I 

111TH CONGRESS 

1ST SESSION H. R. 977 

To amend the Commodity Exchange Act to bring greater transparency and 

accountability to commodity markets, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 11, 2009 

Mr. PETERSON introduced the following bill; which was referred to the Committee on Agriculture, and in addition to the Committee on Financial 

Services, 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 bring greater 

transparency and accountability to commodity markets, 

and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

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

5 Transparency and Accountability Act of 2009’’. 

6 SEC. 2. TABLE OF CONTENTS. 

7 The table of contents of this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 


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Sec. 3. Speculative limits and transparency of off-shore trading. 

Sec. 4. Detailed reporting and disaggregation of market data. 

Sec. 5. Transparency and recordkeeping authorities. 

Sec. 6. Trading limits to prevent excessive speculation. 

Sec. 7. CFTC Administration. 

Sec. 8. Review of prior actions. 

Sec. 9. Review of over-the-counter markets. 

Sec. 10. Study relating to international regulation of energy commodity markets. 

Sec. 11. Over-the-counter authority. 

Sec. 12. Expedited process. 

Sec. 13. Certain exclusions and exemptions available only for certain transactions settled and cleared through registered derivatives clearing organizations. 

Sec. 14. Treatment of emission allowances and offset credits. 

Sec. 15. Inspector General of the Commodity Futures Trading Commission. 

Sec. 16. Authority of Commodity Futures Trading Commission to suspend 

trading in credit default swaps. 

Sec. 17. Authority of Commodity Futures Trading Commission to prosecute 

criminal violations of the Commodity Exchange Act. 

1 SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF2 SHORE TRADING. 

3 (a) IN GENERAL.—Section 4 of the Commodity Ex4 change Act (7 U.S.C. 6) is amended by adding at the end 

5 the following: 

6 ‘‘(e) FOREIGN BOARDS OF TRADE.— 

7 ‘‘(1) IN GENERAL.—The Commission may not 

8 permit a foreign board of trade to provide to the 

9 members of the foreign board of trade or other par10 ticipants located in the United States direct access 

11 to the electronic trading and order matching system 

12 of the foreign board of trade with respect to an 

13 agreement, contract, or transaction that settles 

14 against any price (including the daily or final settle15 ment price) of 1 or more contracts listed for trading 

16 on a registered entity, unless— 


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1 ‘‘(A) the foreign board of trade makes pub2 lic daily trading information regarding the 

3 agreement, contract, or transaction that is com4 parable to the daily trading information pub5 lished by the registered entity for the 1 or more 

6 contracts against which the agreement, con7 tract, or transaction traded on the foreign 

8 board of trade settles; and 

9 ‘‘(B) the foreign board of trade (or the for10 eign futures authority that oversees the foreign 

11 board of trade)— 

12 ‘‘(i) adopts position limits (including 

13 related hedge exemption provisions) for the 

14 agreement, contract, or transaction that 

15 are comparable, taking into consideration 

16 the relative sizes of the respective markets, 

17 to the position limits (including related 

18 hedge exemption provisions) adopted by 

19 the registered entity for the 1 or more con20 tracts against which the agreement, con21 tract, or transaction traded on the foreign 

22 board of trade settles; 

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

24 direct market participants to limit, reduce, 

25 or liquidate any position the foreign board 


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1 of trade (or the foreign futures authority 

2 that oversees the foreign board of trade) 

3 determines to be necessary to prevent or 

4 reduce the threat of price manipulation, 

5 excessive speculation as described in sec6 tion 4a, price distortion, or disruption of 

7 delivery or the cash settlement process; 

8 ‘‘(iii) agrees to promptly notify the 

9 Commission, with regard to the agreement, 

10 contract, or transaction,’’ of any change 

11 regarding— 

12 ‘‘(I) the information that the for13 eign board of trade will make publicly 

14 available; 

15 ‘‘(II) the position limits that the 

16 foreign board of trade or foreign fu17 tures authority will adopt and enforce; 

18 ‘‘(III) the position reductions re19 quired to prevent manipulation, exces20 sive speculation as described in sec21 tion 4a, price distortion, or disruption 

22 of delivery or the cash settlement 

23 process; and 

24 ‘‘(IV) any other area of interest 

25 expressed by the Commission to the 


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1 foreign board of trade or foreign fu2 tures authority; 

3 ‘‘(iv) provides information to the 

4 Commission regarding large trader posi5 tions in the agreement, contract, or trans6 action that is comparable to the large trad7 er position information collected by the 

8 Commission for the 1 or more contracts 

9 against which the agreement, contract, or 

10 transaction traded on the foreign board of 

11 trade settles; and 

12 ‘‘(v) provides the Commission with in13 formation necessary to publish reports on 

14 aggregate trader positions for the agree15 ment, contract, or transaction traded on 

16 the foreign board of trade that are com17 parable to such reports for 1 or more con18 tracts against which the agreement, con19 tract, or transaction traded on the foreign 

20 board of trade settles. 

21 ‘‘(2) EXISTING FOREIGN BOARDS OF TRADE.— 

22 Paragraph (1) shall not be effective with respect to 

23 any agreement, contract, or transaction executed on 

24 a foreign board of trade to which the Commission 

25 had granted direct access permission before the date 


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1 of the enactment of this subsection until the date 

2 that is 180 days after such date of enactment.’’. 

3 (b) LIABILITY OF REGISTERED PERSONS TRADING

4 ON A FOREIGN BOARD OF TRADE.— 

5 (1) Section 4(a) of such Act (7 U.S.C. 6(a)) is 

6 amended by inserting ‘‘or by subsection (f)’’ after 

7 ‘‘Unless exempted by the Commission pursuant to 

8 subsection (c)’’. 

9 (2) Section 4 of such Act (7 U.S.C. 6) is fur10 ther amended by adding at the end the following: 

11 ‘‘(f) A person registered with the Commission, or ex12 empt from registration by the Commission, under this Act 

13 may not be found to have violated subsection (a) with re14 spect to a transaction in, or in connection with, a contract 

15 of sale of a commodity for future delivery if the person— 

16 ‘‘(1) has reason to believe the transaction and 

17 the contract is made on or subject to the rules of a 

18 board of trade that is— 

19 ‘‘(A) legally organized under the laws of a 

20 foreign country; 

21 ‘‘(B) authorized to act as a board of trade 

22 by a foreign futures authority; and 

23 ‘‘(C) subject to regulation by the foreign 

24 futures authority; and 


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1 ‘‘(2) has not been determined by the Commis2 sion to be operating in violation of subsection (a).’’. 

3 (c) CONTRACT ENFORCEMENT FOR FOREIGN FU4 TURES CONTRACTS.—Section 22(a) of such Act (7 U.S.C. 

5 25(a)) is amended by adding at the end the following: 

6 ‘‘(5) A contract of sale of a commodity for fu7 ture delivery traded or executed on or through the 

8 facilities of a board of trade, exchange, or market lo9 cated outside the United States for purposes of sec10 tion 4(a) shall not be void, voidable, or unenforce11 able, and a party to such a contract shall not be en12 titled to rescind or recover any payment made with 

13 respect to the contract, based on the failure of the 

14 foreign board of trade to comply with any provision 

15 of this Act.’’. 

16 SEC. 4. DETAILED REPORTING AND DISAGGREGATION OF 

17 MARKET DATA. 

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

19 6), as amended by section 3 of this Act, is amended by 

20 adding at the end the following: 

21 ‘‘(g) DETAILED REPORTING AND DISAGGREGATION

22 OF MARKET DATA.— 

23 ‘‘(1) INDEX TRADERS AND SWAP DEALERS RE24 PORTING.—The Commission shall issue a proposed 

25 rule defining and classifying index traders and swap 


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1 dealers (as those terms are defined by the Commis2 sion) for purposes of data reporting requirements 

3 and setting routine detailed reporting requirements 

4 for any positions of such entities in contracts traded 

5 on designated contract markets, derivatives trans6 action execution facilities, foreign boards of trade 

7 subject to section 4(e), and electronic trading facili8 ties with respect to significant price discovery con9 tracts not later than 120 days after the date of the 

10 enactment of this subsection, and issue a final rule 

11 within 180 days after such date of enactment. 

12 ‘‘(2) DISAGGREGATION OF INDEX FUNDS AND

13 OTHER DATA IN MARKETS.—Subject to section 8 

14 and beginning within 60 days of the issuance of the 

15 final rule required by paragraph (1), the Commis16 sion shall disaggregate and make public monthly— 

17 ‘‘(A) the number of positions and total no18 tional value of index funds and other passive, 

19 long-only and short-only positions (as defined 

20 by the Commission) in all markets to the extent 

21 such information is available; and 

22 ‘‘(B) data on speculative positions relative 

23 to bona fide physical hedgers in those markets 

24 to the extent such information is available.’’. 


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1 SEC. 5. TRANSPARENCY AND RECORDKEEPING AUTHORI2 TIES. 

3 (a) IN GENERAL.—Section 4g(a) of the Commodity 

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

5 (1) by inserting ‘‘a’’ before ‘‘futures commission 

6 merchant’’; and 

7 (2) by inserting ‘‘and transactions and positions 

8 traded pursuant to subsection (d), (g), (h)(1), or 

9 (h)(3) of section 2, or any exemption issued by the 

10 Commission by rule, regulation or order,’’ after 

11 ‘‘United States or elsewhere,’’. 

12 (b) REPORTS OF DEALS EQUAL TO OR IN EXCESS

13 OF TRADING LIMITS.— 

14 (1) IN GENERAL.—Section 4i of such Act (7 

15 U.S.C. 6i) is amended— 

16 (A) in the first sentence— 

17 (i) by inserting ‘‘(a)’’ before ‘‘It 

18 shall’’; and 

19 (ii) by inserting ‘‘in the United States 

20 or elsewhere, and of transactions and posi21 tions in any such commodity entered into 

22 pursuant to subsection (d), (g), (h)(1), or 

23 (h)(3) of section 2, or any exemption 

24 issued by the Commission by rule, regula25 tion or order’’ before ‘‘, and of cash or 

26 spot’’; and 


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1 (B) by striking all that follows the 1st sen2 tence and inserting the following: 

3 ‘‘(b) Upon special call by the Commission, any person 

4 shall provide to the Commission, in a form and manner 

5 and within the period specified in the special call, books 

6 and records of all transactions and positions traded on or 

7 subject to the rules of any board of trade or electronic 

8 trading facility in the United States or elsewhere, or pur9 suant to subsection (d), (g), (h)(1), or (h)(3) of section 

10 2, or any exemption issued by the Commission by rule, 

11 regulation, or order, as the Commission may determine 

12 appropriate to deter and prevent price manipulation or 

13 any other disruption to market integrity or to diminish, 

14 eliminate, or prevent excessive speculation as described in 

15 section 4a(a). 

16 ‘‘(c) Such books and records described in subsections 

17 (a) and (b) shall show complete details concerning all such 

18 transactions, positions, inventories, and commitments, in19 cluding the names and addresses of all persons having any 

20 interest therein, shall be kept for a period of 5 years, and 

21 shall be open at all times to inspection by any representa22 tive of the Commission or the Department of Justice. For 

23 the purposes of this section, the futures and cash or spot 

24 transactions and positions of any person shall include such 


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1 transactions and positions of any persons directly or indi2 rectly controlled by the person.’’. 

3 (2) NOTICE AND COMMENT.—Within 60 days 

4 after the date of the enactment of this subsection, 

5 the Commodity Futures Trading Commission shall 

6 provide an opportunity for notice and comment on 

7 implementing the amendments made by paragraph 

8 (1). 

9 (c) CONFORMING AMENDMENTS.— 

10 (1) Section 2(d)(2) of such Act (7 U.S.C. 

11 2(d)(2)) is amended— 

12 (A) by inserting ‘‘4g(a), 4i,’’ before ‘‘5a 

13 (to’’; and 

14 (B) by inserting ‘‘, and the regulations of 

15 the Commission pursuant to section 4i(b) re16 quiring reporting in connection with commodity 

17 option transactions,’’ before ‘‘governs’’. 

18 (2) Section 2(g) of such Act (7 U.S.C. 2(g)) is 

19 amended— 

20 (A) by inserting ‘‘4g(a), 4i,’’ before ‘‘5a 

21 (to’’; and 

22 (B) by inserting ‘‘, and the regulations of 

23 the Commission pursuant to section 4i(b) re24 quiring reporting in connection with commodity 

25 option transactions,’’ before ‘‘shall apply’’. 


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1 (3) Section 2(h)(2)(A) of such Act (7 U.S.C. 

2 2(h)(2)(A)) is amended to read as follows: 

3 ‘‘(A) sections 4g(a), 4i, 5b and 

4 12(e)(2)(B), and the regulations of the Com5 mission pursuant to section 4i(b) requiring re6 porting in connection with commodity option 

7 transactions;’’. 

8 (4) Section 2(h)(4)(A) of such Act (7 U.S.C. 

9 2(h)(4)(A)) is amended to read as follows: 

10 ‘‘(A) sections 4g(a), 4i, 5a (to the extent 

11 provided in section 5a(g)), 5b, 5d, and 

12 12(e)(2)(B), and the regulations of the Com13 mission pursuant to section 4i(b) requiring re14 porting in connection with commodity option 

15 transactions;’’. 

16 SEC. 6. TRADING LIMITS TO PREVENT EXCESSIVE SPECU17 LATION. 

18 Section 4a of the Commodity Exchange Act (7 U.S.C. 

19 6a) is amended— 

20 (1) in subsection (a)— 

21 (A) by inserting ‘‘(1)’’ after ‘‘(a)’’; and 

22 (B) by adding after and below the end the 

23 following: 

24 ‘‘(2)(A) In accordance with the standards set forth 

25 in paragraph (1) of this subsection and consistent with 


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1 the good faith exception cited in subsection (b)(2),with re2 spect to physically deliverable commodities as defined by 

3 the Commission, the Commission shall by rule, regulation, 

4 or order establish limits on the amount of positions, as 

5 appropriate, other than bona fide hedge positions, that 

6 may be held by any person with respect to contracts of 

7 sale for future delivery or with respect to options on such 

8 contracts or commodities traded on or subject to the rules 

9 of a contract market or derivatives transaction execution 

10 facility, or on an electronic trading facility as a significant 

11 price discovery contract. 

12 ‘‘(B)(i) For exempt commodities, the limits shall be 

13 established within 90 days after the date of the enactment 

14 of this paragraph. 

15 ‘‘(ii) For agricultural commodities, the limits shall be 

16 established within 180 days after the date of the enact17 ment of this paragraph. 

18 ‘‘(3) In establishing the limits required in paragraph 

19 (2), the Commission, as appropriate, shall set limits— 

20 ‘‘(A) on the number of positions that may be 

21 held by any person for the spot month, each other 

22 month, and the aggregate number of positions that 

23 may be held by any person for all months; 

24 ‘‘(B) to the maximum extent practicable, in its 

25 discretion— 


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1 ‘‘(i) to diminish, eliminate, or prevent ex2 cessive speculation as described under this sec3 tion; 

4 ‘‘(ii) to deter and prevent market manipu5 lation, squeezes, and corners; 

6 ‘‘(iii) to ensure sufficient market liquidity 

7 for bona fide hedgers; and 

8 ‘‘(iv) to ensure that the price discovery 

9 function of the underlying market is not dis10 rupted; and 

11 ‘‘(C) to the maximum extent practicable, in its 

12 discretion, take into account the total number of po13 sitions in fungible agreements, contracts, or trans14 actions that a person can hold in other markets. 

15 ‘‘(4)(A) Not later than 150 days after the date of 

16 the enactment of this paragraph, and annually thereafter, 

17 the Commission shall hold 2 public hearings, 1 for agri18 culture commodities and 1 for energy commodities as such 

19 terms are defined by the Commission, in order to receive 

20 recommendations regarding the position limits to be estab21 lished in paragraph (2). 

22 ‘‘(B) Each public hearing held pursuant to subpara23 graph (A) shall, at a minimum providing there is sufficient 

24 interest, receive recommendations from— 


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1 ‘‘(i) 7 predominantly commercial short hedgers of the 

2 actual physical commodity for future delivery; 

3 ‘‘(ii) 7 predominantly commercial long hedgers of the 

4 actual physical commodity for future delivery; 

5 ‘‘(iii) 4 non-commercial participants in markets for 

6 commodities for future delivery; and 

7 ‘‘(iv) each designated contract market or derivatives 

8 transaction execution facility upon which a contract in the 

9 commodity for future delivery is traded, and each elec10 tronic trading facility that has a significant price discovery 

11 contract in the commodity.’’; and 

12 (2) in subsection (c)— 

13 (A) by inserting ‘‘(1)’’ after ‘‘(c)’’; and 

14 (B) by adding after and below the end the 

15 following: 

16 ‘‘(2) For the purposes of contracts of sale for future 

17 delivery and options on such contracts or commodities, the 

18 Commission shall define what constitutes a bona fide 

19 hedging transaction or position as a transaction or posi20 tion that— 

21 ‘‘(A)(i) represents a substitute for transactions 

22 made or to be made or positions taken or to be 

23 taken at a later time in a physical marketing chan24 nel; 


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1 ‘‘(ii) is economically appropriate to the reduc2 tion of risks in the conduct and management of a 

3 commercial enterprise; and 

4 ‘‘(iii) arises from the potential change in the 

5 value of— 

6 ‘‘(I) assets that a person owns, produces, 

7 manufactures, processes, or merchandises or 

8 anticipates owning, producing, manufacturing, 

9 processing, or merchandising; 

10 ‘‘(II) liabilities that a person owns or an11 ticipates incurring; or 

12 ‘‘(III) services that a person provides, pur13 chases, or anticipates providing or purchasing; 

14 or 

15 ‘‘(B) reduces risks attendant to a position re16 sulting from a transaction that— 

17 ‘‘(i) was executed pursuant to subsection 

18 (d), (g), (h)(1), or (h)(2) of section 2, or an ex19 emption issued by the Commission by rule, reg20 ulation or order; and 

21 ‘‘(ii)(I) was executed opposite a 

22 counterparty for which the transaction would 

23 qualify as a bona fide hedging transaction pur24 suant to subparagraph (A); or 


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1 ‘‘(II) meets the requirements of subpara2 graph (A).’’. 

3 SEC. 7. CFTC ADMINISTRATION. 

4 Section 2(a)(7) of the Commodity Exchange Act (7 

5 U.S.C. 2(a)(7)) is amended by adding at the end the fol6 lowing: 

7 ‘‘(D) ADDITIONAL EMPLOYEES.—As soon 

8 as practicable after the date of the enactment 

9 of this subparagraph, subject to appropriations, 

10 the Commission shall appoint a sufficient num11 ber of full-time employees (in addition to the 

12 employees employed by the Commission as of 

13 the date of the enactment of this subpara14 graph)— 

15 ‘‘(i) to increase the public trans16 parency of operations in markets; 

17 ‘‘(ii) to improve the enforcement of 

18 this Act in those markets; 

19 ‘‘(iii) to enhance oversight of the 

20 clearing of contracts, agreements, and 

21 transactions; and 

22 ‘‘(iv) to carry out the provisions of the 

23 Derivatives Markets Transparency and Ac24 countability Act of 2009 and such other 


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1 duties as are prescribed by the Commis2 sion.’’. 

3 SEC. 8. REVIEW OF PRIOR ACTIONS. 

4 Notwithstanding any other provision of the Com5 modity Exchange Act, the Commodity Futures Trading 

6 Commission shall review, as appropriate, all regulations, 

7 rules, exemptions, exclusions, guidance, no action letters, 

8 orders, other actions taken by or on behalf of the Commis9 sion, and any action taken pursuant to the Commodity 

10 Exchange Act by an exchange, self-regulatory organiza11 tion, or any other registered entity, that are currently in 

12 effect, to ensure that such prior actions are in compliance 

13 with the provisions of this Act. 

14 SEC. 9. REVIEW OF OVER-THE-COUNTER MARKETS. 

15 (a) STUDY.—The Commodity Futures Trading Com16 mission shall conduct a study— 

17 (1) to determine the efficacy, practicality, and 

18 consequences of establishing limits on the size of a 

19 position, other than bona fide hedge positions, that 

20 may be held by any person with respect to agree21 ments, contracts, or transactions involving an agri22 cultural or energy commodity, conducted in reliance 

23 on sections 2(g) and 2(h) of the Commodity Ex24 change Act and of any exemption issued by the 

25 Commission by rule, regulation or order, that are 


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1 fungible (as defined by the Commission) with agree2 ments, contracts, or transactions traded on or sub3 ject to the rules of any board of trade or of any elec4 tronic trading facility with respect to a significant 

5 price discovery contract, as a means to deter and 

6 prevent price manipulation or any other disruption 

7 to market integrity or to diminish, eliminate, or pre8 vent excessive speculation as described in section 4a 

9 of such Act for physical-based agricultural or energy 

10 commodities; and 

11 (2) to determine the efficacy, practicality, and 

12 consequences of establishing aggregate position lim13 its for similar agreements, contracts, or transactions 

14 for physical-based agricultural or energy commod15 ities traded— 

16 (A) on designated contract markets; 

17 (B) on derivatives transaction execution fa18 cilities; and 

19 (C) in reliance on such sections 2(g) and 

20 2(h) and of any exemption issued by the Com21 mission by rule, regulation or order. 

22 (b) PUBLIC HEARINGS.—The Commission shall pro23 vide for not less than 2 public hearings to take testimony, 

24 on the record, as part of the fact- gathering process in 

25 preparation of the report. 


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1 (c) REPORT AND RECOMMENDATIONS.—Not less 

2 than 12 months after the date of the enactment of this 

3 section, the Commission shall provide to the Committee 

4 on Agriculture of the House of Representatives and the 

5 Committee on Agriculture, Nutrition, and Forestry of the 

6 Senate a report that— 

7 (1) describes the results of the study; and 

8 (2) provides recommendations on any actions 

9 necessary to deter and prevent price manipulation or 

10 any other disruption to market integrity or to dimin11 ish, eliminate, or prevent excessive speculation as de12 scribed in section 4a of the Commodity Exchange 

13 Act for physical-based commodities, including— 

14 (A) any additional statutory authority that 

15 the Commission determines to be necessary to 

16 implement the recommendations; and 

17 (B) a description of the resources that the 

18 Commission considers to be necessary to imple19 ment the recommendations. 

20 SEC. 10. STUDY RELATING TO INTERNATIONAL REGULA21 TION OF ENERGY COMMODITY MARKETS. 

22 (a) IN GENERAL.—The Comptroller General of the 

23 United States shall conduct a study of the international 

24 regime for regulating the trading of energy commodity fu25 tures and derivatives. 


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1 (b) ANALYSIS.—The study shall include an analysis 

2 of, at a minimum— 

3 (1) key common features and differences among 

4 countries in the regulation of energy commodity 

5 trading, including with respect to market oversight 

6 and enforcement standards and activities; 

7 (2) variations among countries with respect to 

8 the use of position limits, position accountability lev9 els, or other thresholds to detect and prevent price 

10 manipulation, excessive speculation as described in 

11 section 4a of the Commodity Exchange Act, or other 

12 unfair trading practices; 

13 (3) variations in practices regarding the dif14 ferentiation of commercial and noncommercial trad15 ing; 

16 (4) agreements and practices for sharing mar17 ket and trading data among futures authorities and 

18 between futures authorities and the entities that the 

19 futures authorities oversee; and 

20 (5) agreements and practices for facilitating 

21 international cooperation on market oversight, com22 pliance, and enforcement. 

23 (c) REPORT.—Not later than 1 year after the date 

24 of the enactment of this Act, the Comptroller General shall 

25 submit to the Committee on Agriculture of the House of 


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1 Representatives and the Committee on Agriculture, Nutri2 tion, and Forestry of the Senate a report that— 

3 (1) describes the results of the study; 

4 (2) addresses whether there is excessive specu5 lation, and if so, the effects of any such speculation 

6 and energy price volatility on energy futures; and 

7 (3) provides recommendations to improve open8 ness, transparency, and other necessary elements of 

9 a properly functioning market in a manner that pro10 tects consumers in the United States. 

11 SEC. 11. OVER-THE-COUNTER AUTHORITY. 

12 (a) IN GENERAL.—Section 2 of the Commodity Ex13 change Act (7 U.S.C. 2) is amended by adding at the end 

14 the following: 

15 ‘‘(j) OVER-THE-COUNTER AUTHORITY.— 

16 ‘‘(1) Notwithstanding subsections (d), (g), 

17 (h)(1), and (h)(3) of section 2, and any exemption 

18 issued by the Commission by rule, regulation, or 

19 order, the Commission shall assess and issue a find20 ing on whether agreements, contracts, or trans21 actions entered into in reliance on subsection (d), 

22 (g), (h)(1), or (h)(3) of section 2 or any other ex23 emption issued by the Commission by rule, regula24 tion, or order, that are fungible (as defined by the 

25 Commission) with agreements, contracts, or transVerDate Nov 24 2008 23:41 Feb 11, 2009 Jkt 079200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H977.IH H977

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1 actions traded on or subject to the rules of any 

2 board of trade or electronic trading facility with re3 spect to a significant price discovery contract, alone 

4 or in conjunction with other similar agreements, con5 tracts, or transactions, have the potential to— 

6 ‘‘(A) disrupt the liquidity or price dis7 covery function on a registered entity; 

8 ‘‘(B) cause a severe market disturbance in 

9 the underlying cash or futures market; or 

10 ‘‘(C) prevent or otherwise impair the price 

11 of a contract listed for trading on a registered 

12 entity from reflecting the forces of supply and 

13 demand in any market. 

14 ‘‘(2) If the Commission makes a finding pursu15 ant to paragraph (1) of this subsection, the Commis16 sion may, in its discretion, utilize its authority under 

17 section 8a(9) to impose position limits (including, as 

18 appropriate and in its discretion, related hedge ex19 emption provisions for bona fide hedging comparable 

20 to bona fide hedge provisions of section 4a(c)(2)) on 

21 agreements, contracts, or transactions involved, and 

22 take corrective actions to enforce the limits.’’. 

23 (b) CONFORMING AMENDMENTS.— 


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1 (1) Section 2(d)(1) of such Act (7 U.S.C. 

2 2(d)(1)) is amended by inserting ‘‘subsection (j) of 

3 this section, and’’ after ‘‘(other than’’. 

4 (2) Section 2(d)(2) of such Act (7 U.S.C. 

5 2(d)(2)) is amended by inserting ‘‘subsection (j) of 

6 this section, and’’ after ‘‘(other than’’. 

7 (3) Section 2(g) of such Act (7 U.S.C. 2(g)) is 

8 amended by inserting ‘‘subsection (j) of this section, 

9 and’’ after ‘‘(other than’’. 

10 (4) Section 2(h)(2)(A) of such Act (7 U.S.C. 

11 2(h)(2)(A)), as amended by section 5(c)(3) of this 

12 Act, is amended by inserting ‘‘subsection (j) of this 

13 section and’’ before ‘‘sections’’. 

14 (5) Section 2(h)(4)(A) of such Act (7 U.S.C. 

15 2(h)(4)(A)), as amended by section 5(c)(4) of this 

16 Act, is amended by inserting ‘‘subsection (j) of this 

17 section and’’ before ‘‘sections’’. 

18 (6) Section 8a(9) of such Act (7 U.S.C. 

19 12a(a)(9)) is amended by inserting after ‘‘of the 

20 Commission’s action’’ the following: ‘‘, and to fix 

21 and enforce position limits to agreements, contracts, 

22 or transactions subject to section 2(j)(1) pursuant to 

23 a finding made under section 2(j)(2)’’. 


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1 SEC. 12. EXPEDITED PROCESS. 

2 The Commodity Futures Trading Commission may 

3 use emergency and expedited procedures (including any 

4 administrative or other procedure as appropriate) to carry 

5 out this Act if, in its discretion, it deems it necessary to 

6 do so. 

7 SEC. 13. CERTAIN EXCLUSIONS AND EXEMPTIONS AVAIL8 ABLE ONLY FOR CERTAIN TRANSACTIONS 

9 SETTLED AND CLEARED THROUGH REG10 ISTERED DERIVATIVES CLEARING ORGANIZA11 TIONS. 

12 (a) IN GENERAL.— 

13 (1) EXCLUSION OF CERTAIN DERIVATIVE

14 TRANSACTIONS.— 

15 (A) Section 2(d)(1) of the Commodity Ex16 change Act (7 U.S.C. 2(d)(1)) is amended— 

17 (i) by striking ‘‘and’’ at the end of 

18 subparagraph (A); 

19 (ii) by striking the period at the end 

20 of subparagraph (B) and inserting ‘‘and’’; 

21 and 

22 (iii) by adding at the end the fol23 lowing: 

24 ‘‘(C) except as provided in section 4(h), the 

25 agreement, contract, or transaction is settled 


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1 and cleared through a derivatives clearing orga2 nization registered with the Commission.’’. 

3 (B) Section 2(d)(2) of such Act (7 U.S.C. 

4 2(d)(2)) is amended— 

5 (i) by striking ‘‘and’’ at the end of 

6 subparagraph (B); 

7 (ii) by striking the period at the end 

8 of subparagraph (C) and inserting ‘‘; and’’; 

9 and 

10 (iii) by adding at the end the fol11 lowing: 

12 ‘‘(D) except as provided in section 4(h), 

13 the agreement, contract, or transaction is set14 tled and cleared through a derivatives clearing 

15 organization registered with the Commission.’’. 

16 (2) EXCLUSION FOR CERTAIN SWAP TRANS17 ACTIONS.—Section 2(g) of such Act (7 U.S.C. 2(g)) 

18 is amended— 

19 (A) by striking ‘‘and’’ at the end of para20 graph (2); 

21 (B) by striking the period at the end of 

22 paragraph (3) and inserting ‘‘; and’’; and 

23 (C) by adding at the end the following: 


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1 ‘‘(4) except as provided in section 4(h), settled 

2 and cleared through a derivatives clearing organiza3 tion registered with the Commission.’’. 

4 (3) EXEMPTION FOR CERTAIN TRANSACTIONS

5 IN EXEMPT COMMODITIES.— 

6 (A) Section 2(h)(1) of such Act ( 7 U.S.C. 

7 2(h)(1)) is amended— 

8 (i) by striking ‘‘and’’ at the end of 

9 subparagraph (A); 

10 (ii) by striking the period at the end 

11 of subparagraph (B) and inserting ‘‘; 

12 and’’; and 

13 (iii) by adding at the end the fol14 lowing: 

15 ‘‘(C) except as provided in section 4(h), is 

16 settled and cleared through a derivatives clear17 ing organization registered with the Commis18 sion.’’. 

19 (B) Section 2(h)(3) of such Act (7 U.S.C. 

20 2(h)(3)) is amended— 

21 (i) by striking ‘‘and’’ at the end of 

22 subparagraph (A); 

23 (ii) by striking the period at the end 

24 of subparagraph (B) and inserting ‘‘; 

25 and’’; and 


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1 (iii) by adding at the end the fol2 lowing: 

3 ‘‘(C) except as provided in section 4(h), 

4 settled and cleared through a derivatives clear5 ing organization registered with the Commis6 sion.’’. 

7 (4) GENERAL EXEMPTIVE AUTHORITY.—Sec8 tion 4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is 

9 amended by inserting ‘‘the agreement, contract, or 

10 transaction, except as provided in section 4(h), will 

11 be settled and cleared through a derivatives clearing 

12 organization registered with the Commission and’’ 

13 before ‘‘the Commission determines’’. 

14 (b) ALTERNATIVES TO CLEARING THROUGH DERIVA15 TIVES CLEARING ORGANIZATIONS.—Section 4 of such Act 

16 (7 U.S.C. 6), as amended by sections 3 and 4 of this Act, 

17 is amended by adding at the end the following: 

18 ‘‘(h) ALTERNATIVES TO CLEARING THROUGH DE19 RIVATIVES CLEARING ORGANIZATIONS.— 

20 ‘‘(1) SETTLEMENT AND CLEARING THROUGH

21 CERTAIN OTHER REGULATED ENTITIES.—An agree22 ment, contract, or transaction, or class thereof, re23 lating to an excluded commodity, that would other24 wise be required to be settled and cleared by section 

25 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 


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1 2(h)(3)(C) of this Act, or subsection (c)(1) of this 

2 section may be settled and cleared through an entity 

3 listed in section 409(b) of the Federal Deposit In4 surance Corporation Improvement Act of 1991. 

5 ‘‘(2) REPORTING ALTERNATIVE.— 

6 ‘‘(A) An agreement, contract, or trans7 action, or class thereof, that would otherwise be 

8 required to be settled and cleared by section 

9 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 

10 2(h)(3)(C) of this Act, or subsection (c)(1) of 

11 this section shall be exempt from the require12 ment if reported to the Commission in a man13 ner designated by the Commission, or to such 

14 other entity as the Commission deems appro15 priate. 

16 ‘‘(B) Parties entering into an agreement, 

17 contract, or transaction, or class thereof re18 ported pursuant to subparagraph (A) shall 

19 demonstrate the financial integrity of the agree20 ment, contract, or transaction and their own fi21 nancial integrity, as such terms and standards 

22 are determined by the Commission. 

23 ‘‘(C) The standards established pursuant 

24 to subparagraph (B) shall include a net capital 

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1 ital requirement that would be associated with 

2 such a transaction were it cleared. 

3 ‘‘(i) SPOT AND FORWARD EXCLUSION.—The settle4 ment and clearing requirements of section 2(d)(1)(C), 

5 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), or 4(c)(1) 

6 shall not apply to an agreement, contract, or transaction 

7 of any cash commodity for immediate or deferred ship8 ment or delivery, as defined by the Commission.’’. 

9 (c) ADDITIONAL REQUIREMENTS APPLICABLE TO

10 APPLICANTS FOR REGISTRATION AS A DERIVATIVES

11 CLEARING ORGANIZATION.—Section 5b(c)(2) of such Act 

12 (7 U.S.C. 7a–1(c)(2)) is amended by adding at the end 

13 the following: 

14 ‘‘(O) DISCLOSURE OF GENERAL INFORMA15 TION.—The applicant shall disclose publicly and 

16 to the Commission information concerning— 

17 ‘‘(i) the terms and conditions of con18 tracts, agreements, and transactions 

19 cleared and settled by the applicant; 

20 ‘‘(ii) the conventions, mechanisms, 

21 and practices applicable to the contracts, 

22 agreements, and transactions; 

23 ‘‘(iii) the margin-setting methodology 

24 and the size and composition of the finan25 cial resource package of the applicant; and 


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1 ‘‘(iv) other information relevant to 

2 participation in the settlement and clearing 

3 activities of the applicant. 

4 ‘‘(P) DAILY PUBLICATION OF TRADING IN5 FORMATION.—The applicant shall make public 

6 daily information on settlement prices, volume, 

7 and open interest for contracts settled or 

8 cleared pursuant to the requirements of 

9 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 

10 2(h)(3)(C) or 4(c)(1) of this Act by the appli11 cant if the Commission determines that the 

12 contracts perform a significant price discovery 

13 function for transactions in the cash market for 

14 the commodity underlying the contracts. 

15 ‘‘(Q) FITNESS STANDARDS.—The applicant 

16 shall establish and enforce appropriate fitness 

17 standards for directors, members of any dis18 ciplinary committee, and members of the appli19 cant, and any other persons with direct access 

20 to the settlement or clearing activities of the 

21 applicant, including any parties affiliated with 

22 any of the persons described in this subpara23 graph.’’. 

24 (d) AMENDMENTS.— 


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1 (1) Section 409 of the Federal Deposit Insur2 ance Corporation Improvement Act of 1991 (12 

3 U.S.C. 4422) is amended— 

4 (A) in subsection (a), by inserting after 

5 ‘‘Federal Reserve Act’’ the following: ‘‘, and the 

6 person is registered as a clearing agency under 

7 the Securities Exchange Act of 1934 or as a de8 rivatives clearing organization under the Com9 modity Exchange Act’’; and 

10 (B) in subsection (b)(3), by striking ‘‘the 

11 Comptroller of the Currency, the Board of Gov12 ernors of the Federal Reserve System, the Fed13 eral Deposit Insurance Corporation’’. 

14 (2) Section 407 of the Legal Certainty for 

15 Bank Products Act of 2000 (7 U.S.C. 27e) is 

16 amended by inserting ‘‘and the settlement and clear17 ing requirements of sections 2(d)(1)(C), 2(d)(2)(D), 

18 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of such 

19 Act’’ after ‘‘the clearing of covered swap agree20 ments’’. 

21 (3) Section 10 of the Federal Reserve Act is 

22 amended by adding at the end the following new 

23 provision: 

24 ‘‘The Board shall have no power to issue any rule, regula25 tion, or order, or otherwise to establish the standards of 


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1 regulation of any entity in its capacity as a multilateral 

2 clearing organization as defined in section 408 of the Fed3 eral Deposit Insurance Corporation Improvement Act of 

4 1991.’’. 

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

6 Act (7 U.S.C. 7a–1(b)) is amended— 

7 (A) by striking ‘‘(b) VOLUNTARY REG8 ISTRATION.—A derivatives clearing organiza9 tion’’ and inserting the following: 

10 ‘‘(b) VOLUNTARY REGISTRATION.— 

11 ‘‘(1) A derivatives clearing organization’’; and. 

12 (B) by adding at the end the following: 

13 ‘‘(2)(A) A national bank, a State member bank, 

14 an insured State nonmember bank, an affiliate of a 

15 national bank, a State member bank, an insured 

16 State nonmember bank, or a corporation chartered 

17 under section 25A of the Federal Reserve Act may 

18 register with the Commission as a derivatives clear19 ing organization. 

20 ‘‘(B) The Commission shall expedite the appli21 cation of any institution referred to in subparagraph 

22 (A) to the extent that, as of the date of enactment 

23 of this paragraph, the institution had received the 

24 approval of the Board of Governors of the Federal 


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1 Reserve System to act as a multilateral clearing or2 ganization.’’. 

3 (e) EFFECTIVE DATE.—The amendments made by 

4 this section shall take effect 150 days after the date of 

5 the enactment of this Act. 

6 (f) TRANSITION RULE.—Any agreement, contract, or 

7 transaction entered into before the date of the enactment 

8 of this Act or within 150 days after such date of enact9 ment, in reliance on subsection (d), (g), (h)(1), or (h)(3) 

10 of section 2 of the Commodity Exchange Act or any other 

11 exemption issued by the Commission Futures Trading 

12 Commission by rule, regulation, or order shall, within 150 

13 days after such date of enactment, unless settled and 

14 cleared through an entity registered with the Commission 

15 as a derivatives clearing organization or another clearing 

16 entity pursuant to section 4(h) of such Act, be reported 

17 to the Commission in a manner designated by the Com18 mission, or to such other entity as the Commission deems 

19 appropriate. 

20 SEC. 14. TREATMENT OF EMISSION ALLOWANCES AND OFF21 SET CREDITS. 

22 (a) Section 1a(14) of the Commodity Exchange Act 

23 (7 U.S.C. 1a(14)) is amended by striking ‘‘or an agricul24 tural commodity’’ and inserting ‘‘, an agricultural com25 modity, any allowance authorized under law to emit a 


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1 greenhouse gas, and any credit authorized under law to2 ward the reduction in greenhouse gas emissions or an in3 crease in carbon sequestration’’. 

4 (b) Within 180 days after the date of the enactment 

5 of this section, the Commodity Futures Trading Commis6 sion shall enter into a memorandum of understanding with 

7 the Secretary of Agriculture which shall include provi8 sions, consistent with section 1245 of the Food Security 

9 Act of 1985, ensuring that the development of any proce10 dures and protocols for a market-based greenhouse gas 

11 program are properly constructed and coordinated to 

12 maximize credits for carbon sequestration. 

13 SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FU14 TURES TRADING COMMISSION. 

15 (a) ELEVATION OF OFFICE.— 

16 (1) INCLUSION OF CFTC IN DEFINITION OF ES17 TABLISHMENT.— 

18 (A) Section 11(1) of the Inspector General 

19 Act of 1978 (5 U.S.C. App.) is amended by 

20 striking ‘‘or the Federal Cochairpersons of the 

21 Commissions established under section 15301 

22 of title 40, United States Code;’’ and inserting 

23 ‘‘the Federal Cochairpersons of the Commis24 sions established under section 15301 of title 


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1 40, United States Code; or the Chairman of the 

2 Commodity Futures Trading Commission;’’. 

3 (B) Section 11(2) of the Inspector General 

4 Act of 1978 (5 U.S.C. App.) is amended by 

5 striking ‘‘or the Commissions established under 

6 section 15301 of title 40, United States Code,’’ 

7 and inserting ‘‘the Commissions established 

8 under section 15301 of title 40, United States 

9 Code, or the Commodity Futures Trading Com10 mission,’’. 

11 (2) EXCLUSION OF CFTC FROM DEFINITION OF

12 DESIGNATED FEDERAL ENTITY.—Section 8G(a)(2) 

13 of the Inspector General Act of 1978 (5 U.S.C. 

14 App.) is amended by striking ‘‘the Commodity Fu15 tures Trading Commission,’’. 

16 (b) EFFECTIVE DATE; TRANSITION RULE.— 

17 (1) EFFECTIVE DATE.—The amendments made 

18 by this section shall take effect 30 days after the 

19 date of the enactment of this Act. 

20 (2) TRANSITION RULE.—An individual serving 

21 as Inspector General of the Commodity Futures 

22 Trading Commission on the effective date of this 

23 section pursuant to an appointment made under sec24 tion 8G of the Inspector General Act of 1978 (5 

25 U.S.C. App.)— 


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1 (A) may continue so serving until the 

2 President makes an appointment under section 

3 3(a) of such Act consistent with the amend4 ments made by this section; and 

5 (B) shall, while serving under subpara6 graph (A), remain subject to the provisions of 

7 section 8G of such Act which apply with respect 

8 to the Commodity Futures Trading Commis9 sion. 

10 SEC. 16. AUTHORITY OF COMMODITY FUTURES TRADING 

11 COMMISSION TO SUSPEND TRADING IN 

12 CREDIT DEFAULT SWAPS. 

13 (a) IN GENERAL.—Section 4c of the Commodity Ex14 change Act (7 U.S.C. 6c) is amended by adding at the 

15 end the following: 

16 ‘‘(h) AUTHORITY OF COMMISSION TO SUSPEND

17 TRADING OF CREDIT DEFAULT SWAPS.— 

18 ‘‘(1) IN GENERAL.—If, in the opinion of the 

19 Commission, the public interest and the protection 

20 of investors so require, the Commission may, by 

21 order— 

22 ‘‘(A) summarily suspend trading in any 

23 credit default swap; and 

24 ‘‘(B) summarily suspend all trading on any 

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1 tion facility, or otherwise, in credit default 

2 swaps. 

3 ‘‘(2) LIMITATION.—An action described in 

4 paragraph (1) shall not take effect unless the Com5 mission notifies the President of its decision, and the 

6 President notifies the Commission that the President 

7 does not disapprove of the decision.’’. 

8 (b) DEFINITION OF CREDIT DEFAULT SWAP.—Sec9 tion 1a of such Act (7 U.S.C. 1a) is amended by adding 

10 at the end the following: 

11 ‘‘(34) CREDIT DEFAULT SWAP.—The term 

12 ‘credit default swap’ means a contract which insures 

13 a party to the contract against the risk that an enti14 ty may experience a loss of value as a result of an 

15 event specified in the contract, such as a default or 

16 credit downgrade. A credit default swap that is trad17 ed on or cleared by a registered entity shall be ex18 cluded from the definition of a security as defined in 

19 this Act and in section 2(a)(1) of the Securities Act 

20 of 1933 or section 3(a)(10) of the Securities Ex21 change Act of 1934, except as necessary solely for 

22 purposes of enforcing prohibitions against insider 

23 trading in sections 10 and 16 of the Securities Ex24 change Act of 1934.’’. 


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1 (c) EFFECTIVE DATE.—The amendment made by 

2 subsection (b) shall be effective for credit default swaps 

3 entered into after 90 days after the date of the enactment 

4 of this section. 

5 SEC. 17. AUTHORITY OF COMMODITY FUTURES TRADING 

6 COMMISSION TO PROSECUTE CRIMINAL VIO7 LATIONS OF THE COMMODITY EXCHANGE 

8 ACT. 

9 Section 9 of the Commodity Exchange Act (7 U.S.C. 

10 13) is amended by adding at the end the following: 

11 ‘‘(f) Notwithstanding section 516 of title 28, United 

12 States Code, the Commission may initiate and conduct 

13 criminal litigation relating to a violation of this Act, and 

14 secure evidence therefor, if the Attorney General has de15 clined to do so.’’. 

Æ 


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