I 

110TH CONGRESS 

2D SESSION H. R. 5768 

To amend the Commodity Exchange Act to provide the Commodity Futures 

Trading Commission authority over off-exchange retail foreign currency 

transactions, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 10, 2008 

Mr. FRELINGHUYSEN 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 provide the Commodity Futures Trading Commission authority over offexchange retail foreign currency transactions, 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 title may be cited as the ‘‘CFTC Improvement 

5 Act of 2008’’. 


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1 TITLE I—GENERAL PROVISIONS 

2 SEC. 101. CFTC AUTHORITY OVER OFF-EXCHANGE RETAIL 

3 FOREIGN CURRENCY TRANSACTIONS. 

4 (a) IN GENERAL.—Section 2(c)(2) of the Commodity 

5 Exchange Act (7 U.S.C. 2(c)(2)) is amended by striking 

6 subparagraphs (B) and (C) and inserting the following: 

7 ‘‘(B) AGREEMENTS, CONTRACTS, AND

8 TRANSACTIONS IN RETAIL FOREIGN CUR9 RENCY.— 

10 ‘‘(i) This Act applies to, and the Com11 mission shall have jurisdiction over, an 

12 agreement, contract, or transaction in for13 eign currency that— 

14 ‘‘(I) is a contract of sale of a 

15 commodity for future delivery (or an 

16 option on such a contract) or an op17 tion (other than an option executed or 

18 traded on a national securities ex19 change registered pursuant to section 

20 6(a) of the Securities Exchange Act of 

21 1934 (15 U.S.C. 78f(a))); and 

22 ‘‘(II) is offered to, or entered 

23 into with, a person that is not an eli24 gible contract participant, unless the 

25 counterparty, or the person offering to 


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1 be the counterparty, of the person 

2 is— 

3 ‘‘(aa) a financial institution; 

4 ‘‘(bb)(AA) a broker or deal5 er registered under section 15(b) 

6 (except paragraph (11) thereof) 

7 or 15C of the Securities Ex8 change Act of 1934 (15 U.S.C. 

9 78o(b), 78o–5); or 

10 ‘‘(BB) an associated person 

11 of a broker or dealer registered 

12 under section 15(b) (except para13 graph (11) thereof) or 15C of the 

14 Securities Exchange Act of 1934 

15 (15 U.S.C. 78o(b), 78o–5) con16 cerning the financial or securities 

17 activities of which the broker or 

18 dealer makes and keeps records 

19 under section 15C(b) or 17(h) of 

20 the Securities Exchange Act of 

21 1934 (15 U.S.C. 78o–5(b), 

22 78q(h)); 

23 ‘‘(cc) a futures commission 

24 merchant registered under this 

25 Act (that is not also a person deVerDate Aug 31 2005 04:50 Apr 12, 2008 Jkt 069200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5768.IH H5768

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1 scribed in item (bb)), or an affili2 ated person of such a futures 

3 commission merchant (that is not 

4 also a person described in item 

5 (bb)) if the futures commission 

6 merchant makes and keeps 

7 records under section 4f(c)(2)(B) 

8 of this Act concerning the futures 

9 and other financial activities of 

10 the affiliated person; 

11 ‘‘(dd) an insurance company 

12 described in section 1a(12)(A)(ii) 

13 of this Act, or a regulated sub14 sidiary or affiliate of such an in15 surance company; 

16 ‘‘(ee) a financial holding 

17 company (as defined in section 2 

18 of the Bank Holding Company 

19 Act of 1956); or 

20 ‘‘(ff) an investment bank 

21 holding company (as defined in 

22 section 17(i) of the Securities 

23 Exchange Act of 1934 (15 

24 U.S.C. 78q(i))). 


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1 ‘‘(ii) Notwithstanding item (cc) of 

2 clause (i)(II) of this subparagraph, agree3 ments, contracts, or transactions described 

4 in clause (i) of this subparagraph shall be 

5 subject to subsection (a)(1)(B) of this sec6 tion and sections 4(b), 4b, 4c(b), 4o, 6(c) 

7 and 6(d) (except to the extent that sections 

8 6(c) and 6(d) prohibit manipulation of the 

9 market price of any commodity in inter10 state commerce, or for future delivery on 

11 or subject to the rules of any market), 6c, 

12 6d, 8(a), 13(a), and 13(b) if the agree13 ments, contracts, or transactions are of14 fered, or entered into, by a person that is 

15 registered as a futures commission mer16 chant or an affiliated person of a futures 

17 commission merchant registered under this 

18 Act that is not also a person described in 

19 any of items (aa), (bb), (dd), (ee), or (ff) 

20 of clause (i)(II) of this subparagraph. 

21 ‘‘(iii)(I) Notwithstanding item (cc) of 

22 clause (i)(II), a person shall not participate 

23 in the solicitation or recommendation of 

24 any agreement, contract, or transaction de25 scribed in clause (i) entered into with or to 


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1 be entered into with a person described in 

2 such item, unless the person— 

3 ‘‘(aa) is registered in such capac4 ity as the Commission by rule, regula5 tion, or order shall determine; and 

6 ‘‘(bb) is a member of a futures 

7 association registered under section 

8 17. 

9 ‘‘(II) Subclause (I) shall not 

10 apply to— 

11 ‘‘(aa) any person described 

12 in any of items (aa), (bb), (dd), 

13 (ee), or (ff) of subparagraph 

14 (B)(i)(II); or 

15 ‘‘(bb) any such person’s as16 sociated persons. 

17 ‘‘(C)(i)(I) This subparagraph shall apply to 

18 any agreement, contract, or transaction in for19 eign currency that is— 

20 ‘‘(aa) offered to, or entered into with, 

21 a person that is not an eligible contract 

22 participant (except that this subparagraph 

23 shall not apply if the counterparty, or the 

24 person offering to be the counterparty, of 

25 the person that is not an eligible contract 


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1 participant is a person described in any of 

2 items (aa), (bb), (dd), (ee), or (ff) of sub3 paragraph (B)(i)(II)); and 

4 ‘‘(bb) offered, or entered into, on a le5 veraged or margined basis, or financed by 

6 the offeror, the counterparty, or a person 

7 acting in concert with the offeror or 

8 counterparty on a similar basis. 

9 ‘‘(II) Subclause (I) shall not apply to— 

10 ‘‘(aa) a security that is not a security 

11 futures product; or 

12 ‘‘(bb) a contract of sale that— 

13 ‘‘(AA) results in actual delivery 

14 within 2 days; or 

15 ‘‘(BB) creates an enforceable ob16 ligation to deliver between a seller and 

17 buyer that have the ability to deliver 

18 and accept delivery, respectively, in 

19 connection with their line of business. 

20 ‘‘(ii)(I) Agreements, contracts, or transactions 

21 described in clause (i) of this subparagraph shall be 

22 subject to subsection (a)(1)(B) of this section and 

23 sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) (except to 

24 the extent that sections 6(c) and 6(d) prohibit ma25 nipulation of the market price of any commodity in 


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1 interstate commerce, or for future delivery on or 

2 subject to the rules of any market), 6c, 6d, 8(a), 

3 13(a), and 13(b). 

4 ‘‘(II) Subclause (I) of this clause shall not 

5 apply to— 

6 ‘‘(aa) any person described in any of items 

7 (aa), (bb), (dd), (ee), or (ff) of subparagraph 

8 (B)(i)(II); or 

9 ‘‘(bb) any such person’s associated per10 sons. 

11 ‘‘(iii)(I) A person shall not participate in the solicita12 tion or recommendation of any agreement, contract, or 

13 transaction described in clause (i) of this subparagraph 

14 unless the person is registered in such capacity as the 

15 Commission by rule, regulation, or order shall determine, 

16 and is a member of a futures association registered under 

17 section 17. 

18 ‘‘(II) Subclause (I) shall not apply to— 

19 ‘‘(aa) any person described in any of items (aa), 

20 (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II); 

21 or 

22 ‘‘(bb) any such person’s associated persons. 

23 ‘‘(iv)(I) Sections 4(b) and 4b shall 

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1 paragraph as if the agreement, contract, or 

2 transaction were a contract of sale of a 

3 commodity for future delivery. 

4 ‘‘(II) The Commission may, after 

5 issuing notice and soliciting comment, 

6 issue rules proscribing fraud in connection 

7 with any agreement, contract, or trans8 action described in clause (i) of this sub9 paragraph in an exempt commodity or an 

10 agricultural commodity. Nothing in this 

11 provision shall affect the determination of 

12 whether the agreement, contract, or trans13 action is a contract for the purchase or 

14 sale of a commodity for future delivery for 

15 purposes of section 4(a). 

16 ‘‘(v) This subparagraph shall not be 

17 construed to limit any jurisdiction that the 

18 Commission may otherwise have under any 

19 other provision of this Act over an agree20 ment, contract, or transaction that is a 

21 contract of sale of a commodity for future 

22 delivery. 

23 ‘‘(vi) This subparagraph shall not be 

24 construed to limit any jurisdiction that the 

25 Commission or the Securities and ExVerDate Aug 31 2005 04:50 Apr 12, 2008 Jkt 069200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5768.IH H5768

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1 change Commission may otherwise have 

2 under any other provision of this Act with 

3 respect to security futures products and 

4 persons effecting transactions in security 

5 futures products.’’. 

6 (b) EFFECTIVE DATE.—Clause (iii) of section 

7 2(c)(2)(B) and clause (iii) of section 2(c)(2)(C) of such 

8 Act, as amended by subsection (a) of this section, shall 

9 be effective 120 days after the date of the enactment of 

10 this Act or such other time as the Commodity Futures 

11 Trading Commission shall determine. 

12 SEC. 102. LIAISON WITH DEPARTMENT OF JUSTICE. 

13 Section 2(a)(9) of the Commodity Exchange Act (7 

14 U.S.C. 2(a)(9)) is amended by adding at the end the fol15 lowing: 

16 ‘‘(C) LIAISON WITH DEPARTMENT OF JUS17 TICE.— 

18 ‘‘(i) IN GENERAL.—The Commission 

19 shall, in cooperation with the Attorney 

20 General, maintain a liaison between the 

21 Commission and the Department of Jus22 tice to coordinate civil and criminal inves23 tigations and prosecutions of violations of 

24 this Act as appropriate. 


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1 ‘‘(ii) DESIGNATION.—The Attorney 

2 General shall designate a person as liaison 

3 and take such steps as are necessary to fa4 cilitate communications described in clause 

5 (i).’’. 

6 SEC. 103. ANTI-FRAUD AUTHORITY OVER PRINCIPAL-TO7 PRINCIPAL TRANSACTIONS. 

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

9 Section 6b) is amended— 

10 (1) by redesignating subsections (b) and (c) as 

11 subsections (c) and (d), respectively; and 

12 (2) by striking ‘‘SEC.4b.’’ and all that follows 

13 through the end of subsection (a) and inserting the 

14 following 

15 ‘‘(a) UNLAWFUL ACTIONS.—It shall be unlawful— 

16 ‘‘(1) for any person, in or in connection with 

17 any order to make, or the making of, any contract 

18 of sale of any commodity in interstate commerce or 

19 for future delivery that is made, or to be made, on 

20 or subject to the rules of a designated contract mar21 ket, for or on behalf of any other person; or 

22 ‘‘(2) for any person, in or in connection with 

23 any order to make, or the making of, any contract 

24 of sale of any commodity for future delivery, or 

25 other agreement, contract, or transaction subject to 


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1 paragraphs (1) and (2) of section 5a(g), that is 

2 made, or to be made, for or on behalf of, or with, 

3 any other person, other than on or subject to the 

4 rules of a designated contract market— 

5 ‘‘(A) to cheat or defraud or attempt to 

6 cheat or defraud the other person; 

7 ‘‘(B) willfully to make or cause to be made 

8 to the other person any false report or state9 ment or willfully to enter or cause to be entered 

10 for the other person any false record; 

11 ‘‘(C) willfully to deceive or attempt to de12 ceive the other person by any means whatsoever 

13 in regard to any order or contract or the dis14 position or execution of any order or contract, 

15 or in regard to any act of agency performed, 

16 with respect to any order or contract for or, in 

17 the case of section 5a(g)(2), with the other per18 son; or 

19 ‘‘(D)(i) to bucket an order if the order is 

20 either represented by the person as an order to 

21 be executed, or is required to be executed, on or 

22 subject to the rules of a designated contract 

23 market; or 

24 ‘‘(ii) to fill an order by offset against the 

25 order or orders of any other person, or willfully 


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1 and knowingly and without the prior consent of 

2 the other person to become the buyer in respect 

3 to any selling order of the other person, or be4 come the seller in respect to any buying order 

5 of the other person, if the order is either rep6 resented by the person as an order to be exe7 cuted, or is required to be executed, on or sub8 ject to the rules of a designated contract mar9 ket unless the order is executed in accordance 

10 with the rules of the designated contract mar11 ket. 

12 ‘‘(b) CLARIFICATION.—Subsection (a)(2) of this sec13 tion shall not obligate any person, in or in connection with 

14 a transaction in a contract of sale of a commodity for fu15 ture delivery, or other agreement, contract or transaction 

16 subject to paragraphs (1) and (2) of section 5a(g), with 

17 another person, to disclose to the other person nonpublic 

18 information that may be material to the market price, 

19 rate, or level of the commodity or transaction, except as 

20 necessary to make any statement made to the other person 

21 in or in connection with the transaction not misleading 

22 in any material respect.’’. 


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1 SEC. 104. CRIMINAL AND CIVIL PENALTIES. 

2 (a) ENFORCEMENT POWERS OF THE COMMISSION.— 

3 Section 6(c) of the Commodity Exchange Act (7 U.S.C. 

4 9, 15) is amended in paragraph (3) of the 10th sentence— 

5 (1) by inserting ‘‘(A)’’ after ‘‘assess such per6 son’’; and 

7 (2) by inserting after ‘‘each such violation’’ the 

8 following: ‘‘, or (B) in any case of manipulation or 

9 attempted manipulation in violation of this sub10 section, subsection (d) of this section, or section 

11 9(a)(2), a civil penalty of not more than the greater 

12 of $1,000,000 or triple the monetary gain to the 

13 person for each such violation,’’. 

14 (b) NONENFORCEMENT OF RULES OF GOVERNMENT

15 OR OTHER VIOLATIONS.—Section 6b of such Act (7 

16 U.S.C. 13a) is amended— 

17 (1) in the first sentence, by inserting before the 

18 period at the end the following: ‘‘, or, in any case 

19 of manipulation or attempted manipulation in viola20 tion of section 6(c), 6(d), or 9(a)(2), a civil penalty 

21 of not more than $1,000,000 for each such viola22 tion’’; and 

23 (2) in the second sentence, by inserting before 

24 the period at the end the following: ‘‘, except that 

25 if the failure or refusal to obey or comply with the 

26 order involved any offense under section 9(a)(2), the 


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1 registered entity, director, officer, agent, or employee 

2 shall be guilty of a felony and, on conviction, shall 

3 be subject to penalties under section 9(a)(2)’’. 

4 (c) ACTION TO ENJOIN OR RESTRAIN VIOLATIONS.— 

5 Section 6c(d) of such Act (7 U.S.C. 13a–1(d)) is amended 

6 by striking ‘‘(d)’’ and all that follows through the end of 

7 paragraph (1) and inserting the following: 

8 ‘‘(d) CIVIL PENALTIES.— 

9 ‘‘(1) IN GENERAL.—In any action brought 

10 under this section, the Commission may seek and 

11 the court shall have jurisdiction to impose, on a 

12 proper showing, on any person found in the action 

13 to have committed any violation— 

14 ‘‘(A) a civil penalty in the amount of not 

15 more than the greater of $100,000 or triple the 

16 monetary gain to the person for each violation; 

17 or 

18 ‘‘(B) in any case of manipulation or at19 tempted manipulation in violation of section 

20 6(c), 6(d), or 9(a)(2), a civil penalty in the 

21 amount of not more than the greater of 

22 $1,000,000 or triple the monetary gain to the 

23 person for each violation.’’. 

24 (d) VIOLATIONS GENERALLY.—Section 9 of such Act 

25 (7 U.S.C. 13) is amended— 


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1 (1) in subsection (a), in the matter preceding 

2 paragraph (1)— 

3 (A) by striking ‘‘(or $500,000 in the case 

4 of a person who is an individual)’’; and 

5 (B) by striking ‘‘five years’’ and inserting 

6 ‘‘10 years’’; 

7 (2) by re-designating subsection (f) as sub8 section (e); and 

9 (3) in paragraph (1) of subsection (e) (as redes10 ignated by paragraph (2)), by striking the period at 

11 the end and inserting ‘‘; or’’. 

12 SEC. 105. AUTHORIZATION OF APPROPRIATIONS. 

13 Section 12(d) of the Commodity Exchange Act (7 

14 U.S.C. 16(d)) is amended to read as follows: 

15 ‘‘(d) There are authorized to be appropriated such 

16 sums as are necessary to carry out this Act for each of 

17 the fiscal years 2008 through 2013.’’. 

18 SEC. 106. TECHNICAL AND CONFORMING AMENDMENTS. 

19 (a) Section 4a(e) of the Commodity Exchange Act (7 

20 U.S.C. 6a(e)) is amended in the last proviso by striking 

21 ‘‘section 9(c)’’ and inserting ‘‘section 9(a)(5)’’. 

22 (b) Section 4f(c)(4)(B)(i) of such Act (7 U.S.C. 

23 6f(c)(4)(B)(i)) is amended by striking ‘‘compiled’’ and in24 serting ‘‘complied’’. 


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1 (c) Section 4k of such Act (7 U.S.C. 6k) is amended 

2 by redesignating the second paragraph (5) as paragraph 

3 (6). 

4 (d) The Commodity Exchange Act is amended— 

5 (1) by redesignating the first section 4p (7 

6 U.S.C. 6o–1), as added by section 121 of the Com7 modity Futures Modernization Act of 2000, as sec8 tion 4q; and 

9 (2) by moving such section to after the second 

10 section 4p, as added by section 206 of Public Law 

11 93–446. 

12 (e) Subsections (a)(1) and (d)(1) of section 5c of such 

13 Act (7 U.S.C. 7a–2(a)(1), (d)(1)) are each amended by 

14 striking ‘‘5b(d)(2)’’ and inserting ‘‘5b(c)(2)’’. 

15 (f) Sections 5c(f) and 17(r) of such Act (7 U.S.C. 

16 7a–2(f), 21(r)) are each amended by striking ‘‘4d(3)’’ and 

17 inserting ‘‘4d(c)’’. 

18 (g) Section 8(a)(1) of such Act (7 U.S.C. 12(a)(1)) 

19 is amended in the matter following subparagraph (B)— 

20 (1) by striking ‘‘commenced’’ in the 2nd place 

21 it appears; and 

22 (2) by inserting ‘‘commenced’’ after ‘‘in a judi23 cial proceeding’’. 


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1 (h) Section 22(a)(2) of such Act (7 U.S.C. 25(a)(2)) 

2 is amended by striking ‘‘5b(b)(1)(E)’’ and inserting 

3 ‘‘5b(c)(2)(H)’’. 

4 SEC. 107. PORTFOLIO MARGINING AND SECURITY INDEX 

5 ISSUES. 

6 (a) The agencies represented on the President’s 

7 Working Group on Financial Markets shall work to ensure 

8 that the Securities and Exchange Commission (SEC), the 

9 Commodity Futures Trading Commission (CFTC), or 

10 both, as appropriate, have taken the actions required 

11 under subsection (b). 

12 (b) The SEC, the CFTC, or both, as appropriate, 

13 shall take action under their existing authorities to per14 mit— 

15 (1) by September 30, 2008, risk-based portfolio 

16 margining for security options and security futures 

17 products; and 

18 (2) by June 30, 2008, the trading of futures on 

19 certain security indexes by resolving issues related to 

20 foreign security indexes. 


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1 TITLE II—SIGNIFICANT PRICE 

2 DISCOVERY CONTRACTS ON 

3 EXEMPT COMMERCIAL MAR4 KETS 

5 SEC. 201. SIGNIFICANT PRICE DISCOVERY CONTRACTS. 

6 (a) DEFINITIONS.—Section 1a of the Commodity Ex7 change Act (7 U.S.C. 1a) is amended— 

8 (1) by redesignating paragraph (33) as para9 graph (34); and 

10 (2) by inserting after paragraph (32) the fol11 lowing: 

12 ‘‘(33) SIGNIFICANT PRICE DISCOVERY CON13 TRACT.—The term ‘significant price discovery con14 tract’ means an agreement, contract, or transaction 

15 subject to section 2(h)(7)(A).’’. 

16 (b) STANDARDS APPLICABLE TO SIGNIFICANT PRICE

17 DISCOVERY CONTRACTS.—Section 2(h) of such Act (7 

18 U.S.C. 2(h)) is amended by adding at the end the fol19 lowing: 

20 ‘‘(7) STANDARDS APPLICABLE TO SIGNIFICANT

21 PRICE DISCOVER CONTRACTS.— 

22 ‘‘(A) IN GENERAL.—An agreement, con23 tract, or transaction conducted in reliance on 

24 the exemption in paragraph (3) shall be subject 

25 to the provisions of subparagraphs (B) through 


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1 (E), under such rules and regulations as the 

2 Commission may promulgate, provided that the 

3 Commission determines, in its discretion, that 

4 the agreement, contract, or transaction per5 forms a significant price discovery function as 

6 described in subparagraph (B). 

7 ‘‘(B) SIGNIFICANT PRICE DISCOVERY DE8 TERMINATION.—In making a determination 

9 whether an agreement, contract, or transaction 

10 performs a significant price discovery function, 

11 the Commission shall consider, as appropriate: 

12 ‘‘(i) PRICE LINKAGE.—The extent to 

13 which the agreement, contract, or trans14 action uses or otherwise relies on a daily or 

15 final settlement price, or other major price 

16 parameter, of a contract or contracts list17 ed, for trading on or subject to the rules 

18 of a designated contract market or a de19 rivatives transaction execution facility, or a 

20 significant price discovery contract traded 

21 on an electronic trading facility, to value a 

22 position, transfer or convert a position, 

23 cash or financially settle a position, or 

24 close out a position. 


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1 ‘‘(ii) ARBITRAGE.—The extent to 

2 which the price for the agreement, con3 tract, or transaction is sufficiently related 

4 to the price of a contract or contracts list5 ed for trading on or subject to the rules of 

6 a designated contract market or derivatives 

7 transaction execution facility so as to per8 mit market participants to effectively arbi9 trage between the markets by simulta10 neously maintaining positions or executing 

11 trades in the contracts on the electronic 

12 trading facility and the designated contract 

13 market or derivatives transaction execution 

14 facility on a frequent and recurring basis. 

15 ‘‘(iii) MATERIAL PRICE REF16 ERENCE.—The extent to which, on a fre17 quent and recurring basis, bids, offers, or 

18 transactions in a commodity are directly 

19 based on, or are determined by ref20 erencing, the prices generated by agree21 ments, contracts, or transactions being 

22 traded or executed on the electronic trad23 ing facility. 

24 ‘‘(iv) MATERIAL LIQUIDITY.—The ex25 tent to which the volume of agreements, 


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1 contracts, or transactions in the com2 modity being traded on the electronic trad3 ing facility is sufficient to have a material 

4 impact on other agreements, contracts, or 

5 transactions listed for trading on or sub6 ject to the rules of a designated contract 

7 market, a derivatives trading execution fa8 cility, or an electronic trading facility oper9 ating in reliance on the exemption in para10 graph (3). 

11 ‘‘(v) OTHER MATERIAL FACTORS.— 

12 Such other material factors as the Com13 mission specifies by rule as relevant to de14 termine whether an agreement, contract, 

15 or transaction serves a significant price 

16 discovery function. 

17 ‘‘(C) CORE PRINCIPLES APPLICABLE TO

18 SIGNIFICANT PRICE DISCOVERY CONTRACTS.— 

19 ‘‘(i) IN GENERAL.—An electronic 

20 trading facility on which significant price 

21 discovery contracts are traded or executed 

22 shall, with respect to those contracts, com23 ply with the core principles specified in this 

24 subparagraph. 


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1 ‘‘(ii) CORE PRINCIPLES.—The elec2 tronic trading facility shall have reasonable 

3 discretion in establishing the manner in 

4 which it complies with the following core 

5 principles: 

6 ‘‘(I) CONTRACTS NOT READILY

7 SUSCEPTIBLE TO MANIPULATION.— 

8 The electronic trading facility shall 

9 list only significant price discovery 

10 contracts that are not readily suscep11 tible to manipulation. 

12 ‘‘(II) MONITORING OF TRAD13 ING.—The electronic trading facility 

14 shall monitor trading in significant 

15 price discovery contracts to prevent 

16 market manipulation, price distortion, 

17 and disruptions of the delivery or 

18 cash-settlement process through mar19 ket surveillance, compliance, and dis20 ciplinary practices and procedures, in21 cluding methods for conducting real22 time monitoring of trading and com23 prehensive and accurate trade recon24 structions. 


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1 ‘‘(III) ABILITY TO OBTAIN IN2 FORMATION.—The electronic trading 

3 facility shall— 

4 ‘‘(aa) establish and enforce 

5 rules that will allow the electronic 

6 trading facility to obtain any nec7 essary information to perform 

8 any of the functions described in 

9 this subparagraph; 

10 ‘‘(bb) provide the informa11 tion to the Commission upon re12 quest; and 

13 ‘‘(cc) have the capacity to 

14 carry out such international in15 formation-sharing agreements as 

16 the Commission may require. 

17 ‘‘(IV) POSITION LIMITATIONS OR

18 ACCOUNTABILITY.—The electronic 

19 trading facility shall adopt position 

20 limitations or position accountability 

21 for speculators in significant price dis22 covery contracts, where necessary and 

23 appropriate, to reduce the potential 

24 threat of market manipulation, price 

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1 livery or cash-settlement process or 

2 congestion, especially during trading 

3 in the delivery month. 

4 ‘‘(V) EMERGENCY AUTHORITY.— 

5 The electronic trading facility shall 

6 adopt rules to provide for the exercise 

7 of emergency authority, in consulta8 tion or cooperation with the Commis9 sion, where necessary and appro10 priate, including the authority— 

11 ‘‘(aa) to liquidate open posi12 tions in a significant price dis13 covery contract; and 

14 ‘‘(bb) to suspend or curtail 

15 trading in a significant price dis16 covery contract. 

17 ‘‘(VI) DAILY PUBLICATION OF

18 TRADING INFORMATION.—The elec19 tronic trading facility shall make pub20 lic daily information on price, trading 

21 volume, and other trading data for 

22 significant price discovery contracts, 

23 as the Commission considers appro24 priate. 


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1 ‘‘(VII) COMPLIANCE WITH

2 RULES.—The electronic trading facil3 ity shall monitor and enforce compli4 ance with any rules of the electronic 

5 trading facility applicable to signifi6 cant price discovery contracts, includ7 ing the terms and conditions of the 

8 contracts and any limitations on ac9 cess to the electronic trading facility 

10 with respect to the contracts. 

11 ‘‘(VIII) CONFLICT OF INTER12 EST.—The electronic trading facility 

13 shall— 

14 ‘‘(aa) establish and enforce 

15 rules to minimize conflicts of in16 terest in its decision-making 

17 process; and 

18 ‘‘(bb) establish a process for 

19 resolving the conflicts. 

20 ‘‘(IX) ANTITRUST CONSIDER21 ATIONS.—Unless necessary or appro22 priate to achieve the purposes of this 

23 Act, the electronic trading facility 

24 shall endeavor to avoid— 


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1 ‘‘(aa) adopting any rules or 

2 taking any actions that result in 

3 any unreasonable restraints of 

4 trade; or 

5 ‘‘(bb) imposing any material 

6 anticompetitive burden on trad7 ing on the electronic trading fa8 cility. 

9 ‘‘(D) IMPLEMENTATION.—The electronic 

10 trading facility shall have discretion to take into 

11 account differences between cleared and 

12 uncleared significant price discovery contracts 

13 in applying core principles in subclauses (IV) 

14 and (V) of subparagraph (C)(ii), and the Com15 mission shall take the differences into consider16 ation when reviewing the implementation of the 

17 core principles by an electronic trading facility. 

18 ‘‘(E) NEW SIGNIFICANT PRICE DISCOVERY

19 CONTRACTS.— 

20 ‘‘(i) NOTIFICATION.—An electronic 

21 trading facility shall notify the Commission 

22 whenever the electronic trading facility has 

23 reason to believe that an agreement, con24 tract, or transaction conducted in reliance 

25 on the exemption provided in paragraph 


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1 (3) displays any of the factors relating to 

2 a significant price discovery function as de3 scribed in subparagraph (B) (including 

4 regulations under this paragraph). 

5 ‘‘(ii) REVIEW.—In addition to any re6 view conducted upon receiving a notifica7 tion pursuant to clause (i), at any other 

8 such time the Commission determines to 

9 be appropriate, but at least on an annual 

10 basis, the Commission shall conduct an 

11 evaluation, appropriate to the agreement, 

12 contract, or transaction, to determine 

13 whether any agreement, contract, or trans14 action conducted on an electronic trading 

15 facility in reliance on the exemption pro16 vided in paragraph (3) is performing a sig17 nificant price discovery function.’’. 

18 SEC. 202. LARGE TRADER REPORTING. 

19 (a) REPORTING AND RECORDKEEPING.—Section 

20 4g(a) of the Commodity Exchange Act (7 U.S.C. 6g(a)) 

21 is amended by striking ‘‘elsewhere;’’ and inserting ‘‘else22 where, and in any significant price discovery contract trad23 ed or executed on an electronic trading facility;’’. 


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1 (b) REPORTS OF POSITIONS EQUAL TO OR IN EX2 CESS OF TRADING LIMITS.—Section 4i of such Act (7 

3 U.S.C. 6i) is amended— 

4 (1) by inserting ‘‘, or any significant price dis5 covery contract on an electronic trading facility’’ 

6 after ‘‘subject to the rules of any contract market or 

7 derivatives transaction execution facility’’ ; and 

8 (2) by inserting in the matter following para9 graph (2), ‘‘or electronic trading facility’’ after ‘‘sub10 ject to the rules of any other board of trade’’. 

11 SEC. 203. CONFORMING AMENDMENTS. 

12 (a) Section 1a(12)(A)(x) of the Commodity Exchange 

13 Act (7 U.S.C. 1a(12)(A)(x)) is amended by inserting 

14 ‘‘(other than an electronic trading facility with respect to 

15 a significant price discovery contract)’’ after ‘‘registered 

16 entity’’. 

17 (b) Section 1a(29) of such Act (7 U.S.C. 1a(29)) is 

18 amended— 

19 (1) in subparagraph (C), by striking ‘‘and’’ at 

20 the end; 

21 (2) in subparagraph (D), by striking the period 

22 and inserting ‘‘; and’’; and 

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

24 ‘‘(E) with respect to a contract that the 

25 Commission determines is a significant price 


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1 discovery contract, any electronic trading facil2 ity on which the contract is executed or trad3 ed.’’. 

4 (c)(1) Section 2(a)(1)(A) of such Act (7 U.S.C. 

5 2(a)(1)(A)) is amended by inserting after ‘‘section 19 of 

6 this Act’’ the following: ‘‘, and significant price discovery 

7 contracts traded or executed on an electronic trading facil8 ity’’. 

9 (2) Nothing contained in this title or amendments 

10 made by this title shall be construed to affect the jurisdic11 tion that the Commission or any regulatory authority may 

12 otherwise have under any other provision of law with re13 spect to contracts, agreements, or transactions that are 

14 not significant price discovery contracts. 

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

16 is amended by striking ‘‘paragraph (4)’’ and inserting 

17 ‘‘paragraphs (4) and (7)’’. 

18 (e) Section 2(h)(4) of such Act (7 U.S.C. 2(h)(4)) 

19 is amended by striking subparagraph (D) and inserting 

20 the following: 

21 ‘‘(D) such rules, regulations, and orders as 

22 the Commission may issue to ensure timely 

23 compliance with any of the provisions of this 

24 Act applicable to a significant price discovery 


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1 contract traded on or executed on any electronic 

2 trading facility.’’. 

3 (f) Section 2(h)(5)(B)(iii)(I) of such Act (7 U.S.C. 

4 2(h)(5)(B)(iii)(I)) is amended by inserting ‘‘or to make 

5 the determination described in subparagraph (B) of para6 graph (7)’’ after ‘‘paragraph (4)’’. 

7 (g) Section 4a of such Act (7 U.S.C. 6a) is amend8 ed— 

9 (1) in subsection (a)— 

10 (A) in the first sentence, by inserting ‘‘, or 

11 on electronic trading facilities with respect to a 

12 significant price discovery contract’’ after ‘‘de13 rivatives transaction execution facilities’’; and 

14 (B) in the second sentence, by inserting ‘‘, 

15 or on an electronic trading facility with respect 

16 to a significant price discovery contract,’’ after 

17 ‘‘derivatives transaction execution facility’’; and 

18 (2) in subsection (b)— 

19 (A) in paragraph (1), by inserting ‘‘or elec20 tronic trading facility with respect to a signifi21 cant price discovery contract’’ after ‘‘facility or 

22 facilities’’; and 

23 (B) in paragraph (2), by inserting ‘‘or elec24 tronic trading facility with respect to a signifiVerDate Aug 31 2005 04:50 Apr 12, 2008 Jkt 069200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 E:\BILLS\H5768.IH H5768

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1 cant price discovery contract’’ after ‘‘derivatives 

2 transaction execution facility’’; and 

3 (3) in subsection (e)— 

4 (A) in the first sentence— 

5 (i) by inserting ‘‘or by any electronic 

6 trading facility’’ after ‘‘registered by the 

7 Commission’’; 

8 (ii) by inserting ‘‘or on an electronic 

9 trading facility’’ after ‘‘derivatives trans10 action execution facility’’ the second place 

11 it appears; and 

12 (iii) by inserting ‘‘or electronic trading 

13 facility’’ before ‘‘or such board of trade’’ 

14 each place it appears; and 

15 (B) in the second sentence, by inserting 

16 ‘‘or electronic trading facility with respect to a 

17 significant price discovery contract’’ after ‘‘reg18 istered by the Commission’’. 

19 (h) Section 5a(d) of such Act (7 U.S.C. 7a(d)(1)) is 

20 amended— 

21 (1) by redesignating paragraphs (4) through 

22 (9) as paragraphs (5) through (10); and 

23 (2) by inserting after paragraph (3) the fol24 lowing: 


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1 ‘‘(4) POSITION LIMITS OR ACCOUNTABILITY.— 

2 To reduce the potential threat of market manipula3 tion, price distortion, and disruption of the delivery 

4 or cash-settled process or congestion, especially dur5 ing trading in the delivery month, the derivatives 

6 transaction execution facility shall adopt position 

7 limits or position accountability for speculators, 

8 where necessary and appropriate for a contract, 

9 agreement or transaction with an underlying com10 modity that has a physically deliverable supply.’’. 

11 (i) Section 5c(a) of such Act (7 U.S.C. 7a–2(a)) is 

12 amended in paragraph (1) by inserting ‘‘, and section 

13 2(h)(7) with respect to significant price discovery con14 tracts,’’ after ‘‘, and 5b(d)(2)’’. 

15 (j) Section 5c(b) of such Act (7 U.S.C. 7a–2(b)) is 

16 amended— 

17 (1) by striking paragraph (1) and inserting fol18 lowing: 

19 ‘‘(1) IN GENERAL.—A contract market, deriva20 tives transaction execution facility, or electronic 

21 trading facility with respect to a significant price 

22 discovery contract may comply with any applicable 

23 core principle through delegation of any relevant 

24 function to a registered futures association or a regVerDate Aug 31 2005 04:50 Apr 12, 2008 Jkt 069200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\H5768.IH H5768

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1 istered entity that is not an electronic trading facil2 ity.’’; 

3 (2) in paragraph (2), by striking ‘‘contract 

4 market or derivatives transaction execution facility’’ 

5 and inserting ‘‘contract market, derivatives trans6 action execution facility, or electronic trading facil7 ity’’; and 

8 (3) in paragraph (3), by striking ‘‘contract 

9 market or derivatives transaction execution facility’’ 

10 each place it appears and inserting ‘‘contract mar11 ket, derivatives transaction execution facility, or 

12 electronic trading facility’’. 

13 (k) Section 5c(d)(1) of such Act (7 U.S.C. 7a– 

14 2(d)(1)) is amended by inserting ‘‘or 2(h)(7)(C) with re15 spect to a significant price discovery contract traded or 

16 executed on an electronic trading facility,’’ after 

17 ‘‘5b(d)(2)’’. 

18 (l) Section 5e of such Act (7 U.S.C. 7b) is amended 

19 by inserting ‘‘, or revocation of the right of an electronic 

20 trading facility to rely on the exemption set forth in sec21 tion 2(h)(3) with respect to a significant price discovery 

22 contract,’’ after ‘‘revocation of designation as a registered 

23 entity’’ ; 

24 (m) Section 6(b) of such Act (7 U.S.C. 8(b)) is 

25 amended by striking the first sentence and all that follows 


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1 through ‘‘Provided,’’ and inserting the following: ‘‘The 

2 Commission may suspend for a period not to exceed 6 

3 months or revoke the designation or registration of any 

4 contract market or derivatives transaction execution facil5 ity, or revoke the right of an electronic trading facility to 

6 rely on the exemption set forth in section 2(h)(3) with re7 spect to a significant price discovery contract, on a show8 ing that the contract market or derivatives transaction 

9 execution facility is not enforcing or has not enforced its 

10 rules of government, made a condition of its designation 

11 or registration as set forth in sections 5 through 5b or 

12 section 5f, or that the contract market, derivatives trans13 action execution facility, or electronic trading facility, or 

14 any director, officer, agent, or employee thereof, otherwise 

15 is violating or has violated any of the provisions of this 

16 Act or any of the rules, regulations, or orders of the Com17 mission under this Act. The suspension or revocation shall 

18 only be made after a notice to the officers of the contract 

19 market, derivatives transaction execution facility, or elec20 tronic trading facility and upon a hearing on the record: 

21 Provided,’’. 

22 SEC. 204. EFFECTIVE DATE. 

23 (a) IN GENERAL.—Except as provided in this section, 

24 this title shall become effective on the date of enactment 

25 of this Act. 


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1 (b) SIGNIFICANT PRICE DISCOVERY STANDARDS

2 RULEMAKING.—The Commodity Futures Trading Com3 mission shall— 

4 (1) not later than 180 days after the date of 

5 the enactment of this Act, issue a proposed rule re6 garding the significant price discovery standards in 

7 section 2(h)(7) of the Commodity Exchange Act; 

8 and 

9 (2) not later than 270 days after the date of 

10 enactment of this Act, issue a final rule. 

11 (c) SIGNIFICANT PRICE DISCOVERY DETERMINA12 TIONS.—With respect to any electronic trading facility (as 

13 defined in section 1a(10) of the Commodity Exchange Act) 

14 operating on the effective date of the final rule regarding 

15 the significant price discovery standards referred to in 

16 subsection (b) of this section, the Commodity Futures 

17 Trading Commission shall complete a review of the agree18 ments, contracts, and transactions of the facilities not 

19 later than 180 days after that effective date to determine 

20 whether any such agreement, contract, or transaction per21 forms a significant price discovery function. 

Æ 


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