196
(3) by inserting after section 407, the
following new chapter:
‘‘CHAPTER 2—MULTILATERAL CLEARING
ORGANIZATIONS
‘‘SEC. 408. DEFINITIONS.
For purposes of this chapter, the fol-
lowing definitions shall apply:
‘‘(1) MULTILATERAL
CLEARING
ORGANI-
ZATION.—The term ‘multilateral clearing
organization’ means a system utilized by
more than 2 participants in which the bi-
lateral credit exposures of participants
arising from the transactions cleared are
effectively eliminated and replaced by a
system of guarantees, insurance, or mutu-
alized risk of loss.
‘‘(2) OVER-THE-COUNTER DERIVATIVE IN-
STRUMENT.—The 
term 
‘over-the-counter
derivative instrument’ means—
‘‘(A) any agreement, contract, or
transaction, including the terms and
conditions incorporated by reference
in any such agreement, contract, or
transaction, which is an interest rate
swap, option, or forward agreement,
197
including a rate floor, rate cap, rate
collar, 
cross-currency 
rate 
swap,
basis swap, and forward rate agree-
ment; a spot, same day-tomorrow, to-
morrow-next, forward, or other for-
eign exchange or precious metals
agreement; a currency swap, option,
or forward agreement; an equity
index or equity swap, option, or for-
ward agreement; a debt index or debt
swap, option, or forward agreement; a
credit spread or credit swap, option,
or forward agreement; a commodity
index or commodity swap, option, or
forward agreement; and a weather
swap, weather derivative, or weather
option;
‘‘(B) any agreement, contract or
transaction 
similar 
to 
any 
other
agreement, contract, or transaction
referred to in this clause that is pres-
ently, or in the future becomes, regu-
larly entered into by parties that par-
ticipate in swap transactions (includ-
ing 
terms 
and 
conditions 
incor-
198
porated by reference in such agree-
ment) and that is a forward, swap, or
option on 1 or more occurrences of
any event, rates, currencies, commod-
ities, equity securities or other equity
instruments, debt securities or other
debt instruments, economic or other
indices or measures of economic or
other risk or value;
‘‘(C) any contract of sale of a com-
modity for future delivery or com-
modity 
option 
described 
in 
sub-
section (c), (d), (f), (h), or (i) of section
2 of the Commodity Exchange Act or
exempted under section 4(c) of such
Act; and
‘‘(D) any option to enter into any,
or any combination of, agreements,
contracts or transactions referred to
in this subparagraph.
‘‘(3) OTHER
DEFINITIONS.—The terms
‘State member bank’ and ‘affiliate’ have
the meanings given the terms in section 3
of the Federal Deposit Insurance Act.
199
‘‘SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.
‘‘(a) IN GENERAL.—Except with respect to
clearing organizations described in sub-
section (b), no person may operate a multilat-
eral 
clearing 
organization 
for 
over-the-
counter derivative instruments, or otherwise
engage in activities that constitute such a
multilateral clearing organization unless the
person is a national bank, State member
bank, an affiliate of a national bank or a State
member bank, or a corporation chartered
under section 25A of the Federal Reserve Act.
‘‘(b) 
CLEARING
ORGANIZATIONS.—Sub-
section (a) shall not apply to any clearing or-
ganization that—
‘‘(1) is registered as a clearing agency
under the Securities Exchange Act of
1934;
‘‘(2) performs clearing functions for a
contract market designated pursuant to
the Commodity Exchange Act; or
‘‘(3) is supervised by a foreign finan-
cial regulator that an appropriate Fed-
eral financial regulatory agency has de-
termined 
satisfies 
appropriate 
stand-
ards.’’.
200
(b) ENFORCEMENT POWERS OF THE BOARD OF
GOVERNORS
OF
THE
FEDERAL
RESERVE
SYS-
TEM.—Section 9 of the Federal Reserve Act (12
U.S.C. 221) is amended by adding at the end
the following new paragraph:
‘‘(24) ENFORCEMENT
AUTHORITY.—Sec-
tion 3(u), subsections (j) and (k) of sec-
tion 7, subsections (b) through (n), (s), (u),
and (v) of section 8, and section 19 of the
Federal 
Deposit 
Insurance 
Act 
shall
apply to a State member bank which is
not an insured depository institution (as
defined in section 3 of the Federal De-
posit Insurance Act) in the same manner
and to the same extent as such provisions
apply to State member insured banks,
and any reference in such sections to an
insured depository institution shall be
deemed to include a reference to any
such noninsured State member bank.’’.
(c) RESOLUTION OF CLEARING BANKS.—The
Federal Reserve Act (12 U.S.C. 221 et seq.) is
amended by inserting after section 9A the fol-
lowing new section:
201
‘‘SEC. 9B. RESOLUTION OF CLEARING BANKS.
‘‘(a) CONSERVATORSHIP OR RECEIVERSHIP.—
‘‘(1) APPOINTMENT.—The Board may
appoint a conservator or receiver to take
possession and control of any uninsured
State member bank which operates, or
operates as, a multilateral clearing orga-
nization pursuant to section 409 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991 to the same ex-
tent and in the same manner as the
Comptroller of the Currency may appoint
a conservator or receiver for a national
bank.
‘‘(2) POWERS.—The conservator or re-
ceiver for an uninsured State member
bank referred to in paragraph (1) shall
exercise the same powers, functions, and
duties, subject to the same limitations, as
a conservator or receiver for a national
bank.
‘‘(b) BOARD AUTHORITY.—The Board shall
have the same authority with respect to any
conservator or receiver appointed under sub-
section (a), and the uninsured State member
bank for which the conservator or receiver
202
has been appointed, as the Comptroller of the
Currency has with respect to a conservator or
receiver for a national bank and the national
bank for which the conservator or receiver
has been appointed.
‘‘(c) 
BANKRUPTCY
PROCEEDINGS.—The
Board (in the case of an uninsured State mem-
ber bank which operates, or operates as, such
a multilateral clearing organization) may di-
rect a conservator or receiver appointed for
such bank to file a petition pursuant to title
11, United States Code, in which case, title 11,
United States Code, shall apply to such bank
in lieu of otherwise applicable Federal or
State insolvency law.’’.
(d) TECHNICAL
AND CONFORMING AMEND-
MENTS TO TITLE 11, UNITED STATES CODE.—
(1) BANKRUPTCY
CODE
DEBTORS.—Sec-
tion 109(b)(2) of title 11, United States
Code, is amended by striking ‘‘; or’’ and
inserting the following: ‘‘, except that an
uninsured State member bank, or a cor-
poration organized under section 25A of
the Federal Reserve Act, which operates,
or operates as, a multilateral clearing or-
203
ganization pursuant to section 409 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991 may be a debtor
if a petition is filed at the direction of the
Board of Governors of the Federal Re-
serve System; or’’.
(2) 
CHAPTER
DEBTORS.—Section
109(d) of title 11, United States Code, is
amended to read as follows:
‘‘(d) Only a railroad, a person that may be
a debtor under chapter 7 of this title (except
a stockbroker or a commodity broker), and an
uninsured State member bank, or a corpora-
tion organized under section 25A of the Fed-
eral Reserve Act, which operates, or operates
as, a multilateral clearing organization pursu-
ant to section 409 of the Federal Deposit In-
surance Corporation Improvement Act of 1991
may be a debtor under chapter 11 of this
title.’’.
(3) DEFINITION
OF
FINANCIAL
INSTITU-
TION.—Section 101(22) of title 11, United
States Code, is amended to read as fol-
lows:
‘‘(22) the term ‘financial institution’—
204
‘‘(A) means a Federal reserve
bank or an entity (domestic or for-
eign) that is a commercial or savings
bank, industrial savings bank, sav-
ings and loan association, trust com-
pany, a bank or a corporation orga-
nized under section 25A of the Fed-
eral Reserve Act and, when any such
bank or entity is acting as agent or
custodian for a customer in connec-
tion with a securities contract, as de-
fined in section 741, such customer;
and
‘‘(B) 
includes 
any 
person 
de-
scribed in subparagraph (A) which
operates, or operates as, a multilat-
eral clearing organization pursuant
to section 409 of the Federal Deposit
Insurance Corporation Improvement
Act of 1991;’’.
(4) DEFINITION
OF
UNINSURED
STATE
MEMBER
BANK.—Section 101 of title 11,
United States Code, is amended by insert-
ing after paragraph (54) the following
new paragraph—
205
‘‘(54A) the term ‘uninsured State member
bank’ means a State member bank (as defined
in section 3 of the Federal Deposit Insurance
Act) the deposits of which are not insured by
the Federal Deposit Insurance Corporation;
and’’.
(5) SUBCHAPTER V OF CHAPTER 7.—
(A) IN
GENERAL.—Section 103 of
title 
11, 
United 
States 
Code, 
is
amended—
(i) 
by 
redesignating 
sub-
sections (e) through (i) as sub-
sections (f) through (j), respec-
tively; and
(ii) by inserting after sub-
section (d) the following new sub-
section:
‘‘(e) SCOPE OF APPLICATION.—Subchapter V
of chapter 7 of this title shall apply only in a
case under such chapter concerning the liq-
uidation of an uninsured State member bank,
or a corporation organized under section 25A
of the Federal Reserve Act, which operates, or
operates as, a multilateral clearing organiza-
tion pursuant to section 409 of the Federal De-
206
posit Insurance Corporation Improvement
Act of 1991.’’.
(B) CLEARING BANK LIQUIDATION.—
Chapter 7 of title 11, United States
Code, is amended by adding at the
end the following new subchapter:
‘‘SUBCHAPTER V—CLEARING BANK
LIQUIDATION
‘‘§ 781. Definitions
‘‘For purposes of this subchapter, the fol-
lowing definitions shall apply:
‘‘(1) BOARD.—The term ‘Board’ means
the Board of Governors of the Federal
Reserve System.
‘‘(2) 
DEPOSITORY
INSTITUTION.—The
term ‘depository institution’ has the same
meaning as in section 3 of the Federal
Deposit Insurance Act, and includes any
wholesale bank.
‘‘(3) CLEARING BANK.—The term ‘clear-
ing bank’ means an uninsured State
member bank, or a corporation organized
under section 25A of the Federal Reserve
Act, which operates, or operates as, a
multilateral clearing organization pursu-
207
ant to section 409 of the Federal Deposit
Insurance Corporation Improvement Act
of 1991.
‘‘§ 782. Selection of trustee
‘‘(a) IN GENERAL.—
‘‘(1) 
APPOINTMENT.—Notwithstanding
any other provision of this title, the con-
servator or receiver who files the petition
shall be the trustee under this chapter,
unless the Board designates an alter-
native trustee.
‘‘(2) SUCCESSOR.—The Board may des-
ignate a successor trustee if required.
‘‘(b) AUTHORITY
OF
TRUSTEE.—Whenever
the Board appoints or designates a trustee,
chapter 3 and sections 704 and 705 of this title
shall apply to the Board in the same way and
to the same extent that they apply to a United
States trustee.
‘‘§ 783. Additional powers of trustee
‘‘(a) DISTRIBUTION OF PROPERTY NOT OF THE
ESTATE.—The trustee under this subchapter
has power to distribute property not of the es-
tate, including distributions to customers that
208
are mandated by subchapters III and IV of
this chapter.
‘‘(b) 
DISPOSITION
OF
INSTITUTION.—The
trustee under this subchapter may, after no-
tice and a hearing—
‘‘(1) sell the clearing bank to a deposi-
tory institution or consortium of deposi-
tory institutions (which consortium may
agree on the allocation of the clearing
bank among the consortium);
‘‘(2) merge the clearing bank with a
depository institution;
‘‘(3) transfer contracts to the same ex-
tent as could a receiver for a depository
institution under paragraphs (9) and (10)
of section 11(e) of the Federal Deposit In-
surance Act;
‘‘(4) transfer assets or liabilities to a
depository institution;
‘‘(5) transfer assets and liabilities to a
bridge bank as provided in paragraphs
(1), (3)(A), (5), (6), of section 11(n) of the
Federal Deposit Insurance Act, para-
graphs (9) through (13) of such section,
and subparagraphs (A) through (H) and
209
subparagraph (K) of paragraph (4) of
such section 11(n), except that—
‘‘(A) the bridge bank to which
such assets or liabilities are trans-
ferred shall be treated as a clearing
bank for the purpose of this sub-
section; and
‘‘(B) any references in any such
provision of law to the Federal De-
posit Insurance Corporation shall be
construed to be references to the ap-
pointing agency and that references
to deposit insurance shall be omitted.
‘‘(c) CERTAIN TRANSFERS INCLUDED.—Any
reference in this section to transfers of liabil-
ities includes a ratable transfer of liabilities
within a priority class.
‘‘§ 784. Right to be heard
‘‘The Board or a Federal reserve bank (in
the case of a clearing bank that is a member
of that bank) may raise and may appear and
be heard on any issue in a case under this
subchapter.’’.
(e) CLERICAL AMENDMENT.—The table of
sections for chapter 7 of title 11, United States
210
Code, is amended by adding at the end the fol-
lowing new items:
‘‘SUBCHAPTER V—CLEARING BANK
LIQUIDATION
‘‘Sec.
‘‘781. Definitions.
‘‘782. Selection of trustee.
‘‘783. Additional powers of trustee.
‘‘784. Right to be heard.’’.
(f) RESOLUTION
OF EDGE ACT CORPORA-
TIONS.—The 16th undesignated paragraph of
section 25A of the Federal Reserve Act (12
U.S.C. 624) is amended to read as follows:
‘‘(16) APPOINTMENT
OF
RECEIVER
OR
CONSERVATOR.—
‘‘(A) IN GENERAL.—The Board may
appoint a conservator or receiver for
a corporation organized under the
provisions of this section to the same
extent and in the same manner as the
Comptroller of the Currency may ap-
point a conservator or receiver for a
national bank, and the conservator or
receiver for such corporation shall
exercise the same powers, functions,
and duties, subject to the same limita-
tions, as a conservator or receiver for
a national bank.
211
‘‘(B) EQUIVALENT AUTHORITY.—The
Board shall have the same authority
with respect to any conservator or re-
ceiver appointed for a corporation or-
ganized under the provisions of this
section under this paragraph and any
such corporation as the Comptroller
of the Currency has with respect to a
conservator or receiver of a national
bank and the national bank for which
a conservator or receiver has been
appointed.
‘‘(C) 
TITLE
PETITIONS.—The
Board may direct the conservator or
receiver of a corporation organized
under the provisions of this section to
file a petition pursuant to title 11,
United States Code, in which case,
title 11, United States Code, shall
apply to the corporation in lieu of
otherwise applicable Federal or State
insolvency law.’’.
(g) 
DERIVATIVES
CLEARING
ORGANIZA-
TIONS.—The Commodity Exchange Act (7
U.S.C. 1 et seq.) is amended by inserting after
212
section 5a (as added by section 15) the fol-
lowing new section:
‘‘SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS.
‘‘(a) REGISTRATION REQUIREMENT.—Except
as provided in subsection (b), it shall be un-
lawful for a derivatives clearing organization,
unless registered with the Commission, di-
rectly or indirectly to make use of the mails
or any means or instrumentality of interstate
commerce to perform the functions of a de-
rivatives clearing organization described in
section 1a(8) with respect to a contract of sale
of a commodity for future delivery, option on
a contract of sale of a commodity for future
delivery, or option on a commodity that is not
an exclusion-eligible commodity (unless the
contract or option is described in subsection
(c), (d), (f), (h), or (i) of section 2 or exempted
under section 4(c)).
‘‘(b) VOLUNTARY REGISTRATION.—A deriva-
tives clearing organization that clears agree-
ments, contracts, or transactions described in
subsection (c), (d), (f), (h), or (i) of section 2
or exempted under section 4(c) may register
213
with the Commission as a derivatives clearing
organization.
‘‘(c) REGISTRATION OF DERIVATIVES CLEAR-
ING ORGANIZATIONS.—
‘‘(1) APPLICATION.—A person desiring
to register as a derivatives clearing orga-
nization shall submit to the Commission
an application in such form and con-
taining such information as the Commis-
sion may require for the purpose of mak-
ing the determinations required for ap-
proval under paragraph (2).
‘‘(2) CORE PRINCIPLES.—
‘‘(A) IN GENERAL.—To be registered
and to maintain registration as a de-
rivatives clearing organization, an
applicant shall demonstrate to the
Commission that the applicant com-
plies with the core principles speci-
fied in this paragraph. 
‘‘(B) FINANCIAL
RESOURCES.—The
applicant shall demonstrate that the
applicant 
has 
adequate 
financial,
operational, 
and 
managerial 
re-
sources to discharge the responsibil-
214
ities of a derivatives clearing organi-
zation without interruption in var-
ious market conditions.
‘‘(C) PARTICIPANT
AND
PRODUCT
ELIGIBILITY.—The 
applicant 
shall
establish—
‘‘(i) 
appropriate 
admission
and continuing eligibility stand-
ards (including appropriate min-
imum financial requirements) for
members of and participants in
the organization; and
‘‘(ii) appropriate standards for
determining eligibility of agree-
ments, contracts, or transactions
submitted to the applicant.
‘‘(D) RISK
MANAGEMENT.—The ap-
plicant shall have the ability to man-
age the risks associated with dis-
charging the responsibilities of a de-
rivatives 
clearing 
organization
through the use of appropriate tools
and procedures.
215
‘‘(E) 
SETTLEMENT
PROCEDURES.—
The applicant shall have the ability
to—
‘‘(i) complete settlements on a
timely basis under varying cir-
cumstances;
‘‘(ii) maintain an adequate
record of the flow of funds associ-
ated with each transaction that
the applicant clears; and
‘‘(iii) comply with the terms
and conditions of any permitted
netting or offset arrangements
with other clearing organizations.
‘‘(F) TREATMENT
OF
FUNDS.—The
applicant shall have standards and
procedures designed to protect and
ensure the safety of member and par-
ticipant funds.
‘‘(G) DEFAULT
RULES
AND
PROCE-
DURES.—The 
applicant 
shall 
have
rules and procedures designed to
allow for efficient, fair, and safe man-
agement of events when members or
participants become insolvent or oth-
216
erwise default on their obligations to
the derivatives clearing organization.
‘‘(H) RULE ENFORCEMENT.—The ap-
plicant shall—
‘‘(i) 
maintain 
adequate 
ar-
rangements and resources for the
effective monitoring and enforce-
ment of compliance with rules of
the applicant and for resolution
of disputes; and
‘‘(ii) have the authority and
ability to discipline, limit, sus-
pend, or terminate a member’s or
participant’s activities for viola-
tions of rules of the applicant.
‘‘(I) SYSTEM SAFEGUARDS.—The ap-
plicant shall demonstrate that the
applicant—
‘‘(i) has established and will
maintain a program of oversight
and risk analysis to ensure that
the automated systems of the ap-
plicant 
function 
properly 
and
have adequate capacity and secu-
rity; and
217
‘‘(ii) has established and will
maintain emergency procedures
and a plan for disaster recovery,
and will periodically test backup
facilities sufficient to ensure daily
processing, clearing, and settle-
ment of transactions.
‘‘(J) 
REPORTING.—The 
applicant
shall provide to the Commission all
information necessary for the Com-
mission to conduct the oversight
function of the applicant with respect
to the activities of the derivatives
clearing organization.
‘‘(K) RECORDKEEPING.—The appli-
cant shall—
‘‘(i) maintain full records of
all activities related to the busi-
ness of the applicant as a deriva-
tives clearing organization in a
form and manner acceptable to
the Commission for a period of at
least 5 years;
‘‘(ii) make the records readily
available during at least the first
218
2 years of the 5-year period and
provide the records to the Com-
mission at the expense of the per-
son required to maintain the
records; and
‘‘(iii) keep the records open to
inspection by any representative
of the Commission or the Depart-
ment of Justice.
‘‘(L) 
PUBLIC
INFORMATION.—The
applicant 
shall 
make 
information
concerning the rules and operating
procedures governing the clearing
and settlement systems (including de-
fault procedures) available to market
participants.
‘‘(M) INFORMATION
SHARING.—The
applicant shall—
‘‘(i) enter into and abide by
the terms of all appropriate and
applicable domestic and inter-
national 
information-sharing
agreements; and
‘‘(ii) use relevant information
obtained from the agreements in
219
carrying out the clearing organi-
zation’s risk management pro-
gram.
‘‘(N) ANTITRUST CONSIDERATIONS.—
Unless appropriate to achieve the
purposes of this Act, the derivatives
clearing organization shall avoid—
‘‘(i) adopting any rule or tak-
ing any action that results in any
unreasonable restraint of trade;
or
‘‘(ii) imposing any material
anticompetitive burden on trad-
ing on the contract market.
‘‘(3) 
ORDERS
CONCERNING
COMPETI-
TION.—A derivatives clearing organiza-
tion may request the Commission to issue
an order concerning whether a rule or
practice of the applicant is the least anti-
competitive means of achieving the objec-
tives, purposes, and policies of this Act.
‘‘(d) EXISTING DERIVATIVES CLEARING ORGA-
NIZATIONS.—A derivatives clearing organiza-
tion shall be deemed to be registered under
this section to the extent that—
220
‘‘(1) the derivatives clearing organiza-
tion clears agreements, contracts, or
transactions for a board of trade that has
been designated by the Commission as a
contract market for such agreements,
contracts, or transactions before the date
of enactment of this section; and
‘‘(2) the Commission has reviewed
and approved the rules of the derivatives
clearing organization before that date.
‘‘(e) APPOINTMENT OF TRUSTEE.—
‘‘(1) IN
GENERAL.—If a proceeding
under section 5e results in the suspen-
sion or revocation of the registration of a
derivatives clearing organization, or if a
derivatives clearing organization with-
draws from registration, the Commission,
on notice to the derivatives clearing or-
ganization, may apply to the appropriate
United States district court where the de-
rivatives clearing organization is located
for the appointment of a trustee.
‘‘(2) ASSUMPTION
OF
JURISDICTION.—If
the Commission applies for appointment
of a trustee under paragraph (1)—
221
‘‘(A) the court may take exclusive
jurisdiction 
over 
the 
derivatives
clearing organization and the records
and assets of the derivatives clearing
organization, wherever located; and
‘‘(B) if the court takes jurisdiction
under subparagraph (A), the court
shall appoint the Commission, or a
person designated by the Commis-
sion, as trustee with power to take
possession and continue to operate or
terminate the operations of the de-
rivatives clearing organization in an
orderly manner for the protection of
participants, subject to such terms
and conditions as the court may pre-
scribe.
‘‘(f) LINKING OF REGULATED CLEARING FA-
CILITIES.—
‘‘(1) IN
GENERAL.—The Commission
shall facilitate the linking or coordina-
tion of derivatives clearing organizations
registered under this Act with other reg-
ulated clearance facilities for the coordi-
nated settlement of cleared transactions.
222
‘‘(2) COORDINATION.—In carrying out
paragraph (1), the Commission shall co-
ordinate with the Federal banking agen-
cies and the Securities and Exchange
Commission.’’.
SEC. 117. COMMON PROVISIONS APPLICABLE TO REG-
ISTERED ENTITIES.
The Commodity Exchange Act (7 U.S.C. 1
et seq.) is amended by inserting after section
5b (as added by section 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
purposes of this Act, the Commission may
issue interpretations, or approve inter-
pretations submitted to the Commission,
of sections 5(d), 5a(d), and 5b(d)(2) to de-
scribe what would constitute an accept-
able business practice under such sec-
tions.
‘‘(2) EFFECT
OF
INTERPRETATION.—An
interpretation issued under paragraph
223
(1) shall not provide the exclusive means
for complying with such sections.
‘‘(b) DELEGATION
OF
FUNCTIONS
UNDER
CORE PRINCIPLES.—
‘‘(1) IN GENERAL.—A contract market
or derivatives transaction execution facil-
ity may comply with any applicable core
principle through delegation of any rel-
evant function to a registered futures as-
sociation or another registered entity.
‘‘(2) RESPONSIBILITY.—A contract mar-
ket or derivatives transaction execution
facility that delegates a function under
paragraph (1) shall remain responsible
for carrying out the function.
‘‘(c) NEW CONTRACTS, NEW RULES, AND RULE
AMENDMENTS.—
‘‘(1) IN
GENERAL.—Subject to para-
graph (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
(and the Secretary of the Treasury, in the
case of a contract of sale for future deliv-
224
ery of a government security (or option
thereon) or a rule or rule amendment
specifically related to such a contract) a
written certification that the new con-
tract, new rule, or rule amendment com-
plies with this Act (including regulations
under this Act).
‘‘(2) PRIOR APPROVAL.—
‘‘(A) IN GENERAL.—A registered en-
tity may request that the Commission
grant prior approval to any new con-
tract or other instrument, new rule,
or rule amendment.
‘‘(B) PRIOR APPROVAL REQUIRED.—
Notwithstanding any other provision
of this section, a designated contract
market shall submit to the Commis-
sion for prior approval each rule
amendment that materially changes
the terms and conditions, as deter-
mined by the Commission, in any con-
tract of sale for future delivery of a
commodity specifically enumerated
in section 1a(3) of this Act (or any op-
tion thereon) traded through its fa-
225
cilities if such rule amendment ap-
plies 
to 
contracts 
and 
delivery
months which have already been list-
ed for trading and have open interest.
‘‘(C) DEADLINE.—If prior approval
is requested under subparagraph (A),
the Commission shall take final ac-
tion on the request not later than 90
days after submission of the request,
unless the person submitting the re-
quest agrees to an extension of the
time limitation established under this
subparagraph.
‘‘(3) 
APPROVAL.—The 
Commission
shall approve 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 reason to believe that a registered
entity is violating any applicable provi-
sion specified in section 5(d), 5a(d), or
5b(d)(2), the Commission shall notify the
226
registered entity in writing of the rea-
sons for the preliminary determination
by the Commission of a violation, includ-
ing any data, materials, and facts the
Commission relied on in making the pre-
liminary determination.
‘‘(2) INJUNCTIVE OR ADMINISTRATIVE AC-
TION.—The Commission may initiate an
action for an injunction under section 6c
or an administrative proceeding, to dem-
onstrate, by the preponderance of the
evidence, that—
‘‘(A) the registered entity is vio-
lating any applicable provision speci-
fied in section 5(d), 5a(d), or 5b(d)(2);
and
‘‘(B) the Commission has rec-
ommended an appropriate remedial
action to remove the deficiency based
on an analysis of the costs and bene-
fits in the public interest of the Com-
mission recommendation.
‘‘(3) BURDEN OF PROOF.—In making a
determination that a registered entity is
violating any applicable provision speci-
227
fied in section 5(d), 5a(d), or 5b(d)(2), the
Commission shall have the burden of
proving that the registered entity is vio-
lating the applicable core principle.
‘‘(e) RESERVATION OF EMERGENCY AUTHOR-
ITY.—Nothing in this section shall limit or in
any way affect the emergency powers of the
Commission provided in section 8a(9) of this
Act.’’.
SEC. 118. EXEMPT BOARDS OF TRADE.
The Commodity Exchange Act (7 U.S.C. 1
et seq.) is amended by inserting after section
5c (as added by section 115) 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 contract) of a commodity for
future delivery traded on or through the fa-
cilities of an exempt board of trade shall be
exempt from all provisions of this Act, other
than section 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
228
contracts of sale of a commodity for future de-
livery (or options on such contracts)—
‘‘(1) that have—
‘‘(A) a nearly inexhaustible deliv-
erable supply;
‘‘(B) a deliverable supply that is
sufficiently large, and a cash market
sufficiently liquid, to render any con-
tract traded on the commodity highly
unlikely to be susceptible to the
threat of manipulation; or
‘‘(C) no cash market;
‘‘(2) that are entered into only be-
tween persons that are eligible contract
participants at the time at which the per-
sons enter into the contract; and
‘‘(3) that are not contracts of sale (or
options on the contract) for future deliv-
ery of any security, including any group
or index of securities or any interest in,
or interest that is based on the value of,
any security.
‘‘(c) ANTIMANIPULATION REQUIREMENTS.—A
party to a futures contract or related option
that is traded on an exempt board of trade
229
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 sig-
nificant source of price discovery for any un-
derlying commodity in any transaction traded
on or through the facilities of the board of
trade, the board of trade shall disseminate
publicly on a daily basis trading volume,
opening and closing price ranges, open inter-
est, and other trading data as appropriate to
the market.
‘‘(e) JURISDICTION.—The Commission shall
have exclusive jurisdiction over any account,
agreement, or transaction involving a con-
tract of sale of a commodity for future deliv-
ery, 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
designated as a contract market or registered
as a derivatives transaction execution facility
may operate an exempt board of trade by es-
230
tablishing a separate subsidiary or other legal
entity and otherwise satisfying the require-
ments of this section.’’.
SEC. 119. SUSPENSION OR REVOCATION OF DESIGNATION
AS CONTRACT MARKET.
Section 5e of the Commodity Exchange
Act (7 U.S.C. 7b) (as redesignated by section
112(1)) is amended to read as follows:
‘‘SEC. 5e. SUSPENSION OR REVOCATION OF DESIGNATION
AS REGISTERED ENTITY.
‘‘The failure of a registered entity to com-
ply with any provision of this Act, or any reg-
ulation or order of the Commission under this
Act, shall be cause for the suspension of the
registered entity for a period not to exceed
180 days, or revocation of designation as a
registered entity in accordance with the pro-
cedures and subject to the judicial review
provided in section 6(b).’’.
SEC. 120. AUTHORIZATION OF APPROPRIATIONS.
Section 12(d) of the Commodity Exchange
Act (7 U.S.C. 16(d)) is amended by striking
‘‘2000’’ and inserting ‘‘2005’’.
231
SEC. 121. 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, product, right,
service, or interest, except that this Act
shall supersede and preempt—
‘‘(A) in the case of any such agree-
ment, contract, or transaction—
‘‘(i) that is conducted on or
subject to the rules of a reg-
istered entity or exempt board of
trade;
‘‘(ii) that is conducted on or
subject to the rules of any board
of trade, exchange, or market lo-
cated outside the United States,
or any territory or possession of
the United States (in accordance
with any terms or conditions
specified by the Commission by
regulation); and
232
‘‘(iii) that is subject to regula-
tion 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 general appli-
cability) in the case of—
‘‘(i) an electronic trading facil-
ity under section 2(e); or
‘‘(ii) an agreement, contract,
or transaction that is excluded or
exempt under section 2(c), 2(d),
2(f), or 2(h) or is covered by the
terms of an exemption granted by
the Commission under section
4(c) (regardless of whether any
such 
agreement, 
contract, 
or
transaction is otherwise subject
to this Act); or’’.
SEC. 122. PREDISPUTE RESOLUTION AGREEMENTS FOR IN-
STITUTIONAL CUSTOMERS.
Section 14 of the Commodity Exchange
Act (7 U.S.C. 18) is amended by striking sub-
section (g) and inserting the following:
233
‘‘(g) PREDISPUTE RESOLUTION AGREEMENTS
FOR
INSTITUTIONAL
CUSTOMERS.—Nothing in
this section prohibits a registered futures
commission merchant from requiring a cus-
tomer that is an eligible contract participant,
as a condition to the commission merchant’s
conducting a transaction for the customer, to
enter into an agreement waiving the right to
file a claim under this section.’’.
SEC. 123. 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 fol-
lowing:
‘‘SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND
ANTITRUST LAWS.
‘‘(a) COSTS AND BENEFITS.—
‘‘(1) 
IN
GENERAL.—Before 
promul-
gating a regulation under this Act or
issuing an order (except as provided in
paragraph (3)), the Commission shall con-
sider the costs and benefits of the action
of the Commission.
234
‘‘(2) CONSIDERATIONS.—The costs and
benefits of the proposed Commission ac-
tion shall be evaluated in light of—
‘‘(A) considerations of protection
of market participants and the pub-
lic;
‘‘(B) considerations of the effi-
ciency, competitiveness, and financial
integrity of futures markets;
‘‘(C) considerations of price dis-
covery;
‘‘(D) considerations of sound risk
management practices; and
‘‘(E) other public interest consid-
erations.
‘‘(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 adju-
dicatory or investigative process of
the Commission.
‘‘(B) An emergency action.
235
‘‘(C) A finding of fact regarding
compliance with a requirement of the
Commission.
‘‘(b) ANTITRUST LAWS.—The Commission’’.
SEC. 124. CONTRACT ENFORCEMENT.
Section 22(a) of the Commodity Exchange
Act (7 U.S.C. 25(a)) is amended by adding at
the end the following:
‘‘(4) CONTRACT ENFORCEMENT BETWEEN ELI-
GIBLE COUNTERPARTIES.—
‘‘(A) IN GENERAL.—No agreement, con-
tract, or transaction involving a party de-
scribed in subclauses (I) through (VI) of
section 2(c)(2)(B)(ii) or between eligible
contract participants shall be void, void-
able, or unenforceable, and no such
counterparty or eligible contract partici-
pant shall be entitled to rescind, or re-
cover any payment made with respect to,
such an agreement, contract, or trans-
action, under this section or any other
provision of Federal or State law based
solely on the failure of the agreement,
contract, or transaction to comply with
the terms or conditions of an exemption
236
or exclusion from any provision of this
Act or regulations of the Commission.
‘‘(B) 
EXCEPTION.—This 
paragraph
shall not apply to any swap agreement
(as defined in section 206(b) of the
Gramm-Leach-Bliley Act) with any party
who is not an eligible contract partici-
pant unless such swap agreement is en-
tered into after final regulations have
been prescribed under section 49 of the
Federal Deposit Insurance Act.
SEC. 125. SPECIAL PROCEDURES TO ENCOURAGE AND FA-
CILITATE BONA FIDE HEDGING BY AGRICUL-
TURAL PRODUCERS.
The Commodity Exchange Act, as other-
wise amended by this Act, is amended by in-
serting after section 4o the following:
‘‘SEC. 4p. SPECIAL PROCEDURES TO ENCOURAGE AND FA-
CILITATE BONA FIDE HEDGING BY AGRICUL-
TURAL PRODUCERS.
‘‘(a) AUTHORITY.—The Commission shall
consider issuing rules or orders which—
‘‘(1) 
prescribe 
procedures 
under
which each contract market is to provide
for orderly delivery, including temporary
237
storage costs, of any agricultural com-
modity 
enumerated 
in 
section 
1a(3)
which is the subject of a contract for pur-
chase or sale for future delivery;
‘‘(2) increase the ease with which do-
mestic agricultural producers may par-
ticipate in contract markets, including by
addressing cost and margin require-
ments, so as to better enable such pro-
ducers to hedge price risk associated
with their production;
‘‘(3) provide flexibility in the min-
imum quantities of such agricultural
commodities that may be the subject of a
contract for purchase or sale for future
delivery that is traded on a contract mar-
ket, to better allow domestic agricultural
producers to hedge such price risk; and
‘‘(4) encourage exchanges to provide
information and otherwise facilitate the
participation of domestic agricultural
producers in contract markets.
‘‘(b) REPORT.—Within 1 year after the date
of enactment of this section, the Commission
shall submit to the Committee on Agriculture
238
of the House of Representatives and the Com-
mittee on Agriculture, Nutrition, and Forestry
of the Senate a report on the steps it has
taken to implement this section and on the ac-
tivities of contract markets pursuant to this
section.’’.
SEC. 126. RULE OF CONSTRUCTION.
Except as expressly provided in this title
or an amendment made by this title, nothing
in this title or an amendment made by the
title supersedes, affects, or otherwise limits or
expands the scope and applicability of laws
governing the Securities and Exchange Com-
mission.
SEC. 127. AUTHORITY OF AGENCIES TO CONSTRUE THE
TERM ‘‘CONTRACT MARKET’’.
Each executive agency of the United
States Government that has authority to pre-
scribe regulations under a statute that uses
the term ‘‘contract market’’ may prescribe
regulations construing such term as referring
to any contract market, derivatives trans-
action execution facility, or derivatives clear-
ing organization that is registered with the
Commodity Futures Trading Commission.
239
SEC. 128. TECHNICAL AND CONFORMING AMENDMENTS.
(a) COMMODITY EXCHANGE ACT.—
(1) Section 1a of the Commodity Ex-
change Act (7 U.S.C. 1a) is amended—
(A) in paragraph (3), by inserting
‘‘aluminum, copper, gold, palladium,
platinum, 
silver,’’ 
after 
‘‘orange
juice,’’;
(B) in paragraphs (4), (5), (8), (9),
(12), and (14), by inserting ‘‘or deriva-
tives transaction execution facility’’
after ‘‘contract market’’ each place it
appears; and
(C) in paragraph (15)—
(i) in the paragraph heading,
by striking ‘‘CONTRACT
MARKET’’
and inserting ‘‘REGISTERED
ENTI-
TY’’; and
(ii) by striking ‘‘contract mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’.
(2) Section 2 of the Commodity Ex-
change Act (7 U.S.C. 2, 2a, 4, 4a, 3) is
amended—
(A) by striking ‘‘SEC. 2. (a)(1)(A)(i)
The’’ and inserting the following:
240
‘‘SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF
PRINCIPAL FOR ACT OF AGENT; COMMODITY
FUTURES 
TRADING 
COMMISSION; 
TRANS-
ACTION IN INTERSTATE COMMERCE.
‘‘(a) JURISDICTION
OF COMMISSION; COM-
MODITY FUTURES TRADING COMMISSION.—
‘‘(1) JURISDICTION OF COMMISSION.—
‘‘(A) IN GENERAL.—The’’; and
(B) in subsection (a)—
(i) 
in 
paragraph 
(1) 
(as
amended by subparagraph (A))—
(I) by striking subpara-
graph (B);
(II) by striking ‘‘subpara-
graph (B) of this paragraph’’
and inserting ‘‘subsection (c),
(d), (e), (f), (g), or (i)’’;
(III) by striking ‘‘contract
market designated pursuant
to section 5 of this Act’’ and
inserting 
‘‘contract 
market
designated 
or 
derivatives
transaction execution facility
registered pursuant to section
5 or 5a’’;
241
(IV) by redesignating sub-
clauses (I) and (II) as clauses
(i) and (ii);
(V) by striking clause (ii);
and
(VI) in clause (iii), by
striking ‘‘(iii) The’’ and insert-
ing the following:
‘‘(B) LIABILITY
OF
PRINCIPAL
FOR
ACT OF AGENT.—The’’;
(ii) in paragraph (7), by strik-
ing ‘‘contract market’’ and insert-
ing ‘‘registered entity’’;
(iii) in paragraph (8)(B)(ii)—
(I) in the first sentence, by
striking ‘‘designation as a con-
tract market’’ and inserting
‘‘designation or registration
as a contract market or de-
rivatives transaction execu-
tion facility’’;
(II) in the second sen-
tence, by striking ‘‘designate a
board of trade as a contract
market’’ and inserting ‘‘des-
242
ignate or register a board of
trade as a contract market or
derivatives transaction execu-
tion facility’’; and
(III) in the fourth sen-
tence, 
by 
striking 
‘‘desig-
nating, 
or 
refusing, 
sus-
pending, or revoking the des-
ignation of, a board of trade
as a contract market involv-
ing transactions for future de-
livery 
referred 
to 
in 
this
clause or in considering pos-
sible emergency action under
section 8a(9) of this Act’’ and
inserting 
‘‘designating, 
reg-
istering, 
or 
refusing, 
sus-
pending, or revoking the des-
ignation or registration of, a
board of trade as a contract
market or derivatives trans-
action execution facility in-
volving transactions for fu-
ture delivery referred to in
this clause or in considering
243
any possible action under this
Act (including without limita-
tion emergency action under
section 8a(9))’’, and by strik-
ing ‘‘designation, suspension,
revocation, or emergency ac-
tion’’ and inserting ‘‘designa-
tion, registration, suspension,
revocation, or action’’; and
(iv) by moving paragraphs (2)
through (11) 2 ems to the right.
(3) Section 4 of the Commodity Ex-
change Act (7 U.S.C. 6) is amended—
(A) in subsection (a)—
(i) in paragraph (1), by strik-
ing ‘‘designated by the Commis-
sion as a ‘contract market’ for’’
and inserting ‘‘designated or reg-
istered by the Commission as a
contract market or derivatives
transaction 
execution 
facility
for’’;
(ii) in paragraph (2), by strik-
ing ‘‘member of such’’; and
244
(iii) in paragraph (3), by in-
serting 
‘‘or 
derivatives 
trans-
action execution facility’’ after
‘‘contract market’’; and
(B) in subsection (c)—
(i) in paragraph (1)—
(I) by striking ‘‘designated
as a contract market’’ and in-
serting ‘‘designated or reg-
istered as a contract market
or 
derivatives 
transaction
execution facility’’; and
(II) by striking ‘‘section
2(a)(1)(B)’’ and inserting ‘‘sec-
tion 2(g)’’; and
(ii) in paragraph (2)(B)(ii), by
inserting ‘‘or derivatives trans-
action execution facility’’ after
‘‘contract market’’.
(4) Section 4a of the Commodity Ex-
change Act (7 U.S.C. 6a) is amended—
(A) in subsection (a)—
(i) in the first sentence, by in-
serting 
‘‘or 
derivatives 
trans-
245
action execution facilities’’ after
‘‘contract markets’’; and
(ii) in the second sentence, by
inserting ‘‘or derivatives trans-
action execution facility’’ after
‘‘contract market’’;
(B) in subsection (b)—
(i) in paragraph (1), by insert-
ing ‘‘, or derivatives transaction
execution facility or facilities,’’
after ‘‘markets’’; and
(ii) in paragraph (2), by in-
serting 
‘‘or 
derivatives 
trans-
action execution facility’’ after
‘‘contract market’’; and
(C) in subsection (e)—
(i) by striking ‘‘contract mar-
ket or’’ each place it appears and
inserting ‘‘contract market, de-
rivatives 
transaction 
execution
facility, or’’;
(ii) by striking ‘‘licensed or
designated’’ each place it appears
and 
inserting 
‘‘licensed, 
des-
ignated, or registered’’; and
246
(iii) by striking ‘‘contract mar-
ket, or’’ and inserting ‘‘contract
market or derivatives transaction
execution facility, or’’.
(5) Section 4b(a) of the Commodity
Exchange Act (7 U.S.C. 6b(a)) is amended
by striking ‘‘contract market’’ each place
it appears and inserting ‘‘registered enti-
ty’’.
(6) Sections 4c(g), 4d, 4e, and 4f of the
Commodity Exchange Act (7 U.S.C. 6c(g),
6d, 6e, 6f) are amended by inserting ‘‘or
derivatives transaction execution facil-
ity’’ after ‘‘contract market’’ each place it
appears.
(7) Section 4g of the Commodity Ex-
change Act (7 U.S.C. 6g) is amended—
(A) in subsection (b), by striking
‘‘clearinghouse and contract market’’
and inserting ‘‘registered entity’’; and
(B) in subsection (f), by striking
‘‘clearinghouses, 
contract 
markets,
and exchanges’’ and inserting ‘‘reg-
istered entities’’.
247
(8) Section 4h of the Commodity Ex-
change Act (7 U.S.C. 6h) is amended by
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(9) Section 4i of the Commodity Ex-
change Act (7 U.S.C. 6i) is amended in the
first sentence by inserting ‘‘or derivatives
transaction execution facility’’ after ‘‘con-
tract market’’.
(10) Section 4j of the Commodity Ex-
change Act (7 U.S.C. 6j) is repealed.
(11) Section 4l of the Commodity Ex-
change Act (7 U.S.C. 6l) is amended by in-
serting ‘‘or derivatives transaction execu-
tion facilities’’ after ‘‘contract markets’’
each place it appears.
(12) Section 4p of the Commodity Ex-
change Act (7 U.S.C. 6p) (as determined
before the redesignation by paragraph
(13) of this subsection) is amended—
(A) in the third sentence of sub-
section (a), by striking ‘‘Act or con-
tract markets’’ and inserting ‘‘Act,
contract 
markets, 
or 
derivatives
transaction execution facilities’’; and
248
(B) in subsection (b), by inserting
‘‘derivatives transaction execution fa-
cility,’’ after ‘‘contract market,’’.
(13) The Commodity Exchange Act (as
amended 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 Ex-
change Act (7 U.S.C. 8, 9, 9a, 9b, 13b, 15)
is amended—
(A) in subsection (a)—
(i) in the first sentence—
(I) by striking ‘‘board of
trade 
desiring 
to 
be 
des-
ignated a ‘contract market’
shall make application to the
Commission for such designa-
tion’’ and inserting ‘‘person
desiring to be designated or
registered as a contract mar-
ket or derivatives transaction
execution facility shall make
application to the Commission
249
for such designation or reg-
istration’’;
(II) 
by 
striking 
‘‘above
conditions’’ 
and 
inserting
‘‘conditions set forth in this
Act’’; and
(III) by striking ‘‘above re-
quirements’’ 
and 
inserting
‘‘the 
requirements 
of 
this
Act’’;
(ii) in the second sentence, by
striking ‘‘designation as a con-
tract market within one year’’ and
inserting ‘‘designation or registra-
tion as a contract market or de-
rivatives 
transaction 
execution
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
250
(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 application
therefor, such person’’;
(B) in subsection (b)—
(i) in the first sentence—
(I) by striking ‘‘designa-
tion of any board of trade as a
‘contract market’ upon’’ and
inserting ‘‘designation or reg-
istration of any contract mar-
ket or derivatives transaction
execution facility on’’;
(II) by striking ‘‘board of
trade’’ each place it appears
and inserting ‘‘contract mar-
ket or derivatives transaction
execution facility’’; and
251
(III) by striking ‘‘designa-
tion as set forth in section 5 of
this Act’’ and inserting ‘‘des-
ignation 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 ap-
pears and inserting ‘‘contract
market or derivatives trans-
action execution facility’’; and
(II) by striking ‘‘board of
trade’’ the second and third
places it appears and insert-
ing ‘‘person’’; and
(iii) in the last sentence, by
striking ‘‘board of trade’’ each
place it appears and inserting
‘‘person’’;
(C) in subsection (c)—
(i) by striking ‘‘contract mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’;
252
(ii) by striking ‘‘contract mar-
kets’’ each place it appears and
inserting 
‘‘registered 
entities’’;
and
(iii) by striking ‘‘trading privi-
leges’’ each place it appears and
inserting ‘‘privileges’’;
(D) in subsection (d), by striking
‘‘contract market’’ each place it ap-
pears and inserting ‘‘registered enti-
ty’’; and
(E) in subsection (e), by striking
‘‘trading on all contract markets’’
each place it appears and inserting
‘‘the privileges of all registered enti-
ties’’.
(15) Section 6a of the Commodity Ex-
change Act (7 U.S.C. 10a) is amended—
(A) in the first sentence of sub-
section (a), by striking ‘‘designated as
a ‘contract market’ shall’’ and insert-
ing ‘‘designated or registered as a
contract market or a derivatives
transaction execution facility’’; and
253
(B) in subsection (b), by striking
‘‘designated as a contract market’’
and inserting ‘‘designated or reg-
istered as a contract market or a de-
rivatives transaction execution facil-
ity’’.
(16) Section 6b of the Commodity Ex-
change Act (7 U.S.C. 13a) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’;
(B) in the first sentence, by strik-
ing ‘‘designation as set forth in sec-
tion 5 of this Act’’ and inserting ‘‘des-
ignation or registration as set forth in
sections 5 through 5c’’; and
(C) in the last sentence, by strik-
ing ‘‘the contract market’s ability’’
and inserting ‘‘the ability of the reg-
istered entity’’.
(17) Section 6c(a) of the Commodity
Exchange Act (7 U.S.C. 13a–1(a)) by strik-
ing ‘‘contract market’’ and inserting ‘‘reg-
istered entity’’.
254
(18) Section 6d(1) of the Commodity
Exchange 
Act 
(7 
U.S.C. 
13a–2(1)) 
is
amended by inserting ‘‘derivatives trans-
action execution facility,’’ after ‘‘contract
market,’’.
(19) Section 7 of the Commodity Ex-
change Act (7 U.S.C. 11) is amended—
(A) in the first sentence—
(i) 
by 
striking 
‘‘board 
of
trade’’ and inserting ‘‘person’’;
(ii) 
by 
inserting 
‘‘or 
reg-
istered’’ after ‘‘designated’’;
(iii) by inserting ‘‘or registra-
tion’’ 
after 
‘‘designation’’ 
each
place it appears; and
(iv) by striking ‘‘contract mar-
ket’’ each place it appears and in-
serting ‘‘registered entity’’;
(B) in the second sentence—
(i) by striking ‘‘designation of
such board of trade as a contract
market’’ and inserting ‘‘designa-
tion or registration of the reg-
istered entity’’; and
255
(ii) by striking ‘‘contract mar-
kets’’ 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 in-
serting ‘‘designated or registered
again a registered entity’’.
(20) Section 8(c) of the Commodity
Exchange Act (7 U.S.C. 12(c)) is amended
in the first sentence by striking ‘‘board of
trade’’ and inserting ‘‘registered entity’’.
(21) Section 8a of the Commodity Ex-
change Act (7 U.S.C. 12a) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’; and
(B) in paragraph (2)(F), by strik-
ing ‘‘trading privileges’’ and inserting
‘‘privileges’’.
(22) Sections 8b and 8c(e) of the Com-
modity Exchange Act (7 U.S.C. 12b,
256
12c(e)) are amended by striking ‘‘contract
market’’ each place it appears and insert-
ing ‘‘registered entity’’.
(23) Section 8e of the Commodity Ex-
change Act (7 U.S.C. 12e) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’;
(B) in subsection (a), by striking
‘‘section 5a(b)’’ and inserting ‘‘sec-
tions 5 through 5c’’;
(C) in subsection (b)—
(i) in paragraph (1), by strik-
ing ‘‘a contract market’s trade
monitoring system implemented
pursuant to section 5a(b)’’ and in-
serting ‘‘the trade monitoring sys-
tem of a registered entity imple-
mented pursuant to sections 5
through 5c’’;
(ii) by striking paragraph (3)
and inserting the following:
‘‘(3) REMEDIES.—On becoming final,
the Commission deficiency order may re-
quire the registered entity to—
257
‘‘(A) 
institute 
appropriate 
im-
provements in its trade monitoring
system necessary to correct the defi-
ciencies in the order;
‘‘(B) satisfy stated objective per-
formance criteria to correct the defi-
ciencies;
‘‘(C) upgrade or reconfigure exist-
ing systems for collecting or proc-
essing relevant data on trading and
trader or broker activity, including,
where appropriate, the commitment
of additional resources.’’; and
(iii) in paragraph (5)—
(I) in the paragraph head-
ing, by striking ‘‘DESIGNATION
AS CONTRACT MARKET’’ and in-
serting ‘‘DESIGNATION OR REG-
ISTRATION AS REGISTERED ENTI-
TY’’;
(II) by inserting ‘‘or reg-
istration’’ after ‘‘designation’’;
and
(III) by striking ‘‘board of
trade’’ and inserting ‘‘person’’;
258
(D) in subsection (d)(2), by strik-
ing ‘‘section 5b’’ and inserting ‘‘sec-
tion 5e’’; and
(E) in the paragraph heading of
subsection (e)(2), by striking ‘‘CON-
TRACT MARKETS’’ and inserting ‘‘REG-
ISTERED ENTITIES’’.
(24) Section 9 of the Commodity Ex-
change Act (7 U.S.C. 13) is amended—
(A) by striking ‘‘contract market’’
each place it appears and inserting
‘‘registered entity’’; and
(B) in subsection (a)(2), by strik-
ing ‘‘section 4o(1),’’ and inserting ‘‘sec-
tion 4n(1),’’.
(25) Section 14 of the Commodity Ex-
change Act (7 U.S.C. 18) is amended—
(A) in subsection (a)(1)(B), by
striking ‘‘contract market’’ and insert-
ing ‘‘registered entity’’; and
(B) in subsection (f), by striking
‘‘contract 
markets’’ 
and 
inserting
‘‘registered entities’’.
(26) Section 17 of the Commodity Ex-
change Act (7 U.S.C. 21) is amended by
259
striking ‘‘contract market’’ each place it
appears and inserting ‘‘registered entity’’.
(27) Section 22 of the Commodity Ex-
change 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 inserting ‘‘reg-
istered entity’’;
(ii) in paragraph (2), by strik-
ing ‘‘sections 5a(11),’’ and insert-
ing 
‘‘sections 
5(d)(13),
5b(b)(1)(E),’’; and
(iii) in paragraph (3), by strik-
ing ‘‘contract market’’ and insert-
ing ‘‘registered entity’’; and
(B) in subsection (b)—
(i) in paragraph (1)—
260
(I) by striking ‘‘contract
market or clearing organiza-
tion of a contract market’’ and
inserting ‘‘registered entity’’;
(II) by striking ‘‘section
5a(8) and section 5a(9) of this
Act’’ and inserting ‘‘sections 5
through 5c’’;
(III) by striking ‘‘contract
market, clearing organization
of a contract market, or li-
censed board of trade’’ and in-
serting 
‘‘registered 
entity’’;
and
(IV) by striking ‘‘contract
market or licensed board of
trade’’ 
and 
inserting 
‘‘reg-
istered entity’’;
(ii) in paragraph (3)—
(I) by striking ‘‘contract
market, clearing organization,
licensed board of trade,’’ and
inserting ‘‘registered entity’’;
and
261
(II) by striking ‘‘contract
market, 
licensed 
board 
of
trade’’ 
and 
inserting 
‘‘reg-
istered entity’’;
(iii) in paragraph (4), by strik-
ing ‘‘contract market, licensed
board of trade, clearing organiza-
tion’’ and inserting ‘‘registered
entity’’; and
(iv) in paragraph (5), by strik-
ing ‘‘contract market, licensed
board of trade, clearing organiza-
tion,’’ and inserting ‘‘registered
entity’’.
(b) FEDERAL DEPOSIT INSURANCE CORPORA-
TION
IMPROVEMENT
ACT
OF
1991.—Section
402(2) of the Federal Deposit Insurance Cor-
poration Improvement Act of 1991 (12 U.S.C.
4402(2)) is amended by striking subparagraph
(B) and inserting the following:
‘‘(B) that is registered as a deriva-
tives clearing organization under sec-
tion 5b of the Commodity Exchange
Act.’’.
262
SEC. 129. REPORT TO CONGRESS.
(a) The Commodity Futures Trading Com-
mission (in this section referred to as the
‘‘Commission’’) shall undertake and complete
a study of the Commodity Exchange Act (in
this section referred to as ‘‘the Act’’) and the
Commission’s rules, regulations and orders
governing the conduct of persons required to
be registered under the Act, not later than 1
year after the date of the enactment of this
Act. The study shall identify—
(1) the core principles and interpreta-
tions of acceptable business practices
that the Commission has adopted or in-
tends to adopt to replace the provisions
of the Act and the Commission’s rules
and regulations thereunder;
(2) the rules and regulations that the
Commission has determined must be re-
tained and the reasons therefor;
(3) the extent to which the Commis-
sion believes it can effect the changes
identified in paragraph (1) of this sub-
section through its exemptive authority
under section 4(c) of the Act; and
263
(4) the regulatory functions the Com-
mission currently performs that can be
delegated to a registered futures associa-
tion (within the meaning of the Act) and
the regulatory functions that the Com-
mission has determined must be retained
and the reasons therefor.
(b) In conducting the study, the Commis-
sion shall solicit the views of the public as
well as Commission registrants, registered en-
tities, and registered futures associations (all
within the meaning of the Act).
(c) The Commission shall transmit to the
Committee on Agriculture of the House of
Representatives and the Committee on Agri-
culture, Nutrition, and Forestry of the Senate
a report of the results of its study, which shall
include an analysis of comments received.
SEC. 130. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in
subsection (b), this title shall take effect on
the date of enactment of this Act.
(b) JURISDICTION OF COMMISSION.—Section
108, and the amendments made by that sec-
264
tion, shall take effect 1 year after the date of
enactment of this Act.
SEC. 131. INTERNATIONAL ACTIVITIES OF THE COMMODITY
FUTURES TRADING COMMISSION.
(a) FINDINGS.—The Congress finds that—
(1) 
derivatives 
markets 
serving
United States industry are increasingly
global in scope;
(2) developments in data processing
and communications technologies enable
users of risk management services to ana-
lyze and compare those services on a
worldwide basis;
(3) financial services regulatory pol-
icy must be flexible to account for rapidly
changing derivatives industry business
practices;
(4) regulatory impediments to the op-
eration of global business interests can
compromise 
the 
competitiveness 
of
United States businesses;
(5) events that disrupt financial mar-
kets and economies are often global in
scope, require rapid regulatory response,
265
and coordinated regulatory effort across
international jurisdictions;
(6) through its membership in the
International Organisation of Securities
Commissions, the Commodity Futures
Trading Commission has promoted bene-
ficial communication among market reg-
ulators and international regulatory co-
operation; and
(7) the Commodity Futures Trading
Commission and other United States fi-
nancial regulators and self-regulatory or-
ganizations should continue to foster pro-
ductive and cooperative working rela-
tionships with their counterparts in for-
eign jurisdictions.
(b) SENSE
OF
THE CONGRESS.—It is the
sense of the Congress that, consistent with its
responsibilities under the Commodity Ex-
change Act, the Commodity Futures Trading
Commission should, as part of its inter-
national activities, continue to coordinate
with foreign regulatory authorities, to partici-
pate in international regulatory organiza-
tions and forums, and to provide technical as-
266
sistance to foreign government authorities, in
order to encourage—
(1) the facilitation of cross-border
transactions through the removal or less-
ening of any unnecessary legal or prac-
tical obstacles;
(2) the development of internationally
accepted regulatory standards of best
practice;
(3) the enhancement of international
supervisory cooperation and emergency
procedures;
(4) the strengthening of international
cooperation for customer and market
protection; and
(5) improvements in the quality and
timeliness of international information
sharing.
SEC. 132. ANTIFRAUD PROVISIONS.
(a) IN GENERAL.—It shall be unlawful to
commit retail derivatives fraud by the use of
any means or instruments of transportation
or communication in interstate commerce or
of the mails.
267
(b) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
(1) ELIGIBLE CONTRACT PARTICIPANT.—
The term ‘‘eligible contract participant’’
has the same meaning as in section 1a of
the Commodity Exchange Act.
(2) FEDERAL
FINANCIAL
INSTITUTION
REGULATOR.—The term ‘‘Federal financial
institution regulator’’ means—
(A) any Federal functional regu-
lator (as defined in section 509(2) of
the Gramm-Leach-Bliley Act) in the
case of any financial institution de-
scribed in paragraph (3)(A); and
(B) the Commodity Futures Trad-
ing Commission, in the case of a fi-
nancial institution described in para-
graph (3)(B).
(3) FINANCIAL INSTITUTION.—The term
‘‘financial institution’’—
(A) has the meaning given to such
term in subparagraph (A) of section
509(3) of the Gramm-Leach-Bliley Act;
and
268
(B) includes any person or entity
described in subparagraph (B) of
such section 509(3).
(4) RETAIL
DERIVATIVES
FRAUD.—The
term ‘‘retail derivatives fraud’’ means any
fraud perpetrated by a party on a
counterparty (other than a counterparty
that is an eligible contract participant) to
any 
agreement, 
contract, 
transaction,
warrant, note or option (other than a
contract of sale of a commodity for future
delivery or an option on such contract
(unless such contract or option has been
excluded from the Commodity Exchange
Act under subsection (c), (d), (f), or (i) of
section 2 of such Act), or a security) that
is based, in whole or in part, on the value
of any interest in, or a quantitative meas-
ure relating to 1 or more commodities, se-
curities, currencies, interest or other
rates, indices, or other assets, or the oc-
currence of any event.
(5) SECURITY.—The term ‘‘security’’
has the same meaning as in section 3 of
the Securities Exchange Act of 1934.