National Cheese Exchange Oversight and Improvement Act of 1997

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Cheese Exchange Oversight 
and Improvement Act of 1997''.

SEC. 2. FINDINGS.

    The Congress finds that the operation of the National Cheese 
Exchange and other cash markets is of national concern and in need of 
Federal oversight because of the following:
            (1) The National Cheese Exchange, located in Green Bay, 
        Wisconsin, is the dominant cash market for bulk cheese in the 
        United States.
            (2) While less than 1 percent of the cheese produced in the 
        United States is sold on the National Cheese Exchange, the 
        price determined by the National Cheese Exchange acts as a 
        reference price for as much as 95 percent of the commercial 
        cheese transactions conducted in the United States.
            (3) A 3-year federally funded investigation into the 
        activities of the National Cheese Exchange determined that the 
        National Cheese Exchange is very thinly traded, highly 
        concentrated, completely unregulated, and subject to 
        manipulation.
            (4) The Coffee, Sugar, and Cocoa Exchange in New York, an 
        exchange regulated by the Commodity Futures Trading Commission, 
        trades futures contracts for cheese.
            (5) The low volume in trading of cheese futures contracts 
        on the Coffee, Sugar, and Cocoa Exchange is partially related 
        to concerns about the lack of viability, and potential for 
        manipulation, in the dominant cash market for cheese, the 
        National Cheese Exchange.
            (6) The National Cheese Exchange is completely unregulated 
        by any Federal or State agency.
            (7) The Commodity Futures Trading Commission claims a lack 
        of authority to regulate or oversee the National Cheese 
        Exchange and similar cash markets.

SEC. 3. COMMODITY FUTURES TRADING COMMISSION REGULATION OF NATIONAL 
              CHEESE EXCHANGE AND SIMILAR CASH MARKETS.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 20 (7 U.S.C. 24) the following new section:

``SEC. 21. COMMISSION REGULATION OF NATIONAL CHEESE EXCHANGE AND 
              SIMILAR CASH MARKETS.

    ``(a) Definition of Concentrated Cash Market.--In this section, the 
term `concentrated cash market' means--
            ``(1) the National Cheese Exchange located in Green Bay, 
        Wisconsin; and
            ``(2) a cash market for a commodity if the Commission 
        determines that--
                    ``(A) the cash market is geographically centralized 
                in the form of a market or exchange;
                    ``(B) the cash market is very thinly traded or 
                highly illiquid;
                    ``(C) the price established by the cash market 
                functions as a reference price for a majority of 
                commercial transactions off the cash market for the 
                commodity being traded;
                    ``(D) trading in the cash market is concentrated 
                among relatively few buyers and sellers;
                    ``(E) the cash market is substantially unregulated 
                by any other regulatory structure (including State 
                regulation or self-regulation);
                    ``(F) a futures market regulated under this Act 
                also exists for the commodity that is being traded on 
                the cash market; and
                    ``(G) the instability, illiquidity, or potential 
                for manipulation for on the cash market could be a 
                deterrent to the use of the futures market for that 
                commodity.
    ``(b) Regulation of Concentrated Cash Markets.--In consultation 
with the Secretary of Agriculture, the Commission shall regulate a 
concentrated cash market under this Act until such time as the 
Commission determines that the concentrated cash market is not 
functioning as a reference price for a majority of commercial 
transactions off the cash market for the commodity being traded on the 
concentrated cash market.
    ``(c) Submission and Review of Operating Rules.--The Commission 
shall require a cash market that is subject to this section to--
            ``(1) Submission required.--The Commission shall require a 
        concentrated cash market subject to regulation under subsection 
        (b) to submit to the Commission for approval a set of rules 
        governing the operation of the concentrated cash market; and
            ``(2) Time for submission.--In the case of the National 
        Cheese Exchange, the operating rules required under this 
        subsection shall be submitted not later than 90 days after the 
        date of enactment of this section. In the case of other 
        concentrated cash markets, the operating rules shall be 
        submitted not later than 90 days after the date on which the 
        Commission notifies the concentrated cash market that it is 
        subject to regulation under this section.
            ``(3) Notification of commission action.--The Commission 
        shall promptly review operating rules submitted by a 
        concentrated cash market under this subsection to determine 
        whether the rules are sufficient to govern the operation of the 
        concentrated cash market. Not later than 60 days after 
        receiving the rules from a concentrated cash market, the 
        Commission shall notify the concentrated cash market of the 
        result of the review, including whether the rules are approved 
        or disapproved. If disapproved, the Commission shall provide 
        such recommendations regarding changes to the rules as the 
        Commission considers necessary to secure approval and provide a 
        schedule for resubmission of the rules.
            ``(4) Subsequent rule changes.--A concentrated cash market 
        may not change approved operating rules unless the proposed 
        change is also submitted to the Commission for review and the 
        Commission approves the change in the manner provided in 
        paragraph (3).
    ``(d) Effect of Failure To Submit or Receive Approval of Rules.--
Beginning 1 year after the date of the enactment of this section, the 
National Cheese Exchange may operate only in accordance with rules 
approved by the Commission under subsection (c). In the case of other 
concentrated cash markets, beginning 1 year after the date on which the 
concentrated cash market is notified that it is subject to regulation 
under this section, the concentrated cash market may operate only in 
accordance with rules approved by the Commission under subsection 
(c).''.

Summary: National Cheese Exchange Oversight and Improvement Act of 1997 - Amends the Commodity Exchange Act to direct the Commodity Futures Trading Commission to regulate a concentrated cash market (as defined by this Act), including the National Cheese Exchange in Green Bay, Wisconsin, until the Commission determines that the market is not functioning as a reference price for off-market transactions of the commodity being traded on such market.