Customer Protection and End User Relief Act

To reauthorize the Commodity Futures Trading Commission, to better protect futures customers, to provide end users with market certainty, to make basic reforms to ensure transparency and accountability at the Commission, to help farmers, ranchers, and end users manage risks to help keep consumer costs low, and for other purposes. 1. Short title This Act may be cited as the Customer Protection and End User Relief Act 2. Table of contents The table of contents of this Act is as follows: Sec. 1. Short title. Sec. 2. Table of contents. Title I—Customer protections Sec. 101. Short title. Sec. 102. Enhanced protections for futures customers. Sec. 103. Electronic confirmation of customer funds. Sec. 104. Notice and certifications providing additional customer protections. Sec. 105. Futures commission merchant compliance. Sec. 106. Certainty for futures customers and market participants. Sec. 107. Study on high-frequency trading. Title II—Commodity Futures Trading Commission reforms Sec. 201. Short title. Sec. 202. Extension of operations. Sec. 203. Consideration by the Commodity Futures Trading Commission of the costs and benefits of its regulations and orders. Sec. 204. Division directors. Sec. 205. Office of the Chief Economist. Sec. 206. Procedures governing actions taken without a commission vote. Sec. 207. Strategic technology plan. Sec. 208. Internal risk controls. Sec. 209. Subpoena duration and renewal. Sec. 210. Implementation plan for Commission rulemakings. Sec. 211. Applicability of notice and comment requirements of the Administrative Procedure Act to guidance voted on by the Commission. Sec. 212. Judicial review of Commission rules. Sec. 213. GAO study on adequacy of CFTC resources. Title III—End-user relief Sec. 301. Short title. Subtitle A—End-User exemption from margin requirements Sec. 311. End-user margin requirements. Sec. 312. Implementation. Subtitle B—Inter-Affiliate swaps Sec. 321. Treatment of affiliate transactions. Subtitle C—Indemnification requirements related to swap data repositories Sec. 331. Indemnification requirements. Subtitle D—Relief for municipal utilities Sec. 341. Transactions with utility special entities. Sec. 342. Utility special entity defined. Sec. 343. Utility operations-related swap. Subtitle E—End-User regulatory relief Sec. 351. End users not treated as financial entities. Sec. 352. Reporting of illiquid swaps so as to not disadvantage certain non-financial end users. Sec. 353. Relief for grain elevator operators, farmers, agricultural coun­ter­par­ties, and commercial market participants. Sec. 354. Relief for end users who use physical contracts with volumetric optionality. Sec. 355. Commission vote required before automatic change of swap dealer de minimis level. Sec. 356. Capital requirements for non-bank swap dealers. Sec. 357. Harmonization with the Jumpstart Our Business Startups Act. Sec. 358. Bona fide hedge defined to protect end user risk management needs. Sec. 359. Cross-border regulation of derivatives transactions. Subtitle F—Effective date Sec. 371. Effective date. I Customer protections 101. Short title This title may be cited as the Futures Customer Protection Act 102. Enhanced protections for futures customers Section 17 of the Commodity Exchange Act ( 7 U.S.C. 21 (s) A registered futures association shall— (1) require each member of the association that is a futures commission merchant to maintain written policies and procedures regarding the maintenance of— (A) the residual interest of the member, as described in section 1.23 (B) the residual interest of the member, as described in section 22.2(e)(4) of such title, in any cleared swaps customer collateral account of the member, as identified in section 22.2 of such title; and (2) establish rules to govern the withdrawal, transfer or disbursement by any member of the association, that is a futures commission merchant, of the member's residual interest in customer segregated funds as provided in such section 1.20, in foreign futures and foreign options customer secured amount funds, identified as provided in such section 30.7, and from a cleared swaps customer collateral, identified as provided in such section 22.2. . 103. Electronic confirmation of customer funds Section 17 of the Commodity Exchange Act ( 7 U.S.C. 21 (t) A registered futures association shall require any member of the association that is a futures commission merchant to— (1) use an electronic system or systems to report financial and operational information to the association, including information related to customer segregated funds, foreign futures and foreign options customer secured amount funds accounts, and cleared swaps customer collateral, in accordance with such terms, conditions, documentation standards, and regular time intervals as are established by the association; (2) instruct each depository, including any bank, trust company, derivatives clearing organization, or futures commission merchant, holding customer segregated funds under section 1.20 (3) hold section 1.20 customer segregated funds, section 30.7 foreign futures and foreign options customer secured amount funds and section 22.2 cleared swaps customer funds in a depository that reports the balances in these accounts of the futures commission merchant held at the depository to the registered futures association or another party designated by the registered futures association in the form, manner, and interval prescribed by the registered futures association. . 104. Notice and certifications providing additional customer protections Section 17 of the Commodity Exchange Act ( 7 U.S.C. 21 (u) A futures commission merchant that has adjusted net capital in an amount less than the amount required by regulations established by the Commission or a self-regulatory organization of which the futures commission merchant is a member shall immediately notify the Commission and the self-regulatory organization of this occurrence. (v) A futures commission merchant that does not hold a sufficient amount of funds in segregated accounts for futures customers under section 1.20 (w) Within such time period established by the Commission after the end of each fiscal year, a futures commission merchant shall file with the Commission a report from the chief compliance officer of the futures commission merchant containing an assessment of the internal compliance programs of the futures commission merchant. . 105. Futures commission merchant compliance (a) In general Section 4d(a) of the Commodity Exchange Act ( 7 U.S.C. 6d(a) (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B) and by moving the margins of such subparagraphs two ems to the right; (2) by inserting (1) It shall be unlawful (3) by adding at the end the following new paragraph: (2) Any rules or regulations requiring a futures commission merchant to maintain a residual interest in accounts held for the benefit of customers in amounts at least sufficient to exceed the sum of all uncollected margin deficits of such customers shall provide that a futures commission merchant shall meet its residual interest requirement as of the end of each business day calculated as of the close of business on the previous business day. . (b) Conforming amendment Section 4d(h) of the Commodity Exchange Act ( 7 U.S.C. 6d(h) Notwithstanding subsection (a)(2) Notwithstanding subsection (a)(1)(B) 106. Certainty for futures customers and market participants Section 20(a) of the Commodity Exchange Act ( 7 U.S.C. 24(a) (1) by striking and (2) by striking the period at the end of paragraph (5) and inserting ; and (3) by adding at the end the following: (6) that cash, securities, or other property of the estate of a commodity broker, including the trading or operating accounts of the commodities broker and commodities held in inventory by the commodity broker, shall be included in customer property, but only to the extent that the property that is otherwise customer property is insufficient to satisfy the net equity claims of public customers (as such term may be defined by the Commission by rule or regulation) of the commodity broker. . 107. Study on high-frequency trading (a) In general Not later than one year after the date of the enactment of this Act, the Commodity Futures Trading Commission 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 examining the effect of the practice commonly referred to as high-frequency trading on markets under its jurisdiction. (b) Specific areas examined in report In preparing the report submitted under subsection (a), the Commission shall particularly examine each of the following areas: (1) The technology, personnel, or other resources the Commission may require for purposes of monitoring the effect of high-frequency trading. (2) The role such trading plays in providing market liquidity. (3) Whether the technology creates discrepancies in the marketplace between market participants. (4) Whether the existing authority of the Commission with respect to such trading is sufficient to meet the Commission’s mission to— (A) protect market participants and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives; and (B) foster transparent, open, competitive, and financially sound markets. II Commodity Futures Trading Commission reforms 201. Short title This title may be cited as the Commodity Futures Trading Commission Reform Act 202. Extension of operations Section 12(d) of the Commodity Exchange Act ( 7 U.S.C. 16(d) 2013 2018 203. Consideration by the Commodity Futures Trading Commission of the costs and benefits of its regulations and orders Section 15(a) of the Commodity Exchange Act ( 7 U.S.C. 19(a) (1) In general Before promulgating a regulation under this Act or issuing an order (except as provided in paragraph (3)), the Commission, through the Office of the Chief Economist, shall assess and publish in the regulation or order the costs and benefits, both qualitative and quantitative, of the proposed regulation or order, and the proposed regulation or order shall state its statutory justification. (2) Considerations In making a reasoned determination of the costs and the benefits, the Commission shall evaluate— (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets; (C) considerations of the impact on market liquidity in the futures and swaps markets; (D) considerations of price discovery; (E) considerations of sound risk management practices; (F) available alternatives to direct regulation; (G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction; (H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify); (I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other Federal regulations or orders; (J) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and (K) other public interest considerations. . 204. Division directors Section 2(a)(6)(C) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(6)(C) , and the heads of the units shall serve at the pleasure of the Commission, report directly to the Commission, and perform such functions and duties as the Commission may prescribe 205. Office of the Chief Economist (a) In general Section 2(a) of the Commodity Exchange Act ( 7 U.S.C. 2(a) (17) Office of the chief economist (A) Establishment There is established in the Commission the Office of the Chief Economist. (B) Head The Office of the Chief Economist shall be headed by the Chief Economist, who shall be appointed by the Commission and serve at the pleasure of the Commission. (C) Functions The Chief Economist shall report directly to the Commission and perform such functions and duties as the Commission may prescribe. (D) Professional staff The Commission shall appoint such other economists as may be necessary to assist the Chief Economist in performing such economic analysis, regulatory cost-benefit analysis, or research the Commission may direct. . (b) Conforming amendment Section 2(a)(6)(A) of such Act ( 7 U.S.C. 2(a)(6)(A) (4) and (5) (4), (5), and (17) 206. Procedures governing actions taken without a commission vote Section 2(a)(12) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(12) (1) by striking (12) The (12) Rules and regulations (A) In general Subject to the other provisions of this paragraph, the ; and (2) by adding after and below the end the following new subparagraph: (B) Notice to commission (i) General rule A division or office of the Commission may not issue an interpretive rule of general applicability, a statement of general policy, a response to a formal, written request or petition from any member of the public for guidance, or an exemptive, a no-action, or an interpretive letter, unless, at least 7 calendar days before the issuance, the division or office has provided the Commission with a copy of the matter to be issued. (ii) Opportunity for meeting required After receiving a copy of the matter provided in accordance with clause (i), any member of the Commission may request that the Commission hold a meeting to review the matter, and the Chairman shall immediately put any such request for a meeting before the Commission, and if the Commission decides to hold the meeting by a majority vote, the matter may not be issued until the Commission has concluded the meeting. (iii) Limitations on applicability By a majority vote, the Commission may waive the 7-day prior notice requirement of clause (i) when the Commission finds that requiring such a notice would be impracticable, unnecessary, or contrary to the public interest. . 207. Strategic technology plan Section 2(a) of the Commodity Exchange Act ( 7 U.S.C. 2(a) (18) Strategic technology plan (A) In general Every 5 years, the Commission shall develop and submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a detailed plan focused on the acquisition and use of technology by the Commission. (B) Contents The plan shall— (i) include for each related division or office a detailed technology strategy focused exclusively on market surveillance and risk detection, market data collection, aggregation, interpretation, standardization, harmonization, streamlining, and internal management and protection of data collected by the Commission, including a detailed accounting of how the funds provided for technology will be used and the priorities that will apply in the use of the funds; and (ii) set forth annual goals to be accomplished and annual budgets needed to accomplish the goals. . 208. Internal risk controls (a) In general Section 2(a)(12) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(12) (C) Internal risk controls The Commission staff and the Chief Economist shall develop comprehensive internal risk control mechanisms to safeguard and govern the storage of all market data by the Commission, all market data sharing agreements of the Commission, and all academic research performed at the Commission using market data. . (b) Reports to the Congress (1) Content The Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate 2 reports on the progress made in implementing the internal risk controls provided for in section 2(a)(12)(C) of the Commodity Exchange Act. (2) Timing The Commission shall submit the 1st report required by paragraph (1) within 60 days after the date of the enactment of this Act, and the 2nd such report within 120 days after such date of enactment. 209. Subpoena duration and renewal Section 6(c)(5) of the Commodity Exchange Act ( 7 U.S.C. 9(5) (1) by striking (5) Subpoena.— (5) Subpoena (A) In general For ; and (2) by adding after and below the end the following: (B) Content of subpoena order An order of the Commission authorizing the issuance of a subpoena— (i) shall state in good faith the purpose of the investigation; (ii) shall require only the provision of information reasonably relevant to that purpose; and (iii) shall not be for an indefinite duration. (C) Renewal An order issued under this paragraph may be renewed only by Commission action. . 210. Implementation plan for Commission rulemakings Section 2(a)(12) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(12) (E) Requirement to publish implementation plan for Commission rules The Commission shall direct its staff to develop and publish in any proposed rule a plan for— (i) when and for how long the proposed rule will be subject to public comment; and (ii) by when compliance with the final rule will be required. . 211. Applicability of notice and comment requirements of the Administrative Procedure Act to guidance voted on by the Commission Section 2(a)(12) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(12) (F) Applicability of notice and comment rules to guidance voted on by the Commission The notice and comment requirements of chapter 5 . 212. Judicial review of Commission rules The Commodity Exchange Act ( 7 U.S.C. 1 et seq. 24. Judicial review of commission rules (a) A person aggrieved by a final rule of the Commission under this Act may obtain review of the rule in the United States Court of Appeals for the District of Columbia Circuit or the United States Court of Appeals for the circuit where the party resides, by filing in the court, within 60 days after publication in the Federal Register of the entry of the rule, a written petition requesting that the rule be modified or set aside in whole or in part. (b) A copy of the petition shall be transmitted forthwith by the clerk of the court to an officer designated by the Commission for that purpose. Thereupon the Commission shall file in the court the record on which the rule complained of is entered, as provided in section 2112 (c) On the filing of the petition, the court has jurisdiction, which becomes exclusive on the filing of the record, to affirm or modify and enforce or to set aside the rule in whole or in part. (d) The findings of the Commission as to the facts identified by the Commission as the basis, in whole or in part, of the rule, if supported by substantial evidence, are conclusive. The court shall affirm and enforce the rule unless the Commission's action in promulgating the rule is found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or immunity; in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; or without observance of procedure required by law. (e) If either party applies to the court for leave to adduce additional evidence and shows to the satisfaction of the court that the additional evidence is material and that there was reasonable ground for failure to adduce it before the Commission, the court may remand the case to the Commission for further proceedings, in whatever manner and on whatever conditions the court considers appropriate. If the case is remanded to the Commission, it shall file in the court a supplemental record containing any new evidence, any further or modified findings, and any new order. . 213. GAO study on adequacy of CFTC resources (a) Study The Comptroller General of the United States shall conduct a study of the resources of the Commodity Futures Trading Commission that— (1) assesses whether the resources of the Commission are sufficient to enable the Commission to effectively carry out the duties of the Commission; and (2) examines the prior expenditures of the Commission on hardware, software, and analytical processes designed to protect customers in the areas of— (A) market surveillance and risk detection; and (B) market data collection, aggregation, interpretation, standardization, harmonization, and streamlining. (b) Report Not later than 180 days after the date of the enactment of this Act, the Comptroller General of the United States 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 contains the results of the study. III End-user relief 301. Short title This title may be cited as the End-User Relief and Market Certainty Act A End-User exemption from margin requirements 311. End-user margin requirements Section 4s(e) of the Commodity Exchange Act ( 7 U.S.C. 6s(e) (4) Applicability with respect to counterparties The requirements of paragraphs (2)(A)(ii) and (2)(B)(ii), including the initial and variation margin requirements imposed by rules adopted pursuant to paragraphs (2)(A)(ii) and (2)(B)(ii), shall not apply to a swap in which a counterparty qualifies for an exception under section 2(h)(7)(A), or an exemption issued under section 4(c)(1) from the requirements of section 2(h)(1)(A) for cooperative entities as defined in such exemption, or satisfies the criteria in section 2(h)(7)(D). . 312. Implementation The amendment made by this subtitle shall be implemented— (1) without regard to— (A) chapter 35 (B) the notice and comment provisions of section 553 (2) through the promulgation of an interim final rule, pursuant to which public comment will be sought before a final rule is issued; and (3) such that paragraph (1) shall apply solely to changes to rules and regulations, or proposed rules and regulations, that are limited to and directly a consequence of the amendment. B Inter-Affiliate swaps 321. Treatment of affiliate transactions (a) In general Section 2(h)(7)(D)(i) of the Commodity Exchange Act ( 7 U.S.C. 2(h)(7)(D)(i) (i) In general An affiliate of a person that qualifies for an exception under subparagraph (A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity, provided that if the transfer of commercial risk is addressed by entering into a swap with a swap dealer or major swap participant, a credit support measure or other mechanism is utilized. . (b) Applicability of credit support measure requirement Notwithstanding section 371 of this Act, the requirement in section 2(h)(7)(D)(i) of the Commodity Exchange Act, as amended by subsection (a), requiring that a credit support measure or other mechanism be utilized if the transfer of commercial risk referred to in such section is addressed by entering into a swap with a swap dealer or major swap participant, shall not apply with respect to swaps entered into before the date of the enactment of this Act. C Indemnification requirements related to swap data repositories 331. Indemnification requirements (a) Derivatives clearing organizations Section 5b(k)(5) of the Commodity Exchange Act ( 7 U.S.C. 7a–1(k)(5) (5) Confidentiality agreement Before the Commission may share information with any entity described in paragraph (4), the Commission shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided. . (b) Swap data repositories Section 21(d) of such Act ( 7 U.S.C. 24a(d) (d) Confidentiality agreement Before the swap data repository may share information with any entity described in subsection (c)(7), the swap data repository shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in section 8 relating to the information on swap transactions that is provided. . D Relief for municipal utilities 341. Transactions with utility special entities Section 1a(49) of the Commodity Exchange Act ( 7 U.S.C. 1a(49) (E) Certain transactions with a utility special entity (i) Transactions in utility operations-related swaps shall be reported pursuant to section 4r. (ii) In making a determination to exempt pursuant to subparagraph (D), the Commission shall treat a utility operations-related swap entered into with a utility special entity, as defined in section 4s(h)(2)(D), as if it were entered into with an entity that is not a special entity, as defined in section 4s(h)(2)(C). . 342. Utility special entity defined Section 4s(h)(2) of the Commodity Exchange Act ( 7 U.S.C. 6s(h)(2) (D) Utility special entity For purposes of this Act, the term utility special entity (i) owns or operates an electric or natural gas facility or an electric or natural gas operation; (ii) supplies natural gas and or electric energy to another utility special entity; (iii) has public service obligations under Federal, State, or local law or regulation to deliver electric energy or natural gas service to customers; or (iv) is a Federal power marketing agency, as defined in section 3 of the Federal Power Act. . 343. Utility operations-related swap (a) Swap further defined Section 1a(47)(A)(iii) of the Commodity Exchange Act ( 7 U.S.C. 1a(47)(A)(iii) (1) by striking and (2) by adding and (3) by adding at the end the following: (XXIII) a utility operations-related swap; . (b) Utility operations-related swap defined Section 1a of such Act ( 7 U.S.C. 1a (52) Utility operations-related swap The term utility operations-related swap (A) is entered into to hedge or mitigate a commercial risk; (B) is not a contract, agreement, or transaction based on, derived on, or referencing— (i) an interest rate, credit, equity, or currency asset class; or (ii) a metal, agricultural commodity, or crude oil or gasoline commodity of any grade, except as used as fuel for electric energy generation; and (C) is associated with— (i) the generation, production, purchase, or sale of natural gas or electric energy, the supply of natural gas or electric energy to a utility, or the delivery of natural gas or electric energy service to utility customers; (ii) all fuel supply for the facilities or operations of a utility; (iii) compliance with an electric system reliability obligation; (iv) compliance with an energy, energy efficiency, conservation, or renewable energy or environmental statute, regulation, or government order applicable to a utility; or (v) any other electric energy or natural gas swap to which a utility is a party. . E End-User regulatory relief 351. End users not treated as financial entities (a) In general Section 2(h)(7)(C)(iii) of the Commodity Exchange Act ( 7 U.S.C. 2(h)(7)(C)(iii) (iii) Limitation Such definition shall not include an entity— (I) whose primary business is providing financing, and who uses derivatives for the purpose of hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company; or (II) who is not supervised by a prudential regulator, and is not described in any of subclauses (I) through (VII) of clause (i), and— (aa) is a commercial market participant and is considered a financial entity under clause (i)(VIII) because the entity predominantly engages in physical delivery contracts; or (bb) enters into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates that are not so supervised or described. . (b) Commercial market participant defined (1) In general Section 1a of such Act ( 7 U.S.C. 1a (7) Commercial market participant The term commercial market participant . (2) Conforming amendments (A) Section 1a of such Act ( 7 U.S.C. 1a (i) in subparagraph (A) of paragraph (18) (as so redesignated by paragraph (1) of this subsection), in the matter preceding clause (i), by striking (18)(A) (19)(A) (ii) in subparagraph (A)(vii) of paragraph (19) (as so redesignated by paragraph (1) of this subsection), in the matter following subclause (III), by striking (17)(A) (18)(A) (B) Section 4(c)(1)(A)(i)(I) of such Act ( 7 U.S.C. 6(c)(1)(A)(i)(I) (7), paragraph (18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), (39), (41), (42), (46), (47), (48), and (49) (8), paragraph (19)(A)(vii)(III), paragraphs (24), (25), (32), (33), (39), (40), (42), (43), (47), (48), (49), and (50) (C) Section 4q(a)(1) of such Act ( 7 U.S.C. 6o–1(a)(1) 1a(9) 1a(10) (D) Section 4s(f)(1)(D) of such Act ( 7 U.S.C. 6s(f)(1)(D) 1a(47)(A)(v) 1a(48)(A)(v) (E) Section 4s(h)(5)(A)(i) of such Act ( 7 U.S.C. 6s(h)(5)(A)(i) 1a(18) 1a(19) (F) Section 4t(b)(1)(C) of such Act ( 7 U.S.C. 6t(b)(1)(C) 1a(47)(A)(v) 1a(48)(A)(v) (G) Section 5(d)(23) of such Act ( 7 U.S.C. 7(d)(23) 1a(47)(A)(v) 1a(48)(A)(v) (H) Section 5(e)(1) of such Act ( 7 U.S.C. 7(e)(1) 1a(9) 1a(10) (I) Section 5b(k)(3)(A) of such Act ( 7 U.S.C. 7a–1(k)(3)(A) 1a(47)(A)(v) 1a(48)(A)(v) (J) Section 5c(c)(4)(B) of such Act ( 7 U.S.C. 7a–2(c)(4)(B) 1a(10) 1a(11) (K) Section 5h(f)(10)(A)(iii) of such Act ( 7 U.S.C. 7b–3(f)(10)(A)(iii) 1a(47)(A)(v) 1a(48)(A)(v) (L) Section 21(f)(4)(C) of such Act ( 7 U.S.C. 24a(f)(4)(C) 1a(48) 1a(49) 352. Reporting of illiquid swaps so as to not disadvantage certain non-financial end users Section 2(a)(13) of the Commodity Exchange Act ( 7 U.S.C. 2(a)(13) (1) in subparagraph (C), by striking The Commission Except as provided in subparagraph (D), the Commission (2) by redesignating subparagraphs (D) through (G) as subparagraphs (E) through (H), respectively, and inserting after subparagraph (C) the following: (D) Requirements for swap transactions in illiquid markets Notwithstanding subparagraph (C): (i) The Commission shall provide by rule for the public reporting of swap transactions, including price and volume data, in illiquid markets that are not cleared and entered into by a non-financial entity that is hedging or mitigating commercial risk in accordance with subsection (h)(7)(A). (ii) The Commission shall ensure that the swap transaction information referred to in clause (i) of this subparagraph is available to the public no sooner than 30 days after the swap transaction has been executed or at such later date as the Commission determines appropriate to protect the identity of participants and positions in illiquid markets and to prevent the elimination or reduction of market liquidity. (iii) In this subparagraph, the term illiquid markets . 353. Relief for grain elevator operators, farmers, agricultural coun­ter­par­ties, and commercial market participants The Commodity Exchange Act ( 7 U.S.C. 1 et seq. 4u. Recordkeeping requirements applicable to non-registered members of certain registered entities Except as provided in section 4(a)(3), a member of a designated contract market or a swap execution facility that is not registered with the Commission and not required to be registered with the Commission in any capacity shall satisfy the recordkeeping requirements of this Act and any recordkeeping rule, order, or regulation under this Act by maintaining a written record of each transaction in a contract for future delivery, option on a future, swap, swaption, trade option, or related cash or forward transaction. The written record shall be sufficient if it includes the final agreement between the parties and the material economic terms of the transaction and is identifiable and searchable by transaction. . 354. Relief for end users who use physical contracts with volumetric op­tion­al­i­ty Section 1a(47)(B)(ii) of the Commodity Exchange Act ( 7 U.S.C. 1a(47)(B)(ii) (ii) any purchase or sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the transaction is intended to be physically settled, including any stand-alone or embedded option for which— (I) exercise results in a physical delivery obligation; (II) cannot be severed or marketed separately from the overall transaction for the purpose of financial settlement; and (III) both parties are commercial market participants. . 355. Commission vote required before automatic change of swap dealer de minimis level Section 1a(49)(D) of the Commodity Exchange Act ( 7 U.S.C. 1a(49)(D) (1) by striking all that precedes shall exempt (D) De minimis exception (i) In general The Commission ; and (2) by adding after and below the end the following new clause: (ii) The de minimis quantity of swap dealing as described in clause (i) that is currently set at a quantity of $8,000,000,000 shall only be amended or reduced through a new affirmative action of the Commission undertaken by rule or regulation. . 356. Capital requirements for non-bank swap dealers Section 4s(e) of the Commodity Exchange Act ( 7 U.S.C. 6s(e) (1) in paragraph (2)(B), by inserting , in consultation with the prudential regulators and the Securities and Exchange Commission, shall (2) in paragraph (3)(D)— (A) in clause (ii), by striking shall, to the maximum extent practicable, shall (B) by adding at the end the following: (iii) Financial models To the extent that swap dealers and major swap participants that are banks are permitted to use financial models approved by the prudential regulators or the Securities and Exchange Commission to calculate minimum capital requirements and minimum initial and variation margin requirements, including the use of non-cash collateral, the Commission shall, in consultation with the prudential regulators and the Securities and Exchange Commission, permit the use of comparable financial models by swap dealers and major swap participants that are not banks. . 357. Harmonization with the Jumpstart Our Business Startups Act Within 90 days after the date of the enactment of this Act, the Commodity Futures Trading Commission shall— (1) revise section 4.7(b) (b) Relief available to commodity pool operators et seq ; and (2) revise section 4.13(a)(3)(i) of such title to read as follows: (i) Interests in the pool are exempt from registration under the Securities Act of 1933, and such interests are offered and sold pursuant to section 4 of the Securities Act of 1933 and the regulations thereunder; . 358. Bona fide hedge defined to protect end user risk management needs Section 4a(c) of the Commodity Exchange Act ( 7 U.S.C. 6a(c) (1) in paragraph (1)— (A) by striking may shall (B) by striking future for which future, to be determined by the Commission, for which either an appropriate swap is available or (2) in paragraph (2)— (A) in the matter preceding subparagraph (A), by striking subsection (a)(2) position as paragraphs (2) and (5) of subsection (a) for swaps, contracts of sale for future delivery, or options on the contracts or commodities, a bona fide hedging transaction or position is (B) in subparagraph (A)(ii), by striking of risks or management of current or anticipated risks (3) by adding at the end the following: (3) The Commission may further define, by rule or regulation, what constitutes a bona fide hedging transaction, provided that the rule or regulation is consistent with the requirements of subparagraphs (A) and (B) of paragraph (2). . 359. Cross-border regulation of derivatives transactions (a) Rules required Within 180 days after the date of the enactment of this Act, the Commodity Futures Trading Commission shall issue rules that address— (1) the nature of the connections to the United States that require a non-U.S. person to register as a swap dealer or major swap participant under the Commodity Exchange Act and the regulations issued under such Act; (2) which of the United States swaps requirements shall apply to the swap activities of non-U.S. persons, U.S. persons, and their branches, agencies, subsidiaries, and affiliates outside of the United States and the extent to which such requirements shall apply; and (3) the circumstances under which a non-U.S. person in compliance with the regulatory requirements of a foreign jurisdiction shall be exempt from United States swaps requirements. (b) Rule in accordance with APA required No guidance, memorandum of understanding, or any such other agreement may satisfy the requirement to issue a rule from the Commission in accordance with section 553 of title 5, United States Code. (c) General application to countries or administrative regions having 9 (1) General application In issuing rules under this section, the Commission shall provide that a non-U.S. person in compliance with the swaps regulatory requirements of a country or administrative region that has 1 of the 9 largest swap markets by notional amount in the calendar year preceding issuance of such rules, or other foreign jurisdiction as determined by the Commission, shall be exempt from United States swaps requirements in accordance with the schedule set forth in paragraph (2), unless the Commission determines that the regulatory requirements of the country or administrative region or other foreign jurisdiction are not broadly equivalent to United States swaps requirements. (2) Effective date schedule The exemption described in paragraph (1) and set forth under the rules required by this section shall apply to persons or transactions relating to or involving— (A) countries or administrative regions described in such paragraph, or any other foreign jurisdiction as determined by the Commission, accounting for the 5 largest swap markets by notional amount in the calendar year preceding issuance of such rules, on the date on which final rules are issued under this section; and (B) the remaining countries or administrative regions described in such paragraph, and any other foreign jurisdiction as determined by the Commission, 1 year after the date on which such rules are issued. (3) Criteria In such rules, the Commission shall establish criteria for determining that 1 or more categories of regulatory requirements of a country or administrative region described in paragraph (1) or other foreign jurisdiction is not broadly equivalent to United States swaps requirements and shall determine the appropriate application of certain United States swap requirements to persons or transactions relating to or involving the country or administrative region or other foreign jurisdiction. The criteria shall include the scope and objectives of the regulatory requirements of a country or administrative region described in paragraph (1) or other foreign jurisdiction as well as the effectiveness of the supervisory compliance program administered, and the enforcement authority exercised, by the country or administrative region or other foreign jurisdiction, and such other factors as the Commission, by rule, determines to be necessary or appropriate in the public interest. (4) Required assessment Beginning on the date on which final rules are issued under this section, the Commission shall begin to assess the regulatory requirements of countries or administrative regions described in paragraph (1), as the Commission determines appropriate, in accordance with the criteria established pursuant to this subsection, to determine if 1 or more categories of regulatory requirements of such a country or administrative region or other foreign jurisdiction is not broadly equivalent to United States swaps requirements. (d) Report to Congress If the Commission makes the determination described in subsection (c)(1) that the regulatory requirements of a country or administrative region described in such subsection or other foreign jurisdiction are not broadly equivalent to United States swaps requirements, the Commission shall articulate the basis for the determination in a written report transmitted to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate within 30 days of the determination. The determination shall not be effective until the transmission of the report. (e) Definitions As used in this section and for purposes of the rules issued pursuant to this section, the following definitions apply: (1) The term U.S. person (A) means— (i) any natural person resident in the United States; (ii) any partnership, corporation, trust, or other legal person organized or incorporated under the laws of the United States or having its principal place of business in the United States; (iii) any account (whether discretionary or non-discretionary) of a U.S. person; and (iv) any other person as the Commission may further define to more effectively carry out the purposes of this section; and (B) does not include the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, their agencies and pension plans, and any other similar international organizations and their agencies and pension plans. (2) The term United States swaps requirements (f) Conforming amendment Section 4(c)(1)(A) of the Commodity Exchange Act ( 7 U.S.C. 6(c)(1)(A) or except as necessary to effectuate section 361 of the Customer Protection and End User Relief Act, to grant exemptions, F Effective date 371. Effective date The amendments made by this title shall take effect as if enacted on July 21, 2010. June 5, 2014 Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Summary: Customer Protection and End User Relief Act - Title I: Customer Protections - Futures Customer Protection Act - (Sec. 102) Amends the Commodity Exchange Act (CEA) to direct registered futures associations to require their futures commission merchant members to: (1) maintain written policies and procedures governing maintenance of members&rsquo; specified residual interests in customer segregated funds accounts, including cleared swaps customer collateral accounts; and (2) establish rules governing the withdrawal, transfer, or disbursement of a member's residual interest in customer segregated funds, in foreign futures and foreign options customer secured amount funds, and from a cleared swaps customer collateral. (Sec. 106) Authorizes the Commodity Futures Trading Commission (CFTC) to require that property of the bankruptcy estate, including trading or operating accounts and commodities held in inventory, of a commodity broker who is a Chapter 7 debtor in bankruptcy be included in customer property, subject to any otherwise unavoidable security interest, or otherwise unavoidable contractual offset or netting rights of creditors in respect of such property, but only to the extent that such property is insufficient to satisfy the net equity claims of the broker's public customers. (Sec. 107) Directs the CFTC to examine the effect of high-frequency trading upon markets under its jurisdiction, particularly whether such trading increases market volatility, including short term market swings. Title II: Commodity Futures Trading Commission Reforms - Commodity Futures Trading Commission Reform Act - (Sec. 203) Extends authority for CFTC operations. Amends the Commodity Exchange Act (CEA) to revise the requirement that the CFTC, before promulgating a regulation or issuing an order, consider the costs and benefits of the action. Requires the CFTC, through the Office of the Chief Economist (established by this Act), to: (1) assess and publish the costs and benefits, both qualitative and quantitative, of the proposed regulation; and (2) require the proposed regulation or order to state its statutory justification. Requires a court to affirm a CFTC assessment of costs and benefits, unless it finds the assessment to be an abuse of discretion. (Sec. 204) States that the heads of CFTC units (division directors) shall serve at the pleasure of the Commission, report directly to it, and perform such functions and duties as the Commission may prescribe. (Sec. 205) Establishes within the CFTC the Office of the Chief Economist. (Sec. 206) Directs the CFTC to develop and publish internal procedures governing the issuance of any CFTC response to a formal, written request or petition from any member of the public for an exemptive, a no-action, or an interpretive letter. Requires such procedures to require that the CFTC be provided with the final version of the matter to be issued in the response with sufficient notice to review it thoroughly before its issuance. (Sec. 207) Requires the CFTC to submit every five years to certain congressional committees a detailed strategic technology plan focused upon its acquisition and use of technology. Prescribes plan contents. (Sec. 208) Requires the CFTC to develop comprehensive internal risk control mechanisms to safeguard and govern the storage of all market data, including CFTC market data sharing agreements, and academic research performed at the CFTC using market data. Requires the CFTC to submit to certain congressional committees two status reports regarding implementation of specified internal risk controls. (Sec. 209) Requires a CFTC order authorizing the issuance of a subpoena in an investigation to state: (1) the legitimate purpose of the investigation, and (2) the information sought that will be reasonably relevant to that purpose. Prohibits the issuance of such an order for an indefinite duration, and permits it to be renewed only by CFTC action. (Sec. 210) Requires CFTC staff to develop and publish in any proposed rule a plan for: (1) when and for how long the proposed rule will be subject to public comment, and (2) a deadline for compliance with the final rule. (Sec. 211) Applies certain notice and comment requirements of the Administrative Procedure Act to guidance issued by the CFTC. (Sec. 212) Prescribes procedures for judicial review of CFTC rules. (Sec. 213) Directs the Comptroller General (GAO) to: (1) study and report to certain congressional committees whether CFTC resources are sufficient to enable the CFTC to carry out its duties effectively; and (2) examine prior CFTC expenditures on hardware, software, and analytical processes to protect customers in the areas of market surveillance and risk detection, and market data collection, aggregation, interpretation, standardization, harmonization, and streamlining. (Sec. 214) Prohibits compulsory CFTC disclosure of proprietary information provided to it; but denies any authorization for the CFTC to withhold information from Congress, upon an agreement of confidentiality. States this prohibition does not prevent: CFTC compliance with a request for information from any federal agency or state, local, or foreign governmental entity requesting it for purposes within the scope of its jurisdiction, upon an agreement of confidentiality to protect the information; or CFTC disclosure pursuant to a court order in connection with an administrative or judicial proceeding brought under this Act, in any receivership proceeding involving a receiver appointed in a judicial proceeding brought under this Act, or in any bankruptcy proceeding in which the CFTC has either intervened or in which it has the right to appear and be heard. Subjects proprietary information of a commodity trading advisor or commodity pool operator ascertained via specified CFTC forms to the same limitations on public disclosure as any facts ascertained during an investigation. States that the CFTC, however, shall not be precluded from publishing aggregate information compiled from such forms, to the extent such aggregate information does not identify any individual person or firm, or such person's proprietary information. (Sec. 215) Directs GAO to study how to achieve efficiencies in leasing and rental costs at the CFTC. Requires the CFTC Chairman to report to certain congressional committees as to whether he or she accepts or rejects the GAO recommendations. Title III: End-User Relief and Market Certainty Act - End-User Relief and Market Certainty Act - Subtitle A: End-User Exemption From Margin Requirements - (Sec. 311) Amends the CEA to exempt from prudential rules governing initial and variation margin requirements those swaps in which one of the counterparties: (1) is eligible for an exception from clearing requirements for certain significant price discovery agreements, contracts, or transactions in a commodity exempt from regulation by the CFTC, or an exemption from certain clearing requirements for cooperative entities; or (2) satisfies certain criteria for the treatment of affiliates. Amends the Securities Exchange Act of 1934 (Act) to exempt from prudential regulator and CFTC margin requirements for security-based swap dealers and major security-based swap participants any security-based swap in which a counterparty qualifies for an exception from clearing requirements or satisfies the criteria for an excepted affiliate. Subtitle B: Inter-Affiliate Swaps - (Sec. 321) Amends the CEA and the Act to revise the treatment of affiliate transactions that may be exempt from clearing requirements to authorize such an exemption only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person that is not a financial entity (as under current law), provided that an appropriate credit support measure or other mechanism is used if the transfer of commercial risk is addressed by entering into: (1) a swap with either a swap dealer or major swap participant, or (2) a security-based swap with a security-based swap dealer or major security-based swap participant. Applies this subtitle only to swaps or security-based swaps entered into after enactment of this Act. Subtitle C: Indemnification Requirements Related to Swap Data Repositories - (Sec. 331) Amends the Act and the CEA to require that the CFTC, swap-data repositories, and security-based swap-data repositories, before sharing information with specified federal and foreign entities, receive a written agreement from each such entity stating that it will abide by specified confidentiality requirements regarding the information provided on their swap transactions. Subtitle D: Relief for Municipal Utilities - (Sec. 341) Amends the CEA to prescribe reporting requirements for transactions in utility operations-related swaps. Requires the CFTC, in determining whether to exempt an entity that engages in a de minimis quantity of swap dealing, to treat a utility operations-related swap entered into with a utility special entity as if the entity were not a special entity. Subtitle E: End-User Regulatory Relief - (Sec. 351) Excludes from the definition of financial entity subject to clearing requirements specified entities that are not supervised by a prudential regulator, yet are commercial market participants deemed to be a financial entity because they: (1) predominantly engage in physical delivery contracts; or (2) enter into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of affiliates that are not so supervised or described. (Sec. 352) Directs the CFTC to: (1) provide by rule for the public reporting of swap transactions in illiquid markets that are not cleared and entered into by a non-financial entity that is hedging or mitigating commercial risk; and (2) ensure that certain swap transaction information is publicly available no sooner than 30 days after the swap transaction has been executed, or at a later date appropriate to protect the identity of participants and positions in illiquid markets and to prevent the elimination or reduction of market liquidity. Defines &quot;illiquid market&quot; as any market in which the volume and frequency of trading in swaps is at such a level as to allow identification of individual market participants. (Sec. 353) Sets forth recordkeeping requirements for a member of a designated contract market or a swap execution facility that is neither registered with the CFTC nor required to be registered. (Sec. 354) Excludes from the definition of &ldquo;swap&rdquo; any purchase or sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the transaction is intended to be physically settled (as under current law), including any stand-alone or embedded option: (1) for which exercise results in a physical delivery obligation, (2) which cannot be severed or marketed separately from the overall transaction for the purpose of financial settlement, and (3) in which both parties are commercial market participants. (Sec. 355) Requires a new affirmative CFTC rule or regulation in order to amend or reduce the de minimis quantity of swap dealing that is currently set at $8 billion. (Sec. 356) Directs the CFTC, in consultation with the prudential regulators and the Securities and Exchange Commission (SEC), to the extent that swap dealers and major swap participants that are banks are permitted to use approved financial models to calculate minimum capital requirements (including minimum initial and variation margin requirements and non-cash collateral) to permit the use of comparable financial models by swap dealers and major swap participants that are not banks. Amends the Act to require the SEC, in consultation with the CFTC, to do the same with respect to security-based swap dealers and major security-based swap participants. (Sec. 357) Directs the CFTC to revise regulations regarding criteria that qualify certain registered commodity pool operators for exemption from requirements for specified risk disclosures, performance disclosures, periodic reporting, annual reporting, and recordkeeping. Alters one criterion for qualification for such exemptions currently granted to: (1) registered commodity pool operators who sell participations in a pool solely to qualified eligible persons in an offering which qualifies for exemption from the registration requirements of the Securities Act, and (2) certain banks registered as commodity pool operators in connection with a pool that is a collective trust fund whose securities are exempt from registration under the Securities Act. (Sec. 358) Authorizes the CFTC to define a bona fide hedging transaction, consistent with certain CEA requirements. (Sec. 359) Directs the SEC and the CFTC jointly to issue rules setting forth the application of United States swaps requirements for cross-border swaps and security-based swaps transactions involving U.S. persons or non-U.S. persons. (Sec. 360) Directs the CFTC to report to certain congressional committees on the standards and rules of foreign boards of trade with respect to the physical delivery of base metals, including warehousing facilities, as compared to the standards and rules for domestic designated contract markets and related warehouses for base metals. (Sec. 361) Excludes from the definition of &quot;commodity pool operator&quot; a person who serves as an investment adviser to a registered investment company (or its subsidiary) that invests, reinvests, owns, holds, or trades in commodity interests limited to only financial commodity interests. Excludes from the definition of &quot;commodity trading advisor&quot; a person who serves as an investment adviser to a registered investment company or its subsidiary, if the commodity trading advice relates only to a financial commodity interest. Defines &quot;financial commodity interest&quot; as a futures contract, an option on a futures contract, or a swap involving a commodity that is not an exempt commodity or an agricultural commodity, including any index of financial commodity interests, whether cash settled or involving physical delivery. Subtitle F: Effective Date - (Sec. 371) Makes enactment of this Act retroactive to July 21, 2010 (the date of enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act).