I 
109TH CONGRESS 
1ST SESSION H. R. 1638
To reinstate regulation under the Commodity Exchange Act of futures con-
tracts, swaps, and hybrid instruments involving natural gas, to require 
review and approval by the Commodity Futures Trading Commission 
of rules applicable to transactions involving natural gas, to provide for 
the reporting of large positions in natural gas, to provide for cash 
settlement for certain contracts of sale for future delivery of natural 
gas, to temporarily prohibit members of the Commodity Futures Trading 
Commission from going to work for organizations subject to regulation 
by the Commission, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 14, 2005
Mr. GRAVES (for himself and Mr. BARROW) introduced the following bill; 
which was referred to the Committee on Agriculture 
A BILL 
To reinstate regulation under the Commodity Exchange Act 
of futures contracts, swaps, and hybrid instruments in-
volving natural gas, to require review and approval by 
the Commodity Futures Trading Commission of rules 
applicable to transactions involving natural gas, to pro-
vide for the reporting of large positions in natural gas, 
to provide for cash settlement for certain contracts of 
sale for future delivery of natural gas, to temporarily 
prohibit members of the Commodity Futures Trading 
Commission from going to work for organizations subject 
to regulation by the Commission, 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. 
This Act may be cited as the ‘‘Commodities Exchange 
Improvements Act of 2005’’. 
SEC. 2. REINSTATEMENT OF REGULATION UNDER THE 
COMMODITY EXCHANGE ACT OF FUTURES 
CONTRACTS, SWAPS, AND HYBRID INSTRU-
MENTS INVOLVING NATURAL GAS. 
(a) NATURAL GAS TREATED AS AN AGRICULTURAL 
COMMODITY.—Section 1a(4) of the Commodity Exchange 
Act (7 U.S.C. 1a(4)) is amended—
(1) by inserting ‘‘natural gas,’’ before ‘‘live-
stock,’’; and 
(2) by adding at the end the following: ‘‘For 
purposes of this Act and any other Act referencing 
this paragraph, natural gas shall be considered an 
agricultural commodity enumerated in this para-
graph.’’. 
(b) HYBRID INSTRUMENTS.—Section 405(a) of the 
Commodity Futures Modernization Act of 2000 (7 U.S.C. 
27c(a)) is amended by inserting ‘‘not having one or more 
payments indexed to the value, level, or rate of, or pro-
viding delivery of, natural gas)’’ after ‘‘hybrid instru-
ment’’.
(c) ELIMINATION OF AUTHORITY TO EXEMPT NAT-
URAL GAS TRANSACTIONS FROM STATUTORY REQUIRE-
MENTS.—Section 4(c) of the Commodity Exchange Act (7 
U.S.C. 6(c)) is amended by adding at the end the fol-
lowing: 
‘‘(6) INAPPLICABILITY TO CERTAIN CONTRACTS 
INVOLVING
NATURAL
GAS.—The preceding provi-
sions of this subsection shall not apply to an agree-
ment, contract, or transaction involving natural 
gas.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect 90 days after the date of the 
enactment of this Act. 
SEC. 3. REGULATORY REVIEW OF RULE CHANGES AND 
RULES APPLICABLE TO TRANSACTIONS IN-
VOLVING NATURAL GAS. 
(a) REGULATORY REVIEW OF RULE CHANGES AP-
PLICABLE TO NATURAL GAS TRANSACTIONS.—
(1) IN GENERAL.—Section 5 of the Commodity 
Exchange Act (7 U.S.C. 7) is amended by adding at 
the end the following: 
‘‘(f) REGULATORY REVIEW OF RULE CHANGES AP-
PLICABLE TO NATURAL GAS TRANSACTIONS.—
‘‘(1) PRIOR APPROVAL OF RULE CHANGES RE-
QUIRED.—Notwithstanding any other provision of
this section, a board of trade that is a designated 
contract market shall not, without prior approval of 
the Commission, change a rule, regulation, or con-
tract specification of the board of trade that applies 
to any agreement, contract, or transactions involving 
natural gas. 
‘‘(2) CONSIDERATION.—The Commission shall 
not approve a proposal to make such a change, un-
less—
‘‘(A) a period of at least 60 days has 
elapsed since the Commission received the pro-
posal; 
‘‘(B) the Commission has evaluated the 
economic effects that may result from the 
change; 
‘‘(C) the change, if implemented, would be 
consistent with the core principles specified in 
section 5(d); and 
‘‘(D) for not less than 30 days in the 60-
day period, the Commission has sought public 
comment on the proposal. 
‘‘(3) CRITERIA.—The Commission shall not 
consider such a change to be consistent with the 
core principles specified in section 5(d), unless—
‘‘(A) the rules, regulations, or contract 
specifications limit the maximum daily price 
fluctuation applicable to the agreement, con-
tract, or transaction to not more than 8 percent 
of the settlement price of the prior day’s trad-
ing in the agreement, contract, or transaction; 
and 
‘‘(B) the Commission finds on the basis of 
substantial evidence that the resulting rules, 
regulations, and contract specifications referred 
to in paragraph (1) are consistent with the core 
principles.’’. 
(2) SENSE OF THE CONGRESS.—It is the sense 
of the Congress that the Commodity Futures Trad-
ing Commission should evaluate all public comments 
submitted to the Commission in response to a pro-
posal to change a rule, regulation, or contract speci-
fication of a board of trade that applies to agree-
ments, contracts, or transactions involving natural 
gas, based on how the change relates to the core 
principles specified in section 5(d) of the Commodity 
Exchange Act. 
(3) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall take effect 90 days after the 
date of the enactment of this Act.
(b) REGULATORY REVIEW OF RULES APPLICABLE 
TO TRANSACTIONS INVOLVING NATURAL GAS.—
(1) IN
GENERAL.—Not later than 180 days 
after the date of the enactment of this Act, the 
Commodity Futures Trading Commission (in this 
subsection referred to as the ‘‘Commission’’) shall 
complete a review of the rules, regulations, and con-
tract specifications of each board of trade (as de-
fined in section 1a(2) of the Commodity Exchange 
Act) designated as a contract market under section 
5 of such Act, in force as of the date of the enact-
ment of this subsection, that apply to any agree-
ment, contract, or transaction involving natural gas 
subject to the rules of the contract market. 
(2) CONSIDERATION.—In conducting the review 
required by paragraph (1), the Commission shall—
(A) seek public comment for a period of 
not less than 30 days; and 
(B) determine that each rule, regulation, 
and contract specification is consistent with the 
core principles specified in section 5(d) of the 
Commodity Exchange Act, or require that the 
rule, regulation, or contract specification be 
changed to make it so consistent.
(3) CRITERIA.—The Commission shall not con-
sider the rules, regulations, and contract specifica-
tions that apply to an agreement, contract, or trans-
action involving natural gas to be consistent with the 
core principles specified in section 5(d) of the Com-
modity Exchange Act, unless—
(A) the rules, regulations, or contract spec-
ifications limit the maximum daily price fluc-
tuation applicable to the agreement, contract, 
or transaction to not more than 8 percent of 
the settlement price of the prior day’s trading 
in the agreement, contract, or transaction; and 
(B) the Commission finds on the basis of 
substantial evidence that the rules, regulations, 
and contract specifications are consistent with 
the core principles. 
SEC. 4. BACK-UP REPORTING OF LARGE POSITIONS IN-
VOLVING NATURAL GAS. 
(a) IN GENERAL.—Section 4a of the Commodity Ex-
change Act (7 U.S.C. 6a) is amended—
(1) in subsection (e), by striking the last sen-
tence; and 
(2) by adding at the end the following: 
‘‘(f) REPORTING OF LARGE POSITIONS INVOLVING 
NATURAL GAS.—
‘‘(1) IN
GENERAL.—In accordance with such 
rules as shall be prescribed by the Commission, any 
person holding, maintaining, or controlling any posi-
tion in any agreement, contract, or transaction made 
in connection with any contract for the present or 
for future delivery of natural gas, any position in 
any agreement, contract, or transaction having one 
or more payments indexed to the value, level, or rate 
of providing natural gas for the present or future 
delivery, or any quantity of natural gas that is read-
ily available for delivery shall file such reports re-
garding the position or quantity as the Commission 
determines to be necessary and appropriate to pre-
vent or deter actual or potential manipulation of the 
price of contracts of sale of natural gas for future 
delivery. Notwithstanding any other provision of law, 
including any provision of law that excludes any 
agreement, contract, transaction, or trading facility 
from this Act (other than as specifically provided in 
paragraph (2)), any rule, bylaw, or other require-
ment to file any report regarding a position in any 
agreement, contract, or transaction involving natural 
gas or quantity of natural gas prescribed in accord-
ance with this subsection shall apply to any person 
holding any such position or quantity.
‘‘(2) NO DUPLICATE REPORTS.—Except as oth-
erwise provided in this paragraph, the rules pre-
scribed under paragraph (1) shall not apply to any 
holding or position that otherwise is required to be 
reported to any agency of the United States Govern-
ment if the report would otherwise satisfy the re-
quirements of this subsection and the report is avail-
able to the Commission at the request of the Com-
mission. Notwithstanding the preceding sentence, 
any report of any such holding or position to any 
agency of the United States shall constitute a state-
ment, report, or document required for purposes of 
section 9. 
‘‘(3) CRITERIA FOR RULES.—
‘‘(A) IN
GENERAL.—In prescribing rules 
under paragraph (1), the Commission shall con-
sider—
‘‘(i) the purposes for monitoring large 
positions and quantities in natural gas; 
‘‘(ii) the effect of such reporting re-
quirements on the efficiency and liquidity 
of the market for natural gas and the mar-
ket for any agreement, contract, or trans-
action made in connection with any con-
tract for the present or for future delivery 
of natural gas; and 
‘‘(iii) the costs and burden on the per-
sons that would be required to file such re-
ports. 
‘‘(B) FREQUENCY.—The Commission shall 
require reports under paragraph (1) only in cir-
cumstances where manipulation is suspected, 
except that the Commission may prescribe rules 
requiring regular or continuous reporting if the 
Commission finds that such reporting would 
help to deter or to detect manipulation in any 
market for any agreement, contract, or trans-
action made in connection with any contract for 
the present or for future delivery of natural 
gas. 
‘‘(C) FILING REQUIREMENTS.—Reports re-
quired under paragraph (1) shall be filed with 
the Commission in accordance with such re-
quirements regarding the form, timing, and 
manner of filing such reports, as the Commis-
sion may prescribe by rule. 
‘‘(D) RECORDKEEPING REQUIREMENTS.—
Rules prescribed under paragraph (1) may re-
quire any person holding, maintaining, or con-
trolling a quantity of natural gas that is readily 
available for delivery, or any position in any 
agreement, contract, or transaction made in 
connection with any agreement, contract, or 
transaction for the present or future delivery of 
natural gas or any contract requiring one or 
more payments indexed to the value, level, or 
rate of, or providing for the present or future 
delivery of natural gas to make and keep for 
prescribed periods such records as the Commis-
sion determines are necessary or appropriate to 
ensure that persons covered by reporting re-
quirements of paragraph (1) can comply with 
the reporting requirements. 
‘‘(4) EXEMPTIONS.—Consistent with the public 
interest and the purposes of this section, the Com-
mission by rule or by order may exempt, in whole or 
in part, conditionally or unconditionally, any person 
or class of persons from the requirements of this 
subsection. 
‘‘(5) OTHER RULES NOT AFFECTED.—This sub-
section shall not be interpreted to prohibit or impair 
the adoption by any board of trade licensed, des-
ignated, or registered by the Commission of any 
bylaw, rule, regulation, or resolution requiring re-
ports of positions in any agreement, contract, or 
transaction made in connection with a contract of 
sale for future delivery of natural gas (including 
such a contract of sale), including any bylaw, rule, 
regulation, or resolution pertaining to filing or rec-
ordkeeping, which may be held by any person sub-
ject to the rules of the board of trade, except that 
any bylaw, rule, regulation, or resolution established 
by the board of trade shall not be inconsistent with 
any requirement prescribed by the Commission 
under this subsection. 
‘‘(g) VIOLATION OF CERTAIN RULES IS A VIOLATION 
OF THIS ACT.—It shall be a violation of this Act for any 
person to violate any bylaw, rule, regulation, or resolution 
of any board of trade licensed, designated, or registered 
by the Commission that—
‘‘(1) fixes limits on the amount of trading 
which may be done or positions which may be held 
by any person under contracts of sale of any com-
modity for future delivery or under options on such 
contracts or commodities; or 
‘‘(2) establishes requirements regarding reports 
of any position or quantity which may be held by 
any person (including any requirements pertaining
to filing and keeping records of reports of any such 
positions), 
if the bylaw, rule, regulation, or resolution has been ap-
proved by the Commission: Provided, That section 9(c) 
shall apply only to those who knowingly violate such lim-
its.’’. 
(b) DEADLINE.—The Commission shall prescribe the 
rules required by section 4a(f) of the Commodity Ex-
change Act not later than 180 days after the date of the 
enactment of this Act. 
(c) CONFORMING AMENDMENTS.—Section 2 of the 
Commodity Exchange Act (7 U.S.C. 2) is amended—
(1) in each of subsections (g) and (h)(4)(A), by 
inserting ‘‘4a(f),’’ before ‘‘5a (to’’; 
(2) in subsection (h)(2)(A), by striking ‘‘5b’’ 
and inserting ‘‘4a(f), 5b,’’; and 
(3) in subsection (i)(2), by inserting ‘‘4a(f) of 
this Act,’’ before ‘‘5a of’’. 
SEC. 5. ADDITIONAL AUTHORITY TO PROVIDE FOR CASH 
SETTLEMENT OF TRANSACTIONS INVOLVING 
NATURAL GAS. 
(a) IN GENERAL.—Section 4a of the Commodity Ex-
change Act (7 U.S.C. 6a) is further amended by adding 
at the end the following: