENTI16 TIES. 

17 (a) Section 5(d)(1) of the Commodity Exchange Act 

18 (7 U.S.C. 7(d)(1)) is amended by striking ‘‘The board of 

19 trade shall have’’ and inserting ‘‘Except where the Com20 mission otherwise determines by rule or regulation pursu21 ant to section 8a(5), the board of trade shall have’’. 

22 (b) Section 5b(c)(2)(A) of the Commodity Exchange 

23 Act (7 U.S.C. 7a–1(c)(2)(A)) is amended by striking ‘‘The 

24 applicant shall have’’ and inserting ‘‘Except where the 


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1 Commission otherwise determines by rule or regulation 

2 pursuant to section 8a(5), the applicant shall have’’. 

3 (c) Section 5c(a) of the Commodity Exchange Act (7 

4 U.S.C. 7a–2(a)) is amended— 

5 (1) in paragraph (1), by striking ‘‘5a(d) and 

6 5b(c)(2)’’ and inserting ‘‘5b(c)(2) and 5h(e)’’; and 

7 (2) in paragraph (2), by striking ‘‘shall not’’ 

8 and inserting ‘‘may’’. 

9 (d) Section 5c(c)(1) of the Commodity Exchange Act 

10 (7 U.S.C. 7a–2(c)(1)) is amended by inserting ‘‘(A)’’ after 

11 ‘‘IN GENERAL.—’’ and adding at the end the following: 

12 ‘‘(B) Unless section 805(e) of the Pay13 ment, Clearing, and Settlement Supervision Act 

14 of 2009 applies, the new contract or instrument 

15 or clearing of the new contract or instrument, 

16 new rule, or rule amendment shall become ef17 fective, pursuant to the registered entity’s cer18 tification, 10 business days after the Commis19 sion’s receipt of the certification (or such short20 er period determined by the Commission by rule 

21 or regulation) unless the Commission notifies 

22 the registered entity within such time that it is 

23 staying the certification because there exist 

24 novel or complex issues that require additional 

25 time to analyze, an inadequate explanation by 


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1 the submitting registered entity, or a potential 

2 inconsistency with this Act (including regula3 tions under this Act). 

4 ‘‘(C) A notification by the Commission 

5 pursuant to subparagraph (B) shall stay the 

6 certification of the new contract or instrument 

7 or clearing of the new contract or instrument, 

8 new rule or new amendment for up to an addi9 tional 90 days from the date of such notifica10 tion.’’. 

11 (e) Section 5c(d) of the Commodity Exchange Act (7 

12 U.S.C. 7a–2(d)) is repealed. 

13 SEC. 126. FOREIGN BOARDS OF TRADE. 

14 (a) lll.—Section 4(b) of the Commodity Ex15 change Act (7 U.S.C. 6(b)) is amended by striking ‘‘No 

16 rule or regulation’’ and inserting ‘‘Except as provided in 

17 paragraphs (1) and (2), no rule or regulation’’. 

18 (b) lll.—Section 4(b) of the Commodity Ex19 change Act (7 U.S.C. 6(b)) is further amended by insert20 ing before ‘‘The Commission’’ the following: 

21 ‘‘(1) REGISTRATION.—The Commission may 

22 adopt rules and regulations requiring registration 

23 with the Commission for a foreign board of trade 

24 that provides the members of the foreign board of 

25 trade or other participants located in the United 


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1 States direct access to the electronic trading and 

2 order matching system of the foreign board of trade, 

3 including rules and regulations prescribing proce4 dures and requirements applicable to the registration 

5 of such foreign boards of trade. For purposes of this 

6 paragraph, ‘direct access’ refers to an explicit grant 

7 of authority by a foreign board of trade to an identi8 fied member or other participant located in the 

9 United States to enter trades directly into the trade 

10 matching system of the foreign board of trade. 

11 ‘‘(2) LINKED CONTRACTS.—It shall be unlawful 

12 for a foreign board of trade to provide to the mem13 bers of the foreign board of trade or other partici14 pants located in the United States direct access to 

15 the electronic trading and order-matching system of 

16 the foreign board of trade with respect to an agree17 ment, contract, or transaction that settles against 

18 any price (including the daily or final settlement 

19 price) of 1 or more contracts listed for trading on 

20 a registered entity, unless the Commission deter21 mines that— 

22 ‘‘(A) the foreign board of trade makes pub23 lic daily trading information regarding the 

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1 lished by the registered entity for the 1 or more 

2 contracts against which the agreement, con3 tract, or transaction traded on the foreign 

4 board of trade settles; and 

5 ‘‘(B) the foreign board of trade (or the for6 eign futures authority that oversees the foreign 

7 board of trade)— 

8 ‘‘(i) adopts position limits (including 

9 related hedge exemption provisions) for the 

10 agreement, contract, or transaction that 

11 are comparable to the position limits (in12 cluding related hedge exemption provi13 sions) adopted by the registered entity for 

14 the 1 or more contracts against which the 

15 agreement, contract, or transaction traded 

16 on the foreign board of trade settles; 

17 ‘‘(ii) has the authority to require or 

18 direct market participants to limit, reduce, 

19 or liquidate any position the foreign board 

20 of trade (or the foreign futures authority 

21 that oversees the foreign board of trade) 

22 determines to be necessary to prevent or 

23 reduce the threat of price manipulation, 

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1 tion 4a, price distortion, or disruption of 

2 delivery or the cash settlement process; 

3 ‘‘(iii) agrees to promptly notify the 

4 Commission, with regard to the agreement, 

5 contract, or transaction that settles against 

6 any price (including the daily or final set7 tlement price) of 1 or more contracts listed 

8 for trading on a registered entity, of any 

9 change regarding— 

10 ‘‘(I) the information that the for11 eign board of trade will make publicly 

12 available; 

13 ‘‘(II) the position limits that the 

14 foreign board of trade or foreign fu15 tures authority will adopt and enforce; 

16 ‘‘(III) the position reductions re17 quired to prevent manipulation, exces18 sive speculation as described in sec19 tion 4a, price distortion, or disruption 

20 of delivery or the cash settlement 

21 process; and 

22 ‘‘(IV) any other area of interest 

23 expressed by the Commission to the 

24 foreign board of trade or foreign fu25 tures authority; 


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1 ‘‘(iv) provides information to the 

2 Commission regarding large trader posi3 tions in the agreement, contract, or trans4 action that is comparable to the large trad5 er position information collected by the 

6 Commission for the 1 or more contracts 

7 against which the agreement, contract, or 

8 transaction traded on the foreign board of 

9 trade settles; and 

10 ‘‘(v) provides the Commission with in11 formation necessary to publish reports on 

12 aggregate trader positions for the agree13 ment, contract, or transaction traded on 

14 the foreign board of trade that are com15 parable to such reports on aggregate trad16 er positions for the 1 or more contracts 

17 against which the agreement, contract, or 

18 transaction traded on the foreign board of 

19 trade settles. 

20 ‘‘(3) EXISTING FOREIGN BOARDS OF TRADE.— 

21 Paragraphs (1) and (2) shall not be effective with 

22 respect to any foreign board of trade to which the 

23 Commission has granted direct access permission be24 fore the date of the enactment of this subsection 


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1 until the date that is 180 days after such date of en2 actment. 

3 ‘‘(4) PERSONS LOCATED IN THE UNITED

4 STATES.—’’. 

5 (c) LIABILITY OF REGISTERED PERSONS TRADING

6 ON A FOREIGN BOARD OF TRADE.— 

7 (1) Section 4(a) of the Commodity Exchange 

8 Act (7. U.S.C. 6(a)) is amended by inserting ‘‘or by 

9 subsection (f)’’ after ‘‘Unless exempted by the Com10 mission pursuant to subsection (c)’’; and 

11 (2) Section 4 of the Commodity Exchange Act 

12 (7 U.S.C. 6) is further amended by adding at the 

13 end the following: 

14 ‘‘(f) A person registered with the Commission, or ex15 empt from registration by the Commission, under this Act 

16 may not be found to have violated subsection (a) with re17 spect to a transaction in, or in connection with, a contract 

18 of sale of a commodity for future delivery if the person 

19 has reason to believe that the transaction and the contract 

20 is made on or subject to the rules of a foreign board of 

21 trade that has complied with subsections (b)(1) and 

22 (b)(2).’’. 

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1 change Act (7 U.S.C. 25(a)) is amended by adding at the 

2 end the following: 

3 ‘‘(5) CONTRACT ENFORCEMENT FOR FOREIGN

4 FUTURES CONTRACTS.—A contract of sale of a com5 modity for future delivery traded or executed on or 

6 through the facilities of a board of trade, exchange, 

7 or market located outside the United States for pur8 poses of section 4(a) shall not be void, voidable, or 

9 unenforceable, and a party to such a contract shall 

10 not be entitled to rescind or recover any payment 

11 made with respect to the contract, based on the fail12 ure of the foreign board of trade to comply with any 

13 provision of this Act.’’. 

14 SEC. 127. LEGAL CERTAINTY FOR SWAPS. 

15 Section 22(a)(4) of the Commodity Exchange Act (7 

16 U.S.C. 25(a)(4)) is amended to read as follows: 

17 ‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI18 GIBLE COUNTERPARTIES.— 

19 ‘‘(A) No hybrid instrument sold to any in20 vestor shall be void, voidable, or unenforceable, 

21 and no party to such hybrid instrument shall be 

22 entitled to rescind, or recover any payment 

23 made with respect to, such a hybrid instrument 

24 under this section or any other provision of 

25 Federal or State law, based solely on the failure 


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1 of the hybrid instrument to comply with the 

2 terms or conditions of section 2(f) or regula3 tions of the Commission. 

4 ‘‘(B) No agreement, contract, or trans5 action between eligible contract participants or 

6 persons reasonably believed to be eligible con7 tract participants shall be void, voidable, or un8 enforceable, and no party thereto shall be enti9 tled to rescind, or recover any payment made 

10 with respect to, such agreement, contract, or 

11 transaction under this section or any other pro12 vision of Federal or State law, based solely on 

13 the failure of the agreement, contract, or trans14 action to meet the definition of a swap set forth 

15 in section 1a or to be cleared pursuant to sec16 tion 2(j)(1).’’. 

17 SEC. 128. MULTILATERAL CLEARING ORGANIZATIONS. 

18 (a) Section 408(2)(C) of the Federal Deposit Insur19 ance Corporation Improvement Act of 1991 (12 U.S.C. 

20 4421(2)(C)) is amended by striking ‘‘section 2(c), 2(d), 

21 2(f), or 2(g) of such Act, or exempted under section 2(h) 

22 or 4(c) of such Act’’ and inserting ‘‘section 2(c) or 2(f) 

23 of such Act’’. 


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1 (b) Section 408 of the Federal Deposit Insurance 

2 Corporation Improvement Act of 1991 (12 U.S.C. 4421) 

3 is further amended by inserting at the end the following: 

4 ‘‘(4) The term ‘over-the-counter derivative in5 strument’ does not include a swap or a security6 based swap as defined in sections 1a(35) and 1a(38) 

7 of the Commodity Exchange Act (7 U.S.C. 1a(35) 

8 and 1a(38)).’’. 

9 SEC. 129. PRIMARY ENFORCEMENT AUTHORITY. 

10 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

11 is amended by adding the following new section after sec12 tion 4b: 

13 ‘‘SEC. 4b–1. PRIMARY ENFORCEMENT AUTHORITY. 

14 ‘‘(a) CFTC.—Except as provided in subsections (b), 

15 (c), and (d), the Commission shall have primary authority 

16 to enforce the provisions of Subtitle A of the Over-the17 Counter Derivatives Markets Act of 2009 with respect to 

18 any person. 

19 ‘‘(b) PRUDENTIAL REGULATORS.—The Prudential 

20 Regulators shall have exclusive authority to enforce the 

21 provisions of section 4s(e) and other prudential require22 ments of this Act with respect to banks, and branches or 

23 agencies of foreign banks that are swap dealers or major 

24 swap participants. 


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1 ‘‘(c) REFERRAL.—If the Prudential Regulator for a 

2 swap dealer or major swap participant has cause to believe 

3 that such swap dealer or major swap participant may have 

4 engaged in conduct that constitutes a violation of the non5 prudential requirements of section 4s or rules adopted by 

6 the Commission thereunder, that Prudential Regulator 

7 may recommend in writing to the Commission that the 

8 Commission initiate an enforcement proceeding as author9 ized under this Act. The recommendation shall be accom10 panied by a written explanation of the concerns giving rise 

11 to the recommendation. 

12 ‘‘(d) BACKSTOP ENFORCEMENT AUTHORITY.—If the 

13 Commission does not initiate an enforcement proceeding 

14 before the end of the 90-day period beginning on the date 

15 on which the Commission receives a recommendation 

16 under subsection (c), the Prudential Regulator may ini17 tiate an enforcement proceeding as permitted under Fed18 eral law.’’. 

19 SEC. 130. ENFORCEMENT. 

20 (a) Section 4b(a)(2) of the Commodity Exchange Act 

21 (7 U.S.C. 6b(a)(2)) is amended by striking ‘‘or other 

22 agreement, contract, or transaction subject to paragraphs 

23 (1) and (2) of section 5a(g),’’ and inserting ‘‘or swap,’’. 

24 (b) Section 4b(b) of the Commodity Exchange Act 

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1 ment, contract or transaction subject to paragraphs (1) 

2 and (2) of section 5a(g),’’ and inserting ‘‘or swap,’’. 

3 (c) Section 4c(a) of the Commodity Exchange Act (7 

4 U.S.C. 6c(a)) is amended by inserting ‘‘or swap’’ before 

5 ‘‘if the transaction is used or may be used’’. 

6 (d) Section 9(a)(2) of the Commodity Exchange Act 

7 (7 U.S.C. 13(a)(2)) is amended by inserting ‘‘or of any 

8 swap,’’ before ‘‘or to corner’’. 

9 (e) Section 9(a)(4) of the Commodity Exchange Act 

10 (7 U.S.C. 13(a)(4)) is amended by inserting ‘‘swap reposi11 tory,’’ before ‘‘or futures association’’. 

12 (f) Section 9(e)(1) of the Commodity Exchange Act 

13 (7 U.S.C. 13(e)(1)) is amended by inserting ‘‘swap reposi14 tory,’’ before ‘‘or registered futures association’’ and by 

15 inserting ‘‘, or swaps,’’ before ‘‘on the basis’’. 

16 (g) Section 8(b) of the Federal Deposit Insurance Act 

17 (12 U.S.C. 1818(b)) is amended by adding the following 

18 new paragraph (6) and renumber existing paragraphs (6) 

19 through (10) as (7) through (11): 

20 ‘‘(6) This section shall apply to any swap deal21 er, major swap participant, security-based swap 

22 dealer, major security-based swap participant, de23 rivatives clearing organization, swap repository or 

24 swap execution facility, whether or not it is an in25 sured depository institution, for which the Board, 


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1 the Corporation, or the Office of the Comptroller of 

2 the Currency is the appropriate Federal banking 

3 agency or Prudential Regulator for purposes of the 

4 Over-the-Counter Derivatives Markets Act of 

5 2009.’’. 

6 SEC. 131. RETAIL COMMODITY TRANSACTIONS. 

7 Section 2(c) of the Commodity Exchange Act (7 

8 U.S.C. 2(c)) is amended— 

9 (1) in paragraph (1), by striking ‘‘(to the extent 

10 provided in section 5a(g), 5b, 5d, or 12(e)(2)(B))’’ 

11 and inserting ‘‘5b, or 12(e)(2)(B))’’; 

12 (2) in paragraph (2), by inserting after sub13 paragraph (C) the following: 

14 ‘‘(D) RETAIL COMMODITY TRANS15 ACTIONS.— 

16 ‘‘(i) This subparagraph shall apply to 

17 any agreement, contract, or transaction in 

18 any commodity that is— 

19 ‘‘(I) entered into with, or offered 

20 to (even if not entered into with), a 

21 person that is not an eligible contract 

22 participant or eligible commercial en23 tity; and 

24 ‘‘(II) entered into, or offered 

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1 aged or margined basis, or financed 

2 by the offeror, the counterparty, or a 

3 person acting in concert with the of4 feror or counterparty on a similar 

5 basis. 

6 ‘‘(ii) Clause (i) shall not apply to— 

7 ‘‘(I) an agreement, contract, or 

8 transaction described in paragraph (1) 

9 or subparagraphs (A), (B), or (C), in10 cluding any agreement, contract, or 

11 transaction specifically excluded from 

12 subparagraph (A), (B), or (C); 

13 ‘‘(II) any security; 

14 ‘‘(III) a contract of sale that— 

15 ‘‘(aa) results in actual deliv16 ery within 28 days or such other 

17 period as the Commission may 

18 determine by rule or regulation 

19 based upon the typical commer20 cial practice in cash or spot mar21 kets for the commodity involved; 

22 or 

23 ‘‘(bb) creates an enforceable 

24 obligation to deliver between a 

25 seller and a buyer that have the 


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1 ability to deliver and accept deliv2 ery, respectively, in connection 

3 with their line of business; 

4 ‘‘(IV) an agreement, contract, or 

5 transaction that is listed on a national 

6 securities exchange registered under 

7 section 6(a) of the Securities Ex8 change Act of 1934 (15 U.S.C. 

9 78f(a)); or 

10 ‘‘(V) an identified banking prod11 uct, as defined in section 402(b) of 

12 the Legal Certainty for Bank Prod13 ucts Act of 2000 (7 U.S.C. 27(b)). 

14 ‘‘(iii) Sections 4(a), 4(b) and 4b shall 

15 apply to any agreement, contract or trans16 action described in clause (i), that is not 

17 excluded from clause (i) by clause (ii), as 

18 if the agreement, contract, or transaction 

19 were a contract of sale of a commodity for 

20 future delivery. 

21 ‘‘(iv) This subparagraph shall not be 

22 construed to limit any jurisdiction that the 

23 Commission may otherwise have under any 

24 other provision of this Act over an agree25 ment, contract, or transaction that is a 


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1 contract of sale of a commodity for future 

2 delivery. 

3 ‘‘(v) This subparagraph shall not be 

4 construed to limit any jurisdiction that the 

5 Commission or the Securities and Ex6 change Commission may otherwise have 

7 under any other provisions of this Act with 

8 respect to security futures products and 

9 persons effecting transactions in security 

10 futures products. 

11 ‘‘(vi) For the purposes of this sub12 paragraph, an agricultural producer, pack13 er, or handler shall be considered an eligi14 ble commercial entity for any agreement, 

15 contract, or transaction for a commodity in 

16 connection with its line of business.’’. 

17 SEC. 132. LARGE SWAP TRADER REPORTING. 

18 The Commodity Exchange Act (7 U.S.C. 1 et seq.) 

19 is amended by adding after section 4t (as added by section 

20 118) the following: 

21 ‘‘SEC. 4u. LARGE SWAP TRADER REPORTING. 

22 ‘‘(a) It shall be unlawful for any person to enter into 

23 any swap that performs or affects a significant price dis24 covery function with respect to regulated markets if— 


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1 ‘‘(1) such person shall directly or indirectly 

2 enter into such swaps during any one day in an 

3 amount equal to or in excess of such amount as 

4 shall be fixed from time to time by the Commission; 

5 and 

6 ‘‘(2) such person shall directly or indirectly 

7 have or obtain a position in such swaps equal to or 

8 in excess of such amount as shall be fixed from time 

9 to time by the Commission, 

10 unless such person files or causes to be filed with the prop11 erly designated officer of the Commission such reports re12 garding any transactions or positions described in para13 graphs (1) and (2) as the Commission may by rule or reg14 ulation require and unless, in accordance with the rules 

15 and regulations of the Commission, such person shall keep 

16 books and records of all such swaps and any transactions 

17 and positions in any related commodity traded on or sub18 ject to the rules of any board of trade, and of cash or 

19 spot transactions in, inventories of, and purchase and sale 

20 commitments of, such a commodity. 

21 ‘‘(b) Such books and records shall show complete de22 tails concerning all transactions and positions as the Com23 mission may by rule or regulation prescribe. 


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1 ‘‘(c) Such books and records shall be open at all times 

2 to inspection and examination by any representative of the 

3 Commission. 

4 ‘‘(d) For the purpose of this subsection, the swaps, 

5 futures and cash or spot transactions and positions of any 

6 person shall include such transactions and positions of any 

7 persons directly or indirectly controlled by such person. 

8 ‘‘(e) In making a determination whether a swap per9 forms or affects a significant price discovery function with 

10 respect to regulated markets, the Commission shall con11 sider the factors set forth in section 4a(a)(3).’’. 

12 SEC. 133. AUTHORITY TO BAN ABUSIVE SWAPS. 

13 The Commodity Futures Trading Commission and 

14 the Securities and Exchange Commission may jointly, by 

15 rule or order, prohibit transactions in any swap (as de16 fined in section 1a(35) of the Commodity Exchange Act) 

17 or security-based swap (as defined in section 1a(38) of 

18 such Act) which the Commodity Futures Trading Com19 mission and the Securities Exchange Commission find 

20 would be detrimental to the stability of a financial market 

21 or of participants in a financial market. 

22 SEC. 134. INTERNATIONAL HARMONIZATION. 

23 In order to promote effective and consistent global 

24 regulation of swaps, the Securities and Exchange Commis25 sion, the Commodity Futures Trading Commission, the 


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1 Prudential Regulators (as defined in section 1a(43) of the 

2 Commodity Exchange Act), the financial stability regu3 lator, and the Office of Derivatives Supervision shall con4 sult and coordinate with foreign regulatory authorities on 

5 the establishment of consistent international standards 

6 with respect to the regulation of swaps, and may agree 

7 to such information-sharing arrangements as may be 

8 deemed to be necessary or appropriate in the public inter9 est or for the protection of investors and swap counterpar10 ties. 

11 SEC. 135. AUTHORITY TO BAN ACCESS TO THE UNITED 

12 STATES FINANCIAL SYSTEM. 

13 The Secretary of the Treasury may prohibit any enti14 ty domiciled in a foreign country that regulates swaps (as 

15 defined in section 1a(35) of the Commodity Exchange Act) 

16 or security-based swaps (as defined in section 1a(38) of 

17 such Act) in a manner which the Secretary of the Treas18 ury finds undermines the stability of a financial market, 

19 from participating in such financial activities in the 

20 United States as the Secretary deems appropriate. 

21 SEC. 136. OTHER AUTHORITY. 

22 Unless otherwise provided by its terms, this title does 

23 not divest any appropriate Federal banking agency, the 

24 Commission, the Securities and Exchange Commission, or 


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1 other Federal or State agency, of any authority derived 

2 from any other applicable law. 

3 SEC. 137. ANTITRUST. 

4 Nothing in the amendments made by this title shall 

5 be construed to modify, impair, or supersede the operation 

6 of any of the antitrust laws. For purposes of this subtitle, 

7 the term ‘‘antitrust laws’’ has the same meaning given 

8 such term in subsection (a) of the first section of the Clay9 ton Act, except that such term includes section 5 of the 

10 Federal Trade Commission Act to the extent that such 

11 section 5 applies to unfair methods of competition. 

12 SEC. 138. EFFECTIVE DATE. 

13 This subtitle is effective 180 days after the date of 

14 enactment. 

15 Subtitle B—Regulation of Security16 Based Swap Markets 

17 SEC. 151. DEFINITIONS UNDER THE SECURITIES EX18 CHANGE ACT OF 1934. 

19 Section 3(a) of the Securities Exchange Act of 1934 

20 (15 U.S.C. 78c(a)) is amended— 

21 (1) in paragraph (5)(A) and (B), by inserting 

22 ‘‘(but not security-based swaps, other than security23 based swaps with or for persons that are not eligible 

24 contract participants)’’ after the word ‘‘securities’’ 

25 in each place it appears; 


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

2 following: ‘‘For security-based swaps, such terms in3 clude the execution, termination (prior to its sched4 uled maturity date), assignment, exchange, or simi5 lar transfer or conveyance of, or extinguishing of 

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

7 as the context may require.’’; 

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

9 following: ‘‘For security-based swaps, such terms in10 clude the execution, termination (prior to its sched11 uled maturity date), assignment, exchange, or simi12 lar transfer or conveyance of, or extinguishing of 

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

14 as the context may require.’’; 

15 (4) in paragraph (39)— 

16 (A) by striking ‘‘or government securities 

17 dealer’’ and adding ‘‘government securities 

18 dealer, security-based swap dealer or major se19 curity-based swap participant’’ in its place in 

20 subparagraph (B)(i)(I); 

21 (B) by adding ‘‘security-based swap dealer, 

22 major security-based swap participant,’’ after 

23 ‘‘government securities dealer,’’ in subpara24 graph (B)(i)(II); 


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1 (C) by striking ‘‘or government securities 

2 dealer’’ and adding ‘‘government securities 

3 dealer, security-based swap dealer or major se4 curity-based swap participant’’ in its place in 

5 subparagraph (C); and 

6 (D) by adding ‘‘security-based swap dealer, 

7 major security-based swap participant,’’ after 

8 ‘‘government securities dealer,’’ in subpara9 graph (D); and 

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

11 ‘‘(65) ELIGIBLE CONTRACT PARTICIPANT.—The 

12 term ‘eligible contract participant’ has the same 

13 meaning as in section 1a(13) of the Commodity Ex14 change Act (7 U.S.C. 1a(13)). 

15 ‘‘(66) MAJOR SWAP PARTICIPANT.—The term 

16 ‘major swap participant’ has the same meaning as in 

17 section 1a(40) of the Commodity Exchange Act (7 

18 U.S.C. 1a(40)). 

19 ‘‘(67) MAJOR SECURITY-BASED SWAP PARTICI20 PANT.—The term ‘major security-based swap partic21 ipant’ has the same meaning as in section 1a(41) of 

22 the Commodity Exchange Act (7 U.S.C. 1a(41)). 

23 ‘‘(68) SECURITY-BASED SWAP.—The term ‘se24 curity-based swap’ has the same meaning as in secVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00109 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 tion 1a(38) of the Commodity Exchange Act (7 

2 U.S.C. 1a(38)). 

3 ‘‘(69) SWAP.—The term ‘swap’ has the same 

4 meaning as in section 1a(35) of the Commodity Ex5 change Act (7 U.S.C. 1a(35)). 

6 ‘‘(70) PERSON ASSOCIATED WITH A SECURITY7 BASED SWAP DEALER OR MAJOR SECURITY-BASED

8 SWAP PARTICIPANT.—The term ‘person associated 

9 with a security-based swap dealer or major security10 based swap participant’ or ‘associated person of a 

11 security-based swap dealer or major security-based 

12 swap participant’ has the same meaning as in sec13 tion 1a(48) of the Commodity Exchange Act (7 

14 U.S.C. 1a(48)). 

15 ‘‘(71) SECURITY-BASED SWAP DEALER.—The 

16 term ‘security-based swap dealer’ has the same 

17 meaning as in section 1a(44) of the Commodity Ex18 change Act (7 U.S.C. 1a(44)). 

19 ‘‘(72) APPROPRIATE FEDERAL BANKING AGEN20 CY.—The term ‘appropriate Federal banking agency’ 

21 has the same meaning as in section 3(q) of the Fed22 eral Deposit Insurance Act (12 U.S.C. 1813(q)). 

23 ‘‘(73) BOARD.—The term ‘Board’ means the 

24 Board of Governors of the Federal Reserve System. 


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1 ‘‘(74) PRUDENTIAL REGULATOR.—The term 

2 ‘Prudential Regulator’ has the same meaning as in 

3 section 1a(43) of the Commodity Exchange Act (7 

4 U.S.C. 1a(43)). 

5 ‘‘(75) SWAP DEALER.—The term ‘swap dealer’ 

6 has the same meaning as in section 1a(39) of the 

7 Commodity Exchange Act (7 U.S.C. 1a(39)). 

8 ‘‘(76) SECURITY-BASED SWAP AGREEMENT.— 

9 ‘‘(A) IN GENERAL.—For purposes of sec10 tions 10, 16, 20, and 21A of this Act, and sec11 tion 17 of the Securities Act of 1933 (15 

12 U.S.C. 77q), the term ‘security-based swap 

13 agreement’ means a swap agreement as defined 

14 in section 206A of the Gramm-Leach-Bliley Act 

15 (15 U.S.C. 78c note) of which a material term 

16 is based on the price, yield, value, or volatility 

17 of any security or any group or index of securi18 ties, or any interest therein. 

19 ‘‘(B) EXCLUSIONS.—The term ‘security20 based swap agreement’ does not include any se21 curity-based swap.’’. 

22 SEC. 152. REPEAL OF PROHIBITION ON REGULATION OF SE23 CURITY-BASED SWAPS. 

24 (a) REPEAL OF LAW.—Section 206B of the Gramm25 Leach-Bliley Act (15 U.S.C. 78c note) is repealed. 


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1 (b) CONFORMING AMENDMENTS TO THE SECURITIES

2 ACT OF 1933.— 

3 (1) Section 2A(b) is amended by striking ‘‘(as 

4 defined in section 206B of the Gramm-Leach-Bliley 

5 Act)’’ each place that such term appears. 

6 (2) Section 17 of the Securities Act of 1933 (15 

7 U.S.C. 77q) is amended— 

8 (A) in subsection (a)— 

9 (i) by inserting ‘‘(including security10 based swaps)’’ after ‘‘securities’’; and 

11 (ii) by striking ‘‘206B of the Gramm12 Leach-Bliley Act’’ and inserting ‘‘3(a)(76) 

13 of the Securities Exchange Act of 1934’’; 

14 and 

15 (B) in subsection (d), by striking ‘‘206B of 

16 the Gramm-Leach-Bliley Act’’ and inserting 

17 ‘‘3(a)(76) of the Securities Exchange Act of 

18 1934’’. 

19 (c) CONFORMING AMENDMENTS TO THE SECURITIES

20 EXCHANGE ACT OF 1934.—The Securities Exchange Act 

21 of 1934 (15 U.S.C. 78a, et seq.) is amended as follows: 

22 (1) Section 3A (15 U.S.C. 78c–1) is amended 

23 by striking ‘‘(as defined in section 206B of the 

24 Gramm-Leach-Bliley Act)’’ each place that the term 

25 appears. 


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1 (2) Section 9(a) (15 U.S.C. 78i(a)) is amended 

2 by striking paragraphs (2) through (5) and insert3 ing: 

4 ‘‘(2) To effect, alone or with one or more other 

5 persons, a series of transactions in any security reg6 istered on a national securities exchange or in con7 nection with any security-based swap with respect to 

8 such security creating actual or apparent active 

9 trading in such security, or raising or depressing the 

10 price of such security, for the purpose of inducing 

11 the purchase or sale of such security by others. 

12 ‘‘(3) If a dealer, broker, security-based swap 

13 dealer, major security-based swap participant or 

14 other person selling or offering for sale or pur15 chasing or offering to purchase the security to in16 duce the purchase or sale of any security registered 

17 on a national securities exchange or any security18 based swap with respect to such security by the cir19 culation or dissemination in the ordinary course of 

20 business of information to the effect that the price 

21 of any such security will or is likely to rise or fall 

22 because of market operations of any one or more 

23 persons conducted for the purpose of raising or de24 pressing the price of such security. 


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1 ‘‘(4) If a dealer, broker, security-based swap 

2 dealer, major security-based swap participant or 

3 other person selling or offering for sale or pur4 chasing or offering to purchase the security, to 

5 make, regarding any security registered on a na6 tional securities exchange or any security-based swap 

7 with respect to such security, for the purpose of in8 ducing the purchase or sale of such security or such 

9 security-based swap, any statement which was at the 

10 time and in the light of the circumstances under 

11 which it was made, false or misleading with respect 

12 to any material fact, and which he knew or had rea13 sonable ground to believe was so false or misleading. 

14 ‘‘(5) For a consideration, received directly or 

15 indirectly from a dealer, broker, security-based swap 

16 dealer, major security-based swap participant or 

17 other person selling or offering for sale or pur18 chasing or offering to purchase the security, to in19 duce the purchase of any security registered on a 

20 national securities exchange or any security-based 

21 swap with respect to such security by the circulation 

22 or dissemination of information to the effect that the 

23 price of any such security will or is likely to rise or 

24 fall because of the market operations of any one or 


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1 more persons conducted for the purpose of raising or 

2 depressing the price of such security.’’. 

3 (3) Section 10 (15 U.S.C. 78j) is amended by 

4 striking ‘‘(as defined in section 206B of the Gramm5 Leach-Bliley Act)’’ each place that the term appears. 

6 (4) Section 15(c)(1) is amended— 

7 (A) in subparagraph (A, by striking ‘‘, or 

8 any security-based swap agreement (as defined 

9 in section 206B of the Gramm-Leach-Bliley 

10 Act),’’; and 

11 (B) in subparagraphs (B) and (C), by 

12 striking ‘‘agreement (as defined in section 206B 

13 of the Gramm-Leach-Bliley Act)’’ in each place 

14 that the term appears. 

15 (5) Section 15(i) (15 U.S.C. 78o(i), as added 

16 by section 303(f) of the Commodity Futures Mod17 ernization Act of 2000 (Public Law 106–554; 114 

18 Stat. 2763A–455) is amended by striking ‘‘(as de19 fined in section 206B of the Gramm-Leach-Bliley 

20 Act)’’. 

21 (6) Section 16 (15 U.S.C. 78p) is amended— 

22 (A) in subsection (a)(2)(C), by striking 

23 ‘‘(as defined in section 206(b) of the Gramm24 Leach-Bliley Act)’’; 


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1 (B) in subsection (b), by striking ‘‘(as de2 fined in section 206B of the Gramm-Leach-Bli3 ley Act)’’ in each place that the term appears; 

4 and 

5 (C) in subsection (g), by striking ‘‘(as de6 fined in section 206B of the Gramm-Leach-Bli7 ley Act)’’; 

8 (7) Section 20 (15 U.S.C. 78t) is amended— 

9 (A) in subsection (d), by striking ‘‘(as de10 fined in section 206B of the Gramm-Leach-Bli11 ley Act)’’; and 

12 (B) in subsection (f), by striking ‘‘(as de13 fined in section 206B of the Gramm-Leach-Bli14 ley Act)’’; and 

15 (8) Section 21A (15 U.S.C. 78u–1) is amend16 ed— 

17 (A) in subsection (a)(1), by striking ‘‘(as 

18 defined in section 206B of the Gramm-Leach19 Bliley Act)’’; and 

20 (B) in subsection (g), by striking ‘‘(as de21 fined in section 206B of the Gramm-Leach-Bli22 ley Act)’’. 


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1 SEC. 153. AMENDMENTS TO THE SECURITIES EXCHANGE 

2 ACT OF 1934. 

3 (a) CLEARING FOR SECURITY-BASED SWAPS.—The 

4 Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.) 

5 is amended by adding the following section after section 

6 3A: 

7 ‘‘SEC. 3B. CLEARING OF SECURITY-BASED SWAPS. 

8 ‘‘(a) CLEARING REQUIREMENT.— 

9 ‘‘(1) CLEARING OF SECURITY-BASED SWAPS.— 

10 ‘‘(A) CLEARING REQUIREMENT.—The 

11 Commission shall monitor security-based swap 

12 activity and transaction data and by rule or 

13 regulation identify specific security-based swap 

14 contracts that it determines are required to be 

15 cleared consistent with the public interest, after 

16 taking into account— 

17 ‘‘(i) the existence of significant out18 standing notional exposures, trading liquid19 ity and adequate pricing data; 

20 ‘‘(ii) the availability of one or more 

21 swap clearinghouses with the rule frame22 work, capacity, operational expertise and 

23 resources, and credit support infrastruc24 ture to clear the contract on terms that are 

25 consistent with the material terms and 


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1 trading conventions on which the contract 

2 is then traded; 

3 ‘‘(iii) the impact on the mitigation of 

4 systemic risk, taking into account the size 

5 of the market for such contract and the re6 sources of the swap clearinghouses avail7 able to clear the contract; 

8 ‘‘(iv) the impact on competition; and 

9 ‘‘(v) the existence of reasonable legal 

10 certainty in the event of the insolvency of 

11 the relevant swap clearinghouse or one or 

12 more of its clearing members with regard 

13 to the treatment of customer and swap 

14 counterparty positions, funds, and prop15 erty. 

16 ‘‘(B) SCOPE OF CLEARING FUNCTIONS.— 

17 The Commission shall by rule or regulation de18 fine the scope of the clearing functions that are 

19 necessary to satisfy the requirements of sub20 paragraph (A). 

21 ‘‘(2) PREVENTION OF EVASION.—The Commis22 sion and the Commodities Futures Trading Commis23 sion shall have authority to prescribe rules under 

24 this section, or issue interpretations of such rules, as 

25 necessary to prevent evasions of this Act. Any such 


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1 rules or interpretations of rules shall be prescribed 

2 and issued jointly by both Commissions. 

3 ‘‘(3) REQUIRED REPORTING.— 

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

5 swap that is not accepted for clearing by any 

6 clearing agency shall be reported to either a se7 curity-based swap repository described in sec8 tion 13(n) or, if there is no repository that 

9 would accept the security-based swap, to the 

10 Commission pursuant to section 13A within 

11 such time period as the Commission may by 

12 rule prescribe. 

13 ‘‘(B) AUTHORITY OF SWAP DEALER TO RE14 PORT.—Counterparties to a security-based swap 

15 may agree as to which counterparty will report 

16 such swap as required by subparagraph (A). In 

17 any security-based swap where only one 

18 counterparty is a swap dealer, the swap dealer 

19 shall report the swap. 

20 ‘‘(4) TRANSITION RULES.—Rules adopted by 

21 the Commission under this section shall provide for 

22 the reporting of data, as follows: 

23 ‘‘(A) Security-based swaps that were en24 tered into before the date of enactment of the 

25 Over-the-Counter Derivatives Markets Act of 


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1 2009 shall be reported to a registered security2 based swap repository or the Commission no 

3 later than 180 days after the effective date of 

4 such Act. 

5 ‘‘(B) Security-based swaps that were en6 tered into on or after the date of enactment of 

7 the Over-the-Counter Derivatives Markets Act 

8 of 2009 shall be reported to a registered secu9 rity-based swap repository or the Commission 

10 no later than the later of— 

11 ‘‘(i) 90 days after the effective date of 

12 such Act; or 

13 ‘‘(ii) such other time after entering 

14 into the swap as the Commission may pre15 scribe by rule or regulation. 

16 ‘‘(b) CONSULTATION.—The Commission and the 

17 Commodity Futures Trading Commission shall consult 

18 with the appropriate Federal banking agencies and each 

19 other prior to adopting rules under this section.’’. 

20 (b) CLEARING AGENCY REQUIREMENTS.—Section 

21 17A of the Securities Exchange Act of 1934 (15 U.S.C. 

22 78q) is amended by adding at the end the following new 

23 subsections: 

24 ‘‘(g) REGISTRATION REQUIREMENT.—It shall be un25 lawful for a clearing agency, unless registered with the 


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1 Commission, directly or indirectly to make use of the mails 

2 or any means or instrumentality of interstate commerce 

3 to perform the functions of a clearing agency with respect 

4 to a swap. 

5 ‘‘(h) VOLUNTARY REGISTRATION.— 

6 ‘‘(1) CLEARING AGENCIES.—A person that 

7 clears agreements, contracts, or transactions that 

8 are not required to be cleared under this Act may 

9 register with the Commission as a clearing agency. 

10 ‘‘(2) DERIVATIVES CLEARING ORGANIZA11 TIONS.—A clearing agency may clear swaps that are 

12 required to be cleared by a person who is registered 

13 as a derivatives clearing organization under the 

14 Commodity Exchange Act (7 U.S.C. 1, et seq.). 

15 ‘‘(i) REQUIRED REGISTRATION FOR BANKS AND

16 CLEARING AGENCIES.—A person that is required to be 

17 registered as a clearing agency under this section shall 

18 register with the Commission regardless of whether the 

19 person is also a bank or a derivatives clearing organization 

20 registered with the Commodity Futures Trading Commis21 sion under the Commodity Exchange Act (7 U.S.C. 1, et 

22 seq.). 

23 ‘‘(j) REPORTING.— 

24 ‘‘(1) IN GENERAL.—A clearing agency that 

25 clears security-based swaps shall provide to the 


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1 Commission all information determined by the Com2 mission to be necessary to perform its responsibil3 ities under this Act. The Commission shall adopt 

4 data collection and maintenance requirements for se5 curity-based swaps cleared by clearing agencies that 

6 are comparable to the corresponding requirements 

7 for security-based swaps accepted by security-based 

8 swap repositories and security-based swaps traded 

9 on alternative swap execution facilities. The Com10 mission shall share such information, upon request, 

11 with the Board, the Commodity Futures Trading 

12 Commission, the appropriate Federal banking agen13 cies, the Financial Services Oversight Council, and 

14 the Department of Justice or to other persons the 

15 Commission deems appropriate, including foreign fi16 nancial supervisors (including foreign futures au17 thorities), foreign central banks, and foreign min18 istries. 

19 ‘‘(2) PUBLIC INFORMATION.—A clearing agency 

20 that clears security-based swaps shall provide to the 

21 Commission, or its designee, such information as is 

22 required by, and in a form and at a frequency to be 

23 determined by, the Commission, in order to comply 

24 with the public reporting requirements contained in 

25 section 13. 


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1 ‘‘(k) DESIGNATION OF COMPLIANCE OFFICER.— 

2 ‘‘(1) IN GENERAL.—Each clearing agency that 

3 clears security-based swaps shall designate an indi4 vidual to serve as a compliance officer. 

5 ‘‘(2) DUTIES.—The compliance officer shall— 

6 ‘‘(A) report directly to the board or to the 

7 senior officer of the clearing agency; 

8 ‘‘(B) in consultation with the board of the 

9 clearing agency, a body performing a function 

10 similar to that of a board, or the senior officer 

11 of the clearing agency, resolve any conflicts of 

12 interest that may arise; 

13 ‘‘(C) be responsible for administering the 

14 policies and procedures required to be estab15 lished pursuant to this section; 

16 ‘‘(D) ensure compliance with securities 

17 laws and the rules and regulations issued there18 under, including rules prescribed by the Com19 mission pursuant to this section; and 

20 ‘‘(E) establish procedures for remediation 

21 of noncompliance issues found during compli22 ance office reviews, lookbacks, internal or exter23 nal audit findings, self-reported errors, or 

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1 diation, retesting, and closing of noncompliance 

2 issues. 

3 ‘‘(3) ANNUAL REPORTS REQUIRED.—The com4 pliance officer shall annually prepare and sign a re5 port on the compliance of the clearing agency with 

6 the securities laws and its policies and procedures, 

7 including its code of ethics and conflict of interest 

8 policies, in accordance with rules prescribed by the 

9 Commission. Such compliance report shall accom10 pany the financial reports of the clearing agency 

11 that are required to be furnished to the Commission 

12 pursuant to this section and shall include a certifi13 cation that, under penalty of law, the report is accu14 rate and complete. 

15 ‘‘(l) CORE PRINCIPLES FOR CLEARING AGENCIES.— 

16 ‘‘(1) IN GENERAL.—To be registered and to 

17 maintain registration as a clearing agency, a clear18 ing agency shall comply with the core principles 

19 specified in this subsection. The Commission may 

20 conform the core principles to reflect evolving United 

21 States and international standards. Except where 

22 the Commission determines otherwise by rule or reg23 ulation, a clearing agency shall have reasonable dis24 cretion in establishing the manner in which it com25 plies with the core principles. 


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1 ‘‘(2) FINANCIAL RESOURCES.— 

2 ‘‘(A) The clearing agency shall have ade3 quate financial, operational, and managerial re4 sources to discharge its responsibilities. 

5 ‘‘(B) Financial resources shall at a min6 imum exceed the total amount that would— 

7 ‘‘(i) enable the clearing agency to 

8 meet its financial obligations to its mem9 bers and participants notwithstanding a 

10 default by the member or participant cre11 ating the largest financial exposure for 

12 that clearing agency in extreme but plau13 sible market conditions; and 

14 ‘‘(ii) enable the clearing agency to 

15 cover its operating costs for a period of 

16 one year, calculated on a rolling basis. 

17 ‘‘(3) PARTICIPANT AND PRODUCT ELIGI18 BILITY.— 

19 ‘‘(A) The clearing agency shall establish— 

20 ‘‘(i) appropriate admission and con21 tinuing eligibility standards (including suf22 ficient financial resources and operational 

23 capacity to meet obligations arising from 

24 participation in the clearing agency) for 


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1 members of and participants in the organi2 zation; and 

3 ‘‘(ii) appropriate standards for deter4 mining eligibility of agreements, contracts, 

5 or transactions submitted to the clearing 

6 agency for clearing. 

7 ‘‘(B) The clearing agency shall have proce8 dures in place to verify that participation and 

9 membership requirements are met on an ongo10 ing basis. 

11 ‘‘(C) The clearing agency’s participation 

12 and membership requirements shall be objec13 tive, publicly disclosed, and permit fair and 

14 open access. 

15 ‘‘(D) The rules of the clearing agency shall 

16 provide for acceptance of a standardized secu17 rity-based swap regardless of the system on 

18 which the transaction was executed. 

19 ‘‘(4) RISK MANAGEMENT.— 

20 ‘‘(A) The clearing agency shall have the 

21 ability to manage the risks associated with dis22 charging the responsibilities of a clearing agen23 cy through the use of appropriate tools and pro24 cedures. 


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1 ‘‘(B) The clearing agency shall measure its 

2 credit exposures to its members and partici3 pants at least once each business day and shall 

4 monitor such exposures throughout the business 

5 day. 

6 ‘‘(C) Through margin requirements and 

7 other risk control mechanisms, a clearing agen8 cy shall limit its exposures to potential losses 

9 from defaults by its members and participants 

10 so that the operations of the clearing agency 

11 would not be disrupted and nondefaulting mem12 bers or participants would not be exposed to 

13 losses that they cannot anticipate or control. 

14 ‘‘(D) Margin required from all members 

15 and participants shall be sufficient to cover po16 tential exposures in normal market conditions. 

17 ‘‘(E) The models and parameters used in 

18 setting margin requirements shall be risk-based 

19 and reviewed regularly. 

20 ‘‘(5) SETTLEMENT PROCEDURES.—The clearing 

21 agency shall— 

22 ‘‘(A) complete money settlements on a 

23 timely basis, and not less than once each busi24 ness day; 


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1 ‘‘(B) employ money settlement arrange2 ments that eliminate or strictly limit the clear3 ing agency’s exposure to settlement bank risks, 

4 such as credit and liquidity risks from the use 

5 of banks to effect money settlements; 

6 ‘‘(C) ensure money settlements are final 

7 when effected; 

8 ‘‘(D) maintain an accurate record of the 

9 flow of funds associated with each money settle10 ment; 

11 ‘‘(E) have the ability to comply with the 

12 terms and conditions of any permitted netting 

13 or offset arrangements with other clearing orga14 nizations; and 

15 ‘‘(F) for physical settlements, establish 

16 rules that clearly state the clearing agency’s ob17 ligations with respect to physical deliveries. The 

18 risks from these obligations shall be identified 

19 and managed. 

20 ‘‘(6) TREATMENT OF FUNDS.— 

21 ‘‘(A) The clearing agency shall have stand22 ards and procedures designed to protect and en23 sure the safety of member and participant 

24 funds and assets. 


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1 ‘‘(B) The clearing agency shall hold mem2 ber and participant funds and assets in a man3 ner whereby risk of loss or of delay in the clear4 ing agency’s access to the assets and funds is 

5 minimized. 

6 ‘‘(C) Assets and funds invested by the 

7 clearing agency shall be held in instruments 

8 with minimal credit, market, and liquidity risks. 

9 ‘‘(7) DEFAULT RULES AND PROCEDURES.— 

10 ‘‘(A) The clearing agency shall have rules 

11 and procedures designed to allow for the effi12 cient, fair, and safe management of events 

13 when members or participants become insolvent 

14 or otherwise default on their obligations to the 

15 clearing agency. 

16 ‘‘(B) The clearing agency’s default proce17 dures shall be clearly stated, and they shall en18 sure that the clearing agency can take timely 

19 action to contain losses and liquidity pressures 

20 and to continue meeting its obligations. 

21 ‘‘(C) The default procedures shall be pub22 licly available. 

23 ‘‘(8) RULE ENFORCEMENT.—The clearing agen24 cy shall— 


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1 ‘‘(A) maintain adequate arrangements and 

2 resources for the effective monitoring and en3 forcement of compliance with rules of the clear4 ing agency and for resolution of disputes; and 

5 ‘‘(B) have the authority and ability to dis6 cipline, limit, suspend, or terminate a member’s 

7 or participant’s activities for violations of rules 

8 of the clearing agency. 

9 ‘‘(9) SYSTEM SAFEGUARDS.—The clearing 

10 agency shall— 

11 ‘‘(A) establish and maintain a program of 

12 risk analysis and oversight to identify and mini13 mize sources of operational risk through the de14 velopment of appropriate controls and proce15 dures, and the development of automated sys16 tems, that are reliable, secure, and have ade17 quate scalable capacity; 

18 ‘‘(B) establish and maintain emergency 

19 procedures, backup facilities, and a plan for dis20 aster recovery that allows for the timely recov21 ery and resumption of operations and the ful22 fillment of the clearing agency’s responsibilities 

23 and obligations; and 

24 ‘‘(C) periodically conduct tests to verify 

25 that backup resources are sufficient to ensure 


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1 continued order processing and trade matching, 

2 price reporting, market surveillance, and main3 tenance of a comprehensive and accurate audit 

4 trail. 

5 ‘‘(10) REPORTING.—The clearing agency shall 

6 provide to the Commission all information necessary 

7 for the Commission to conduct oversight of the 

8 clearing agency. 

9 ‘‘(11) RECORDKEEPING.—The clearing agency 

10 shall maintain records of all activities related to the 

11 business of the clearing agency as a clearing agency 

12 in a form and manner acceptable to the Commission 

13 for a period of 5 years. 

14 ‘‘(12) PUBLIC INFORMATION.— 

15 ‘‘(A) The clearing agency shall provide 

16 market participants with sufficient information 

17 to identify and evaluate accurately the risks and 

18 costs associated with using the clearing agen19 cy’s services. 

20 ‘‘(B) The clearing agency shall make infor21 mation concerning the rules and operating pro22 cedures governing its clearing and settlement 

23 systems (including default procedures) available 

24 to market participants. 


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1 ‘‘(C) The clearing agency shall disclose 

2 publicly and to the Commission information 

3 concerning— 

4 ‘‘(i) the terms and conditions of con5 tracts, agreements, and transactions 

6 cleared and settled by the clearing agency; 

7 ‘‘(ii) clearing and other fees that the 

8 clearing agency charges its members and 

9 participants; 

10 ‘‘(iii) the margin-setting methodology 

11 and the size and composition of the finan12 cial resource package of the clearing agen13 cy; 

14 ‘‘(iv) other information relevant to 

15 participation in the settlement and clearing 

16 activities of the clearing agency; and 

17 ‘‘(v) daily settlement prices, volume, 

18 and open interest for all contracts settled 

19 or cleared by it. 

20 ‘‘(13) INFORMATION-SHARING.—The clearing 

21 agency shall— 

22 ‘‘(A) enter into and abide by the terms of 

23 all appropriate and applicable domestic and 

24 international information-sharing agreements; 

25 and 


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1 ‘‘(B) use relevant information obtained 

2 from the agreements in carrying out the clear3 ing organization’s risk management program. 

4 ‘‘(14) ANTITRUST CONSIDERATIONS.—Unless 

5 appropriate to achieve the purposes of this chapter, 

6 the clearing agency shall avoid— 

7 ‘‘(A) adopting any rule or taking any ac8 tion that results in any unreasonable restraint 

9 of trade; or 

10 ‘‘(B) imposing any material anticompeti11 tive burden. 

12 ‘‘(15) GOVERNANCE FITNESS STANDARDS.— 

13 ‘‘(A) The clearing agency shall establish 

14 governance arrangements that are transparent 

15 in order to fulfill public interest requirements 

16 and to support the objectives of owners and 

17 participants. 

18 ‘‘(B) The clearing agency shall establish 

19 and enforce appropriate fitness standards for 

20 directors, members of any disciplinary com21 mittee, and members of the clearing agency, 

22 and any other persons with direct access to the 

23 settlement or clearing activities of the clearing 

24 agency, including any parties affiliated with any 

25 of the persons described in this subparagraph. 


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1 ‘‘(16) CONFLICTS OF INTEREST.—The clearing 

2 agency shall establish and enforce rules to minimize 

3 conflicts of interest in the decisionmaking process of 

4 the clearing agency and establish a process for re5 solving such conflicts of interest. 

6 ‘‘(17) COMPOSITION OF THE BOARDS.—The 

7 clearing agency shall ensure that the composition of 

8 the governing board or committee includes market 

9 participants. 

10 ‘‘(18) LEGAL RISK.—The clearing agency shall 

11 have a well-founded, transparent, and enforceable 

12 legal framework for each aspect of its activities. 

13 ‘‘(m) CONSULTATION.—The Commission and the 

14 Commodity Futures Trading Commission shall consult 

15 with the appropriate Federal banking agencies and each 

16 other prior to adopting rules under this section. 

17 ‘‘(n) HARMONIZATION OF RULES.—Not later than 

18 180 days after the effective date of the Over-the-Counter 

19 Derivatives Markets Act of 2009, the Commission and the 

20 Commodity Futures Trading Commission shall jointly 

21 adopt uniform rules governing persons that are registered 

22 as derivatives clearing organizations for swaps under the 

23 Commodity Exchange Act (7 U.S.C. 1, et seq.) and per24 sons that are registered as clearing agencies for securityVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 based swaps under the Securities Exchange Act of 1934 

2 (15 U.S.C. 78a, et seq.).’’. 

3 (c) EXECUTION OF SECURITY-BASED SWAPS.—The 

4 Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.) 

5 is amended by inserting after section 5 the following: 

6 ‘‘SEC. 5A. EXECUTION OF SECURITY-BASED SWAPS. 

7 ‘‘(a) TRADE EXECUTION.—With respect to trans8 actions involving security-based swaps subject to the re9 quirement of section 3B and where both counterparties 

10 are either security-based swap dealers or major security11 based swap participants, such counterparties must either: 

12 ‘‘(1) execute the transaction on a national secu13 rities exchange registered pursuant to section 6(a) 

14 (in which event such transaction shall be subject to 

15 regulation under this title as a transaction in a secu16 rity); 

17 ‘‘(2) execute the transaction on a swap execu18 tion facility registered with the Commission; 

19 ‘‘(3) execute the transaction on a foreign swap 

20 execution facility that is subject to regulation as 

21 such under the laws of a foreign jurisdiction; or 

22 ‘‘(4) if the transaction is not executed on an en23 tity listed in paragraph (1), (2), or (3), comply with 

24 any recordkeeping and end-of-day transaction re25 porting requirements— 


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1 ‘‘(A) as may be prescribed by the Commis2 sion with respect to security-based swaps sub3 ject to the requirements of section 3B and 

4 where both counterparties are either security5 based swap dealers or major security-based 

6 swap participants; or 

7 ‘‘(B) as may be prescribed by the relevant 

8 foreign regulator in the case of security-based 

9 swaps subject to the requirements of section 3B 

10 and where both counterparties are either secu11 rity-based swap dealers or major security-based 

12 swap participants entered into by— 

13 ‘‘(i) a foreign swap dealer or a foreign 

14 swap market participant; or 

15 ‘‘(ii) a non-foreign swap dealer or 

16 major swap participant that is entering 

17 into the security-based swap either outside 

18 of the United States, its territories and 

19 possessions or with a foreign counterparty. 

20 ‘‘(b) EXCHANGE TRADING.—In adopting rules and 

21 regulations, the Commission shall endeavor to eliminate 

22 unnecessary impediments to the trading on national secu23 rities exchanges or swap execution facilities, agreements 

24 or transactions that would be commodity swaps but for 


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1 the trading of such contracts, agreements or transactions 

2 on such a designated contract market.’ ’’’. 

3 (d) ALTERNATIVE SWAP EXECUTION FACILITIES.— 

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

5 seq.) is amended by adding after section 3B the following: 

6 ‘‘SEC. 3C. ALTERNATIVE SWAP EXECUTION FACILITIES. 

7 ‘‘(a) REGISTRATION.— 

8 ‘‘(1) IN GENERAL.—No person may operate a 

9 facility for the trading of security-based swaps un10 less the facility is registered as an alternative swap 

11 execution facility under this section. 

12 ‘‘(2) DUAL REGISTRATION.—Any person that is 

13 required to be registered as an alternative swap exe14 cution facility under this section shall register with 

15 the Commission regardless of whether that person 

16 also is registered with the Commodity Futures Trad17 ing Commission as an alternative swap execution fa18 cility. 

19 ‘‘(b) REQUIREMENTS FOR TRADING.—An alternative 

20 swap execution facility that is registered under subsection 

21 (a) may trade any security-based swap. 

22 ‘‘(c) TRADING BY EXCHANGES.—An exchange shall, 

23 to the extent that the exchange also operates an alter24 native swap execution facility and uses the same electronic 

25 trade execution system for trading on the exchange and 


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1 the alternative swap execution facility, identify whether 

2 the electronic trading is taking place on the exchange or 

3 the alternative swap execution facility. 

4 ‘‘(d) CRITERIA FOR REGISTRATION.— 

5 ‘‘(1) IN GENERAL.—To be registered as an al6 ternative swap execution facility, the facility shall be 

7 required to demonstrate to the Commission that it 

8 meets the criteria specified herein. 

9 ‘‘(2) DETERRENCE OF ABUSES.—The swap exe10 cution facility shall establish and enforce trading 

11 and participation rules that will deter abuses and 

12 have the capacity to detect, investigate, and enforce 

13 those rules, including means to— 

14 ‘‘(A) obtain information necessary to per15 form the functions required under this section; 

16 or 

17 ‘‘(B) use means to— 

18 ‘‘(i) provide market participants with 

19 impartial access to the market; and 

20 ‘‘(ii) capture information that may be 

21 used in establishing whether rule violations 

22 have occurred. 

23 ‘‘(3) TRADING PROCEDURES.—The swap execu24 tion facility shall establish and enforce rules or 

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1 tailing, trading procedures to be used in entering 

2 and executing orders traded on or through its facili3 ties. 

4 ‘‘(4) FINANCIAL INTEGRITY OF TRANS5 ACTIONS.—The swap execution facility shall estab6 lish and enforce rules and procedures for ensuring 

7 the financial integrity of security-based swaps en8 tered on or through its facilities, including the clear9 ance and settlement of the security-based swaps. 

10 ‘‘(e) CORE PRINCIPLES FOR ALTERNATIVE SWAP

11 EXECUTION FACILITIES.— 

12 ‘‘(1) IN GENERAL.—To maintain its registra13 tion as an alternative swap execution facility, the fa14 cility shall comply with the core principles specified 

15 in this subsection and any requirement that the 

16 Commission may impose by rule or regulation. Ex17 cept where the Commission determines otherwise by 

18 rule or regulation, the facility shall have reasonable 

19 discretion in establishing the manner in which it 

20 complies with these core principles. 

21 ‘‘(2) COMPLIANCE WITH RULES.—The swap 

22 execution facility shall monitor and enforce compli23 ance with any of the rules of the facility, including 

24 the terms and conditions of the security-based swaps 


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1 traded on or through the facility and any limitations 

2 on access to the facility. 

3 ‘‘(3) SECURITY-BASED SWAPS NOT READILY

4 SUSCEPTIBLE TO MANIPULATION.—The swap execu5 tion facility shall permit trading only in security6 based swaps that are not readily susceptible to ma7 nipulation. 

8 ‘‘(4) MONITORING OF TRADING.—The swap 

9 execution facility shall monitor trading in security10 based swaps to prevent manipulation and price dis11 tortion through surveillance, compliance, and dis12 ciplinary practices and procedures, including meth13 ods for conducting real-time monitoring of trading 

14 and comprehensive and accurate trade reconstruc15 tions. 

16 ‘‘(5) ABILITY TO OBTAIN INFORMATION.—The 

17 swap execution facility shall— 

18 ‘‘(A) establish and enforce rules that will 

19 allow the facility to obtain any necessary infor20 mation to perform any of the functions de21 scribed in this subsection; 

22 ‘‘(B) provide the information to the Com23 mission upon request; and 


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1 ‘‘(C) have the capacity to carry out such 

2 international information-sharing agreements as 

3 the Commission may require. 

4 ‘‘(6) EMERGENCY AUTHORITY.—The swap exe5 cution facility shall adopt rules to provide for the ex6 ercise of emergency authority, in consultation or co7 operation with the Commission, where necessary and 

8 appropriate, including the authority to suspend or 

9 curtail trading in a security-based swap. 

10 ‘‘(7) TIMELY PUBLICATION OF TRADING INFOR11 MATION.—The swap execution facility shall make 

12 public timely information on price, trading volume, 

13 and other trading data to the extent prescribed by 

14 the Commission. 

15 ‘‘(8) RECORDKEEPING AND REPORTING.—The 

16 swap execution facility shall maintain records of all 

17 activities related to the business of the facility, in18 cluding a complete audit trail, in a form and manner 

19 acceptable to the Commission for a period of 5 

20 years, and report to the Commission all information 

21 determined by the Commission to be necessary or 

22 appropriate for the Commission to perform its re23 sponsibilities under this Act in a form and manner 

24 acceptable to the Commission. The Commission shall 

25 adopt data collection and reporting requirements for 


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1 alternative swap execution facilities that are com2 parable to corresponding requirements for clearing 

3 agencies and security-based swap repositories. 

4 ‘‘(9) ANTITRUST CONSIDERATIONS.—Unless 

5 necessary or appropriate to achieve the purposes of 

6 this Act, the swap execution facility shall avoid— 

7 ‘‘(A) adopting any rules or taking any ac8 tions that result in any unreasonable restraints 

9 of trade; or 

10 ‘‘(B) imposing any material anticompeti11 tive burden on trading on the swap execution 

12 facility. 

13 ‘‘(10) CONFLICTS OF INTEREST.—The swap 

14 execution facility shall— 

15 ‘‘(A) establish and enforce rules to mini16 mize conflicts of interest in its decision-making 

17 process; and 

18 ‘‘(B) establish a process for resolving the 

19 conflicts of interest. 

20 ‘‘(11) DESIGNATION OF COMPLIANCE OFFI21 CER.— 

22 ‘‘(A) IN GENERAL.—Each alternative swap 

23 execution facility shall designate an individual 

24 to serve as a compliance officer. 

25 ‘‘(B) DUTIES.—The compliance officer— 


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1 ‘‘(i) shall report directly to the board 

2 or to the senior officer of the facility; 

3 ‘‘(ii) shall— 

4 ‘‘(I) review compliance with the 

5 core principles in section 3B(e). 

6 ‘‘(II) in consultation with the 

7 board of the facility, a body per8 forming a function similar to that of 

9 a board, or the senior officer of the 

10 facility, resolve any conflicts of inter11 est that may arise; 

12 ‘‘(III) be responsible for admin13 istering the policies and procedures 

14 required to be established pursuant to 

15 this section; and 

16 ‘‘(IV) ensure compliance with se17 curities laws and the rules and regula18 tions issued thereunder, including 

19 rules prescribed by the Commission 

20 pursuant to this section; and 

21 ‘‘(iii) shall establish procedures for re22 mediation of non-compliance issues found 

23 during compliance office reviews, 

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1 dated complaints. Procedures will establish 

2 the handling, management response, reme3 diation, retesting, and closing of non4 compliant issues. 

5 ‘‘(C) ANNUAL REPORTS REQUIRED.—The 

6 compliance officer shall annually prepare and 

7 sign a report on the compliance of the facility 

8 with the securities laws and its policies and pro9 cedures, including its code of ethics and conflict 

10 of interest policies, in accordance with rules 

11 prescribed by the Commission. Such compliance 

12 report shall accompany the financial reports of 

13 the facility that are required to be furnished to 

14 the Commission pursuant to this section and 

15 shall include a certification that, under penalty 

16 of law, the report is accurate and complete. 

17 ‘‘(f) EXEMPTIONS.—The Commission may exempt, 

18 conditionally or unconditionally, an alternative swap exe19 cution facility from registration under this section if the 

20 Commission finds that such organization is subject to 

21 comparable, comprehensive supervision and regulation on 

22 a consolidated basis by the Commodity Futures Trading 

23 Commission, a Prudential Regulator or the appropriate 

24 governmental authorities in the organization’s home coun25 try. 


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1 ‘‘(g) HARMONIZATION OF RULES.—Not later than 

2 180 days after the date of enactment of the Over-the3 Counter Derivatives Markets Act of 2009, the Commission 

4 and the Commodity Futures Trading Commission shall 

5 jointly prescribe rules governing the regulation of alter6 native swap execution facilities under this section and sec7 tion 5h of the Commodity Exchange Act (7 U.S.C. 7b– 

8 3).’’. 

9 (e) SEGREGATION OF ASSETS HELD AS COLLATERAL

10 IN SWAP TRANSACTIONS.—The Securities Exchange Act 

11 of 1934 (15 U.S.C. 78a, et seq.) is further amended by 

12 adding after section 3C (as added by subsection (b) the 

13 following: 

14 ‘‘SEC. 3D. SEGREGATION OF ASSETS HELD AS COLLATERAL 

15 IN SWAP TRANSACTIONS. 

16 ‘‘(a) CLEARED SWAPS.—A security-based swap deal17 er or clearing agency by or through which funds or other 

18 property are held as margin or collateral to secure the obli19 gations of a counterparty under a security-based swap to 

20 be cleared by or through a derivatives clearing agency 

21 shall segregate, maintain, and use the funds or other prop22 erty for the benefit of the counterparty, in accordance with 

23 such rules and regulations as the Commission or Pruden24 tial Regulator shall prescribe. Any such funds or other 


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1 property shall be treated as customer property under this 

2 Act. 

3 ‘‘(b) OVER-THE-COUNTER SWAPS.—At the request of 

4 a counterparty to a security-based swap who provides 

5 funds or other property to a swap dealer as margin or 

6 collateral to secure the obligations of the counterparty 

7 under a security-based swap between the counterparty and 

8 the swap dealer that is not submitted for clearing to a 

9 derivatives clearing agency, the swap dealer shall seg10 regate the funds or other property for the benefit of the 

11 counterparty, and maintain the funds or other property 

12 in an account which is carried by a third-party custodian 

13 and designated as a segregated account for the 

14 counterparty, in accordance with such rules and regula15 tions as the Commission or Prudential Regulator may pre16 scribe. This subsection shall not be interpreted to preclude 

17 commercial arrangements regarding the investment of the 

18 segregated funds or other property and the related alloca19 tion of gains and losses resulting from any such invest20 ment.’’. 

21 (f) TRADING IN SECURITY-BASED SWAP AGREE22 MENTS.—Section 6 of the Securities Exchange Act of 

23 1934 (15 U.S.C. 78f) is amended by adding at the end 

24 the following: 


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1 ‘‘(l) It shall be unlawful for any person to effect a 

2 transaction in a security-based swap with or for a person 

3 that is not an eligible contract participant unless such 

4 transaction is effected on a national securities exchange 

5 registered pursuant to subsection (b).’’. 

6 (g) ADDITIONS OF SECURITY-BASED SWAPS TO CER7 TAIN ENFORCEMENT PROVISIONS.—Paragraphs (1) 

8 through (3) of section 9(b) of the Securities Exchange Act 

9 of 1934 (15 U.S.C. 78i(b)(1)–(3)) are amended to read 

10 as follows: 

11 ‘‘(1) any transaction in connection with any se12 curity whereby any party to such transaction ac13 quires (A) any put, call, straddle, or other option or 

14 privilege of buying the security from or selling the 

15 security to another without being bound to do so; 

16 (B) any security futures product on the security; or 

17 (C) any security-based swap involving the security or 

18 the issuer of the security; 

19 ‘‘(2) any transaction in connection with any se20 curity with relation to which he has, directly or indi21 rectly, any interest in any (A) such put, call, strad22 dle, option, or privilege; (B) such security futures 

23 product; or (C) such security-based swap; or 

24 ‘‘(3) any transaction in any security for the ac25 count of any person who he has reason to believe 


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1 has, and who actually has, directly or indirectly, any 

2 interest in any (A) such put, call, straddle, option, 

3 or privilege; (B) such security futures product with 

4 relation to such security; or (C) any security-based 

5 swap involving such security or the issuer of such se6 curity.’’. 

7 (h) RULEMAKING AUTHORITY TO PREVENT FRAUD, 

8 MANIPULATION, AND DECEPTIVE CONDUCT IN SECURITY9 BASED SWAPS.—Section 9 of the Securities Exchange Act 

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

11 the following: 

12 ‘‘(i) It shall be unlawful for any person, directly or 

13 indirectly, by the use of any means or instrumentality of 

14 interstate commerce or of the mails, or of any facility of 

15 any national securities exchange, to effect any transaction 

16 in, or to induce or attempt to induce the purchase or sale 

17 of, any security-based swap, in connection with which such 

18 person engages in any fraudulent, deceptive, or manipula19 tive act or practice, makes any fictitious quotation, or en20 gages in any transaction, practice, or course of business 

21 which operates as a fraud or deceit upon any person. The 

22 Commission shall, for the purposes of this paragraph, by 

23 rules and regulations define, and prescribe means reason24 ably designed to prevent, such transactions, acts, pracVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00148 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 tices, and courses of business as are fraudulent, deceptive, 

2 or manipulative, and such quotations as are fictitious.’’. 

3 (i) POSITION LIMITS AND POSITION ACCOUNT4 ABILITY FOR SECURITY-BASED SWAPS.—The Securities 

5 Exchange Act of 1934 is amended by inserting after sec6 tion 10A (15 U.S.C. 78j–1) the following new section: 

7 ‘‘SEC. 10B. POSITION LIMITS AND POSITION ACCOUNT8 ABILITY FOR SECURITY-BASED SWAPS AND 

9 LARGE TRADER REPORTING. 

10 ‘‘(a) POSITION LIMITS.—As a means reasonably de11 signed to prevent fraud and manipulation, the Commission 

12 may, by rule or regulation, as necessary or appropriate 

13 in the public interest or for the protection of investors, 

14 establish limits (including related hedge exemption provi15 sions) on the size of positions in any security-based swap 

16 or security-based swap agreement that may be held by any 

17 person. In establishing such limits, the Commission may 

18 require any person to aggregate positions in— 

19 ‘‘(1) any security-based swap and any security 

20 or loan or group or index of securities or loans on 

21 which such security-based swap is based, which such 

22 security-based swap references, or to which such se23 curity-based swap is related as described in section 

24 (a)(3) of the Over-the-Counter Derivatives Markets 

25 Act of 2009, and any security-based swap agreement 


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1 and any other instrument relating to such security 

2 or loan or group or index of securities or loans; or 

3 ‘‘(2) any security-based swap and (A) any secu4 rity or group or index of securities, the price, yield, 

5 value, or volatility of which, or of which any interest 

6 therein, is the basis for a material term of such se7 curity-based swap as described in section 3(a)(76) of 

8 the Securities Exchange Act of 1934 and (B) any 

9 security-based swap and any other instrument relat10 ing to the same security or group or index of securi11 ties. 

12 ‘‘(b) EXEMPTIONS.—The Commission, by rule, regu13 lation, or order, may conditionally or unconditionally ex14 empt any person or class of persons, any security-based 

15 swap or class of security-based swaps, or any transaction 

16 or class of transactions from any requirement it may es17 tablish under this section with respect to position limits. 

18 ‘‘(c) SRO RULES.— 

19 ‘‘(1) IN GENERAL.—As a means reasonably de20 signed to prevent fraud or manipulation, the Com21 mission, by rule, regulation, or order, as necessary 

22 or appropriate in the public interest, for the protec23 tion of investors, or otherwise in furtherance of the 

24 purposes of this title, may direct a self-regulatory 

25 organization— 


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1 ‘‘(A) to adopt rules regarding the size of 

2 positions in any security-based swap that may 

3 be held by— 

4 ‘‘(i) any member of such self-regu5 latory organization; or 

6 ‘‘(ii) any person for whom a member 

7 of such self-regulatory organization effects 

8 transactions in such security-based swap or 

9 other security-based swap agreement; and 

10 ‘‘(B) to adopt rules reasonably designed to 

11 ensure compliance with requirements prescribed 

12 by the Commission under paragraph (c)(1)(A). 

13 ‘‘(2) REQUIREMENT TO AGGREGATE POSI14 TIONS.—In establishing such limits, the self-regu15 latory organization may require such member or per16 son to aggregate positions in— 

17 ‘‘(A) any security-based swap and any se18 curity or loan or group or index of securities or 

19 loans on which such security-based swap is 

20 based, which such security-based swap ref21 erences, or to which such security-based swap is 

22 related as described in section 3(a) of the Over23 the-Counter Derivatives Markets Act of 2009, 

24 and any security-based swap agreement and 

25 any other instrument relating to such security 


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1 or loan or group or index of securities or loans; 

2 or 

3 ‘‘(B)(i) any security-based swap; 

4 ‘‘(ii) any security or group or index of se5 curities, the price, yield, value, or volatility of 

6 which, or of which any interest therein, is the 

7 basis for a material term of such security-based 

8 swap as described in section 3(a)(76) of the Se9 curities Exchange Act of 1934; and 

10 ‘‘(iii) any security-based swap and any 

11 other instrument relating to the same security 

12 or group or index of securities. 

13 ‘‘(d) LARGE TRADER REPORTING.—The Commis14 sion, by rule or regulation, may require any person that 

15 effects transactions for such person’s own account or the 

16 account of others in any securities-based swap or security17 based swap agreement and any security or loan or group 

18 or index of securities or loans as set forth in paragraphs 

19 (a)(1) and (2) under this section to report such informa20 tion as the Commission may prescribe regarding any posi21 tion or positions in any security-based swap or security22 based swap agreement and any security or loan or group 

23 or index of securities or loans and any other instrument 

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1 rities or loans as set forth in paragraphs (a)(1) and (2) 

2 under this section.’’. 

3 (j) PUBLIC REPORTING AND REPOSITORIES FOR SE4 CURITY-BASED SWAP AGREEMENTS.—Section 13 of the 

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

6 amended by adding at the end the following: 

7 ‘‘(m) PUBLIC REPORTING OF AGGREGATE SECURITY8 BASED SWAP DATA.— 

9 ‘‘(1) IN GENERAL.—The Commission, or a per10 son designated by the Commission pursuant to para11 graph (2), shall make available to the public, in a 

12 manner that does not disclose the business trans13 actions and market positions of any person, aggre14 gate data on security-based swap trading volumes 

15 and positions from the sources set forth in para16 graph (3). 

17 ‘‘(2) DESIGNEE OF THE COMMISSION.—The 

18 Commission may designate a clearing agency or a 

19 security-based swap repository to carry out the pub20 lic reporting described in paragraph (1). 

21 ‘‘(3) SOURCES OF INFORMATION.—The sources 

22 of the information to be publicly reported as de23 scribed in paragraph (1) are— 

24 ‘‘(A) clearing agencies pursuant to section 

25 3A; 


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1 ‘‘(B) security-based swap repositories pur2 suant to subsection (n); and 

3 ‘‘(C) reports received by the Commission 

4 pursuant to section 13A. 

5 ‘‘(n) SECURITY-BASED SWAP REPOSITORIES.— 

6 ‘‘(1) REGISTRATION REQUIREMENT.— 

7 ‘‘(A) IN GENERAL.—It shall be unlawful 

8 for a security-based swap repository, unless reg9 istered with the Commission, directly or indi10 rectly to make use of the mails or any means 

11 or instrumentality of interstate commerce to 

12 perform the functions of a security-based swap 

13 repository. 

14 ‘‘(B) INSPECTION AND EXAMINATION.— 

15 Registered security-based swap repositories 

16 shall be subject to inspection and examination 

17 by any representatives of the Commission. 

18 ‘‘(2) STANDARD SETTING.— 

19 ‘‘(A) DATA IDENTIFICATION.—The Com20 mission shall prescribe standards that specify 

21 the data elements for each security-based swap 

22 that shall be collected and maintained by each 

23 security-based swap repository. 

24 ‘‘(B) DATA COLLECTION AND MAINTE25 NANCE.—The Commission shall prescribe data 


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1 collection and data maintenance standards for 

2 security-based swap repositories. 

3 ‘‘(C) COMPARABILITY.—The standards 

4 prescribed by the Commission under this sub5 section shall be comparable to the data stand6 ards imposed by the Commission on clearing 

7 agencies that clear security-based swaps. 

8 ‘‘(3) DUTIES.—A security-based swap reposi9 tory shall— 

10 ‘‘(A) accept data prescribed by the Com11 mission for each security-based swap under this 

12 paragraph (2); 

13 ‘‘(B) maintain such data in such form and 

14 manner and for such period as may be required 

15 by the Commission; 

16 ‘‘(C) provide to the Commission, or its des17 ignee, such information as is required by, and 

18 in a form and at a frequency to be determined 

19 by, the Commission, in order to comply with the 

20 public reporting requirements contained in sub21 section (m); and 

22 ‘‘(D) make available, on a confidential 

23 basis, all data obtained by the security-based 

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1 sion, the appropriate Federal banking agencies, 

2 the Commodity Futures Trading Commission, 

3 the Financial Services Oversight Council, and 

4 the Department of Justice or to other persons 

5 the Commission deems appropriate, including 

6 foreign financial supervisors (including foreign 

7 futures authorities), foreign central banks, and 

8 foreign ministries. 

9 ‘‘(4) REQUIRED REGISTRATION FOR SECURITY10 BASED SWAP REPOSITORIES.—Any person that is re11 quired to be registered as a securities-based swap re12 pository under this subsection shall register with the 

13 Commission, regardless of whether that person also 

14 is registered with the Commodity Futures Trading 

15 Commission as a swap repository. 

16 ‘‘(5) HARMONIZATION OF RULES.—Not later 

17 than 180 days after the date of enactment of the 

18 Over-the-Counter Derivatives Markets Act of 2009, 

19 the Commission and the Commodity Futures Trad20 ing Commission shall jointly adopt uniform rules 

21 governing persons that are registered under this sec22 tion and persons that are registered as swap reposi23 tories under the Commodity Exchange Act (7 U.S.C. 

24 1, et seq.), including uniform rules that specify the 


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1 data elements that shall be collected and maintained 

2 by each repository. 

3 ‘‘(6) EXEMPTIONS.—The Commission may ex4 empt, conditionally or unconditionally, a security5 based swap repository from the requirements of this 

6 section if the Commission finds that such security7 based swap repository is subject to comparable, com8 prehensive supervision or regulation on a consoli9 dated basis by the Commodity Futures Trading 

10 Commission, a Prudential Regulator or the appro11 priate governmental authorities in the organization’s 

12 home country.’’. 

13 SEC. 154. REGISTRATION AND REGULATION OF SWAP DEAL14 ERS AND MAJOR SWAP PARTICIPANTS. 

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

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

17 U.S.C. 78o–7) the following: 

18 ‘‘SEC. 15F. REGISTRATION AND REGULATION OF SECURITY19 BASED SWAP DEALERS AND MAJOR SECU20 RITY-BASED SWAP PARTICIPANTS. 

21 ‘‘(a) REGISTRATION.— 

22 ‘‘(1) It shall be unlawful for any person to act 

23 as a security-based swap dealer unless such person 

24 is registered as a security-based swap dealer with 

25 the Commission. 


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1 ‘‘(2) It shall be unlawful for any person to act 

2 as a major security-based swap participant unless 

3 such person is registered as a major security-based 

4 swap participant with the Commission. 

5 ‘‘(b) REQUIREMENTS.— 

6 ‘‘(1) IN GENERAL.—A person shall register as 

7 a security-based swap dealer or major security-based 

8 swap participant by filing a registration application 

9 with the Commission. 

10 ‘‘(2) CONTENTS.—The application shall be 

11 made in such form and manner as prescribed by the 

12 Commission, giving any information and facts as the 

13 Commission may deem necessary concerning the 

14 business in which the applicant is or will be engaged. 

15 Such person, when registered as a security-based 

16 swap dealer or major security-based swap partici17 pant, shall continue to report and furnish to the 

18 Commission such information pertaining to such 

19 person’s business as the Commission may require. 

20 ‘‘(3) EXPIRATION.—Each registration shall ex21 pire at such time as the Commission may by rule or 

22 regulation prescribe. 

23 ‘‘(4) RULES.—Except as provided in sub24 sections (c), (d) and (e), the Commission may pre25 scribe rules applicable to security-based swap dealers 


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1 and major security-based swap participants, includ2 ing rules that limit the activities of security-based 

3 swap dealers and major security-based swap partici4 pants. Except as provided in subsections (c) and (e), 

5 the Commission may provide conditional or uncondi6 tional exemptions from rules prescribed under this 

7 section for security-based swap dealers and major 

8 security-based swap participants that are subject to 

9 substantially similar requirements as brokers or 

10 dealers. 

11 ‘‘(5) TRANSITION.—Rules adopted under this 

12 section shall provide for the registration of security13 based swap dealers and major security-based swap 

14 participants no later than 1 year after the effective 

15 date of the Over-the-Counter Derivatives Markets 

16 Act of 2009. 

17 ‘‘(c) DUAL REGISTRATION.— 

18 ‘‘(1) SECURITY-BASED SWAP DEALERS.—Any 

19 person that is required to be registered as a secu20 rity-based swap dealer under this section shall reg21 ister with the Commission regardless of whether that 

22 person also is a bank or is registered with the Com23 modity Futures Trading Commission as a swap deal24 er. 


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1 ‘‘(2) MAJOR SECURITY-BASED SWAP PARTICI2 PANTS.—Any person that is required to be reg3 istered as a major security-based swap participant 

4 under this section shall register with the Commis5 sion regardless of whether that person also is a bank 

6 or is registered with the Commodity Futures Trad7 ing Commission as a major swap participant. 

8 ‘‘(d) JOINT RULES.— 

9 ‘‘(1) IN GENERAL.—Not later than 180 days 

10 after the effective date of the Over-the-Counter De11 rivatives Markets Act of 2009, the Commission and 

12 the Commodity Futures Trading Commission shall 

13 jointly adopt uniform rules for persons that are reg14 istered as security-based swap dealers or major secu15 rity-based swap participants under this Act and per16 sons that are registered as swap dealers or major 

17 swap participants under the Commodity Exchange 

18 Act (7 U.S.C. 1, et seq.). 

19 ‘‘(2) EXCEPTION FOR PRUDENTIAL REQUIRE20 MENTS.—The Commission and the Commodity Fu21 tures Trading Commission shall not prescribe rules 

22 imposing prudential requirements (including activity 

23 restrictions) on security-based swap dealers or major 

24 security-based swap participants for which there is a 

25 Prudential Regulator. This provision shall not be 


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1 construed as limiting the authority of the Commis2 sion and the Commodity Futures Trading Commis3 sion to prescribe appropriate business conduct, re4 porting, and recordkeeping requirements to protect 

5 investors. 

6 ‘‘(e) CAPITAL AND MARGIN REQUIREMENTS.— 

7 ‘‘(1) IN GENERAL.— 

8 ‘‘(A) BANK SECURITY-BASED SWAP DEAL9 ERS AND MAJOR SECURITY-BASED SWAP PAR10 TICIPANTS.—Each registered security-based 

11 swap dealer and major security-based swap par12 ticipant for which there is a Prudential Regu13 lator shall meet such minimum capital require14 ments and minimum initial and variation mar15 gin requirements as the Prudential Regulators 

16 shall by rule or regulation jointly prescribe to 

17 help ensure the safety and soundness of the se18 curity-based swap dealer or major security19 based swap participant. 

20 ‘‘(B) NONBANK SECURITY-BASED SWAP

21 DEALERS AND MAJOR SECURITY-BASED SWAP

22 PARTICIPANTS.—Each registered security-based 

23 swap dealer and major security-based swap par24 ticipant for which there is not a Prudential 

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1 quirements and minimum initial and variation 

2 margin requirements as the Commission and 

3 the Commodity Futures Trading Commission 

4 shall by rule or regulation jointly prescribe to 

5 help ensure the safety and soundness of the se6 curity-based swap dealer or major security7 based swap participant. 

8 ‘‘(2) JOINT RULES.— 

9 ‘‘(A) BANK SECURITY-BASED SWAP DEAL10 ERS AND MAJOR SECURITY-BASED SWAP PAR11 TICIPANTS.—Within 180 days of the enactment 

12 of the Over-the-Counter Derivatives Markets 

13 Act of 2009, the Prudential Regulators, in con14 sultation with the Commission and the Com15 modity Futures Trading Commission, shall 

16 jointly adopt rules imposing capital and margin 

17 requirements under this subsection for security18 based swap dealers and major security-based 

19 swap participants. 

20 ‘‘(B) NONBANK SECURITY-BASED SWAP

21 DEALERS AND MAJOR SECURITY-BASED SWAP

22 PARTICIPANTS.—Within 180 days of the enact23 ment of the Over-the-Counter Derivatives Mar24 kets Act of 2009, the Commission and the 

25 Commodity Futures Trading Commission, in 


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1 consultation with the Prudential Regulators, 

2 shall jointly adopt rules imposing capital and 

3 margin requirements under this subsection for 

4 security-based swap dealers and major security5 based swap participants for which there is no 

6 Prudential Regulator. 

7 ‘‘(3) CAPITAL.— 

8 ‘‘(A) BANK SECURITY-BASED SWAP DEAL9 ERS AND MAJOR SECURITY-BASED SWAP PAR10 TICIPANTS.—In setting capital requirements 

11 under this subsection, the Prudential Regu12 lators shall impose— 

13 ‘‘(i) a capital requirement that is 

14 greater than zero for security-based swaps 

15 that are cleared by a clearing agency; and 

16 ‘‘(ii) to offset the greater risk to the 

17 security-based swap dealer or major secu18 rity-based swap participant and to the fi19 nancial system arising from the use of se20 curity-based swaps that are not centrally 

21 cleared, higher capital requirements for se22 curity-based swaps that are not cleared by 

23 a clearing agency than for security-based 

24 swaps that are centrally cleared. 


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1 ‘‘(B) NONBANK SECURITY-BASED SWAP

2 DEALERS AND MAJOR SECURITY-BASED SWAP

3 PARTICIPANTS.—Capital requirements set by 

4 the Commission and the Commodity Futures 

5 Trading Commission under this subsection shall 

6 be as strict as or stricter than the capital re7 quirements set by the Prudential Regulators 

8 under this subsection. 

9 ‘‘(C) BANK HOLDING COMPANIES.—Capital 

10 requirements set by the Board for security11 based swaps of bank holding companies on a 

12 consolidated basis shall be as strict as or strict13 er than the capital requirements set by the Pru14 dential Regulators under this subsection. 

15 ‘‘(4) MARGIN.— 

16 ‘‘(A) BANK SECURITY-BASED SWAP DEAL17 ERS AND MAJOR SECURITY-BASED SWAP PAR18 TICIPANTS.—The Prudential Regulators shall 

19 impose both initial and variation margin re20 quirements under this subsection on all secu21 rity-based swaps that are not cleared by a reg22 istered clearing agency. 

23 ‘‘(B) NON-SWAP DEALERS AND MAJOR

24 MARKET PARTICIPANTS.—The Prudential Regu25 lators may, but are not required to, impose 


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1 margin requirements with respect to security2 based swaps in which one of the counterparties 

3 is not a swap dealer, major swap participant, 

4 security-based swap dealer or major security5 based swap participant. Margin requirements 

6 for swaps set by the Commission and the Com7 modity Futures Trading Commission shall pro8 vide for the use of non-cash assets as collateral. 

9 ‘‘(C) NONBANK SECURITY-BASED SWAP

10 DEALERS AND MAJOR SECURITY-BASED SWAP

11 PARTICIPANTS.—Margin requirements for secu12 rity-based swaps set by the Commission and the 

13 Commodity Futures Trading Commission under 

14 this subsection shall be as strict as or stricter 

15 than margin requirements for security-based 

16 swaps set by the Prudential Regulators. 

17 ‘‘(f) REPORTING AND RECORDKEEPING.— 

18 ‘‘(1) IN GENERAL.—Each registered security19 based swap dealer and major security-based swap 

20 participant— 

21 ‘‘(A) shall make such reports as are pre22 scribed by the Commission by rule or regulation 

23 regarding the transactions and positions and fi24 nancial condition of such person; 

25 ‘‘(B) for which— 


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1 ‘‘(i) there is a Prudential Regulator, 

2 shall keep books and records of all activi3 ties related to its business as a security4 based swap dealer or major security-based 

5 swap participant in such form and manner 

6 and for such period as may be prescribed 

7 by the Commission by rule or regulation; 

8 or 

9 ‘‘(ii) there is no Prudential Regulator, 

10 shall keep books and records in such form 

11 and manner and for such period as may be 

12 prescribed by the Commission by rule or 

13 regulation; 

14 ‘‘(C) shall keep such books and records 

15 open to inspection and examination by any rep16 resentative of the Commission; and 

17 ‘‘(D) shall keep any such books and 

18 records relating to transactions in swaps based 

19 on 1 or more securities open to inspection and 

20 examination by the Commission. 

21 ‘‘(2) RULES.—Not later than 1 year after the 

22 date of enactment of the Over-the-Counter Deriva23 tives Markets Act of 2009, the Commission and the 

24 Commodity Futures Trading Commission, in con25 sultation with the appropriate Federal banking agenVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00166 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 cies, shall jointly adopt rules governing reporting 

2 and recordkeeping for swap dealers, major swap par3 ticipants, security-based swap dealers and major se4 curity-based swap participants. 

5 ‘‘(g) DAILY TRADING RECORDS.— 

6 ‘‘(1) IN GENERAL.—Each registered security7 based swap dealer and major security-based swap 

8 participant shall maintain daily trading records of 

9 its security-based swaps and all related records (in10 cluding related transactions) and recorded commu11 nications including but not limited to electronic mail, 

12 instant messages, and recordings of telephone calls, 

13 for such period as may be prescribed by the Com14 mission by rule or regulation. 

15 ‘‘(2) INFORMATION REQUIREMENTS.—The daily 

16 trading records shall include such information as the 

17 Commission shall prescribe by rule or regulation. 

18 ‘‘(3) CUSTOMER RECORDS.—Each registered se19 curity-based swap dealer or major security-based 

20 swap participant shall maintain daily trading records 

21 for each customer or counterparty in such manner 

22 and form as to be identifiable with each security23 based swap transaction. 

24 ‘‘(4) AUDIT TRAIL.—Each registered security25 based swap dealer or major security-based swap parVerDate Nov 24 2008 01:42 Oct 17, 2009 Jkt 089200 PO 00000 Frm 00167 Fmt 6652 Sfmt 6201 E:\BILLS\H3795.IH H3795

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1 ticipant shall maintain a complete audit trail for 

2 conducting comprehensive and accurate trade recon3 structions. 

4 ‘‘(5) RULES.—Not later than 1 year after the 

5 date of enactment of the Over-the-Counter Deriva6 tives Markets Act of 2009, the Commission and the 

7 Commodity Futures Trading Commission, in con8 sultation with the appropriate Federal banking agen9 cies, shall jointly adopt rules governing daily trading 

10 records for swap dealers, major swap participants, 

11 security-based swap dealers, and major security12 based swap participants. 

13 ‘‘(h) BUSINESS CONDUCT STANDARDS.— 

14 ‘‘(1) IN GENERAL.—Each registered security15 based swap dealer and major security-based swap 

16 participant shall conform with business conduct 

17 standards as may be prescribed by the Commission 

18 by rule or regulation addressing— 

19 ‘‘(A) fraud, manipulation, and other abu20 sive practices involving security-based swaps 

21 (including security-based swaps that are offered 

22 but not entered into); 

23 ‘‘(B) diligent supervision of its business as 

24 a security-based swap dealer; 


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1 ‘‘(C) adherence to all applicable position 

2 limits; and 

3 ‘‘(D) such other matters as the Commis4 sion shall determine to be necessary or appro5 priate. 

6 ‘‘(2) BUSINESS CONDUCT REQUIREMENTS.— 

7 Business conduct requirements adopted by the Com8 mission shall— 

9 ‘‘(A) establish the standard of care for a 

10 security-based swap dealer or major security11 based swap participant to verify that any secu12 rity-based swap counterparty meets the eligi13 bility standards for an eligible contract partici14 pant; 

15 ‘‘(B) require disclosure by the security16 based swap dealer or major security-based swap 

17 participant to any counterparty to the security18 based swap (other than a swap dealer, major 

19 swap participant, security-based swap dealer or 

20 major security-based swap participant) of— 

21 ‘‘(i) information about the material 

22 risks and characteristics of the security23 based swap; 

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

25 fees or other material remuneration that 


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1 the security-based swap dealer or major se2 curity-based swap participant would di3 rectly or indirectly expect to receive in con4 nection with the security-based swap; and 

5 ‘‘(iii) any other material incentives or 

6 conflicts of interest that the security-based 

7 swap dealer or major security-based swap 

8 participant may have in connection with 

9 the security-based swap; and 

10 ‘‘(C) establish such other standards and 

11 requirements as the Commission may determine 

12 are necessary or appropriate in the public inter13 est, for the protection of investors, or otherwise 

14 in furtherance of the purposes of this title. 

15 ‘‘(3) RULES.—Not later than 1 year after the 

16 date of enactment of the Over-the-Counter Deriva17 tives Markets Act of 2009, the Commission and the 

18 Commodity Futures Trading Commission, in con19 sultation with the appropriate Federal banking agen20 cies, shall jointly prescribe rules under this sub21 section governing business conduct standards for 

22 swap dealers, major swap participants, security23 based swap dealers, and major security-based swap 

24 participants. 


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1 ‘‘(i) DOCUMENTATION AND BACK OFFICE STAND2 ARDS.— 

3 ‘‘(1) IN GENERAL.—Each registered security4 based swap dealer and major security-based swap 

5 participant shall conform with standards, as may be 

6 prescribed by the Commission by rule or regulation, 

7 addressing timely and accurate confirmation, proc8 essing, netting, documentation, and valuation of all 

9 security-based swaps. 

10 ‘‘(2) RULES.—Not later than 1 year after the 

11 date of enactment of the Over-the-Counter Deriva12 tives Markets Act of 2009, the Commission and the 

13 Commodity Futures Trading Commission, in con14 sultation with the appropriate Federal banking agen15 cies, shall jointly adopt rules governing documenta16 tion and back office standards for swap dealers, 

17 major swap participants, security-based swap deal18 ers, and major security-based swap participants. 

19 ‘‘(j) DEALER RESPONSIBILITIES.—Each registered 

20 security-based swap dealer and major security-based swap 

21 participant at all times shall comply with the following re22 quirements: 

23 ‘‘(1) MONITORING OF TRADING.—The security24 based swap dealer or major security-based swap par25 ticipant shall monitor its trading in security-based 


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1 swaps to prevent violations of applicable position 

2 limits. 

3 ‘‘(2) DISCLOSURE OF GENERAL INFORMA4 TION.—The security-based swap dealer or major se5 curity-based swap participant shall disclose to the 

6 Commission and to the Prudential Regulator for 

7 such security-based swap dealer or major security8 based swap participant, as applicable, information 

9 concerning— 

10 ‘‘(A) terms and conditions of its security11 based swaps; 

12 ‘‘(B) security-based swap trading oper13 ations, mechanisms, and practices; 

14 ‘‘(C) financial integrity protections relating 

15 to security-based swaps; and 

16 ‘‘(D) other information relevant to its trad17 ing in security-based swaps. 

18 ‘‘(3) ABILITY TO OBTAIN INFORMATION.—The 

19 security-based swap dealer or major swap security20 based participant shall— 

21 ‘‘(A) establish and enforce internal systems 

22 and procedures to obtain any necessary infor23 mation to perform any of the functions de24 scribed in this section; and 


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1 ‘‘(B) provide the information to the Com2 mission and to the Prudential Regulator for 

3 such security-based swap dealer or major secu4 rity-based swap participant, as applicable, upon 

5 request. 

6 ‘‘(4) CONFLICTS OF INTEREST.—The security7 based swap dealer and major security-based swap 

8 participant shall implement conflict-of-interest sys9 tems and procedures that— 

10 ‘‘(A) establish structural and institutional 

11 safeguards to assure that the activities of any 

12 person within the firm relating to research or 

13 analysis of the price or market for any security 

14 are separated by appropriate informational par15 titions within the firm from the review, pres16 sure, or oversight of those whose involvement in 

17 trading or clearing activities might potentially 

18 bias their judgment or supervision; and 

19 ‘‘(B) address such other issues as the 

20 Commission determines appropriate. 

21 ‘‘(5) ANTITRUST CONSIDERATIONS.—Unless 

22 necessary or appropriate to achieve the purposes of 

23 this Act, the security-based swap dealer or major se24 curity-based swap participant shall avoid— 


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1 ‘‘(A) adopting any processes or taking any 

2 actions that result in any unreasonable re3 straints of trade; or 

4 ‘‘(B) imposing any material anticompeti5 tive burden on trading. 

6 ‘‘(k) RULES.—The Commission, the Commodity Fu7 tures Trading Commission, and the Prudential Regulators 

8 shall consult with each other prior to adopting any rules 

9 under the Over-the-Counter Derivatives Markets Act of 

10 2009. 

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

12 extent otherwise specifically provided by rule, regulation, 

13 or order of the Commission, it shall be unlawful for a secu14 rity-based swap dealer or a major security-based swap par15 ticipant to permit any person associated with a security16 based swap dealer or a major security-based swap partici17 pant who is subject to a statutory disqualification to effect 

18 or be involved in effecting security-based swaps on behalf 

19 of such security-based swap dealer or major security-based 

20 swap participant, if such security-based swap dealer or 

21 major security-based swap participant knew, or in the ex22 ercise of reasonable care should have known, of such stat23 utory disqualification. 

24 ‘‘(m) ENFORCEMENT AND ADMINISTRATIVE PRO25 CEEDING AUTHORITY.— 


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1 ‘‘(1) PRIMARY ENFORCEMENT AUTHORITY.— 

2 ‘‘(A) SEC.—Except as provided in sub3 section (b), the Commission shall have primary 

4 authority to enforce the provisions of the 

5 amendments made by subtitle B of the Over6 the-Counter Derivatives Markets Act of 2009 

7 with respect to any person. 

8 ‘‘(B) PRUDENTIAL REGULATORS.—The 

9 Prudential Regulators shall have exclusive au10 thority to enforce the provisions of subsection 

11 (e) and other prudential requirements of this 

12 Act with respect to banks, and branches or 

13 agencies of foreign banks that are security14 based swap dealers or major security-based 

15 swap participants. 

16 ‘‘(C) REFERRAL.—If the Prudential Regu17 lator for a security-based swap dealer or major 

18 security-based swap participant has cause to be19 lieve that such security-based swap dealer or 

20 major security-based swap participant may have 

21 engaged in conduct that constitutes a violation 

22 of the nonprudential requirements of section 

23 15F or rules adopted by the Commission there24 under, that Prudential Regulator may rec25 ommend in writing to the Commission that the 


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1 Commission initiate an enforcement proceeding 

2 as authorized under this Act. The recommenda3 tion shall be accompanied by a written expla4 nation of the concerns giving rise to the rec5 ommendation. 

6 ‘‘(D) BACKSTOP ENFORCEMENT AUTHOR7 ITY.—If the Commission does not initiate an 

8 enforcement proceeding before the end of the 

9 90 day period beginning on the date on which 

10 the Commission receives a recommendation 

11 under subparagraph (C), the Prudential Regu12 lator may initiate an enforcement proceeding as 

13 permitted under Federal law. 

14 ‘‘(2) CENSURE, DENIAL, SUSPENSION; NOTICE

15 AND HEARING.—The Commission, by order, shall 

16 censure, place limitations on the activities, functions, 

17 or operations of, or revoke the registration of any se18 curity-based swap dealer or major security-based 

19 swap participant that has registered with the Com20 mission pursuant to subsection (b) if it finds, on the 

21 record after notice and opportunity for hearing, that 

22 such censure, placing of limitations, or revocation is 

23 in the public interest and that such security-based 

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1 based swap dealer or major security-based swap par2 ticipant effecting or involved in effecting trans3 actions in security-based swaps on behalf of such se4 curity-based swap dealer or major security-based 

5 swap participant, whether prior or subsequent to be6 coming so associated— 

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

8 is subject to an order or finding, enumerated in 

9 subparagraph (A), (D), or (E) of paragraph (4) 

10 of section 15(b); 

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

12 specified in subparagraph (B) of such para13 graph (4) within 10 years of the commencement 

14 of the proceedings under this subsection; 

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

16 or practice specified in subparagraph (C) of 

17 such paragraph (4); 

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

19 specified in subparagraph (F) or (H), respec20 tively, of such paragraph (4); or 

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

22 regulatory authority to have committed or omit23 ted any act, or violated any foreign statute or 

24 regulation, enumerated in subparagraph (G) of 

25 such paragraph (4). 


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1 ‘‘(3) With respect to any person who is associ2 ated, who is seeking to become associated, or, at the 

3 time of the alleged misconduct, who was associated 

4 or was seeking to become associated with a security5 based swap dealer or major security-based swap par6 ticipant for the purpose of effecting or being in7 volved in effecting security-based swaps on behalf of 

8 such security-based swap dealer or major security9 based swap participant, the Commission, by order, 

10 shall censure, place limitations on the activities or 

11 functions of such person, or suspend for a period not 

12 exceeding 12 months, or bar such person from being 

13 associated with a security-based swap dealer or 

14 major security-based swap participant, if the Com15 mission finds, on the record after notice and oppor16 tunity for a hearing, that such censure, placing of 

17 limitations, suspension, or bar is in the public inter18 est and that such person— 

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

20 is subject to an order or finding, enumerated in 

21 subparagraph (A), (D), or (E) of paragraph (4) 

22 of section 15(b); 

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

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1 graph (4) within 10 years of the commencement 

2 of the proceedings under this subsection; 

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

4 or practice specified in subparagraph (C) of 

5 such paragraph (4); 

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

7 specified in subparagraph (F) or (H), respec8 tively, of such paragraph (4); or 

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

10 regulatory authority to have committed or omit11 ted any act, or violated any foreign statute or 

12 regulation, enumerated in subparagraph (G) of 

13 such paragraph (4). 

14 ‘‘(4) It shall be unlawful— 

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

16 under paragraph (3) is in effect, without the 

17 consent of the Commission, willfully to become, 

18 or to be, associated with a security-based swap 

19 dealer or major security-based swap participant 

20 in contravention of such order; or 

21 ‘‘(B) for any security-based swap dealer or 

22 major security-based swap participant to permit 

23 such a person, without the consent of the Com24 mission, to become or remain a person associ25 ated with the security-based swap dealer or 


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1 major security-based swap participant in con2 travention of such order, if such security-based 

3 swap dealer or major security-based swap par4 ticipant knew, or in the exercise of reasonable 

5 care should have known, of such order. 

6 ‘‘(5) RECOGNITION OF COMPARABLE NON-U.S. 

7 REGULATION.—The Commission, in consultation 

8 with the Secretary of the Treasury, the Commodity 

9 Futures Trading Commission and the Prudential 

10 Regulators, shall adopt rules exempting from reg11 istration and the other requirements of title I of the 

12 Over-the-Counter Derivatives Market Act of 2009 

13 foreign financial institutions that the Commission 

14 finds are subject to comparable regulation in the fi15 nancial institution’s home country.’’. 

16 SEC. 155. REPORTING AND RECORDKEEPING. 

17 (a) IN GENERAL.—The Securities Exchange Act of 

18 1934 (15 U.S.C. 78a, et seq.) is amended by inserting 

19 after section 13 the following section: 

20 ‘‘SEC. 13A. REPORTING AND RECORDKEEPING FOR CER21 TAIN SECURITY-BASED SWAPS. 

22 ‘‘(a) IN GENERAL.—Any person who enters into a se23 curity-based swap and— 

24 ‘‘(1) did not clear the security-based swap in 

25 accordance with section 3A; and 


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1 ‘‘(2) did not have data regarding the security2 based swap accepted by a security-based swap repos3 itory in accordance with rules adopted by the Com4 mission under section 13(n), 

5 shall meet the requirements in subsection (b). 

6 ‘‘(b) REPORTS.—Any person described in subsection 

7 (a) shall— 

8 ‘‘(1) make such reports in such form and man9 ner and for such period as the Commission shall pre10 scribe by rule or regulation regarding the security11 based swaps held by the person; and 

12 ‘‘(2) keep books and records pertaining to the 

13 security-based swaps held by the person in such 

14 form and manner and for such period as may be re15 quired by the Commission, which books and records 

16 shall be open to inspection by any representative of 

17 the Commission, an appropriate Federal banking 

18 agency, the Commodity Futures Trading Commis19 sion, the Financial Services Oversight Council, and 

20 the Department of Justice. 

21 ‘‘(c) IDENTICAL DATA.—In adopting rules under this 

22 section, the Commission shall require persons described in 

23 subsection (a) to report the same or more comprehensive 

24 data than the Commission requires security-based swap 

25 repositories to collect under subsection (n).’’. 


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1 (b) BENEFICIAL OWNERSHIP REPORTING.— 

2 (1) Section 13(d)(1) of the Securities Exchange 

3 Act of 1934 (15 U.S.C. 78m(d)(1)) is amended by 

4 inserting ‘‘or otherwise becomes or is deemed to be5 come a beneficial owner of any of the foregoing upon 

6 the purchase or sale of a security-based swap or 

7 other derivative instrument as the Commission may 

8 define by rule, and’’ after ‘‘Alaska Native Claims 

9 Settlement Act,’’. 

10 (2) Section 13(g)(1) of the Securities Exchange 

11 Act of 1934 (15 U.S.C. 78m(g)(1)) is amended by 

12 inserting ‘‘or otherwise becomes or is deemed to be13 come a beneficial owner of any security of a class de14 scribed in subsection (d)(1) upon the purchase or 

15 sale of a security-based swap or other derivative in16 strument, as the Commission may define by rule’’ 

17 after ‘‘subsection (d)(1) of this section’’. 

18 (c) REPORTS BY INSTITUTIONAL INVESTMENT MAN19 AGERS.—Section 13(f)(1) of the Securities Exchange Act 

20 of 1934 (15 U.S.C. 78m(f)(1)) is amended by inserting 

21 ‘‘or otherwise becomes or is deemed to become a beneficial 

22 owner of any security of a class described in subsection 

23 (d)(1) upon the purchase or sale of a security-based swap 

24 or other derivative instrument, as the Commission may de25 fine by rule,’’ after ‘‘subsection (d)(1) of this section’’. 


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1 (d) ADMINISTRATIVE PROCEEDING AUTHORITY.— 

2 Section 15(b)(4) of the Securities Exchange Act of 1934 

3 (15 U.S.C. 78o(b)(4)) is amended— 

4 (1) in subparagraph (C), by inserting ‘‘security5 based swap dealer, major security-based swap partic6 ipant,’’ after ‘‘government securities dealer,’’; and 

7 (2) in subparagraph (F), by inserting ‘‘, or se8 curity-based swap dealer, or a major security-based 

9 swap participant’’ after ‘‘or dealer’’. 

10 (e) TRANSACTIONS BY CORPORATE INSIDERS.—Sec11 tion 16(f) of the Securities Exchange Act of 1934 (15 

12 U.S.C. 78p) is amended by inserting ‘‘or security-based 

13 swaps’’ after ‘‘security futures products’’. 

14 SEC. 156. STATE GAMING AND BUCKET SHOP LAWS. 

15 Section 28(a) of the Securities Exchange Act of 1934 

16 (15 U.S.C. 78bb(a)) is amended to read as follows: 

17 ‘‘(a) Except as provided in subsection (f), the rights 

18 and remedies provided by this title shall be in addition 

19 to any and all other rights and remedies that may exist 

20 at law or in equity; but no person permitted to maintain 

21 a suit for damages under the provisions of this title shall 

22 recover, through satisfaction of judgment in one or more 

23 actions, a total amount in excess of his actual damages 

24 on account of the act complained of. Except as otherwise 

25 specifically provided in this title, nothing in this title shall 


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1 affect the jurisdiction of the securities commission (or any 

2 agency or officer performing like functions) of any State 

3 over any security or any person insofar as it does not con4 flict with the provisions of this title or the rules and regu5 lations thereunder. No State law which prohibits or regu6 lates the making or promoting of wagering or gaming con7 tracts, or the operation of ‘bucket shops’ or other similar 

8 or related activities, shall invalidate (1) any put, call, 

9 straddle, option, privilege, or other security subject to this 

10 title (except a security-based swap agreement and any se11 curity that has a pari-mutuel payout or otherwise is deter12 mined by the Commission, acting by rule, regulation, or 

13 order, to be appropriately subject to such laws), or apply 

14 to any activity which is incidental or related to the offer, 

15 purchase, sale, exercise, settlement, or closeout of any 

16 such security, (2) any security-based swap between eligible 

17 contract participants, or (3) any security-based swap ef18 fected on a national securities exchange registered pursu19 ant to section 6(b). No provision of State law regarding 

20 the offer, sale, or distribution of securities shall apply to 

21 any transaction in a security-based swap or a security fu22 tures product, except that this sentence shall not be con23 strued as limiting any State antifraud law of general ap24 plicability.’’. 


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1 SEC. 157. AMENDMENTS TO THE SECURITIES ACT OF 1933; 

2 TREATMENT OF SECURITY-BASED SWAPS. 

3 (a) DEFINITIONS.—Section 2(a) of the Securities Act 

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

5 (1) in paragraph (1), by inserting ‘‘security6 based swap,’’ after ‘‘security future,’’; 

7 (2) in paragraph (3) by adding at the end the 

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

9 swap by or on behalf of the issuer of the securities 

10 upon which such security-based swap is based or is 

11 referenced, an affiliate of the issuer, or an under12 writer, shall constitute a contract for sale of, sale of, 

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

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

15 ‘‘(17) The terms ‘swap’ and ‘security-based 

16 swap’ have the same meanings as provided in sec17 tions 1a(35) and (38) of the Commodity Exchange 

18 Act (7 U.S.C. 1a(35) and (38)). 

19 ‘‘(18) The terms ‘purchase’ or ‘sale’ of a secu20 rity-based swap shall be deemed to mean the execu21 tion, termination (prior to its scheduled maturity 

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

23 conveyance of, or extinguishing of rights or obliga24 tions under, a security-based swap, as the context 

25 may require.’’. 


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

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

3 is amended by adding at the end the following: 

4 ‘‘(d) Notwithstanding the provisions of section 3 or 

5 section 4, unless a registration statement meeting the re6 quirements of subsection (a) of section 10 is in effect as 

7 to a security-based swap, it shall be unlawful for any per8 son, directly or indirectly, to make use of any means or 

9 instruments of transportation or communication in inter10 state commerce or of the mails to offer to sell, offer to 

11 buy or purchase or sell a security-based swap to any per12 son who is not an eligible contract participant as defined 

13 in section 1a(13) of the Commodity Exchange Act (7 

14 U.S.C. 1a(13)).’’. 

15 SEC. 158. OTHER AUTHORITY. 

16 Unless otherwise provided by its terms, this subtitle 

17 does not divest any appropriate Federal banking agency, 

18 the Commission, the Commodity Futures Trading Com19 mission, or other Federal or State agency, of any authority 

20 derived from any other applicable law. 

21 SEC. 159. JURISDICTION. 

22 Section 36 of the Securities Exchange Act of 1934 

23 (15 U.S.C. 78mm) is amended by adding at the end the 

24 following new subsection: 


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1 ‘‘(c) DERIVATIVES.—The Commission shall not have 

2 the authority to grant exemptions from the security-based 

3 swap provisions of the Over-the-Counter Derivatives Mar4 kets Act of 2009, except as expressly authorized under the 

5 provisions of that Act.’’. 

6 SEC. 160. EFFECTIVE DATE. 

7 This subtitle is effective 180 days after the date of 

8 enactment. 

Æ 


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