(iii) by adding at the end the fol-
lowing: 
‘‘(C) except as provided in section 4(h), set-
tled and cleared through a derivatives clearing 
organization registered with the Commission.’’. 
(4) GENERAL EXEMPTIVE AUTHORITY.—Section 
4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is amended by 
inserting ‘‘the agreement, contract, or transaction, ex-
cept as provided in section 4(h), will be settled and 
cleared through a derivatives clearing organization 
registered with the Commission and’’ before ‘‘the 
Commission determines’’. 
(b) ALTERNATIVES TO CLEARING THROUGH DERIVA-
TIVES CLEARING ORGANIZATIONS.—Section 4 of such Act 
(7 U.S.C. 6), as amended by sections 3 and 4 of this Act, 
is amended by adding at the end the following: 
‘‘(h) ALTERNATIVES TO CLEARING THROUGH DERIVA-
TIVES CLEARING ORGANIZATIONS.— 
‘‘(1) SETTLEMENT
AND
CLEARING
THROUGH 
CERTAIN OTHER REGULATED ENTITIES.— 
‘‘(A) An agreement, contract, or trans-
action, or class thereof, relating to an excluded 
commodity, that would otherwise be required to 
be settled and cleared by section 2(d)(1)(C), 
2(d)(2)(D), or 2(g)(4) of this Act, or subsection 
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(c)(1) of this section may be settled and cleared 
through an entity listed in section 409(b)(1) of 
the Federal Deposit Insurance Corporation Im-
provement Act of 1991. 
‘‘(B) An agreement, contract, or trans-
action, or class thereof, that would otherwise be 
required to be settled and cleared by section 
2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 2(h)(1)(C), or 
2(h)(3)(C) of this Act, or subsection (c)(1) of this 
section may be settled and cleared through an 
entity listed in section 409(b)(3) of the Federal 
Deposit Insurance Corporation Improvement Act 
of 1991. 
‘‘(2) WAIVER OF CLEARING REQUIREMENT.— 
‘‘(A) The Commission, in its discretion, 
may exempt an agreement, contract, or trans-
action, or class thereof, that would otherwise be 
required by section 2(d)(1)(C), 2(d)(2)(D), 
2(g)(4), 2(h)(1)(C), or 2(h)(3)(C) of this Act, or 
subsection (c)(1) of this section to be settled and 
cleared through a derivatives clearing organiza-
tion registered with the Commission from such 
requirement. 
‘‘(B) In granting exemptions pursuant to 
subparagraph (A), the Commission shall consult 
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PWALKER on DSK8KYBLC1PROD with BILLS
with the Securities and Exchange Commission 
and the Board of Governors of the Federal Re-
serve System regarding exemptions that relate to 
excluded commodities or entities for which the 
Securities Exchange Commission or the Board of 
Governors of the Federal Reserve System serve as 
the primary regulator. 
‘‘(C) Before granting an exemption pursu-
ant to subparagraph (A), the Commission shall 
find that the agreement, contract, or transaction, 
or class thereof— 
‘‘(i) is highly customized as to its ma-
terial terms and conditions; 
‘‘(ii) is transacted infrequently; 
‘‘(iii) does not serve a significant 
price-discovery function in the marketplace; 
and 
‘‘(iv) is being entered into by parties 
who can demonstrate the financial integrity 
of the agreement, contract, or transaction 
and their own financial integrity, as such 
terms and standards are determined by the 
Commission. The standards shall include a 
net capital requirement associated with any 
agreement, contract, or transaction subject 
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PWALKER on DSK8KYBLC1PROD with BILLS
to an exemption from the clearing require-
ment that recognizes the risks associated 
with the absence of clearing. 
‘‘(D) Any agreement, contract, or trans-
action, or class thereof, which is exempted pursu-
ant to subparagraph (A) shall be reported in a 
manner designated by the Commission to the 
Commission, the Securities and Exchange Com-
mission, the Board of Governors of the Federal 
Reserve System, or such other entity the Com-
mission deems appropriate. 
‘‘(i) SPOT AND FORWARD EXCLUSION.—The settlement 
and clearing requirements of section 2(d)(1)(C), 2(d)(2)(D), 
2(g)(4), 2(h)(1)(C), 2(h)(3)(C), or 4(c)(1) shall not apply 
to an agreement, contract, or transaction of any cash com-
modity for immediate or deferred shipment or delivery, as 
defined by the Commission.’’. 
(c) ADDITIONAL REQUIREMENTS APPLICABLE TO AP-
PLICANTS FOR REGISTRATION AS A DERIVATIVES CLEARING 
ORGANIZATION.—Section 5b(c)(2) of such Act (7 U.S.C. 
7a–1(c)(2)) is amended by adding at the end the following: 
‘‘(O) DISCLOSURE OF GENERAL INFORMA-
TION.—The applicant shall disclose publicly and 
to the Commission information concerning— 
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‘‘(i) the terms and conditions of con-
tracts, agreements, and transactions cleared 
and settled by the applicant; 
‘‘(ii) the conventions, mechanisms, and 
practices applicable to the contracts, agree-
ments, and transactions; 
‘‘(iii) the margin-setting methodology 
and the size and composition of the finan-
cial resource package of the applicant; and 
‘‘(iv) other information relevant to 
participation in the settlement and clearing 
activities of the applicant. 
‘‘(P) DAILY PUBLICATION OF TRADING IN-
FORMATION.—The applicant shall make public 
daily information on settlement prices, volume, 
and open interest for contracts settled or cleared 
pursuant 
to 
the 
requirements 
of 
section 
2(d)(1)(C), 
2(d)(2)(D), 
2(g)(4), 
2(h)(1)(C), 
2(h)(3)(C) or 4(c)(1) of this Act by the applicant 
if the Commission determines that the contracts 
perform a significant price discovery function 
for transactions in the cash market for the com-
modity underlying the contracts. 
‘‘(Q) FITNESS STANDARDS.—The applicant 
shall establish and enforce appropriate fitness 
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PWALKER on DSK8KYBLC1PROD with BILLS
standards for directors, members of any discipli-
nary committee, and members of the applicant, 
and any other persons with direct access to the 
settlement or clearing activities of the applicant, 
including any parties affiliated with any of the 
persons described in this subparagraph.’’. 
(d) AMENDMENTS.— 
(1) Section 409 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 
4422) is amended— 
(A) in subsection (a), by inserting after 
‘‘Federal Reserve Act’’ the following: ‘‘, and the 
person is registered as a clearing agency under 
the Securities Exchange Act of 1934 or as a de-
rivatives clearing organization under the Com-
modity Exchange Act’’; and 
(B) in subsection (b)(3), by striking ‘‘the 
Comptroller of the Currency, the Board of Gov-
ernors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation,’’. 
(2) Section 407 of the Legal Certainty for Bank 
Products Act of 2000 (7 U.S.C. 27e) is amended by 
inserting ‘‘and the settlement and clearing require-
ments of sections 2(d)(1)(C), 2(d)(2)(D), 2(g)(4), 
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PWALKER on DSK8KYBLC1PROD with BILLS
2(h)(1)(C), 2(h)(3)(C), and 4(c)(1) of such Act’’ after 
‘‘the clearing of covered swap agreements’’. 
(3) Section 10 of the Federal Reserve Act is 
amended by adding at the end the following new pro-
vision: 
‘‘The Board shall have no power to issue any rule, reg-
ulation, or order, or otherwise to establish the standards of 
regulation of any entity in its capacity as a multilateral 
clearing organization as defined in section 408 of the Fed-
eral Deposit Insurance Corporation Improvement Act of 
1991.’’. 
(4) Section 5b(b) of the Commodity Exchange 
Act (7 U.S.C. 7a–1(b)) is amended— 
(A) by striking ‘‘(b) VOLUNTARY REGISTRA-
TION.—A derivatives clearing organization’’ and 
inserting the following: 
‘‘(b) VOLUNTARY REGISTRATION.— 
‘‘(1) A derivatives clearing organization’’; and 
(B) by adding at the end the following: 
‘‘(2)(A) A national bank, a State member bank, 
an insured State nonmember bank, an affiliate of a 
national bank, a State member bank, an insured 
State nonmember bank, or a corporation chartered 
under section 25A of the Federal Reserve Act may 
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PWALKER on DSK8KYBLC1PROD with BILLS
register with the Commission as a derivatives clearing 
organization. 
‘‘(B) The Commission shall expedite the applica-
tion of any institution referred to in subparagraph 
(A) to the extent that, as of the date of enactment of 
this paragraph, the institution had received the ap-
proval of the Board of Governors of the Federal Re-
serve System to act as a multilateral clearing organi-
zation.’’. 
(e) EFFECTIVE DATE.— 
(1) IN
GENERAL.—The amendments made by 
this section shall take effect 150 days after the date 
of the enactment of this Act. 
(2) PUBLICATION
OF
GUIDELINES.—Before the 
amendments made by this section take effect, the 
Commission shall through rulemaking, after notice 
and comment, establish and publish guidelines out-
lining the terms and conditions that must apply for 
an agreement, contract, transaction, or class thereof, 
to qualify for the exemption cited in section 4(h)(2) 
of the Commodity Exchange Act. 
(f) TRANSITION RULE.—Any agreement, contract, or 
transaction entered into before the date of the enactment 
of this Act or within 150 days after such date of enactment, 
in reliance on subsection (d), (g), (h)(1), or (h)(3) of section 
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PWALKER on DSK8KYBLC1PROD with BILLS
2 of the Commodity Exchange Act or any other exemption 
issued by the Commodity Futures Trading Commission by 
rule, regulation, or order shall, within 150 days after such 
date of enactment, unless settled and cleared through an en-
tity registered with the Commission as a derivatives clear-
ing organization or another clearing entity pursuant to sec-
tion 4(h) of such Act, be reported to the Commission in a 
manner designated by the Commission, or to such other en-
tity as the Commission deems appropriate. 
SEC. 14. TREATMENT OF EMISSION ALLOWANCES AND OFF-
SET CREDITS. 
(a) Section 1a(14) of the Commodity Exchange Act (7 
U.S.C. 1a(14)) is amended by striking ‘‘or an agricultural 
commodity’’ and inserting ‘‘, an agricultural commodity, 
any allowance authorized under law to emit a greenhouse 
gas, and any credit authorized under law toward the reduc-
tion in greenhouse gas emissions or an increase in carbon 
sequestration’’. 
(b) Within 180 days after the date of the enactment 
of this section, the Commodity Futures Trading Commis-
sion shall enter into a memorandum of understanding with 
the Secretary of Agriculture which shall include provisions, 
consistent with section 1245 of the Food Security Act of 
1985, ensuring that the development of any procedures and 
protocols for a market-based greenhouse gas contract on a 
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PWALKER on DSK8KYBLC1PROD with BILLS
board of trade designated as a contract market under sec-
tion 5 of the Commodity Exchange Act are properly con-
structed and coordinated to maximize credits for carbon se-
questration. 
SEC. 15. INSPECTOR GENERAL OF THE COMMODITY FU-
TURES TRADING COMMISSION. 
(a) ELEVATION OF OFFICE.— 
(1) INCLUSION OF CFTC IN DEFINITION OF ES-
TABLISHMENT.— 
(A) Section 12(1) of the Inspector General 
Act of 1978 (5 U.S.C. App.) is amended by strik-
ing ‘‘or the Federal Cochairpersons of the Com-
missions established under section 15301 of title 
40, United States Code;’’ and inserting ‘‘the Fed-
eral Cochairpersons of the Commissions estab-
lished under section 15301 of title 40, United 
States Code; or the Chairman of the Commodity 
Futures Trading Commission;’’. 
(B) Section 12(2) of the Inspector General 
Act of 1978 (5 U.S.C. App.) is amended by strik-
ing ‘‘or the Commissions established under sec-
tion 15301 of title 40, United States Code,’’ and 
inserting ‘‘the Commissions established under 
section 15301 of title 40, United States Code, or 
the Commodity Futures Trading Commission,’’. 
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PWALKER on DSK8KYBLC1PROD with BILLS
(2) EXCLUSION OF CFTC FROM DEFINITION OF 
DESIGNATED FEDERAL ENTITY.—Section 8G(a)(2) of 
the Inspector General Act of 1978 (5 U.S.C. App.) is 
amended by striking ‘‘the Commodity Futures Trad-
ing Commission,’’. 
(b) EFFECTIVE DATE; TRANSITION RULE.— 
(1) EFFECTIVE DATE.—The amendments made 
by this section shall take effect 30 days after the date 
of the enactment of this Act. 
(2) TRANSITION RULE.—An individual serving 
as Inspector General of the Commodity Futures Trad-
ing Commission on the effective date of this section 
pursuant to an appointment made under section 8G 
of the Inspector General Act of 1978 (5 U.S.C. 
App.)— 
(A) may continue so serving until the Presi-
dent makes an appointment under section 3(a) 
of such Act consistent with the amendments 
made by this section; and 
(B) shall, while serving under subparagraph 
(A), remain subject to the provisions of section 
8G of such Act which apply with respect to the 
Commodity Futures Trading Commission. 
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SEC. 16. AUTHORITY OF COMMODITY FUTURES TRADING 
COMMISSION TO SUSPEND TRADING IN CRED-
IT DEFAULT SWAPS. 
(a) IN GENERAL.—Section 4c of the Commodity Ex-
change Act (7 U.S.C. 6c) is amended by adding at the end 
the following: 
‘‘(h) AUTHORITY OF COMMISSION TO SUSPEND TRAD-
ING OF CREDIT DEFAULT SWAPS.— 
‘‘(1) IN
GENERAL.—If, in the opinion of the 
Commission, the public interest and the protection of 
investors so require, the Commission may, by order— 
‘‘(A) summarily suspend trading in any 
credit default swap; and 
‘‘(B) summarily suspend all trading on any 
contract market, derivatives transaction execu-
tion facility, or otherwise, in credit default 
swaps. 
‘‘(2) LIMITATION.—An action described in para-
graph (1) shall— 
‘‘(A) not take effect unless the Commission 
notifies the President of its decision, and the 
President notifies the Commission that the Presi-
dent does not disapprove of the decision; 
‘‘(B) only apply to credit default swaps that 
are related to securities subject to a short selling 
suspension order by the Securities and Exchange 
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Commission, and such action must terminate 
when such suspension order terminates; and 
‘‘(C) only apply to credit default swaps 
purchased by persons who are not purchasing the 
credit default swap to reduce an existing credit 
risk directly related to the reference entity or its 
obligations.’’. 
(b) DEFINITION OF CREDIT DEFAULT SWAP.—Section 
1a of such Act (7 U.S.C. 1a) is amended by adding at the 
end the following: 
‘‘(34) CREDIT DEFAULT SWAP.—The term ‘credit 
default swap’ means a contract which hedges a party 
to the contract against the risk that an entity may 
experience a loss of value as a result of an event spec-
ified in the contract, such as a default or credit down-
grade. A credit default swap that is proposed to be 
traded or is traded on or proposed to be or is cleared 
by a registered entity pursuant to this Act shall be ex-
cluded from the definition of a security as defined in 
this Act and in section 2(a)(1) of the Securities Act 
of 1933 or section 3(a)(10) of the Securities Exchange 
Act of 1934, except as necessary solely for purposes of 
enforcing prohibitions against insider trading in sec-
tions 10 and 16 of the Securities Exchange Act of 
1934.’’. 
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PWALKER on DSK8KYBLC1PROD with BILLS
(c) EFFECTIVE DATE.—The amendment made by sub-
section (b) shall be effective for credit default swaps entered 
into after 90 days after the date of the enactment of this 
section. 
SEC. 17. AUTHORITY OF COMMODITY FUTURES TRADING 
COMMISSION TO PROSECUTE CRIMINAL VIO-
LATIONS OF THE COMMODITY EXCHANGE 
ACT. 
Section 9 of the Commodity Exchange Act (7 U.S.C. 
13) is amended by adding at the end the following: 
‘‘(f) Notwithstanding section 516 of title 28, United 
States Code, the Commission may initiate and conduct 
criminal litigation relating to a violation of this Act, and 
secure evidence therefor, if the Attorney General has de-
clined to do so.’’. 
SEC. 18. DIVERSITY OF DIRECTORS OF BOARDS OF TRADE. 
Section 5(d) of the Commodity Exchange Act (7 U.S.C. 
7(d)) is amended by adding at the end the following: 
‘‘(19) DIVERSITY OF BOARDS OF DIRECTORS.— 
The board of trade of a publicly traded company shall 
endeavor to recruit individuals to serve on the board 
of directors and the other decision-making bodies (as 
determined by the Commission) of the board of trade 
from among, and to have the composition of such bod-
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ies reflect, a broad and culturally diverse pool of 
qualified candidates.’’. 
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Union Calendar No. 223 
111TH CONGRESS 
1ST SESSION 
H. R. 977 
[Report No. 111–385, Part I] 
A BILL 
To amend the Commodity Exchange Act to bring 
greater transparency and accountability to com-
modity markets, and for other purposes. 
DECEMBER 19, 2009 
Reported from the Committee on Agriculture with an 
amendment and referred to the Committee on the Ju-
diciary for a period ending not later than December 
19, 2009, for consideration of such provisions of the 
bill and amendment as fall within the jurisdiction of 
that committee pursuant to clause 1(k), rule X 
DECEMBER 19, 2009 
Committees on Financial Services and the Judiciary dis-
charged; committed to the Committee of the Whole 
House on the State of the Union and ordered to be 
printed 
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