```

[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5592 Introduced in House (IH)]

<DOC>

114th CONGRESS
  2d Session
                                H. R. 5592

To amend the Commodity Exchange Act to clarify which fees the Commodity 
   Futures Trading Commission may assess and collect, and for other 
                               purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             June 28, 2016

 Mr. Cummings introduced the following bill; which was referred to the 
    Committee on Agriculture, and in addition to the Committees on 
Financial Services, and the Judiciary, 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 amend the Commodity Exchange Act to clarify which fees the Commodity 
   Futures Trading Commission may assess and collect, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Derivatives Oversight and Taxpayer 
Protection Act''.

            TITLE I--STRENGTHENING OVERSIGHT AND ENFORCEMENT

SEC. 101. FEES TO RECOVER COSTS.

    (a) In General.--The Commodity Exchange Act is amended by inserting 
after section 10 (7 U.S.C. 17) the following:

``SEC. 11. FEES TO RECOVER COSTS.

    ``(a) Recovery of Certain Costs of Annual Appropriation.--
            ``(1) In general.--Effective beginning October 1, 2016, so 
        as to recover the costs to the Federal Government of the annual 
        appropriation to the Commission by Congress, the Commission 
        shall assess and collect fees under this subsection.
            ``(2) Requirements.--Subject to paragraph (3), the 
        Commission may--
                    ``(A) assess fees to recover the costs of the 
                regulatory services provided by the Commission; and
                    ``(B) assess fees from registered entities and 
                persons registered under this Act.
            ``(3) Service fees.--The Commission may assess fees to 
        recover the costs of the following regulatory services provided 
        by the Commission:
                    ``(A) Designated contract market compliance 
                examinations.
                    ``(B) Foreign board of trade registration reviews.
                    ``(C) Swap execution facility designation reviews.
                    ``(D) Swap data repository registration reviews.
                    ``(E) Designated contract market designation 
                reviews.
                    ``(F) Swap execution facility compliance 
                examinations.
                    ``(G) Swap data repository compliance reviews.
                    ``(H) Designated contract market contract review 
                and approvals.
                    ``(I) Swap execution facility contract review and 
                approvals.
                    ``(J) Designated contract market contract 
                certification and rule reviews.
                    ``(K) Swap execution facility contract 
                certification and rule reviews.
                    ``(L) Swap data repository rule reviews.
                    ``(M) Reviews of mergers, transfers, and other 
                action requests from designated contract markets, swap 
                execution facilities, and swap data repositories.
                    ``(N) Designated self-regulatory organization 
                financial surveillance reviews.
                    ``(O) Registered futures association compliance 
                program reviews.
                    ``(P) Derivatives clearing organization reviews.
                    ``(Q) Futures commission merchant examinations.
                    ``(R) Registered foreign exchange dealer 
                examinations.
                    ``(S) Swap dealer registration reviews.
                    ``(T) Swap dealer examinations.
                    ``(U) Other entity registration, reviews, or 
                examinations, or other regulatory services provided by 
                the Commission.
            ``(4) Fee rates.--Fees assessed shall--
                    ``(A) be reasonably related to the cost to the 
                Commission of providing the services of the Commission;
                    ``(B) take into consideration the full-time 
                equivalent number of employees performing the services, 
                overhead costs, and other factors that the Commission 
                determines are necessary in the public interest;
                    ``(C) support market access for smaller market 
                participants hedging or mitigating commercial or 
                agricultural risk, including farmers and ranchers; and
                    ``(D) minimize negative impacts on market liquidity 
                and maintain the efficiency, competitiveness, and 
                financial integrity of futures and swaps markets in the 
                United States.
            ``(5) Collection of fees.--The Commission shall collect 
        fees paid in accordance with paragraph (2) in a manner and 
        within such time as determined by the Commission.
    ``(b) Publication.--Not later than 60 days after the date on which 
a law providing a regular appropriation to the Commission for a fiscal 
year is enacted, the Commission shall publish in the Federal Register--
            ``(1) notices of the fee rates for the fiscal year, 
        including any estimates or projections on which the fees are 
        based; and
            ``(2) a schedule of fees for the fiscal year, including an 
        explanation of the method used for calculating applicable fee 
        rates.
    ``(c) Deposit of Fees.--
            ``(1) Offsetting collections.--Fees collected under 
        subsection (a) for any fiscal year--
                    ``(A) shall be deposited and credited as offsetting 
                collections to the account providing appropriations to 
                the Commission; and
                    ``(B) except as provided in subsection (e), shall 
                not be collected or available for obligation for any 
                fiscal year except to the extent provided in advance in 
                appropriation Acts.
            ``(2) General revenues prohibited.--No fees collected under 
        subsection (a) shall be deposited and credited as general 
        revenue of the Treasury.
    ``(d) Fee Orders.--
            ``(1) Annual adjustment.--For each fiscal year, the 
        Commission shall by order set the fees applicable under 
        subsection (a) for the fiscal year at rates that are reasonably 
        likely to produce aggregate fee collections under this section 
        that are equal to the costs to the Federal Government of the 
        annual appropriation to the Commission by Congress.
            ``(2) Mid-year adjustment.--
                    ``(A) In general.--For each fiscal year, the 
                Commission shall determine, not later than March 1 of 
                the fiscal year, whether, based on the actual fees 
                collected during the first 5 months of the fiscal year, 
                the collections generated under the fee rates 
                determined under paragraph (1) for the fiscal year are 
                reasonably likely to be 10 percent (or more) greater or 
                less than the annual appropriation to the Commission 
                for the fiscal year.
                    ``(B) Adjustment.--
                            ``(i) In general.--If the Commission makes 
                        an affirmative determination, the Commission 
                        shall by order, not later than March 1, adjust 
                        the fees for the fiscal year to rates that are 
                        reasonably likely to produce aggregate fee 
                        collections under this section that are equal 
                        to the cost to the Federal Government of the 
                        annual appropriation to the Commission by 
                        Congress.
                            ``(ii) Factors.--The fee rates shall be 
                        assessed based on the same factors described in 
                        subsection (a).
    ``(e) Lapse of Appropriation.--If on the first day of a fiscal year 
a regular appropriation to the Commission has not been enacted, the 
Commission shall continue to collect (as offsetting collections) the 
fees and assessments under subsection (a) at the rates in effect on 
September 30 of the preceding fiscal year, until 90 days after the date 
a regular appropriation is enacted.''.
    (b) Conforming Amendments.--
            (1) Section 2(d) of the Commodity Exchange Act (7 U.S.C. 
        2(d)) is amended by striking ``and 9'' and inserting ``9, and 
        11''.
            (2) Section 4(c)(1)(A)(i)(I) of the Commodity Exchange Act 
        (7 U.S.C. 6(c)(1)(A)(i)(I)) is amended by inserting ``11,'' 
        after ``8e,''.
            (3) Section 15(a)(3) of the Commodity Exchange Act (7 
        U.S.C. 19(a)(3)) is amended by adding at the end the following:
                    ``(D) An action under section 11.''.

SEC. 102. CIVIL PENALTIES AND FINES UNDER THE COMMODITY EXCHANGE ACT 
              AND RELATED ENFORCEMENT ACTIONS.

    (a) Civil Penalties Generally.--Section 6(c)(10) of the Commodity 
Exchange Act (7 U.S.C. 9(10)) is amended by striking subparagraph (C) 
and inserting the following:
                    ``(C) assess such person--
                            ``(i) a civil penalty of not more than an 
                        amount equal to the greater of--
                                    ``(I) $1,000,000, in the case of a 
                                person who is an individual, for each 
                                violation;
                                    ``(II) $10,000,000, in the case of 
                                any person other than an individual, 
                                for each violation;
                                    ``(III) triple the monetary gain to 
                                the person and all other persons acting 
                                in concert with the person, for each 
                                such violation; or
                                    ``(IV) triple the total amount of 
                                losses to persons proximately caused by 
                                each such violation; or
                            ``(ii) a civil penalty of triple the 
                        maximum amount otherwise available under clause 
                        (i) if the person, within 5 years preceding the 
                        violation, has been--
                                    ``(I) found in a proceeding brought 
                                by the Commission, or by agreement of 
                                settlement to which the Commission is a 
                                party, to have recklessly, knowingly, 
                                or willfully violated any provision of 
                                this Act or of the rules, regulations, 
                                or orders of the Commission thereunder;
                                    ``(II) found in a proceeding 
                                brought by the Securities and Exchange 
                                Commission, or by agreement of 
                                settlement to which the Securities and 
                                Exchange Commission is a party, to have 
                                recklessly, knowingly, or willfully 
                                violated any provision of the 
                                Securities Act of 1933, the Securities 
                                Exchange Act of 1934, the Investment 
                                Company Act of 1940, or the Investment 
                                Advisers Act of 1940, or of the rules, 
                                regulations, or orders of the 
                                Securities and Exchange Commission 
                                thereunder;
                                    ``(III) found in a proceeding 
                                brought by the Federal Energy 
                                Regulatory Commission, or by agreement 
                                of settlement to which the Federal 
                                Energy Regulatory Commission is a 
                                party, to have recklessly, knowingly, 
                                or willfully violated any provision of 
                                the Federal Power Act (16 U.S.C. 792 et 
                                seq.), the Natural Gas Act (15 U.S.C. 
                                717 et seq.), the Public Utility 
                                Regulatory Policies Act of 1978 (16 
                                U.S.C. 2601 et seq.), the Natural Gas 
                                Policy Act of 1978 (15 U.S.C. 3301 et 
                                seq.), or the rules, regulations, or 
                                orders of the Federal Energy Regulatory 
                                Commission issued thereunder;
                                    ``(IV) convicted of any criminal 
                                violation of this Act or of the rules, 
                                regulations, or orders of the 
                                Commission thereunder;
                                    ``(V) convicted of any criminal 
                                violation of the Securities Act of 
                                1933, the Securities Exchange Act of 
                                1934, the Investment Company Act of 
                                1940, or the Investment Advisers Act of 
                                1940, or of the rules, regulations, or 
                                orders of the Securities and Exchange 
                                Commission thereunder; or
                                    ``(VI) convicted of any other 
                                criminal offense that involves any 
                                conduct, transaction, advice or 
                                activity related to any commodity 
                                interest, as that term is defined by 
                                the Commission, or security-based swap; 
                                and''.
    (b) Fines and Civil Penalties Related to Violation of Cease and 
Desist Order.--Section 6(d) of the Commodity Exchange Act (7 U.S.C. 
13b) is amended--
            (1) by inserting ``(1)'' after ``(d)'';
            (2) by striking ``$140,000 or triple the monetary gain to 
        such person,'' and inserting ``(A) $1,000,000, in the case of a 
        person who is an individual, for each violation, (B) 
        $10,000,000, in the case of any person other than an 
        individual, for each violation, (C) triple the monetary gain to 
        the person and all other persons acting in concert with the 
        person, for each such violation, or (D) triple the total amount 
        of losses to persons proximately caused by each such 
        violation,''; and
            (3) by adding at the end the following:
    ``(2) A person may be held liable for a civil penalty in triple the 
amount otherwise available for a violation under this subsection if the 
person, within 5 years preceding such violation, has been--
            ``(A) found in a proceeding brought by the Commission, or 
        by agreement of settlement to which the Commission is a party, 
        to have recklessly, knowingly, or willfully violated any 
        provision of this Act or the rules, regulations, or orders of 
        the Commission thereunder;
            ``(B) found in a proceeding brought by the Securities and 
        Exchange Commission, or by agreement of settlement to which the 
        Securities and Exchange Commission is a party, to have 
        recklessly, knowingly, or willfully violated any provision of 
        the Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, or the Investment 
        Advisers Act of 1940, or of the rules, regulations, or orders 
        of the Securities and Exchange Commission thereunder;
            ``(C) found in a proceeding brought by the Federal Energy 
        Regulatory Commission, or by agreement of settlement to which 
        the Federal Energy Regulatory Commission is a party, to have 
        recklessly, knowingly, or willfully violated any provision of 
        the Federal Power Act (16 U.S.C. 792 et seq.), the Natural Gas 
        Act (15 U.S.C. 717 et seq.), the Public Utility Regulatory 
        Policies Act of 1978 (16 U.S.C. 2601 et seq.), the Natural Gas 
        Policy Act of 1978 (15 U.S.C. 3301 et seq.), or the rules, 
        regulations, or orders of the Federal Energy Regulatory 
        Commission issued thereunder;
            ``(D) convicted of any criminal violation of this Act or 
        the rules, regulations, or orders of the Commission thereunder;
            ``(E) convicted of any criminal violation of the Securities 
        Act of 1933, the Securities Exchange Act of 1934, the 
        Investment Company Act of 1940, or the Investment Advisers Act 
        of 1940, or of the rules, regulations, or orders of the 
        Securities and Exchange Commission thereunder; or
            ``(F) convicted of any other criminal offense that involves 
        any conduct, transaction, advice or activity related to any 
        commodity interest, as that term is defined by the Commission, 
        or security-based swap.''.
    (c) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended--
            (1) in the first sentence, by striking ``$500,000 for each 
        such violation, or, in any case of manipulation or attempted 
        manipulation in violation of section 6(c), 6(d), or 9(a)(2), a 
        civil penalty of not more than $1,000,000 for each such 
        violation'' and inserting ``(A) $1,000,000, in the case of a 
        person who is an individual, for each violation, (B) 
        $10,000,000, in the case of any person other than an 
        individual, for each violation, (C) triple the monetary gain to 
        the person and all other persons acting in concert with the 
        person, for each such violation, or (D) triple the total amount 
        of losses to persons proximately caused by each such violation, 
        and such civil penalty shall be assessed for each violation on 
        which a failure to enforce or other violation occurs or has 
        occurred; provided that such registered entity, director, 
        officer, agent, or employee may be assessed a civil penalty of 
        triple the amount otherwise available if the person, within 5 
        years of such violation, has been (i) found in a proceeding 
        brought by the Commission, or by agreement of settlement to 
        which the Commission is a party, to have recklessly, knowingly, 
        or willfully violated any provision of this Act or the rules, 
        regulations, or orders of the Commission thereunder, (ii) found 
        in a proceeding brought by the Securities and Exchange 
        Commission, or by agreement of settlement to which the 
        Securities and Exchange Commission is a party, to have 
        recklessly, knowingly, or willfully violated any provision of 
        the Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, or the Investment 
        Advisers Act of 1940, or of the rules, regulations, or orders 
        of the Securities and Exchange Commission thereunder, (iii) 
        found in a proceeding brought by the Federal Energy Regulatory 
        Commission, or by agreement of settlement to which the Federal 
        Energy Regulatory Commission is a party, to have recklessly, 
        knowingly, or willfully violated any provision of the Federal 
        Power Act (16 U.S.C. 792 et seq.), the Natural Gas Act (15 
        U.S.C. 717 et seq.), the Public Utility Regulatory Policies Act 
        of 1978 (16 U.S.C. 2601 et seq.), the Natural Gas Policy Act of 
        1978 (15 U.S.C. 3301 et seq.), or the rules, regulations, or 
        orders of the Federal Energy Regulatory Commission issued 
        thereunder; (iv) convicted of any criminal violation of this 
        Act or the rules, regulations, or orders of the Commission 
        thereunder; (v) convicted of any criminal violation of the 
        Securities Act of 1933, the Securities Exchange Act of 1934, 
        the Investment Company Act of 1940, or the Investment Advisers 
        Act of 1940, or of the rules, regulations, or orders of the 
        Securities and Exchange Commission thereunder; or (vi) 
        convicted of any other criminal offense that involves any 
        conduct, transaction, advice or activity related to any 
        commodity interest, as that term is defined by the Commission, 
        or security-based swap''; and
            (2) in the second sentence, by striking ``$500,000'' and 
        inserting ``$1,000,000''.
    (d) Action To Enjoin or Restrain Violations.--Section 6c(d) of the 
Commodity Exchange Act (7 U.S.C. 13a-1(d)) is amended--
            (1) in paragraph (1), by inserting ``a civil penalty in the 
        amount of'' after ``violation''; and
            (2) by striking subparagraphs (A) and (B) of paragraph (1) 
        and inserting the following:
                    ``(A) not more than the greater of--
                            ``(i) $1,000,000, in the case of a person 
                        who is an individual, for each violation;
                            ``(ii) $10,000,000, in the case of any 
                        person other than an individual, for each 
                        violation;
                            ``(iii) triple the monetary gain to the 
                        person and all other persons acting in concert 
                        with the person, for each such violation; or
                            ``(iv) triple the total amount of losses by 
                        persons proximately caused by each such 
                        violation; or
                    ``(B) triple the maximum amount otherwise available 
                under subparagraph (A) if the person, within 5 years 
                preceding the violation, has been--
                            ``(i) found in a proceeding brought by the 
                        Commission, or by agreement of settlement to 
                        which the Commission is a party, to have 
                        recklessly, knowingly, or willfully violated 
                        any provision of this Act or of the rules, 
                        regulations, or orders of the Commission 
                        thereunder;
                            ``(ii) found in a proceeding brought by the 
                        Securities and Exchange Commission, or by 
                        agreement of settlement to which the Securities 
                        and Exchange Commission is a party, to have 
                        recklessly, knowingly, or willfully violated 
                        any provision of the Securities Act of 1933, 
                        the Securities Exchange Act of 1934, the 
                        Investment Company Act of 1940, or the 
                        Investment Advisers Act of 1940, or of the 
                        rules, regulations, or orders of the Commission 
                        thereunder;
                            ``(iii) found in a proceeding brought by 
                        the Federal Energy Regulatory Commission, or by 
                        agreement of settlement to which the Federal 
                        Energy Regulatory Commission is a party, to 
                        have recklessly, knowingly, or willfully 
                        violated any provision of the Federal Power Act 
                        (16 U.S.C. 792 et seq.), the Natural Gas Act 
                        (15 U.S.C. 717 et seq.), the Public Utility 
                        Regulatory Policies Act of 1978 (16 U.S.C. 2601 
                        et seq.), the Natural Gas Policy Act of 1978 
                        (15 U.S.C. 3301 et seq.), or the rules, 
                        regulations, or orders of the Federal Energy 
                        Regulatory Commission issued thereunder;
                            ``(iv) convicted of any criminal violation 
                        of this Act or of the rules, regulations, or 
                        orders of the Commission thereunder;
                            ``(v) convicted of any criminal violation 
                        of the Securities Act of 1933, the Securities 
                        Exchange Act of 1934, the Investment Company 
                        Act of 1940, or the Investment Advisers Act of 
                        1940, or of the rules, regulations, or orders 
                        of the Securities and Exchange Commission 
                        thereunder; or
                            ``(vi) convicted of any other criminal 
                        offense that involves any conduct, transaction, 
                        advice or activity related to any commodity 
                        interest, as that term is defined by the 
                        Commission, or security-based swap.''.
    (e) Criminal Penalties.--Section 9(a) of the Commodity Exchange Act 
(7 U.S.C. 13(a)) is amended in the matter preceding paragraph (1) by 
inserting after ``$1,000,000'' the following: ``in the case of an 
individual for each violation or $10,000,000 in the case of any person 
other than an individual for each violation,''.
    (f) Statute of Limitations.--Section 9 of the Commodity Exchange 
Act (7 U.S.C. 13) is amended by adding at the end the following:
    ``(f) Statute of Limitations.--
            ``(1) In general.--An action, suit or proceeding for the 
        enforcement of any civil fine, penalty, or forfeiture, 
        pecuniary or otherwise, shall not be entertained unless 
        commenced within 10 years after the date when the cause of 
        action first accrued if, within the same period, the offender 
        or the property is found within the United States in order that 
        proper service may be made thereon.
            ``(2) Accrual.--A cause of action accrues as of the date 
        the Commission learns of facts sufficient to give the 
        Commission notice that a violation has occurred.''.
    (g) Effective Date.--The amendments made by this section shall take 
effect on the date that is 90 days after the date of the enactment of 
this Act.

SEC. 103. CLOSING THE CROSS-BORDER LOOPHOLE.

    Section 2(i) of the Commodity Exchange Act (7 U.S.C. 2(i)) is 
amended--
            (1) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively;
            (2) in the matter preceding subparagraph (A), as so 
        redesignated, by striking ``The provisions'' and inserting the 
        following:
            ``(1) In general.--The provisions'';
            (3) in paragraph (1), as so designated--
                    (A) in subparagraph (A), as so redesignated, by 
                striking ``or'' at the end;
                    (B) in subparagraph (B), as so redesignated, by 
                striking the period at the end and inserting ``; or''; 
                and
                    (C) by adding at the end the following:
                    ``(C) except as provided in paragraph (2), involve 
                a swaps transaction in which a financial entity that is 
                domiciled or organized in the United States, or a 
                subsidiary entity that is majority owned or controlled 
                by a financial entity that is domiciled or organized in 
                the United States, bears swaps-related risks.''; and
            (4) by adding at the end the following:
            ``(2) Substituted compliance.--Notwithstanding paragraph 
        (1)(C), the Commission may allow a swaps transaction that 
        involves a subsidiary entity that is majority owned or 
        controlled by a financial entity that is domiciled or organized 
        in the United States to be conducted in whole or in part under 
        the rules and oversight of a foreign jurisdiction if the 
        Commission determines, by rule, that--
                    ``(A) the applicable elements of the foreign rules 
                are substantively equivalent to, or offer greater 
                protection than, the applicable rules in the United 
                States; and
                    ``(B) enforcement of and oversight with respect to 
                the rules described in subparagraph (A) is not less 
                stringent than enforcement of and oversight with 
                respect to the applicable rules in the United 
                States.''.

SEC. 104. PROVIDING OVERSIGHT OF FOREIGN EXCHANGE SWAPS.

    Section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)) is 
amended by striking subparagraph (E) and inserting the following:
                    ``(E) Treatment of foreign exchange swaps and 
                forwards.--Foreign exchange swaps and foreign exchange 
                forwards shall be considered swaps under this 
                paragraph.''.

SEC. 105. IMPROVING DATA SHARING BETWEEN REGULATORS.

    Section 21 of the Commodity Exchange Act (7 U.S.C. 24a) is amended 
by adding at the end the following:
    ``(i) Data Sharing.--The Commission shall make data with respect to 
any person that is required to be registered as a swap data repository 
under this section available to any other financial regulatory agency--
            ``(1) upon request; and
            ``(2) as soon as is practicable after receiving a 
        request.''.

SEC. 106. IMPROVING DATA QUALITY AND ACCESSIBILITY.

    Section 4s of the Commodity Exchange Act (7 U.S.C. 6s) is amended 
by adding at the end the following:
    ``(m) Data Quality and Accessibility.--
            ``(1) In general.--Not later than 2 years after the date of 
        enactment of this subsection, the Commission and the Securities 
        and Exchange Commission shall determine whether the data that 
        swap dealers registered under this section provide to swap data 
        repositories--
                    ``(A) are accurate; and
                    ``(B) use consistent and standardized formats that 
                allow that data to be aggregated and analyzed by 
                regulators.
            ``(2) Penalty.--The Commission shall revoke the license of 
        any swap dealer that the Commission and the Securities and 
        Exchange Commission has found violated paragraph (1).''.

   TITLE II--SHIFTING DERIVATIVES RISKS FROM TAXPAYERS TO FINANCIAL 
                              INSTITUTIONS

SEC. 201. ENDING FAVORABLE TREATMENT OF DERIVATIVES IN BANKRUPTCY.

    Section 560 of title 11, United States Code, is repealed.

SEC. 202. REVERSING THE CFTC'S INTERAFFILIATE MARGIN EXCEPTION.

    Not later than 180 days after the date of enactment of this Act, 
the Commodity Futures Trading Commission shall modify the rule on 
margin requirements entitled ``Margin Requirements for Uncleared Swaps 
for Swap Dealers and Major Swap Participants'' (81 Fed. Reg. 636 
(January 6, 2016)) to require entities to collect margin in all 
interaffiliate swaps.

SEC. 203. BANNING CLOSEOUT NETTING FOR CAPITAL PURPOSES; ENSURING 
              MINIMUM CAPITAL.

    Section 165(b)(1) of the Financial Stability Act of 2010 (12 U.S.C. 
5365(b)(1)) is amended by adding at the end the following:
                    ``(C) Consolidated assets.--
                            ``(i) Definition.--In this subparagraph, 
                        the term `covered financial institution' 
                        means--
                                    ``(I) a swap dealer registered 
                                under section 4s of the Commodity 
                                Exchange Act (7 U.S.C. 6s);
                                    ``(II) a security-based swap 
                                dealer, as defined in section 3(a) of 
                                the Securities Exchange Act of 1934 (15 
                                U.S.C. 78c(a));
                                    ``(III) an insured depository 
                                institution, as defined in section 3 of 
                                the Federal Deposit Insurance Act (12 
                                U.S.C. 1813);
                                    ``(IV) a nonbank financial company 
                                supervised by the Board of Governors;
                                    ``(V) a major swap participant, as 
                                defined in section 1a of the Commodity 
                                Exchange Act (7 U.S.C. 1a);
                                    ``(VI) a bank holding company 
                                described in subsection (a); and
                                    ``(VII) any subsidiary of a bank 
                                holding company described in subsection 
                                (a).
                            ``(ii) In general.--For purposes of 
                        determining the amount of capital required 
                        under the risk-based capital requirements and 
                        leverage limits required under subparagraph 
                        (A)(i), consolidated assets shall include the 
                        fair value and potential future exposure of 
                        derivatives exposures, without recognizing the 
                        benefits of any netting arrangement, unless the 
                        netting arrangement--
                                    ``(I)(aa) is documented under a 
                                formal master netting agreement or 
                                other formal arrangement with a 
                                derivatives clearing organization 
                                registered with a primary Federal 
                                financial regulatory agency; and
                                    ``(bb) meets financial standards 
                                approved by the Board of Governors and 
                                the Corporation; or
                                    ``(II)(aa) is documented under a 
                                formal master netting agreement with a 
                                counterparty; and
                                    ``(bb) requires the covered 
                                financial institution, as a matter of 
                                ongoing business practice, to--
                                            ``(AA) exchange collateral 
                                        daily for the fulfillment of 
                                        variation margin requirements 
                                        on a net basis; and
                                            ``(BB) fulfill all 
                                        contractual payment 
                                        requirements, including 
                                        payments for contract 
                                        determination, on a net basis, 
                                        with such net exchange of 
                                        collateral and payments 
                                        encompassing all derivatives 
                                        exposures covered by the formal 
                                        arrangement.
                    ``(D) Total derivatives risk exposures.--For 
                purposes of determining the amount of capital required 
                under leverage limits required under subparagraph 
                (A)(i)--
                            ``(i) total derivatives risk exposures 
                        shall not be assessed at a level less than 2 
                        percent of total gross notional derivatives 
                        contracts to which the covered financial 
                        institution, as defined in subparagraph (C)(i), 
                        is a party; and
                            ``(ii) such leverage limits shall not vary 
                        for derivatives exposures as compared to other 
                        assets.''.

SEC. 204. REPORT ON CLEARINGHOUSES.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Commodity Futures Trading Commission, the Office of 
the Comptroller of the Currency, the Federal Deposit Insurance 
Corporation, and the Board of Governors of the Federal Reserve System 
shall jointly publish a report that answers the following questions:
            (1) Are prefunded default funds at major clearinghouses, 
        along with prefunded liquidity resources, adequate to absorb 
        losses and continue operations in the event of the failure of 
        multiple large clearing members during a systemic stress event 
        affecting the financial system as a whole?
            (2) Are capital and liquidity resources associated with 
        cleared derivatives at clearinghouse members adequate to meet 
        clearinghouse capital and margin calls that might occur during 
        a systemic stress event associated with the failure of multiple 
        large clearing members during a systemic stress event?
            (3) Based on planned resource levels at clearinghouses and 
        major clearing members, in what ways might a lack of prefunded 
        resources at a clearing house, or the level of member capital 
        and liquidity resources associated with cleared derivatives, 
        contribute to increased financial system stress during a 
        systemic event?
            (4) How would the answers to the questions in paragraphs 
        (1) through (3) be affected if portfolio correlation levels in 
        clearinghouse margin and default fund models were significantly 
        lower than those assumed in current risk models?
            (5) Are such lower correlation levels possible in a stress 
        event?
            (6) Are capital levels held by clearinghouses currently 
        adequate to align risk management incentives between 
        clearinghouses themselves, their members, and end user clients 
        of their members?
            (7) Do the fiduciary duties of clearinghouse management to 
        their stockholders in any way conflict with the public 
        interest?
    (b) Policy Recommendations.--The report required under subsection 
(a) shall contain policy recommendations associated with the answers to 
the questions posed under paragraphs (1) through (7) of that 
subsection.
                                 <all>
```