310
‘‘(ii) a depository institution
organized by the Corporation, for
which a conservator is appointed
either—
‘‘(I) immediately upon the
organization of the institu-
tion; or
‘‘(II) at the time of a pur-
chase and assumption trans-
action between such institu-
tion and the Corporation as
receiver for a depository insti-
tution in default.’’.
SEC. 205. AMENDMENTS RELATING TO DISAFFIRMANCE OR
REPUDIATION 
OF 
QUALIFIED 
FINANCIAL
CONTRACTS.
(a) IN GENERAL.—Section 11(e) of the Fed-
eral Deposit Insurance Act (12 U.S.C. 1821(e))
is further amended—
(1) by redesignating paragraphs (11)
through (15) as paragraphs (12) through
(16), respectively; and
(2) by inserting after paragraph (10)
the following new paragraph:
311
‘‘(11) DISAFFIRMANCE
OR
REPUDIATION
OF
QUALIFIED
FINANCIAL
CONTRACTS.—In
exercising the rights of disaffirmance or
repudiation of a conservator or receiver
with respect to any qualified financial
contract to which an insured depository
institution is a party, the conservator or
receiver 
for 
such 
institution 
shall
either—
‘‘(A) disaffirm or repudiate all
qualified 
financial 
contracts
between—
‘‘(i) any person or any affiliate
of such person; and
‘‘(ii) the depository institution
in default; or
‘‘(B) disaffirm or repudiate none
of the qualified financial contracts re-
ferred to in subparagraph (A) (with
respect to such person or any affiliate
of such person).’’.
(b) TECHNICAL
AND CONFORMING AMEND-
MENTS.—Section 11(e)(8) of the Federal De-
posit Insurance Act (12 U.S.C. 1821(e)(8)) is
312
amended in subparagraph (C)(i), by striking
‘‘(11)’’ and inserting ‘‘(12)’’.
SEC. 206. CLARIFYING AMENDMENT RELATING TO MASTER
AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal De-
posit 
Insurance 
Act 
(12 
U.S.C.
1821(e)(8)(D)(vii)) is amended to read as fol-
lows:
‘‘(vii) TREATMENT
OF
MASTER
AGREEMENT AS 1 AGREEMENT.—Any
master agreement for any con-
tract or agreement described in
any preceding clause of this sub-
paragraph (or any master agree-
ment for such master agreement
or agreements), together with all
supplements 
to 
such 
master
agreement, shall be treated as a
single agreement and a single
qualified financial contract. If a
master agreement contains provi-
sions relating to agreements or
transactions that are not them-
selves 
qualified 
financial 
con-
tracts, the master agreement shall
313
be deemed to be a qualified finan-
cial contract only with respect to
those transactions that are them-
selves 
qualified 
financial 
con-
tracts.’’.
SEC. 207. FEDERAL DEPOSIT INSURANCE CORPORATION
IMPROVEMENT ACT OF 1991.
(a) DEFINITIONS.—Section 402 of the Fed-
eral Deposit Insurance Corporation Improve-
ment Act of 1991 (12 U.S.C. 4402) is amended—
(1) in paragraph (2)—
(A) by inserting ‘‘or exempt from
such registration pursuant to an
order of the Securities and Exchange
Commission’’ before the semicolon at
the end of subparagraph (A)(ii); and
(B) by inserting ‘‘or that has been
granted an exemption pursuant to
section 4(c)(1) of such Act’’ before the
period at the end of subparagraph
(B);
(2) in paragraph (6)—
(A) 
by 
redesignating 
subpara-
graphs (B) through (D) as subpara-
graphs (C) through (E), respectively;
314
(B) by inserting after subpara-
graph (A) the following new subpara-
graph:
‘‘(B) an uninsured national bank
or an uninsured State bank that is a
member of the Federal Reserve Sys-
tem if the national bank or State
member bank is not eligible to make
application to become an insured
bank under section 5 of the Federal
Deposit Insurance Act;’’; and
(C) by amending subparagraph
(C) (as redesignated) to read as fol-
lows:
‘‘(C) a branch or agency of a for-
eign bank, a foreign bank and any
branch or agency of the foreign bank,
or the foreign bank that established
the branch or agency, as those terms
are defined in section 1(b) of the
International Banking Act of 1978;’’;
(3) in paragraph (11), by adding be-
fore the period ‘‘and any other clearing
organization with which such clearing
organization has a netting contract’’;
315
(4) by amending paragraph (14)(A)(i)
to read as follows:
‘‘(i) means a contract or agree-
ment between two or more finan-
cial institutions, clearing organi-
zations, or members that provides
for netting present or future pay-
ment obligations or payment enti-
tlements (including liquidation or
closeout values relating to such
obligations 
or 
entitlements)
among the parties to the agree-
ment; and’’; and
(5) by adding at the end the following
new paragraph:
‘‘(15) PAYMENT.—The term ‘payment’
means a payment of United States dol-
lars, another currency, or a composite
currency, and a noncash delivery, includ-
ing a payment or delivery to liquidate an
unmatured obligation.’’.
(b) ENFORCEABILITY OF BILATERAL NETTING
CONTRACTS.—Section 403 of the Federal De-
posit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4403) is amended—
316
(1) by amending subsection (a) to
read as follows:
‘‘(a) GENERAL RULE.—Notwithstanding any
other provision of State or Federal law (other
than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance
Act or any order authorized under section
5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment
obligations and the covered contractual pay-
ment entitlements between any two financial
institutions shall be netted in accordance
with, and subject to the conditions of, the
terms of any applicable netting contract (ex-
cept as provided in section 561(b)(2) of title
11, United States Code).’’; and
(2) by adding at the end the following
new subsection:
‘‘(f) ENFORCEABILITY
OF SECURITY AGREE-
MENTS.—The provisions of any security agree-
ment or arrangement or other credit enhance-
ment related to 1 or more netting contracts
between any two financial institutions shall
be enforceable in accordance with their terms
(except as provided in section 561(b)(2) of title
317
11, United States Code) and shall not be
stayed, avoided, or otherwise limited by any
State or Federal law (other than paragraphs
(8)(E), (8)(F), and (10)(B) of section 11(e) of the
Federal Deposit Insurance Act and section
5(b)(2) of the Securities Investor Protection
Act of 1970).’’.
(c) ENFORCEABILITY OF CLEARING ORGANI-
ZATION NETTING CONTRACTS.—Section 404 of
the Federal Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C. 4404) is
amended—
(1) by amending subsection (a) to
read as follows:
‘‘(a) GENERAL RULE.—Notwithstanding any
other provision of State or Federal law (other
than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance
Act and any order authorized under section
5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment
obligations and the covered contractual pay-
ment entitlements of a member of a clearing
organization to and from all other members of
a clearing organization shall be netted in ac-
318
cordance with and subject to the conditions
of any applicable netting contract (except as
provided in section 561(b)(2) of title 11,
United States Code).’’; and
(2) by adding at the end the following
new subsection:
‘‘(h) ENFORCEABILITY OF SECURITY AGREE-
MENTS.—The provisions of any security agree-
ment or arrangement or other credit enhance-
ment related to 1 or more netting contracts
between any two members of a clearing orga-
nization shall be enforceable in accordance
with their terms (except as provided in sec-
tion 561(b)(2) of title 11, United States Code)
and shall not be stayed, avoided, or otherwise
limited by any State or Federal law (other
than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance
Act and section 5(b)(2) of the Securities Inves-
tor Protection Act of 1970).’’.
(d) ENFORCEABILITY
OF CONTRACTS WITH
UNINSURED NATIONAL BANKS
AND UNINSURED
FEDERAL BRANCHES AND AGENCIES.—The Fed-
eral Deposit Insurance Corporation Improve-
319
ment Act of 1991 (12 U.S.C. 4401 et seq.) is
amended—
(1) by redesignating section 407 as
section 407A; and
(2) by adding after section 406 the fol-
lowing new section:
‘‘SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED
NATIONAL BANKS AND UNINSURED FEDERAL
BRANCHES AND AGENCIES.
‘‘(a) IN
GENERAL.—Notwithstanding any
other provision of law, paragraphs (8), (9),
(10), and (11) of section 11(e) of the Federal
Deposit Insurance Act shall apply to an unin-
sured national bank or uninsured Federal
branch or Federal agency except—
‘‘(1) any reference to the ‘Corporation
as receiver’ or ‘the receiver or the Cor-
poration’ shall refer to the receiver of an
uninsured national bank or uninsured
Federal branch or Federal agency ap-
pointed by the Comptroller of the Cur-
rency;
‘‘(2) any reference to the ‘Corporation’
(other than in section 11(e)(8)(D) of such
Act), the ‘Corporation, whether acting as
320
such or as conservator or receiver’, a ‘re-
ceiver’, or a ‘conservator’ shall refer to
the receiver or conservator of an unin-
sured national bank or uninsured Fed-
eral branch or Federal agency appointed
by the Comptroller of the Currency; and
‘‘(3) any reference to an ‘insured de-
pository institution’ or ‘depository insti-
tution’ shall refer to an uninsured na-
tional bank or an uninsured Federal
branch or Federal agency.
‘‘(b) LIABILITY.—The liability of a receiver
or conservator of an uninsured national bank
or uninsured Federal branch or agency shall
be determined in the same manner and sub-
ject to the same limitations that apply to re-
ceivers and conservators of insured deposi-
tory institutions under section 11(e) of the
Federal Deposit Insurance Act.
‘‘(c) REGULATORY AUTHORITY.—
‘‘(1) IN GENERAL.—The Comptroller of
the Currency, in consultation with the
Federal Deposit Insurance Corporation,
may promulgate regulations to imple-
ment this section.
321
‘‘(2) SPECIFIC
REQUIREMENT.—In pro-
mulgating regulations to implement this
section, the Comptroller of the Currency
shall ensure that the regulations gen-
erally are consistent with the regulations
and policies of the Federal Deposit Insur-
ance Corporation adopted pursuant to
the Federal Deposit Insurance Act.
‘‘(d) DEFINITIONS.—For purposes of this
section, the terms ‘Federal branch’, ‘Federal
agency’, and ‘foreign bank’ have the same
meaning as in section 1(b) of the International
Banking Act.’’.
SEC. 208. BANKRUPTCY CODE AMENDMENTS.
(a) DEFINITIONS
OF FORWARD CONTRACT,
REPURCHASE AGREEMENT, SECURITIES CLEARING
AGENCY, SWAP AGREEMENT, COMMODITY CON-
TRACT, AND SECURITIES CONTRACT.—Title 11,
United States Code, is amended—
(1) in section 101—
(A) in paragraph (25)—
(i) by striking ‘‘means a con-
tract’’ and inserting ‘‘means—
‘‘(A) a contract’’;
322
(ii) by striking ‘‘, or any com-
bination thereof or option there-
on;’’ and inserting ‘‘, or any other
similar agreement;’’; and
(iii) by adding at the end the
following:
‘‘(B) any combination of agree-
ments or transactions referred to in
subparagraphs (A) and (C);
‘‘(C) any option to enter into an
agreement or transaction referred to
in subparagraph (A) or (B);
‘‘(D) a master agreement that pro-
vides for an agreement or transaction
referred to in subparagraph (A), (B),
or (C), together with all supplements
to any such master agreement, with-
out regard to whether such master
agreement provides for an agreement
or transaction that is not a forward
contract under this paragraph, ex-
cept that such master agreement
shall be considered to be a forward
contract under this paragraph only
with respect to each agreement or
323
transaction under such master agree-
ment that is referred to in subpara-
graph (A), (B) or (C); or
‘‘(E) any security agreement or ar-
rangement, or other credit enhance-
ment related to any agreement or
transaction referred to in subpara-
graph (A), (B), (C), or (D), but not to
exceed the actual value of such con-
tract on the date of the filing of the
petition;’’;
(B) in paragraph (46), by striking
‘‘on any day during the period begin-
ning 90 days before the date of’’ and
replacing it with ‘‘at any time before’’;
(C) by amending paragraph (47)
to read as follows:
‘‘(47) ‘repurchase agreement’ (which
definition also applies to a ‘reverse repur-
chase agreement’)—
(A) means—
‘‘(i) an agreement, including
related terms, which provides for
the transfer of 1 or more certifi-
cates of deposit, mortgage-related
324
securities (as defined in the Secu-
rities 
Exchange 
Act 
of 
1934),
mortgage loans, interests in mort-
gage-related securities or mort-
gage loans, eligible bankers’ ac-
ceptances, qualified foreign gov-
ernment securities, or securities
that are direct obligations of, or
that are fully guaranteed by, the
United States or any agency of
the United States against the
transfer of funds by the trans-
feree of such certificates of de-
posit, eligible bankers’ accept-
ances, securities, loans, or inter-
ests, with a simultaneous agree-
ment by such transferee to trans-
fer to the transferor thereof cer-
tificates of deposit, eligible bank-
ers’ acceptance, securities, loans,
or interests of the kind described
above, at a date certain not later
than 1 year after such transfer or
on demand, against the transfer
of funds;
325
‘‘(ii) any combination of agree-
ments or transactions referred to
in clauses (i) and (iii);
‘‘(iii) an option to enter into
an agreement or transaction re-
ferred to in clause (i) or (ii);
‘‘(iv) a master agreement that
provides for an agreement or
transaction referred to in clause
(i), (ii), or (iii), together with all
supplements to any such master
agreement, 
without 
regard 
to
whether such master agreement
provides for an agreement or
transaction that is not a repur-
chase agreement under this para-
graph, except that such master
agreement shall be considered to
be a repurchase agreement under
this paragraph only with respect
to each agreement or transaction
under the master agreement that
is referred to in clause (i), (ii), or
(iii); or
326
‘‘(v) any security agreement
or arrangement or other credit
enhancement 
related 
to 
any
agreement or transaction referred
to in clause (i), (ii), (iii), or (iv),
but not to exceed the actual value
of such contract on the date of
the filing of the petition; and
‘‘(B) does not include a repur-
chase obligation under a participa-
tion in a commercial mortgage loan,
and, for purposes of this paragraph, the
term ‘qualified foreign government secu-
rity’ means a security that is a direct ob-
ligation of, or that is fully guaranteed by,
the central government of a member of
the Organization for Economic Coopera-
tion and Development;’’;
(D) in paragraph (48) by inserting
‘‘or exempt from such registration
under such section pursuant to an
order of the Securities and Exchange
Commission’’ after ‘‘1934’’; and
(E) by amending paragraph (53B)
to read as follows:
327
‘‘(53B) ‘swap agreement’—
‘‘(A) means—
‘‘(i) any agreement, including
the terms and conditions incor-
porated by reference in such
agreement, which is an interest
rate swap, option, future, or for-
ward agreement, including a rate
floor, rate cap, rate collar, cross-
currency rate swap, and basis
swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other
foreign exchange or precious met-
als agreement; a currency swap,
option, future, or forward agree-
ment; an equity index or an eq-
uity swap, option, future, or for-
ward agreement; a debt index or
a debt swap, option, future, or
forward 
agreement; 
a 
credit
spread or a credit swap, option,
future, or forward agreement; a
commodity index or a commodity
swap, option, future, or forward
agreement; or a weather swap,
328
weather derivative, or weather
option;
‘‘(ii) any agreement or trans-
action similar to any other agree-
ment or transaction referred to in
this paragraph that—
‘‘(I) is presently, or in the
future becomes, regularly en-
tered into in the swap market
(including terms and condi-
tions 
incorporated 
by 
ref-
erence therein); and
‘‘(II) is a forward, swap,
future, or option on 1 or more
rates, 
currencies, 
commod-
ities, 
equity 
securities, 
or
other 
equity 
instruments,
debt securities or other debt
instruments, or economic in-
dices or measures of economic
risk or value;
‘‘(iii) 
any 
combination 
of
agreements or transactions re-
ferred to in this paragraph;
329
‘‘(iv) any option to enter into
an agreement or transaction re-
ferred to in this paragraph;
‘‘(v) a master agreement that
provides for an agreement or
transaction referred to in clause
(i), (ii), (iii), or (iv), together with
all supplements to any such mas-
ter agreement, and without re-
gard to whether the master agree-
ment contains an agreement or
transaction that is not a swap
agreement under this paragraph,
except that the master agreement
shall be considered to be a swap
agreement under this paragraph
only with respect to each agree-
ment or transaction under the
master agreement that is referred
to in clause (i), (ii), (iii), or (iv); or
‘‘(B) any security agreement or ar-
rangement or other credit enhance-
ment related to any agreements or
transactions referred to in subpara-
graph (A), but not to exceed the ac-
330
tual value of such contract on the
date of the filing of the petition; and
‘‘(C) is applicable for purposes of
this title only and shall not be con-
strued or applied so as to challenge
or affect the characterization, defini-
tion, or treatment of any swap agree-
ment under any other statute, regula-
tion, or rule, including the Securities
Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding
Company Act of 1935, the Trust In-
denture Act of 1939, the Investment
Company Act of 1940, the Investment
Advisers Act of 1940, the Securities
Investor Protection Act of 1970, the
Commodity Exchange Act, and the
regulations prescribed by the Securi-
ties and Exchange Commission or the
Commodity Futures Trading Commis-
sion.’’;
(2) by amending section 741(7) to read
as follows:
‘‘(7) ‘securities contract’—
‘‘(A) means—
331
‘‘(i) a contract for the pur-
chase, sale, or loan of a security,
a certificate of deposit, a mort-
gage loan or any interest in a
mortgage loan, a group or index
of securities, certificates of de-
posit or mortgage loans or inter-
ests therein (including an interest
therein or based on the value
thereof), or option on any of the
foregoing, including an option to
purchase or sell any such secu-
rity, certificate of deposit, loan,
interest, group or index, or op-
tion;
‘‘(ii) any option entered into
on a national securities exchange
relating to foreign currencies;
‘‘(iii) the guarantee by or to
any securities clearing agency of
a settlement of cash, securities,
certificates of deposit, mortgage
loans or interests therein, group
or index of securities, or mort-
gage loans or interests therein
332
(including any interest therein or
based on the value thereof), or op-
tion on any of the foregoing, in-
cluding an option to purchase or
sell any such security, certificate
of deposit, loan, interest, group or
index, or option;
‘‘(iv) any margin loan;
‘‘(v) any other agreement or
transaction that is similar to an
agreement or transaction referred
to in this paragraph;
‘‘(vi) any combination of the
agreements or transactions re-
ferred to in this paragraph;
‘‘(vii) any option to enter into
any agreement or transaction re-
ferred to in this paragraph;
‘‘(viii) 
a 
master 
agreement
that provides for an agreement or
transaction referred to in clause
(i), (ii), (iii), (iv), (v), (vi), or (vii),
together with all supplements to
any such master agreement, with-
out regard to whether the master
333
agreement provides for an agree-
ment or transaction that is not a
securities 
contract 
under 
this
paragraph, except that such mas-
ter agreement shall be considered
to be a securities contract under
this paragraph only with respect
to each agreement or transaction
under 
such 
master 
agreement
that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii); or
‘‘(ix) any security agreement
or arrangement or other credit
enhancement 
related 
to 
any
agreement or transaction referred
to in this paragraph, but not to
exceed the actual value of such
contract on the date of the filing
of the petition; and
‘‘(B) does not include any pur-
chase, sale, or repurchase obligation
under a participation in a commer-
cial mortgage loan.’’; and
(3) in section 761(4)—
334
(A) by striking ‘‘or’’ at the end of
subparagraph (D); and
(B) by adding at the end the fol-
lowing:
‘‘(F) 
any 
other 
agreement 
or
transaction that is similar to an
agreement or transaction referred to
in this paragraph;
‘‘(G) 
any 
combination 
of 
the
agreements or transactions referred
to in this paragraph;
‘‘(H) any option to enter into an
agreement or transaction referred to
in this paragraph;
‘‘(I) a master agreement that pro-
vides for an agreement or transaction
referred to in subparagraph (A), (B),
(C), (D), (E), (F), (G), or (H), together
with all supplements to such master
agreement, without regard to wheth-
er the master agreement provides for
an agreement or transaction that is
not a commodity contract under this
paragraph, except that the master
agreement shall be considered to be a
335
commodity contract under this para-
graph only with respect to each
agreement or transaction under the
master agreement that is referred to
in subparagraph (A), (B), (C), (D), (E),
(F), (G), or (H); or
‘‘(J) any security agreement or ar-
rangement or other credit enhance-
ment related to any agreement or
transaction referred to in this para-
graph, but not to exceed the actual
value of such contract on the date of
the filing of the petition;’’.
(b) DEFINITIONS OF FINANCIAL PARTICIPANT
AND FORWARD CONTRACT MERCHANT.—Section
101 of title 11, United States Code, is
amended—
(1) by inserting after paragraph (22)
the following:
‘‘(22A) ‘financial participant’ means
an entity that, at the time it enters into a
securities contract, commodity contract
or forward contract, or at the time of the
filing of the petition, has 1 or more agree-
ments or transactions described in para-
336
graph (1), (2), (3), (4), (5), or (6) of section
561(a) with the debtor or any other entity
(other than an affiliate) of a total gross
dollar value of at least $1,000,000,000 in
notional or actual principal amount out-
standing on any day during the previous
15-month period, or has gross mark-to-
market positions of at least $100,000,000
(aggregated across counterparties) in 1
or more such agreement or transaction
with the debtor or any other entity (other
than an affiliate) on any day during the
previous 15-month period;’’; and
(2) by amending paragraph (26) to
read as follows:
‘‘(26) 
‘forward 
contract 
merchant’
means a Federal reserve bank, or an enti-
ty whose business consists in whole or in
part of entering into forward contracts as
or with merchants or in a commodity, as
defined or in section 761, or any similar
good, article, service, right, or interest
which is presently or in the future be-
comes the subject of dealing or in the for-
ward contract trade;’’.
337
(c) DEFINITION OF MASTER NETTING AGREE-
MENT AND MASTER NETTING AGREEMENT PAR-
TICIPANT.—Section 101 of title 11, United
States Code, is amended by inserting after
paragraph (38) the following new paragraphs:
‘‘(38A) 
‘master 
netting 
agreement’
means an agreement providing for the ex-
ercise of rights, including rights of net-
ting, setoff, liquidation, termination, ac-
celeration, or closeout, under or in con-
nection with 1 or more contracts that are
described in any 1 or more of paragraphs
(1) through (5) of section 561(a), or any
security agreement or arrangement or
other credit enhancement related to 1 or
more of the foregoing. If a master netting
agreement contains provisions relating to
agreements or transactions that are not
contracts described in paragraphs (1)
through (5) of section 561(a), the master
netting agreement shall be deemed to be
a master netting agreement only with re-
spect to those agreements or transactions
that are described in any 1 or more of the
338
paragraphs (1) through (5) of section
561(a);
‘‘(38B) ‘master netting agreement par-
ticipant’ means an entity that, at any
time before the filing of the petition, is a
party to an outstanding master netting
agreement with the debtor;’’.
(d) SWAP AGREEMENTS, SECURITIES CON-
TRACTS, COMMODITY CONTRACTS, FORWARD CON-
TRACTS, REPURCHASE AGREEMENTS, AND MASTER
NETTING AGREEMENTS UNDER THE AUTOMATIC-
STAY.—
(1) IN GENERAL.—Section 362(b) of title
11, United States Code, is amended—
(A) in paragraph (6), by inserting
‘‘, pledged to and under the control
of,’’ after ‘‘held by’’;
(B) in paragraph (7), by inserting
‘‘, pledged to and under the control
of,’’ after ‘‘held by’’;
(C) by amending paragraph (17)
to read as follows:
‘‘(17) under subsection (a), of the
setoff by a swap participant of a mutual
debt and claim under or in connection
339
with 1 or more swap agreements that
constitutes the setoff of a claim against
the debtor for any payment or other
transfer of property due from the debtor
under or in connection with any swap
agreement against any payment due to
the debtor from the swap participant
under or in connection with any swap
agreement or against cash, securities, or
other property held by, pledged to and
under the control of, or due from such
swap participant to margin, guarantee,
secure, or settle any swap agreement;’’;
(D) in paragraph (18) by striking
the period at the end and inserting ‘‘;
or’’; and
(E) by inserting after paragraph
(18) the following new paragraph:
‘‘(19) under subsection (a), of the
setoff by a master netting agreement par-
ticipant of a mutual debt and claim
under or in connection with 1 or more
master netting agreements or any con-
tract or agreement subject to such agree-
ments that constitutes the setoff of a
340
claim against the debtor for any payment
or other transfer of property due from
the debtor under or in connection with
such agreements or any contract or
agreement subject to such agreements
against any payment due to the debtor
from such master netting agreement par-
ticipant under or in connection with such
agreements or any contract or agreement
subject to such agreements or against
cash, securities, or other property held
by, pledged to and under the control of,
or due from such master netting agree-
ment participant to margin, guarantee,
secure, or settle such agreements or any
contract or agreement subject to such
agreements, to the extent such partici-
pant is eligible to exercise such offset
rights under paragraph (6), (7), or (17) for
each individual contract covered by the
master netting agreement in issue.’’.
(2) LIMITATION.—Section 362 of title
11, United States Code, is amended by
adding at the end the following:
341
‘‘(i) LIMITATION.—The exercise of rights
not subject to the stay arising under sub-
section (a) pursuant to paragraph (6), (7), or
(17), or (32) of subsection (b) shall not be
stayed by any order of a court or administra-
tive agency in any proceeding under this
title.’’.
(e) LIMITATION
OF
AVOIDANCE
POWERS
UNDER MASTER NETTING AGREEMENT.—Section
546 of title 11, United States Code, is
amended—
(1) in subsection (g) (as added by sec-
tion 103 of Public Law 101–311)—
(A) by striking ‘‘under a swap
agreement’’; and
(B) by striking ‘‘in connection
with a swap agreement’’ and insert-
ing ‘‘under or in connection with any
swap agreement’’; and
(2) by adding at the end the fol-
lowing:
‘‘(j) Notwithstanding sections 544, 545, 547,
548(a)(1)(B), and 548(b), the trustee may not
avoid a transfer made by or to a master net-
ting agreement participant under or in con-
342
nection with any master netting agreement or
any individual contract covered thereby that
is made before the commencement of the case,
except under section 548(a)(1)(A), and except
to the extent the trustee could otherwise
avoid such a transfer made under an indi-
vidual contract covered by such master net-
ting agreement.’’.
(f) FRAUDULENT
TRANSFERS
OF
MASTER
NETTING
AGREEMENTS.—Section 548(d)(2) of
title 11, United States Code, is amended—
(1) in subparagraph (C), by striking
‘‘and’’;
(2) in subparagraph (D), by striking
the period and inserting ‘‘; and’’; and
(3) by adding at the end the following
new subparagraph:
‘‘(E) a master netting agreement par-
ticipant that receives a transfer in con-
nection with a master netting agreement
or any individual contract covered there-
by takes for value to the extent of such
transfer, except, with respect to a trans-
fer under any individual contract cov-
ered thereby, to the extent such master
343
netting agreement participant otherwise
did not take (or is otherwise not deemed
to have taken) such transfer for value.’’.
(g) TERMINATION OR ACCELERATION OF SE-
CURITIES CONTRACTS.—Section 555 of title 11,
United States Code, is amended—
(1) by amending the section heading
to read as follows:
‘‘§ 555. Contractual right to liquidate, terminate, or
accelerate a securities contract’’;
and
(2) in the first sentence, by striking
‘‘liquidation’’ and inserting ‘‘liquidation,
termination, or acceleration’’.
(h) TERMINATION OR ACCELERATION OF COM-
MODITIES
OR
FORWARD
CONTRACTS.—Section
556 of title 11, United States Code, is
amended—
(1) by amending the section heading
to read as follows:
‘‘§ 556. Contractual right to liquidate, terminate, or
accelerate a commodities contract or for-
ward contract’’;
and
344
(2) in the first sentence, by striking
‘‘liquidation’’ and inserting ‘‘liquidation,
termination, or acceleration’’.
(i) TERMINATION OR ACCELERATION OF RE-
PURCHASE AGREEMENTS.—Section 559 of title
11, United States Code, is amended—
(1) by amending the section heading
to read as follows:
‘‘§ 559. Contractual right to liquidate, terminate, or
accelerate a repurchase agreement’’;
and
(2) in the first sentence, by striking
‘‘liquidation’’ and inserting ‘‘liquidation,
termination, or acceleration’’.
(j) LIQUIDATION, TERMINATION, OR ACCEL-
ERATION OF SWAP AGREEMENTS.—Section 560 of
title 11, United States Code, is amended—
(1) by amending the section heading
to read as follows:
‘‘§ 560. Contractual right to liquidate, terminate, or
accelerate a swap agreement’’;
(2) in the first sentence, by striking
‘‘termination of a swap agreement’’ and
inserting ‘‘liquidation, termination, or ac-
345
celeration of 1 or more swap agree-
ments’’; and
(3) by striking ‘‘in connection with
any swap agreement’’ and inserting ‘‘in
connection with the termination, liquida-
tion, or acceleration of 1 or more swap
agreements’’.
(k) LIQUIDATION, TERMINATION, ACCELERA-
TION, OR OFFSET UNDER
A MASTER NETTING
AGREEMENT AND ACROSS CONTRACTS.—(1) Title
11, United States Code, is amended by insert-
ing after section 560 the following:
‘‘§ 561. Contractual right to terminate, liquidate, ac-
celerate, or offset under a master netting
agreement and across contracts
‘‘(a) IN GENERAL.—Subject to subsection
(b), the exercise of any contractual right, be-
cause of a condition of the kind specified in
section 365(e)(1), to cause the termination, liq-
uidation, or acceleration of or to offset or net
termination values, payment amounts or
other transfer obligations arising under or in
connection with 1 or more (or the termi-
nation, liquidation, or acceleration of 1 or
more)—
346
‘‘(1) securities contracts, as defined in
section 741(7);
‘‘(2) commodity contracts, as defined
in section 761(4);
‘‘(3) forward contracts;
‘‘(4) repurchase agreements;
‘‘(5) swap agreements; or
‘‘(6) master netting agreements,
shall not be stayed, avoided, or otherwise lim-
ited by operation of any provision of this title
or by any order of a court or administrative
agency in any proceeding under this title.
‘‘(b) EXCEPTION.—
‘‘(1) A party may exercise a contrac-
tual right described in subsection (a) to
terminate, liquidate, or accelerate only to
the extent that such party could exercise
such a right under section 555, 556, 559,
or 560 for each individual contract cov-
ered by the master netting agreement in
issue.
‘‘(2) If a debtor is a commodity broker
subject to subchapter IV of chapter 7—
‘‘(A) a party may not net or offset
an obligation to the debtor arising
347
under, or in connection with, a com-
modity contract against any claim
arising under, or in connection with,
other 
instruments, 
contracts, 
or
agreements listed in subsection (a),
except to the extent the party has
positive net equity in the commodity
accounts at the debtor, as calculated
under such subchapter; and
‘‘(B) another commodity broker
may not net or offset an obligation to
the debtor arising under, or in con-
nection with, a commodity contract
entered into or held on behalf of a
customer of the debtor against any
claim arising under, or in connection
with, other instruments, contracts, or
agreements listed in subsection (a).
‘‘(c) 
RULE
OF
APPLICATION.—Subpara-
graphs (A) and (B) of subsection (b)(2) shall
not be construed as prohibiting the offset of
claims and obligations arising pursuant to—
‘‘(1) a cross-margining arrangement
that has been approved by the Com-
modity Futures Trading Commission or
348
that has been submitted to such Commis-
sion pursuant to section 5a(a)(12) of the
Commodity Exchange Act and has been
permitted to go into effect; or
‘‘(2) another netting arrangement, be-
tween a clearing organization (as defined
in section 761) and another entity, that
has been approved by the Commodity Fu-
tures Trading Commission.
‘‘(d) DEFINITION.—As used in this section,
the term ‘contractual right’ includes a right
set forth in a rule or bylaw of a national secu-
rities exchange, a national securities associa-
tion, or a securities clearing agency, a right
set forth in a bylaw of a clearing organization
or contract market or in a resolution of the
governing board thereof, and a right, whether
or not evidenced in writing, arising under
common law, under law merchant, or by rea-
son of normal business practice.’’.
(2) CONFORMING AMENDMENT.—The table of
sections of chapter 5 of title 11, United States
Code, is amended by inserting after the item
relating to section 560 the following:
‘‘561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and
across contracts.’’.
349
(l) 
MUNICIPAL
BANKRUPTCIES.—Section
901(a) of title 11, United States Code, is
amended—
(1) by inserting ‘‘555, 556,’’ after
‘‘553,’’; and
(2) by inserting ‘‘559, 560, 561, 562,’’
after ‘‘557,’’.
(m) ANCILLARY PROCEEDINGS.—Section 304
of title 11, United States Code, is amended by
adding at the end the following new sub-
section:
‘‘(d) Any provisions of this title relating to
securities contracts, commodity contracts,
forward contracts, repurchase agreements,
swap agreements, or master netting agree-
ments shall apply in a case ancillary to a for-
eign proceeding under this section or any
other section of this title so that enforcement
of contractual provisions of such contracts
and agreements in accordance with their
terms will not be stayed or otherwise limited
by operation of any provision of this title or
by order of a court in any proceeding under
this title, and to limit avoidance powers to the
same extent as in a proceeding under chapter
350
7 or 11 (such enforcement not to be limited
based on the presence or absence of assets of
the debtor in the United States).’’.
(n) COMMODITY
BROKER
LIQUIDATIONS.—
Title 11, United States Code, is amended by in-
serting after section 766 the following:
‘‘§ 767. Commodity broker liquidation and forward
contract merchants, commodity brokers,
stockbrokers, financial institutions, fi-
nancial participants, securities clearing
agencies, swap participants, repo partici-
pants, and master netting agreement par-
ticipants
‘‘Notwithstanding any other provision of
this title, the exercise of rights by a forward
contract merchant, commodity broker, stock-
broker, financial institution, financial partici-
pant, securities clearing agency, swap partici-
pant, repo participant, or master netting
agreement participant under this title shall
not affect the priority of any unsecured claim
it may have after the exercise of such rights.’’.
(o) STOCKBROKER LIQUIDATIONS.—Title 11,
United States Code, is amended by inserting
after section 752 the following:
351
‘‘§ 753. Stockbroker liquidation and forward contract
merchants, commodity brokers, stock-
brokers, financial institutions, financial
participants, securities clearing agencies,
swap participants, repo participants, and
master netting agreement participants
‘‘Notwithstanding any other provision of
this title, the exercise of rights by a forward
contract merchant, commodity broker, stock-
broker, financial institution, securities clear-
ing agency, swap participant, repo partici-
pant, financial participant, or master netting
agreement participant under this title shall
not affect the priority of any unsecured claim
it may have after the exercise of such rights.’’.
(p) SETOFF.—Section 553 of title 11, United
States Code, is amended—
(1) in subsection (a)(3)(C), by insert-
ing ‘‘(except for a setoff of a kind de-
scribed in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(32), 555, 556, 559, 560 or
561)’’ before the period; and
(2) in subsection (b)(1), by striking
‘‘362(b)(14)’’ 
and 
inserting 
‘‘362(b)(17),
362(b)(32), 555, 556, 559, 560, 561’’.
352
(q) SECURITIES
CONTRACTS, COMMODITY
CONTRACTS, AND FORWARD CONTRACTS.—Title
11, United States Code, is amended—
(1) in section 362(b)(6), by striking ‘‘fi-
nancial institutions,’’ each place such
term appears and inserting ‘‘financial in-
stitution, financial participant’’;
(2) in section 546(e), by inserting ‘‘fi-
nancial participant,’’ after ‘‘financial in-
stitution,’’;
(3) in section 548(d)(2)(B), by insert-
ing ‘‘financial participant,’’ after ‘‘finan-
cial institution,’’;
(4) in section 555—
(A) by inserting ‘‘financial partici-
pant,’’ after ‘‘financial institution,’’;
and
(B) by inserting before the period
at the end ‘‘, a right set forth in a
bylaw of a clearing organization or
contract market or in a resolution of
the governing board thereof, and a
right, whether or not in writing, aris-
ing under common law, under law
353
merchant, or by reason of normal
business practice’’; and
(5) in section 556, by inserting ‘‘, fi-
nancial participant’’ after ‘‘commodity
broker’’.
(r) CONFORMING
AMENDMENTS.—Title 11,
United States Code, is amended—
(1) in the table of sections of chapter
5—
(A) by amending the items relat-
ing to sections 555 and 556 to read as
follows:
‘‘555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
‘‘556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.’’;
and
(B) by amending the items relat-
ing to sections 559 and 560 to read as
follows:
‘‘559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
‘‘560. Contractual right to liquidate, terminate, or accelerate a
swap agreement.’’;
and
(2) in the table of sections of chapter
7—
(A) by inserting after the item re-
lating to section 766 the following:
354
‘‘767. Commodity broker liquidation and forward contract mer-
chants, commodity brokers, stockbrokers, finan-
cial institutions, financial participants, securities
clearing agencies, swap participants, repo partici-
pants, and master netting agreement partici-
pants.’’;
and
(B) by inserting after the item re-
lating to section 752 the following:
‘‘753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial insti-
tutions, financial participants, securities clearing
agencies, swap participants, repo participants,
and master netting agreement participants.’’.
SEC. 209. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)) is amended
by adding at the end the following new sub-
paragraph:
‘‘(H) 
RECORDKEEPING
REQUIRE-
MENTS.—The Corporation, in consulta-
tion with the appropriate Federal
banking agencies, may prescribe reg-
ulations requiring more detailed rec-
ordkeeping with respect to qualified
financial contracts (including market
valuations) by insured depository in-
stitutions.’’.
355
SEC. 210. EXEMPTIONS FROM CONTEMPORANEOUS EXECU-
TION REQUIREMENT.
Section 13(e)(2) of the Federal Deposit In-
surance Act (12 U.S.C. 1823(e)(2)) is amended
to read as follows:
‘‘(2) EXEMPTIONS
FROM
CONTEMPORA-
NEOUS
EXECUTION
REQUIREMENT.—An
agreement to provide for the lawful
collateralization of—
‘‘(A) deposits of, or other credit
extension by, a Federal, State, or
local governmental entity, or of any
depositor 
referred 
to 
in 
section
11(a)(2), including an agreement to
provide collateral in lieu of a surety
bond;
‘‘(B) bankruptcy estate funds pur-
suant to section 345(b)(2) of title 11,
United States Code;
‘‘(C) extensions of credit, includ-
ing any overdraft, from a Federal re-
serve bank or Federal home loan
bank; or
‘‘(D) 1 or more qualified financial
contracts, 
as 
defined 
in 
section
11(e)(8)(D),
356
shall not be deemed invalid pursuant to
paragraph (1)(B) solely because such
agreement was not executed contempora-
neously with the acquisition of the collat-
eral or because of pledges, delivery, or
substitution of the collateral made in ac-
cordance with such agreement.’’.
SEC. 211. DAMAGE MEASURE.
(a) IN GENERAL.—Title 11, United States
Code, is amended—
(1) by inserting after section 561 the
following:
‘‘§ 562. Damage measure in connection with swap
agreements, securities contracts, forward
contracts, commodity contracts, repur-
chase agreements, or master netting
agreements
‘‘If the trustee rejects a swap agreement,
securities contract as defined in section 741,
forward contract, commodity contract (as de-
fined in section 761) repurchase agreement,
or master netting agreement pursuant to sec-
tion 365(a), or if a forward contract merchant,
stockbroker, financial institution, securities
clearing agency, repo participant, financial
357
participant, master netting agreement partic-
ipant, or swap participant liquidates, termi-
nates, or accelerates such contract or agree-
ment, damages shall be measured as of the
earlier of—
‘‘(1) the date of such rejection; or
‘‘(2) the date of such liquidation, ter-
mination, or acceleration.’’; and
(2) in the table of sections of chapter
5 by inserting after the item relating to
section 561 the following:
‘‘562. Damage measure in connection with swap agreements, se-
curities contracts, forward contracts, commodity
contracts, repurchase agreements, or master net-
ting agreements.’’.
(b) CLAIMS ARISING FROM REJECTION.—Sec-
tion 502(g) of title 11, United States Code, is
amended—
(1) by designating the existing text as
paragraph (1); and
(2) by adding at the end the fol-
lowing:
‘‘(2) A claim for damages calculated in ac-
cordance with section 562 shall be allowed
under subsection (a), (b), or (c), or disallowed
under subsection (d) or (e), as if such claim
358
had arisen before the date of the filing of the
petition.’’.
SEC. 212. SIPC STAY.
Section 5(b)(2) of the Securities Investor
Protection Act of 1970 (15 U.S.C. 78eee(b)(2))
is amended by adding after subparagraph (B)
the following new subparagraph:
‘‘(C) EXCEPTION FROM STAY.—
‘‘(i) Notwithstanding section
362 of title 11, United States Code,
neither the filing of an applica-
tion under subsection (a)(3) nor
any order or decree obtained by
the Securities Investor Protection
Corporation from the court shall
operate as a stay of any contrac-
tual rights of a creditor to liq-
uidate, terminate, or accelerate a
securities 
contract, 
commodity
contract, forward contract, repur-
chase 
agreement, 
swap 
agree-
ment, or master netting agree-
ment, each as defined in title 11,
United States Code, to offset or
net termination values, payment
359
amounts, or other transfer obliga-
tions arising under or in connec-
tion with 1 or more of such con-
tracts or agreements, or to fore-
close 
on 
any 
cash 
collateral
pledged by the debtor whether or
not with respect to 1 or more of
such contracts or agreements.
‘‘(ii) Notwithstanding clause
(i), such application, order, or de-
cree may operate as a stay of the
foreclosure on or disposition of
securities collateral pledged by
the debtor, whether or not with
respect to 1 or more of such con-
tracts or agreements, securities
sold by the debtor under a repur-
chase 
agreement 
or 
securities
lent under a securities lending
agreement.
‘‘(iii) As used in this section,
the term ‘contractual right’ in-
cludes a right set forth in a rule
or bylaw of a national securities
exchange, a national securities as-
360
sociation, or a securities clearing
agency, a right set forth in a
bylaw of a clearing organization
or contract market or in a resolu-
tion of the governing board there-
of, and a right, whether or not in
writing, arising under common
law, under law merchant, or by
reason of normal business prac-
tice.’’.
SEC. 213. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code,
is amended—
(1) in subsection (b)—
(A) by striking ‘‘or’’ at the end of
paragraph (4)(B)(ii);
(B) by redesignating paragraph
(5) as paragraph (6); and
(C) by inserting after paragraph
(4) the following new paragraph:
‘‘(5) any eligible asset (or proceeds
thereof), to the extent that such eligible
asset was transferred by the debtor be-
fore the date of commencement of the
case, to an eligible entity in connection
361
with an asset-backed securitization, ex-
cept to the extent such asset (or proceeds
or value thereof) may be recovered by the
trustee under section 550 by virtue of
avoidance under section 548(a)(1); or’’;
and
(2) by adding at the end the following
new subsection:
‘‘(e) For purposes of this section, the fol-
lowing definitions shall apply:
‘‘(1) 
the 
term 
‘asset-backed
securitization’ means a transaction in
which eligible assets transferred to an el-
igible entity are used as the source of
payment on securities, including all secu-
rities issued by governmental units, at
least 1 class or tranche of which is rated
investment grade by 1 or more nationally
recognized securities rating organiza-
tions, when the securities are initially
issued by an issuer;
‘‘(2) the term ‘eligible asset’ means—
‘‘(A) financial assets (including in-
terests therein and proceeds thereof),
either fixed or revolving, whether or
362
not such assets are in existence as of
the date of the transfer, including
residential and commercial mortgage
loans, consumer receivables, trade re-
ceivables, 
assets 
of 
governmental
units (including payment obligations
relating to taxes, receipts, fines, tick-
ets, and other sources of revenue),
and lease receivables, that, by their
terms, convert into cash within a fi-
nite time period, plus any residual in-
terest in property subject to receiv-
ables included in such financial as-
sets plus any rights or other assets
designed to assure the servicing or
timely distribution of proceeds to se-
curity holders;
‘‘(B) cash; and
‘‘(C) securities, including all secu-
rities issued by governmental units.
‘‘(3) the term ‘eligible entity’ means—
‘‘(A) an issuer; or
‘‘(B) a trust, corporation, partner-
ship, governmental unit, limited li-
ability company (including a single
363
member limited liability company), or
other entity engaged exclusively in
the business of acquiring and trans-
ferring eligible assets directly or indi-
rectly to an issuer and taking actions
ancillary thereto;
‘‘(4) the term ‘issuer’ means a trust,
corporation, partnership, governmental
unit, limited liability company (including
a single member limited liability com-
pany), or other entity engaged exclu-
sively in the business of acquiring and
holding eligible assets, issuing securities
backed by eligible assets, and taking ac-
tions ancillary thereto; and
‘‘(5) the term ‘transferred’ means the
debtor, pursuant to a written agreement,
represented and warranted that eligible
assets were sold, contributed, or other-
wise conveyed with the intention of re-
moving them from the estate of the debt-
or pursuant to subsection (b)(5) (whether
or not reference is made to this title or
any section of this title), irrespective,
without limitation, of—
364
‘‘(A) whether the debtor directly
or indirectly obtained or held an in-
terest in the issuer or in any securi-
ties issued by the issuer;
‘‘(B) whether the debtor had an
obligation to repurchase or to service
or supervise the servicing of all or
any portion of such eligible assets; or
‘‘(C) the characterization of such
sale, contribution, or other convey-
ance for tax, accounting, regulatory
reporting, or other purposes.’’.
SEC. 214. APPLICATION OF AMENDMENTS.
The amendments made by this title shall
apply with respect to cases commenced or ap-
pointments made under any Federal or State
law after the date of the enactment of this Act,
but shall not apply with respect to cases com-
menced or appointments made under any
Federal or State law before the date of the en-
actment of this Act.
Amend the title so as to read: ‘‘A bill to reauthorize
and amend the Commodity Exchange Act to promote
legal certainty, enhance competition, and reduce systemic
risk in markets for futures and over-the-counter deriva-
tives, to revise the banking and bankruptcy insolvency
365
laws with respect to the termination and netting of finan-
cial contracts, and for other purposes.’’.
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as
the ‘‘Commodity Futures Modernization 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.
Sec. 2. Purposes.
TITLE I—COMMODITY EXCHANGE ACT AMENDMENTS
Sec. 101. Definitions.
Sec. 102. Agreements, contracts, and transactions in foreign
currency, government securities, and certain other
commodities.
Sec. 103. Legal certainty for excluded derivative transactions.
Sec. 104. Excluded electronic trading facilities.
Sec. 105. Hybrid instruments.
Sec. 106. Futures on securities.
Sec. 107. Transactions in exempt commodities and swap trans-
actions.
Sec. 108. Protection of the public interest.
Sec. 109. Prohibited transactions.
Sec. 110. Designation of boards of trade as contract markets.
Sec. 111. Derivatives transaction execution facilities.
Sec. 112. Derivatives clearing organizations.
Sec. 113. Common provisions applicable to registered entities.
Sec. 114. Exempt boards of trade.
Sec. 115. Suspension or revocation of designation as contract
market.
Sec. 116. Authorization of appropriations.
Sec. 117. Preemption.
Sec. 118. Consideration of costs and benefits and antitrust laws.
Sec. 119. Contract enforcement between eligible counterparties.
Sec. 120. Special procedures to encourage and facilitate bona
fide hedging by agricultural producers.
Sec. 121. Rule of construction.
Sec. 122. Technical and conforming amendments.
Sec. 123. Privacy.
Sec. 124. Report to Congress.
Sec. 125. Effective date.
Sec. 126. International activities of the Commodity Futures
Trading Commission.
TITLE II—SECURITIES ACTS AMENDMENTS
366
Subtitle A—Amendments
Sec. 201. Definitions under the Securities Exchange Act of 1934.
Sec. 202. Regulatory relief for markets trading security future
products.
Sec. 203. Regulatory relief for intermediaries trading security
future products.
Sec. 204. Special provisions for interagency cooperation.
Sec. 205. Maintenance of market integrity for security future
products.
Sec. 206. Special provisions for the trading of security future
products.
Sec. 207. Clearance and settlement.
Sec. 208. Amendments relating to registration and disclosure
issues under the Securities Act of 1933 and the Se-
curities Exchange Act of 1934.
Sec. 209. Amendments to the Investment Company Act of 1940
and the Investment Advisers Act of 1940.
Sec. 210. Preemption of state gaming and and bucket shop
laws.
Subtitle B—Conforming Amendments to the Commodity
Exchange Act
Sec. 221. Jurisdiction of Securities and Exchange Commission;
other provisions.
Sec. 222. Application of the Commodity Exchange Act to na-
tional securities exchanges and national securities
associations that trade security futures.
Sec. 223. Notification of investigations and enforcement ac-
tions.
Subtitle C—Effective Date
Sec. 231. Effective date.
SEC. 2. PURPOSES.
The purposes of this Act are—
(1) to reauthorize the appropriation
for the Commodity Futures Trading Com-
mission;
(2) to streamline and eliminate unnec-
essary regulation for the commodity fu-
tures exchanges and other entities regu-
lated under the Commodity Exchange Act;
367
(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 trading
of futures on individual securities and
narrow-based securities indexes in a man-
ner equivalent with the treatment of other
similar 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 provide
greater stability to markets during times
of market disorder by allowing the clear-
ing of transactions in over-the-counter de-
rivatives through appropriately regulated
clearing organizations; and
368
(8) to enhance the competitive position
of United States financial institutions
and financial markets.
TITLE I—COMMODITY
EXCHANGE ACT AMENDMENTS
SEC. 101. DEFINITIONS.
Section 1a of the Commodity Exchange Act
(7 U.S.C. 1a) is amended—
(1) by redesignating paragraphs (1)
through (7), (8) through (12), (13), (14),
(15), and (16) as paragraphs (2) through
(8), (16) through (20), (22), (23), (25), and
(29), respectively;
(2) by inserting before paragraph (2)
(as redesignated by paragraph (1)) the
following:
‘‘(1) ALTERNATIVE
TRADING
SYSTEM.—
The term ‘alternative trading system’
means an organization, association, or
group of persons that is registered as a
broker or dealer pursuant to section 15(b)
of the Securities Exchange Act of 1934 (ex-
cept paragraph (11) thereof) and that per-
forms the functions commonly performed
by an exchange (as defined in section
369
3(a)(1) of such Act) but that is exempt
from the definition of the term ‘exchange’
under such section 3(a)(1) by rule or regu-
lation of the Securities and Exchange
Commission on terms that require compli-
ance with regulations of the trading func-
tions of such organization, association, or
group of persons.’’;
(3) by inserting after paragraph (8)
(as redesignated by paragraph (1)) the
following:
‘‘(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
transaction to substitute, through
novation or otherwise, the credit
370
of the derivatives clearing organi-
zation for the credit of the parties;
‘‘(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 derivatives
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—
‘‘(i) settlement, netting, or no-
vation 
of 
obligations 
resulting
from agreements, contracts, or
371
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-
ticipant’ means a party or entity de-
scribed in paragraph (11)(A)(i), (ii), (v),
372
or (viii) or paragraph (11)(C), who, in
connection 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 or a foreign
government (including a regu-
lated subsidiary or affiliate of
such an insurance company);
373
‘‘(iii) an investment company
subject to regulation under the In-
vestment Company Act of 1940 (15
U.S.C. 80a–1 et seq.) or a foreign
person performing a similar role
or function subject as such to for-
eign 
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 per-
son is itself an eligible con-
tract participant);
374
‘‘(v) a corporation, partner-
ship, proprietorship, organization,
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 en-
tity’s business or to man-
age the risk associated
375
with an asset or liability
owned or incurred or rea-
sonably likely to be owned
or incurred by the entity
in the conduct of the enti-
ty’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 foreign
person performing a similar role
or function subject as such to for-
eign 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;
376
‘‘(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 or a foreign govern-
ment (including a regu-
lated subsidiary or affil-
iate 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 entity
described in subclause (I) or (II);
‘‘(viii)(I) a broker or dealer
subject to regulation under the Se-
377
curities Exchange Act of 1934 (15
U.S.C. 78a et seq.) or a foreign per-
son performing a similar role or
function subject as such to foreign
regulation, except that, if the
broker or dealer or foreign person
is a natural person or proprietor-
ship, the broker or dealer or for-
eign person shall not be consid-
ered to be an eligible contract par-
ticipant unless the broker or deal-
er or foreign person also meets the
requirements of clause (v) or (xi);
‘‘(II) an associated person of a
registered broker or dealer con-
cerning the financial or securities
activities of which the registered
person makes and keeps records
under section 15C(b) or 17(h) of
the Securities Exchange Act of
1934 (15 U.S.C. 78o–5(b), 78q(h));
‘‘(III) 
an 
investment 
bank
holding company (as defined in
section 17(i) of the Securities Ex-
378
change Act of 1934 (15 U.S.C.
78q(i)));
‘‘(ix)(I) 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 reg-
ulation, except that, if the futures
commission merchant or foreign
person is a natural person or pro-
prietorship, the futures commis-
sion merchant or foreign person
shall not be considered to be an el-
igible contract participant unless
the futures commission merchant
or foreign person also meets the
requirements of clause (v) or (xi);
or
‘‘(II) an affiliate of a reg-
istered futures commission mer-
chant concerning the financial ac-
tivities of which the registered
person makes and keeps records
under section 4f(c)(2)(B) of this
Act;
379
‘‘(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) a natural person with
total assets exceeding $10,000,000;
‘‘(B)(i) 
a 
person 
described 
in
clause (i), (ii), (viii), (ix), or (x) of sub-
paragraph (A) or in subparagraph
(C), acting as broker or performing an
equivalent agency function on behalf
of another person described in sub-
paragraph (A) or (C); or
‘‘(ii) an investment adviser subject
to regulation under the Investment
Advisers Act of 1940, a commodity
trading advisor subject to regulation
under this Act, a foreign person per-
forming a similar role or function
subject as such to foreign regulation,
380
or a person described in clause (i),
(ii), (viii), (ix), or (x) of subparagraph
(A) or in subparagraph (C), in any
such case acting as investment man-
ager or fiduciary (but excluding a per-
son acting as broker or performing an
equivalent agency function) for an-
other person described in subpara-
graph (A) or (C) and who is author-
ized 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;
except that entities that are eligible con-
tract participants under clause (v), (vi),
(vii)(I) or (III), or (xi) of subparagraph
(A) or subparagraph (C) and own and in-
vest on a discretionary basis less than
$50,000,000 in investments, shall only be
considered eligible contract participants
if the agreement, contract, or transaction
is offered by, and entered into with, an en-
tity that is listed in any of subclauses (I)
381
through (VI) of section 2(c)(2)(B)(ii) of
this Act.
‘‘(13) EXCLUDED COMMODITY.—The term
‘excluded commodity’ means—
‘‘(A) an interest rate, exchange
rate, 
currency, 
security, 
security
index, credit risk or measure, debt or
equity instrument, or index or meas-
ure of inflation;
‘‘(B) any other rate, differential,
index, or measure of economic or com-
mercial risk, return, or value that—
‘‘(i) is not within the control of
any party to the relevant contract,
agreement, or transaction; and
‘‘(ii) is not based in substan-
tial part on the value of a limited
number of commodities not de-
scribed in subparagraph (A) that
have a finite supply; or
‘‘(C) an occurrence, extent of an
occurrence, or contingency associated
with commercial or economic con-
sequences beyond the control of the
382
parties to the relevant contract, agree-
ment, or transaction.
‘‘(14) EXEMPT
COMMODITY.—The term
‘exempt commodity’ means a commodity
that is not an excluded commodity and is
not 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-
monly known as an ‘Edge Act corpora-
tion’;
‘‘(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));
383
‘‘(E) a depository institution (as
defined in section 3 of the Federal De-
posit 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) a financial holding company
(as defined in section 2 of the Bank
Holding Company Act of 1956 (12
U.S.C. 1841));
‘‘(H) a trust company; or
‘‘(I) a similarly regulated sub-
sidiary or affiliate of an entity de-
scribed in any of subparagraphs (A)
through (H).’’;
(4) by inserting after paragraph (20)
(as redesignated by paragraph (1)) the
following:
‘‘(21) HYBRID
INSTRUMENT.—The term
‘hybrid instrument’ means a deposit (as
defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)) offered by
a financial institution, or a security, hav-
384
ing 1 or more payments indexed to the
value, level, or rate of 1 or more commod-
ities.’’;
(5) by inserting after paragraph (23)
(as redesignated by paragraph (1)) the
following:
‘‘(24)(A) MARGIN.—The term ‘margin’,
when used with respect to a security fu-
ture product, means the amount, type, and
form of collateral required to secure any
extension or maintenance of credit, or the
amount, type, and form of collateral re-
quired as a performance bond related to
the purchase, sale, or carrying of a secu-
rity future product, and all other uses of
collateral related to the purchasing, sell-
ing, or carrying of a security future prod-
uct.
‘‘(B) The terms ‘margin level’ and
‘level of margin’, when used with respect
to a security future product, mean the
amount of margin required to secure any
extension or maintenance of credit, or the
amount of margin required as a perform-
385
ance bond related to the purchase, sale, or
carrying of a security future product.
‘‘(C) The terms ‘higher margin level’
and ‘higher level of margin’, when used
with respect to a security future product,
mean a margin level established by a con-
tract market that is higher than the min-
imum amount established by the Securi-
ties and Exchange Commission pursuant
to section 7(c)(2)(B) of the Securities Ex-
change Act of 1934.’’;
(6) by inserting after paragraph (25)
(as redesignated by paragraph (1)) the
following:
‘‘(26) NARROW-BASED SECURITY INDEX.—
The term ‘narrow-based security index’
means an index of securities on which
contracts for future delivery are not per-
mitted under section 2(a)(1)(C) of this Act,
including any interest therein or based on
the value thereof.
‘‘(27) 
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-
386
tion’, ‘privilege’, ‘indemnity’, ‘bid’, ‘offer’,
‘put’, ‘call’, ‘advance guaranty’, or ‘decline
guaranty’.
‘‘(28) ORGANIZED EXCHANGE.—The term
‘organized exchange’ means a trading fa-
cility that—
‘‘(A) permits trading—
‘‘(i) by or on behalf of a person
that is not an eligible contract
participant; or
‘‘(ii) by persons other than on
a principal-to-principal basis; or
‘‘(B) 
has 
adopted 
(directly 
or
through another nongovernmental en-
tity) 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
(7) by adding at the end the following:
387
‘‘(30) 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;
‘‘(C) a derivatives clearing organi-
zation registered under section 5b; or
‘‘(D) a board of trade designated
as a contract market under section 5f.
‘‘(31) SECURITY.—The term ‘security’
means a security as defined in section
2(a)(1) of the Securities Act of 1933 (15
U.S.C. 77b(a)(1)) or section 3(a)(10) of the
Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(10)).
‘‘(32) SECURITY FUTURE.—The term ‘se-
curity future’ means a contract of sale for
future delivery of a single security or of a
narrow-based security index, including
any interest therein or based on the value
thereof, 
except 
an 
exempted 
security
under section 3(a)(12) of the Securities
Exchange Act of 1934 as in effect on the
388
date of enactment of the Futures Trading
Act of 1982 (other than any municipal se-
curity as defined in section 3(a)(29) of the
Securities Exchange Act of 1934 as in ef-
fect on the date of enactment of the Fu-
tures Trading Act of 1982).
‘‘(33) SECURITY FUTURE PRODUCT.—The
term ‘security future product’ means a se-
curity future or any put, call, straddle, op-
tion, or privilege on any security future.
‘‘(34) TRADING FACILITY.—
‘‘(A) IN GENERAL.—The term ‘trad-
ing facility’ means a person or group
of persons that constitutes, maintains,
or provides a physical or electronic fa-
cility or system in which multiple par-
ticipants have the ability to execute or
trade agreements, contracts, or trans-
actions by accepting bids and offers
made by other participants that are
open to multiple participants in the
facility or system.
‘‘(B) EXCLUSIONS.—The term ‘trad-
ing facility’ does not include—
389
‘‘(i) a person or group of per-
sons solely because the person or
group of persons—
‘‘(I) constitutes, maintains,
or provides an electronic facil-
ity or system that enables par-
ticipants 
to 
negotiate 
the
terms of and enter into bilat-
eral transactions as a result
of communications exchanged
by the parties and not from
interaction of multiple orders
within a predetermined, non-
discretionary automated trade
matching algorithm; or
‘‘(II) is a derivatives clear-
ing organization;
‘‘(ii) a government securities
dealer or government securities
broker, to the extent that the deal-
er or broker executes or trades
agreements, contracts, or trans-
actions in government securities,
or 
assists 
persons 
in 
commu-
nicating about, negotiating, enter-
390
ing into, executing, or trading an
agreement, 
contract, 
or 
trans-
action in government securities
(as the terms ‘government securi-
ties dealer’, ‘government securities
broker’, and ‘government securi-
ties’ are defined in section 3(a) of
the Securities Exchange Act of
1934 (15 U.S.C. 78c(a))); or
‘‘(iii) facilities on which bids
and offers, and acceptances of
bids and offers effected on the fa-
cility, are not binding.’’.
SEC. 102. 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
391
(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 agreements in an
excluded commodity; or
‘‘(G) mortgages or mortgage pur-
chase commitments.
‘‘(2) COMMISSION JURISDICTION.—
‘‘(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-
392
eign currency or a security or
group or index of securities), 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 exchange
registered pursuant to section 6(a)
of the Securities Exchange Act of
1934.
‘‘(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 trans-
action in foreign currency that—
‘‘(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-
393
son 
offering 
to 
be 
the
counterparty, of the person is—
‘‘(I) a financial institu-
tion;
‘‘(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 Exchange
Act of 1934 (15 U.S.C. 78o(b),
78o–5), or an affiliated person
of a futures commission mer-
chant registered under this
Act, concerning the financial
or 
securities 
activities 
of
which the registered person
makes 
and 
keeps 
records
under section 15C(b) or 17(h)
of the Securities Exchange Act
394
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 section
2 of the Bank Holding Com-
pany Act of 1956); or
‘‘(VI) an investment bank
holding company (as defined
in section 17(i) of the Securi-
ties Exchange Act of 1934).’’.
SEC. 103. 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
102) is amended by adding at the end the fol-
lowing:
‘‘(d) 
EXCLUDED
DERIVATIVE
TRANS-
ACTIONS.—
395
‘‘(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
applies to an agreement, contract, or
transaction in an excluded commodity if—
‘‘(A) the agreement, contract, or
transaction is entered into on a prin-
cipal-to-principal basis between par-
ties trading for their own accounts or
396
as described in section 1a(12)(B)(ii) of
this Act;
‘‘(B) the agreement, contract, or
transaction is entered into only be-
tween persons that are eligible con-
tract participants (as defined in sec-
tions 1a(12)(A), (B)(ii), and (C)) at the
time at which the persons enter into
the agreement, contract, or trans-
action; and
‘‘(C) the agreement, contract, or
transaction is executed or traded on
an electronic trading facility.’’.
SEC. 104. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section
103) is amended by adding at the end the fol-
lowing:
‘‘(e) EXCLUDED ELECTRONIC TRADING FACILI-
TIES.—
‘‘(1) IN GENERAL.—Nothing in this Act
(other than section 12(e)(2)(B)) governs or
is applicable to an electronic trading fa-
cility that limits transactions authorized
to be conducted on its facilities to those
397
satisfying the requirements of sections
2(d)(2) and 2(h)(3) of this Act.
‘‘(2) EFFECT
ON
AUTHORITY
TO
ESTAB-
LISH
AND
OPERATE.—Nothing in this Act
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 excluded
electronic trading facility excluded under
this Act pursuant to paragraph (1).’’.
SEC. 105. HYBRID INSTRUMENTS.
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:
‘‘(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 hybrid instrument that
is predominantly a security or depository
instrument.
‘‘(2) PREDOMINANCE.—A hybrid instru-
ment shall be considered to be predomi-
398
nantly a security or depository 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 in-
strument;
‘‘(B) the purchaser or holder of the
hybrid instrument is not required to
make any payment to the issuer in ad-
dition 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.
399
‘‘(3) MARK-TO-MARKET
MARGINING
RE-
QUIREMENTS.—For the purposes of para-
graph (2)(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.’’.
SEC. 106. FUTURES ON SECURITIES.
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:
‘‘(g) Nothing in subsection (a)(1)(C) or
(a)(1)(D) governs or applies to—
‘‘(1) an agreement, contract, or trans-
action that is excluded under subsection
(c) or (d) (whether or not the agreement,
contract, or transaction is otherwise sub-
ject to this Act);
‘‘(2) an electronic trading facility that
is excluded under subsection (e); or
400
‘‘(3) a hybrid instrument that is cov-
ered by an exclusion under subsection (f)
or an exemption granted by the Commis-
sion under section 4(c) (whether or not the
hybrid instrument is otherwise subject to
this Act).’’.
SEC. 107. TRANSACTIONS IN EXEMPT COMMODITIES AND
SWAP TRANSACTIONS.
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:
‘‘(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 between
persons that are eligible contract par-
ticipants at the time they enter into
the agreement, contract, or trans-
action; and
401
‘‘(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—
‘‘(A) sections 5b and 12(e)(2)(B) of
this Act;
‘‘(B) sections 4b and 4o of this Act
and the regulations of the Commission
pursuant to section 4c(b) of this Act
proscribing fraud in connection with
commodity option transactions, to the
extent such agreement, contract, or
transaction is not between eligible
commercial participants and would
otherwise be subject to those provi-
sions; and
‘‘(C) sections 6(c) and 9(a)(2) of
this Act to the extent they prohibit ma-
nipulation of the market price of any
commodity in interstate commerce, to
the extent such agreement, contract,
or transaction would otherwise be
subject to those provisions.
402
‘‘(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
which—
‘‘(A) is entered into on a principal-
to-principal basis solely between per-
sons that are eligible contract partici-
pants at the time at which the persons
enter into the agreement, contract, or
transaction;
‘‘(B) entered into only between per-
sons that are eligible contract partici-
pants 
(as 
defined 
in 
sections
1a(12)(A), (B)(ii), (B)(iii), and (C) at
the time at which the persons enter
into the agreement, contract, or trans-
action; and
‘‘(C) is executed or traded on an
electronic trading facility.
‘‘(4) An agreement, contract, or trans-
action described in paragraph (3) shall be
subject to—
403
‘‘(A) sections 5a (to the extent so
provided in section 5a(g)), 5b, and
12(e)(2)(B) of this Act;
‘‘(B) sections 4b and 4o of this Act
and the regulations of the Commission
pursuant to section 4c(b) of this Act
proscribing fraud in connection with
commodity option transactions to the
extent such agreement, contract, or
transaction would otherwise be sub-
ject to those provisions;
‘‘(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 commerce
and to the extent such agreement, con-
tract, or transaction would otherwise
be subject to those provisions; and
‘‘(D) 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
404
electronic trading facility performs a
significant price discovery function
for transactions in the cash market
for the commodity underlying any
agreement, contract, or transaction
executed or traded on the electronic
trading facility.
‘‘(i) APPLICATION OF THE ACT.—Nothing in
this Act shall be construed (1) as implying or
creating any presumption that (A) any agree-
ment, contract, or transaction that is eligible
for an exclusion or exemption from regulation
under this Act or (B) any agreement, contract,
or transaction that is not eligible for an exclu-
sion or exemption from regulation under this
Act is or would otherwise be subject to this Act
or (2) as conferring jurisdiction on the Com-
mission with respect to any such agreement,
contract, or transaction, except as expressly
provided in section 5a (to the extent so pro-
vided in section 5a(g)) and 5b.’’.
SEC. 108. PROTECTION OF THE PUBLIC INTEREST.
The Commodity Exchange Act is amended
by striking section 3 (7 U.S.C. 5) and inserting
the following:
405
‘‘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 Commission.
To foster these public interests, it is further the
purpose of this Act to deter and prevent price
manipulation or any other disruptions to mar-
ket integrity; to ensure the financial integrity
of all transactions subject to this Act and the
avoidance of systemic risk; to protect all mar-
ket participants from fraudulent or other abu-
sive sales practices and misuses of customer
assets; and to promote responsible innovation
406
and fair competition among boards of trade,
other markets and market participants.’’.
SEC. 109. 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 commodity
or the product or byproduct of the
commodity;
‘‘(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 interstate
407
commerce for the execution of the
transaction.
‘‘(2) TRANSACTION.—A transaction re-
ferred to in paragraph (1) is a trans-
action 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. 110. 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
(2) by striking sections 5 and 5a (7
U.S.C. 7, 7a) and inserting the following:
408
‘‘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 re-
quire 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 spec-
ified 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 reconstruc-
tions.
‘‘(3) FAIR
AND
EQUITABLE
TRADING.—
The board of trade shall establish and en-
force trading rules to ensure fair and eq-
409
uitable trading through the facilities of
the contract market, and the capacity to
detect, investigate, and discipline any per-
son 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.
‘‘(4) TRADE
EXECUTION
FACILITY.—The
board of trade shall—
410
‘‘(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
trade, or similar methods for performing
411
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 information
to perform any of the functions described
in this subsection, including the capacity
to carry out such international informa-
tion-sharing agreements as the Commis-
sion may require.
‘‘(c) 
EXISTING
CONTRACT
MARKETS.—A
board of trade that is designated as a contract
market on the effective date of the Commodity
Futures Modernization Act of 2000 shall be
considered to be a designated contract market
under this section.
‘‘(d) CORE PRINCIPLES FOR CONTRACT MAR-
KETS.—
‘‘(1) IN
GENERAL.—To maintain the
designation of a board of trade as a con-
412
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 con-
tracts 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, espe-
cially during trading in the delivery
month, the board of trade shall adopt po-
413
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 author-
ity, in consultation or cooperation with
the Commission, where necessary and ap-
propriate, 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—
‘‘(A) the terms and conditions of
the contracts of the contract market;
and
414
‘‘(B) the mechanisms for executing
transactions on or through the facili-
ties 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 mech-
anism 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-
viding evidence of any violations of the
rules of the contract market.
‘‘(11) FINANCIAL
INTEGRITY
OF
CON-
TRACTS.—The board of trade shall estab-
415
lish and enforce rules providing for the fi-
nancial integrity of any contracts traded
on the contract market, including rules to
ensure the financial integrity of any fu-
tures commission merchants and intro-
ducing brokers and the protection of cus-
tomer 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
and enforce appropriate fitness standards
for directors, members of any disciplinary
committee, members of the contract mar-
ket, and any other persons with direct ac-
416
cess to the facility (including any parties
affiliated with any of the persons de-
scribed 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 re-
flects 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 man-
ner 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 provide
417
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 Jus-
tice.
‘‘(18) ANTITRUST CONSIDERATIONS.—Un-
less necessary or appropriate to achieve
the purposes of this Act, the board of
trade shall not—
‘‘(A) adopt any rules or taking any
actions that result in any unreason-
able restraints of trade; or
‘‘(B) impose any material anti-
competitive burden on trading on the
contract market.
‘‘(e) CURRENT AGRICULTURAL
AND METAL
COMMODITIES.—
‘‘(1) Subject to paragraph (2), a con-
tract for purchase or sale for future deliv-
ery of an agricultural or metal commodity
enumerated in section 1a(4) that is avail-
able for trade on a contract market, as of
the date of the enactment of this sub-
418
section, 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 public
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 transaction
execution facility.’’.
SEC. 111. 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 110(2)) the following:
‘‘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—
419
‘‘(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 subsection
(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—
‘‘(A) the underlying commodity
has a nearly inexhaustible deliverable
supply;
‘‘(B) the underlying commodity
has a deliverable supply that is suffi-
420
ciently large that the contract is not
readily susceptible to manipulation;
‘‘(C) the underlying commodity
has no cash market; or
‘‘(D) the Commission determines,
based on the market characteristics,
surveillance 
history, 
self-regulatory
record, or capacity of the facility that
trading in the futures contract is not
readily susceptible to 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
‘‘(ii) be a person trading through
a futures commission merchant that—
‘‘(I) is registered with the Com-
mission;
‘‘(II) is a member of a futures
self-regulatory organization;
421
‘‘(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 transaction
execution facility of the board of
trade; or
‘‘(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
422
the derivatives transaction execution
facility.
‘‘(5) IMPERMISSIBLE PRODUCTS.—It shall
be unlawful for any person to execute or
trade a security future product or other
future involving a security, except an ex-
empt 
security 
as 
defined 
in 
section
3(a)(12) of the Securities Exchange Act of
1934 as in effect on the date of enactment
of the Futures Trading Act of 1982, on a
designated transaction execution facility.
‘‘(c) CRITERIA FOR REGISTRATION.—
‘‘(1) IN GENERAL.—To be registered as a
registered derivatives transaction execu-
tion facility, the board of trade shall dem-
onstrate to the Commission that the board
of trade meets the criteria specified in
this subsection.
‘‘(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—
423
‘‘(A) obtain information necessary
to perform the functions required
under this section; or
‘‘(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 speci-
fications 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
424
‘‘(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 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 condi-
tions providing for the financial integrity
of transactions entered on or through the
facilities of the board of trade, including
rules or terms and conditions to ensure
the financial integrity of any futures com-
mission merchants and introducing bro-
kers and the protection of customer funds.
‘‘(d) CORE PRINCIPLES FOR REGISTERED DE-
RIVATIVES
TRANSACTION
EXECUTION
FACILI-
TIES.—
425
‘‘(1) IN
GENERAL.—To maintain the
registration of a board of trade as a de-
rivatives transaction execution facility, a
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 main-
tain an orderly market while providing
any necessary trading information to the
Commission to allow the Commission to
discharge the responsibilities of the Com-
mission under the Act.
‘‘(4) DISCLOSURE OF GENERAL INFORMA-
TION.—The board of trade shall disclose
publicly and to the Commission informa-
tion concerning—
426
‘‘(A) contract terms and condi-
tions;
‘‘(B) trading conventions, mecha-
nisms, and practices;
‘‘(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
427
rules to minimize conflicts of interest in
the decisionmaking process of the deriva-
tives transaction execution facility and es-
tablish a process for resolving such con-
flicts 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 fa-
cility 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 provide
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 Jus-
tice.
‘‘(9) ANTITRUST
CONSIDERATIONS.—Un-
less necessary or appropriate to achieve
428
the purposes of this Act, the board of
trade shall not—
‘‘(A) adopt any rules or take any
actions that result in any unreason-
able restraint of trade; or
‘‘(B) impose 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 in-
stitution, or institution of the Farm Credit
System that meets the requirements 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 insti-
tution of the Farm Credit System; and
429
‘‘(B) receive funds of customers to
serve as margin or security for such
transactions.
‘‘(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 depository
institution or institution of the Farm
Credit System be in good standing
with Federal bank regulatory agen-
cies (including the Farm Credit Ad-
ministration), 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, depos-
itory institution, or institution of the
Farm Credit System is registered as a
futures commission merchant and is a
430
member of a registered futures asso-
ciation.
‘‘(3) IMPLEMENTATION.—The Commis-
sion shall cooperate and coordinate with
the Securities and Exchange Commission,
the Secretary of the Treasury, and Federal
banking regulatory agencies (including
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 Modernization Act
of 2000, consistent with regulations adopted by
the 
Commission, 
a 
registered 
derivatives
transaction execution facility may authorize a
futures commission merchant to offer any cus-
tomer of the futures commission merchant that
is an eligible contract participant the right to
not segregate the customer funds of the futures
commission merchant for purposes of trading
on or through the facilities of the registered
derivatives transaction execution facility.
431
‘‘(g) ELECTION TO TRADE EXCLUDED COM-
MODITIES.—
‘‘(1) IN
GENERAL.—A board of trade
that is a registered derivatives trans-
action execution facility may trade on the
facility any agreements, contracts, or
transactions involving excluded commod-
ities other than securities, except exempt
securities under section 3(a)(12) of the Se-
curities Exchange Act of 1934 as in effect
on the date of enactment of the Futures
Trading Act of 1982, that are otherwise
excluded or exempt from this Act under
section 2(c), 2(d), or 2(h). Notwithstanding
section 5a(b)(2), a board of trade on
which agreements, contracts, or trans-
actions excluded or exempt from this Act
under section 2(c), 2(d), or 2(h) are traded
may elect, but shall not be required, to
register as a derivatives transaction exe-
cution facility with respect to such agree-
ments, contracts, or transactions, other
than any agreement, contract, or trans-
action in a security other than such an
exempt security.
432
‘‘(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 agree-
ments, contracts, or transactions are trad-
ed on a derivatives transaction execution
facility.’’.
SEC. 112. DERIVATIVES CLEARING ORGANIZATIONS.
The Commodity Exchange Act (7 U.S.C. 1
et seq.) is amended by inserting after section
5a (as added by section 111) the following:
‘‘SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS.
‘‘(a) REGISTRATION REQUIREMENT.—Except
as provided in subsection (b), it shall be un-
lawful for a derivatives clearing organization,
unless registered with the Commission, di-
rectly or indirectly to make use of the mails or
any means or instrumentality of interstate
commerce to perform the functions of a deriva-
tives clearing organization described in sec-
tion 1a(9).
‘‘(b) EXCLUSION OF DERIVATIVES CLEARING
ORGANIZATIONS SUBJECT TO OTHER REGULATORY
AUTHORITIES.—A derivatives clearing organi-
433
zation shall not be required to register with
the Commission, and the Commission shall
have no jurisdiction with respect to the deriva-
tives clearing organization, if the derivatives
clearing organization—
‘‘(1)(A) is registered as a clearing
agency under the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.);
‘‘(B) is subject to the supervisory juris-
diction of a Federal banking agency (as
defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)) or the Na-
tional Credit Union Administration; or
‘‘(C) is subject to the supervisory juris-
diction of a foreign regulatory authority
that is recognized by the Securities and
Exchange Commission, the Board of Gov-
ernors of the Federal Reserve System, the
Comptroller of the Currency, or the Com-
mission as overseeing a system of consoli-
dated supervision comparable to that pro-
vided under applicable United States law;
and
‘‘(2) does not clear—
434
‘‘(A) a contract of sale for future
delivery other than a security future
product;
‘‘(B) an option on a contract of
sale for future delivery other than a
security future product; or
‘‘(C) an option on a commodity
other than a security.
‘‘(c) VOLUNTARY REGISTRATION.—A deriva-
tives clearing organization that is not exempt
from registration under subsection (b) may
register with the Commission as a derivatives
clearing organization.
‘‘(d) REGISTRATION OF DERIVATIVES CLEAR-
ING ORGANIZATIONS.—
‘‘(1) APPLICATION.—A person desiring
to register as a derivatives clearing orga-
nization shall submit to the Commission
an application in such form and con-
taining such information as the Commis-
sion may require for the purpose of mak-
ing the determinations required for ap-
proval under paragraph (2).
‘‘(2) CORE PRINCIPLES.—
435
‘‘(A) IN GENERAL.—To be registered
and to maintain registration as a de-
rivatives clearing organization, an
applicant shall demonstrate to the
Commission that the applicant com-
plies with the core principles specified
in this paragraph.
‘‘(B) FINANCIAL
RESOURCES.—The
applicant shall demonstrate that the
applicant 
has 
adequate 
financial,
operational, 
and 
managerial 
re-
sources to discharge the responsibil-
ities of a derivatives clearing organi-
zation without interruption in various
market conditions.
‘‘(C) PARTICIPANT AND PRODUCT ELI-
GIBILITY.—The 
applicant 
shall
establish—
‘‘(i) 
appropriate 
admission
and continuing eligibility stand-
ards (including appropriate min-
imum financial requirements) for
members of and participants in
the organization; and
436
‘‘(ii) 
appropriate 
standards
for 
determining 
eligibility 
of
agreements, contracts, or trans-
actions submitted to the appli-
cant.
‘‘(D) RISK
MANAGEMENT.—The ap-
plicant shall have the ability to man-
age the risks associated with dis-
charging the responsibilities of a de-
rivatives 
clearing 
organization
through the use of appropriate tools
and procedures.
‘‘(E) 
SETTLEMENT
PROCEDURES.—
The applicant shall have the ability
to—
‘‘(i) complete settlements on a
timely basis under varying cir-
cumstances;
‘‘(ii) maintain an adequate
record of the flow of funds associ-
ated with each transaction that
the applicant clears; and
‘‘(iii) comply with the terms
and conditions of any permitted
437
netting or offset arrangements
with other clearing organizations.
‘‘(F) TREATMENT
OF
FUNDS.—The
applicant shall have standards and
procedures designed to protect and en-
sure the safety of member and partici-
pant funds.
‘‘(G) DEFAULT
RULES
AND
PROCE-
DURES.—The 
applicant 
shall 
have
rules and procedures designed to
allow for efficient, fair, and safe man-
agement of events when members or
participants become insolvent or oth-
erwise default on their obligations to
the derivatives clearing organization.
‘‘(H) RULE ENFORCEMENT.—The ap-
plicant shall—
‘‘(i) maintain adequate ar-
rangements and resources for the
effective monitoring and enforce-
ment of compliance with rules of
the applicant and for resolution of
disputes; and
‘‘(ii) have the authority and
ability to discipline, limit, sus-
438
pend, or terminate a member’s or
participant’s activities for viola-
tions of rules of the applicant.
‘‘(I) SYSTEM SAFEGUARDS.—The ap-
plicant shall demonstrate that the
applicant—
‘‘(i) has established and will
maintain a program of oversight
and risk analysis to ensure that
the automated systems of the ap-
plicant 
function 
properly 
and
have adequate capacity and secu-
rity; and
‘‘(ii) has established and will
maintain emergency procedures
and a plan for disaster recovery,
and will periodically test backup
facilities sufficient to ensure daily
processing, clearing, and settle-
ment of transactions.
‘‘(J) 
REPORTING.—The 
applicant
shall provide to the Commission all
information necessary for the Commis-
sion to conduct the oversight function
of the applicant with respect to the ac-
439
tivities of the derivatives clearing or-
ganization.
‘‘(K) RECORDKEEPING.—The appli-
cant shall—
‘‘(i) maintain full records of
all activities related to the busi-
ness of the applicant as a deriva-
tives clearing organization in a
form and manner acceptable to
the Commission for a period of at
least 5 years;
‘‘(ii) make the records readily
available during at least the first
2 years of the 5-year period and
provide the records to the Commis-
sion at the expense of the person
required to maintain the records;
and
‘‘(iii) keep the records open to
inspection by any representative of
the Commission or the Department
of Justice.
‘‘(L) PUBLIC INFORMATION.—The ap-
plicant shall make information con-
cerning the rules and operating proce-
440
dures governing the clearing and set-
tlement systems (including default
procedures) available to market par-
ticipants.
‘‘(M) INFORMATION
SHARING.—The
applicant shall—
‘‘(i) enter into and abide by
the terms of all appropriate and
applicable domestic and inter-
national 
information-sharing
agreements; and
‘‘(ii) use relevant information
obtained from the agreements in
carrying out the clearing organi-
zation’s 
risk 
management 
pro-
gram.
‘‘(N) ANTITRUST CONSIDERATIONS.—
Unless necessary or appropriate to
achieve the purposes of this Act, the
derivatives 
clearing 
organization
shall not—
‘‘(i) adopt any rule or take any
action that results in any unrea-
sonable restraint of trade; or
441
‘‘(ii) impose any material anti-
competitive burden on trading on
the contract market.
‘‘(3) 
ORDERS
CONCERNING
COMPETI-
TION.—A derivatives clearing organization
may request the Commission to issue an
order concerning whether a rule or prac-
tice of the applicant is the least anti-
competitive means of achieving the objec-
tives, purposes, and policies of this Act.
‘‘(e) EXISTING DERIVATIVES CLEARING ORGA-
NIZATIONS.—A derivatives clearing organiza-
tion shall be deemed to be registered under
this section to the extent that—
‘‘(1) the derivatives clearing organiza-
tion 
clears 
agreements, 
contracts, 
or
transactions for a board of trade that has
been designated by the Commission as a
contract market for such agreements, con-
tracts, or transactions before the date of
enactment of this section; and
‘‘(2) the Commission has reviewed and
approved the rules of the derivatives
clearing organization before that date.
‘‘(f) APPOINTMENT OF TRUSTEE.—
442
‘‘(1) IN
GENERAL.—If a proceeding
under section 5e results in the suspension
or revocation of the registration of a de-
rivatives clearing organization, or if a de-
rivatives clearing organization withdraws
from registration, the Commission, on no-
tice to the derivatives clearing organiza-
tion, may apply to the appropriate United
States district court where the derivatives
clearing organization is located for the
appointment of a trustee.
‘‘(2) ASSUMPTION
OF
JURISDICTION.—If
the Commission applies for appointment
of a trustee under paragraph (1)—
‘‘(A) the court may take exclusive
jurisdiction over the derivatives clear-
ing organization and the records and
assets of the derivatives clearing orga-
nization, wherever located; and
‘‘(B) if the court takes jurisdiction
under subparagraph (A), the court
shall appoint the Commission, or a
person designated by the Commission,
as trustee with power to take posses-
sion and continue to operate or termi-
443
nate the operations of the derivatives
clearing organization in an orderly
manner for the protection of partici-
pants, subject to such terms and con-
ditions as the court may prescribe.
‘‘(g) LINKING OF REGULATED CLEARING FA-
CILITIES.—
‘‘(1) IN
GENERAL.—The Commission
shall facilitate the linking or coordina-
tion of derivatives clearing organizations
registered under this Act with other regu-
lated clearance facilities for the coordi-
nated settlement of cleared transactions.
‘‘(2) COORDINATION.—In carrying out
paragraph (1), the Commission shall co-
ordinate with the Federal banking agen-
cies and the Securities and Exchange
Commission.’’.
SEC. 113. 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 112) the following:
444
‘‘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 interpretations, or approve interpre-
tations submitted to the Commission, of
sections 5(d), 5a(d), and 5b(d)(2) to de-
scribe what would constitute an accept-
able business practice under such sec-
tions.
‘‘(2) EFFECT
OF
INTERPRETATION.—An
interpretation issued under paragraph (1)
shall not provide the exclusive means for
complying with such sections.
‘‘(b) DELEGATION
OF
FUNCTIONS
UNDER
CORE PRINCIPLES.—
‘‘(1) IN
GENERAL.—A contract market
or derivatives transaction execution facil-
ity may comply with any applicable core
principle through delegation of any rel-
evant function to a registered futures as-
sociation or another registered entity.
‘‘(2) RESPONSIBILITY.—A contract mar-
ket or derivatives transaction execution
445
facility that delegates a function under
paragraph (1) shall remain responsible
for carrying out the function.
‘‘(c) NEW CONTRACTS, NEW RULES, AND RULE
AMENDMENTS.—
‘‘(1) IN GENERAL.—Except as provided
in sections 2(a)(1)(C) and 2(a)(1)(D), and
subject to paragraph (2), a registered en-
tity 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 Com-
mission (and the Secretary of the Treas-
ury, in the case of a contract of sale for
future delivery of a government security
(or option thereon) or a rule or rule
amendment specifically related to such a
contract) a written certification that the
new contract, new rule, or rule amend-
ment complies with this Act (including
regulations under this Act).
‘‘(2) PRIOR APPROVAL.—
‘‘(A) IN GENERAL.—A registered en-
tity may request that the Commission
grant prior approval to any new con-
446
tract or other instrument, new rule, or
rule amendment.
‘‘(B) PRIOR
APPROVAL
REQUIRED.—
Notwithstanding any other provision
of this section, a designated contract
market shall submit to the Commis-
sion for prior approval each rule
amendment that materially changes
the terms and conditions, as deter-
mined by the Commission, in any con-
tract of sale for future delivery of a
commodity specifically enumerated in
section 1a(4) of this Act (or any option
thereon) traded through its facilities
if such rule amendment applies to
contracts and delivery months which
have already been listed for trading
and have open interest.
‘‘(C) DEADLINE.—If prior approval
is requested under subparagraph (A),
the Commission shall take final ac-
tion on the request not later than 90
days after submission of the request,
unless the person submitting the re-
quest agrees to an extension of the
447
time limitation established under this
subparagraph.
‘‘(3) APPROVAL.—The Commission shall
approve any such new contract or instru-
ment, new rule, or rule amendment unless
the Commission finds that the new con-
tract or instrument, new rule, or rule
amendment would violate this Act.
‘‘(d) RESERVATION OF EMERGENCY AUTHOR-
ITY.—Nothing in this section shall limit or in
any way affect the emergency powers of the
Commission provided in section 8a(9) of this
Act.’’.
SEC. 114. 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 113) the following:
‘‘SEC. 5d. EXEMPT BOARDS OF TRADE.
‘‘(a) IN GENERAL.—Except as otherwise pro-
vided in this section, a contract of sale (or op-
tion on such a contract) of a commodity for fu-
ture delivery traded on or through the facili-
ties of an exempt board of trade shall be ex-
empt from all provisions of this Act, other than
section 2(g).
448
‘‘(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 op-
tions on such contracts)—
‘‘(1) that have—
‘‘(A) a nearly inexhaustible deliv-
erable supply;
‘‘(B) a deliverable supply that is
sufficiently large, and a cash market
sufficiently liquid, to render any con-
tract 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 partici-
pants 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 deliv-
ery of any security, including any group
or index of securities or any interest in, or
449
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, 4o, 6(c), and
9(a)(2), and the Commission shall enforce
those provisions with respect to any such trad-
ing.
‘‘(d) PRICE DISCOVERY.—If the Commission
finds that an exempt board of trade is a sig-
nificant source of price discovery for any un-
derlying 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, open-
ing and closing price ranges, open interest,
and other trading data as appropriate to the
market.
‘‘(e) JURISDICTION.—The Commission shall
have exclusive jurisdiction over any account,
agreement, or transaction involving a contract
of sale of a commodity, or related option, to the
extent that such account, agreement, or trans-
action is traded on an exempt board of trade.
450
‘‘(f) SUBSIDIARIES.—A board of trade that is
designated as a contract market or registered
as a derivatives transaction execution facility
may operate an exempt board of trade by es-
tablishing a separate subsidiary or other legal
entity and otherwise satisfying the require-
ments of this section.’’.
SEC. 115. SUSPENSION OR REVOCATION OF DESIGNATION
AS CONTRACT MARKET.
Section 5e of the Commodity Exchange Act
(7 U.S.C. 7b) (as redesignated by section
110(1)) is amended to read as follows:
‘‘SEC. 5e. SUSPENSION OR REVOCATION OF DESIGNATION
AS REGISTERED ENTITY.
‘‘The failure of a registered entity to com-
ply with any provision of this Act, or any regu-
lation or order of the Commission under this
Act, shall be cause for the suspension of the
registered entity for a period not to exceed 180
days, or revocation of designation as a reg-
istered entity in accordance with the proce-
dures and subject to the judicial review pro-
vided in section 6(b).’’.
451
SEC. 116. AUTHORIZATION OF APPROPRIATIONS.
Section 12(d) of the Commodity Exchange
Act (7 U.S.C. 16(d)) is amended by striking
‘‘2000’’ and inserting ‘‘2005’’.
SEC. 117. PREEMPTION.
Section 12(e) of the Commodity Exchange
Act (7 U.S.C. 16(e)) is amended by striking
paragraph (2) and inserting the following:
‘‘(2) the application of any Federal or
State law to an agreement, contract, or
transaction in or involving any com-
modity, product, right, service, or interest,
except that this Act shall supersede and
preempt—
‘‘(A) any Federal or State law,
other than antifraud provisions of
general applicability and the securi-
ties 
laws 
(as 
defined 
in 
section
3(a)(47) of the Securities Exchange
Act of 1934), as such Federal or State
law applies to any such agreement,
contract, or transaction—
‘‘(i) that is conducted on or
subject to the rules of a registered
entity or exempt board of trade;
452
‘‘(ii) that is conducted on or
subject to the rules of any board of
trade, exchange, or market lo-
cated 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);
or
‘‘(iii) that is subject to regula-
tion by the Commission under sec-
tion 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 appli-
cability) in the case of—
‘‘(i) an electronic trading fa-
cility under section 2(e); or
‘‘(ii) an agreement, contract,
or transaction that is excluded or
exempt under section 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)
453
(regardless of whether any such
agreement, 
contract, 
or 
trans-
action is otherwise subject to this
Act); or’’.
SEC. 118. 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 
promul-
gating a regulation under this Act or
issuing an order (except as provided in
paragraph (3)), the Commission shall con-
sider the costs and benefits of the action
of the Commission.
‘‘(2) CONSIDERATIONS.—The costs and
benefits of the proposed Commission ac-
tion shall be evaluated in light of—
‘‘(A) considerations of protection
of market participants and the public;
454
‘‘(B) considerations of the effi-
ciency, competitiveness, and financial
integrity of futures markets;
‘‘(C) considerations of price dis-
covery;
‘‘(D) considerations of sound risk
management practices; and
‘‘(E) other public interest consider-
ations.
‘‘(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 adjudica-
tory 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’’.
455
SEC. 119. 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 following:
‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI-
GIBLE
COUNTERPARTIES.—No agreement, con-
tract, or transaction a party to which is rea-
sonably believed by another party to which to
be an eligible contract participant shall be
void, voidable, or unenforceable, and no such
reasonably believed eligible contract partici-
pant shall be entitled to rescind, or recover
any payment made with respect to, such an
agreement, contract, or transaction, 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. 120. SPECIAL PROCEDURES TO ENCOURAGE AND FA-
CILITATE BONA FIDE HEDGING BY AGRICUL-
TURAL PRODUCERS.
The Commodity Exchange Act is amended
by inserting after section 4p the following:
456
‘‘SEC. 4q. 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 contract market is to provide for or-
derly delivery, including temporary stor-
age costs, of any agricultural commodity
enumerated in section 1a(4) which is the
subject of a contract for purchase or sale
for future delivery;
‘‘(2) increase the ease with which do-
mestic agricultural producers may par-
ticipate in contract markets, including by
addressing cost and margin requirements,
so as to better enable such producers to
hedge price risk associated with their pro-
duction;
‘‘(3) provide flexibility in the min-
imum quantities 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 mar-
ket, to better allow domestic agricultural
producers to hedge such price risk; and
457
‘‘(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 enactment of this section, the Commission
shall submit to the Committee on Agriculture
of the House of Representatives and the Com-
mittee 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 pursuant to this section.’’.
SEC. 121. RULE OF CONSTRUCTION.
Except as expressly provided in this title or
an amendment made by this title, nothing in
this title or an amendment made by this title
supersedes, affects, or otherwise limits or ex-
pands the scope and applicability of laws gov-
erning the Securities and Exchange Commis-
sion.
SEC. 122. TECHNICAL AND CONFORMING AMENDMENTS.
(a) COMMODITY EXCHANGE ACT.—
(1) Section 1a of the Commodity Ex-
change Act (7 U.S.C. 1a) is amended—
458
(A) in paragraphs (5), (6), (16),
(17), (20), and (23) (as redesignated by
section 101), by inserting ‘‘or deriva-
tives transaction execution facility’’
after ‘‘contract market’’ each place it
appears; and
(B) in paragraph (25) (as redesig-
nated by section 101)—
(i) in the paragraph heading,
by striking ‘‘CONTRACT
MARKET’’
and inserting ‘‘REGISTERED
ENTI-
TY’’;
(ii) by striking ‘‘contract mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’; and
(iii) by inserting at the end the
following:
‘‘A participant in an alternative trading
system that is designated as a contract
market pursuant to section 5f shall be
deemed a member of such contract market
for purposes of transactions in security
future products through such contract
market.’’.
459
(2) Section 2 of the Commodity Ex-
change 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; COM-
MODITY FUTURES TRADING COMMISSION.—
‘‘(1) JURISDICTION OF COMMISSION.—
‘‘(A) IN GENERAL.—The’’;
(B) in subsection (a)(1)(A) (as
amended by subparagraph (A) of this
paragraph)—
(i) by striking ‘‘subparagraph
(B) of this paragraph’’ and insert-
ing ‘‘subparagraphs (C) and (D) of
this paragraph and subsections
(c), (d), (e), (f), (g), and (h) of this
section’’;
(ii) by striking ‘‘contract mar-
ket designated pursuant to section
5 of this Act’’ and inserting ‘‘con-
460
tract market designated or deriva-
tives transaction execution facility
registered pursuant to section 5 or
5a’’;
(iii) by striking clause (ii);
and
(iv) in clause (iii), by striking
‘‘(iii) The’’ and inserting the fol-
lowing:
‘‘(B) LIABILITY
OF
PRINCIPAL
FOR
ACT OF AGENT.—The’’; and
(C) in subsection (a)(1)(B)—
(i) by striking ‘‘(B)’’ and in-
serting ‘‘(C)’’;
(ii) in clause (ii)(I), by striking
‘‘section 3 of the Securities Act of
1933 or’’;
(iii) in clause (iv), by striking
‘‘(I)’’ and all that follows through
‘‘(II)’’;
(iv) in clause (v)—
(I) by striking ‘‘section 3 of
the Securities Act of 1933 or’’;
and
461
(II) by inserting ‘‘or sub-
paragraph (D)’’ after ‘‘sub-
paragraph’’; and
(v) 
by 
moving 
clauses 
(i)
through (v) 4 ems to the right;
(D) in subsection (a)(7), by strik-
ing ‘‘contract market’’ and inserting
‘‘registered entity’’;
(E) in subsection (a)(8)(B)(ii)—
(i) in the first sentence, by
striking ‘‘designation as a con-
tract market’’ and inserting ‘‘des-
ignation or registration as a con-
tract market or derivatives trans-
action execution facility’’;
(ii) in the second sentence, by
striking ‘‘designate a board of
trade as a contract market’’ and
inserting ‘‘designate or register a
board of trade as a contract mar-
ket or derivatives transaction exe-
cution facility’’; and
(iii) in the fourth sentence, by
striking ‘‘designating, or refusing,
suspending, or revoking the des-
462
ignation of, a board of trade as a
contract market involving trans-
actions for future delivery referred
to in this clause or in considering
possible emergency action under
section 8a(9) of this Act’’ and in-
serting ‘‘designating, registering,
or refusing, suspending, or revok-
ing the designation or registration
of, a board of trade as a contract
market or derivatives transaction
execution facility involving trans-
actions for future delivery referred
to in this clause or in considering
any possible action under this Act
(including 
without 
limitation
emergency action under section
8a(9))’’, and by striking ‘‘designa-
tion, suspension, revocation, or
emergency action’’ and inserting
‘‘designation, registration, suspen-
sion, revocation, or action’’; and
(F) in subsection (a), by moving
paragraphs (2) through (9) 2 ems to
the right.
463
(3) Section 4 of the Commodity Ex-
change Act (7 U.S.C. 6) is amended—
(A) in subsection (a)—
(i) in paragraph (1), by strik-
ing ‘‘designated by the Commis-
sion as a ‘contract market’ for’’
and inserting ‘‘designated or reg-
istered by the Commission as a
contract market or derivatives
transaction execution facility for’’;
(ii) in paragraph (2), by strik-
ing ‘‘member of such’’; and
(iii) in paragraph (3), by in-
serting ‘‘or derivatives transaction
execution facility’’ after ‘‘contract
market’’; and
(B) in subsection (c)—
(i) in paragraph (1)—
(I) by striking ‘‘designated
as a contract market’’ and in-
serting ‘‘designated or reg-
istered as a contract market
or derivatives transaction exe-
cution facility’’; and
464
(II) by striking ‘‘section
2(a)(1)(B)’’ and inserting ‘‘sec-
tions 
2(a)(1)(C) 
and
2(a)(1)(D)’’; and
(ii) in paragraph (2)(B)(ii), by
inserting ‘‘or derivatives trans-
action execution facility’’ after
‘‘contract market’’.
(4) Section 4a of the Commodity Ex-
change Act (7 U.S.C. 6a) is amended—
(A) in subsection (a)—
(i) in the first sentence, by in-
serting ‘‘or derivatives transaction
execution facilities’’ after ‘‘con-
tract markets’’; and
(ii) in the second sentence, by
inserting ‘‘or derivatives trans-
action execution facility’’ after
‘‘contract market’’;
(B) in subsection (b)—
(i) in paragraph (1), by insert-
ing ‘‘, or derivatives transaction
execution facility or facilities,’’
after ‘‘markets’’; and
465
(ii) in paragraph (2), by in-
serting ‘‘or derivatives transaction
execution facility’’ after ‘‘contract
market’’; and
(C) in subsection (e)—
(i) by striking ‘‘contract mar-
ket or’’ each place it appears and
inserting ‘‘contract market, de-
rivatives transaction execution fa-
cility, or’’;
(ii) by striking ‘‘licensed or
designated’’ each place it appears
and 
inserting 
‘‘licensed, 
des-
ignated, or registered’’; and
(iii) by striking ‘‘contract mar-
ket, or’’ and inserting ‘‘contract
market or derivatives transaction
execution facility, or’’.
(5) Section 4b(a) of the Commodity Ex-
change Act (7 U.S.C. 6b(a)) is amended by
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(6) Sections 4c(g), 4d, 4e, and 4f of the
Commodity Exchange Act (7 U.S.C. 6c(g),
6d, 6e, 6f) are amended by inserting ‘‘or
466
derivatives transaction execution facility’’
after ‘‘contract market’’ each place it ap-
pears.
(7) Section 4g of the Commodity Ex-
change Act (7 U.S.C. 6g) is amended—
(A) in subsection (b), by striking
‘‘clearinghouse and contract market’’
and inserting ‘‘registered entity’’; and
(B) in subsection (f), by striking
‘‘clearinghouses, 
contract 
markets,
and exchanges’’ and inserting ‘‘reg-
istered entities’’.
(8) Section 4h of the Commodity Ex-
change Act (7 U.S.C. 6h) is amended by
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(9) Section 4i of the Commodity Ex-
change Act (7 U.S.C. 6i) is amended in the
first sentence by inserting ‘‘or derivatives
transaction execution facility’’ after ‘‘con-
tract market’’.
(10) Section 4j(a) of the Commodity
Exchange 
Act 
(7 
U.S.C. 
6j(a)) 
is
amended—
467
(A) in paragraph (1), by inserting
‘‘for security future products’’ after
‘‘contract market’’;
(B) in paragraph (3)—
(i) in the matter preceding
subparagraph (A), by inserting ‘‘,
other than a designated contract
market in a security future prod-
uct,’’ after ‘‘exempt a contract
market’’; and
(ii) in subparagraph (A), by
striking ‘‘section 5a(b)’’ and in-
serting ‘‘section 5’’; and
(C) in paragraph (6)(ii), by strik-
ing ‘‘section 5b’’ and inserting ‘‘section
5e’’.
(11) Section 4l of the Commodity Ex-
change Act (7 U.S.C. 6l) is amended by in-
serting ‘‘or derivatives transaction execu-
tion facilities’’ after ‘‘contract markets’’
each place it appears.
(12) Section 4p of the Commodity Ex-
change Act (7 U.S.C. 6p) is amended—
(A) in the third sentence of sub-
section (a), by striking ‘‘Act or con-
468
tract markets’’ and inserting ‘‘Act,
contract markets, or derivatives trans-
action execution facilities’’; and
(B) in subsection (b), by inserting
‘‘derivatives transaction execution fa-
cility,’’ after ‘‘contract market,’’.
(13) Section 6 of the Commodity Ex-
change 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 
desiring 
to 
be 
des-
ignated a ‘contract market’
shall make application to the
Commission for such designa-
tion’’ and inserting ‘‘person
desiring to be designated or
registered as a contract mar-
ket or derivatives transaction
execution facility shall make
application to the Commission
for such designation or reg-
istration’’;
469
(II) by striking ‘‘above con-
ditions’’ and inserting ‘‘condi-
tions set forth in this Act’’;
and
(III) by striking ‘‘above re-
quirements’’ 
and 
inserting
‘‘the requirements of this Act’’;
(ii) in the second sentence, by
striking ‘‘designation as a con-
tract market within one year’’ and
inserting ‘‘designation or registra-
tion as a contract market or de-
rivatives transaction execution fa-
cility 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,
470
such board of trade’’ and insert-
ing ‘‘designate 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 ‘‘designa-
tion of any board of trade as a
‘contract market’ upon’’ and
inserting ‘‘designation or reg-
istration of any contract mar-
ket or derivatives transaction
execution facility on’’;
(II) by striking ‘‘board of
trade’’ each place it appears
and inserting ‘‘contract mar-
ket or derivatives transaction
execution facility’’; and
(III) by striking ‘‘designa-
tion as set forth in section 5 of
this Act’’ and inserting ‘‘des-
ignation or registration as set
471
forth in section 5, 5a, 5b, or
5f’’;
(ii) in the second sentence—
(I) by striking ‘‘board of
trade’’ the first place it ap-
pears 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 insert-
ing ‘‘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 mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’;
(ii) by striking ‘‘contract mar-
kets’’ each place it appears and
inserting ‘‘registered entities’’; and
472
(iii) by striking ‘‘trading privi-
leges’’ each place it appears and
inserting ‘‘privileges’’;
(D) in subsection (d), by striking
‘‘contract market’’ each place it ap-
pears and inserting ‘‘registered enti-
ty’’; and
(E) in subsection (e), by striking
‘‘trading on all contract markets’’
each place it appears and inserting
‘‘the privileges of all registered enti-
ties’’.
(14) Section 6a of the Commodity Ex-
change Act (7 U.S.C. 10a) is amended—
(A) in the first sentence of sub-
section (a), by striking ‘‘designated as
a ‘contract market’ shall’’ and insert-
ing ‘‘designated or registered as a con-
tract market or a derivatives trans-
action execution facility’’; and
(B) in subsection (b), by striking
‘‘designated as a contract market’’
and inserting ‘‘designated or reg-
istered as a contract market or a de-
473
rivatives transaction execution facil-
ity’’.
(15) Section 6b of the Commodity Ex-
change Act (7 U.S.C. 13a) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’;
(B) in the first sentence, by strik-
ing ‘‘designation as set forth in sec-
tion 5 of this Act’’ and inserting ‘‘des-
ignation or registration as set forth in
sections 5 through 5c’’; and
(C) in the last sentence, by strik-
ing ‘‘the contract market’s ability’’
and inserting ‘‘the ability of the reg-
istered entity’’.
(16) Section 6c(a) of the Commodity
Exchange Act (7 U.S.C. 13a–1(a)) by strik-
ing ‘‘contract market’’ and inserting ‘‘reg-
istered entity’’.
(17) Section 6d(1) of the Commodity
Exchange 
Act 
(7 
U.S.C. 
13a–2(1)) 
is
amended by inserting ‘‘derivatives trans-
action execution facility,’’ after ‘‘contract
market,’’.
474
(18) Section 7 of the Commodity Ex-
change 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 
reg-
istered’’ after ‘‘designated’’;
(iii) by inserting ‘‘or registra-
tion’’ 
after 
‘‘designation’’ 
each
place it appears; and
(iv) by striking ‘‘contract mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’;
(B) in the second sentence—
(i) by striking ‘‘designation of
such board of trade as a contract
market’’ and inserting ‘‘designa-
tion or registration of the reg-
istered entity’’; and
(ii) by striking ‘‘contract mar-
kets’’ and inserting ‘‘registered en-
tities’’; and
(C) in the last sentence—
(i) by striking ‘‘board of trade’’
and inserting ‘‘person’’; and
475
(ii) by striking ‘‘designated
again a contract market’’ and in-
serting ‘‘designated or registered
again a registered entity’’.
(19) Section 8(c) of the Commodity Ex-
change Act (7 U.S.C. 12(c)) is amended in
the first sentence by striking ‘‘board of
trade’’ and inserting ‘‘registered entity’’.
(20) Section 8a of the Commodity Ex-
change Act (7 U.S.C. 12a) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’; and
(B) in paragraph (2)(F), by strik-
ing ‘‘trading privileges’’ and inserting
‘‘privileges’’.
(21) Sections 8b and 8c(e) of the Com-
modity Exchange Act (7 U.S.C. 12b, 12c(e))
are amended by striking ‘‘contract mar-
ket’’ each place it appears and inserting
‘‘registered entity’’.
(22) Section 8e of the Commodity Ex-
change Act (7 U.S.C. 12e) is amended—
476
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’;
(B) in subsection (a), by striking
‘‘section 5a(b)’’ and inserting ‘‘sections
5 through 5c’’;
(C) in subsection (b)—
(i) in paragraph (1), by strik-
ing ‘‘contract market’s trade moni-
toring system implemented pursu-
ant to section 5a(b)’’ and inserting
‘‘the trade monitoring system of a
registered entity implemented pur-
suant to sections 5 through 5c’’;
(ii) by striking paragraph (3)
and inserting the following:
‘‘(3) REMEDIES.—On becoming final,
the Commission deficiency order may re-
quire the registered entity to—
‘‘(A) 
institute 
appropriate 
im-
provements in its trade monitoring
system necessary to correct the defi-
ciencies in the order;
477
‘‘(B) satisfy stated objective per-
formance criteria to correct the defi-
ciencies;
‘‘(C) upgrade or reconfigure exist-
ing systems for collecting or proc-
essing 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 head-
ing, by striking ‘‘DESIGNATION
AS CONTRACT MARKET’’ and in-
serting ‘‘DESIGNATION OR REG-
ISTRATION AS REGISTERED ENTI-
TY’’;
(II) by inserting ‘‘or reg-
istration’’ after ‘‘designation’’;
and
(III) by striking ‘‘board of
trade’’ and inserting ‘‘person’’;
(D) in subsection (d)(2), by strik-
ing ‘‘section 5b’’ and inserting ‘‘section
5e’’; and
478
(E) in the paragraph heading of
subsection (e)(2), by striking ‘‘CON-
TRACT
MARKETS’’ and inserting ‘‘REG-
ISTERED ENTITIES’’.
(23) Section 9 of the Commodity Ex-
change Act (7 U.S.C. 13) is amended by
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(24) Section 14 of the Commodity Ex-
change Act (7 U.S.C. 18) is amended—
(A) in subsection (a)(1)(B), by
striking ‘‘contract market’’ and insert-
ing ‘‘registered entity’’; and
(B) in subsection (f), by striking
‘‘contract 
markets’’ 
and 
inserting
‘‘registered entities’’.
(25) Section 17 of the Commodity Ex-
change Act (7 U.S.C. 21) is amended by
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(26) Section 22 of the Commodity Ex-
change Act (7 U.S.C. 25) is amended—
(A) in subsection (a)—
(i) in paragraph (1)—
479
(I) by striking ‘‘contract
market, clearing organization
of a contract market, licensed
board of trade,’’ and inserting
‘‘registered entity or a deriva-
tives clearing organization ex-
empt from registration pursu-
ant to section 5b(b)’’; and
(II) 
in 
subparagraph
(C)(i), by striking ‘‘contract
market’’ and inserting ‘‘reg-
istered entity’’;
(ii) in paragraph (2), by strik-
ing ‘‘sections 5a(11),’’ and insert-
ing 
‘‘sections 
5(d)(13),
5b(b)(1)(E),’’; and
(iii) in paragraph (3), by strik-
ing ‘‘contract market’’ and insert-
ing ‘‘registered entity’’; and
(B) in subsection (b)—
(i) in paragraph (1)—
(I) by striking ‘‘contract
market or clearing organiza-
tion of a contract market’’ and
inserting ‘‘registered entity’’;
480
(II) by striking ‘‘section
5a(8) and section 5a(9) of this
Act’’ and inserting ‘‘sections 5
through 5c’’;
(III) by striking ‘‘contract
market, clearing organization
of a contract market, or li-
censed board of trade’’ and in-
serting 
‘‘registered 
entity’’;
and
(IV) by striking ‘‘contract
market or licensed board of
trade’’ 
and 
inserting 
‘‘reg-
istered entity’’;
(ii) in paragraph (3)—
(I) by striking ‘‘a contract
market, clearing organization,
licensed board of trade,’’ and
inserting ‘‘registered entity’’;
and
(II) by striking ‘‘contract
market, 
licensed 
board 
of
trade’’ 
and 
inserting 
‘‘reg-
istered entity’’;
481
(iii) in paragraph (4), by strik-
ing 
‘‘contract 
market, 
licensed
board of trade, clearing organiza-
tion,’’ and inserting ‘‘registered
entity’’; and
(iv) in paragraph (5), by strik-
ing 
‘‘contract 
market, 
licensed
board of trade, clearing organiza-
tion,’’ and inserting ‘‘registered
entity’’.
(b) FEDERAL DEPOSIT INSURANCE CORPORA-
TION
IMPROVEMENT
ACT
OF
1991.—Section
402(2) of the Federal Deposit Insurance Cor-
poration Improvement Act of 1991 (12 U.S.C.
4402(2)) is amended by striking subparagraph
(B) and inserting the following:
‘‘(B) that is registered as a deriva-
tives clearing organization under sec-
tion 5b of the Commodity Exchange
Act.’’.
SEC. 123. PRIVACY.
The Commodity Exchange Act (7 U.S.C. 1
et seq.) is amended by inserting after section
5f (as added by section 222) the following:
482
‘‘SEC. 5g. PRIVACY.
‘‘(a) TREATMENT
AS
FINANCIAL
INSTITU-
TIONS.—Notwithstanding section 509(3)(B) of
the Gramm-Leach-Bliley Act, any person or en-
tity that is subject to the jurisdiction of the
Commission under this Act with respect to any
financial activity shall be treated as a finan-
cial institution for purposes of title V of such
Act with respect to such financial activity.
‘‘(b) TREATMENT OF CFTC AS FEDERAL FUNC-
TIONAL REGULATOR.—For purposes of title V of
such Act, the Commodity Futures Trading
Commission shall be treated as a Federal
functional regulator within the meaning of
section 509(2) of such Act and shall prescribe
regulations under such title within 6 months
after the date of enactment of this section.’’.
SEC. 124. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Com-
mission (in this section referred to as the
‘‘Commission’’) shall undertake and complete
a study of the Commodity Exchange Act (in
this section referred to as ‘‘the Act’’) and the
Commission’s rules, regulations and orders
governing the conduct of persons required to
be registered under the Act, not later than 1
483
year after the date of the enactment of this Act.
The study shall identify—
(1) the core principles and interpreta-
tions of acceptable business practices that
the Commission has adopted or intends to
adopt to replace the provisions of the Act
and the Commission’s rules and regula-
tions thereunder;
(2) the rules and regulations that the
Commission has determined must be re-
tained and the reasons therefor;
(3) the extent to which the Commis-
sion believes it can effect the changes
identified in paragraph (1) of this sub-
section through its exemptive authority
under section 4(c) of the Act; and
(4) the regulatory functions the Com-
mission currently performs that can be
delegated to a registered futures associa-
tion (within the meaning of the Act) and
the regulatory functions that the Commis-
sion has determined must be retained and
the reasons therefor.
(b) In conducting the study, the Commis-
sion shall solicit the views of the public as well
484
as Commission registrants, registered entities,
and registered futures associations (all within
the meaning of the Act).
(c) The Commission shall transmit to the
Committee on Agriculture of the House of Rep-
resentatives and the Committee on Agri-
culture, Nutrition, and Forestry of the Senate
a report of the results of its study, which shall
include an analysis of comments received.
SEC. 125. EFFECTIVE DATE.
This title takes effect on the date of enact-
ment of this Act.
SEC. 126. INTERNATIONAL ACTIVITIES OF THE COMMODITY
FUTURES TRADING COMMISSION.
(a) FINDINGS.—The Congress finds that—
(1) derivatives markets serving United
States industry are increasingly global in
scope;
(2) developments in data processing
and communications technologies enable
users of risk management services to ana-
lyze and compare those services on a
worldwide basis;
(3) financial services regulatory policy
must be flexible to account for rapidly
485
changing derivatives industry business
practices;
(4) regulatory impediments to the op-
eration of global business interests can
compromise the competitiveness of United
States businesses;
(5) events that disrupt financial mar-
kets and economies are often global in
scope, require rapid regulatory response,
and coordinated regulatory effort across
international jurisdictions;
(6) through its membership in the
International Organization of Securities
Commissions, 
the 
Commodity 
Futures
Trading Commission has promoted bene-
ficial communication among market regu-
lators and international regulatory co-
operation; and
(7) the Commodity Futures Trading
Commission and other United States fi-
nancial regulators and self-regulatory or-
ganizations should continue to foster pro-
ductive and cooperative working relation-
ships with their counterparts in foreign
jurisdictions.
486
(b) SENSE OF THE CONGRESS.—It is the sense
of the Congress that, consistent with its re-
sponsibilities under the Commodity Exchange
Act, the Commodity Futures Trading Commis-
sion should, as part of its international activi-
ties, continue to coordinate with foreign regu-
latory authorities, to participate in inter-
national regulatory organizations and fo-
rums, and to provide technical assistance to
foreign government authorities, in order to
encourage—
(1) the facilitation of cross-border
transactions through the removal or less-
ening of any unnecessary legal or prac-
tical 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
cooperation for customer and market pro-
tection; and
487
(5) improvements in the quality and
timeliness of international information
sharing.
TITLE II—SECURITIES ACTS
AMENDMENTS
Subtitle A—Amendments
SEC. 201. DEFINITIONS UNDER THE SECURITIES EXCHANGE
ACT OF 1934.
Section 3(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)) is amended—
(1) in paragraph (10), by inserting ‘‘se-
curity future,’’ after ‘‘treasury stock,’’;
(2) by striking paragraph (11) and in-
serting the following:
‘‘(11) The term ‘equity security’ means
any stock or similar security; or any secu-
rity future; or any security convertible,
with or without consideration, into such a
security, or carrying any warrant or right
to subscribe to or purchase such a secu-
rity; or any such warrant or right; or any
put, call, straddle, option, or privilege on
any such security; or any other security
which the Commission shall deem to be of
similar nature and consider necessary or
488
appropriate, by such rules and regula-
tions as it may prescribe in the public in-
terest or for the protection of investors, to
treat as an equity security.’’;
(3) in paragraph (13), by adding at
the end the following: ‘‘For security future
products, such term includes any con-
tract, agreement, or transaction for future
delivery.’’;
(4) in paragraph (14), by adding at
the end the following: ‘‘For security future
products, such term includes any con-
tract, agreement, or transaction for future
delivery.’’; and
(5) by adding at the end the following:
‘‘(55)(A) The term ‘security future’
means a contract of sale for future deliv-
ery of a single security or of a narrow-
based security index, including any inter-
est therein or based on the value thereof,
except an exempted security under section
3(a)(12) of the Securities Exchange Act of
1934 as in effect on the date of enactment
of the Futures Trading Act of 1982 (other
than any municipal security as defined in
489
section 3(a)(29) as in effect on the date of
enactment of the Futures Trading Act of
1982). The term ‘security future’ does not
include any agreement, contract, or trans-
action excluded under subsection (c), (d),
or (f) of section 2 of the Commodity Ex-
change Act as in effect on the date of en-
actment of the Commodity Futures Mod-
ernization Act of 2000.
‘‘(B) The term ‘narrow-based security
index’ means an index of securities on
which contracts for future delivery are
not permitted under section 2(a)(1)(C) of
the Commodity Exchange Act, including
any interest therein or based on the value
thereof.
‘‘(C) The term ‘security future product’
means a security future or any put, call,
straddle, option, or privilege on any secu-
rity future.
‘‘(56)(A) The term ‘margin’, when used
with respect to a security future product,
means the amount, type, and form of col-
lateral required to secure any extension
or maintenance of credit, or the amount,
490
type, and form of collateral required as a
performance bond related to the pur-
chase, sale, or carrying of a security fu-
ture product, and all other uses of collat-
eral related to the purchasing, selling, or
carrying of a security future product.
‘‘(B) The terms ‘margin level’ and
‘level of margin’, when used with respect
to a security future product, mean the
amount of margin required to secure any
extension or maintenance of credit, or the
amount of margin required as a perform-
ance bond related to the purchase, sale, or
carrying of a security future product.
‘‘(C) The terms ‘higher margin level’
and ‘higher level of margin’, when used
with respect to a security future product,
mean a margin level established by a na-
tional securities exchange registered pur-
suant to section 6(g) that is higher than
the minimum amount established by the
Commission 
pursuant 
to 
section
7(c)(2)(B).’’.
491
SEC. 202. REGULATORY RELIEF FOR MARKETS TRADING SE-
CURITY FUTURE PRODUCTS.
(a) EXPEDITED REGISTRATION
AND EXEMP-
TION.—Section 6 of the Securities Exchange Act
of 1934 (15 U.S.C. 78f) is amended by adding
at the end the following:
‘‘(g) NOTICE REGISTRATION OF SECURITY FU-
TURE PRODUCT EXCHANGES.—
‘‘(1) REGISTRATION
REQUIRED.—An ex-
change that lists or trades security future
products may be registered as a national
securities exchange solely for the purposes
of trading security future products if—
‘‘(A) the exchange is a board of
trade, as that term is defined by the
Commodity Exchange Act (7 U.S.C.
1a(2)), that has been designated a
contract market by the Commodity Fu-
tures Trading Commission and such
designation is not suspended by order
by the Commodity Futures Trading
Commission; and
‘‘(B) such exchange does not serve
as a market place for transactions in
securities other than—
492
‘‘(i) security future products;
or
‘‘(ii) futures on exempted secu-
rities or groups or indexes of secu-
rities or options thereon that have
been 
authorized 
under 
section
2(a)(1)(C) of the Commodity Ex-
change Act by Commodity Futures
Trading Commission order.
‘‘(2) REGISTRATION BY NOTICE FILING.—
‘‘(A) FORM
AND
CONTENT.—An ex-
change required to register only be-
cause such exchange lists or trades se-
curity future products may register for
purposes of this section by filing with
the Commission a written notice in
such form, and containing the rules of
the exchange and such other informa-
tion and documents concerning such
exchange as the Commission, by rule,
may prescribe as necessary or appro-
priate in the public interest or for the
protection of investors.
‘‘(B) IMMEDIATE
EFFECTIVENESS.—
Such registration shall be effective
493
immediately upon filing of the written
notice with the Commission, except
that such registration shall not be ef-
fective if such registration would be
subject to suspension or revocation.
‘‘(C) TERMINATION.—Such registra-
tion shall be terminated immediately
if any of the conditions for registra-
tion set forth in this subsection are no
longer satisfied.
‘‘(3) PUBLIC
AVAILABILITY.—The Com-
mission shall make available to the pub-
lic all notices it receives under this sub-
section.
‘‘(4) EXEMPTION
OF
EXCHANGES
FROM
SPECIFIED PROVISIONS.—
‘‘(A) TRANSACTION
EXEMPTIONS.—
An exchange that is registered under
paragraph (1) of this subsection shall
be exempt from, and shall not be re-
quired to enforce compliance by its
members with, and its members shall
not, solely with respect to those trans-
actions effected on such exchange in
security future products, be required
494
to comply with, the following provi-
sions of this title and the rules there-
under:
‘‘(i) Subsections (b)(2), (b)(3),
(b)(4), (b)(7), (b)(9), (c), (d), and
(e) of this section.
‘‘(ii) Subsection (a) of section
10.
‘‘(iii) Section 11.
‘‘(iv) Subsections (d), (f), and
(k) of section 17.
‘‘(v) Subsections (a), (f), and
(h) of section 19.
‘‘(B) RULE
CHANGE
EXEMPTIONS.—
An exchange that is subject to the reg-
istration requirement of paragraph
(1) of this subsection shall also be ex-
empt from submitting proposed rule
changes pursuant to section 19(b) of
this title, except that—
‘‘(i) such exchange shall file
proposed rule changes related to
higher margin levels, fraud or ma-
nipulation, recordkeeping, report-
ing, listing standards, or decimal
495
pricing for security future prod-
ucts, sales practices for security
future products for persons who
effect transactions in security fu-
ture products or rules effectuating
such exchange’s obligation to en-
force the securities laws pursuant
to section 19(b)(7);
‘‘(ii) such exchange shall file
pursuant to sections 19(b)(1) and
19(b)(2) proposed rule changes re-
lated 
to 
margin, 
except 
for
changes resulting in higher mar-
gin levels; and
‘‘(iii) such exchange shall file
pursuant to section 19(b)(1) pro-
posed rule changes that have been
abrogated by the Commission pur-
suant to section 19(b)(7)(C).
‘‘(5) ASSOCIATION COMPLIANCE WITH RE-
QUIREMENTS.—No exchange that is reg-
istered under paragraph (1) of this sub-
section shall trade any security future
product until a futures association reg-
istered under section 17 of the Commodity
496
Exchange Act has met the requirements
set forth in section 15A(k)(2) of this title.
‘‘(6) 
TRADING
IN
SECURITY
FUTURE
PRODUCTS.—It shall be unlawful for any
person to execute or trade a security fu-
ture product until the later of—
‘‘(A) one year after the date of en-
actment of the Commodity Futures
Modernization Act of 2000; or
‘‘(B) such date as the Federal in-
come tax treatment applicable to the
security future products permitted
under this title are equivalent to the
Federal income tax treatment of eq-
uity options traded on a national se-
curities exchange.’’.
(b) COMMISSION REVIEW OF PROPOSED RULE
CHANGES.—
(1) EXPEDITED
REVIEW.—Section 19(b)
of the Securities Exchange Act of 1934 (15
U.S.C. 78s(b)) is amended by adding at the
end the following:
‘‘(7) SECURITY
FUTURE
PRODUCT
RULE
CHANGES.—
497
‘‘(A) FILING REQUIRED.—A self-regu-
latory organization that is an ex-
change registered with the Commis-
sion pursuant to section 6(g) of this
title or that is a national securities
association registered pursuant to sec-
tion 15A(k) of this title shall file with
the Commission, in accordance with
such rules as the Commission may
prescribe, copies of any proposed rule
change or any proposed change in,
addition to, or deletion from the rules
of such self-regulatory organization
(hereinafter in this paragraph collec-
tively referred to as a ‘proposed rule
change’) that relates to higher margin
levels, fraud or manipulation, record-
keeping, reporting, listing standards,
or decimal pricing for security future
products, sales practices for security
future products for persons who effect
transactions in security future prod-
ucts or rules effectuating such self-
regulatory organization’s obligation
to enforce the securities laws. Such
498
proposed rule change shall be accom-
panied by a concise general statement
of the basis and purpose of such pro-
posed rule change. The Commission
shall, upon the filing of any proposed
rule change, publish notice thereof to-
gether with the terms of substance of
the proposed rule change or a descrip-
tion of the subjects and issues in-
volved. The Commission shall give in-
terested persons an opportunity to
submit written data, views, and argu-
ments concerning such proposed rule
change.
‘‘(B) FILING
WITH
CFTC.—A pro-
posed rule change filed with the Com-
mission pursuant to subparagraph (A)
shall be filed concurrently with the
Commodity Futures Trading Commis-
sion. Such proposed rule change may
take effect upon filing of a written
certification with the Commodity Fu-
tures Trading Commission, upon a de-
termination by the Commodity Fu-
tures Trading Commission that review
499
of the proposed rule change is not nec-
essary or upon approval of the pro-
posed rule change by the Commodity
Futures Trading Commission.
‘‘(C) 
ABROGATION
OF
RULE
CHANGES.—Any proposed rule change
of a self-regulatory organization that
has taken effect pursuant to subpara-
graph (B) may be enforced by such
self-regulatory organization to the ex-
tent such rule is not inconsistent with
the provisions of this title, the rules
and regulations thereunder, and ap-
plicable Federal law. At any time
within 60 days of the date of the filing
of a written certification with the
Commodity Futures Trading Commis-
sion, the date the Commodity Futures
Trading Commission determines that
review of such proposed rule change is
not necessary, or the date the Com-
modity Futures Trading Commission
approves such proposed rule change,
the Commission, after consultation
with the Commodity Futures Trading
500
Commission, summarily may abrogate
the proposed rule change and require
that the proposed rule change be
refiled in accordance with the provi-
sions of paragraph (1), if it appears to
the Commission that such proposed
rule change unduly burdens competi-
tion, conflicts with the securities laws,
does not promote efficiency, or is in-
consistent with the public interest and
the protection of investors. Commis-
sion action pursuant to the preceding
sentence shall not affect the validity
or force of the rule change during the
period it was in effect and shall not be
reviewable 
under 
section 
nor
deemed to be a final agency action for
purposes of section 704 of title 5,
United States Code.
‘‘(D) REVIEW OF RESUBMITTED ABRO-
GATED RULES.—
‘‘(i) PROCEEDINGS.—Within 35
days of the date of publication of
notice of the filing of a proposed
rule change that is abrogated in
501
accordance 
with 
subparagraph
(C) and refiled in accordance with
paragraph (1), or within such
longer period as the Commission
may designate up to 90 days after
such date if the Commission finds
such longer period to be appro-
priate and publishes its reasons
for so finding or as to which the
self-regulatory organization con-
sents, the Commission shall—
‘‘(I) by order approve such
proposed rule change; or
‘‘(II) 
after 
consultation
with the Commodity Futures
Trading Commission, institute
proceedings 
to 
determine
whether 
the 
proposed 
rule
change should be disapproved.
Proceedings under subclause (II)
shall 
include 
notice 
of 
the
grounds for disapproval under
consideration and opportunity for
hearing and be concluded within
180 days after the date of publica-
502
tion of notice of the filing of the
proposed rule change. At the con-
clusion of such proceedings, the
Commission, by order, shall ap-
prove or disapprove such proposed
rule change. The Commission may
extend the time for conclusion of
such proceedings for up to 60 days
if it finds good cause for such ex-
tension and publishes its reasons
for so finding or for such longer
period as to which the self-regu-
latory organization consents.
‘‘(ii) GROUNDS FOR APPROVAL.—
The Commission shall approve a
proposed rule change of a self-reg-
ulatory organization under this
subparagraph if it finds that such
proposed rule change promotes ef-
ficiency, does not unduly burden
competition, does not conflict with
the securities laws, and is not in-
consistent with the public interest
or the protection of investors. The
Commission shall disapprove such
503
a proposed rule change of a self-
regulatory organization if it does
not make such finding. The Com-
mission shall not approve any pro-
posed rule change prior to the
30th day after the date of publica-
tion of notice of the filing thereof,
unless the Commission finds good
cause for so doing and publishes
its reasons for so finding.’’.
(2) DECIMAL PRICING PROVISIONS.—Sec-
tion 19(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78s(b)) is amended by
inserting after paragraph (7), as added by
paragraph (1), the following:
‘‘(8) DECIMAL PRICING.—Not later than
9 months after the later of the dates speci-
fied in section 6(g)(5), all self-regulatory
organizations listing or trading security
future products shall file proposed rule
changes necessary to implement decimal
pricing of security future products. The
Commission may not require such rules to
contain equal minimum increments in
such decimal pricing.’’.
504
(3) 
CONSULTATION
PROVISIONS.—Sec-
tion 19(b) of the Securities Exchange Act
of 1934 (15 U.S.C. 78s(b)) is amended by
inserting after paragraph (8), as added by
paragraph (2), the following:
‘‘(9) CONSULTATION WITH CFTC.—
‘‘(A) 
CONSULTATION
REQUIRED.—
The Commission shall consult with
and consider the views of the Com-
modity Futures Trading Commission
prior to approving a proposed rule
change filed by a national securities
association registered pursuant to sec-
tion 15A(a) or a national securities ex-
change subject to the provisions of
subsection (a) that primarily concerns
conduct related to transactions in se-
curity futures products, except where
the Commission determines that an
emergency exists requiring expedi-
tious or summary action and pub-
lishes its reasons therefor.
‘‘(B) RESPONSES TO CFTC COMMENTS
AND FINDINGS.—If the Commodity Fu-
tures Trading Commission comments