I
106TH CONGRESS
2D SESSION
H. R. 4541
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
MAY 25, 2000
Mr. EWING introduced the following bill; which was referred to the Committee
on Agriculture, and in addition to the Committees on Banking and Fi-
nancial Services, and Commerce, for a period to be subsequently deter-
mined 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.
Sec. 3. Definitions.
Sec. 4. Agreements, contracts, and transactions in foreign currency, govern-
ment securities, and certain other commodities.
Sec. 5. Legal certainty for excluded derivative transactions.
Sec. 6. Excluded electronic trading facilities.
Sec. 7. Hybrid instruments.
Sec. 8. Futures on securities.
Sec. 9. Transactions in exempt commodities.
Sec. 10. Protection of the public interest.
Sec. 11. Prohibited transactions.
Sec. 12. Designation of boards of trade as contract markets.
Sec. 13. Derivatives transaction execution facilities.
Sec. 14. Derivatives clearing organizations.
Sec. 15. Common provisions applicable to registered entities.
Sec. 16. Exempt boards of trade.
Sec. 17. Suspension or revocation of designation as contract market.
Sec. 18. Authorization of appropriations.
Sec. 19. Preemption.
Sec. 20. Predispute resolution agreements for institutional customers.
Sec. 21. Consideration of costs and benefits and antitrust laws.
Sec. 22. Contract enforcement between eligible counterparties.
Sec. 23. Rule of construction.
Sec. 24. Technical and conforming amendments.
Sec. 25. Effective date.
SEC. 2. PURPOSES.
The purposes of this Act are—
(1) to reauthorize the Commodity Exchange Act
(7 U.S.C. 1 et seq.);
(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 in its oversight of the fu-
tures markets;
(4) to provide a legislative and regulatory
framework for allowing the trading of futures on se-
curities;
(5) to provide the Commission jurisdiction over
the retail foreign exchange market and bucket shops
that are not 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.
SEC. 3. DEFINITIONS.
Section 1a of the Commodity Exchange Act (7 U.S.C.
1a) is amended—
(1) by redesignating paragraphs (8) through
(12), (13) through (15), and (16) as paragraphs
(16) through (20), (22) through (24), and (29), re-
spectively;
(2) by inserting after paragraph (7) the fol-
lowing:
‘‘(8) 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 a derivative agreement,
contract, or transaction (other than a secu-
rity)—
‘‘(i) enables each party to the deriva-
tive agreement, contract, or transaction to
substitute, through novation or otherwise,
the credit of the derivatives clearing orga-
nization 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 parties in the derivatives clearing orga-
nization; or
‘‘(iii) otherwise provides clearing serv-
ices or arrangements that mutualize or
transfer among parties in the derivatives
clearing organization the credit risk arising
‘‘(10) ELIGIBLE CONTRACT PARTICIPANT.—The
term ‘eligible contract participant’ means—
‘‘(A) acting for its own account—
‘‘(i) a financial institution;
‘‘(ii) an insurance company regulated
by a State (including a subsidiary or affil-
iate 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—
‘‘(aa) has a net worth ex-
ceeding $1,000,000; and
‘‘(bb) enters into an agree-
ment, contract, or transaction in
connection with the conduct of
the entity’s business or to man-
age the risk associated with an
asset or liability owned or in-
curred or reasonably likely to be
owned or incurred by the entity
in the conduct of the entity’s
business;
‘‘(vi) an employee benefit plan subject
to the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1001 et seq.)
or a foreign person performing a similar
role or function subject as such to foreign
regulation—
‘‘(I) that has total assets exceed-
ing $5,000,000; or
‘‘(II) the investment decisions of
which are made by—
‘‘(aa) an investment advisor
or commodity trading advisor
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
regulated by a State (including a
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);
‘‘(viii) 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);
‘‘(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) a natural person with total as-
sets exceeding $10,000,000;
‘‘(B)(i) a person described in any of
clauses (i) through (x) of subparagraph (A) or
in subparagraph (C), acting as broker or per-
forming an equivalent agency function on behalf
of another person described in subparagraph
(A) or (C); or
‘‘(ii) an investment adviser subject to regu-
lation under the Investment Advisors 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 any of clauses (i) through (x) of sub-
paragraph (A) or in subparagraph (C), in any
such case acting as investment manager or fi-
duciary (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;
‘‘(C) any other person that the Commis-
sion determines to be eligible in light of the fi-
nancial or other qualifications of the person.
‘‘(11) ENERGY COMMODITY.—The term ‘energy
commodity’ means coal, condensates, crude oil, elec-
tricity, natural gas, or natural gas liquids.
‘‘(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) a trust company; or
‘‘(H) a similarly regulated subsidiary or af-
filiate of an entity described in any of subpara-
graphs (A) through (F).’’;
(3) by inserting after paragraph (20) (as redes-
ignated by paragraph (1)) the following:
‘‘(21) HYBRID INSTRUMENT.—The term ‘hybrid
instrument’ means a deposit (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C.
1813)) offered by a financial institution, or a secu-
rity, having 1 or more payments indexed to the
value, level, or rate of 1 or more commodities.’’;
(4) by inserting after paragraph (24) (as redes-
ignated by paragraph (1)) the following:
‘‘(25) METAL
COMMODITY.—The term ‘metal
commodity’ means aluminum, copper, gold, palla-
dium, platinum, or silver.
‘‘(26) NONEXEMPT SECURITY.—The term ‘non-
exempt security’ means a security that is not an ex-
empted security under section 3 of the Securities
Act of 1933 or section 3(a)(12) of the Securities Ex-
change Act of 1934 (other than any municipal secu-
rity, as defined in section 3(a)(29) of the Securities
Exchange Act of 1934).
‘‘(27) 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.’
‘‘(28) 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 bona
fide principal-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 system; or
‘‘(ii) include disciplinary sanctions
other than the exclusion of participants
from trading.’’; and
(5) by adding at the end the following:
‘‘(30) 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; or
‘‘(C) a derivatives clearing organization
registered under section 5b.
‘‘(31) SECURITY.—The term ‘security’ has the
meaning given the term in section 3(a) of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78c(a)).
‘‘(32) 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
orders within a predetermined, nondis-
cretionary automated trade matching algo-
rithm;
‘‘(ii) a government securities dealer or
government securities broker, to the extent
that the dealer or broker executes or
trades agreements, contracts, or 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.’’.
SEC. 4. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN
FOREIGN CURRENCY, GOVERNMENT SECURI-
TIES, 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 5b
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 a financial
commodity; or
‘‘(G) mortgages or mortgage purchase
commitments.
‘‘(2) COMMISSION JURISDICTION.—
‘‘(A) 
AGREEMENTS, 
CONTRACTS, 
AND
TRANSACTIONS
THAT
ARE
FUTURES
TRADED
ON AN ORGANIZED EXCHANGE.—This Act ap-
plies to, and the Commission shall have juris-
diction over, an agreement, contract, or trans-
action described in paragraph (1) that is—
‘‘(i) a contract of sale of a commodity
for future delivery (or an option thereon),
or an option on a commodity (other than
foreign currency or a security), that is exe-
cuted or traded on an organized exchange;
or
‘‘(ii) an option on foreign currency
and is executed or traded on an organized
exchange that is not a national securities
exchange.
‘‘(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 for future de-
livery (or an option on such a contract);
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);
‘‘(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) concerning the finan-
cial or securities activities of which
the registered person makes and
keeps records under section 15C(b) or
17(h) of the Securities Exchange Act
of 1934 (15 U.S.C. 78o–5(b), 78q(h))
or section 4f(c)(2)(B) of this Act;
‘‘(IV) an insurance company that
is subject to State regulation (includ-
ing a subsidiary or affiliate 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).’’.
SEC. 5. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE
TRANSACTIONS.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) (as amended by section 4) is 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 5b or
12(e)(2)(B)) governs or applies to an agreement,
contract, or transaction in an excluded commodity
if—
‘‘(A) the agreement, contract, or trans-
action is entered into on a bona fide principal-
to-principal basis between parties trading for
their own accounts or as described in section
1a(10)(B)(ii) of this Act;
‘‘(B) the agreement, contract, or trans-
action is entered into only between persons that
are eligible contract participants (as defined in
sections 1a(10)(A), (B)(ii), and (C)) 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. 6. EXCLUDED ELECTRONIC TRADING FACILITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) (as amended by section 5) is 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 sections 2(d)(2) and
2(h)(1)(B) of this Act.
‘‘(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 an exempt board of trade, from estab-
lishing and operating an excluded electronic trading
facility excluded under this Act pursuant to para-
graph (1).’’.
SEC. 7. HYBRID INSTRUMENTS.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) (as amended by section 6) is 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 security
or depository instrument.
‘‘(2) PREDOMINANCE.—A hybrid instrument
shall be considered to be predominantly a security or
depository instrument 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 for future delivery
of a commodity (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.’’.
SEC. 8. FUTURES ON SECURITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) (as amended by section 7) is amended
by adding at the end the following:
‘‘(g) Notwithstanding any other provision of law:
‘‘(1) This Act shall not apply to and the Com-
mission shall have no jurisdiction to designate a
board of trade as a contract market for any trans-
action whereby any party to the transaction acquires
a put, call, or other option on 1 or more securities
(as defined in section 2(a)(1) of the Securities Act
of 1933 or section 3(a)(10) of the Securities Ex-
change Act of 1934, on the date of enactment of the
Futures Trading Act of 1982), including any group
or index of securities and any interest in or based
on the value of securities.
‘‘(2) Nothing in this subsection governs or ap-
plies to—
‘‘(A) an agreement, contract, or trans-
action in a commodity that is excluded under
subsection (c) or (d); or
‘‘(B) a hybrid instrument that is covered
by an exclusion under subsection (f) or an ex-
emption granted by the Commission under sec-
tion 4(c) (whether or not the hybrid instrument
is otherwise subject to this Act).
‘‘(3) Except as provided in paragraph (4) of
this subsection, or unless excluded by paragraph (2)
of this subsection, a person shall not offer to enter
into, enter into, or confirm the execution of any con-
tract of sale (or option on the contract) for future
delivery of any security or interest in or based on
the value of a nonexempt security.
‘‘(4)(A) Except as excluded by paragraph (2) of
this subsection, this Act shall apply to and the Com-
mission shall have exclusive jurisdiction with respect
to accounts, agreements (including any transaction
which 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), and transactions involving, and may designate
a board of trade as a contract market under section
5 or register the board of trade as a derivatives
transaction execution facility under section 5a in,
contracts of sale (or options on the contracts) for fu-
ture delivery of 1 or more securities (as defined in
section 2(a)(1) of the Securities Act of 1933 or sec-
tion 3(a)(10) of the Securities Exchange Act of
1934), including any group or index of securities
and any interest in or based on the value of securi-
ties.
‘‘(B) The Commission shall not designate a
board of trade as a contract market under section
5 or register a board of trade as a derivatives trans-
action execution facility under section 5a with re-
spect to any such contracts of sale (or options on the
contracts) for future delivery unless the board of
trade demonstrates and the Commission expressly
finds that the specific contract (or option on the
contract) with respect to which the application for
the designation or recognition has been made meets
the following requirements:
‘‘(i) Settlement of or delivery on the con-
tract (or option on the contract) shall be ef-
fected in cash or by means other than the
transfer or receipt of a nonexempt security.
‘‘(ii) SUSCEPTIBILITY TO PRICE MANIPULA-
TION.—Trading in a contract (or option on
such a contract) described in subparagraph (A)
shall not be readily susceptible to—
‘‘(I) manipulation of the price of the
contract (or option on such a contract); or
‘‘(II) causing or being used in the ma-
nipulation of the price of any underlying
security, option on a security, or option on
a group or index that includes a security.
‘‘(iii) If the contract is based on a single
nonexempt security, an option on the security
underlying the contract would meet all Securi-
ties and Exchange Commission requirements
for listing on a national securities exchange.
‘‘(iv) If the contract is based on any group
or index of nonexempt securities comprised of
fewer than 5 securities, or on an index in which
a single nonexempt security predominates, an
option on each security comprising the group or
index would meet all requirements for listing on
a national securities exchange.
‘‘(v) The contract will be traded on a
board of trade that establishes the level of mar-
gin for futures contracts (or options on the con-
tracts) based on a single nonexempt security,
an index of fewer than 5 nonexempt securities,
or an index in which a single nonexempt secu-
rity predominates, that are no less than the
level of margin on comparable option contracts
listed on any national securities exchange.
‘‘(vi) The contract will be traded on a
board of trade that prohibits a person who acts
as a floor broker for any contract of sale (or op-
tions on the contract) for future delivery of a
nonexempt security, an index based on fewer
than 5 nonexempt securities, or an index in
which a single nonexempt security predomi-
nates, from trading that contract for the bro-
ker’s own account during the same trading ses-
sion.
‘‘(vii) The contract will be traded on a
board of trade that collects, maintains, and
promptly provides to the Securities and Ex-
change Commission such information as the
Commission and the Securities and Exchange
Commission jointly consider necessary to per-
form the enforcement responsibilities described
in paragraph (6).
‘‘(5) The Commission shall consult with the Se-
curities and Exchange Commission with respect to
any application submitted by a board of trade for
designation as a contract market or derivatives
transaction execution facility with respect to any
contract of sale (or option on the contract) for fu-
ture delivery of a nonexempt security or a group or
index of such securities. If, not later than 15 days
after the consultation, the Securities and Exchange
Commission objects to the designation of a board of
trade as a contract market or derivatives transaction
execution facility in the contract (or option on the
contract) on the ground that any requirement of
paragraph (3) is not met, the Commission shall af-
ford the Securities and Exchange Commission an op-
portunity for an oral hearing to be transcribed be-
fore the Commission, and shall give appropriate
weight to the views of the Securities and Exchange
Commission. The oral hearing shall be held before
Commission action upon the application for the des-
ignation, and not less than 30 nor more than 45
days after the Securities and Exchange Commission
has objected. If such an oral hearing is held, the
Securities and Exchange Commission fails to with-
draw its objections, and the Commission issues an
order designating a board of trade as a contract
market or recognizes the board of trade as a deriva-
tives transaction execution facility with respect to
any such contract (or option on the contract), the
Securities and Exchange Commission may seek judi-
cial review of the order in accordance with the proce-
dural requirements set forth in section 6(c). If, pur-
suant to section 6, there is a hearing on the record
with respect to an application for such designation,
the Securities and Exchange Commission may par-
ticipate in that hearing as an interested party.
‘‘(6) Notwithstanding any other provision of
this Act, the Securities and Exchange Commission
may enforce against a person that purchases or sells
any contract of sale (or option on the contract) for
future delivery of any nonexempt security, any index
comprised of fewer than 5 nonexempt securities, or
any index in which a single nonexempt security pre-
dominates to the same extent as if the person had
purchased or sold an option on the security or index
under the following provisions of the securities laws
and regulations with respect to the following cat-
egories of conduct:
‘‘(A) Section 10(b) and 21A of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78j(b),
78u–1) with respect to insider trading.
‘‘(B) Section 16(b) of such Act (15 U.S.C.
78p(b)) with respect to unfair use of informa-
tion in short swing trading by a corporate in-
sider.
‘‘(C) Section 9 of such Act (15 U.S.C. 78i)
with respect to manipulation of securities
prices.
‘‘(D) Section 10(b) of such Act (15 U.S.C.
78J(b)) and section 204A of the Investment
Adviser’s Act of 1940 (15 U.S.C. 80b–4a) with
respect to frontrunning.
‘‘(E) Section 14 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78n) with re-
spect to the pricing and integrity of tender of-
fers.
‘‘(F) Rule 144 of the rules of the Securi-
ties and Exchange Commission (17 C.F.R.
230.144) with respect to trading in restricted
securities.
‘‘(7)(A) Notwithstanding any other provision of
this Act, any contract market or derivatives trans-
action execution facility in a stock or stock index fu-
tures contract (or option thereon) shall file with the
Board of Governors of the Federal Reserve System
any rule establishing or changing the levels of mar-
gin (initial and maintenance) for the nonexempt
stock or stock index futures contract (or option on
the contract).
‘‘(B) The Board may at any time request any
contract market or derivatives transaction execution
facility to set the level of margin for any stock or
stock index futures contract (or option on the con-
tract) at such levels as the Board in its judgment
determines are appropriate to preserve the financial
integrity of the contract market or derivatives trans-
action execution facility or its clearing system or to
prevent systemic risk. If the contract market or de-
rivatives transaction execution facility fails to do so
within the time specified by the Board in its request,
the Board may direct the contract market or deriva-
tives transaction execution facility to alter or supple-
ment the rules of the contract market or derivatives
transaction execution facility as specified in the re-
quest.
‘‘(C) Subject to such conditions as the Board
may determine, the Board may delegate any or all
of its authority under this paragraph to the Com-
mission or an intermarket margin board as provided
in subparagraph (D).
‘‘(D) INTERMARKET MARGIN BOARD.—
‘‘(i) ESTABLISHMENT.—With the concur-
rence of the Securities and Exchange Commis-
sion and the Commission, the Board may estab-
lish an intermarket margin board, consisting of
representatives of any or all of the three agen-
cies.
‘‘(ii) DUTIES.—The intermarket margin
board may set and maintain margin levels and
rules pertaining to margin for futures on a sin-
gle nonexempt security, an index of fewer than
5 nonexempt securities, or an index in which a
single nonexempt security predominates, listed
on a contract market or derivatives transaction
execution facility.
‘‘(E) This paragraph shall not be construed to
supersede or limit the authority granted to the Com-
mission in section 8a(9) to direct a contract market
or derivatives transaction execution facility, on find-
ing an emergency to exist, to raise temporary emer-
gency margin levels on any futures contract or op-
tion on the contract covered by this paragraph.
‘‘(F) Any action taken by the Board under this
paragraph, or by the Commission acting under the
delegation of authority under subparagraph (C), di-
recting a contract market or derivatives transaction
execution facility to alter or supplement a contract
market or derivatives transaction execution facility
rule shall be subject to review only in the United
States Court of Appeals for the judicial circuit in
which the party seeking review resides or has its
principal place of business, or in the United States
Court of Appeals for the District of Columbia Cir-
cuit. The review shall be based on the examination
of all information before the Board or the Commis-
sion, as the case may be, at the time the determina-
tion was made. The court reviewing the action of
the Board or the Commission shall not enter a stay
or order of mandamus unless the court determines,
after notice and a hearing before a panel of the
court, that the agency action complained of was ar-
bitrary, capricious, an abuse of discretion, or other-
wise not in accordance with law.
‘‘(8) This subsection shall not be construed to
prohibit—
‘‘(A) an agreement, contract, or trans-
action excluded from this Act by paragraph (2);
or
‘‘(B) any hybrid instrument that is covered
by the terms of any exemption granted by the
Commission under section 4(c) (whether or not
any such hybrid instrument is otherwise subject
to this Act).
‘‘(9)(A) No futures commission merchant or in-
troducing broker shall recommend to any customer
the purchase or sale of any contract of sale for fu-
ture delivery of a single nonexempt security, an
index of fewer than 5 nonexempt securities, or an
index in which a single nonexempt security predomi-
nates, unless the futures commission merchant or in-
troducing broker complies with the rules described in
subparagraph (B) of a registered futures association
of which such person is a member.
‘‘(B) Within 9 months of the date of enactment
of the Commodity Futures Modernization Act of
2000 a registered futures association shall adopt
rules requiring a futures commission merchant or an
introducing broker which recommends to any cus-
tomer the purchase or sale of any contract of sale
for future delivery of a single nonexempt security, an
index of fewer than 5 nonexempt securities, or an
index in which a single nonexempt security predomi-
nates to ascertain through reasonable due diligence
that the recommendation is suitable for that cus-
tomer in light of the customer’s financial position
and trading goals. The registered futures association
shall consult with the Commission and the Securities
and Exchange Commission prior to the adoption of
any such rule, and shall submit any such rule to the
Commission for approval in the manner and accord-
ing to the procedures described in section 17(j) of
this Act, provided, that in such case the rule shall
become effective if the Commission fails to dis-
approve such rule within 90 days of submission.’’.
SEC. 9. TRANSACTIONS IN EXEMPT COMMODITIES.
Section 2 of the Commodity Exchange Act (7 U.S.C.
2, 2a, 3, 4, 4a) (as amended by section 8) is 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) of
this subsection, nothing in this Act shall apply to a
contract, agreement or transaction in an exempt
commodity which—
‘‘(A)(i) is entered into between persons
that are eligible contract participants at the
time they enter into the agreement, contract, or
transaction; and
‘‘(ii) is not entered into on a trading facil-
ity; or
‘‘(B)(i) is entered into on a bona fide prin-
cipal-to-principal basis between parties trading
for their own accounts (or as described in sec-
tion 1a(10)(B)(ii) of this Act);
‘‘(ii) is entered into between persons that
are eligible contract participants (as defined in
sections 1a(10)(A), (B)(ii) or (C) of this Act) at
the time at which the persons enter into the
agreement, contract, or transaction; and
‘‘(iii) is executed or traded on an electronic
trading facility.
‘‘(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) of this
Act;
‘‘(B) sections 4b and 4n of this Act and
the regulations of the Commission pursuant to
section 4c(b) of this Act proscribing fraud in
connection with commodity option transactions;
‘‘(C) sections 6(c) and 9(a)(2) of this Act
to the extent these provisions prohibit manipu-
lation of the market price of any commodity in
interstate commerce; and
‘‘(D) such rules and regulations as the
Commission may prescribe in the case of any
agreement, contract, or transaction described in
paragraph (1)(B) of this subsection, if nec-
essary to ensure timely dissemination by the
electronic trading facility of price, trading vol-
ume, and other trading data to the extent ap-
propriate to the exempt commodity and elec-
tronic trading facility, if the Commission deter-
mines the electronic trading facility performs a
significant price discovery function for related
transactions in the exempt commodity under-
lying the agreement, contract, or transaction.’’.
SEC. 10. PROTECTION OF THE PUBLIC INTEREST.
The Commodity Exchange Act is amended by striking
section 3 (7 U.S.C. 5) and inserting the following:
‘‘SEC. 3. FINDINGS AND PURPOSE.
‘‘(a) FINDINGS.—The futures contracts and options
contracts that are subject to this Act are entered into reg-
ularly in interstate and international commerce and are
affected with a national public interest by providing a
means for managing and assuming price risks, discovering
prices, and disseminating pricing information through
trading in liquid, fair and financially secure trading facili-
ties.
‘‘(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 authorize the Commission to deter and prevent price
manipulation or any other disruptions to market integrity;
to ensure the financial integrity of all transactions subject
to this Act and the avoidance of systemic risk; to protect
all market participants from fraudulent or other abusive
sales practices and misuses of customer assets; and to pro-
mote responsible innovation and fair competition among
boards of trade, other markets and market participants.’’.
SEC. 11. 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 any commodity if the trans-
action is used or may be used to—
‘‘(A) hedge any transaction in interstate
commerce in the commodity or the product or
byproduct of the commodity;
‘‘(B) determine the price basis of any such
transaction in interstate commerce in the 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, is of the character of, or is com-
monly known to the trade as, a ‘wash sale’,
‘cross trade’, 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.
‘‘(3) EFFECT OF SUBSECTION.—Nothing in this
subsection—
‘‘(A) makes unlawful an exchange of—
‘‘(i) futures in connection with a cash
commodity transaction;
‘‘(ii) futures for cash commodities;
‘‘(iii) transfer trades or office trades;
or
‘‘(iv) futures for swaps;
if the exchange is made in accordance with
rules of the contract market or derivatives
transaction execution facility that apply to such
transactions, and those rules have been ap-
proved by the Commission; or
‘‘(B) makes it unlawful for a futures com-
mission merchant, acting as principal or agent,
to enter into, execute, or confirm the execution
of a contract for the purchase or sale of a com-
modity for future delivery if the contract is en-
tered into, executed, reported, recorded, and
cleared in accordance with the rules of a con-
tract market or derivatives transaction execu-
tion facility.’’.
SEC. 12. 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.
‘‘(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 trading facility
operates in accordance with the rules or speci-
fications.
‘‘(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.
‘‘(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
agreement as the Commission may require.
‘‘(c) EXISTING CONTRACT MARKETS.—A board of
trade that is designated as a contract market on the effec-
tive date of the Commodity Futures Modernization Act of
2000 shall be considered to be a designated contract mar-
ket 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, a
board of trade shall comply with the core principles
specified in this subsection.
‘‘(2) COMPLIANCE WITH RULES.—The board of
trade shall monitor and enforce 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 rules to en-
sure the financial integrity of any futures commis-
sion merchants and introducing brokers and the pro-
tection of customer funds.
‘‘(12) 
PROTECTION
OF
MARKET
PARTICI-
PANTS.—The board of trade shall establish and en-
force rules to protect market participants from any
abusive 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—
‘‘(A) maintain full records of all activities
related to the business of the contract market
in a form and manner acceptable to the Com-
mission for a period of at least 5 years;
‘‘(B) make the records readily available
during at least the first 2 years of the 5-year
period and provide the records to the Commis-
sion at the expense of the person required to
maintain the records; and
‘‘(C) keep the records open to inspection
by any representative of the Commission or the
Department of Justice.
‘‘(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 mar-
ket.’’.
SEC. 13. 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 12(2)) the following:
‘‘SEC. 5a. DERIVATIVES TRANSACTION EXECUTION FACILI-
TIES.
‘‘(a) IN GENERAL.—In lieu of compliance with the
contract market designation requirements of section 5, a
board of trade may elect to operate as a registered deriva-
tives transaction execution facility if the facility 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).
‘‘(b) REQUIREMENTS FOR TRADING FUTURES CON-
TRACTS OR OTHER DERIVATIVES TRANSACTIONS.—
‘‘(1) IN
GENERAL.—A registered derivatives
transaction execution facility under subsection (a)
may trade any futures contract (or option on such
a contract) on a security on or through the facility
only by satisfying the requirements of this section.
‘‘(2) REQUIREMENTS
FOR
UNDERLYING
COM-
MODITIES.—A registered derivatives transaction exe-
cution facility may trade any futures 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; or
‘‘(D) the Commission determines, based on
the market characteristics, surveillance history,
self-regulatory record, and capacity of the facil-
ity that trading in the futures contract is highly
unlikely to be susceptible to the threat of ma-
nipulation.
‘‘(3) ELIGIBLE TRADERS.—To trade on a reg-
istered derivatives transaction execution facility, a
person shall—
‘‘(A) be authorized by the board of trade
to trade on the facility; and
‘‘(B)(i) be an eligible contract participant;
or
‘‘(ii) 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-
regulatory organization;
‘‘(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 demonstrate to the Commission
that the board of trade meets the criteria specified
in this paragraph.
‘‘(2) DETERRENCE OF ABUSES.—The board of
trade shall establish and enforce trading rules that
will deter abuses and has the capacity to detect, in-
vestigate, 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.
‘‘(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, including
rules or terms and conditions to ensure the financial
integrity of any futures commission merchants and
introducing 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.
‘‘(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) PROVISION OF TRADING INFORMATION.—
The board of trade shall provide to market partici-
pants on a fair, equitable, and timely basis—
‘‘(A) information regarding prices, bids,
and offers; and
‘‘(B) for actively traded contracts, daily in-
formation on settlement prices, volume, open in-
terest, and opening and closing ranges.
‘‘(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 decisionmaking process of
the derivatives transaction execution facility and es-
tablish a process for resolving such conflicts of inter-
est.
‘‘(8) RECORDKEEPING.—The board of trade
shall—
‘‘(A) maintain full records of all activities
related to the business of the derivatives trans-
action execution facility in a form and manner
acceptable to the Commission for a period of at
least 5 years;
‘‘(B) make the records readily available
during at least the first 2 years of the 5-year
period and provide the records to the Commis-
sion at the expense of the person required to
maintain the records; and
‘‘(C) keep the records open to inspection
by any representatives of the Commission or the
Department of Justice.
‘‘(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 AND DEPOSITORY
INSTITUTIONS AS INTERMEDIARIES.—
‘‘(1) IN
GENERAL.—A registered derivatives
transaction execution facility may by rule allow a
broker-dealer or depository institution 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 or depository insti-
tution; and
‘‘(B) receive funds of customers to serve as
margin or security for such transactions.
‘‘(2) REQUIREMENTS.—The requirements re-
ferred to in paragraph (1) are that—
‘‘(A) a broker-dealer be in good standing
with the Securities and Exchange Commission
and a depository institution be in good standing
with Federal bank regulatory agencies (includ-
ing the Farm Credit Administration), as appli-
cable; and
‘‘(B) if a broker-dealer or depository insti-
tution carries or holds customer accounts or
funds for transactions on the derivatives trans-
action execution facility for more than 1 busi-
ness day, the broker-dealer or depository insti-
tution is registered as a futures commission
merchant and is a member of a registered fu-
tures association.
‘‘(3) IMPLEMENTATION.—The Commission shall
cooperate and coordinate with the Securities and Ex-
change Commission 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 sub-
section.
‘‘(f) SEGREGATION
OF CUSTOMER FUNDS.—Not
later than 180 days after the effective date of the Com-
modity Futures Modernization Act of 2000, consistent
with regulations adopted by the Commission, a registered
derivatives transaction execution facility may authorize a
futures commission merchant to offer any customer of the
futures commission merchant that is an eligible contract
participant the right to not segregate the customer funds
of the futures commission merchant for purposes of trad-
ing on or through the facilities of the registered derivatives
transaction execution facility.
‘‘(g) ELECTION TO TRADE EXCLUDED COMMOD-
ITIES.—
‘‘(1) IN GENERAL.—A board of trade that is a
registered derivatives transaction execution facility
may trade on the facility any agreements, contracts,
or transactions involving excluded commodities that
are otherwise excluded from this Act under section
2(c) or 2(d).
‘‘(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. 14. DERIVATIVES CLEARING ORGANIZATIONS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.)
is amended by inserting after section 5a (as added by sec-
tion 13) the following:
‘‘SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS.
‘‘(a) APPLICATION.—A derivatives clearing organiza-
tion for a board of trade that is designated as a contract
market under section 5 or is registered as a derivatives
transaction execution facility under section 5b, or for an
exempt board of trade, or a derivatives clearing organiza-
tion for transactions excluded by subsection (c), (d) or (h)
of section 2, desiring to be registered with the Commission
as a registered derivatives clearing organization may sub-
mit to the Commission an application for such registration
which shall be in such form and in accordance with such
procedures as the Commission may prescribe by regula-
tion, and which shall contain the rules of the derivatives
clearing organization and such other information and doc-
uments as the Commission may prescribe by regulation.
An applicant may withdraw an application submitted
under this subsection by filing with the Commission a
written notice of withdrawal.
‘‘(b) QUALIFICATIONS.—The Commission shall not
approve an application submitted under subsection (a),
unless the Commission determines that—
‘‘(1) the rules of the applicant are in accord-
ance with such rules as the Commission may adopt
with respect to—
‘‘(A) standards of financial responsibility,
operational capability, experience, competence,
and conduct applicable to participants in de-
rivatives clearing organizations;
‘‘(B) governance of derivatives clearing or-
ganizations;
‘‘(C) qualifications of management of de-
rivatives clearing organization;
‘‘(D) dues, fees, and other charges imposed
by derivatives clearing organizations; and
‘‘(E) procedures for resolving disputes and
redressing grievances;
‘‘(2) the applicant—
‘‘(A) has sufficient financial resources,
standards for participant eligibility, and ade-
quate risk management policies and procedures
to protect the financial integrity of the appli-
cant, consistent with international standards;
‘‘(B) has adequate operational systems and
settlement and default procedures designed to
ensure orderly settlement of contracts;
‘‘(C) has procedures and mechanisms to
ensure the performance of obligations in the
event of participant default;
‘‘(D) has such other resources and mecha-
nisms as are necessary to ensure compliance
with this Act; and
‘‘(E) meets such other requirements as the
Commission may prescribe by rule or order; and
‘‘(3) the operation of the applicant would not be
inconsistent with the public interest protected by the
antitrust laws.
‘‘(c) PUBLICATION OF NOTICE OF APPLICATION.—
On the filing of an application under subsection (a), the
Commission shall publish notice of the filing and afford
interested persons an opportunity to submit written data,
views, and arguments concerning the application.
‘‘(d) DISPOSITION OF APPLICATION.—
‘‘(1) IN GENERAL.—Within 90 days after the
publication of a notice under subsection (c) (or with-
in such longer period as the applicant may agree to),
the Commission shall—
‘‘(A) by order, approve the application; or
‘‘(B) institute proceedings to determine
whether to disapprove the application.
‘‘(2) RULES APPLICABLE TO ADMINISTRATIVE
DISPOSITION PROCEEDINGS.—
‘‘(A) The proceedings referred to in para-
graph (1)(B) shall include notice of the grounds
for disapproval under consideration and shall
provide an opportunity for a hearing, and shall
be concluded within 180 days after the filing of
the application for registration.
‘‘(B) At the conclusion of the proceedings,
the Commission, by order, shall approve or dis-
approve the application.
‘‘(C) The Commission shall approve the
application unless the Commission determines
that the applicant does not meet the qualifica-
tions set forth in subsection (b).
‘‘(3) JUDICIAL REVIEW OF APPLICATION DIS-
APPROVAL.—An applicant whose application sub-
mitted under subsection (a) is disapproved may ap-
peal the disapproval to the United States Court of
Appeals for the judicial circuit in which the appli-
cant has its principal place of business, in accord-
ance with the procedural requirements set forth in
section 6(b).
‘‘(e) REVOCATION OF REGISTRATION.—
‘‘(1) NOTICE.—If the Commission makes a pre-
liminary determination that finds that a registered
derivatives clearing organization has ceased to exist
or is operating in violation of this Act, the Commis-
sion shall notify the registered derivatives clearing
organization in writing of the reasons for the pre-
liminary determination, including any data, mate-
rials, and specific findings the Commission has re-
lied on in reaching the preliminary determination.
The Commission shall allow the registered deriva-
tives clearing organization not fewer than 21 days to
respond in writing to such a notice. The Commission
may, in its discretion, extend the period of time for
filing such a response.
‘‘(2) DISCUSSIONS.—After the Commission re-
ceives the response, the Commission shall promptly
initiate discussions with the registered derivatives
clearing organization to attempt to remedy the al-
leged violation in a mutually acceptable manner.
‘‘(3) REVOCATION AUTHORITY.—If, after a rea-
sonable period of time, no mutually acceptable reso-
lution is reached, the Commission may make a final
determination to revoke the registration of the reg-
istered derivatives clearing organization under this
section.
‘‘(4) JUDICIAL REVIEW.—A derivatives clearing
organization may appeal a final determination to re-
voke its registration under this section to the United
States Court of Appeals for the judicial circuit in
which the derivatives clearing organization has its
principal place of business, in accordance with the
procedural requirements set forth in section 6(b).
‘‘(f) RECORDKEEPING AND EXAMINATION.—A reg-
istered derivatives clearing organization shall make and
keep for prescribed periods such records, furnish such cop-
ies of the records, and make and disseminate such reports
as the Commission prescribes by regulation or order.
‘‘(g) AUTHORITY TO CLEAR OVER-THE-COUNTER
TRANSACTIONS.—A derivatives clearing organization de-
scribed in subsection (a) of this section may clear an
agreement, contract, or transaction excluded from this Act
by subsection (c), (d) or (h) of section 2.
‘‘(h) EXCLUSIVE JURISDICTION
OF
THE COMMIS-
SION.— The Commission shall have exclusive jurisdiction
with respect to any registered derivatives clearing organi-
zation.
‘‘(i) REGISTERED DERIVATIVES CLEARING ORGANI-
ZATION.—In this section, the term ‘registered derivatives
clearing organization’ means a derivatives clearing organi-
zation registered under this section.’’.
SEC. 15. COMMON PROVISIONS APPLICABLE TO REG-
ISTERED ENTITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.)
is amended by inserting after section 5b (as added by sec-
tion 14) the following:
‘‘SEC. 5c. COMMON PROVISIONS APPLICABLE TO REG-
ISTERED ENTITIES.
‘‘(a) ACCEPTABLE BUSINESS PRACTICES UNDER
CORE PRINCIPLES.—
‘‘(1) IN GENERAL.—Consistent with the pur-
poses of this Act, the Commission may issue inter-
pretations, or approve interpretations submitted to
the Commission, of sections 5(d), 5a(d), and 5b(b)
to describe what would constitute an acceptable busi-
ness practice under such sections.
‘‘(2) EFFECT OF INTERPRETATION.—An inter-
pretation issued under paragraph (1) shall not pro-
vide the exclusive means for complying with such
sections.
‘‘(b) DELEGATION
OF FUNCTIONS UNDER CORE
PRINCIPLES.—
‘‘(1) IN GENERAL.—A contract market or de-
rivatives transaction execution facility may comply
with any applicable core principle through delegation
of any relevant function to a registered futures asso-
ciation or another registered entity.
‘‘(2) RESPONSIBILITY.—A contract market or
derivatives transaction execution facility that dele-
gates a function under paragraph (1) shall remain
responsible for carrying out the function.
‘‘(c) NEW CONTRACTS, NEW RULES, AND RULE
AMENDMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), a
registered entity may elect to list for trading any
new contract or other instrument, or may elect to
approve and implement any new rule or rule amend-
ment, by providing to the Commission a written cer-
tification that the new contract, new rule, or rule
amendment complies with this Act (including regula-
tions under this Act).
‘‘(2) PRIOR APPROVAL.—
‘‘(A) IN
GENERAL.—A registered entity
may request that the Commission grant prior
approval to any new contract or other instru-
ment, new rule, or rule amendment.
‘‘(B) PRIOR APPROVAL REQUIRED.—Not-
withstanding any other provision of this section,
for three years from the effective date of the
Commodity Futures Trading Modernization Act
of 2000, a designated contract market shall
submit to the Commission for prior approval
each rule amendment that materially changes
the terms and conditions in any contract of sale
for future delivery of a commodity specifically
enumerated in section 1a(3) of this Act (or any
option thereon) traded through its facilities if
such rule amendment applies to contracts and
delivery months which have already been listed
for trading and have substantial open interest.
‘‘(C) DEADLINE.—If prior approval is re-
quested under subparagraph (A), the Commis-
sion shall take final action on the request not
later than 90 days after submission of the re-
quest, unless the person submitting the request
agrees to an extension of the time limitation es-
tablished under this subparagraph.
‘‘(3) APPROVAL.—The Commission shall ap-
prove any such new contract or instrument, new
rule, or rule amendment unless the Commission
finds that the new contract or instrument, new rule,
or rule amendment would violate this Act.
‘‘(d) VIOLATION OF CORE PRINCIPLES.—
‘‘(1) IN GENERAL.—If the Commission has rea-
son to believe that a registered entity is violating
any applicable provision specified in section 5(d),
5a(d), or 5b(b), the Commission shall notify the reg-
istered entity in writing of the reasons for the pre-
liminary determination by the Commission of a vio-
lation, including any data, materials, and facts the
Commission relied on in making the preliminary de-
termination.
‘‘(2) INJUNCTIVE
OR
ADMINISTRATIVE
AC-
TION.—The Commission may initiate an action for
an injunction under section 6c or an administrative
proceeding, to demonstrate, by the preponderance of
the evidence, that—
‘‘(A) the registered entity is violating any
applicable provision specified in section 5(f),
5a(d), or 5b(b); and
‘‘(B) the Commission has recommended an
appropriate remedial action to remove the defi-
ciency based on an analysis of the costs and
benefits of the Commission recommendation.
‘‘(3) BURDEN OF PROOF.—In making a deter-
mination any that a registered entity is violating any
applicable provision specified in section 5(d), 5a(d),
or 5b(b), the Commission shall have the burden of
proving that the registered entity is violating the ap-
plicable core principle.
‘‘(e) RESERVATION OF EMERGENCY AUTHORITY.—
Nothing in this section shall limit or in any way affect
the emergency powers of the Commission provided in sec-
tion 8a(9) of this Act.’’.
SEC. 16. EXEMPT BOARDS OF TRADE.
The Commodity Exchange Act (7 U.S.C. 1 et seq.)
is amended by inserting after section 5c (as added by sec-
tion 15) the following:
‘‘SEC. 5d. EXEMPT BOARDS OF TRADE.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this section, a contract of sale (or option on such a con-
tract) of a commodity for future delivery traded on or
through the facilities of an exempt board of trade shall
be exempt from all provisions of this Act, other than sec-
tion 2(g).
‘‘(b) CRITERIA FOR EXEMPTION.—To qualify for an
exemption under subsection (a), a board of trade shall
limit trading on or through the facilities of the board of
trade to contracts of sale of a commodity for future deliv-
ery (or options on such contracts)—
‘‘(1) that have—
‘‘(A) a nearly inexhaustible deliverable sup-
ply;
‘‘(B) a deliverable supply that is suffi-
ciently large, and a cash market sufficiently liq-
uid, to render any contract traded on the com-
modity highly unlikely to be susceptible to the
threat of manipulation; or
‘‘(C) no cash market; and
‘‘(2) that are entered into only between persons
that—
‘‘(A) are eligible contract participants at
the time at which the persons enter into the
contract; or
‘‘(B) enter into the contract or option for
the benefit only of eligible contract participants.
‘‘(c) ANTIMANIPULATION REQUIREMENTS.—A party
to a futures contract or related option that is traded on
an exempt board of trade shall be subject to sections 4b,
4n, 6(c), and 9(a)(2), and the Commission shall enforce
those provisions with respect to any such trading.
‘‘(d) PRICE DISCOVERY.—If the Commission finds
that an exempt board of trade is a significant source of
price discovery for any underlying commodity in any
transaction traded on or through the facilities of the board
of trade, the board of trade shall disseminate publicly on
a daily basis trading volume, opening and closing price
ranges, open interest, and other trading data as appro-
priate to the market.
‘‘(e) JURISDICTION.—The Commission shall have ex-
clusive jurisdiction over any account, agreement, or trans-
action involving a contract of sale of a commodity for fu-
ture delivery, or related option, to the extent that such
account, agreement, or transaction is traded on an exempt
board of trade.
‘‘(f) SUBSIDIARIES.—A board of trade that is des-
ignated as a contract market or registered as a derivatives
transaction execution facility may operate an exempt
board of trade by establishing a separate subsidiary or
other legal entity and otherwise satisfying the require-
ments of this section.’’.
SEC. 17. SUSPENSION OR REVOCATION OF DESIGNATION
AS CONTRACT MARKET.
Section 5e of the Commodity Exchange Act (7 U.S.C.
7b) (as redesignated by section 12(1)) is amended to read
as follows:
‘‘SEC. 5e. SUSPENSION OR REVOCATION OF DESIGNATION
AS REGISTERED ENTITY.
‘‘The failure of a registered entity to comply with any
provision of this Act, or any regulation or order of the
Commission under this Act, shall be cause for the suspen-
sion of the registered entity for a period not to exceed 180
days, or revocation of designation as a registered entity
in accordance with the procedures and subject to the judi-
cial review provided in section 6(b).’’.
SEC. 18. AUTHORIZATION OF APPROPRIATIONS.
Section 12(d) of the Commodity Exchange Act (7
U.S.C. 16(d)) is amended by striking ‘‘2000’’ and insert-
ing ‘‘2005’’.
SEC. 19. PREEMPTION.
Section 12(e) of the Commodity Exchange Act (7
U.S.C. 16(e)) is amended by striking paragraph (2) and
inserting the following:
‘‘(2) the application of any Federal or State law
(including any regulation) to an agreement, contract,
or transaction in or involving any commodity, prod-
uct, right, service, or interest, except that this Act
shall supersede and preempt—
‘‘(A) in the case of any such agreement,
contract, or transaction—
‘‘(i) that is conducted on or subject to
the rules of a registered entity or exempt
board of trade;
‘‘(ii) that is conducted on or subject
to the rules of any board of trade, ex-
change, or market located outside the
United States, or any territory or posses-
sion of the United States (in accordance
with any terms or conditions specified by
the Commission by regulation); and
‘‘(iii) that is subject to regulation by
the Commission under section 4c or 19;
and
‘‘(B) any State or local law that prohibits
or regulates gaming or the operation of bucket
shops (other than antifraud provisions of gen-
eral applicability) in the case of—
‘‘(i) an electronic trading facility
under section 2(e); or
‘‘(ii) an agreement, contract, or trans-
action that is excluded or exempt under
section 2(c), 2(d), 2(f), or 2(h) or is cov-
ered by the terms of an exemption granted
by the Commission under section 4(c) (re-
gardless of whether any such agreement,
contract, or transaction is otherwise sub-
ject to this Act); or’’.
SEC. 20. PREDISPUTE RESOLUTION AGREEMENTS FOR IN-
STITUTIONAL CUSTOMERS.
Section 14 of the Commodity Exchange Act (7 U.S.C.
18) is amended by striking subsection (g) and inserting
the following:
‘‘(g) PREDISPUTE RESOLUTION AGREEMENTS FOR
INSTITUTIONAL CUSTOMERS.—Nothing in this section
prohibits a registered futures commission merchant from
requiring a customer that is an eligible contract partici-
pant, as a condition to the commission merchant’s con-
ducting a transaction for the customer, to enter into an
agreement waiving the right to file a claim under this sec-
tion.’’.
SEC. 21. CONSIDERATION OF COSTS AND BENEFITS AND
ANTITRUST LAWS.
Section 15 of the Commodity Exchange Act (7 U.S.C.
19) is amended by striking ‘‘SEC. 15. The Commission’’
and inserting the following:
‘‘SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND
ANTITRUST LAWS.
‘‘(a) COSTS AND BENEFITS.—
‘‘(1) IN GENERAL.—Before promulgating a reg-
ulation under this Act or issuing an order (except as
provided in paragraph (3)), the Commission shall
consider the costs and benefits of the action of the
Commission.
‘‘(2) CONSIDERATIONS.—The costs and benefits
of the proposed Commission action shall be evalu-
ated in light of—
‘‘(A) considerations of protection of market
participants and the public;
‘‘(B) considerations of the efficiency, com-
petitiveness, and financial integrity of futures
markets;
‘‘(C) considerations of price discovery;
‘‘(D) considerations of sound risk manage-
ment practices; and
‘‘(E) other public interest considerations.
‘‘(3) APPLICABILITY.—This subsection does not
apply to the following actions of the Commission:
‘‘(A) An order that initiates, is part of, or
is the result of an adjudicatory or investigative
process of the Commission.
‘‘(B) An emergency action.
‘‘(C) A finding of fact regarding compli-
ance with a requirement of the Commission.
‘‘(b) ANTITRUST LAWS.—The Commission’’.
SEC. 22. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE
COUNTERPARTIES.
Section 22(a) of the Commodity Exchange Act (7
U.S.C. 25(a)) is amended by adding at the end the fol-
lowing:
‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI-
GIBLE COUNTERPARTIES.—No agreement, contract,
or transaction between eligible contract participants
shall be void, voidable, or unenforceable, and no
such eligible contract participant shall be entitled to
rescind, or recover any payment made with respect
to, such an agreement, contract, or transaction,
under this section based solely on the failure of the
agreement, contract, or transaction to comply with
the terms or conditions of an exemption or exclusion
from any provision of this Act or regulations of the
Commission.’’.
SEC. 23. RULE OF CONSTRUCTION.
Except as expressly provided in this Act or an amend-
ment made by this Act, nothing in this Act or an amend-
ment made by the Act supersedes, affects, or otherwise
limits or expands the scope and applicability of laws gov-
erning the Securities and Exchange Commission.
SEC. 24. TECHNICAL AND CONFORMING AMENDMENTS.
(a) COMMODITY EXCHANGE ACT.—
(1) Section 1a of the Commodity Exchange Act
(7 U.S.C. 1a) is amended—
(A) in paragraphs (4), (5), (8), (9), (12),
and (14), by inserting ‘‘or derivatives trans-
action execution facility’’ after ‘‘contract mar-
ket’’ each place it appears; and
(B) in paragraph (15)—
(i) in the paragraph heading, by strik-
ing ‘‘CONTRACT
MARKET’’ and inserting
‘‘REGISTERED ENTITY’’; and
(ii) by striking ‘‘contract market’’
each place it appears and inserting ‘‘reg-
istered entity’’.
(2) Section 2 of the Commodity Exchange Act
(7 U.S.C. 2, 2a, 4, 4a, 3) is amended—
(A) by striking ‘‘SEC. 2. (a)(1)(A)(i) The’’
and inserting the following:
‘‘SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF
PRINCIPAL FOR ACT OF AGENT; COMMODITY
FUTURES 
TRADING 
COMMISSION; 
TRANS-
ACTION IN INTERSTATE COMMERCE.
‘‘(a) JURISDICTION
OF COMMISSION; COMMODITY
FUTURES TRADING COMMISSION.—
‘‘(1) JURISDICTION OF COMMISSION.—
‘‘(A) IN GENERAL.—The’’; and
(B) in subsection (a)—
(i) in paragraph (1) (as amended by
subparagraph (A))—
(I) by striking subparagraph (B);
(II) by striking ‘‘subparagraph
(B) of this subparagraph’’ and insert-
ing ‘‘subsection (g)’’;
(III) by striking ‘‘contract mar-
ket designated pursuant to section 5
of this Act’’ and inserting ‘‘contract
market 
designated 
or 
derivatives
transaction execution facility reg-
istered pursuant to section 5 or 5a’’;
(IV) by striking clause (ii); and
(V) in clause (iii), by striking
‘‘(iii) The’’ and inserting the fol-
lowing:
‘‘(B) LIABILITY OF PRINCIPAL FOR ACT OF
AGENT.—The’’;
(ii) in paragraph (7), by striking
‘‘contract market’’ and inserting ‘‘reg-
istered entity’’; and
(iii) in paragraph (8)(B)(ii)—
(I) in the first sentence, by strik-
ing ‘‘designation as a contract mar-
ket’’ and inserting ‘‘designation or
registration as a contract market or
derivatives transaction execution facil-
ity’’;
(II) in the second sentence, by
striking ‘‘designate a board of trade
as a contract market’’ and inserting
‘‘designate or register a board of
trade as a contract market or deriva-
tives transaction execution facility’’;
and
(III) in the fourth sentence, by
striking ‘‘designating, or refusing,
suspending, or revoking the designa-
tion of, a board of trade as a contract
market’’ and inserting ‘‘designating,
registering, or refusing, suspending,
or revoking the designation or reg-
istration of, a board of trade as a con-
tract market or derivatives trans-
action execution facility’’.
(3) Section 4 of the Commodity Exchange Act
(7 U.S.C. 6) is amended—
(A) in subsection (a)—
(i) in paragraph (1), by striking ‘‘des-
ignated by the Commission as a ‘contract
market’ for’’ and inserting ‘‘designated or
registered by the Commission as a contract
market or derivatives transaction execution
facility for’’;
(ii) in paragraph (2), by striking
‘‘member of such’’; and
(iii) in paragraph (3), by inserting ‘‘or
derivatives transaction execution facility’’
after ‘‘contract market’’; and
(B) in subsection (c)—
(i) in paragraph (1)—
(I) by striking ‘‘designated as a
contract market’’ and inserting ‘‘des-
ignated or registered as a contract
market or derivatives transaction exe-
cution facility’’; and
(II) 
by 
striking 
‘‘section
2(a)(1)(B)’’ and inserting ‘‘section
2(g)’’; and
(ii) in paragraph (2)(B)(ii), by insert-
ing ‘‘or derivatives transaction execution
facility’’ after ‘‘contract market’’.
(4) Section 4a of the Commodity Exchange Act
(7 U.S.C. 6a) is amended—
(A) in subsection (a)—
(i) in the first sentence, by inserting
‘‘or derivatives transaction execution facili-
ties’’ after ‘‘contract markets’’; and
(ii) in the second sentence, by insert-
ing ‘‘or derivatives transaction execution
facility’’ after ‘‘contract market’’;
(B) in subsection (b), by inserting ‘‘or de-
rivatives transaction execution facility’’ after
‘‘contract market’’ each place it appears; and
(C) in subsection (e)—
(i) by striking ‘‘contract market or’’
each place it appears and inserting ‘‘con-
tract market, derivatives transaction execu-
tion facility, or’’;
(ii) by striking ‘‘licensed or des-
ignated’’ each place it appears and insert-
ing ‘‘licensed, designated, or registered’’;
and
(iii) by striking ‘‘contract market, or’’
and inserting ‘‘contract market or deriva-
tives transaction execution facility, or’’.
(5) Section 4b(a) of the Commodity Exchange
Act (7 U.S.C. 6b(a)) is amended by striking ‘‘con-
tract market’’ each place it appears and inserting
‘‘registered entity’’.
(6) Sections 4c(g), 4d, 4e, and 4f of the Com-
modity Exchange Act (7 U.S.C. 6c(g), 6d, 6e, 6f)
are amended by inserting ‘‘or derivatives transaction
execution facility’’ after ‘‘contract market’’ each
place it appears.
(7) Section 4g of the Commodity Exchange Act
(7 U.S.C. 6g) is amended—
(A) in subsection (b), by striking ‘‘clear-
inghouse and contract market’’ and inserting
‘‘registered entity’’; and
(B) in subsection (f), by striking ‘‘clearing-
houses, contract markets, and exchanges’’ and
inserting ‘‘registered entities’’.
(8) Section 4h of the Commodity Exchange Act
(7 U.S.C. 6h) is amended by striking ‘‘contract mar-
ket’’ each place it appears and inserting ‘‘registered
entity’’.
(9) Section 4i of the Commodity Exchange Act
(7 U.S.C. 6i) is amended in the first sentence by in-
serting ‘‘or derivatives transaction execution facility’’
after ‘‘contract market’’.
(10) Section 4j of the Commodity Exchange
Act (7 U.S.C. 6j) is repealed.
(11) Section 4l of the Commodity Exchange Act
(7 U.S.C. 6l) is amended by inserting ‘‘or derivatives
transaction execution facilities’’ after ‘‘contract mar-
kets’’ each place it appears.
(12) Section 4p of the Commodity Exchange
Act (7 U.S.C. 6p) is amended—
(A) in the third sentence of subsection (a),
by striking ‘‘Act or contract markets’’ and in-
serting ‘‘Act, contract markets, or derivatives
transaction execution facilities’’; and
(B) in subsection (b), by inserting ‘‘deriva-
tives transaction execution facility,’’ after ‘‘con-
tract market,’’.
(13) The Commodity Exchange Act (as amend-
ed by paragraphs (10), (11), and (12)) is amended
by redesignating section 4k through 4p (7 U.S.C. 6k
through 6p) as sections 4j through 4o, respectively.
(14) Section 6 of the Commodity Exchange Act
(7 U.S.C. 8, 9, 9a, 9b, 13b, 15) is amended—
(A) in subsection (a)—
(i) in the first sentence—
(I) by striking ‘‘board of trade
desiring to be designated a ‘contract
market’ shall make application to the
Commission for such designation’’ and
inserting ‘‘person desiring to be des-
ignated or registered as a contract
market or derivatives transaction exe-
cution facility shall make application
to the Commission for such designa-
tion or registration’’;
(II) by striking ‘‘above condi-
tions’’ and inserting ‘‘conditions set
forth in this Act’’; and
(III) by striking ‘‘above require-
ments’’ and inserting ‘‘the require-
ments of this Act’’;
(ii) in the second sentence, by striking
‘‘designation as a contract market within
one year’’ and inserting ‘‘designation or
registration as a contract market or de-
rivatives 
transaction 
execution 
facility
within 180 days’’;
(iii) in the third sentence—
(I) by striking ‘‘board of trade’’
and inserting ‘‘person’’; and
(II) by striking ‘‘one-year period’’
and inserting ‘‘180-day period’’; and
(iv) in the last sentence, by striking
‘‘designate as a ‘contract market’ any
board of trade that has made application
therefor, such board of trade’’ and insert-
ing ‘‘designate or register as a contract
market or derivatives transaction execution
facility any person that has made applica-
tion therefor, such person’’;
(B) in subsection (b)—
(i) in the first sentence—
(I) by striking ‘‘designation of
any board of trade as a ‘contract mar-
ket’ upon’’ and inserting ‘‘designation
or registration of any contract market
or derivatives transaction execution
facility on’’;
(II) by striking ‘‘board of trade’’
each place it appears and inserting
‘‘contract market or derivatives trans-
action execution facility’’; and
(III) by striking ‘‘designation as
set forth in section 5 of this Act’’ and
inserting ‘‘designation or registration
as set forth in sections 5 through 5b’’;
(ii) in the second sentence—
(I) by striking ‘‘board of trade’’
the first place it appears and inserting
‘‘contract market or derivatives trans-
action execution facility’’; and
(II) by striking ‘‘board of trade’’
the second and third places it appears
and inserting ‘‘person’’; and
(iii) in the last sentence, by striking
‘‘board of trade’’ each place it appears and
inserting ‘‘person’’;
(C) in subsection (c)—
(i) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered
entity’’;
(ii) by striking ‘‘contract markets’’
each place it appears and inserting ‘‘reg-
istered entities’’; and
(iii) by striking ‘‘trading privileges’’
each place it appears and inserting ‘‘privi-
leges’’;
(D) in subsection (d), by striking ‘‘contract
market’’ each place it appears and inserting
‘‘registered entity’’; and
(E) in subsection (e), by striking ‘‘trading
on all contract markets’’ each place it appears
and inserting ‘‘the privileges of all registered
entities’’.
(15) Section 6a of the Commodity Exchange
Act (7 U.S.C. 10a) is amended—
(A) in the first sentence of subsection (a),
by striking ‘‘designated as a ‘contract market’
shall’’ and inserting ‘‘designated or registered
as a contract market or a derivatives trans-
action execution facility’’; and
(B) in subsection (b), by striking ‘‘des-
ignated as a contract market’’ and inserting
‘‘designated or registered as a contract market
or a derivatives transaction execution facility’’.
(16) Section 6b of the Commodity Exchange
Act (7 U.S.C. 13a) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’;
(B) in the first sentence, by striking ‘‘des-
ignation as set forth in section 5 of this Act’’
and inserting ‘‘designation or registration as set
forth in sections 5 through 5c’’; and
(C) in the last sentence, by striking ‘‘the
contract market’s ability’’ and inserting ‘‘the
ability of the registered entity’’.
(17) Section 6c(a) of the Commodity Exchange
Act (7 U.S.C. 13a–1(a)) by striking ‘‘contract mar-
ket’’ and inserting ‘‘registered entity’’.
(18) Section 6d(1) of the Commodity Exchange
Act (7 U.S.C. 13a–2(1)) is amended by inserting
‘‘derivatives transaction execution facility,’’ after
‘‘contract market,’’.
(19) Section 7 of the Commodity Exchange Act
(7 U.S.C. 11) is amended—
(A) in the first sentence—
(i) by striking ‘‘board of trade’’ and
inserting ‘‘person’’;
(ii) by inserting ‘‘or registered’’ after
‘‘designated’’;
(iii) by inserting ‘‘or registration’’
after ‘‘designation’’ each place it appears;
and
(iv) by striking ‘‘contract market’’
each place it appears and inserting ‘‘reg-
istered entity’’;
(B) in the second sentence—
(i) by striking ‘‘designation of such
board of trade as a contract market’’ and
inserting ‘‘designation or registration of
the registered entity’’; and
(ii) by striking ‘‘contract markets’’
and inserting ‘‘registered entities’’; and
(C) in the last sentence—
(i) by striking ‘‘board of trade’’ and
inserting ‘‘person’’; and
(ii) by striking ‘‘designated again a
contract market’’ and inserting ‘‘des-
ignated or registered again a registered en-
tity’’.
(20) Section 8(c) of the Commodity Exchange
Act (7 U.S.C. 12(c)) is amended in the first sen-
tence by striking ‘‘board of trade’’ and inserting
‘‘registered entity’’.
(21) Section 8a of the Commodity Exchange
Act (7 U.S.C. 12a) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’; and
(B) in paragraph (2)(F), by striking ‘‘trad-
ing privileges’’ and inserting ‘‘privileges’’.
(22) Sections 8b and 8c(e) of the Commodity
Exchange Act (7 U.S.C. 12b, 12c(e)) are amended
by striking ‘‘contract market’’ each place it appears
and inserting ‘‘registered entity’’.
(23) Section 8e of the Commodity Exchange
Act (7 U.S.C. 12e) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’;
(B) in subsection (a), by striking ‘‘section
5a(b)’’ and inserting ‘‘sections 5 through 5c’’;
(C) in subsection (b)—
(i) in paragraph (1), by striking ‘‘a
contract market’s trade monitoring system
implemented pursuant to section 5a(b)’’
and inserting ‘‘the trade monitoring system
of a registered entity implemented pursu-
ant to sections 5 through 5c’’;
(ii) by striking paragraph (3) and in-
serting the following:
‘‘(3) REMEDIES.—On becoming final, the Com-
mission deficiency order may require the registered
entity to—
‘‘(A) institute appropriate improvements in
its trade monitoring system necessary to correct
the deficiencies in the order;
‘‘(B) satisfy stated objective performance
criteria to correct the deficiencies;
‘‘(C) upgrade or reconfigure existing sys-
tems for collecting or processing relevant data
on trading and trader or broker activity, includ-
ing, where appropriate, the commitment of ad-
ditional resources.’’; and
(iii) in paragraph (5)—
(I) in the paragraph heading, by
striking ‘‘DESIGNATION AS CONTRACT
MARKET’’ and inserting ‘‘DESIGNA-
TION
OR
REGISTRATION
AS
REG-
ISTERED ENTITY’’;
(II) by inserting ‘‘or registra-
tion’’ after ‘‘designation’’; and
(III) by striking ‘‘board of trade’’
and inserting ‘‘person’’;
(D) in subsection (d)(2), by striking ‘‘sec-
tion 5b’’ and inserting ‘‘section 5e’’; and
(E) in the paragraph heading of subsection
(e)(2), by striking ‘‘CONTRACT MARKETS’’ and
inserting ‘‘REGISTERED ENTITIES’’.
(24) Section 9 of the Commodity Exchange Act
(7 U.S.C. 13) is amended—
(A) by striking ‘‘contract market’’ each
place it appears and inserting ‘‘registered enti-
ty’’; and
(B) in subsection (a)(2), by striking ‘‘sec-
tion 4o(1),’’ and inserting ‘‘section 4n(1),’’.
(25) Section 14 of the Commodity Exchange
Act (7 U.S.C. 18) is amended—
(A) in subsection (a)(1)(B), by striking
‘‘contract market’’ and inserting ‘‘registered en-
tity’’; and
(B) in subsection (f), by striking ‘‘contract
markets’’ and inserting ‘‘registered entities’’.
(26) Section 17 of the Commodity Exchange
Act (7 U.S.C. 21) is amended by striking ‘‘contract
market’’ each place it appears and inserting ‘‘reg-
istered entity’’.
(27) Section 22 of the Commodity Exchange
Act (7 U.S.C. 25) is amended—
(A) in subsection (a)—
(i) in paragraph (1)—
(I) by striking ‘‘contract market,
clearing organization of a contract
market, licensed board of trade,’’ and
inserting ‘‘registered entity’’; and
(II) in subparagraph (C)(i), by
striking ‘‘contract market’’ and insert-
ing ‘‘registered entity’’;
(ii) in paragraph (2), by striking ‘‘sec-
tions 5a(11),’’ and inserting ‘‘sections
5(d)(13), 5b(b)(1)(E),’’; and
(iii) in paragraph (3), by striking
‘‘contract market’’ and inserting ‘‘reg-
istered entity’’; and
(B) in subsection (b)—
(i) in paragraph (1)—
(I) by striking ‘‘contract market
or clearing organization of a contract
market’’ and inserting ‘‘registered en-
tity’’;
(II) by striking ‘‘section 5a(8)
and section 5a(9) of this Act’’ and in-
serting ‘‘sections 5 through 5c’’;
(III) by striking ‘‘contract mar-
ket, clearing organization of a con-
tract market, or licensed board of
trade’’ and inserting ‘‘registered enti-
ty’’; and
(IV) by striking ‘‘contract market
or licensed board of trade’’ and insert-
ing ‘‘registered entity’’;
(ii) in paragraph (3)—
(I) by striking ‘‘a contract mar-
ket, clearing organization, licensed
board of trade,’’ and inserting ‘‘reg-
istered entity’’; and
(II) by striking ‘‘contract market,
licensed board of trade’’ and inserting
‘‘registered entity’’;
(iii) in paragraph (4), by striking
‘‘contract market, licensed board of trade,
clearing organization,’’ and inserting ‘‘reg-
istered entity’’; and
(iv) in paragraph (5), by striking
‘‘contract market, licensed board of trade,
clearing organization,’’ and inserting ‘‘reg-
istered entity’’.
(b) FEDERAL DEPOSIT INSURANCE CORPORATION
IMPROVEMENT ACT OF 1991.—Section 402(2) of the Fed-
eral Deposit Insurance Corporation Improvement Act of
1991 (12 U.S.C. 4402(2)) is amended by striking sub-
paragraph (B) and inserting the following:
‘‘(B) that is registered as a derivatives
clearing organization under section 5b of the
Commodity Exchange Act.’’.
SEC. 25. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in subsection
(b), this Act takes effect on the date of enactment of this
Act.
(b) JURISDICTION OF COMMISSION.—Section 8, and
the amendments made by that section, take effect 1 year
after the date of enactment of this Act.
Æ