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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 977 Reported in House (RH)]

                                                 Union Calendar No. 223
111th CONGRESS
  1st Session
                                H. R. 977

                      [Report No. 111-385, Part I]

 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

                           December 19, 2009

Additional sponsors: Mr. Holden, Mr. Boswell, Mr. Cardoza, Ms. Herseth 
 Sandlin, Mr. Walz, Mr. Kagen, Mr. Schrader, Mr. Massa, Ms. Markey of 
    Colorado, Mr. Schauer, Mr. Kissell, Mr. Pomeroy, Mr. Welch, Mr. 
Higgins, Mr. Andrews, Mr. Michaud, Mr. Shuler, Mr. Rahall, Mr. Wexler, 
Mr. Pascrell, Mr. Hall of New York, Mr. Bright, Mr. Bishop of New York, 
                        Mr. Cohen, and Mr. Hodes

                           December 19, 2009

   Reported from the Committee on Agriculture with an amendment and 
  referred to the Committee on the Judiciary for a period ending not 
 later than December 19, 2009, for consideration of such provisions of 
    the bill and amendment as fall within the jurisdiction of that 
               committee pursuant to clause 1(k), rule X
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                           December 19, 2009

     Committees on Financial Services and the Judiciary discharged; 
committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed
    [For text of introduced bill, see copy of bill as introduced on 
                           February 11, 2009]

_______________________________________________________________________

                                 A BILL

 
 To amend the Commodity Exchange Act to bring greater transparency and 
      accountability to commodity markets, 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 Markets Transparency and 
Accountability Act of 2009''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
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.
Sec. 18. Diversity of directors of boards of trade.

SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF-SHORE TRADING.

    (a) In General.--Section 4 of the Commodity Exchange Act (7 U.S.C. 
6) is amended by adding at the end the following:
    ``(e) Foreign Boards of Trade.--
            ``(1) In general.--The Commission may not permit a foreign 
        board of trade to provide to the members of the foreign board 
        of trade or other participants located in the United States 
        direct access to the electronic trading and order matching 
        system of the foreign board of trade with respect to an 
        agreement, contract, or transaction that settles against any 
        price (including the daily or final settlement price) of 1 or 
        more contracts listed for trading on a registered entity, 
        unless--
                    ``(A) the foreign board of trade makes public daily 
                trading information regarding the agreement, contract, 
                or transaction that is comparable to the daily trading 
                information published by the registered entity for the 
                1 or more contracts against which the agreement, 
                contract, or transaction traded on the foreign board of 
                trade settles; and
                    ``(B) the foreign board of trade (or the foreign 
                futures authority that oversees the foreign board of 
                trade)--
                            ``(i) adopts position limits (including 
                        related hedge exemption provisions) for the 
                        agreement, contract, or transaction that are 
                        comparable, taking into consideration the 
                        relative sizes of the respective markets, to 
                        the position limits (including related hedge 
                        exemption provisions) adopted by the registered 
                        entity for the 1 or more contracts against 
                        which the agreement, contract, or transaction 
                        traded on the foreign board of trade settles;
                            ``(ii) has the authority to require or 
                        direct market participants to limit, reduce, or 
                        liquidate any position the foreign board of 
                        trade (or the foreign futures authority that 
                        oversees the foreign board of trade) determines 
                        to be necessary to prevent or reduce the threat 
                        of price manipulation, excessive speculation as 
                        described in section 4a, price distortion, or 
                        disruption of delivery or the cash settlement 
                        process;
                            ``(iii) agrees to promptly notify the 
                        Commission, with regard to the agreement, 
                        contract, or transaction, of any change 
                        regarding--
                                    ``(I) the information that the 
                                foreign board of trade will make 
                                publicly available;
                                    ``(II) the position limits that the 
                                foreign board of trade or foreign 
                                futures authority will adopt and 
                                enforce;
                                    ``(III) the position reductions 
                                required to prevent manipulation, 
                                excessive speculation as described in 
                                section 4a, price distortion, or 
                                disruption of delivery or the cash 
                                settlement process; and
                                    ``(IV) any other area of interest 
                                expressed by the Commission to the 
                                foreign board of trade or foreign 
                                futures authority;
                            ``(iv) provides information to the 
                        Commission regarding large trader positions in 
                        the agreement, contract, or transaction that is 
                        comparable to the large trader position 
                        information collected by the Commission for the 
                        1 or more contracts against which the 
                        agreement, contract, or transaction traded on 
                        the foreign board of trade settles; and
                            ``(v) provides the Commission with 
                        information necessary to publish reports on 
                        aggregate trader positions for the agreement, 
                        contract, or transaction traded on the foreign 
                        board of trade that are comparable to such 
                        reports on aggregate trading positions for 1 or 
                        more contracts against which the agreement, 
                        contract, or transaction traded on the foreign 
                        board of trade settles.
            ``(2) Existing foreign boards of trade.--Paragraph (1) 
        shall not be effective with respect to any agreement, contract, 
        or transaction executed on a foreign board of trade to which 
        the Commission had granted direct access permission before the 
        date of the enactment of this subsection until the date that is 
        180 days after such date of enactment.''.
    (b) Liability of Registered Persons Trading on a Foreign Board of 
Trade.--
            (1) Section 4(a) of such Act (7 U.S.C. 6(a)) is amended by 
        inserting ``or by subsection (f)'' after ``Unless exempted by 
        the Commission pursuant to subsection (c)''.
            (2) Section 4 of such Act (7 U.S.C. 6) is further amended 
        by adding at the end the following:
    ``(f)(1) A person registered with the Commission, or exempt from 
registration by the Commission, under this Act may not be found to have 
violated subsection (a) with respect to a transaction in, or in 
connection with, a contract of sale of a commodity for future delivery 
if the person--
            ``(A) has reason to believe the transaction and the 
        contract is made on or subject to the rules of a board of trade 
        that is--
                    ``(i) legally organized under the laws of a foreign 
                country;
                    ``(ii) authorized to act as a board of trade by a 
                foreign futures authority; and
                    ``(iii) subject to regulation by the foreign 
                futures authority; and
            ``(B) has not been determined by the Commission to be 
        operating in violation of subsection (a).
    ``(2) Nothing in this subsection shall be construed as implying or 
creating any presumption that a board of trade, exchange, or market is 
located outside the United States, or its territories or possessions, 
for purposes of subsection (a).''.
    (c) Contract Enforcement for Foreign Futures Contracts.--Section 
22(a) of such Act (7 U.S.C. 25(a)) is amended by adding at the end the 
following:
            ``(5) A contract of sale of a commodity for future delivery 
        traded or executed on or through the facilities of a board of 
        trade, exchange, or market located outside the United States 
        for purposes of section 4(a) shall not be void, voidable, or 
        unenforceable, and a party to such a contract shall not be 
        entitled to rescind or recover any payment made with respect to 
        the contract, based on the failure of the foreign board of 
        trade to comply with any provision of this Act.''.

SEC. 4. DETAILED REPORTING AND DISAGGREGATION OF MARKET DATA.

    Section 4 of the Commodity Exchange Act (7 U.S.C. 6), as amended by 
section 3 of this Act, is amended by adding at the end the following:
    ``(g) Detailed Reporting and Disaggregation of Market Data.--
            ``(1) Index traders and swap dealers reporting.--The 
        Commission shall issue a proposed rule defining and classifying 
        index traders and swap dealers (as those terms are defined by 
        the Commission) for purposes of data reporting requirements and 
        setting routine detailed reporting requirements for any 
        positions of such entities in contracts traded on designated 
        contract markets, derivatives transaction execution facilities, 
        foreign boards of trade subject to section 4(e), and electronic 
        trading facilities with respect to significant price discovery 
        contracts not later than 90 days after the date of the 
        enactment of this subsection, and issue a final rule within 180 
        days after such date of enactment.
            ``(2) Disaggregation of index funds and other data in 
        markets.--Subject to section 8 and beginning within 60 days of 
        the issuance of the final rule required by paragraph (1), the 
        Commission shall disaggregate and make public monthly--
                    ``(A) the number of positions and total notional 
                value of index funds and other passive, long-only and 
                short-only positions (as defined by the Commission) in 
                all markets to the extent such information is 
                available; and
                    ``(B) data on speculative positions relative to 
                bona fide hedgers in those markets to the extent such 
                information is available.''.

SEC. 5. TRANSPARENCY AND RECORDKEEPING AUTHORITIES.

    (a) In General.--Section 4g(a) of the Commodity Exchange Act (7 
U.S.C. 6g(a)) is amended--
            (1) by inserting ``a'' before ``futures commission 
        merchant''; and
            (2) by inserting ``and transactions and positions traded 
        pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 
        2, or any exemption issued by the Commission by rule, 
        regulation or order,'' after ``United States or elsewhere,''.
    (b) Reports of Deals Equal to or in Excess of Trading Limits.--
            (1) In general.--Section 4i of such Act (7 U.S.C. 6i) is 
        amended--
                    (A) in the first sentence--
                            (i) by inserting ``(a)'' before ``It 
                        shall''; and
                            (ii) by inserting ``in the United States or 
                        elsewhere, and of transactions and positions in 
                        any such commodity entered into pursuant to 
                        subsection (d), (g), (h)(1), or (h)(3) of 
                        section 2, or any exemption issued by the 
                        Commission by rule, regulation or order'' 
                        before ``, and of cash or spot''; and
                    (B) by striking all that follows the 1st sentence 
                and inserting the following:
    ``(b) Upon special call by the Commission, any person shall provide 
to the Commission, in a form and manner and within the period specified 
in the special call, books and records of all transactions and 
positions traded on or subject to the rules of any board of trade or 
electronic trading facility in the United States or elsewhere, or 
pursuant to subsection (d), (g), (h)(1), or (h)(3) of section 2, or any 
exemption issued by the Commission by rule, regulation, or order, as 
the Commission may determine appropriate to deter and prevent price 
manipulation or any other disruption to market integrity or to 
diminish, eliminate, or prevent excessive speculation as described in 
section 4a(a).
    ``(c) Such books and records described in subsections (a) and (b) 
shall show complete details concerning all such transactions, 
positions, inventories, and commitments, including the names and 
addresses of all persons having any interest therein, shall be kept for 
a period of 5 years, and shall be open at all times to inspection by 
any representative of the Commission or the Department of Justice. For 
the purposes of this section, the futures and cash or spot transactions 
and positions of any person shall include such transactions and 
positions of any persons directly or indirectly controlled by the 
person.''.
            (2) Notice and comment.--Within 60 days after the date of 
        the enactment of this subsection, the Commodity Futures Trading 
        Commission shall conduct rulemaking, including an opportunity 
        for notice and comment, on implementing the amendments made by 
        paragraph (1).
    (c) Conforming Amendments.--
            (1) Section 2(d)(1) of such Act (7 U.S.C. 2(d)(1)) is 
        amended by striking ``5b or 12(e)(2)(B)'' and inserting 
        ``4g(a), 4i, 5b, or 12(e)(2)(B), and the regulations of the 
        Commission pursuant to section 4i(b) requiring reporting in 
        connection with commodity option transactions)''.
            (2) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is 
        amended--
                    (A) by inserting ``4g(a), 4i,'' before ``5a (to''; 
                and
                    (B) by inserting ``, and the regulations of the 
                Commission pursuant to section 4i(b) requiring 
                reporting in connection with commodity option 
                transactions'' after ``12(e)(2)(B)''.
            (3) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended--
                    (A) by inserting ``4g(a), 4i,'' before ``5a (to''; 
                and
                    (B) by inserting ``, and the regulations of the 
                Commission pursuant to section 4i(b) requiring 
                reporting in connection with commodity option 
                transactions'' after ``12(e)(2)''.
            (4) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)) is 
        amended to read as follows:
                    ``(A) sections 4g(a), 4i, 5b and 12(e)(2)(B), and 
                the regulations of the Commission pursuant to section 
                4i(b) requiring reporting in connection with commodity 
                option transactions;''.
            (5) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)) is 
        amended to read as follows:
                    ``(A) sections 4g(a), 4i, 5a (to the extent 
                provided in section 5a(g)), 5b, 5d, and 12(e)(2)(B), 
                and the regulations of the Commission pursuant to 
                section 4i(b) requiring reporting in connection with 
                commodity option transactions;''.

SEC. 6. TRADING LIMITS TO PREVENT EXCESSIVE SPECULATION.

    (a) Position Limits.--Section 4a of the Commodity Exchange Act (7 
U.S.C. 6a) is amended--
            (1) in subsection (a)--
                    (A) by inserting ``(1)'' after ``(a)''; and
                    (B) by adding after and below the end the 
                following:
    ``(2)(A) In accordance with the standards set forth in paragraph 
(1) of this subsection and consistent with the good faith exception 
cited in subsection (b)(2), with respect to physical commodities other 
than excluded commodities as defined by the Commission, the Commission 
shall by rule, regulation, or order establish limits on the amount of 
positions, as appropriate, other than bona fide hedge positions, that 
may be held by any person with respect to contracts of sale for future 
delivery or with respect to options on such contracts or commodities 
traded on or subject to the rules of a contract market or derivatives 
transaction execution facility, or on an electronic trading facility as 
a significant price discovery contract.
    ``(B)(i) For exempt commodities, the limits shall be established 
within 180 days after the date of the enactment of this paragraph.
    ``(ii) For agricultural commodities, the limits shall be 
established within 270 days after the date of the enactment of this 
paragraph.
    ``(3) In establishing the limits required in paragraph (2), the 
Commission, as appropriate, shall set limits--
            ``(A) on the number of positions that may be held by any 
        person for the spot month, each other month, and the aggregate 
        number of positions that may be held by any person for all 
        months;
            ``(B) to the maximum extent practicable, in its 
        discretion--
                    ``(i) to diminish, eliminate, or prevent excessive 
                speculation as described under this section;
                    ``(ii) to deter and prevent market manipulation, 
                squeezes, and corners;
                    ``(iii) to ensure sufficient market liquidity for 
                bona fide hedgers; and
                    ``(iv) to ensure that the price discovery function 
                of the underlying market is not disrupted; and
            ``(C) to the maximum extent practicable, in its discretion, 
        take into account the total number of positions in fungible 
        agreements, contracts, or transactions that a person can hold 
        in other markets.
    ``(4)(A) Not later than 150 days after the establishment of 
position limits pursuant to paragraph (2), and biannually thereafter, 
the Commission shall hold 2 public hearings, 1 for agriculture 
commodities and 1 for energy commodities as such terms are defined by 
the Commission, in order to receive recommendations regarding the 
position limits to be established in paragraph (2).
    ``(B) Each public hearing held pursuant to subparagraph (A) shall, 
at a minimum providing there is sufficient interest, receive 
recommendations from--
            ``(i) 7 predominantly commercial short hedgers of the 
        actual physical commodity for future delivery;
            ``(ii) 7 predominantly commercial long hedgers of the 
        actual physical commodity for future delivery;
            ``(iii) 4 non-commercial participants in markets for 
        commodities for future delivery; and
            ``(iv) each designated contract market or derivatives 
        transaction execution facility upon which a contract in the 
        commodity for future delivery is traded, and each electronic 
        trading facility that has a significant price discovery 
        contract in the commodity.
    ``(C) Within 60 days after each public hearing held pursuant to 
subparagraph (A), the Commission shall publish in the Federal Register 
its response to the recommendations regarding position limits heard at 
the hearing.''; and
            (2) in subsection (c)--
                    (A) by inserting ``(1)'' after ``(c)''; and
                    (B) by adding after and below the end the 
                following:
    ``(2) For the purposes of implementation of subsection (a)(2) for 
contracts of sale for future delivery and options on such contracts or 
commodities, the Commission shall define what constitutes a bona fide 
hedging transaction or position as a transaction or position that--
            ``(A)(i) represents a substitute for transactions made or 
        to be made or positions taken or to be taken at a later time in 
        a physical marketing channel;
            ``(ii) is economically appropriate to the reduction of 
        risks in the conduct and management of a commercial enterprise; 
        and
            ``(iii) arises from the potential change in the value of--
                    ``(I) assets that a person owns, produces, 
                manufactures, processes, or merchandises or anticipates 
                owning, producing, manufacturing, processing, or 
                merchandising;
                    ``(II) liabilities that a person owns or 
                anticipates incurring; or
                    ``(III) services that a person provides, purchases, 
                or anticipates providing or purchasing; or
            ``(B) reduces risks attendant to a position resulting from 
        a transaction that--
                    ``(i) was executed pursuant to subsection (g), 
                (h)(1), or (h)(3) of section 2, or an exemption issued 
                by the Commission by rule, regulation or order; and
                    ``(ii)(I) was executed opposite a counterparty for 
                which the transaction would qualify as a bona fide 
                hedging transaction pursuant to subparagraph (A); or
                    ``(II) meets the requirements of subparagraph 
                (A).''.
    (b) Conforming Amendments.--
            (1) Section 5(d)(5) of such Act (7 U.S.C. 7(d)(5)) is 
        amended to read as follows:
            ``(5) To reduce the potential threat of market manipulation 
        or congestion, especially during trading in the delivery month, 
        the board of trade shall adopt for each of its contracts, where 
        necessary and appropriate, position limitations or position 
        accountability standards for speculators. For any contract that 
        is subject to a position limitation established by the 
        Commission pursuant to section 4a(a), the board of trade shall 
        set its position limitation at a level no higher than the 
        Commission-established limitation.''.
            (2) Section 5a(d)(4) of such Act (7 U.S.C. 7a(d)(4)) is 
        amended to read as follows:
            ``(4) To reduce the potential threat of market manipulation 
        or congestion, especially during trading in the delivery month, 
        the board of trade shall adopt for each of its contracts, where 
        necessary and appropriate, position limitations or position 
        accountability standards for speculators. For any contract that 
        is subject to a position limitation established by the 
        Commission pursuant to section 4a(a), the board of trade shall 
        set its position limitation at a level no higher than the 
        Commission-established limitation.''.
            (3) Section 2(h)(7)(C)(ii)(IV) of such Act (7 U.S.C. 
        2(h)(7)(C)(ii)(IV)) is amended to read as follows:
                                    ``(IV) The electronic trading 
                                facility shall adopt, where necessary 
                                and appropriate, position limitations 
                                or position accountability standards 
                                for speculators in significant price 
                                discovery contracts, taking into 
                                account positions in other agreements, 
                                contracts, and transactions that are 
                                treated by a derivatives clearing 
                                organization, whether registered or not 
                                registered, as fungible with such 
                                significant price discovery contracts 
                                to reduce the potential threat of 
                                market manipulation or congestion, 
                                especially during trading in the 
                                delivery month. For any contract that 
                                is subject to a position limitation 
                                established by the Commission pursuant 
                                to section 4a(a), the electronic 
                                trading facility shall set its position 
                                limitation at a level no higher than 
                                the Commission-established 
                                limitation.''.

SEC. 7. CFTC ADMINISTRATION.

    Section 2(a)(7) of the Commodity Exchange Act (7 U.S.C. 2(a)(7)) is 
amended by adding at the end the following:
                    ``(D) Additional employees.--As soon as practicable 
                after the date of the enactment of this subparagraph, 
                subject to appropriations, the Commission shall appoint 
                a sufficient number of full-time employees (in addition 
                to the employees employed by the Commission as of the 
                date of the enactment of this subparagraph)--
                            ``(i) to increase the public transparency 
                        of operations in markets;
                            ``(ii) to improve the enforcement of this 
                        Act in those markets;
                            ``(iii) to enhance oversight of the trading 
                        and clearing of contracts, agreements, and 
                        transactions; and
                            ``(iv) to carry out the provisions of the 
                        Derivatives Markets Transparency and 
                        Accountability Act of 2009 and such other 
                        duties as are prescribed by the Commission.''.

SEC. 8. REVIEW OF PRIOR ACTIONS.

    Notwithstanding any other provision of the Commodity Exchange Act, 
the Commodity Futures Trading Commission shall review, as appropriate, 
all regulations, rules, exemptions, exclusions, guidance, no action 
letters, orders, other actions taken by or on behalf of the Commission, 
and any action taken pursuant to the Commodity Exchange Act by an 
exchange, self-regulatory organization, or any other registered entity, 
that are currently in effect, to ensure that such prior actions are in 
compliance with the provisions of this Act.

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

    (a) Study.--The Commodity Futures Trading Commission shall conduct 
a study--
            (1) to determine the efficacy, practicality, and 
        consequences of establishing limits on the size of a position, 
        other than bona fide hedge positions, that may be held by any 
        person with respect to agreements, contracts, or transactions 
        involving an agricultural or energy commodity, conducted in 
        reliance on section 2(g) or 2(h) of the Commodity Exchange Act 
        and of any exemption issued by the Commission by rule, 
        regulation or order, that are fungible (as defined by the 
        Commission) with agreements, contracts, or transactions traded 
        on or subject to the rules of any board of trade or of any 
        electronic trading facility with respect to a significant price 
        discovery contract, as a means to deter and prevent price 
        manipulation or any other disruption to market integrity or to 
        diminish, eliminate, or prevent excessive speculation as 
        described in section 4a of such Act for physical-based 
        agricultural or energy commodities; and
            (2) to determine the efficacy, practicality, and 
        consequences of establishing aggregate position limits for 
        similar agreements, contracts, or transactions for physical-
        based agricultural or energy commodities traded--
                    (A) on designated contract markets;
                    (B) on derivatives transaction execution 
                facilities; and
                    (C) in reliance on such section 2(g) or 2(h) and of 
                any exemption issued by the Commission by rule, 
                regulation or order.
    (b) Public Hearings.--The Commission shall provide for not less 
than 2 public hearings to take testimony, on the record, as part of the 
fact- gathering process in preparation of the report.
    (c) Report and Recommendations.--Not less than 12 months after the 
date of the enactment of this section, the Commission shall provide to 
the Committee on Agriculture of the House of Representatives and the 
Committee on Agriculture, Nutrition, and Forestry of the Senate a 
report that--
            (1) describes the results of the study; and
            (2) provides recommendations on any actions necessary to 
        deter and prevent price manipulation or any other disruption to 
        market integrity or to diminish, eliminate, or prevent 
        excessive speculation as described in section 4a of the 
        Commodity Exchange Act for physical-based commodities, 
        including--
                    (A) any additional statutory authority that the 
                Commission determines to be necessary to implement the 
                recommendations; and
                    (B) a description of the resources that the 
                Commission considers to be necessary to implement the 
                recommendations.

SEC. 10. STUDY RELATING TO INTERNATIONAL REGULATION OF ENERGY COMMODITY 
              MARKETS.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study of the international regime for regulating the trading 
of energy commodity futures and derivatives.
    (b) Analysis.--The study shall include an analysis of, at a 
minimum--
            (1) key common features and differences among countries in 
        the regulation of energy commodity trading, including with 
        respect to market oversight and enforcement standards and 
        activities;
            (2) variations among countries with respect to the use of 
        position limits, position accountability levels, or other 
        thresholds to detect and prevent price manipulation, excessive 
        speculation as described in section 4a of the Commodity 
        Exchange Act, or other unfair trading practices;
            (3) variations in practices regarding the differentiation 
        of commercial and noncommercial trading;
            (4) agreements and practices for sharing market and trading 
        data among futures authorities and between futures authorities 
        and the entities that the futures authorities oversee; and
            (5) agreements and practices for facilitating international 
        cooperation on market oversight, compliance, and enforcement.
    (c) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Comptroller General shall submit to the Committee on 
Agriculture of the House of Representatives and the Committee on 
Agriculture, Nutrition, and Forestry of the Senate a report that--
            (1) describes the results of the study;
            (2) addresses whether there is excessive speculation, and 
        if so, the effects of any such speculation and energy price 
        volatility on energy futures; and
            (3) provides recommendations to improve openness, 
        transparency, and other necessary elements of a properly 
        functioning market in a manner that protects consumers in the 
        United States.

SEC. 11. OVER-THE-COUNTER AUTHORITY.

    (a) In General.--Section 2 of the Commodity Exchange Act (7 U.S.C. 
2) is amended by adding at the end the following:
    ``(j) Over-the-counter Authority.--
            ``(1) Notwithstanding subsections (d), (g), (h)(1), and 
        (h)(3) of section 2, and any exemption issued by the Commission 
        by rule, regulation, or order, the Commission shall assess and 
        issue a finding on whether agreements, contracts, or 
        transactions entered into in reliance on subsection (d), (g), 
        (h)(1), or (h)(3) of section 2 or any other exemption issued by 
        the Commission by rule, regulation, or order, that are fungible 
        (as defined by the Commission) with agreements, contracts, or 
        transactions traded on or subject to the rules of any board of 
        trade or electronic trading facility with respect to a 
        significant price discovery contract, alone or in conjunction 
        with other similar agreements, contracts, or transactions, have 
        the potential to--
                    ``(A) disrupt the liquidity or price discovery 
                function on a registered entity;
                    ``(B) cause a severe market disturbance in the 
                underlying cash or futures market; or
                    ``(C) prevent or otherwise impair the price of a 
                contract listed for trading on a registered entity from 
                reflecting the forces of supply and demand in any 
                market.
            ``(2) If the Commission makes a finding pursuant to 
        paragraph (1) of this subsection, the Commission may, in its 
        discretion, utilize its authority under section 8a(9) to impose 
        position limits (including, as appropriate and in its 
        discretion, related hedge exemption provisions for bona fide 
        hedging comparable to bona fide hedge provisions of section 
        4a(c)(2)) on agreements, contracts, or transactions involved, 
        and take corrective actions to enforce the limits.''.
    (b) Conforming Amendments.--
            (1) Section 2(d)(1) of such Act (7 U.S.C. 2(d)(1)) is 
        amended by inserting ``subsection (j) of this section, and'' 
        after ``(other than''.
            (2) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) is 
        amended by inserting ``subsection (j) of this section, and'' 
        after ``(other than''.
            (3) Section 2(g) of such Act (7 U.S.C. 2(g)) is amended by 
        inserting ``subsection (j) of this section, and'' after 
        ``(other than''.
            (4) Section 2(h)(2)(A) of such Act (7 U.S.C. 2(h)(2)(A)), 
        as amended by section 5(c)(4) of this Act, is amended by 
        inserting ``subsection (j) of this section and'' before 
        ``sections''.
            (5) Section 2(h)(4)(A) of such Act (7 U.S.C. 2(h)(4)(A)), 
        as amended by section 5(c)(5) of this Act, is amended by 
        inserting ``subsection (j) of this section and'' before 
        ``sections''.
            (6) Section 8a(9) of such Act (7 U.S.C. 12a(a)(9)) is 
        amended--
                    (A) by striking ``(9)'' and inserting ``(9)(A)''; 
                and
                    (B) by striking ``action.'' and inserting ``action; 
                and (B) to direct any person to abide by any position 
                limits to agreements, contracts, or transactions 
                subject to section 2(j)(1) that are imposed pursuant to 
                section 2(j)(2).''.

SEC. 12. EXPEDITED PROCESS.

    The Commodity Futures Trading Commission may use emergency and 
expedited procedures (including any administrative or other procedure 
as appropriate) to carry out this Act if, in its discretion, it deems 
it necessary to do so.

SEC. 13. CERTAIN EXCLUSIONS AND EXEMPTIONS AVAILABLE ONLY FOR CERTAIN 
              TRANSACTIONS SETTLED AND CLEARED THROUGH REGISTERED 
              DERIVATIVES CLEARING ORGANIZATIONS.

    (a) In General.--
            (1) Exclusion of certain derivative transactions.--
                    (A) Section 2(d)(1) of the Commodity Exchange Act 
                (7 U.S.C. 2(d)(1)) is amended--
                            (i) by striking ``and'' at the end of 
                        subparagraph (A);
                            (ii) by striking the period at the end of 
                        subparagraph (B) and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(C) except as provided in section 4(h), the 
                agreement, contract, or transaction is settled and 
                cleared through a derivatives clearing organization 
                registered with the Commission.''.
                    (B) Section 2(d)(2) of such Act (7 U.S.C. 2(d)(2)) 
                is amended--
                            (i) by striking ``and'' at the end of 
                        subparagraph (B);
                            (ii) by striking the period at the end of 
                        subparagraph (C) and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(D) except as provided in section 4(h), the 
                agreement, contract, or transaction is settled and 
                cleared through a derivatives clearing organization 
                registered with the Commission.''.
            (2) Exclusion for certain swap transactions.--Section 2(g) 
        of such Act (7 U.S.C. 2(g)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (2);
                    (B) by striking the period at the end of paragraph 
                (3) and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(4) except as provided in section 4(h), settled and 
        cleared through a derivatives clearing organization registered 
        with the Commission.''.
            (3) Exemption for certain transactions in exempt 
        commodities.--
                    (A) Section 2(h)(1) of such Act ( 7 U.S.C. 2(h)(1)) 
                is amended--
                            (i) by striking ``and'' at the end of 
                        subparagraph (A);
                            (ii) by striking the period at the end of 
                        subparagraph (B) and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(C) except as provided in section 4(h), is 
                settled and cleared through a derivatives clearing 
                organization registered with the Commission.''.
                    (B) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3)) 
                is amended--
                            (i) by striking ``and'' at the end of 
                        subparagraph (A);
                            (ii) by striking the period at the end of 
                        subparagraph (B) and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(C) except as provided in section 4(h), settled 
                and cleared through a derivatives clearing organization 
                registered with the Commission.''.
            (4) General exemptive authority.--Section 4(c)(1) of such 
        Act (7 U.S.C. 6(c)(1)) is amended by inserting ``the agreement, 
        contract, or transaction, except as provided in section 4(h), 
        will be settled and cleared through a derivatives clearing 
        organization registered with the Commission and'' before ``the 
        Commission determines''.
    (b) Alternatives to Clearing Through Derivatives Clearing 
Organizations.--Section 4 of such Act (7 U.S.C. 6), as amended by 
sections 3 and 4 of this Act, is amended by adding at the end the 
following:
    ``(h) Alternatives to Clearing Through Derivatives Clearing 
Organizations.--
            ``(1) Settlement and clearing through certain other 
        regulated entities.--
                    ``(A) An agreement, contract, or transaction, or 
                class thereof, relating to an excluded commodity, that 
                would otherwise be required to be settled and cleared 
                by section 2(d)(1)(C), 2(d)(2)(D), or 2(g)(4) of this 
                Act, or subsection (c)(1) of this section may be 
                settled and cleared through an entity listed in section 
                409(b)(1) of the Federal Deposit Insurance Corporation 
                Improvement Act of 1991.
                    ``(B) An agreement, contract, or transaction, or 
                class thereof, that would otherwise be required to be 
                settled and cleared by section 2(d)(1)(C), 2(d)(2)(D), 
                2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or 
                subsection (c)(1) of this section may be settled and 
                cleared through an entity listed in section 409(b)(3) 
                of the Federal Deposit Insurance Corporation 
                Improvement Act of 1991.
            ``(2) Waiver of clearing requirement.--
                    ``(A) The Commission, in its discretion, may exempt 
                an agreement, contract, or transaction, or class 
                thereof, that would otherwise be required by section 
                2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 
                2(h)(3)(C) of this Act, or subsection (c)(1) of this 
                section to be settled and cleared through a derivatives 
                clearing organization registered with the Commission 
                from such requirement.
                    ``(B) In granting exemptions pursuant to 
                subparagraph (A), the Commission shall consult with the 
                Securities and Exchange Commission and the Board of 
                Governors of the Federal Reserve System regarding 
                exemptions that relate to excluded commodities or 
                entities for which the Securities Exchange Commission 
                or the Board of Governors of the Federal Reserve System 
                serve as the primary regulator.
                    ``(C) Before granting an exemption pursuant to 
                subparagraph (A), the Commission shall find that the 
                agreement, contract, or transaction, or class thereof--
                            ``(i) is highly customized as to its 
                        material terms and conditions;
                            ``(ii) is transacted infrequently;
                            ``(iii) does not serve a significant price-
                        discovery function in the marketplace; and
                            ``(iv) is being entered into by parties who 
                        can demonstrate the financial integrity of the 
                        agreement, contract, or transaction and their 
                        own financial integrity, as such terms and 
                        standards are determined by the Commission. The 
                        standards shall include a net capital 
                        requirement associated with any agreement, 
                        contract, or transaction subject to an 
                        exemption from the clearing requirement that 
                        recognizes the risks associated with the 
                        absence of clearing.
                    ``(D) Any agreement, contract, or transaction, or 
                class thereof, which is exempted pursuant to 
                subparagraph (A) shall be reported in a manner 
                designated by the Commission to the Commission, the 
                Securities and Exchange Commission, the Board of 
                Governors of the Federal Reserve System, or such other 
                entity the Commission deems appropriate.
    ``(i) Spot and Forward Exclusion.--The settlement and clearing 
requirements of section 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 
2(h)(3)(C), or 4(c)(1) shall not apply to an agreement, contract, or 
transaction of any cash commodity for immediate or deferred shipment or 
delivery, as defined by the Commission.''.
    (c) Additional Requirements Applicable to Applicants for 
Registration as a Derivatives Clearing Organization.--Section 5b(c)(2) 
of such Act (7 U.S.C. 7a-1(c)(2)) is amended by adding at the end the 
following:
                    ``(O) Disclosure of general information.--The 
                applicant shall disclose publicly and to the Commission 
                information concerning--
                            ``(i) the terms and conditions of 
                        contracts, agreements, and transactions cleared 
                        and settled by the applicant;
                            ``(ii) the conventions, mechanisms, and 
                        practices applicable to the contracts, 
                        agreements, and transactions;
                            ``(iii) the margin-setting methodology and 
                        the size and composition of the financial 
                        resource package of the applicant; and
                            ``(iv) other information relevant to 
                        participation in the settlement and clearing 
                        activities of the applicant.
                    ``(P) Daily publication of trading information.--
                The applicant shall make public daily information on 
                settlement prices, volume, and open interest for 
                contracts settled or cleared pursuant to the 
                requirements of section 2(d)(1)(C), 2(d)(2)(D), 
                2(g)(4), 2(h)(1)(C), 2(h)(3)(C) or 4(c)(1) of this Act 
                by the applicant if the Commission determines that the 
                contracts perform a significant price discovery 
                function for transactions in the cash market for the 
                commodity underlying the contracts.
                    ``(Q) Fitness standards.--The applicant shall 
                establish and enforce appropriate fitness standards for 
                directors, members of any disciplinary committee, and 
                members of the applicant, and any other persons with 
                direct access to the settlement or clearing activities 
                of the applicant, including any parties affiliated with 
                any of the persons described in this subparagraph.''.
    (d) Amendments.--
            (1) Section 409 of the Federal Deposit Insurance 
        Corporation Improvement Act of 1991 (12 U.S.C. 4422) is 
        amended--
                    (A) in subsection (a), by inserting after ``Federal 
                Reserve Act'' the following: ``, and the person is 
                registered as a clearing agency under the Securities 
                Exchange Act of 1934 or as a derivatives clearing 
                organization under the Commodity Exchange Act''; and
                    (B) in subsection (b)(3), by striking ``the 
                Comptroller of the Currency, the Board of Governors of 
                the Federal Reserve System, the Federal Deposit 
                Insurance Corporation,''.
            (2) Section 407 of the Legal Certainty for Bank Products 
        Act of 2000 (7 U.S.C. 27e) is amended by inserting ``and the 
        settlement and clearing requirements of sections 2(d)(1)(C), 
        2(d)(2)(D), 2(g)(4), 2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of 
        such Act'' after ``the clearing of covered swap agreements''.
            (3) Section 10 of the Federal Reserve Act is amended by 
        adding at the end the following new provision:
    ``The Board shall have no power to issue any rule, regulation, or 
order, or otherwise to establish the standards of regulation of any 
entity in its capacity as a multilateral clearing organization as 
defined in section 408 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991.''.
            (4) Section 5b(b) of the Commodity Exchange Act (7 U.S.C. 
        7a-1(b)) is amended--
                    (A) by striking ``(b) Voluntary Registration.--A 
                derivatives clearing organization'' and inserting the 
                following:
    ``(b) Voluntary Registration.--
            ``(1) A derivatives clearing organization''; and
                    (B) by adding at the end the following:
            ``(2)(A) A national bank, a State member bank, an insured 
        State nonmember bank, an affiliate of a national bank, a State 
        member bank, an insured State nonmember bank, or a corporation 
        chartered under section 25A of the Federal Reserve Act may 
        register with the Commission as a derivatives clearing 
        organization.
            ``(B) The Commission shall expedite the application of any 
        institution referred to in subparagraph (A) to the extent that, 
        as of the date of enactment of this paragraph, the institution 
        had received the approval of the Board of Governors of the 
        Federal Reserve System to act as a multilateral clearing 
        organization.''.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect 150 days after the date of the enactment of this 
        Act.
            (2) Publication of guidelines.--Before the amendments made 
        by this section take effect, the Commission shall through 
        rulemaking, after notice and comment, establish and publish 
        guidelines outlining the terms and conditions that must apply 
        for an agreement, contract, transaction, or class thereof, to 
        qualify for the exemption cited in section 4(h)(2) of the 
        Commodity Exchange Act.
    (f) Transition Rule.--Any agreement, contract, or transaction 
entered into before the date of the enactment of this Act or within 150 
days after such date of enactment, in reliance on subsection (d), (g), 
(h)(1), or (h)(3) of section 2 of the Commodity Exchange Act or any 
other exemption issued by the Commodity Futures Trading Commission by 
rule, regulation, or order shall, within 150 days after such date of 
enactment, unless settled and cleared through an entity registered with 
the Commission as a derivatives clearing organization or another 
clearing entity pursuant to section 4(h) of such Act, be reported to 
the Commission in a manner designated by the Commission, or to such 
other entity as the Commission deems appropriate.

SEC. 14. TREATMENT OF EMISSION ALLOWANCES AND OFFSET CREDITS.

    (a) Section 1a(14) of the Commodity Exchange Act (7 U.S.C. 1a(14)) 
is amended by striking ``or an agricultural commodity'' and inserting 
``, an agricultural commodity, any allowance authorized under law to 
emit a greenhouse gas, and any credit authorized under law toward the 
reduction in greenhouse gas emissions or an increase in carbon 
sequestration''.
    (b) Within 180 days after the date of the enactment of this 
section, the Commodity Futures Trading Commission shall enter into a 
memorandum of understanding with the Secretary of Agriculture which 
shall include provisions, consistent with section 1245 of the Food 
Security Act of 1985, ensuring that the development of any procedures 
and protocols for a market-based greenhouse gas contract on a board of 
trade designated as a contract market under section 5 of the Commodity 
Exchange Act are properly constructed and coordinated to maximize 
credits for carbon sequestration.

SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FUTURES TRADING COMMISSION.

    (a) Elevation of Office.--
            (1) Inclusion of cftc in definition of establishment.--
                    (A) Section 12(1) of the Inspector General Act of 
                1978 (5 U.S.C. App.) is amended by striking ``or the 
                Federal Cochairpersons of the Commissions established 
                under section 15301 of title 40, United States Code;'' 
                and inserting ``the Federal Cochairpersons of the 
                Commissions established under section 15301 of title 
                40, United States Code; or the Chairman of the 
                Commodity Futures Trading Commission;''.
                    (B) Section 12(2) of the Inspector General Act of 
                1978 (5 U.S.C. App.) is amended by striking ``or the 
                Commissions established under section 15301 of title 
                40, United States Code,'' and inserting ``the 
                Commissions established under section 15301 of title 
                40, United States Code, or the Commodity Futures 
                Trading Commission,''.
            (2) Exclusion of cftc from definition of designated federal 
        entity.--Section 8G(a)(2) of the Inspector General Act of 1978 
        (5 U.S.C. App.) is amended by striking ``the Commodity Futures 
        Trading Commission,''.
    (b) Effective Date; Transition Rule.--
            (1) Effective date.--The amendments made by this section 
        shall take effect 30 days after the date of the enactment of 
        this Act.
            (2) Transition rule.--An individual serving as Inspector 
        General of the Commodity Futures Trading Commission on the 
        effective date of this section pursuant to an appointment made 
        under section 8G of the Inspector General Act of 1978 (5 U.S.C. 
        App.)--
                    (A) may continue so serving until the President 
                makes an appointment under section 3(a) of such Act 
                consistent with the amendments made by this section; 
                and
                    (B) shall, while serving under subparagraph (A), 
                remain subject to the provisions of section 8G of such 
                Act which apply with respect to the Commodity Futures 
                Trading Commission.

SEC. 16. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO SUSPEND 
              TRADING IN CREDIT DEFAULT SWAPS.

    (a) In General.--Section 4c of the Commodity Exchange Act (7 U.S.C. 
6c) is amended by adding at the end the following:
    ``(h) Authority of Commission To Suspend Trading of Credit Default 
Swaps.--
            ``(1) In general.--If, in the opinion of the Commission, 
        the public interest and the protection of investors so require, 
        the Commission may, by order--
                    ``(A) summarily suspend trading in any credit 
                default swap; and
                    ``(B) summarily suspend all trading on any contract 
                market, derivatives transaction execution facility, or 
                otherwise, in credit default swaps.
            ``(2) Limitation.--An action described in paragraph (1) 
        shall--
                    ``(A) not take effect unless the Commission 
                notifies the President of its decision, and the 
                President notifies the Commission that the President 
                does not disapprove of the decision;
                    ``(B) only apply to credit default swaps that are 
                related to securities subject to a short selling 
                suspension order by the Securities and Exchange 
                Commission, and such action must terminate when such 
                suspension order terminates; and
                    ``(C) only apply to credit default swaps purchased 
                by persons who are not purchasing the credit default 
                swap to reduce an existing credit risk directly related 
                to the reference entity or its obligations.''.
    (b) Definition of Credit Default Swap.--Section 1a of such Act (7 
U.S.C. 1a) is amended by adding at the end the following:
            ``(34) Credit default swap.--The term `credit default swap' 
        means a contract which hedges a party to the contract against 
        the risk that an entity may experience a loss of value as a 
        result of an event specified in the contract, such as a default 
        or credit downgrade. A credit default swap that is proposed to 
        be traded or is traded on or proposed to be or is cleared by a 
        registered entity pursuant to this Act shall be excluded from 
        the definition of a security as defined in this Act and in 
        section 2(a)(1) of the Securities Act of 1933 or section 
        3(a)(10) of the Securities Exchange Act of 1934, except as 
        necessary solely for purposes of enforcing prohibitions against 
        insider trading in sections 10 and 16 of the Securities 
        Exchange Act of 1934.''.
    (c) Effective Date.--The amendment made by subsection (b) shall be 
effective for credit default swaps entered into after 90 days after the 
date of the enactment of this section.

SEC. 17. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION TO PROSECUTE 
              CRIMINAL VIOLATIONS OF THE COMMODITY EXCHANGE ACT.

    Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended by 
adding at the end the following:
    ``(f) Notwithstanding section 516 of title 28, United States Code, 
the Commission may initiate and conduct criminal litigation relating to 
a violation of this Act, and secure evidence therefor, if the Attorney 
General has declined to do so.''.

SEC. 18. DIVERSITY OF DIRECTORS OF BOARDS OF TRADE.

    Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is 
amended by adding at the end the following:
            ``(19) Diversity of boards of directors.--The board of 
        trade of a publicly traded company shall endeavor to recruit 
        individuals to serve on the board of directors and the other 
        decision-making bodies (as determined by the Commission) of the 
        board of trade from among, and to have the composition of such 
        bodies reflect, a broad and culturally diverse pool of 
        qualified candidates.''.
                                                 Union Calendar No. 223

111th CONGRESS

  1st Session

                               H. R. 977

                      [Report No. 111-385, Part I]

_______________________________________________________________________

                                 A BILL

 To amend the Commodity Exchange Act to bring greater transparency and 
      accountability to commodity markets, and for other purposes.

_______________________________________________________________________

                           December 19, 2009

   Reported from the Committee on Agriculture with an amendment and 
  referred to the Committee on the Judiciary for a period ending not 
 later than December 19, 2009, for consideration of such provisions of 
    the bill and amendment as fall within the jurisdiction of that 
               committee pursuant to clause 1(k), rule X

                           December 19, 2009

    Committees on Financial Services and the Judiciary discharged; 
committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed
```