‘‘(2) COORDINATION.—In carrying out para-
graph (1), the Commission shall coordinate with the
Federal banking agencies and the Securities and Ex-
change Commission.’’.
SEC. 15. COMMON PROVISIONS APPLICABLE TO REG-
ISTERED ENTITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is
amended by inserting after section 5b (as added by section
14) the following:
‘‘SEC. 5c. COMMON PROVISIONS APPLICABLE TO REG-
ISTERED ENTITIES.
‘‘(a) ACCEPTABLE BUSINESS PRACTICES UNDER CORE
PRINCIPLES.—
‘‘(1) IN GENERAL.—Consistent with the purposes
of this Act, the Commission may issue interpreta-
tions, or approve interpretations submitted to the
Commission, of sections 5(d), 5a(d), and 5b(d)(2) to
describe what would constitute an acceptable business
practice under such sections.
‘‘(2) EFFECT
OF
INTERPRETATION.—An inter-
pretation issued under paragraph (1) shall not pro-
vide the exclusive means for complying with such sec-
tions.
‘‘(b) DELEGATION OF FUNCTIONS UNDER CORE PRIN-
CIPLES.—
‘‘(1) IN GENERAL.—A contract market or deriva-
tives transaction execution facility may comply with
any applicable core principle through delegation of
any relevant function to a registered futures associa-
tion or another registered entity.
‘‘(2) RESPONSIBILITY.—A contract market or de-
rivatives transaction execution facility that delegates
a function under paragraph (1) shall remain respon-
sible for carrying out the function.
‘‘(c) NEW
CONTRACTS, NEW
RULES, AND
RULE
AMENDMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), a
registered entity may elect to list for trading any new
contract or other instrument, or may elect to approve
and implement any new rule or rule amendment, by
providing to the Commission (and the Secretary of
the Treasury, in the case of a contract of sale for fu-
ture delivery of a government security (or option
thereon) or a rule or rule amendment specifically re-
lated to such a contract) a written certification that
the new contract, new rule, or rule amendment com-
plies with this Act (including regulations under this
Act).
‘‘(2) PRIOR APPROVAL.—
‘‘(A) IN GENERAL.—A registered entity may
request that the Commission grant prior ap-
proval to any new contract or other instrument,
new rule, or rule amendment.
‘‘(B) PRIOR
APPROVAL
REQUIRED.—Not-
withstanding any other provision of this section,
a designated contract market shall submit to the
Commission for prior approval each rule amend-
ment that materially changes the terms and con-
ditions, as determined by the Commission, in
any contract of sale for future delivery of a com-
modity specifically enumerated in section 1a(3)
of this Act (or any option thereon) traded
through its facilities if such rule amendment ap-
plies to contracts and delivery months which
have already been listed for trading and have
open interest.
‘‘(C) DEADLINE.—If prior approval is re-
quested under subparagraph (A), the Commis-
sion shall take final action on the request not
later than 90 days after submission of the re-
quest, unless the person submitting the request
agrees to an extension of the time limitation es-
tablished under this subparagraph.
‘‘(3) APPROVAL.—The Commission shall approve
any such new contract or instrument, new rule, or
rule amendment unless the Commission finds that the
new contract or instrument, new rule, or rule amend-
ment would violate this Act.
‘‘(d) VIOLATION OF CORE PRINCIPLES.—
‘‘(1) IN GENERAL.—If the Commission has rea-
son to believe that a registered entity is violating any
applicable provision specified in section 5(d), 5a(d),
or 5b(d)(2), the Commission shall notify the registered
entity in writing of the reasons for the preliminary
determination by the Commission of a violation, in-
cluding any data, materials, and facts the Commis-
sion relied on in making the preliminary determina-
tion.
‘‘(2) INJUNCTIVE OR ADMINISTRATIVE ACTION.—
The Commission may initiate an action for an in-
junction under section 6c or an administrative pro-
ceeding, to demonstrate, by the preponderance of the
evidence, that—
‘‘(A) the registered entity is violating any
applicable provision specified in section 5(d),
5a(d), or 5b(d)(2); and
‘‘(B) the Commission has recommended an
appropriate remedial action to remove the defi-
ciency based on an analysis of the costs and ben-
efits in the public interest of the Commission rec-
ommendation.
‘‘(3) BURDEN OF PROOF.—In making a deter-
mination that a registered entity is violating any ap-
plicable provision specified in section 5(d), 5a(d), or
5b(d)(2), the Commission shall have the burden of
proving that the registered entity is violating the ap-
plicable core principle.
‘‘(e) RESERVATION
OF EMERGENCY AUTHORITY.—
Nothing in this section shall limit or in any way affect
the emergency powers of the Commission provided in sec-
tion 8a(9) of this Act.’’.
SEC. 16. EXEMPT BOARDS OF TRADE.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is
amended by inserting after section 5c (as added by section
15) the following:
‘‘SEC. 5d. EXEMPT BOARDS OF TRADE.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this section, a contract of sale (or option on such a contract)
of a commodity for future delivery traded on or through
the facilities of an exempt board of trade shall be exempt
from all provisions of this Act, other than section 2(g).
‘‘(b) CRITERIA FOR EXEMPTION.—To qualify for an
exemption under subsection (a), a board of trade shall limit
trading on or through the facilities of the board of trade
to contracts of sale of a commodity for future delivery (or
options on such contracts)—
‘‘(1) that have—
‘‘(A) a nearly inexhaustible deliverable sup-
ply;
‘‘(B) a deliverable supply that is sufficiently
large, and a cash market sufficiently liquid, to
render any contract traded on the commodity
highly unlikely to be susceptible to the threat of
manipulation; or
‘‘(C) no cash market;
‘‘(2) that are entered into only between persons
that are eligible contract participants at the time at
which the persons enter into the contract; and
‘‘(3) that are not contracts of sale (or options on
the contract) for future delivery of any security, in-
cluding any group or index of securities or any inter-
est in, or interest that is based on the value of, any
security.
‘‘(c) ANTIMANIPULATION REQUIREMENTS.—A party to
a futures contract or related option that is traded on an
exempt board of trade shall be subject to sections 4b, 4n,
6(c), and 9(a)(2), and the Commission shall enforce those
provisions with respect to any such trading.
‘‘(d) PRICE DISCOVERY.—If the Commission finds that
an exempt board of trade is a significant source of price
discovery for any underlying commodity in any transaction
traded on or through the facilities of the board of trade,
the board of trade shall disseminate publicly on a daily
basis trading volume, opening and closing price ranges,
open interest, and other trading data as appropriate to the
market.
‘‘(e) JURISDICTION.—The Commission shall have ex-
clusive jurisdiction over any account, agreement, or trans-
action involving a contract of sale of a commodity for future
delivery, or related option, to the extent that such account,
agreement, or transaction is traded on an exempt board of
trade.
‘‘(f) SUBSIDIARIES.—A board of trade that is des-
ignated as a contract market or registered as a derivatives
transaction execution facility may operate an exempt board
of trade by establishing a separate subsidiary or other legal
entity and otherwise satisfying the requirements of this sec-
tion.’’.
SEC. 17. SUSPENSION OR REVOCATION OF DESIGNATION AS
CONTRACT MARKET.
Section 5e of the Commodity Exchange Act (7 U.S.C.
7b) (as redesignated by section 12(1)) is amended to read
as follows:
‘‘(i) that is conducted on or subject to
the rules of a registered entity or exempt
board of trade;
‘‘(ii) that is conducted on or subject to
the rules of any board of trade, exchange, or
market located outside the United States, or
any territory or possession of the United
States (in accordance with any terms or
conditions specified by the Commission by
regulation); and
‘‘(iii) that is subject to regulation by
the Commission under section 4c or 19; and
‘‘(B) any State or local law that prohibits
or regulates gaming or the operation of bucket
shops (other than antifraud provisions of general
applicability) in the case of—
‘‘(i) an electronic trading facility
under section 2(e); or
‘‘(ii) an agreement, contract, or trans-
action that is excluded or exempt under sec-
tion 2(c), 2(d), 2(f), or 2(h) or is covered by
the terms of an exemption granted by the
Commission under section 4(c) (regardless
of whether any such agreement, contract, or
transaction is otherwise subject to this Act);
or’’.
SEC. 20. PREDISPUTE RESOLUTION AGREEMENTS FOR IN-
STITUTIONAL CUSTOMERS.
Section 14 of the Commodity Exchange Act (7 U.S.C.
18) is amended by striking subsection (g) and inserting the
following:
‘‘(g) PREDISPUTE RESOLUTION AGREEMENTS FOR IN-
STITUTIONAL CUSTOMERS.—Nothing in this section pro-
hibits a registered futures commission merchant from re-
quiring a customer that is an eligible contract participant,
as a condition to the commission merchant’s conducting a
transaction for the customer, to enter into an agreement
waiving the right to file a claim under this section.’’.
SEC. 21. CONSIDERATION OF COSTS AND BENEFITS AND
ANTITRUST LAWS.
Section 15 of the Commodity Exchange Act (7 U.S.C.
19) is amended by striking ‘‘SEC. 15. The Commission’’ and
inserting the following:
‘‘SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND
ANTITRUST LAWS.
‘‘(a) COSTS AND BENEFITS.—
‘‘(1) IN GENERAL.—Before promulgating a regu-
lation under this Act or issuing an order (except as
provided in paragraph (3)), the Commission shall
consider the costs and benefits of the action of the
Commission.
‘‘(2) CONSIDERATIONS.—The costs and benefits
of the proposed Commission action shall be evaluated
in light of—
‘‘(A) considerations of protection of market
participants and the public;
‘‘(B) considerations of the efficiency, com-
petitiveness, and financial integrity of futures
markets;
‘‘(C) considerations of price discovery;
‘‘(D) considerations of sound risk manage-
ment practices; and
‘‘(E) other public interest considerations.
‘‘(3) APPLICABILITY.—This subsection does not
apply to the following actions of the Commission:
‘‘(A) An order that initiates, is part of, or
is the result of an adjudicatory or investigative
process of the Commission.
‘‘(B) An emergency action.
‘‘(C) A finding of fact regarding compliance
with a requirement of the Commission.
‘‘(b) ANTITRUST LAWS.—The Commission’’.
SEC. 22. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE
COUNTERPARTIES.
Section 22(a) of the Commodity Exchange Act (7
U.S.C. 25(a)) is amended by adding at the end the fol-
lowing:
‘‘(4) CONTRACT
ENFORCEMENT
BETWEEN
ELIGIBLE
COUNTERPARTIES.—No agreement, contract, or transaction
between eligible contract participants shall be void, void-
able, or unenforceable, and no such eligible contract partici-
pant shall be entitled to rescind, or recover any payment
made with respect to, such an agreement, contract, or trans-
action, under this section based solely on the failure of the
agreement, contract, or transaction to comply with the
terms or conditions of an exemption or exclusion from any
provision of this Act or regulations of the Commission.’’.
SEC. 23. SPECIAL PROCEDURES TO ENCOURAGE AND FA-
CILITATE BONA FIDE HEDGING BY AGRICUL-
TURAL PRODUCERS.
The Commodity Exchange Act, as otherwise amended
by this Act, is amended by inserting after section 4o the
following:
‘‘SEC. 4p. SPECIAL PROCEDURES TO ENCOURAGE AND FA-
CILITATE BONA FIDE HEDGING BY AGRICUL-
TURAL PRODUCERS.
‘‘(a) AUTHORITY.—The Commission shall consider
issuing rules or orders which—
‘‘(1) prescribe procedures under which each con-
tract market is to provide for orderly delivery, includ-
ing temporary storage costs, of any agricultural com-
modity enumerated in section 1a(3) which is the sub-
ject of a contract for purchase or sale for future deliv-
ery;
‘‘(2) increase the ease with which domestic agri-
cultural producers may participate in contract mar-
kets, including by addressing cost and margin re-
quirements, so as to better enable such producers to
hedge price risk associated with their production;
‘‘(3) provide flexibility in the minimum quan-
tities of such agricultural commodities that may be
the subject of a contract for purchase or sale for future
delivery that is traded on a contract market, to better
allow domestic agricultural producers to hedge such
price risk; and
‘‘(4) encourage exchanges to provide information
and otherwise facilitate the participation of domestic
agricultural producers in contract markets.
‘‘(b) REPORT.—Within 1 year after the date of enact-
ment of this section, 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 a report on the steps it has taken to implement
this section and on the activities of contract markets pursu-
ant to this section.’’.
SEC. 24. RULE OF CONSTRUCTION.
Except as expressly provided in this Act or an amend-
ment made by this Act, nothing in this Act or an amend-
ment made by the Act supersedes, affects, or otherwise limits
or expands the scope and applicability of laws governing
the Securities and Exchange Commission.
SEC. 25. TECHNICAL AND CONFORMING AMENDMENTS.
(a) COMMODITY EXCHANGE ACT.—
(1) Section 1a of the Commodity Exchange Act
(7 U.S.C. 1a) is amended—
(A) in paragraph (3), by inserting ‘‘alu-
minum, copper, gold, palladium, platinum, sil-
ver,’’ after ‘‘orange juice,’’;
(B) in paragraphs (4), (5), (8), (9), (12),
and (14), by inserting ‘‘or derivatives trans-
action execution facility’’ after ‘‘contract mar-
ket’’ each place it appears; and
(C) in paragraph (15)—
(i) in the paragraph heading, by strik-
ing ‘‘CONTRACT
MARKET’’ and inserting
‘‘REGISTERED ENTITY’’; and
(ii) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered
entity’’.
(2) Section 2 of the Commodity Exchange Act (7
U.S.C. 2, 2a, 4, 4a, 3) is amended—
(A) by striking ‘‘SEC. 2. (a)(1)(A)(i) The’’
and inserting the following:
‘‘SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF
PRINCIPAL FOR ACT OF AGENT; COMMODITY
FUTURES 
TRADING 
COMMISSION; 
TRANS-
ACTION IN INTERSTATE COMMERCE.
‘‘(a) JURISDICTION OF COMMISSION; COMMODITY FU-
TURES TRADING COMMISSION.—
‘‘(1) JURISDICTION OF COMMISSION.—
‘‘(A) IN GENERAL.—The’’; and
(B) in subsection (a)—
(i) in paragraph (1) (as amended by
subparagraph (A))—
(I) by striking subparagraph (B);
(II) by striking ‘‘subparagraph
(B) of this subparagraph’’ and insert-
ing ‘‘subsection (g)’’;
(III) by striking ‘‘contract market
designated pursuant to section 5 of this
Act’’ and inserting ‘‘contract market
designated or derivatives transaction
execution facility registered pursuant
to section 5 or 5a’’;
(IV) by striking clause (ii); and
(V) in clause (iii), by striking
‘‘(iii) The’’ and inserting the following:
‘‘(B) LIABILITY OF PRINCIPAL FOR ACT OF
AGENT.—The’’;
(ii) in paragraph (7), by striking
‘‘contract market’’ and inserting ‘‘registered
entity’’;
(iii) in paragraph (8)(B)(ii)—
(I) in the first sentence, by strik-
ing ‘‘designation as a contract market’’
and inserting ‘‘designation or registra-
tion as a contract market or deriva-
tives transaction execution facility’’;
(II) in the second sentence, by
striking ‘‘designate a board of trade as
a contract market’’ and inserting ‘‘des-
ignate or register a board of trade as
a contract market or derivatives trans-
action execution facility’’; and
(III) in the fourth sentence, by
striking ‘‘designating, or refusing, sus-
pending, or revoking the designation
of, a board of trade as a contract mar-
ket involving transactions for future
delivery referred to in this clause or in
considering possible emergency action
under section 8a(9) of this Act’’ and
inserting ‘‘designating, registering, or
refusing, suspending, or revoking the
designation or registration of, a board
of trade as a contract market or de-
rivatives transaction execution facility
involving transactions for future deliv-
ery referred to in this clause or in con-
sidering any possible action under this
Act 
(including 
without 
limitation
emergency 
action 
under 
section
8a(9))’’, and by striking ‘‘designation,
suspension, revocation, or emergency
action’’ and inserting ‘‘designation,
registration, suspension, revocation, or
action’’; and
(iv) by moving paragraphs (2) through
(9) 2 ems to the right.
(3) Section 4 of the Commodity Exchange Act (7
U.S.C. 6) is amended—
(A) in subsection (a)—
(i) in paragraph (1), by striking ‘‘des-
ignated by the Commission as a ‘contract
market’ for’’ and inserting ‘‘designated or
registered by the Commission as a contract
market or derivatives transaction execution
facility for’’;
(ii) in paragraph (2), by striking
‘‘member of such’’; and
(iii) in paragraph (3), by inserting
‘‘or derivatives transaction execution facil-
ity’’ after ‘‘contract market’’; and
(B) in subsection (c)—
(i) in paragraph (1)—
(I) by striking ‘‘designated as a
contract market’’ and inserting ‘‘des-
ignated or registered as a contract
market or derivatives transaction exe-
cution facility’’; and
(II) 
by 
striking 
‘‘section
2(a)(1)(B)’’ and inserting ‘‘section
2(g)’’; and
(ii) in paragraph (2)(B)(ii), by insert-
ing ‘‘or derivatives transaction execution fa-
cility’’ after ‘‘contract market’’.
(4) Section 4a of the Commodity Exchange Act
(7 U.S.C. 6a) is amended—
(A) in subsection (a)—
(i) in the first sentence, by inserting
‘‘or derivatives transaction execution facili-
ties’’ after ‘‘contract markets’’; and
(ii) in the second sentence, by inserting
‘‘or derivatives transaction execution facil-
ity’’ after ‘‘contract market’’;
(B) in subsection (b)—
(i) in paragraph (1), by inserting ‘‘, or
derivatives transaction execution facility or
facilities,’’ after ‘‘markets’’; and
(ii) in paragraph (2), by inserting ‘‘or
derivatives transaction execution facility’’
after ‘‘contract market’’; and
(C) in subsection (e)—
(i) by striking ‘‘contract market or’’
each place it appears and inserting ‘‘con-
tract market, derivatives transaction execu-
tion facility, or’’;
(ii) by striking ‘‘licensed or des-
ignated’’ each place it appears and insert-
ing ‘‘licensed, designated, or registered’’;
and
(iii) by striking ‘‘contract market, or’’
and inserting ‘‘contract market or deriva-
tives transaction execution facility, or’’.
(5) Section 4b(a) of the Commodity Exchange
Act (7 U.S.C. 6b(a)) is amended by striking ‘‘contract
market’’ each place it appears and inserting ‘‘reg-
istered entity’’.
(6) Sections 4c(g), 4d, 4e, and 4f of the Com-
modity Exchange Act (7 U.S.C. 6c(g), 6d, 6e, 6f) are
amended by inserting ‘‘or derivatives transaction exe-
cution facility’’ after ‘‘contract market’’ each place it
appears.
(7) Section 4g of the Commodity Exchange Act
(7 U.S.C. 6g) is amended—
(A) in subsection (b), by striking ‘‘clearing-
house and contract market’’ and inserting ‘‘reg-
istered entity’’; and
(B) in subsection (f), by striking ‘‘clearing-
houses, contract markets, and exchanges’’ and in-
serting ‘‘registered entities’’.
(8) Section 4h of the Commodity Exchange Act
(7 U.S.C. 6h) is amended by striking ‘‘contract mar-
ket’’ each place it appears and inserting ‘‘registered
entity’’.
(9) Section 4i of the Commodity Exchange Act
(7 U.S.C. 6i) is amended in the first sentence by in-
serting ‘‘or derivatives transaction execution facility’’
after ‘‘contract market’’.
(10) Section 4j of the Commodity Exchange Act
(7 U.S.C. 6j) is repealed.
(11) Section 4l of the Commodity Exchange Act
(7 U.S.C. 6l) is amended by inserting ‘‘or derivatives
transaction execution facilities’’ after ‘‘contract mar-
kets’’ each place it appears.
(12) Section 4p of the Commodity Exchange Act
(7 U.S.C. 6p) is amended—
(A) in the third sentence of subsection (a),
by striking ‘‘Act or contract markets’’ and in-
serting ‘‘Act, contract markets, or derivatives
transaction execution facilities’’; and
(B) in subsection (b), by inserting ‘‘deriva-
tives transaction execution facility,’’ after ‘‘con-
tract market,’’.
(13) The Commodity Exchange Act (as amended
by paragraphs (10), (11), and (12)) is amended by
redesignating section 4k through 4p (7 U.S.C. 6k
through 6p) as sections 4j through 4o, respectively.
(14) Section 6 of the Commodity Exchange Act
(7 U.S.C. 8, 9, 9a, 9b, 13b, 15) is amended—
(A) in subsection (a)—
(i) in the first sentence—
(I) by striking ‘‘board of trade de-
siring to be designated a ‘contract
market’ shall make application to the
Commission for such designation’’ and
inserting ‘‘person desiring to be des-
ignated or registered as a contract
market or derivatives transaction exe-
cution facility shall make application
to the Commission for such designation
or registration’’;
(II) by striking ‘‘above condi-
tions’’ and inserting ‘‘conditions set
forth in this Act’’; and
(III) by striking ‘‘above require-
ments’’ and inserting ‘‘the require-
ments of this Act’’;
(ii) in the second sentence, by striking
‘‘designation as a contract market within
one year’’ and inserting ‘‘designation or
registration as a contract market or deriva-
tives transaction execution facility within
180 days’’;
(iii) in the third sentence—
(I) by striking ‘‘board of trade’’
and inserting ‘‘person’’; and
(II) by striking ‘‘one-year period’’
and inserting ‘‘180-day period’’; and
(iv) in the last sentence, by striking
‘‘designate as a ‘contract market’ any board
of trade that has made application therefor,
such board of trade’’ and inserting ‘‘des-
ignate or register as a contract market or
derivatives transaction execution facility
any person that has made application
therefor, such person’’;
(B) in subsection (b)—
(i) in the first sentence—
(I) by striking ‘‘designation of
any board of trade as a ‘contract mar-
ket’ upon’’ and inserting ‘‘designation
or registration of any contract market
or derivatives transaction execution fa-
cility on’’;
(II) by striking ‘‘board of trade’’
each place it appears and inserting
‘‘contract market or derivatives trans-
action execution facility’’; and
(III) by striking ‘‘designation as
set forth in section 5 of this Act’’ and
inserting ‘‘designation or registration
as set forth in sections 5 through 5b’’;
(ii) in the second sentence—
(I) by striking ‘‘board of trade’’
the first place it appears and inserting
‘‘contract market or derivatives trans-
action execution facility’’; and
(II) by striking ‘‘board of trade’’
the second and third places it appears
and inserting ‘‘person’’; and
(iii) in the last sentence, by striking
‘‘board of trade’’ each place it appears and
inserting ‘‘person’’;
(C) in subsection (c)—
(i) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered
entity’’;
(ii) by striking ‘‘contract markets’’
each place it appears and inserting ‘‘reg-
istered entities’’; and
(iii) by striking ‘‘trading privileges’’
each place it appears and inserting ‘‘privi-
leges’’;
(D) in subsection (d), by striking ‘‘contract
market’’ each place it appears and inserting
‘‘registered entity’’; and
(E) in subsection (e), by striking ‘‘trading
on all contract markets’’ each place it appears
and inserting ‘‘the privileges of all registered en-
tities’’.
(15) Section 6a of the Commodity Exchange Act
(7 U.S.C. 10a) is amended—
(A) in the first sentence of subsection (a), by
striking ‘‘designated as a ‘contract market’
shall’’ and inserting ‘‘designated or registered as
a contract market or a derivatives transaction
execution facility’’; and
(B) in subsection (b), by striking ‘‘des-
ignated as a contract market’’ and inserting
‘‘designated or registered as a contract market or
a derivatives transaction execution facility’’.
(16) Section 6b of the Commodity Exchange Act
(7 U.S.C. 13a) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’;
(B) in the first sentence, by striking ‘‘des-
ignation as set forth in section 5 of this Act’’
and inserting ‘‘designation or registration as set
forth in sections 5 through 5c’’; and
(C) in the last sentence, by striking ‘‘the
contract market’s ability’’ and inserting ‘‘the
ability of the registered entity’’.
(17) Section 6c(a) of the Commodity Exchange
Act (7 U.S.C. 13a–1(a)) by striking ‘‘contract mar-
ket’’ and inserting ‘‘registered entity’’.
(18) Section 6d(1) of the Commodity Exchange
Act (7 U.S.C. 13a–2(1)) is amended by inserting ‘‘de-
rivatives transaction execution facility,’’ after ‘‘con-
tract market,’’.
(19) Section 7 of the Commodity Exchange Act
(7 U.S.C. 11) is amended—
(A) in the first sentence—
(i) by striking ‘‘board of trade’’ and
inserting ‘‘person’’;
(ii) by inserting ‘‘or registered’’ after
‘‘designated’’;
(iii) by inserting ‘‘or registration’’
after ‘‘designation’’ each place it appears;
and
(iv) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered
entity’’;
(B) in the second sentence—
(i) by striking ‘‘designation of such
board of trade as a contract market’’ and
inserting ‘‘designation or registration of the
registered entity’’; and
(ii) by striking ‘‘contract markets’’ and
inserting ‘‘registered entities’’; and
(C) in the last sentence—
(i) by striking ‘‘board of trade’’ and
inserting ‘‘person’’; and
(ii) by striking ‘‘designated again a
contract market’’ and inserting ‘‘designated
or registered again a registered entity’’.
(20) Section 8(c) of the Commodity Exchange
Act (7 U.S.C. 12(c)) is amended in the first sentence
by striking ‘‘board of trade’’ and inserting ‘‘registered
entity’’.
(21) Section 8a of the Commodity Exchange Act
(7 U.S.C. 12a) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’; and
(B) in paragraph (2)(F), by striking ‘‘trad-
ing privileges’’ and inserting ‘‘privileges’’.
100
(22) Sections 8b and 8c(e) of the Commodity Ex-
change Act (7 U.S.C. 12b, 12c(e)) are amended by
striking ‘‘contract market’’ each place it appears and
inserting ‘‘registered entity’’.
(23) Section 8e of the Commodity Exchange Act
(7 U.S.C. 12e) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’;
(B) in subsection (a), by striking ‘‘section
5a(b)’’ and inserting ‘‘sections 5 through 5c’’;
(C) in subsection (b)—
(i) in paragraph (1), by striking ‘‘con-
tract market’s trade monitoring system im-
plemented pursuant to section 5a(b)’’ and
inserting ‘‘the trade monitoring system of a
registered entity implemented pursuant to
sections 5 through 5c’’;
(ii) by striking paragraph (3) and in-
serting the following:
‘‘(3) REMEDIES.—On becoming final, the Com-
mission deficiency order may require the registered
entity to—
101
‘‘(A) institute appropriate improvements in
its trade monitoring system necessary to correct
the deficiencies in the order;
‘‘(B) satisfy stated objective performance
criteria to correct the deficiencies;
‘‘(C) upgrade or reconfigure existing sys-
tems for collecting or processing relevant data on
trading and trader or broker activity, including,
where appropriate, the commitment of additional
resources.’’; and
(iii) in paragraph (5)—
(I) in the paragraph heading, by
striking ‘‘DESIGNATION AS CONTRACT
MARKET’’ and inserting ‘‘DESIGNATION
OR REGISTRATION AS REGISTERED EN-
TITY’’;
(II) by inserting ‘‘or registration’’
after ‘‘designation’’; and
(III) by striking ‘‘board of trade’’
and inserting ‘‘person’’;
(D) in subsection (d)(2), by striking ‘‘sec-
tion 5b’’ and inserting ‘‘section 5e’’; and
(E) in the paragraph heading of subsection
(e)(2), by striking ‘‘CONTRACT MARKETS’’ and
inserting ‘‘REGISTERED ENTITIES’’.
102
(24) Section 9 of the Commodity Exchange Act
(7 U.S.C. 13) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’; and
(B) in subsection (a)(2), by striking ‘‘sec-
tion 4o(1),’’ and inserting ‘‘section 4n(1),’’.
(25) Section 14 of the Commodity Exchange Act
(7 U.S.C. 18) is amended—
(A) in subsection (a)(1)(B), by striking
‘‘contract market’’ and inserting ‘‘registered enti-
ty’’; and
(B) in subsection (f), by striking ‘‘contract
markets’’ and inserting ‘‘registered entities’’.
(26) Section 17 of the Commodity Exchange Act
(7 U.S.C. 21) is amended by striking ‘‘contract mar-
ket’’ each place it appears and inserting ‘‘registered
entity’’.
(27) Section 22 of the Commodity Exchange Act
(7 U.S.C. 25) is amended—
(A) in subsection (a)—
(i) in paragraph (1)—
(I) by striking ‘‘contract market,
clearing organization of a contract
103
market, licensed board of trade,’’ and
inserting ‘‘registered entity’’; and
(II) in subparagraph (C)(i), by
striking ‘‘contract market’’ and insert-
ing ‘‘registered entity’’;
(ii) in paragraph (2), by striking ‘‘sec-
tions 5a(11),’’ and inserting ‘‘sections
5(d)(13), 5b(b)(1)(E),’’; and
(iii) in paragraph (3), by striking
‘‘contract market’’ and inserting ‘‘registered
entity’’; and
(B) in subsection (b)—
(i) in paragraph (1)—
(I) by striking ‘‘contract market
or clearing organization of a contract
market’’ and inserting ‘‘registered enti-
ty’’;
(II) by striking ‘‘section 5a(8)
and section 5a(9) of this Act’’ and in-
serting ‘‘sections 5 through 5c’’;
(III) by striking ‘‘contract mar-
ket, clearing organization of a contract
market, or licensed board of trade’’ and
inserting ‘‘registered entity’’; and
104
(IV) by striking ‘‘contract market
or licensed board of trade’’ and insert-
ing ‘‘registered entity’’;
(ii) in paragraph (3)—
(I) by striking ‘‘a contract mar-
ket, clearing organization, licensed
board of trade,’’ and inserting ‘‘reg-
istered entity’’; and
(II) by striking ‘‘contract market,
licensed board of trade’’ and inserting
‘‘registered entity’’;
(iii) in paragraph (4), by striking
‘‘contract market, licensed board of trade,
clearing organization,’’ and inserting ‘‘reg-
istered entity’’; and
(iv) in paragraph (5), by striking
‘‘contract market, licensed board of trade,
clearing organization,’’ and inserting ‘‘reg-
istered entity’’.
(b) FEDERAL DEPOSIT INSURANCE CORPORATION IM-
PROVEMENT ACT OF 1991.—Section 402(2) of the Federal
Deposit Insurance Corporation Improvement Act of 1991
(12 U.S.C. 4402(2)) is amended by striking subparagraph
(B) and inserting the following:
105
‘‘(B) that is registered as a derivatives
clearing organization under section 5b of the
Commodity Exchange Act.’’.
SEC. 26. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Commission (in
this section referred to as the ‘‘Commission’’) shall under-
take and complete a study of the Commodity Exchange Act
(in this section referred to as ‘‘the Act’’) and the Commis-
sion’s rules, regulations and orders governing the conduct
of persons required to be registered under the Act, not later
than 1 year after the date of the enactment of this Act. The
study shall identify—
(1) the core principles and interpretations of ac-
ceptable business practices that the Commission has
adopted or intends to adopt to replace the provisions
of the Act and the Commission’s rules and regulations
thereunder;
(2) the rules and regulations that the Commis-
sion has determined must be retained and the reasons
therefor;
(3) the extent to which the Commission believes
it can effect the changes identified in paragraph (1)
of this subsection through its exemptive authority
under section 4(c) of the Act; and
106
(4) the regulatory functions the Commission cur-
rently performs that can be delegated to a registered
futures association (within the meaning of the Act)
and the regulatory functions that the Commission has
determined must be retained and the reasons therefor.
(b) In conducting the study, the Commission shall so-
licit the views of the public as well as Commission reg-
istrants, registered entities, and registered futures associa-
tions (all within the meaning of the Act).
(c) The Commission shall transmit to the Committee
on Agriculture of the House of Representatives and the
Committee on Agriculture, Nutrition, and Forestry of the
Senate a report of the results of its study, which shall in-
clude an analysis of comments received.
SEC. 27. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in subsection
(b), this Act takes effect on the date of enactment of this
Act.
(b) JURISDICTION OF COMMISSION.—Section 8, and
the amendments made by that section, take effect 1 year
after the date of enactment of this Act.
SEC. 28. INTERNATIONAL ACTIVITIES OF THE COMMODITY
FUTURES TRADING COMMISSION.
(a) FINDINGS.—The Congress finds that—
107
(1) derivatives markets serving United States in-
dustry are increasingly global in scope;
(2) developments in data processing and commu-
nications technologies enable users of risk manage-
ment services to analyze and compare those services
on a worldwide basis;
(3) financial services regulatory policy must be
flexible to account for rapidly changing derivatives
industry business practices;
(4) regulatory impediments to the operation of
global business interests can compromise the competi-
tiveness of United States businesses;
(5) events that disrupt financial markets and
economies are often global in scope, require rapid reg-
ulatory response, and coordinated regulatory effort
across international jurisdictions;
(6) through its membership in the International
Organisation of Securities Commissions, the Com-
modity Futures Trading Commission has promoted
beneficial communication among market regulators
and international regulatory cooperation; and
(7) the Commodity Futures Trading Commission
and other United States financial regulators and self-
regulatory organizations should continue to foster
108
productive and cooperative working relationships
with their counterparts in foreign jurisdictions.
(b) SENSE OF THE CONGRESS.—It is the sense of the
Congress that, consistent with its responsibilities under the
Commodity Exchange Act, the Commodity Futures Trading
Commission should, as part of its international activities,
continue to coordinate with foreign regulatory authorities,
to participate in international regulatory organizations
and forums, and to provide technical assistance to foreign
government authorities, in order to encourage—
(1) the facilitation of cross-border transactions
through the removal or lessening of any unnecessary
legal or practical obstacles;
(2) the development of internationally accepted
regulatory standards of best practice;
(3) the enhancement of international supervisory
cooperation and emergency procedures;
(4) the strengthening of international coopera-
tion for customer and market protection; and
(5) improvements in the quality and timeliness
of international information sharing.
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as
the ‘‘Commodity Futures Modernization and
109
Financial Contract Netting Improvement Act
of 2000’’.
(b) TABLE OF CONTENTS.—The table of con-
tents of this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—COMMODITY FUTURES MODERNIZATION
Sec. 101. Short title.
Sec. 102. Purposes.
Sec. 103. Definitions.
Sec. 104. Agreements, contracts, and transactions in foreign
currency, government securities, and certain
other commodities.
Sec. 105. Legal certainty for excluded derivative transactions.
Sec. 106. Excluded electronic trading facilities.
Sec. 107. Conformity with the Gramm-Leach-Bliley Act; hybrid
instruments.
Sec. 108. Futures on securities.
Sec. 109. Transactions in exempt commodities.
Sec. 110. Swap transactions.
Sec. 111. Application of the Commodity Exchange Act.
Sec. 112. Protection of the public interest.
Sec. 113. Prohibited transactions.
Sec. 114. Designation of boards of trade as contract markets.
Sec. 115. Derivatives transaction execution facilities.
Sec. 116. Derivatives clearing.
Sec. 117. Common provisions applicable to registered entities.
Sec. 118. Exempt boards of trade.
Sec. 119. Suspension or revocation of designation as contract
market.
Sec. 120. Authorization of appropriations.
Sec. 121. Preemption.
Sec. 122. Predispute resolution agreements for institutional
customers.
Sec. 123. Consideration of costs and benefits and antitrust
laws.
Sec. 124. Contract enforcement.
Sec. 125. Special procedures to encourage and facilitate bona
fide hedging by agricultural producers.
Sec. 126. Rule of construction.
Sec. 127. Authority of agencies to construe the term ‘‘contract
market’’.
Sec. 128. Technical and conforming amendments.
Sec. 129. Report to Congress.
Sec. 130. Effective date.
Sec. 131. International activities of the Commodity Futures
Trading Commission.
Sec. 132. Antifraud provisions.
Sec. 133. Retail swap customer protections.
110
TITLE II—FINANCIAL CONTRACT NETTING IMPROVEMENT
Sec. 201. Short title.
Sec. 202. Treatment of certain agreements by conservators or
receivers of insured depository institutions.
Sec. 203. Authority of the Corporation with respect to failed
and failing institutions.
Sec. 204. Amendments relating to transfers of qualified finan-
cial contracts.
Sec. 205. Amendments relating to disaffirmance or repudiation
of qualified financial contracts.
Sec. 206. Clarifying amendment relating to master agreements.
Sec. 207. Federal Deposit Insurance Corporation Improvement
Act of 1991.
Sec. 208. Bankruptcy code amendments.
Sec. 209. Recordkeeping requirements.
Sec. 210. Exemptions from contemporaneous execution re-
quirement.
Sec. 211. Damage measure.
Sec. 212. SIPC stay.
Sec. 213. Asset-backed securitizations.
Sec. 214. Application of amendments.
TITLE I—COMMODITY FUTURES
MODERNIZATION
SEC. 101. SHORT TITLE.
This title may be cited as the ‘‘Commodity
Futures Modernization Act of 2000’’.
SEC. 102. PURPOSES.
The purposes of this title are—
(1) to reauthorize the appropriation
for the Commodity Futures Trading Com-
mission;
(2) to streamline and eliminate un-
necessary regulation for the commodity
futures exchanges and other entities reg-
ulated under the Commodity Exchange
Act;
111
(3) to transform the role of the Com-
modity Futures Trading Commission to
oversight of the futures markets;
(4) to provide a statutory and regu-
latory framework for allowing the trad-
ing of futures on securities;
(5) to provide the Commission juris-
diction over certain retail foreign ex-
change transactions and bucket shops
that may not be otherwise regulated;
(6) to promote innovation for futures
and derivatives and to reduce systemic
risk by enhancing legal certainty in the
markets for certain futures and deriva-
tives transactions;
(7) to reduce systemic risk and pro-
vide greater stability to markets during
times of market disorder by allowing the
clearing 
of 
transactions 
in 
over-the-
counter 
derivatives 
through 
appro-
priately regulated clearing organizations;
and
(8) to enhance the competitive posi-
tion of United States financial institu-
tions and financial markets.
112
SEC. 103. DEFINITIONS.
Section 1a of the Commodity Exchange
Act (7 U.S.C. 1a) is amended—
(1) by redesignating—
(A) paragraphs (1) through (7) as
paragraphs (2) through (8), respec-
tively;
(B) paragraphs (8) through (12) as
paragraphs (16) through (20), respec-
tively;
(C) paragraphs (13) through (15)
as paragraphs (22) through (24), re-
spectively; and
(D) paragraph (16) as paragraph
(28);
(2) by inserting before paragraph (2)
(as so redesignated by paragraph (1) of
this section) the following new para-
graph:
‘‘(1) BANKING PRODUCT.—
‘‘(A) IN GENERAL.—The term ‘bank-
ing product’ means any agreement,
contract, or transaction that is an
identified banking product (as de-
fined in section 206(a) of the Gramm-
Leach-Bliley Act).
113
‘‘(B) EXCLUSION.—The term ‘bank-
ing product’ does not include a con-
tract for the sale of a commodity for
future delivery traded on a contract
market designated under section 5 of
this Act or an agreement, contract, or
transaction traded on a derivatives
transaction execution facility reg-
istered under section 5a.’’;
(3) by inserting after paragraph (8)
(as so redesignated by paragraph (1) of
this section) the following new para-
graphs:
‘‘(9) DERIVATIVES
CLEARING
ORGANIZA-
TION.—
‘‘(A) IN
GENERAL.—The term ‘de-
rivatives 
clearing 
organization’
means a clearinghouse, clearing asso-
ciation, clearing corporation, or simi-
lar entity, facility, system, or organi-
zation that, with respect to a deriva-
tive 
agreement, 
contract, 
or
transaction—
‘‘(i) enables each party to the
derivative agreement, contract, or
114
transaction to substitute, through
novation or otherwise, the credit
of the derivatives clearing organi-
zation for the credit of the par-
ties;
‘‘(ii) arranges or provides, on
a multilateral basis, for the settle-
ment or netting of obligations re-
sulting from such agreements,
contracts, or transactions exe-
cuted by parties in the deriva-
tives clearing organization; or
‘‘(iii) otherwise provides clear-
ing services or arrangements that
mutualize or transfer among par-
ties in the derivatives clearing or-
ganization the credit risk arising
from such agreements, contracts,
or transactions executed by the
parties.
‘‘(B) EXCLUSIONS.—The term ‘de-
rivatives clearing organization’ does
not include an entity, facility, system,
or organization solely because it ar-
ranges or provides for—
115
‘‘(i) settlement, netting, or no-
vation of obligations resulting
from agreements, contracts, or
transactions, on a bilateral basis
and 
without 
a 
centralized
counterparty;
‘‘(ii) settlement or netting of
cash payments through an inter-
bank payment system; or
‘‘(iii) settlement, netting, or
novation of obligations resulting
from a sale of a commodity in a
transaction in the spot market for
the commodity.
‘‘(10) ELECTRONIC TRADING FACILITY.—
The term ‘electronic trading facility’
means a trading facility that—
‘‘(A) operates by means of an elec-
tronic network; and
‘‘(B) maintains a real-time audit
trail of bids, offers, and the matching
of orders or the execution of trans-
actions.
‘‘(11) ELIGIBLE
COMMERCIAL
PARTICI-
PANT.—The term ‘eligible commercial par-
116
ticipant’ means a party or entity de-
scribed in paragraph (11)(A)(i), (ii), (v), or
(vii) or paragraph (11)(C), who, in con-
nection with its business—
‘‘(A) has a demonstrable capacity
or ability, directly or through sepa-
rate contractual arrangements, to
make or take delivery of the under-
lying physical commodity;
‘‘(B) incurs risks, in addition to
price risk, related to the commodity;
or
‘‘(C) is a dealer that regularly pro-
vides hedging, risk management, or
market-making services to the fore-
going entities.
‘‘(12) 
ELIGIBLE
CONTRACT
PARTICI-
PANT.—The term ‘eligible contract partici-
pant’ means—
‘‘(A) acting for its own account—
‘‘(i) a financial institution;
‘‘(ii) an insurance company
regulated by a State (including a
subsidiary or affiliate of such an
insurance company);
117
‘‘(iii) an investment company
subject to regulation under the
Investment Company Act of 1940
(15 U.S.C. 80a–1 et seq.) or a for-
eign person performing a similar
role or function subject as such to
foreign regulation (regardless of
whether each investor in the in-
vestment company or the foreign
person is itself an eligible con-
tract participant);
‘‘(iv) a commodity pool that—
‘‘(I) has total assets ex-
ceeding $5,000,000; and
‘‘(II) is formed and oper-
ated by a person subject to
regulation under this Act or a
foreign person performing a
similar role or function sub-
ject as such to foreign regula-
tion (regardless of whether
each investor in the com-
modity pool or the foreign
person is itself an eligible
contract participant);
118
‘‘(v) a corporation, partner-
ship, 
proprietorship, 
organiza-
tion, trust, or other entity—
‘‘(I) that has total assets
exceeding $10,000,000;
‘‘(II) 
the 
obligations 
of
which under an agreement,
contract, or transaction are
guaranteed or otherwise sup-
ported by a letter of credit or
keepwell, support, or other
agreement by an entity de-
scribed in subclause (I), in
clause (i), (ii), (iii), (iv), or
(vii), or in subparagraph (C);
or
‘‘(III) that—
‘‘(aa) has a net worth
exceeding $1,000,000; and
‘‘(bb) enters into an
agreement, 
contract, 
or
transaction in connection
with the conduct of the
entity’s 
business 
or 
to
manage the risk associ-
119
ated with an asset or li-
ability owned or incurred
or reasonably likely to be
owned or incurred by the
entity in the conduct of
the entity’s business;
‘‘(vi) an employee benefit plan
subject to the Employee Retire-
ment Income Security Act of 1974
(29 U.S.C. 1001 et seq.) or a for-
eign person performing a similar
role or function subject as such to
foreign regulation—
‘‘(I) that has total assets
exceeding $5,000,000; or
‘‘(II) the investment deci-
sions of which are made by—
‘‘(aa) 
an 
investment
advisor 
or 
commodity
trading advisor subject to
regulation under the In-
vestment Advisers Act of
1940 (15 U.S.C. 80b–1 et
seq.) or this Act;
120
‘‘(bb) a foreign person
performing a similar role
or 
function 
subject 
as
such to foreign regulation;
‘‘(cc) a financial insti-
tution; or
‘‘(dd) 
an 
insurance
company regulated by a
State (including a sub-
sidiary or affiliate of such
an insurance company);
‘‘(vii)(I) a governmental entity
(including the United States, a
State, or a foreign government) or
political subdivision of a govern-
mental entity;
‘‘(II) a multinational or supra-
national government entity; or
‘‘(III) 
an 
instrumentality,
agency, or department of an enti-
ty described in subclause (I) or
(II);
‘‘(viii) a broker or dealer sub-
ject to regulation under the Secu-
rities Exchange Act of 1934 (15
121
U.S.C. 78a et seq.) or a foreign
person performing a similar role
or function subject as such to for-
eign regulation, except that, if the
broker or dealer or foreign per-
son is a natural person or propri-
etorship, the broker or dealer or
foreign person shall not be con-
sidered to be an eligible contract
participant unless the broker or
dealer or foreign person also
meets the requirements of clause
(v) or (xi);
‘‘(ix) a futures commission
merchant subject to regulation
under this Act or a foreign person
performing a similar role or func-
tion subject as such to foreign
regulation, except that, if the fu-
tures commission merchant or
foreign person is a natural person
or 
proprietorship, 
the 
futures
commission merchant or foreign
person shall not be considered to
be an eligible contract participant
122
unless the futures commission
merchant or foreign person also
meets the requirements of clause
(v) or (xi);
‘‘(x) a floor broker or floor
trader subject to regulation under
this Act in connection with any
transaction that takes place on or
through the facilities of a reg-
istered entity or an exempt board
of trade, or any affiliate thereof,
on which such person regularly
trades; or
‘‘(xi) an individual who has
total assets in an amount in ex-
cess of—
‘‘(I) $10,000,000; or
‘‘(II) $5,000,000 and who
enters into the agreement,
contract, or transaction in
order to manage the risk asso-
ciated with an asset owned or
liability incurred, or reason-
ably likely to be owned or in-
curred, by such individual
123
with total assets exceeding
$10,000,000;
‘‘(B)(i) a person described in any
of clauses (i) through (x) of subpara-
graph (A) or in subparagraph (C), act-
ing as broker or performing an equiv-
alent agency function on behalf of an-
other person described in subpara-
graph (A) or (C);
‘‘(ii) an investment adviser sub-
ject to regulation under the Invest-
ment Advisors Act of 1940, a com-
modity trading advisor subject to reg-
ulation under this Act, a foreign per-
son performing a similar role or func-
tion subject as such to foreign regula-
tion, or a person described in any of
clauses (i) through (x) of subpara-
graph (A) or in subparagraph (C), in
any such case acting as investment
manager or fiduciary (but excluding a
person acting as broker or per-
forming an equivalent agency func-
tion) for another person described in
subparagraph (A) or (C) and who is
124
authorized by such person to commit
such person to the transaction; or
‘‘(iii) a commodity trading advisor
subject to regulation under this Act,
having assets under management of
not less than $25,000,000 and acting
as investment manager or fiduciary
for another person and authorized by
such person to commit such person to
the transaction; or
‘‘(C) any other person that the
Commission determines to be eligible
in light of the financial or other
qualifications of the person.
‘‘(13) 
EXCLUSION-ELIGIBLE
COM-
MODITY.—
‘‘(A) IN GENERAL.—The term ‘exclu-
sion-eligible commodity’ means—
‘‘(i) an interest rate, exchange
rate, currency, security, security
index, credit risk or measure,
debt or equity instrument, index
or measure of inflation, or other
macroeconomic index or measure;
125
‘‘(ii) any other rate, differen-
tial, index, or measure of eco-
nomic or commercial risk, return,
or value that is—
‘‘(I) not based in substan-
tial part on the value of a nar-
row group of commodities not
described in clause (i); or
‘‘(II) based solely on 1 or
more commodities that have
no cash market;
‘‘(iii) any economic or com-
mercial index based on prices,
rates, values, or levels that are
not within the control of any
party to the relevant contract,
agreement, or transaction; or
‘‘(iv) an occurrence, extent of
an occurrence, or contingency
(other than a change in the price,
rate, value, or level of a com-
modity not described in clause (i))
that is—
‘‘(I) beyond the control of
the parties to the relevant
126
contract, agreement, or trans-
action; and
‘‘(II) associated with a fi-
nancial, commercial, or eco-
nomic consequence.
‘‘(B) REFERENCE TO EXCLUDED COM-
MODITY.—Any reference in this Act to
the term ‘excluded commodity’ shall
be deemed to be a reference to ‘exclu-
sion-eligible commodity’.
‘‘(14) EXEMPT
COMMODITY.—The term
‘exempt commodity’ means a commodity
that is not an excluded commodity or an
agricultural commodity.
‘‘(15) 
FINANCIAL
INSTITUTION.—The
term ‘financial institution’ means—
‘‘(A) 
a 
corporation 
operating
under the fifth undesignated para-
graph of section 25 of the Federal Re-
serve Act (12 U.S.C. 603), commonly
known as ‘an agreement corporation’;
‘‘(B) 
a 
corporation 
organized
under section 25A of the Federal Re-
serve Act (12 U.S.C. 611 et seq.), com-
127
monly known as an ‘Edge Act cor-
poration’;
‘‘(C) an institution that is regu-
lated by the Farm Credit Administra-
tion;
‘‘(D) a Federal credit union or
State credit union (as defined in sec-
tion 101 of the Federal Credit Union
Act (12 U.S.C. 1752));
‘‘(E) a depository institution (as
defined in section 3 of the Federal
Deposit 
Insurance 
Act 
(12 
U.S.C.
1813));
‘‘(F) a foreign bank or a branch or
agency of a foreign bank (each as de-
fined in section 1(b) of the Inter-
national Banking Act of 1978 (12
U.S.C. 3101(b)));
‘‘(G) any financial holding com-
pany (as defined in section 2 of the
Bank Holding Company Act of 1956);
‘‘(H) a trust company; or
‘‘(I) a similarly regulated sub-
sidiary or affiliate of an entity de-
128
scribed in any of subparagraphs (A)
through (H).’’;
(3) by inserting after paragraph (20)
(as so redesignated by paragraph (1)) the
following new paragraph:
‘‘(21) HYBRID INSTRUMENT.—
‘‘(A) IN
GENERAL.—The term ‘hy-
brid instrument’ means a deposit in-
strument offered by a financial insti-
tution, or a security, having 1 or more
payments indexed to the value, level,
or rate of 1 or more commodities.
‘‘(B) 
DEPOSIT
INSTRUMENT
DE-
FINED.—The term ‘deposit instrument’
means an instrument representing an
interest described in paragraph (1),
(2), (3), (4), or (5) of section 3(l) of the
Federal Deposit Insurance Act, other
than in subparagraph (A), (B), or (C)
at the end of paragraph (5).’’;
(4) by inserting after paragraph (24)
(as so redesignated by paragraph (1)) the
following new paragraphs:
‘‘(25) NONEXEMPT SECURITY.—The term
‘nonexempt security’ means a security
129
that is not an exempted security under
section 3 of the Securities Act of 1933 or
section 3(a)(12) of the Securities Ex-
change Act of 1934 (other than any mu-
nicipal security, as defined in section
3(a)(29) of the Securities Exchange Act of
1934).
‘‘(26) 
OPTION.—The 
term 
‘option’
means an agreement, contract, or trans-
action that is of the character of, or is
commonly known to the trade as, an ‘op-
tion’, ‘privilege’, ‘indemnity’, ‘bid’, ‘offer’,
‘put’, ‘call’, ‘advance guaranty’, or ‘decline
guaranty’.
‘‘(27) ORGANIZED EXCHANGE.—The term
‘organized exchange’ means a trading fa-
cility that—
‘‘(A) permits trading by persons
other than—
‘‘(i) eligible contract partici-
pants trading on a principal-to-
principal basis; or
‘‘(ii) eligible contract partici-
pants described in subclause (I),
(II), (III), (IV), (V) or (VI) of sec-
130
tion 2(c)(2)(B), acting as a broker
or 
performing 
an 
equivalent
agency function on behalf of eligi-
ble contract participants; or
‘‘(B) 
has 
adopted 
(directly 
or
through 
another 
nongovernmental
entity) rules that—
‘‘(i) govern the conduct of par-
ticipants, other than rules that
govern the submission of orders
or execution of transactions on
the trading facility; or
‘‘(ii) include disciplinary sanc-
tions other than the exclusion of
participants from trading.’’; and
(5) by adding at the end the following
new paragraphs:
‘‘(29) REGISTERED
ENTITY.—The term
‘registered entity’ means—
‘‘(A) a board of trade designated
as a contract market under section 5;
‘‘(B) a derivatives transaction exe-
cution facility registered under sec-
tion 5a; or
131
‘‘(C) a derivatives clearing organi-
zation registered under section 5b.
‘‘(30) SECURITY.—The term ‘security’
has the meaning given the term in sec-
tion 3(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)) as in effect on
date of the enactment of this paragraph.
‘‘(31) TRADING FACILITY.—
‘‘(A) IN GENERAL.—The term ‘trad-
ing facility’ means a person or group
of persons that constitutes, main-
tains, or provides a physical or elec-
tronic facility or system in which
multiple participants have the ability
to execute or trade agreements, con-
tracts, or transactions by accepting
bids and offers made by other partici-
pants that are open to multiple par-
ticipants in the facility or system.
‘‘(B) EXCLUSIONS.—The term ‘trad-
ing facility’ does not include—
‘‘(i) a person or group of per-
sons solely because the person or
group 
of 
persons 
constitutes,
maintains, or provides an elec-
132
tronic facility or system that en-
ables participants to negotiate
the terms of and enter into bilat-
eral transactions as a result of
communications 
exchanged 
by
the parties and not from inter-
action of multiple orders within a
predetermined, nondiscretionary
automated trade matching algo-
rithm;
‘‘(ii) a government securities
dealer or government securities
broker, to the extent that the
dealer 
or 
broker 
executes 
or
trades agreements, contracts, or
transactions in government secu-
rities, or assists persons in com-
municating 
about, 
negotiating,
entering into, executing, or trad-
ing an agreement, contract, or
transaction in government securi-
ties (as the terms ‘government se-
curities dealer’, ‘government secu-
rities broker’, and ‘government
securities’ are defined in section
133
3(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)));
‘‘(iii) facilities on which bids
and offers, and acceptances of
bids and offers effected on the fa-
cility, are not binding; or
‘‘(iv) a person or group of per-
sons solely because the person or
group 
of 
persons 
constitutes,
maintains, or provides an elec-
tronic facility or system that—
‘‘(I) enables participants
to enter into bilateral trans-
actions with other partici-
pants; and
‘‘(II) incorporates credit
screens or filters that prevent
any 
participant 
from 
exe-
cuting a transaction with an-
other participant unless both
participants 
have 
approved
the extension of credit to the
other.’’.
134
SEC. 104. AGREEMENTS, CONTRACTS, AND TRANSACTIONS
IN FOREIGN CURRENCY, GOVERNMENT SECU-
RITIES, AND CERTAIN OTHER COMMODITIES.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) is amended by adding
at the end the following:
‘‘(c) AGREEMENTS, CONTRACTS, AND TRANS-
ACTIONS IN FOREIGN CURRENCY, GOVERNMENT
SECURITIES, 
AND
CERTAIN
OTHER
COMMOD-
ITIES.—
‘‘(1) IN GENERAL.—Except as provided
in paragraph (2), nothing in this Act
(other than section 5b or 12(e)(2)(B)) gov-
erns or applies to an agreement, contract,
or transaction in—
‘‘(A) foreign currency;
‘‘(B) government securities;
‘‘(C) security warrants;
‘‘(D) security rights;
‘‘(E) resales of installment loan
contracts;
‘‘(F) repurchase transactions in
an excluded commodity; or
‘‘(G) mortgages or mortgage pur-
chase commitments.
‘‘(2) COMMISSION JURISDICTION.—
135
‘‘(A) AGREEMENTS, CONTRACTS, AND
TRANSACTIONS THAT ARE FUTURES TRAD-
ED ON AN ORGANIZED EXCHANGE.—This
Act applies to, and the Commission
shall have jurisdiction over, an agree-
ment, contract, or transaction de-
scribed in paragraph (1) that is—
‘‘(i) a contract of sale of a
commodity for future delivery (or
an option thereon), or an option
on a commodity (other than for-
eign currency or a security), that
is executed or traded on an orga-
nized exchange; or
‘‘(ii) an option on foreign cur-
rency and is executed or traded
on an organized exchange that is
not 
a 
national 
securities 
ex-
change.
‘‘(B) AGREEMENTS, CONTRACTS, AND
TRANSACTIONS IN RETAIL FOREIGN CUR-
RENCY.—This Act applies to, and the
Commission shall have jurisdiction
over, 
an 
agreement, 
contract, 
or
transaction in foreign currency that—
136
‘‘(i) is a contract of sale for fu-
ture delivery (or an option on
such a contract) or an option; and
‘‘(ii) is offered to, or entered
into with, a person that is not an
eligible contract participant, un-
less the counterparty, or the per-
son 
offering 
to 
be 
the
counterparty, of the person is—
‘‘(I) a financial institution;
‘‘(II) a broker or dealer
registered under section 15(b)
or 15C of the Securities Ex-
change Act of 1934 (15 U.S.C.
78o(b), 78o–5) or a futures
commission 
merchant 
reg-
istered under this Act;
‘‘(III) an associated person
of a broker or dealer reg-
istered under section 15(b) or
15C 
of 
the 
Securities 
Ex-
change Act of 1934 (15 U.S.C.
78o(b), 78o–5), or an affiliated
person of a futures commis-
sion 
merchant 
registered
137
under this Act, concerning the
financial or securities activi-
ties of which the registered
person 
makes 
and 
keeps
records under section 15C(b)
or 17(h) of the Securities Ex-
change Act of 1934 (15 U.S.C.
78o–5(b), 78q(h)) or section
4f(c)(2)(B) of this Act;
‘‘(IV) an insurance com-
pany that is subject to State
regulation (including a sub-
sidiary or affiliate of such an
insurance company);
‘‘(V) a financial holding
company (as defined in sec-
tion 2 of the Bank Holding
Company Act of 1956); or
‘‘(VI) an investment bank
holding company (as defined
in section 17(i) of the Securi-
ties Exchange Act of 1934).’’.
138
SEC. 105. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE
TRANSACTIONS.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
104) is amended by adding at the end the fol-
lowing:
‘‘(d) 
EXCLUDED
DERIVATIVE
TRANS-
ACTIONS.—
‘‘(1) IN GENERAL.—Nothing in this Act
(other than section 5b or 12(e)(2)(B)) gov-
erns or applies to an agreement, contract,
or transaction in an excluded commodity
if—
‘‘(A) the agreement, contract, or
transaction is entered into only be-
tween persons that are eligible con-
tract participants at the time at
which the persons enter into the
agreement, contract, or transaction;
and
‘‘(B) the agreement, contract, or
transaction is not executed or traded
on a trading facility.
‘‘(2) ELECTRONIC TRADING FACILITY EX-
CLUSION.—Nothing in this Act (other than
section 5a, 5b, or 12(e)(2)(B)) governs or
139
applies to an agreement, contract, or
transaction in an excluded commodity
if—
‘‘(A) the agreement, contract, or
transaction is—
‘‘(i) entered into—
‘‘(I) on a principal-to-prin-
cipal basis between parties
trading for their own ac-
counts or as described in sec-
tion 1a(12)(B)(ii) of this Act;
and
‘‘(II) only between eligible
contract participants (as de-
fined in subparagraphs (A),
(B)(ii), and (C) section 1a(12))
at the time at which the per-
sons enter into the agreement,
contract, or transaction; or
‘‘(ii) entered into only be-
tween eligible contract partici-
pants described in subclause (I),
(II), (III), (IV), (V), or (VI) of sec-
tion 
2(c)(2)(B)(ii) 
acting 
as 
a
broker or performing a similar
140
agency function on behalf of per-
sons that are eligible contract
participants at the time at which
the persons enter into the agree-
ment, contract, or transaction;
and
‘‘(B) the agreement, contract, or
transaction is executed or traded on
an electronic trading facility.’’.
SEC. 106. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
105) is amended by adding at the end the fol-
lowing:
‘‘(e) EXCLUDED ELECTRONIC TRADING FA-
CILITIES.—
‘‘(1) IN GENERAL.—Nothing in this Act
(other than section 12(e)(2)(B)) governs
or is applicable to an electronic trading
facility that limits transactions author-
ized to be conducted on its facilities to
those satisfying the requirements of sec-
tions 2(d)(2) and 2(h)(3)(B) of this Act.
‘‘(2) EFFECT
ON
AUTHORITY
TO
ESTAB-
LISH
AND
OPERATE.—Nothing in this Act
141
shall prohibit a board of trade designated
by the Commission as a contract market
or derivatives transaction execution facil-
ity, or an exempt board of trade, from es-
tablishing and operating an electronic
trading facility excluded under this Act
pursuant to paragraph (1).’’.
SEC. 107. CONFORMITY WITH THE GRAMM-LEACH-BLILEY
ACT; HYBRID INSTRUMENTS.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
106) is amended by adding at the end the fol-
lowing:
‘‘(f) EXCLUSION FOR QUALIFYING HYBRID IN-
STRUMENTS.—
‘‘(1) IN GENERAL.—Nothing in this Act
(other than section 12(e)(2)(B)) governs
or is applicable to—
‘‘(A) a banking product or secu-
rity sold or provided by an entity that
is listed in any of subclauses (I)
through (VI) of section 2(c)(2)(B)(ii);
or
142
‘‘(B) a hybrid instrument that is
predominantly a security or a deposit
instrument.
‘‘(2) 
EXCEPTION.—Paragraph 
(1)(A)
shall not apply to any swap agreement
(as defined in section 206(b) of the
Gramm-Leach-Bliley Act) with any party
who is not an eligible contract partici-
pant unless such swap agreement is en-
tered into after final regulations have
been prescribed under section 49 of the
Federal Deposit Insurance Act.
‘‘(3) PREDOMINANCE.—A hybrid instru-
ment shall be considered to be predomi-
nantly a security or deposit instrument
if—
‘‘(A) the issuer of the hybrid in-
strument receives payment in full of
the purchase price of the hybrid in-
strument, substantially contempora-
neously with delivery of the hybrid
instrument;
‘‘(B) the purchaser or holder of
the hybrid instrument is not required
to make any payment to the issuer in
143
addition to the purchase price paid
under subparagraph (A), whether as
margin, settlement payment, or other-
wise, during the life of the hybrid in-
strument or at maturity;
‘‘(C) the issuer of the hybrid in-
strument is not subject by the terms
of the instrument to mark-to-market
margining requirements; and
‘‘(D) the hybrid instrument is not
marketed as a contract of sale for fu-
ture delivery of a commodity (or op-
tion on such a contract) subject to
this Act.
‘‘(4) MARK-TO-MARKET
MARGINING
RE-
QUIREMENTS.—For the purposes of para-
graph (3)(C), mark-to-market margining
requirements do not include the obliga-
tion of an issuer of a secured debt instru-
ment to increase the amount of collateral
held in pledge for the benefit of the pur-
chaser of the secured debt instrument to
secure the repayment obligations of the
issuer under the secured debt instru-
ment.’’.
144
SEC. 108. FUTURES ON SECURITIES.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
107) is amended by adding at the end the fol-
lowing:
‘‘(g) Notwithstanding any other provision
of law:
‘‘(1) This Act shall not apply to and
the Commission shall have no jurisdic-
tion to designate a board of trade as a
contract 
market 
for 
any 
transaction
whereby any party to the transaction ac-
quires a put, call, or other option on 1 or
more securities (as defined in section
2(a)(1) of the Securities Act of 1933 or
section 3(a)(10) of the Securities Ex-
change Act of 1934, on the date of enact-
ment of the Futures Trading Act of 1982),
including any group or index of securi-
ties and any interest in or based on the
value of securities.
‘‘(2) Nothing in this subsection gov-
erns or applies to—
‘‘(A) an agreement, contract, or
transaction in a commodity that is ex-
cluded under subsection (c) or (d);
145
‘‘(B) an electronic trading facility
that is excluded under subsection (e);
or
‘‘(C) a hybrid instrument that is
covered by an exclusion under sub-
section (f) or an exemption granted
by the Commission under section 4(c)
(whether or not the hybrid instru-
ment is otherwise subject to this Act).
‘‘(3) Except as provided in paragraph
(4) of this subsection, or unless excluded
by paragraph (2) of this subsection, a per-
son shall not offer to enter into, enter
into, or confirm the execution of any con-
tract of sale (or option on the contract)
for future delivery of any security or in-
terest in or based on the value of a non-
exempt security.
‘‘(4)(A) Except as excluded by para-
graph (2) of this subsection, this Act shall
apply to and the Commission shall have
exclusive jurisdiction with respect to ac-
counts, agreements (including any trans-
action which is of the character of, or is
commonly known to the trade as an op-
146
tion, privilege, indemnity, bid, offer, put,
call, advance guaranty, or decline guar-
anty), and transactions involving, and
may designate a board of trade as a con-
tract market under section 5 or register
the board of trade as a derivatives trans-
action execution facility under section 5a
in, contracts of sale (or options on the
contracts) for future delivery of 1 or
more securities (as defined in section
2(a)(1) of the Securities Act of 1933 or
section 3(a)(10) of the Securities Ex-
change Act of 1934), including any group
or index of securities and any interest in
or based on the value of securities.
‘‘(B) The Commission shall not des-
ignate a board of trade as a contract mar-
ket under section 5 or register a board of
trade as a derivatives transaction execu-
tion facility under section 5a with respect
to any such contracts of sale (or options
on the contracts) for future delivery un-
less the board of trade demonstrates and
the Commission expressly finds that the
specific contract (or option on the con-
147
tract) with respect to which the applica-
tion for the designation or recognition
has been made meets the following re-
quirements:
‘‘(i) Settlement of or delivery on
the contract (or option on the con-
tract) shall be effected in cash or by
means other than the transfer or re-
ceipt of a nonexempt security.
‘‘(ii) SUSCEPTIBILITY TO PRICE MA-
NIPULATION.—Trading in a contract
(or option on such a contract) de-
scribed in subparagraph (A) shall not
be readily susceptible to—
‘‘(I) manipulation of the price
of the contract (or option on such
a contract); or
‘‘(II) causing or being used in
the manipulation of the price of
any underlying security, option
on a security, or option on a
group or index that includes a se-
curity.
‘‘(iii) If the contract is based on a
single nonexempt security, an option
148
on the security underlying the con-
tract would meet all Securities and
Exchange Commission requirements
for listing on a national securities ex-
change.
‘‘(iv) If the contract is based on
any group or index of nonexempt se-
curities comprised of fewer than 5 se-
curities, or on an index in which a
single nonexempt security predomi-
nates, an option on each security
comprising the group or index would
meet all requirements for listing on a
national securities exchange.
‘‘(v)(I) IN GENERAL.—The contract
will be traded on a board of trade
that establishes the level of margin
for futures contracts (or options on
the contracts) based on a single non-
exempt security, an index of fewer
than 5 nonexempt securities, or an
index in which a single nonexempt
security predominates, at a level con-
sistent with the level of margin on
149
comparable option contracts listed on
any national securities exchange.
‘‘(II) 
CONSISTENCY.—For
the purposes of subclause (I),
a margin for designated fu-
tures on securities and op-
tions on securities shall be
considered to be consistent if
the margin provides a similar
level of protection against de-
faults by counterparties, tak-
ing 
into 
account 
any 
dif-
ferences in—
‘‘(aa) the price vola-
tility of the contracts;
‘‘(bb) 
the 
frequency
with 
which 
margin 
re-
quirements are made; and
‘‘(cc) 
the 
period 
of
time within which margin
calls must be met.
‘‘(vi) The contract will be traded
on a board of trade that prohibits a
person who acts as a floor broker for
any contract of sale (or options on
150
the contract) for future delivery of a
nonexempt security, an index based
on fewer than 5 nonexempt securi-
ties, or an index in which a single
nonexempt 
security 
predominates,
from trading that contract for the
broker’s own account during the
same trading session.
‘‘(vii) The contract will be traded
on a board of trade that collects,
maintains, and promptly provides to
the Securities and Exchange Commis-
sion such information as the Commis-
sion and the Securities and Exchange
Commission 
jointly 
consider 
nec-
essary to perform the enforcement re-
sponsibilities described in paragraph
(6).
‘‘(5) The Commission shall consult
with the Securities and Exchange Com-
mission with respect to any application
submitted by a board of trade for des-
ignation as a contract market or deriva-
tives transaction execution facility with
respect to any contract of sale (or option
151
on the contract) for future delivery of a
nonexempt security or a group or index
of such securities. If, not later than 15
days after the consultation, the Securities
and Exchange Commission objects to the
designation of a board of trade as a con-
tract market or derivatives transaction
execution facility in the contract (or op-
tion on the contract) on the ground that
any requirement of paragraph (4)(B) is
not met, the Commission shall afford the
Securities and Exchange Commission an
opportunity for an oral hearing to be
transcribed before the Commission, and
shall give appropriate weight to the
views of the Securities and Exchange
Commission. The oral hearing shall be
held before Commission action upon the
application for the designation, and not
less than 30 nor more than 45 days after
the Securities and Exchange Commission
has objected. If such an oral hearing is
held, the Securities and Exchange Com-
mission fails to withdraw its objections,
and the Commission issues an order des-
152
ignating a board of trade as a contract
market or recognizes the board of trade
as a derivatives transaction execution fa-
cility with respect to any such contract
(or option on the contract), the Securities
and Exchange Commission may seek judi-
cial review of the order in accordance
with the procedural requirements set
forth in section 6(c). If, pursuant to sec-
tion 6, there is a hearing on the record
with respect to an application for such
designation, the Securities and Exchange
Commission may participate in that hear-
ing as an interested party.
‘‘(6) Notwithstanding any other provi-
sion of this Act, the Securities and Ex-
change Commission may enforce against
a person that purchases or sells any con-
tract of sale (or option on the contract)
for future delivery of any nonexempt se-
curity, any index comprised of fewer
than 5 nonexempt securities, or any
index in which a single nonexempt secu-
rity predominates to the same extent as if
the person had purchased or sold an op-
153
tion on the security or index under the
following provisions of the securities
laws and regulations with respect to the
following categories of conduct:
‘‘(A) Section 10(b) and 21A of the
Securities Exchange Act of 1934 (15
U.S.C. 78j(b), 78u–1) with respect to
insider trading.
‘‘(B) Section 16(b) of such Act (15
U.S.C. 78p(b)) with respect to unfair
use of information in short swing
trading by a corporate insider.
‘‘(C) Section 9 of such Act (15
U.S.C. 78i) with respect to manipula-
tion of securities prices.
‘‘(D) Section 10(b) of such Act (15
U.S.C. 78J(b)) and section 204A of the
Investment Adviser’s Act of 1940 (15
U.S.C. 
80b–4a) 
with 
respect 
to
frontrunning.
‘‘(E) Section 14 of the Securities
Exchange Act of 1934 (15 U.S.C. 78n)
with respect to the pricing and integ-
rity of tender offers.
154
‘‘(F) Rule 144 of the rules of the
Securities and Exchange Commission
(17 C.F.R. 230.144) with respect to
trading in restricted securities.
‘‘(7)(A) Notwithstanding any other
provision of this Act, any contract market
or derivatives transaction execution facil-
ity in a nonexempt security or stock
index futures contract (or option there-
on) shall file with the Board of Governors
of the Federal Reserve System any rule
establishing or changing the levels of
margin (initial and maintenance) for the
nonexempt security or stock index fu-
tures contract (or option on the contract).
‘‘(B) The Board may at any time re-
quest any contract market or derivatives
transaction execution facility to set the
level of margin for any nonexempt secu-
rity or stock index futures contract (or
option on the contract) at such levels as
the Board in its judgment determines are
appropriate to preserve the financial in-
tegrity of the contract market or deriva-
tives transaction execution facility or its
155
clearing system or to prevent systemic
risk. If the contract market or derivatives
transaction execution facility fails to do
so within the time specified by the Board
in its request, the Board may direct the
contract market or derivatives trans-
action execution facility to alter or sup-
plement the rules of the contract market
or derivatives transaction execution facil-
ity as specified in the request.
‘‘(C) Subject to such conditions as the
Board may determine, the Board may del-
egate any or all of its authority under
this paragraph to the Commission or an
intermarket margin board as provided in
subparagraph (D).
‘‘(D) INTERMARKET MARGIN BOARD.—
‘‘(i) 
ESTABLISHMENT.—With 
the
concurrence of the Securities and Ex-
change Commission and the Commis-
sion, the Board may establish an
intermarket margin board, consisting
of representatives of any or all of the
three agencies.
156
‘‘(ii) 
DUTIES.—The 
intermarket
margin board may set and maintain
margin levels and rules pertaining to
margin for futures on a single non-
exempt security, an index of fewer
than 5 nonexempt securities, or an
index in which a single nonexempt
security predominates, listed on a
contract market or derivatives trans-
action 
execution 
facility. 
In 
dis-
charging 
these 
duties, 
the 
inter-
market margin board shall endeavor
to make the levels of margin for fu-
tures and options on a single non-
exempt security consistent taking
into account any material differences
in such contracts, including—
‘‘(I) the price volatility of the
contracts;
‘‘(II) the frequency with which
margin calls are made; and
‘‘(III) the period of time with-
in which margin calls must be
met.
157
‘‘(E) This paragraph shall not be con-
strued to supersede or limit the authority
granted to the Commission in section
8a(9) to direct a contract market or de-
rivatives transaction execution facility,
on finding an emergency to exist, to raise
temporary emergency margin levels on
any futures contract or option on the
contract covered by this paragraph.
‘‘(F) Any action taken by the Board
under this paragraph, or by the Commis-
sion acting under the delegation of au-
thority under subparagraph (C), direct-
ing a contract market or derivatives
transaction execution facility to alter or
supplement a contract market or deriva-
tives transaction execution facility rule
shall be subject to review only in the
United States Court of Appeals for the ju-
dicial circuit in which the party seeking
review resides or has its principal place
of business, or in the United States Court
of Appeals for the District of Columbia
Circuit. The review shall be based on the
examination of all information before the
158
Board or the Commission, as the case
may be, at the time the determination
was made. The court reviewing the action
of the Board or the Commission shall not
enter a stay or order of mandamus unless
the court determines, after notice and a
hearing before a panel of the court, that
the agency action complained of was ar-
bitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with
law.
‘‘(8) This subsection shall not be con-
strued to prohibit—
‘‘(A) an agreement, contract, or
transaction excluded from this Act by
paragraph (2); or
‘‘(B) any hybrid instrument that is
covered by the terms of any exemp-
tion 
granted 
by 
the 
Commission
under section 4(c) (whether or not
any such hybrid instrument is other-
wise subject to this Act).
‘‘(9)(A) No futures commission mer-
chant, commodity trading advisor, or in-
troducing broker shall recommend to any
159
customer the purchase or sale of any con-
tract of sale for future delivery of a single
nonexempt security, an index of fewer
than 5 nonexempt securities, or an index
in which a single nonexempt security
predominates, unless the futures commis-
sion merchant, commodity trading advi-
sor, or introducing broker complies with
the rules described in subparagraph (B)
of a registered futures association of
which such merchant, advisor, or broker
is a member.
‘‘(B) Within 9 months of the date of
enactment of the Commodity Futures
Modernization Act of 2000, a registered
futures association shall adopt rules re-
quiring a futures commission merchant, a
commodity trading advisor, or an intro-
ducing broker which recommends to any
customer the purchase or sale of any con-
tract of sale for future delivery of a single
nonexempt security, an index of fewer
than 5 nonexempt securities, or an index
in which a single nonexempt security
predominates to ascertain through rea-
160
sonable 
due 
diligence 
that 
the 
rec-
ommendation is suitable for that cus-
tomer in light of the customer’s financial
position and trading goals. The reg-
istered futures association shall consult
with the Commission and the Securities
and Exchange Commission prior to the
adoption of any such rule, and shall sub-
mit any such rule to the Commission for
approval in the manner and according to
the procedures described in section 17(j)
of this Act, provided, that in such case
the rule shall become effective if the
Commission fails to disapprove such rule
within 90 days of submission.
‘‘(10)(A) Nothing in this Act shall be
construed to require or authorize the
Commission to review or approve, di-
rectly or indirectly, any contract, rule,
regulation, or action adopted by a foreign
board of trade, exchange, or market, or a
clearinghouse for such a board of trade,
exchange, or market, relating to any
transaction involving a contract of sale
for future delivery (or option on such a
161
contract) in or involving any security, in-
cluding any foreign government debt se-
curity, or group or index of such securi-
ties, if—
‘‘(i)(I) in the case of a contract of
sale for future delivery (or option on
such a contract) in or involving a sin-
gle equity security, the United States
is not the primary trading market for
the underlying security; or
‘‘(II) in the case of a contract of
sale for future delivery (or option on
such a contract) in or involving a
group or index of equity securities,
less than 25 percent of the weighting
of the group or index is derived from
securities for which the United States
is the primary trading market for the
securities underlying the contract for
future delivery (or option on the con-
tract); and
‘‘(ii) settlement of or delivery on
the contract for future delivery (or
option on such a contract) is to be ef-
fected in cash or by means other than
162
the transfer or receipt of a security in
the United States other than an ex-
empted security.
‘‘(B) Within 90 days after the date of
the enactment of this paragraph, the
Commission shall adopt such procedures
as it deems appropriate pursuant to
which, consistent with this Act, the Com-
mission shall authorize the offer and sale
in the United States of any contract of
sale for future delivery (or option on
such a contract) of a security, other than
a security of the type described in sub-
paragraph (A)(i)(I) or a group or index of
securities of the type described in sub-
paragraph (A)(i)(II), traded on or subject
to the rules of a foreign board of trade,
exchange, or market, or a clearinghouse
for such a board of trade, exchange, or
market, except that such procedures
shall not require a foreign board of trade,
exchange, or market, or a clearinghouse
for such a board of trade, exchange, or
market to apply for designation as a con-
tract market under this Act with respect
163
to such a contract for future delivery (or
option on such a contract).’’.
SEC. 109. TRANSACTIONS IN EXEMPT COMMODITIES.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
108) is amended by adding at the end the fol-
lowing.
‘‘(h) LEGAL CERTAINTY FOR CERTAIN TRANS-
ACTIONS IN EXEMPT COMMODITIES.—
‘‘(1) Except as provided in paragraph
(2) of this subsection, nothing in this Act
shall apply to a contract, agreement or
transaction in an exempt commodity
which—
‘‘(A) is entered into solely be-
tween persons that are eligible con-
tract participants at the time they
enter into the agreement, contract, or
transaction; and
‘‘(B) is not entered into on a trad-
ing facility.
‘‘(2) An agreement, contract, or trans-
action described in paragraph (1) of this
subsection shall be subject to—
164
‘‘(A) sections 5b and 12(e)(2)(B) of
this Act;
‘‘(B) sections 4b and 4n of this Act
and the regulations of the Commis-
sion pursuant to section 4c(b) of this
Act proscribing fraud in connection
with commodity option transactions,
to the extent such agreement, con-
tract, or transaction is not between
eligible commercial participants and
would otherwise be subject to those
provisions; and
‘‘(C) sections 6(c) and 9(a)(2) of
this Act to the extent they prohibit
manipulation of the market price of
any commodity in interstate com-
merce, to the extent such agreement,
contract, or transaction would other-
wise be subject to those provisions.
‘‘(3) Except as provided in paragraph
(4) of this subsection, nothing in this Act
shall apply to an agreement, contract, or
transaction in an exempt commodity
(other than a metal commodity enumer-
ated in section 1a(3) of this Act) which—
165
‘‘(A) is entered into solely be-
tween persons that are eligible con-
tract participants at the time at
which the persons enter into the
agreement, contract, or transaction;
and
‘‘(B) is executed or traded on an
electronic trading facility.
‘‘(4) An agreement, contract, or trans-
action described in paragraph (3) shall be
subject to—
‘‘(A) sections 5b and 12(e)(2)(B) of
this Act;
‘‘(B) sections 4b and 4n of this Act
and the regulations of the Commis-
sion pursuant to section 4c(b) of this
Act proscribing fraud in connection
with commodity option transactions
and section 6(c) and 9(a)(2) of this
Act, to the extent these provisions
prohibit manipulation of the market
price of any commodity in interstate
commerce, to the extent such agree-
ment, contract, or transaction would
166
otherwise be subject to those provi-
sions; and
‘‘(C) such rules and regulations as
the Commission may prescribe if nec-
essary to ensure timely dissemination
by the electronic trading facility of
price, trading volume, and other trad-
ing data to the extent appropriate, if
the Commission determines that the
electronic trading facility performs a
significant price discovery function
for transactions related to the com-
modity executed or traded on the
electronic trading facility.’’.
SEC. 110. SWAP TRANSACTIONS.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
109) is amended by adding at the end the fol-
lowing new subsection:
‘‘(i) EXCLUDED SWAP TRANSACTIONS.—
‘‘(1) IN GENERAL.—No provision of this
Act (other than section 5b or 12(e)(2)(B))
shall apply to or govern any agreement,
contract, or transaction in a commodity
167
other than an agricultural commodity
enumerated in section 1a(3) if—
‘‘(A) the agreement, contract, or
transaction is entered into only be-
tween persons that are eligible con-
tract participants at the time they
enter into the agreement, contract, or
transaction; and
‘‘(B) the material economic terms
of the agreement, contract, or trans-
action are subject to individual nego-
tiation and are not specified by the
rules terms or conditions of a trading
facility.
‘‘(2) EXCLUSION.—Paragraph (1) shall
not apply to—
‘‘(A) a contract for the sale of a
commodity for future delivery traded
on a contract market designated
under section 5; or
‘‘(B) any agreement, contract, or
transaction traded on a derivatives
transaction execution facility reg-
istered under section 5a.’’.
168
SEC. 111. APPLICATION OF THE COMMODITY EXCHANGE
ACT.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
110) is amended by adding at the end the fol-
lowing new subsection:
‘‘(j) APPLICATION OF THE ACT.—No provi-
sion of this Act shall be construed as—
‘‘(1) implying or creating any pre-
sumption that—
‘‘(A) any agreement, contract, or
transaction that is eligible for an ex-
clusion or exemption from regulation
under this Act; or
‘‘(B) any agreement, contract, or
transaction that is not eligible for an
exclusion or exemption from regula-
tion under this Act,
is or would otherwise be subject to this
Act; or
‘‘(2) conferring jurisdiction on the
Commission with respect to any such
agreement, contract, or transaction, ex-
cept as expressly provided in section 5b.’’.
169
SEC. 112. PROTECTION OF THE PUBLIC INTEREST.
The Commodity Exchange Act is amended
by striking section 3 (7 U.S.C. 5) and inserting
the following:
‘‘SEC. 3. FINDINGS AND PURPOSE.
‘‘(a) FINDINGS.—The futures contracts and
options contracts that are subject to this Act
are entered into regularly in interstate and
international commerce and are affected with
a national public interest by providing a
means for managing and assuming price
risks, discovering prices, and disseminating
pricing information through trading in liquid,
fair and financially secure trading facilities.
‘‘(b) PURPOSE.—It is the purpose of this Act
to serve the public interests described in sub-
section (a) through a system of effective self-
regulation of trading facilities, clearing sys-
tems, market participants and market profes-
sionals under the oversight of the Commis-
sion. To foster these public interests, it is fur-
ther the purpose of this Act to deter and pre-
vent price manipulation or any other disrup-
tions to market integrity; to ensure the finan-
cial integrity of all transactions subject to this
Act and the avoidance of systemic risk; to pro-
170
tect all market participants from fraudulent
or other abusive sales practices and misuses
of customer assets; and to promote respon-
sible innovation and fair competition among
boards of trade, other markets and market
participants.’’.
SEC. 113. PROHIBITED TRANSACTIONS.
Section 4c of the Commodity Exchange
Act (7 U.S.C. 6c) is amended by striking ‘‘SEC.
4c.’’ and all that follows through subsection
(a) and inserting the following:
‘‘SEC. 4c. PROHIBITED TRANSACTIONS.
‘‘(a) IN GENERAL.—
‘‘(1) PROHIBITION.—It shall be unlaw-
ful for any person to offer to enter into,
enter into, or confirm the execution of a
transaction described in paragraph (2)
involving any commodity if the trans-
action is used or may be used to—
‘‘(A) hedge any transaction in
interstate 
commerce 
in 
the 
com-
modity or the product or byproduct
of the commodity;
171
‘‘(B) determine the price basis of
any such transaction in interstate
commerce in the commodity; or
‘‘(C) deliver any such commodity
sold, shipped, or received in inter-
state commerce for the execution of
the transaction.
‘‘(2) TRANSACTION.—A transaction re-
ferred to in paragraph (1) is a transaction
that—
‘‘(A)(i) is, is of the character of, or
is commonly known to the trade as, a
‘wash sale’ or ‘accommodation trade’;
or
‘‘(ii) is a fictitious sale; or
‘‘(B) is used to cause any price to
be reported, registered, or recorded
that is not a true and bona fide
price.’’.
SEC. 114. DESIGNATION OF BOARDS OF TRADE AS CON-
TRACT MARKETS.
The 
Commodity 
Exchange 
Act 
is
amended—
(1) by redesignating section 5b (7
U.S.C. 7b) as section 5e; and
172
(2) by striking sections 5 and 5a (7
U.S.C. 7, 7a) and inserting the following:
‘‘SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CON-
TRACT MARKETS.
‘‘(a) APPLICATIONS.—A board of trade ap-
plying to the Commission for designation as
a contract market shall submit an application
to the Commission that includes any relevant
materials and records the Commission may
require consistent with this Act.
‘‘(b) CRITERIA FOR DESIGNATION.—
‘‘(1) IN GENERAL.—To be designated as
a contract market, the board of trade
shall demonstrate to the Commission that
the board of trade meets the criteria
specified in this subsection.
‘‘(2) PREVENTION OF MARKET MANIPULA-
TION.—The board of trade shall have the
capacity to prevent market manipulation
through market surveillance, compliance,
and enforcement practices and proce-
dures, including methods for conducting
real-time monitoring of trading and com-
prehensive and accurate trade recon-
structions.
173
‘‘(3) FAIR
AND
EQUITABLE
TRADING.—
The board of trade shall establish and en-
force trading rules to ensure fair and eq-
uitable trading through the facilities of
the contract market, and the capacity to
detect, investigate, and discipline any
person that violates the rules. Such rules
may authorize—
‘‘(A) an exchange of—
‘‘(i) futures in connection with
a cash commodity transaction;
‘‘(ii) futures for cash commod-
ities;
‘‘(iii) transfer trades or office
trades; or
‘‘(iv) futures for swaps; and
‘‘(B) a futures commission mer-
chant, acting as principal or agent, to
enter into or confirm the execution of
a contract for the purchase or sale of
a commodity for future delivery if the
contract is reported, recorded, or
cleared in accordance with the rules
of the contract market or a deriva-
tives clearing organization.
174
‘‘(4) TRADE
EXECUTION
FACILITY.—The
board of trade shall—
‘‘(A) establish and enforce rules
defining, or specifications detailing,
the manner of operation of the trade
execution facility maintained by the
board of trade, including rules or
specifications describing the oper-
ation of any electronic matching plat-
form; and
‘‘(B) demonstrate that the trading
facility operates in accordance with
the rules or specifications.
‘‘(5) FINANCIAL
INTEGRITY
OF
TRANS-
ACTIONS.—The board of trade shall estab-
lish and enforce rules and procedures for
ensuring the financial integrity of trans-
actions entered into by or through the fa-
cilities of the contract market.
‘‘(6) DISCIPLINARY
PROCEDURES.—The
board of trade shall establish and enforce
disciplinary procedures that authorize
the board of trade to discipline, suspend,
or expel members or market participants
that violate the rules of the board of
175
trade, or similar methods for performing
the same functions, including delegation
of the functions to third parties.
‘‘(7) PUBLIC
ACCESS.—The board of
trade shall provide the public with access
to the rules, regulations, and contract
specifications of the board of trade.
‘‘(8) ABILITY TO OBTAIN INFORMATION.—
The board of trade shall establish and en-
force rules that will allow the board of
trade to obtain any necessary informa-
tion to perform any of the functions de-
scribed in this subsection, including the
capacity to carry out such international
information-sharing agreements as the
Commission may require.
‘‘(c) 
EXISTING
CONTRACT
MARKETS.—A
board of trade that is designated as a contract
market on the effective date of the Com-
modity Futures Modernization Act of 2000
shall be considered to be a designated con-
tract market under this section.
‘‘(d) CORE PRINCIPLES FOR CONTRACT MAR-
KETS.—
176
‘‘(1) IN
GENERAL.—To maintain the
designation of a board of trade as a con-
tract market, a board of trade shall com-
ply with the core principles specified in
this subsection.
‘‘(2) COMPLIANCE
WITH
RULES.—The
board of trade shall monitor and enforce
compliance with the rules of the contract
market, including the terms and condi-
tions of any contracts to be traded and
any limitations on access to the contract
market.
‘‘(3) CONTRACTS NOT READILY SUBJECT
TO
MANIPULATION.—The board of trade
shall list on the contract market only
contracts that are not readily susceptible
to manipulation.
‘‘(4) MONITORING
OF
TRADING.—The
board of trade shall monitor trading to
prevent manipulation, price distortion,
and disruptions of the delivery or cash-
settlement process.
‘‘(5) POSITION LIMITATIONS OR ACCOUNT-
ABILITY.—To reduce the potential threat
of market manipulation or congestion, es-
177
pecially during trading in the delivery
month, the board of trade shall adopt po-
sition limitations or position account-
ability for speculators, where necessary
and appropriate.
‘‘(6) 
EMERGENCY
AUTHORITY.—The
board of trade shall adopt rules to pro-
vide for the exercise of emergency au-
thority, in consultation or cooperation
with the Commission, where necessary
and appropriate, including the authority
to—
‘‘(A) liquidate or transfer open po-
sitions in any contract;
‘‘(B) suspend or curtail trading in
any contract; and
‘‘(C) require market participants
in any contract to meet special mar-
gin requirements.
‘‘(7) AVAILABILITY OF GENERAL INFORMA-
TION.—The board of trade shall make
available to market authorities, market
participants, and the public information
concerning—
178
‘‘(A) the terms and conditions of
the contracts of the contract market;
and
‘‘(B) the mechanisms for exe-
cuting transactions on or through the
facilities of the contract market.
‘‘(8) DAILY PUBLICATION OF TRADING IN-
FORMATION.—The board of trade shall
make public daily information on settle-
ment prices, volume, open interest, and
opening and closing ranges for actively
traded contracts on the contract market.
‘‘(9) EXECUTION OF TRANSACTIONS.—The
board of trade shall provide a competi-
tive, open, and efficient market and
mechanism for executing transactions.
‘‘(10) TRADE INFORMATION.—The board
of trade shall maintain rules and proce-
dures to provide for the recording and
safe storage of all identifying trade infor-
mation in a manner that enables the con-
tract market to use the information for
purposes of assisting in the prevention of
customer and market abuses and pro-
179
viding evidence of any violations of the
rules of the contract market.
‘‘(11) FINANCIAL
INTEGRITY
OF
CON-
TRACTS.—The board of trade shall estab-
lish and enforce rules providing for the
financial integrity of any contracts trad-
ed on the contract market, including
rules to ensure the financial integrity of
any futures commission merchants and
introducing brokers and the protection of
customer funds.
‘‘(12) PROTECTION OF MARKET PARTICI-
PANTS.—The board of trade shall establish
and enforce rules to protect market par-
ticipants from abusive practices com-
mitted by any party acting as an agent
for the participants.
‘‘(13) DISPUTE RESOLUTION.—The board
of trade shall establish and enforce rules
regarding and provide facilities for alter-
native dispute resolution as appropriate
for market participants and any market
intermediaries.
‘‘(14) 
GOVERNANCE
FITNESS
STAND-
ARDS.—The board of trade shall establish
180
and enforce appropriate fitness stand-
ards for directors, members of any dis-
ciplinary committee, members of the con-
tract market, and any other persons with
direct access to the facility (including
any parties affiliated with any of the per-
sons described in this paragraph).
‘‘(15) CONFLICTS
OF
INTEREST.—The
board of trade shall establish and enforce
rules to minimize conflicts of interest in
the decisionmaking process of the con-
tract market and establish a process for
resolving such conflicts of interest.
‘‘(16) COMPOSITION OF BOARDS OF MUTU-
ALLY
OWNED
CONTRACT
MARKETS.—In the
case of a mutually owned contract mar-
ket, the board of trade shall ensure that
the composition of the governing board
reflects market participants.
‘‘(17) RECORDKEEPING.—The board of
trade shall—
‘‘(A) maintain full records of all
activities related to the business of
the contract market in a form and
181
manner acceptable to the Commission
for a period of at least 5 years;
‘‘(B) make the records readily
available during at least the first 2
years of the 5-year period and pro-
vide the records to the Commission at
the expense of the person required to
maintain the records; and
‘‘(C) keep the records open to in-
spection by any representative of the
Commission or the Department of
Justice.
‘‘(18) ANTITRUST CONSIDERATIONS.—Un-
less necessary or appropriate to achieve
the purposes of this Act, the board of
trade shall endeavor to avoid—
‘‘(A) adopting any rules or taking
any actions that result in any unrea-
sonable restraints of trade; or
‘‘(B) imposing any material anti-
competitive burden on trading on the
contract market.
‘‘(e) CURRENT AGRICULTURAL
AND METAL
COMMODITIES.—
182
‘‘(1) Subject to paragraph (2), a con-
tract for purchase or sale for future de-
livery of an agricultural or metal com-
modity enumerated in section 1a(3) that
is available for trade on a contract mar-
ket, as of the date of the enactment of
this subsection, may be traded only on a
contract market designated under this
section.
‘‘(2) In order to promote responsible
economic or financial innovation and fair
competition, the Commission, on applica-
tion by any person, after notice and pub-
lic comment and opportunity for hearing,
may prescribe rules and regulations to
provide for the offer and sale of contracts
for future delivery or options thereon to
be conducted on a derivatives trans-
action execution facility.’’.
SEC. 115. DERIVATIVES TRANSACTION EXECUTION FACILI-
TIES.
The Commodity Exchange Act (7 U.S.C. 1
et seq.) is amended by inserting after section
5 (as amended by section 112(2)) the fol-
lowing:
183
‘‘SEC. 5a. DERIVATIVES TRANSACTION EXECUTION FACILI-
TIES.
‘‘(a) IN GENERAL.—In lieu of compliance
with the contract market designation require-
ments of section 5, a board of trade may elect
to operate as a registered derivatives trans-
action execution facility if the facility is—
‘‘(1) designated as a contract market
and meets the requirements of this sec-
tion; or
‘‘(2) registered as a derivatives trans-
action 
execution 
facility 
under 
sub-
section (c).
‘‘(b) REQUIREMENTS FOR TRADING FUTURES
CONTRACTS
OR
OTHER
DERIVATIVES
TRANS-
ACTIONS.—
‘‘(1) IN GENERAL.—A registered deriva-
tives transaction execution facility under
subsection (a) may trade any futures con-
tract (or option on such a contract) on or
through the facility only by satisfying the
requirements of this section.
‘‘(2) REQUIREMENTS
FOR
UNDERLYING
COMMODITIES.—A 
registered 
derivatives
transaction execution facility may trade
any futures contract only if—
184
‘‘(A) the underlying commodity
has a nearly inexhaustible deliver-
able supply;
‘‘(B) the underlying commodity
has a deliverable supply that is suffi-
ciently large that the contract is high-
ly unlikely to be susceptible to the
threat of manipulation;
‘‘(C) the underlying commodity
has no cash market; or
‘‘(D) the Commission determines,
based on the market characteristics,
surveillance history, self-regulatory
record, and capacity of the facility
that trading in the futures contract is
highly unlikely to be susceptible to
the threat of manipulation.
‘‘(3) ELIGIBLE TRADERS.—To trade on a
registered derivatives transaction execu-
tion facility, a person shall—
‘‘(A) be authorized by the board of
trade to trade on the facility; and
‘‘(B)(i) be an eligible contract par-
ticipant; or
185
‘‘(ii) be a person trading through
a 
futures 
commission 
merchant
that—
‘‘(I) is registered with the
Commission;
‘‘(II) is a member of a futures
self-regulatory organization;
‘‘(III) is a clearing member of
a derivatives clearing organiza-
tion; and
‘‘(IV) has net capital of at
least $20,000,000.
‘‘(4) TRADING BY CONTRACT MARKETS.—
A board of trade that is designated as a
contract market shall, to the extent that
the contract market also operates a reg-
istered derivatives transaction execution
facility—
‘‘(A) provide a physical location
for the contract market trading of the
board of trade that is separate from
trading on the derivatives trans-
action execution facility of the board
of trade; or
186
‘‘(B) if the board of trade uses the
same electronic trading system for
trading on the contract market and
derivatives transaction execution fa-
cility of the board of trade, identify
whether the electronic trading is tak-
ing place on the contract market or
the derivatives transaction execution
facility.
‘‘(c) CRITERIA FOR REGISTRATION.—
‘‘(1) IN GENERAL.—To be registered as
a registered derivatives transaction exe-
cution facility, the board of trade shall
demonstrate to the Commission that the
board of trade meets the criteria speci-
fied in this paragraph.
‘‘(2) 
DETERRENCE
OF
ABUSES.—The
board of trade shall establish and enforce
trading rules that will deter abuses and
has the capacity to detect, investigate,
and enforce those rules, including means
to—
‘‘(A) obtain information necessary
to perform the functions required
under this section; or
187
‘‘(B) use technological means to—
‘‘(i) provide market partici-
pants with impartial access to the
market; and
‘‘(ii) capture information that
may 
be 
used 
in 
establishing
whether rule violations have oc-
curred.
‘‘(3) TRADING PROCEDURES.—The board
of trade shall establish and enforce rules
or terms and conditions defining, or spec-
ifications detailing, trading procedures to
be used in entering and executing orders
traded on the facilities of the board of
trade. Such rules may authorize—
‘‘(A) an exchange of—
‘‘(i) futures in connection with
a cash commodity transaction;
‘‘(ii) futures for cash commod-
ities;
‘‘(iii) transfer trades or office
trades; or
‘‘(iv) futures for swaps; and
‘‘(B) a futures commission mer-
chant, acting as principal or agent, to
188
enter into or confirm the execution of
a contract for the purchase or sale of
a commodity for future delivery if the
contract is reported, recorded, or
cleared in accordance with the rules
of the registered derivatives trans-
action execution facility or a deriva-
tives clearing organization.
‘‘(4) FINANCIAL
INTEGRITY
OF
TRANS-
ACTIONS.—The board of trade shall estab-
lish and enforce rules or terms and con-
ditions providing for the financial integ-
rity 
of 
transactions 
entered 
on 
or
through the facilities of the board of
trade, including rules or terms and condi-
tions to ensure the financial integrity of
any futures commission merchants and
introducing brokers and the protection of
customer funds.
‘‘(d) CORE PRINCIPLES FOR REGISTERED DE-
RIVATIVES
TRANSACTION
EXECUTION
FACILI-
TIES.—
‘‘(1) IN
GENERAL.—To maintain the
registration of a board of trade as a de-
rivatives transaction execution facility, a
189
board of trade shall comply with the core
principles specified in this subsection.
‘‘(2) COMPLIANCE
WITH
RULES.—The
board of trade shall monitor and enforce
the rules of the facility, including any
terms and conditions of any contracts
traded on or through the facility and any
limitations on access to the facility.
‘‘(3) MONITORING
OF
TRADING.—The
board of trade shall monitor trading in
the contracts of the facility to ensure or-
derly trading in the contract and to
maintain an orderly market while pro-
viding any necessary trading information
to the Commission to allow the Commis-
sion to discharge the responsibilities of
the Commission under the Act.
‘‘(4) DISCLOSURE OF GENERAL INFORMA-
TION.—The board of trade shall disclose
publicly and to the Commission informa-
tion concerning—
‘‘(A) contract terms and condi-
tions;
‘‘(B) trading conventions, mecha-
nisms, and practices;
190
‘‘(C) financial integrity protec-
tions; and
‘‘(D) other information relevant to
participation in trading on the facil-
ity.
‘‘(5) DAILY PUBLICATION OF TRADING IN-
FORMATION.—The board of trade shall
make public daily information on settle-
ment prices, volume, open interest, and
opening and closing ranges for actively
traded contracts on the facility.
‘‘(6) FITNESS STANDARDS.—The board of
trade shall establish and enforce appro-
priate fitness standards for directors,
members of any disciplinary committee,
members, and any other persons with di-
rect access to the facility, including any
parties affiliated with any of the persons
described in this paragraph.
‘‘(7) 
CONFLICTS
OF
INTEREST.—The
board of trade shall establish and enforce
rules to minimize conflicts of interest in
the decisionmaking process of the deriva-
tives transaction execution facility and
191
establish a process for resolving such
conflicts of interest.
‘‘(8) RECORDKEEPING.—The board of
trade shall—
‘‘(A) maintain full records of all
activities related to the business of
the derivatives transaction execution
facility in a form and manner accept-
able to the Commission for a period
of at least 5 years;
‘‘(B) make the records readily
available during at least the first 2
years of the 5-year period and pro-
vide the records to the Commission at
the expense of the person required to
maintain the records; and
‘‘(C) keep the records open to in-
spection by any representatives of
the Commission or the Department of
Justice.
‘‘(9) ANTITRUST
CONSIDERATIONS.—Un-
less necessary or appropriate to achieve
the purposes of this Act, the board of
trade shall endeavor to avoid—
192
‘‘(A) adopting any rules or taking
any actions that result in any unrea-
sonable restraint of trade; or
‘‘(B) imposing any material anti-
competitive burden on trading on the
derivatives transaction execution fa-
cility.
‘‘(e) USE OF BROKER-DEALERS, DEPOSITORY
INSTITUTIONS, AND FARM CREDIT SYSTEM INSTI-
TUTIONS AS INTERMEDIARIES.—
‘‘(1) IN GENERAL.—A registered deriva-
tives transaction execution facility may
by rule allow a broker-dealer, depository
institution, or institution of the Farm
Credit System that meets the require-
ments of paragraph (2) to—
‘‘(A) act as an intermediary in
transactions executed on the facility
on behalf of customers of the broker-
dealer, depository institution, or in-
stitution of the Farm Credit System;
and
‘‘(B) receive funds of customers to
serve as margin or security for such
transactions.
193
‘‘(2) 
REQUIREMENTS.—The 
require-
ments referred to in paragraph (1) are
that—
‘‘(A) the broker-dealer be in good
standing with the Securities and Ex-
change Commission, or the deposi-
tory institution or institution of the
Farm Credit System be in good stand-
ing with Federal bank regulatory
agencies (including the Farm Credit
Administration), as applicable; and
‘‘(B) if the broker-dealer, deposi-
tory institution, or institution of the
Farm Credit System carries or holds
customer accounts or funds for trans-
actions on the derivatives transaction
execution facility for more than 1
business day, the broker-dealer, de-
pository institution, or institution of
the Farm Credit System is registered
as a futures commission merchant
and is a member of a registered fu-
tures association.
‘‘(3) IMPLEMENTATION.—The Commis-
sion shall cooperate and coordinate with
194
the Securities and Exchange Commission,
the Secretary of the Treasury, and Fed-
eral banking regulatory agencies (includ-
ing the Farm Credit Administration) in
adopting rules and taking any other ap-
propriate action to facilitate the imple-
mentation of this subsection.
‘‘(f) SEGREGATION
OF CUSTOMER FUNDS.—
Not later than 180 days after the effective
date of the Commodity Futures Moderniza-
tion Act of 2000, consistent with regulations
adopted by the Commission, a registered de-
rivatives transaction execution facility may
authorize a futures commission merchant to
offer any customer of the futures commission
merchant that is an eligible contract partici-
pant the right to not segregate the customer
funds of the futures commission merchant for
purposes of trading on or through the facili-
ties of the registered derivatives transaction
execution facility.
‘‘(g) ELECTION TO TRADE EXCLUDED COM-
MODITIES.—
‘‘(1) IN
GENERAL.—A board of trade
that is a registered derivatives trans-
195
action execution facility may trade on the
facility any agreements, contracts, or
transactions involving excluded commod-
ities that are otherwise excluded from
this Act under section 2(c), 2(d), or 2(h).
‘‘(2) EXCLUSIVE
JURISDICTION
OF
THE
COMMISSION.—The Commission shall have
exclusive jurisdiction over agreements,
contracts, or transactions described in
paragraph (1) to the extent that the
agreements, contracts, or transactions
are traded on a derivatives transaction
execution facility.’’.
SEC. 116. DERIVATIVES CLEARING.
(a) IN GENERAL.—Subtitle A of title IV of
the Federal Deposit Insurance Corporation
Improvement Act of 1991 is amended—
(1) by inserting before the section
heading for section 401, the following
new heading:
‘‘CHAPTER 1—BILATERAL AND CLEARING
ORGANIZATION NETTING’’;
(2) in section 402, by striking ‘‘this
subtitle’’ and inserting ‘‘this chapter’’;
and