I
106TH CONGRESS
2D SESSION
H. R. 5660
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 derivatives, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 14, 2000
Mr. EWING (for himself, Mr. COMBEST, Mr. LEACH, Mr. LAFALCE, and Mr.
BLILEY) introduced the following bill; which was referred to the Com-
mittee on Agriculture, and in addition to the Committees on Banking and
Financial Services, Commerce, and the Judiciary, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of
such provisions as fall within the jurisdiction of the committee concerned
A BILL
To reauthorize and amend the Commodity Exchange Act
to promote legal certainty, enhance competition, and re-
duce systemic risk in markets for futures and over-the-
counter derivatives, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
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 contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
TITLE I—COMMODITY FUTURES MODERNIZATION
Sec. 101. Definitions.
Sec. 102. Agreements, contracts, and transactions in foreign currency, govern-
ment securities, and certain other commodities.
Sec. 103. Legal certainty for excluded derivative transactions.
Sec. 104. Excluded electronic trading facilities.
Sec. 105. Hybrid instruments; swap transactions.
Sec. 106. Transactions in exempt commodities.
Sec. 107. Application of commodity futures laws.
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.
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. Predispute resolution agreements for institutional customers.
Sec. 119. Consideration of costs and benefits and antitrust laws.
Sec. 120. Contract enforcement between eligible counterparties.
Sec. 121. Special procedures to encourage and facilitate bona fide hedging by
agricultural producers.
Sec. 122. Rule of construction.
Sec. 123. Technical and conforming amendments.
Sec. 124. Privacy.
Sec. 125. Report to Congress.
Sec. 126. International activities of the Commodity Futures Trading Commis-
sion.
TITLE II—COORDINATED REGULATION OF SECURITY FUTURES
PRODUCTS
Subtitle A—Securities Law Amendments
Sec. 201. Definitions under the Securities Exchange Act of 1934.
Sec. 202. Regulatory relief for markets trading security futures products.
Sec. 203. Regulatory relief for intermediaries trading security futures products.
Sec. 204. Special provisions for interagency cooperation.
Sec. 205. Maintenance of market integrity for security futures products.
Sec. 206. Special provisions for the trading of security futures products.
Sec. 207. Clearance and settlement.
Sec. 208. Amendments relating to registration and disclosure issues under the
Securities Act of 1933 and the Securities Exchange Act of
1934.
Sec. 209. Amendments to the Investment Company Act of 1940 and the Invest-
ment Advisers Act of 1940.
Sec. 210. Preemption of State laws.
Subtitle B—Amendments to the Commodity Exchange Act
Sec. 251. Jurisdiction of Securities and Exchange Commission; other provi-
sions.
Sec. 252. Application of the Commodity Exchange Act to national securities ex-
changes and national securities associations that trade security
futures.
Sec. 253. Notification of investigations and enforcement actions.
TITLE III—LEGAL CERTAINTY FOR SWAP AGREEMENTS
Sec. 301. Swap agreement.
Sec. 302. Amendments to the Securities Act of 1933.
Sec. 303. Amendments to the Securities Exchange Act of 1934.
Sec. 304. Savings provision.
TITLE IV—REGULATORY RESPONSIBILITY FOR BANK PRODUCTS
Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Exclusion of identified banking products commonly offered on or be-
fore December 5, 2000.
Sec. 404. Exclusion of certain identified banking products offered by banks
after December 5, 2000.
Sec. 405. Exclusion of certain other identified banking products.
Sec. 406. Administration of the predominance test.
Sec. 407. Exclusion of covered swap agreements.
Sec. 408. Contract enforcement.
SEC. 2. PURPOSES.
The purposes of this Act are—
(1) to reauthorize the appropriation for the
Commodity Futures Trading Commission;
(2) to streamline and eliminate unnecessary
regulation for the commodity futures exchanges and
other entities regulated under the Commodity Ex-
change Act;
(3) to transform the role of the Commodity Fu-
tures Trading Commission to oversight of the fu-
tures markets;
(4) to provide a statutory and regulatory frame-
work for allowing the trading of futures on securi-
ties;
(5) to clarify the jurisdiction of the Commodity
Futures Trading Commission over certain retail for-
eign exchange transactions and bucket shops that
may not be otherwise regulated;
(6) to promote innovation for futures and de-
rivatives and to reduce systemic risk by enhancing
legal certainty in the markets for certain futures and
derivatives transactions;
(7) to reduce systemic risk and provide greater
stability to markets during times of market disorder
by allowing the clearing of transactions in over-the-
counter derivatives through appropriately regulated
clearing organizations; and
(8) to enhance the competitive position of
United States financial institutions and financial
markets.
TITLE I—COMMODITY FUTURES
MODERNIZATION
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) through (15), and (16)
as paragraphs (2) through (8), (16) through (20),
(22) through (24), and (28), respectively;
(2) by inserting before paragraph (2) (as redes-
ignated by paragraph (1)) the following:
‘‘(1) ALTERNATIVE
TRADING
SYSTEM.—The
term ‘alternative trading system’ means an organiza-
tion, association, or group of persons that—
‘‘(A) is registered as a broker or dealer
pursuant to section 15(b) of the Securities Ex-
change Act of 1934 (except paragraph (11)
thereof );
‘‘(B) performs the functions commonly
performed by an exchange (as defined in section
3(a)(1) of the Securities Exchange Act of
1934);
‘‘(C) does not—
‘‘(i) set rules governing the conduct of
subscribers other than the conduct of such
subscribers’ trading on the alternative
trading system; or
‘‘(ii) discipline subscribers other than
by exclusion from trading; and
‘‘(D) is exempt from the definition of the
term ‘exchange’ under such section 3(a)(1) by
rule or regulation of the Securities and Ex-
change Commission on terms that require com-
pliance with regulations of its trading func-
tions.’’;
(3) by striking paragraph (2) (as redesignated
by paragraph (1)) and inserting the following:
‘‘(2) BOARD OF TRADE.—The term ‘board of
trade’ means any organized exchange or other trad-
ing facility.’’;
(4) by inserting after paragraph (8) (as redesig-
nated by paragraph (1)) the following:
‘‘(9) DERIVATIVES CLEARING ORGANIZATION.—
‘‘(A) IN GENERAL.—The term ‘derivatives
clearing organization’ means a clearinghouse,
clearing association, clearing corporation, or
similar entity, facility, system, or organization
that, with respect to an agreement, contract, or
transaction—
‘‘(i) enables each party to the agree-
ment, contract, or transaction to sub-
stitute, through novation or otherwise, the
credit of the derivatives clearing organiza-
tion for the credit of the parties;
‘‘(ii) arranges or provides, on a multi-
lateral basis, for the settlement or netting
of obligations resulting from such agree-
ments, contracts, or transactions executed
by participants in the derivatives clearing
organization; or
‘‘(iii) otherwise provides clearing serv-
ices or arrangements that mutualize or
transfer among participants in the deriva-
tives clearing organization the credit risk
arising from such agreements, contracts,
or transactions executed by the partici-
pants.
‘‘(B) EXCLUSIONS.—The term ‘derivatives
clearing organization’ does not include an enti-
ty, facility, system, or organization solely be-
cause it arranges or provides for—
‘‘(i) settlement, netting, or novation of
obligations resulting from agreements, con-
tracts, or transactions, on a bilateral basis
and without a central counterparty;
‘‘(ii) settlement or netting of cash
payments through an interbank 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 fa-
cility that—
‘‘(A) operates by means of an electronic or
telecommunications network; and
‘‘(B) maintains an automated audit trail of
bids, offers, and the matching of orders or the
execution of transactions on the facility.
‘‘(11) ELIGIBLE
COMMERCIAL
ENTITY.—The
term ‘eligible commercial entity’ means, with respect
to an agreement, contract or transaction in a
commodity—
‘‘(A) an eligible contract participant de-
scribed in clause (i), (ii), (v), (vii), (viii), or (ix)
of paragraph (12)(A) that, in connection with
its business—
‘‘(i) has a demonstrable ability, di-
rectly or through separate contractual ar-
rangements, to make or take delivery of
the underlying commodity;
‘‘(ii) incurs risks, in addition to price
risk, related to the commodity; or
‘‘(iii) is a dealer that regularly pro-
vides risk management or hedging services
to, or engages in market-making activities
with, the foregoing entities involving trans-
actions to purchase or sell the commodity
or derivative agreements, contracts, or
transactions in the commodity;
‘‘(B) an eligible contract participant, other
than a natural person or an instrumentality, de-
partment, or agency of a State or local govern-
mental entity, that—
‘‘(i) regularly enters into transactions
to purchase or sell the commodity or deriv-
ative agreements, contracts, or trans-
actions in the commodity; and
‘‘(ii) either—
‘‘(I) in the case of a collective in-
vestment vehicle whose participants
include persons other than—
‘‘(aa) qualified eligible per-
sons, as defined in Commission
rule 4.7(a) (17 CFR 4.7(a));
‘‘(bb) accredited investors,
as defined in Regulation D of the
Securities and Exchange Com-
mission under the Securities Act
of 1933 (17 CFR 230.501(a)),
with total assets of $2,000,000;
or
‘‘(cc) qualified purchasers,
as defined in section 2(a)(51)(A)
of the Investment Company Act
of 1940;
in each case as in effect on the date
of the enactment of the Commodity
Futures Modernization Act of 2000,
has, or is one of a group of vehicles
under common control or management
having 
in 
the 
aggregate,
$1,000,000,000 in total assets; or
‘‘(II) in the case of other per-
sons, has, or is one of a group of per-
sons under common control or man-
agement having in the aggregate,
$100,000,000 in total assets; or
‘‘(C) such other persons as the Commis-
sion shall determine appropriate and shall des-
ignate by rule, regulation, or order.
‘‘(12) ELIGIBLE CONTRACT PARTICIPANT.—The
term ‘eligible contract participant’ means—
‘‘(A) acting for its own account—
‘‘(i) a financial institution;
‘‘(ii) an insurance company that is
regulated by a State, or that is regulated
by a foreign government and is subject to
comparable regulation as determined by
the Commission, including a regulated sub-
sidiary or affiliate of such an insurance
company;
‘‘(iii) an investment company subject
to regulation under the Investment Com-
pany 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
foreign regulation (regardless of whether
each investor in the investment company or
the foreign person is itself an eligible con-
tract participant);
‘‘(iv) a commodity pool that—
‘‘(I) has total assets exceeding
$5,000,000; and
‘‘(II) is formed and operated by a
person subject to regulation under
this Act or a foreign person per-
forming a similar role or function sub-
ject as such to foreign regulation (re-
gardless of whether each investor in
the commodity pool or the foreign per-
son is itself an eligible contract partic-
ipant);
‘‘(v) a corporation, partnership, pro-
prietorship, organization, trust, or other
entity—
‘‘(I) that has total assets exceed-
ing $10,000,000;
‘‘(II) the obligations of which
under an agreement, contract, or
transaction are guaranteed or other-
wise supported by a letter of credit or
keepwell, support, or other agreement
by an entity described in subclause
(I), in clause (i), (ii), (iii), (iv), or
(vii), or in subparagraph (C); or
‘‘(III) that—
subject to regulation under the
Investment Advisers Act of 1940
(15 U.S.C. 80b–1 et seq.) or this
Act;
‘‘(bb) a foreign person per-
forming a similar role or function
subject as such to foreign regula-
tion;
‘‘(cc) a financial institution;
or
‘‘(dd) an insurance company
described in clause (ii), or a reg-
ulated subsidiary or affiliate of
such an insurance company;
‘‘(vii)(I) a governmental entity (in-
cluding the United States, a State, or a
foreign government) or political subdivision
of a governmental entity;
‘‘(II) a multinational or supranational
government entity; or
‘‘(III) an instrumentality, agency, or
department of an entity described in sub-
clause (I) or (II);
except that such term does not include an
entity, instrumentality, agency, or depart-
ment referred to in subclause (I) or (III)
of this clause unless (aa) the entity, instru-
mentality, agency, or department is a per-
son described in clause (i), (ii), or (iii) of
section 1a(11)(A); (bb) the entity, instru-
mentality, agency, or department owns and
invests 
on 
a 
discretionary 
basis
$25,000,000 or more in investments; or
(cc) the agreement, contract, or trans-
action is offered by, and entered into with,
an entity that is listed in any of subclauses
(I) through (VI) of section 2(c)(2)(B)(ii);
‘‘(viii)(I) a broker or dealer subject to
regulation under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.) or a
foreign person performing a similar role or
function subject as such to foreign regula-
tion, except that, if the broker or dealer or
foreign person is a natural person or pro-
prietorship, the broker or dealer or foreign
person shall not be considered to be an eli-
gible contract participant unless the broker
or dealer or foreign person also meets the
requirements of clause (v) or (xi);
‘‘(II) an associated person of a reg-
istered broker or dealer concerning the fi-
nancial or securities activities of which the
registered person makes and keeps records
under section 15C(b) or 17(h) of the Secu-
rities 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 Exchange Act of 1934 (15
U.S.C. 78q(i));
‘‘(ix) a futures commission merchant
subject to regulation under this Act or a
foreign person performing a similar role or
function subject as such to foreign regula-
tion, except that, if the futures commission
merchant or foreign person is a natural
person or proprietorship, the futures com-
mission merchant or foreign person shall
not be considered to be an eligible contract
participant unless the futures commission
merchant or foreign person also meets the
requirements of clause (v) or (xi);
‘‘(x) a floor broker or floor trader sub-
ject to regulation under this Act in connec-
tion with any transaction that takes place
on or through the facilities of a registered
entity or an exempt board of trade, or any
affiliate thereof, on which such person reg-
ularly trades; or
‘‘(xi) an individual who has total as-
sets in an amount in excess of—
‘‘(I) $10,000,000; or
‘‘(II) $5,000,000 and who enters
into the agreement, contract, or trans-
action in order to manage the risk as-
sociated with an asset owned or liabil-
ity incurred, or reasonably likely to be
owned or incurred, by the individual;
‘‘(B)(i) a person described in clause (i),
(ii), (iv), (v), (viii), (ix), or (x) of subparagraph
(A) or in subparagraph (C), acting as broker or
performing an equivalent agency function on
behalf of another person described in subpara-
graph (A) or (C); or
‘‘(ii) an investment adviser subject to regu-
lation 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, or a person de-
scribed in clause (i), (ii), (iv), (v), (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 person acting
as broker or performing an equivalent agency
function) for another person described in sub-
paragraph (A) or (C) and who is authorized by
such person to commit such person to the
transaction; or
‘‘(C) any other person that the Commis-
sion determines to be eligible in light of the fi-
nancial or other qualifications of the person.
‘‘(13) EXCLUDED COMMODITY.—The term ‘ex-
cluded commodity’ means—
‘‘(i) an interest rate, exchange rate,
currency, security, security index, credit
risk or measure, debt or equity instrument,
index or measure of inflation, or other
macroeconomic index or measure;
‘‘(ii) any other rate, differential,
index, or measure of economic or commer-
cial risk, return, or value that is—
‘‘(I) not based in substantial part
on the value of a narrow group of
commodities not described in clause
(i); or
‘‘(II) based solely on one or more
commodities that have no cash mar-
ket;
‘‘(iii) any economic or commercial
index based on prices, rates, values, or lev-
els that are not within the control of any
party to the relevant contract, agreement,
or transaction; or
‘‘(iv) an occurrence, extent of an oc-
currence, or contingency (other than a
change in the price, rate, value, or level of
a commodity not described in clause (i))
that is—
‘‘(I) beyond the control of the
parties to the relevant contract, agree-
ment, or transaction; and
‘‘(II) associated with a financial,
commercial, or economic consequence.
‘‘(14) EXEMPT COMMODITY.—The term ‘exempt
commodity’ means a commodity that is not an ex-
cluded commodity or an agricultural commodity.
‘‘(15) FINANCIAL INSTITUTION.—The term ‘fi-
nancial institution’ means—
‘‘(A) a corporation operating under the
fifth undesignated paragraph of section 25 of
the Federal Reserve Act (12 U.S.C. 603), com-
monly known as ‘an agreement corporation’;
‘‘(B) a corporation organized under section
25A of the Federal Reserve Act (12 U.S.C. 611
et seq.), commonly known as an ‘Edge Act cor-
poration’;
‘‘(C) an institution that is regulated by the
Farm Credit Administration;
‘‘(D) a Federal credit union or State credit
union (as defined in section 101 of the Federal
Credit Union Act (12 U.S.C. 1752));
‘‘(E) a depository institution (as defined in
section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813));
‘‘(F) a foreign bank or a branch or agency
of a foreign bank (each as defined in section
1(b) of the International Banking Act of 1978
(12 U.S.C. 3101(b)));
‘‘(G) any financial holding company (as de-
fined in section 2 of the Bank Holding Com-
pany Act of 1956);
‘‘(H) a trust company; or
‘‘(I) a similarly regulated subsidiary or af-
filiate of an entity described in any of subpara-
graphs (A) through (H).’’;
(5) by inserting after paragraph (20) (as redes-
ignated by paragraph (1)) the following:
‘‘(21) HYBRID INSTRUMENT.—The term ‘hybrid
instrument’ means a security having one or more
payments indexed to the value, level, or rate of, or
providing for the delivery of, one or more commod-
ities.’’;
(6) by striking paragraph (24) (as redesignated
by paragraph (1)) and inserting the following:
‘‘(24) MEMBER OF A CONTRACT MARKET; MEM-
BER OF A DERIVATIVES TRANSACTION EXECUTION
FACILITY.—The term ‘member’ means, with respect
to a contract market or derivatives transaction exe-
cution facility, an individual, association, partner-
ship, corporation, or trust—
‘‘(A) owning or holding membership in, or
admitted to membership representation on, the
contract market or derivatives transaction exe-
cution facility; or
‘‘(B) having trading privileges on the con-
tract market or derivatives transaction execu-
tion facility.
‘‘(25) NARROW-BASED SECURITY INDEX.—
‘‘(A) The term ‘narrow-based security
index’ means an index—
‘‘(i) that has 9 or fewer component se-
curities;
‘‘(ii) in which a component security
comprises more than 30 percent of the
index’s weighting;
‘‘(iii) in which the five highest weight-
ed component securities in the aggregate
comprise more than 60 percent of the
index’s weighting; or
‘‘(iv) in which the lowest weighted
component securities comprising, in the ag-
gregate, 
percent 
of 
the 
index’s
weighting have an aggregate dollar value
of average daily trading volume of less
than $50,000,000 (or in the case of an
index with 15 or more component securi-
ties, $30,000,000), except that if there are
two 
or 
more 
securities 
with 
equal
weighting that could be included in the cal-
culation of the lowest weighted component
securities comprising, in the aggregate, 25
percent of the index’s weighting, such se-
curities shall be ranked from lowest to
highest dollar value of average daily trad-
ing volume and shall be included in the
calculation based on their ranking starting
with the lowest ranked security.
‘‘(B) Notwithstanding subparagraph (A),
an index is not a narrow-based security index
if—
‘‘(i)(I) it has at least 9 component se-
curities;
‘‘(II) no component security comprises
more than 30 percent of the index’s
weighting; and
‘‘(III) each component security is—
‘‘(aa) registered pursuant to sec-
tion 12 of the Securities Exchange
Act of 1934;
‘‘(bb) one of 750 securities with
the largest market capitalization; and
‘‘(cc) one of 675 securities with
the largest dollar value of average
daily trading volume;
‘‘(ii) a board of trade was designated
as a contract market by the Commodity
Futures Trading Commission with respect
to a contract of sale for future delivery on
the index, before the date of the enactment
of the Commodity Futures Modernization
Act of 2000;
‘‘(iii)(I) a contract of sale for future
delivery on the index traded on a des-
ignated contract market or registered de-
rivatives transaction execution facility for
at least 30 days as a contract of sale for
future delivery on an index that was not a
narrow-based security index; and
‘‘(II) it has been a narrow-based secu-
rity index for no more than 45 business
days over 3 consecutive calendar months;
‘‘(iv) a contract of sale for future de-
livery on the index is traded on or subject
to the rules of a foreign board of trade and
meets such requirements as are jointly es-
tablished by rule or regulation by the Com-
mission and the Securities and Exchange
Commission;
‘‘(v) no more than 18 months have
passed since the date of the enactment of
the Commodity Futures Modernization Act
of 2000 and—
‘‘(I) it is traded on or subject to
the rules of a foreign board of trade;
‘‘(II) the offer and sale in the
United States of a contract of sale for
future delivery on the index was au-
thorized before the date of the enact-
ment of the Commodity Futures Mod-
ernization Act of 2000; and
‘‘(III) the conditions of such au-
thorization continue to be met; or
‘‘(vi) a contract of sale for future de-
livery on the index is traded on or subject
to the rules of a board of trade and meets
such requirements as are jointly estab-
lished by rule, regulation, or order by the
Commission and the Securities and Ex-
change Commission.
‘‘(C) Within 1 year after the date of the
enactment of the Commodity Futures Mod-
ernization Act of 2000, the Commission and the
Securities and Exchange Commission jointly
shall adopt rules or regulations that set forth
the requirements under subparagraph (B)(iv).
‘‘(D) An index that is a narrow-based se-
curity index solely because it was a narrow-
based security index for more than 45 business
days over 3 consecutive calendar months pursu-
ant to clause (iii) of subparagraph (B) shall not
be a narrow-based security index for the 3 fol-
lowing calendar months.
‘‘(E) For purposes of subparagraphs (A)
and (B)—
‘‘(i) the dollar value of average daily
trading volume and the market capitaliza-
tion shall be calculated as of the preceding
6 full calendar months; and
‘‘(ii) the Commission and the Securi-
ties and Exchange Commission shall, by
rule or regulation, jointly specify the meth-
od to be used to determine market capital-
ization and dollar value of average daily
trading volume.
‘‘(26) OPTION.—The term ‘option’ means an
agreement, contract, or transaction that is of the
character of, or is commonly known to the trade as,
an ‘option’, ‘privilege’, ‘indemnity’, ‘bid’, ‘offer’,
‘put’, ‘call’, ‘advance guaranty’, or ‘decline guar-
anty’.
‘‘(27) ORGANIZED EXCHANGE.—The term ‘or-
ganized exchange’ means a trading facility 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 prin-
cipal-to-principal basis; or
‘‘(B) has adopted (directly or through an-
other nongovernmental entity) rules that—
‘‘(i) govern the conduct of partici-
pants, other than rules that govern the
submission of orders or execution of trans-
actions on the trading facility; and
‘‘(ii) include disciplinary sanctions
other than the exclusion of participants
from trading.’’; and
(7) by adding at the end the following:
‘‘(29) REGISTERED
ENTITY.—The term ‘reg-
istered entity’ means—
‘‘(A) a board of trade designated as a con-
tract market under section 5;
‘‘(B) a derivatives transaction execution fa-
cility registered under section 5a;
‘‘(C) a derivatives clearing organization
registered under section 5b; and
‘‘(D) a board of trade designated as a con-
tract market under section 5f.
‘‘(30) SECURITY.—The term ‘security’ means a
security as defined in section 2(a)(1) of the Securi-
ties 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)).
‘‘(31) SECURITY FUTURE.—The term ‘security
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 date of the enactment of
the Futures Trading Act of 1982 (other than any
municipal security as defined in section 3(a)(29) of
the Securities Exchange Act of 1934 as in effect on
the date of the enactment of the Futures Trading
Act of 1982). The term ‘security future’ does not in-
clude any agreement, contract, or transaction ex-
cluded from this Act under section 2(c), 2(d), 2(f ),
or 2(g) of this Act (as in effect on the date of the
enactment of the Commodity Futures Modernization
Act of 2000) or title IV of the Commodity Futures
Modernization Act of 2000.
‘‘(32) SECURITY
FUTURES
PRODUCT.—The
term ‘security futures product’ means a security fu-
ture or any put, call, straddle, option, or privilege on
any security future.
‘‘(33) TRADING FACILITY.—
‘‘(A) IN GENERAL.—The term ‘trading fa-
cility’ means a person or group of persons that
constitutes, maintains, or provides a physical or
electronic facility or system in which multiple
participants have the ability to execute or trade
agreements, contracts, or transactions by ac-
cepting bids and offers made by other partici-
pants that are open to multiple participants in
the facility or system.
‘‘(B) EXCLUSIONS.—The term ‘trading fa-
cility’ does not include—
‘‘(i) a person or group of persons sole-
ly because the person or group of persons
constitutes, maintains, or provides an elec-
tronic facility or system that enables par-
ticipants to negotiate the terms of and
enter into bilateral transactions as a result
of communications exchanged by the par-
ties and not from interaction of multiple
bids and multiple offers within a predeter-
mined, nondiscretionary automated trade
matching and execution algorithm;
‘‘(ii) a government securities dealer or
government securities broker, to the extent
that the dealer or broker executes or
trades agreements, contracts, or trans-
actions in government securities, or assists
persons in communicating about, negoti-
ating, entering into, executing, or trading
an agreement, contract, or transaction in
government securities (as the terms ‘gov-
ernment securities dealer’, ‘government se-
curities broker’, and ‘government securi-
ties’ are defined in section 3(a) of the Se-
curities Exchange Act of 1934 (15 U.S.C.
78c(a))); or
‘‘(iii) facilities on which bids and of-
fers, and acceptances of bids and offers ef-
fected on the facility, are not binding.
Any person, group of persons, dealer, broker, or
facility described in clause (i) or (ii) is excluded
from the meaning of the term ‘trading facility’
for the purposes of this Act without any prior
specific approval, certification, or other action
by the Commission.
‘‘(C) SPECIAL RULE.—A person or group
of persons that would not otherwise constitute
a trading facility shall not be considered to be
a trading facility solely as a result of the sub-
mission to a derivatives clearing organization of
transactions executed on or through the person
or group of persons.’’.
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 fol-
lowing:
‘‘(c) AGREEMENTS, CONTRACTS, AND TRANSACTIONS
IN FOREIGN CURRENCY, GOVERNMENT SECURITIES, AND
CERTAIN OTHER COMMODITIES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), nothing in this Act (other than section 5a
(to the extent provided in section 5a(g)), 5b, 5d, or
12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in—
‘‘(A) foreign currency;
‘‘(B) government securities;
‘‘(C) security warrants;
‘‘(D) security rights;
‘‘(E) resales of installment loan contracts;
‘‘(F) repurchase transactions in an ex-
cluded commodity; or
‘‘(G) mortgages or mortgage purchase
commitments.
‘‘(2) COMMISSION JURISDICTION.—
‘‘(A) 
AGREEMENTS, 
CONTRACTS, 
AND
TRANSACTIONS TRADED ON AN ORGANIZED EX-
CHANGE.—This Act applies to, and the Com-
mission shall have jurisdiction over, an agree-
ment, contract, or transaction described in
paragraph (1) that is—
‘‘(i) a contract of sale of a commodity
for future delivery (or an option on such a
contract), or an option on a commodity
(other than foreign currency or a security
or a group or index of securities), that is
executed or traded on an organized ex-
change; or
‘‘(ii) an option on foreign currency ex-
ecuted 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 Commis-
sion shall have jurisdiction over, an agreement,
contract, or transaction in foreign currency
that—
‘‘(i) is a contract of sale of a com-
modity for future delivery (or an option on
such a contract) or an option (other than
an option executed or traded on a national
securities exchange registered pursuant to
section 6(a) of the Securities Exchange Act
of 1934); and
‘‘(ii) is offered to, or entered into
with, a person that is not an eligible con-
tract participant, unless the counterparty,
or 
the 
person 
offering 
to 
be 
the
counterparty, of the person is—
‘‘(I) a financial institution;
‘‘(II) 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 a fu-
tures commission merchant registered
under this Act;
‘‘(III) an associated person of a
broker or dealer registered under sec-
tion 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 merchant
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 Ex-
change Act of 1934 (15 U.S.C. 78o–
5(b), 78q(h)) or section 4f(c)(2)(B) of
this Act;
‘‘(IV) an insurance company de-
scribed in section 1a(12)(A)(ii) of this
Act, or a regulated subsidiary or affil-
iate of such an insurance company;
‘‘(V) a financial holding company
(as defined in section 2 of the Bank
Holding Company Act of 1956); or
‘‘(VI) an investment bank hold-
ing company (as defined in section
17(i) of the Securities Exchange Act
of 1934).
‘‘(C) Notwithstanding subclauses (II) and
(III) of subparagraph (B)(ii), agreements, con-
tracts, or transactions described in subpara-
graph (B) shall be subject to sections 4b, 4c(b),
6(c) and 6(d) (to the extent that sections 6(c)
and 6(d) prohibit manipulation of the market
price of any commodity, in interstate commerce,
or for future delivery on or subject to the rules
of any market), 6c, 6d, and 8(a) if they are en-
tered into by a futures commission merchant or
an affiliate of a futures commission merchant
that is not also an entity described in subpara-
graph (B)(ii) of this paragraph.’’.
SEC. 103. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE
TRANSACTIONS.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) is further amended by adding at the end
the following:
‘‘(d) EXCLUDED DERIVATIVE TRANSACTIONS.—
‘‘(1) IN GENERAL.—Nothing in this Act (other
than section 5b or 12(e)(2)(B) governs or applies to
an agreement, contract, or transaction in an ex-
cluded commodity if—
‘‘(A) the agreement, contract, or trans-
action is entered into only between persons that
are eligible contract participants at the time at
which the persons enter into the agreement,
contract, or transaction; and
‘‘(B) the agreement, contract, or trans-
action is not executed or traded on a trading fa-
cility.
‘‘(2) ELECTRONIC TRADING FACILITY EXCLU-
SION.—Nothing in this Act (other than section 5a
(to the extent provided in section 5a(g)), 5b, 5d, or
12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in an excluded commodity
if—
‘‘(A) the agreement, contract, or trans-
action is entered into on a principal-to-principal
basis between parties trading for their own ac-
counts or as described in section 1a(12)(B)(ii);
‘‘(B) the agreement, contract, or trans-
action is entered into only between persons that
are eligible contract participants described in
subparagraph (A), (B)(ii), or (C) of section
1a(12)) at the time at which the persons enter
into the agreement, contract, or transaction;
and
‘‘(C) the agreement, contract, or trans-
action 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) is further amended by adding at the end
the following:
‘‘(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 facility that limits transactions
authorized to be conducted on its facilities to those
satisfying the requirements of section 2(d)(2), 2(g),
or 2(h)(3).
‘‘(2) EFFECT
ON
AUTHORITY
TO
ESTABLISH
AND OPERATE.—Nothing in this Act shall prohibit a
board of trade designated by the Commission as a
contract market or derivatives transaction execution
facility, or operating as an exempt board of trade
from establishing and operating an electronic trad-
ing facility excluded under this Act pursuant to
paragraph (1).
‘‘(3) EFFECT ON TRANSACTIONS.—No failure
by an electronic trading facility to limit transactions
as required by paragraph (1) of this subsection or
to comply with section 2(h)(5) shall in itself affect
the legality, validity, or enforceability of an agree-
ment, contract, or transaction entered into or traded
on the electronic trading facility or cause a partici-
pant on the system to be in violation of this Act.
‘‘(4) SPECIAL
RULE.—A person or group of
persons that would not otherwise constitute a trad-
ing facility shall not be considered to be a trading
facility solely as a result of the submission to a de-
rivatives clearing organization of transactions exe-
cuted on or through the person or group of per-
sons.’’.
SEC. 105. HYBRID INSTRUMENTS; SWAP TRANSACTIONS.
(a) HYBRID INSTRUMENTS.—Section 2 of the Com-
modity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) is further
amended by adding at the end the following:
‘‘(f ) EXCLUSION FOR QUALIFYING HYBRID INSTRU-
MENTS.—
‘‘(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 secu-
rity.
‘‘(2) PREDOMINANCE.—A hybrid instrument
shall be considered to be predominantly a security
if—
‘‘(A) the issuer of the hybrid instrument
receives payment in full of the purchase price of
the hybrid instrument, substantially contem-
poraneously with delivery of the hybrid instru-
ment;
‘‘(B) the purchaser or holder of the hybrid
instrument is not required to make any pay-
ment to the issuer in addition to the purchase
price paid under subparagraph (A), whether as
margin, settlement payment, or otherwise, dur-
ing the life of the hybrid instrument or at ma-
turity;
‘‘(C) the issuer of the hybrid instrument is
not subject by the terms of the instrument to
mark-to-market margining requirements; and
‘‘(D) the hybrid instrument is not mar-
keted as a contract of sale of a commodity for
future delivery (or option on such a contract)
subject to this Act.
‘‘(3) MARK-TO-MARKET
MARGINING
REQUIRE-
MENTS.—For the purposes of paragraph (2)(C),
mark-to-market margining requirements do not in-
clude the obligation of an issuer of a secured debt
instrument to increase the amount of collateral held
in pledge for the benefit of the purchaser of the se-
cured debt instrument to secure the repayment obli-
gations of the issuer under the secured debt instru-
ment.’’.
(b) SWAP TRANSACTIONS.—Section 2 of the Com-
modity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) is further
amended by adding at the end the following:
‘‘(g) EXCLUDED SWAP TRANSACTIONS.—No provi-
sion of this Act (other than section 5a (to the extent pro-
vided in section 5a(g)), 5b, 5d, or 12(e)(2)) shall apply
to or govern any agreement, contract, or transaction in
a commodity other than an agricultural commodity if the
agreement, contract, or transaction is—
‘‘(1) entered into only between persons that are
eligible contract participants at the time they enter
into the agreement, contract, or transaction;
‘‘(2) subject to individual negotiation by the
parties; and
‘‘(3) not executed or traded on a trading facil-
ity.’’.
(c) STUDY REGARDING RETAIL SWAPS.—
(1) IN GENERAL.—The Board of Governors of
the Federal Reserve System, the Secretary of the
Treasury, the Commodity Futures Trading Commis-
sion, and the Securities and Exchange Commission
shall conduct a study of issues involving the offering
of swap agreements to persons other than eligible
contract participants (as defined in section 1a of the
Commodity Exchange Act).
(2) MATTERS TO BE ADDRESSED.—The study
shall address—
(A) the potential uses of swap agreements
by persons other than eligible contract partici-
pants;
(B) the extent to which financial institu-
tions are willing to offer swap agreements to
persons other than eligible contract partici-
pants;
(C) the appropriate regulatory structure to
address customer protection issues that may
arise in connection with the offer of swap agree-
ments to persons other than eligible contract
participants; and
(D) such other relevant matters deemed
necessary or appropriate to address.
(3) REPORT.—Before the end of the 1-year pe-
riod beginning on the date of the enactment of this
Act, a report on the findings and conclusions of the
study required by paragraph (1) shall be submitted
to Congress, together with such recommendations
for legislative action as are deemed necessary and
appropriate.
SEC. 106. TRANSACTIONS IN EXEMPT COMMODITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) is further amended by adding at the end
the following:
‘‘(h) LEGAL
CERTAINTY
FOR
CERTAIN
TRANS-
ACTIONS IN EXEMPT COMMODITIES.—
‘‘(1) Except as provided in paragraph (2), noth-
ing 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 participants at the
time the persons enter into the agreement, con-
tract, or transaction; and
‘‘(B) is not entered into on a trading facil-
ity.
‘‘(2) An agreement, contract, or transaction de-
scribed in paragraph (1) of this subsection shall be
subject to—
‘‘(A) sections 5b and 12(e)(2)(B);
‘‘(B) sections 4b, 4o, 6(c), 6(d), 6c, 6d,
and 8a, and the regulations of the Commission
pursuant to section 4c(b) proscribing fraud in
connection with commodity option transactions,
to the extent the agreement, contract, or trans-
action is not between eligible commercial enti-
ties (unless one of the entities is an instrumen-
tality, department, or agency of a State or local
governmental entity) and would otherwise be
subject to such sections and regulations; and
‘‘(C) sections 6(c), 6(d), 6c, 6d, 8a, and
9(a)(2), to the extent such sections prohibit ma-
nipulation of the market price of any com-
modity in interstate commerce and the agree-
ment, contract, or transaction would otherwise
be subject to such sections.
‘‘(3) Except as provided in paragraph (4), noth-
ing in this Act shall apply to an agreement, contract,
or transaction in an exempt commodity which is—
‘‘(A) entered into on a principal-to-prin-
cipal basis solely between persons that are eligi-
ble commercial entities at the time the persons
enter into the agreement, contract, or trans-
action; and
‘‘(B) executed or traded on an electronic
trading facility.
‘‘(4) An agreement, contract, or transaction de-
scribed in paragraph (3) of this subsection shall be
subject to—
‘‘(A) sections 5a (to the extent provided in
section 5a(g)), 5b, 5d, and 12(e)(2)(B);
‘‘(5) An electronic trading facility relying on the
exemption provided in paragraph (3) shall—
‘‘(A) notify the Commission of its intention
to operate an electronic trading facility in reli-
ance on the exemption set forth in paragraph
(3), which notice shall include—
‘‘(i) the name and address of the facil-
ity and a person designated to receive com-
munications from the Commission;
‘‘(ii) the commodity categories that
the facility intends to list or otherwise
make available for trading on the facility
in reliance on the exemption set forth in
paragraph (3);
‘‘(iii) certifications that—
‘‘(I) no executive officer or mem-
ber of the governing board of, or any
holder of a 10 percent or greater eq-
uity interest in, the facility is a person
described in any of subparagraphs (A)
through (H) of section 8a(2);
‘‘(II) the facility will comply with
the conditions for exemption under
this paragraph; and
‘‘(III) the facility will notify the
Commission of any material change in
the information previously provided by
the facility to the Commission pursu-
ant to this paragraph; and
‘‘(iv) the identity of any derivatives
clearing organization to which the facility
transmits or intends to transmit trans-
action data for the purpose of facilitating
the clearance and settlement of trans-
actions conducted on the facility in reliance
on the exemption set forth in paragraph
(3);
‘‘(B)(i)(I) provide the Commission with ac-
cess to the facility’s trading protocols and elec-
tronic access to the facility with respect to
transactions conducted in reliance on the ex-
emption set forth in paragraph (3); or
‘‘(II) provide such reports to the Commis-
sion regarding transactions executed on the fa-
cility in reliance on the exemption set forth in
paragraph (3) as the Commission may from
time to time request to enable the Commission
to satisfy its obligations under this Act;
‘‘(ii) maintain for 5 years, and make avail-
able for inspection by the Commission upon re-
quest, records of activities related to its busi-
ness as an electronic trading facility exempt
under paragraph (3), including—
‘‘(I) information relating to data entry
and transaction details sufficient to enable
the Commission to reconstruct trading ac-
tivity on the facility conducted in reliance
on the exemption set forth in paragraph
(3); and
‘‘(II) the name and address of each
participant on the facility authorized to
enter into transactions in reliance on the
exemption set forth in paragraph (3); and
‘‘(iii) upon special call by the Commission,
provide to the Commission, in a form and man-
ner and within the period specified in the spe-
cial call, such information related to its busi-
ness as an electronic trading facility exempt
under paragraph (3), including information re-
lating to data entry and transaction details in
respect of transactions entered into in reliance
on the exemption set forth in paragraph (3), as
the Commission may determine appropriate—
‘‘(I) to enforce the provisions specified
in subparagraphs (B) and (C) of para-
graph (4);
‘‘(II) to evaluate a systemic market
event; or
‘‘(III) to obtain information requested
by a Federal financial regulatory authority
in order to enable the regulator to fulfill
its regulatory or supervisory responsibil-
ities;
‘‘(C)(i) upon receipt of any subpoena
issued by or on behalf of the Commission to any
foreign person who the Commission believes is
conducting or has conducted transactions in re-
liance on the exemption set forth in paragraph
(3) on or through the electronic trading facility
relating to the transactions, promptly notify the
foreign person of, and transmit to the foreign
person, the subpoena in a manner reasonable
under the circumstances, or as specified by the
Commission; and
‘‘(ii) if the Commission has reason to be-
lieve that a person has not timely complied with
a subpoena issued by or on behalf of the Com-
mission pursuant to clause (i), and the Commis-
sion in writing has directed that a facility rely-
ing on the exemption set forth in paragraph (3)
deny or limit further transactions by the per-
son, the facility shall deny that person further
trading access to the facility or, as applicable,
limit that person’s access to the facility for liq-
uidation trading only;
‘‘(D) comply with the requirements of this
paragraph applicable to the facility and require
that each participant, as a condition of trading
on the facility in reliance on the exemption set
forth in paragraph (3), agree to comply with all
applicable law;
‘‘(E) have a reasonable basis for believing
that participants authorized to conduct trans-
actions on the facility in reliance on the exemp-
tion set forth in paragraph (3) are eligible com-
mercial entities; and
‘‘(F) not represent to any person that the
facility is registered with, or designated, recog-
nized, licensed, or approved by the Commission.
‘‘(6) A person named in a subpoena referred to
in paragraph (5)(C) that believes the person is or
may be adversely affected or aggrieved by action
taken by the Commission under this section, shall
contract, or transaction, except as expressly provided
in section 5a of this Act (to the extent provided in
section 5a(g) of this Act), 5b of this Act, or 5d of
this Act.’’.
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:
‘‘SEC. 3. FINDINGS AND PURPOSE.
‘‘(a) FINDINGS.—The transactions 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, or disseminating pricing informa-
tion 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 subsection (a) through a
system of effective self-regulation of trading facilities,
clearing systems, 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 dis-
ruptions to market integrity; to ensure the financial integ-
rity of all transactions subject to this Act and the avoid-
ance of systemic risk; to protect all market participants
from fraudulent or other abusive sales practices and mis-
uses of customer assets; and to promote responsible inno-
vation 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 unlawful for
any person to offer to enter into, enter into, or con-
firm the execution of a transaction described in
paragraph (2) involving the purchase or sale of any
commodity for future delivery (or any option on such
a transaction or option on a commodity) if the
transaction 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 com-
modity; or
‘‘(C) deliver any such commodity sold,
shipped, or received in interstate commerce for
the execution of the transaction.
‘‘(2) TRANSACTION.—A transaction referred to
in paragraph (1) is a transaction that—
‘‘(A)(i) is, of the character of, or is com-
monly 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 re-
ported, 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:
‘‘SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CON-
TRACT MARKETS.
‘‘(a) APPLICATIONS.—A board of trade applying 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 con-
tract market, the board of trade shall demonstrate
to the Commission that the board of trade meets the
criteria specified in this subsection.
‘‘(2) PREVENTION
OF
MARKET
MANIPULA-
TION.—The board of trade shall have the capacity to
prevent market manipulation through market sur-
veillance, compliance, and enforcement practices and
procedures, including methods for conducting real-
time monitoring of trading and comprehensive and
accurate trade reconstructions.
‘‘(3) FAIR
AND
EQUITABLE
TRADING.—The
board of trade shall establish and enforce trading
rules to ensure fair and equitable trading through
the facilities of the contract market, and the capac-
ity to detect, investigate, and discipline any person
that violates the rules. The rules may authorize—
‘‘(A) transfer trades or office trades;
‘‘(B) an exchange of—
‘‘(i) futures in connection with a cash
commodity transaction;
‘‘(ii) futures for cash commodities; or
‘‘(iii) futures for swaps; or
‘‘(C) a futures commission merchant, act-
ing as principal or agent, to enter into or con-
firm the execution of a contract for the pur-
chase 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 derivatives clearing organization.
‘‘(4) TRADE EXECUTION FACILITY.—The board
of trade shall—
‘‘(A) establish and enforce rules defining,
or specifications detailing, the manner of oper-
ation of the trade execution facility maintained
by the board of trade, including rules or speci-
fications describing the operation of any elec-
tronic matching platform; and
‘‘(B) demonstrate that the trade execution
facility operates in accordance with the rules or
specifications.
‘‘(5) 
FINANCIAL
INTEGRITY
OF
TRANS-
ACTIONS.—The board of trade shall establish and
enforce rules and procedures for ensuring the finan-
cial integrity of transactions entered into by or
through the facilities of the contract market, includ-
ing the clearance and settlement of the transactions
with a derivatives clearing organization.
‘‘(6) DISCIPLINARY PROCEDURES.—The board
of trade shall establish and enforce disciplinary pro-
cedures that authorize the board of trade to dis-
cipline, suspend, or expel members or market par-
ticipants that violate the rules of the board of trade,
or similar methods for performing the same func-
tions, including delegation of the functions to third
parties.
‘‘(7) PUBLIC ACCESS.—The board of trade shall
provide the public with access to the rules, regula-
tions, and contract specifications of the board of
trade.
‘‘(8) ABILITY TO OBTAIN INFORMATION.—The
board of trade shall establish and enforce rules that
will allow the board of trade to obtain any necessary
information to perform any of the functions de-
scribed in this subsection, including the capacity to
carry out such international information-sharing
agreements as the Commission may require.
‘‘(c) EXISTING CONTRACT MARKETS.—A board of
trade that is designated as a contract market on the date
of the enactment of the Commodity Futures Moderniza-
tion Act of 2000 shall be considered to be a designated
contract market under this section.
‘‘(d) CORE PRINCIPLES FOR CONTRACT MARKETS.—
‘‘(1) IN GENERAL.—To maintain the designa-
tion of a board of trade as a contract market, the
board of trade shall comply with the core principles
specified in this subsection. The board of trade shall
have reasonable discretion in establishing the man-
ner in which it complies with the core principles.
‘‘(2) COMPLIANCE WITH RULES.—The board of
trade shall monitor and enforce compliance with the
rules of the contract market, including the terms
and conditions of any contracts to be traded and any
limitations on access to the contract market.
‘‘(3) CONTRACTS
NOT
READILY
SUBJECT
TO
MANIPULATION.—The board of trade shall list on
the contract market only contracts that are not
readily susceptible to manipulation.
‘‘(4) MONITORING OF TRADING.—The board of
trade shall monitor trading to prevent manipulation,
price distortion, and disruptions of the delivery or
cash-settlement process.
‘‘(5) POSITION
LIMITATIONS
OR
ACCOUNT-
ABILITY.—To reduce the potential threat of market
manipulation or congestion, especially during trading
in the delivery month, the board of trade shall adopt
position limitations or position accountability for
speculators, where necessary and appropriate.
‘‘(6) EMERGENCY AUTHORITY.—The board of
trade shall adopt rules to provide for the exercise of
emergency authority, in consultation or cooperation
with the Commission, where necessary and appro-
priate, including the authority to—
‘‘(A) liquidate or transfer open positions in
any contract;
‘‘(B) suspend or curtail trading in any con-
tract; and
‘‘(C) require market participants in any
contract to meet special margin 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 con-
tracts of the contract market; and
‘‘(B) the mechanisms for executing trans-
actions on or through the facilities of the con-
tract market.
‘‘(8) DAILY PUBLICATION OF TRADING INFOR-
MATION.—The board of trade shall make public
daily information on settlement 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 competitive, open, and
efficient market and mechanism for executing trans-
actions.
‘‘(10) TRADE
INFORMATION.—The board of
trade shall maintain rules and procedures to provide
for the recording and safe storage of all identifying
trade information 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 providing evidence of any violations of
the rules of the contract market.
‘‘(11) FINANCIAL INTEGRITY OF CONTRACTS.—
The board of trade shall establish and enforce rules
providing for the financial integrity of any contracts
traded on the contract market (including the clear-
ance and settlement of the transactions with a de-
rivatives clearing organization), and rules to ensure
the financial integrity of any futures commission
merchants and introducing brokers and the protec-
tion of customer funds.
‘‘(12) 
PROTECTION
OF
MARKET
PARTICI-
PANTS.—The board of trade shall establish and en-
force rules to protect market participants from abu-
sive practices committed 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 alternative dispute resolution as
appropriate for market participants and any market
intermediaries.
‘‘(14) GOVERNANCE
FITNESS
STANDARDS.—
The board of trade shall establish and enforce ap-
propriate fitness standards for directors, members of
any disciplinary committee, members of the contract
market, and any other persons with direct access to
the facility (including any parties affiliated with any
of the persons described in this paragraph).
‘‘(15) CONFLICTS OF INTEREST.—The board of
trade shall establish and enforce rules to minimize
conflicts of interest in the decisionmaking process of
the contract market and establish a process for re-
solving such conflicts of interest.
‘‘(16) COMPOSITION OF BOARDS OF MUTUALLY
OWNED CONTRACT MARKETS.—In the case of a mu-
tually owned contract market, the board of trade
shall ensure that the composition of the governing
board reflects market participants.
‘‘(17) RECORDKEEPING.—The board of trade
shall maintain 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 5
years.
‘‘(18) ANTITRUST
CONSIDERATIONS.—Unless
necessary or appropriate to achieve the purposes of
this Act, the board of trade shall endeavor to
avoid—
‘‘(A) adopting any rules or taking any ac-
tions that result in any unreasonable restraints
of trade; or
‘‘(B) imposing any material anticompeti-
tive burden on trading on the contract market.
‘‘(e) CURRENT AGRICULTURAL COMMODITIES.—
‘‘(1) Subject to paragraph (2) of this sub-
section, a contract for purchase or sale for future
delivery of an agricultural commodity enumerated in
section 1a(4) that is available for trade on a con-
tract market, as of the date of the enactment of this
subsection, may be traded only on a contract market
designated under this section.
‘‘(2) In order to promote responsible economic
or financial innovation and fair competition, the
Commission, on application by any person, after no-
tice and public comment and opportunity for hear-
ing, may prescribe rules and regulations to provide
for the offer and sale of contracts for future delivery
or options on such contracts 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 requirements of sections 4(a)
and 5, a board of trade may elect to operate as a reg-
istered derivatives transaction execution facility if the fa-
cility is—
‘‘(1) designated as a contract market and meets
the requirements of this section; or
‘‘(2) registered as a derivatives transaction exe-
cution facility under subsection (c) of this section.
‘‘(b) REQUIREMENTS FOR TRADING.—
‘‘(1) IN
GENERAL.—A registered derivatives
transaction execution facility under subsection (a)
may trade any contract of sale of a commodity for
future delivery (or option on such a contract) on or
through the facility only by satisfying the require-
ments of this section.
‘‘(2) REQUIREMENTS
FOR
UNDERLYING
COM-
MODITIES.—A registered derivatives transaction exe-
cution facility may trade any contract of sale of a
commodity for future delivery (or option on such a
contract) only if—
‘‘(A) the underlying commodity has a near-
ly inexhaustible deliverable supply;
‘‘(B) the underlying commodity has a de-
liverable supply that is sufficiently large that
the contract is highly unlikely to be susceptible
to the threat of manipulation;
‘‘(C) the underlying commodity has no
cash market;
‘‘(D)(i) the contract is a security futures
product, and (ii) the registered derivatives
transaction execution facility is a national secu-
rities exchange registered under the Securities
Exchange Act of 1934;
‘‘(E) the Commission determines, based on
the market characteristics, surveillance history,
self-regulatory record, and capacity of the facil-
ity that trading in the contract (or option) is
highly unlikely to be susceptible to the threat of
manipulation; or
‘‘(F) except as provided in section 5(e)(2),
the underlying commodity is a commodity other
than an agricultural commodity enumerated in
section 1a(4), and trading access to the facility
is limited to eligible commercial entities trading
for their own account.
‘‘(3) ELIGIBLE TRADERS.—To trade on a reg-
istered derivatives transaction execution facility, a
person shall—
‘‘(A) be an eligible contract participant; or
‘‘(B) be a person trading through a futures
commission merchant that—
‘‘(i) is registered with the Commis-
sion;
‘‘(ii) is a member of a futures self-reg-
ulatory organization or, if the person
trades only security futures products on
the facility, a national securities associa-
tion registered under section 15A(a) of the
Securities Exchange Act of 1934;
‘‘(iii) is a clearing member of a de-
rivatives clearing organization; 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 mar-
ket shall, to the extent that the contract market also
operates a registered derivatives transaction execu-
tion 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 facility of the board of trade, identify
whether the electronic trading is taking place
on the contract market or the derivatives trans-
action execution facility.
‘‘(c) CRITERIA FOR REGISTRATION.—
‘‘(1) IN GENERAL.—To be registered as a reg-
istered derivatives transaction execution facility, the
board of trade shall be required to demonstrate to
the Commission only that the board of trade meets
the criteria specified in subsection (b) and this sub-
section.
‘‘(2) DETERRENCE OF ABUSES.—The board of
trade shall establish and enforce trading and partici-
pation rules that will deter abuses and has the ca-
pacity to detect, investigate, and enforce those rules,
including means to—
‘‘(A) obtain information necessary to per-
form the functions required under this section;
or
‘‘(B) use technological means to—
‘‘(i) provide market participants with
impartial access to the market; and
‘‘(ii) capture information that may be
used in establishing whether rule violations
have occurred.
‘‘(3) TRADING
PROCEDURES.—The board of
trade shall establish and enforce rules or terms and
conditions defining, or specifications detailing, trad-
ing procedures to be used in entering and executing
orders traded on the facilities of the board of trade.
The rules may authorize—
‘‘(A) transfer trades or office trades;
‘‘(B) an exchange of—
‘‘(i) futures in connection with a cash
commodity transaction;
‘‘(ii) futures for cash commodities; or
‘‘(iii) futures for swaps; or
‘‘(C) a futures commission merchant, act-
ing as principal or agent, to enter into or con-
firm the execution of a contract for the pur-
chase 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 transaction execution facility or a
derivatives clearing organization.
‘‘(4) 
FINANCIAL
INTEGRITY
OF
TRANS-
ACTIONS.—The board of trade shall establish and
enforce rules or terms and conditions providing for
the financial integrity of transactions entered on or
through the facilities of the board of trade, and rules
or terms and conditions to ensure the financial in-
tegrity of any futures commission merchants and in-
troducing brokers and the protection of customer
funds.
‘‘(d) CORE PRINCIPLES FOR REGISTERED DERIVA-
TIVES TRANSACTION EXECUTION FACILITIES.—
‘‘(1) IN GENERAL.—To maintain the registra-
tion of a board of trade as a derivatives transaction
execution facility, a board of trade shall comply with
the core principles specified in this subsection. The
board of trade shall have reasonable discretion in es-
tablishing the manner in which the board of trade
complies with the core principles.
‘‘(2) COMPLIANCE WITH RULES.—The board of
trade shall monitor and enforce the rules of the fa-
cility, 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 orderly trading in the contract and
to maintain an orderly market while providing any
necessary trading information to the Commission to
allow the Commission to discharge the responsibil-
ities of the Commission under the Act.
‘‘(4) DISCLOSURE
OF
GENERAL
INFORMA-
TION.—The board of trade shall disclose publicly
and to the Commission information concerning—
‘‘(A) contract terms and conditions;
‘‘(B) trading conventions, mechanisms, and
practices;
‘‘(C) financial integrity protections; and
‘‘(D) other information relevant to partici-
pation in trading on the facility.
‘‘(5) DAILY PUBLICATION OF TRADING INFOR-
MATION.—The board of trade shall make public
daily information on settlement prices, volume, open
interest, and opening and closing ranges for con-
tracts traded on the facility if the Commission deter-
mines that the contracts perform a significant price
discovery function for transactions in the cash mar-
ket for the commodity underlying the contracts.
‘‘(6) FITNESS STANDARDS.—The board of trade
shall establish and enforce appropriate fitness stand-
ards for directors, members of any disciplinary com-
mittee, members, and any other persons with direct
access to the facility, including any parties affiliated
with any of the persons described in this paragraph.
‘‘(7) CONFLICTS OF INTEREST.—The board of
trade shall establish and enforce rules to minimize
conflicts of interest in the decision making process
of the derivatives transaction execution facility and
establish a process for resolving such conflicts of in-
terest.
‘‘(8) RECORDKEEPING.—The board of trade
shall maintain records of all activities related to the
business of the derivatives transaction execution fa-
cility in a form and manner acceptable to the Com-
mission for a period of 5 years.
‘‘(9) 
ANTITRUST
CONSIDERATIONS.—Unless
necessary or appropriate to achieve the purposes of
this Act, the board of trade shall endeavor to
avoid—
‘‘(A) adopting any rules or taking any ac-
tions that result in any unreasonable restraint
of trade; or
‘‘(B) imposing any material anticompeti-
tive burden on trading on the derivatives trans-
action execution facility.
‘‘(e) USE OF BROKER-DEALERS, DEPOSITORY INSTI-
TUTIONS, AND FARM CREDIT SYSTEM INSTITUTIONS AS
INTERMEDIARIES.—
‘‘(1) IN
GENERAL.—With respect to trans-
actions other than transactions in security futures
products, a registered derivatives transaction execu-
tion facility may by rule allow a broker-dealer, de-
pository institution, or institution of the Farm Cred-
it System that meets the requirements of paragraph
(2) to—
‘‘(A) act as an intermediary in trans-
actions executed on the facility on behalf of cus-
tomers of the broker-dealer, depository institu-
tion, or institution of the Farm Credit System;
and
‘‘(B) receive funds of customers to serve as
margin or security for the transactions.
‘‘(2) REQUIREMENTS.—The requirements re-
ferred to in paragraph (1) are that—
‘‘(A) the broker-dealer be in good standing
with the Securities and Exchange Commission,
or the depository institution or institution of
the Farm Credit System be in good standing
with Federal bank regulatory agencies (includ-
ing the Farm Credit Administration), as appli-
cable; and
‘‘(B) if the broker-dealer, depository insti-
tution, or institution of the Farm Credit Sys-
tem carries or holds customer accounts or funds
for transactions on the derivatives transaction
execution facility for more than 1 business day,
the broker-dealer, depository institution, or in-
stitution of the Farm Credit System is reg-
istered as a futures commission merchant and
is a member of a registered futures association.
‘‘(3) IMPLEMENTATION.—The Commission shall
cooperate and coordinate with the Securities and Ex-
change Commission, the Secretary of the Treasury,
and Federal banking regulatory agencies (including
the Farm Credit Administration) in adopting rules
and taking any other appropriate action to facilitate
the implementation of this subsection.
‘‘(f ) SEGREGATION
OF CUSTOMER FUNDS.—Not
later than 180 days after the date of the enactment of
the Commodity Futures Modernization Act of 2000, con-
sistent with regulations adopted by the Commission, a reg-
istered derivatives transaction execution facility may au-
thorize a futures commission merchant to offer any cus-
tomer of the futures commission merchant that is an eligi-
ble contract participant the right to not segregate the cus-
tomer funds of the customer that are carried with the fu-
tures commission merchant for purposes of trading on or
through the facilities of the registered derivatives trans-
action execution facility.
‘‘(g) ELECTION TO TRADE EXCLUDED AND EXEMPT
COMMODITIES.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b)(2) of this section, a board of trade that is or
elects to become a registered derivatives transaction
execution facility may trade on the facility any
agreements, contracts, or transactions involving ex-
cluded or exempt commodities other than securities,
except contracts of sale for future delivery of exempt
securities under section 3(a)(12) of the Securities
Exchange Act of 1934 as in effect on the date of the
enactment of the Futures Trading Act of 1982, that
are otherwise excluded from this Act under section
2(c), 2(d), or 2(g) of this Act, or exempt under sec-
tion 2(h) of this Act.
‘‘(2) EXCLUSIVE JURISDICTION OF THE COM-
MISSION.—The Commission shall have exclusive ju-
risdiction over agreements, contracts, or transactions
described in paragraph (1) to the extent that the
agreements, contracts, or transactions are traded on
a derivatives transaction execution facility.’’.
SEC. 112. DERIVATIVES CLEARING.
(a) IN GENERAL.—Subtitle A of title IV of the Fed-
eral Deposit Insurance Corporation Improvement Act of
1991 is amended—
(1) by inserting before the section heading for
section 401, the following new heading:
‘‘CHAPTER 1—BILATERAL AND CLEARING
ORGANIZATION NETTING’’;
(2) in section 402, by striking ‘‘this subtitle’’
and inserting ‘‘this chapter’’; and
(3) by inserting after section 407, the following
new chapter:
‘‘CHAPTER 2—MULTILATERAL CLEARING
ORGANIZATIONS
‘‘SEC. 408. DEFINITIONS.
For purposes of this chapter, the following definitions
shall apply:
‘‘(1) MULTILATERAL
CLEARING
ORGANIZA-
TION.—The term ‘multilateral clearing organization’
means a system utilized by more than two partici-
pants in which the bilateral credit exposures of par-
ticipants arising from the transactions cleared are
effectively eliminated and replaced by a system of
guarantees, insurance, or mutualized risk of loss.
‘‘(2) OVER-THE-COUNTER DERIVATIVE INSTRU-
MENT.—The term ‘over-the-counter derivative in-
strument’ includes—
‘‘(A) any agreement, contract, or trans-
action, including the terms and conditions in-
corporated by reference in any such agreement,
contract, or transaction, which is an interest
rate swap, option, or forward agreement, in-
cluding a rate floor, rate cap, rate collar, cross-
currency rate swap, basis swap, and forward
rate agreement; a same day-tomorrow, tomor-
row-next, forward, or other foreign exchange or
precious metals agreement; a currency swap,
option, or forward agreement; an equity index
or equity swap, option, or forward agreement; a
debt index or debt swap, option, or forward
agreement; a credit spread or credit swap, op-
tion, or forward agreement; a commodity index
or commodity swap, option, or forward agree-
ment; and a weather swap, weather derivative,
or weather option;
‘‘(B) any agreement, contract or trans-
action similar to any other agreement, contract,
or transaction referred to in this clause that is
presently, or in the future becomes, regularly
entered into by parties that participate in swap
transactions (including terms and conditions in-
corporated by reference in the agreement) and
that is a forward, swap, or option on one or
more occurrences of any event, rates, cur-
rencies, commodities, equity securities or other
equity instruments, debt securities or other debt
instruments, economic or other indices or meas-
ures of economic or other risk or value;
‘‘(C) any agreement, contract, or trans-
action excluded from the Commodity Exchange
Act under section 2(c), 2(d), 2(f ), or 2(g) of
such Act, or exempted under section 2(h) or
4(c) of such Act; and
‘‘(D) any option to enter into any, or any
combination of, agreements, contracts or trans-
actions referred to in this subparagraph.
‘‘(3) OTHER DEFINITIONS.—The terms ‘insured
State nonmember bank’, ‘State member bank’, and
‘affiliate’ have the same meanings as in section 3 of
the Federal Deposit Insurance Act.
‘‘SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.
‘‘(a) IN GENERAL.—Except with respect to clearing
organizations described in subsection (b), no person may
operate a multilateral clearing organization for over-the-
counter derivative instruments, or otherwise engage in ac-
tivities that constitute such a multilateral clearing organi-
zation unless the person is a national bank, a State mem-
ber bank, an insured State nonmember bank, an affiliate
of a national bank, a State member bank, or an insured
State nonmember bank, or a corporation chartered under
section 25A of the Federal Reserve Act.
‘‘(b) CLEARING
ORGANIZATIONS.—Subsection (a)
shall not apply to any clearing organization that—
‘‘(1) is registered as a clearing agency under
the Securities Exchange Act of 1934;
‘‘(2) is registered as a derivatives clearing orga-
nization under the Commodity Exchange Act; or
‘‘(3) is supervised by a foreign financial regu-
lator that the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System,
the Federal Deposit Insurance Corporation, the Se-
curities and Exchange Commission, or the Com-
modity Futures Trading Commission, as applicable,
has determined satisfies appropriate standards.’’.
(b) RESOLUTION OF CLEARING BANKS.—The Fed-
eral Reserve Act (12 U.S.C. 221 et seq.) is amended by
inserting after section 9A the following new section:
‘‘SEC. 9B. RESOLUTION OF CLEARING BANKS.
‘‘(a) CONSERVATORSHIP OR RECEIVERSHIP.—
‘‘(1) APPOINTMENT.—The Board may appoint
a conservator or receiver to take possession and con-
trol of any uninsured State member bank which op-
erates, or operates as, a multilateral clearing organi-
zation pursuant to section 409 of the Federal De-
posit Insurance Corporation Improvement Act of
1991 to the same extent and in the same manner as
the Comptroller of the Currency may appoint a con-
servator or receiver for a national bank.
‘‘(2) POWERS.—The conservator or receiver for
an uninsured State member bank referred to in
paragraph (1) shall exercise the same powers, func-
tions, and duties, subject to the same limitations, as
a conservator or receiver for a national bank.
‘‘(b) BOARD AUTHORITY.—The Board shall have the
same authority with respect to any conservator or receiver
appointed under subsection (a), and the uninsured State
member bank for which the conservator or receiver has
been appointed, as the Comptroller of the Currency has
with respect to a conservator or receiver for a national
bank and the national bank for which the conservator or
receiver has been appointed.
‘‘(c) BANKRUPTCY PROCEEDINGS.—The Board (in
the case of an uninsured State member bank which oper-
ates, or operates as, such a multilateral clearing organiza-
tion) may direct a conservator or receiver appointed for
the bank to file a petition pursuant to title 11, United
States Code, in which case, title 11, United States Code,
shall apply to the bank in lieu of otherwise applicable Fed-
eral or State insolvency law.’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS TO
TITLE 11, UNITED STATES CODE.—
(1) BANKRUPTCY
CODE
DEBTORS.—Section
109(b)(2) of title 11, United States Code, is amend-
ed by striking ‘‘; or’’ and inserting the following: ‘‘,
except that an uninsured State member bank, or a
corporation organized under section 25A of the Fed-
eral Reserve Act, which operates, or operates as, a
multilateral clearing organization pursuant to sec-
tion 409 of the Federal Deposit Insurance Corpora-
tion Improvement Act of 1991 may be a debtor if
a petition is filed at the direction of the Board of
Governors of the Federal Reserve System; or’’.
(2) CHAPTER 7 DEBTORS.—Section 109(d) of
title 11, United States Code, is amended to read as
follows:
‘‘(d) Only a railroad, a person that may be a debtor
under chapter 7 of this title (except a stockbroker or a
commodity broker), and an uninsured State member bank,
or a corporation organized under section 25A of the Fed-
eral Reserve Act, which operates, or operates as, a multi-
lateral clearing organization pursuant to section 409 of
the Federal Deposit Insurance Corporation Improvement
Act of 1991 may be a debtor under chapter 11 of this
title.’’.
(3) DEFINITION OF FINANCIAL INSTITUTION.—
Section 101(22) of title 11, United States Code, is
amended to read as follows:
‘‘(22) the term ‘financial institution’—
‘‘(A) means—
‘‘(i) a Federal reserve bank or an en-
tity (domestic or foreign) that is a com-
mercial or savings bank, industrial savings
bank, savings and loan association, trust
company, or receiver or conservator for
such entity and, when any such Federal re-
serve bank, receiver, conservator, or entity
is acting as agent or custodian for a cus-
tomer in connection with a securities con-
tract, as defined in section 741 of this
title, the customer; or
‘‘(ii) in connection with a securities
contract, as defined in section 741 of this
title, an investment company registered
under the Investment Company Act of
1940; and
‘‘(B) includes any person described in sub-
paragraph (A) which operates, or operates as, a
multilateral clearing organization pursuant to
section 409 of the Federal Deposit Insurance
Corporation Improvement Act of 1991;’’.
(4) DEFINITION OF UNINSURED STATE MEM-
BER BANK.—Section 101 of title 11, United States
Code, is amended by inserting after paragraph (54)
the following new paragraph—
‘‘(54A) the term ‘uninsured State member bank’
means a State member bank (as defined in section 3 of
the Federal Deposit Insurance Act) the deposits of which
are not insured by the Federal Deposit Insurance Cor-
poration; and’’.
(5) SUBCHAPTER V OF CHAPTER 7.—
(A) IN GENERAL.—Section 103 of title 11,
United States Code, is amended—
(i) by redesignating subsections (e)
through (i) as subsections (f ) through ( j),
respectively; and
(ii) by inserting after subsection (d)
the following new subsection:
‘‘(e) SCOPE
OF APPLICATION.—Subchapter V of
chapter 7 of this title shall apply only in a case under
such chapter concerning the liquidation of an uninsured
State member bank, or a corporation organized under sec-
tion 25A of the Federal Reserve Act, which operates, or
operates as, a multilateral clearing organization pursuant
to section 409 of the Federal Deposit Insurance Corpora-
tion Improvement Act of 1991.’’.
(B) 
CLEARING
BANK
LIQUIDATION.—
Chapter 7 of title 11, United States Code, is
amended by adding at the end the following
new subchapter:
‘‘SUBCHAPTER V—CLEARING BANK
LIQUIDATION
‘‘§ 781. Definitions
‘‘For purposes of this subchapter, the following defi-
nitions shall apply:
‘‘(1) BOARD.—The term ‘Board’ means the
Board of Governors of the Federal Reserve System.
‘‘(2) DEPOSITORY INSTITUTION.—The term ‘de-
pository institution’ has the same meaning as in sec-
tion 3 of the Federal Deposit Insurance Act.
‘‘(3) CLEARING
BANK.—The term ‘clearing
bank’ means an uninsured State member bank, or a
corporation organized under section 25A of the Fed-
eral Reserve Act, which operates, or operates as, a
multilateral clearing organization pursuant to sec-
tion 409 of the Federal Deposit Insurance Corpora-
tion Improvement Act of 1991.
‘‘§ 782. Selection of trustee
‘‘(a) IN GENERAL.—
‘‘(1) 
APPOINTMENT.—Notwithstanding 
any
other provision of this title, the conservator or re-
ceiver who files the petition shall be the trustee
under this chapter, unless the Board designates an
alternative trustee.
‘‘(2) SUCCESSOR.—The Board may designate a
successor trustee if required.
‘‘(b) AUTHORITY
OF
TRUSTEE.—Whenever the
Board appoints or designates a trustee, chapter 3 and sec-
tions 704 and 705 of this title shall apply to the Board
in the same way and to the same extent that they apply
to a United States trustee.
‘‘§ 783. Additional powers of trustee
‘‘(a) DISTRIBUTION OF PROPERTY NOT OF THE ES-
TATE.—The trustee under this subchapter has power to
distribute property not of the estate, including distribu-
tions to customers that are mandated by subchapters III
and IV of this chapter.
‘‘(b) DISPOSITION
OF INSTITUTION.—The trustee
under this subchapter may, after notice and a hearing—
‘‘(1) sell the clearing bank to a depository insti-
tution or consortium of depository institutions
(which consortium may agree on the allocation of
the clearing bank among the consortium);
‘‘(2) merge the clearing bank with a depository
institution;
‘‘(3) transfer contracts to the same extent as
could a receiver for a depository institution under
paragraphs (9) and (10) of section 11(e) of the Fed-
eral Deposit Insurance Act;
‘‘(4) transfer assets or liabilities to a depository
institution; and
‘‘(5) transfer assets and liabilities to a bridge
bank as provided in paragraphs (1), (3)(A), (5), and
(6) of section 11(n) of the Federal Deposit Insur-
ance Act, paragraphs (9) through (13) of such sec-
tion, and subparagraphs (A) through (H) and sub-
paragraph (K) of paragraph (4) of such section
11(n), except that—
‘‘(A) the bridge bank to which such assets
or liabilities are transferred shall be treated as
a clearing bank for the purpose of this sub-
section; and
‘‘(B) any references in any such provision
of law to the Federal Deposit Insurance Cor-
poration shall be construed to be references to
the appointing agency and that references to
deposit insurance shall be omitted.
‘‘(c) CERTAIN TRANSFERS INCLUDED.—Any ref-
erence in this section to transfers of liabilities includes a
ratable transfer of liabilities within a priority class.
‘‘§ 784. Right to be heard
‘‘The Board or a Federal reserve bank (in the case
of a clearing bank that is a member of that bank) may
raise and may appear and be heard on any issue in a case
under this subchapter.’’.
(6) DEFINITIONS OF CLEARING ORGANIZATION,
CONTRACT MARKET, AND RELATED DEFINITIONS.—
(A) Section 761(2) of title 11, United
States Code, is amended to read as follows:
‘‘(2) ‘clearing organization’ means a derivatives
clearing organization registered under the Act;’’.
(B) Section 761(7) of title 11, United
States Code, is amended to read as follows:
‘‘(7) ‘contract market’ means a registered enti-
ty;’’.
(C) Section 761(8) of title 11, United
States Code, is amended to read as follows:
‘‘(8) ‘contract of sale’, ‘commodity’, ‘derivatives
clearing organization’, ‘future delivery’, ‘board of
trade’, ‘registered entity’, and ‘futures commission
merchant’ have the meanings assigned to those
terms in the Act;’’.
(d) CLERICAL AMENDMENT.—The table of sections
for chapter 7 of title 11, United States Code, is amended
by adding at the end the following new items:
‘‘SUBCHAPTER V—CLEARING BANK
LIQUIDATION
‘‘Sec.
‘‘781. Definitions.
‘‘782. Selection of trustee.
‘‘783. Additional powers of trustee.
‘‘784. Right to be heard.’’.
(e) RESOLUTION OF EDGE ACT CORPORATIONS.—
The 16th undesignated paragraph of section 25A of the
Federal Reserve Act (12 U.S.C. 624) is amended to read
as follows:
‘‘(16) APPOINTMENT OF RECEIVER OR CONSER-
VATOR.—
‘‘(A) IN GENERAL.—The Board may ap-
point a conservator or receiver for a corporation
organized under the provisions of this section to
the same extent and in the same manner as the
Comptroller of the Currency may appoint a con-
servator or receiver for a national bank, and the
conservator or receiver for such corporation
shall exercise the same powers, functions, and
duties, subject to the same limitations, as a
conservator or receiver for a national bank.
‘‘(B) 
EQUIVALENT
AUTHORITY.—The
Board shall have the same authority with re-
spect to any conservator or receiver appointed
for a corporation organized under the provisions
of this section under this paragraph and any
such corporation as the Comptroller of the Cur-
rency has with respect to a conservator or re-
ceiver of a national bank and the national bank
for which a conservator or receiver has been ap-
pointed.
‘‘(C) TITLE
PETITIONS.—The Board
may direct the conservator or receiver of a cor-
poration organized under the provisions of this
section to file a petition pursuant to title 11,
United States Code, in which case, title 11,
United States Code, shall apply to the corpora-
tion in lieu of otherwise applicable Federal or
State insolvency law.’’.
(f ) 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 of
this Act, the following:
‘‘SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS.
‘‘(a) REGISTRATION REQUIREMENT.—It shall be un-
lawful for a derivatives clearing organization, unless reg-
istered with the Commission, directly or indirectly to make
use of the mails or any means or instrumentality of inter-
state commerce to perform the functions of a derivatives
clearing organization described in section 1a(9) of this Act
with respect to a contract of sale of a commodity for fu-
ture delivery (or option on such a contract) or option on
a commodity, in each case unless the contract or option—
‘‘(1) is excluded from this Act by section
2(a)(1)(C)(i), 2(c), 2(d), 2(f ), or 2(g) of this Act or
title IV of the Commodity Futures Modernization
Act of 2000, or exempted under section 2(h) or 4(c)
of this Act; or
‘‘(2) is a security futures product cleared by a
clearing agency registered under the Securities Ex-
change Act of 1934.
‘‘(b) VOLUNTARY
REGISTRATION.—A derivatives
clearing organization that clears agreements, contracts, or
transactions excluded from this Act by section 2(c), 2(d),
2(f ), or 2(g) of this Act or title IV of the Commodity Fu-
tures Modernization Act of 2000, or exempted under sec-
tion 2(h) or 4(c) of this Act, or other over-the-counter de-
rivative instruments (as defined in the Federal Deposit In-
surance Corporation Improvement Act of 1991) may reg-
ister with the Commission as a derivatives clearing organi-
zation.
‘‘(c) REGISTRATION OF DERIVATIVES CLEARING OR-
GANIZATIONS.—
‘‘(1) APPLICATION.—A person desiring to reg-
ister as a derivatives clearing organization shall sub-
mit to the Commission an application in such form
and containing such information as the Commission
may require for the purpose of making the deter-