To amend the Commodity Exchange Act and the Securities Exchange Act of 1934 to specify how clearing requirements apply to certain affiliate transactions, and for other purposes.

SECTION 1. TREATMENT OF AFFILIATE TRANSACTIONS.

    (a) Commodity Exchange Act Amendments.--Section 2(h)(7)(D) of the 
Commodity Exchange Act (7 U.S.C. 2(h)(7)(D)) is amended--
            (1) by redesignating clause (iii) as clause (v);
            (2) by striking clauses (i) and (ii) and inserting the 
        following:
                            ``(i) In general.--An affiliate of a person 
                        that qualifies for an exception under 
                        subparagraph (A) (including affiliate entities 
                        predominantly engaged in providing financing 
                        for the purchase of the merchandise or 
                        manufactured goods of the person) may qualify 
                        for the exception only if the affiliate--
                                    ``(I) enters into the swap to hedge 
                                or mitigate the commercial risk of the 
                                person or other affiliate of the person 
                                that is not a financial entity, and the 
                                commercial risk that the affiliate is 
                                hedging or mitigating has been 
                                transferred to the affiliate;
                                    ``(II) is directly and wholly-owned 
                                by another affiliate qualified for the 
                                exception under this subparagraph or an 
                                entity that is not a financial entity;
                                    ``(III) is not indirectly majority-
                                owned by a financial entity;
                                    ``(IV) is not ultimately owned by a 
                                parent company that is a financial 
                                entity; and
                                    ``(V) does not provide any 
                                services, financial or otherwise, to 
                                any affiliate that is a nonbank 
                                financial company supervised by the 
                                Board of Governors (as defined under 
                                section 102 of the Financial Stability 
                                Act of 2010).
                            ``(ii) Limitation on qualifying 
                        affiliates.--The exception in clause (i) shall 
                        not apply if the affiliate is--
                                    ``(I) a swap dealer;
                                    ``(II) a security-based swap 
                                dealer;
                                    ``(III) a major swap participant;
                                    ``(IV) a major security-based swap 
                                participant;
                                    ``(V) a commodity pool;
                                    ``(VI) a bank holding company;
                                    ``(VII) a private fund, as defined 
                                in section 202(a) of the Investment 
                                Advisers Act of 1940 (15 U.S.C. 80-b-
                                2(a));
                                    ``(VIII) an employee benefit plan 
                                or government plan, as defined in 
                                paragraphs (3) and (32) of section 3 of 
                                the Employee Retirement Income Security 
                                Act of 1974 (29 U.S.C. 1002);
                                    ``(IX) an insured depository 
                                institution;
                                    ``(X) a farm credit system 
                                institution;
                                    ``(XI) a credit union;
                                    ``(XII) a nonbank financial company 
                                supervised by the Board of Governors 
                                (as defined under section 102 of the 
                                Financial Stability Act of 2010); or
                                    ``(XIII) an entity engaged in the 
                                business of insurance and subject to 
                                capital requirements established by an 
                                insurance governmental authority of a 
                                State, a territory of the United 
                                States, the District of Columbia, a 
                                country other than the United States, 
                                or a political subdivision of a country 
                                other than the United States that is 
                                engaged in the supervision of insurance 
                                companies under insurance law.
                            ``(iii) Limitation on affiliates' 
                        affiliates.--Unless the Commission determines, 
                        by order, rule, or regulation, that it is in 
                        the public interest, the exception in clause 
                        (i) shall not apply with respect to an 
                        affiliate if the affiliate is itself affiliated 
                        with--
                                    ``(I) a major security-based swap 
                                participant;
                                    ``(II) a security-based swap 
                                dealer;
                                    ``(III) a major swap participant; 
                                or
                                    ``(IV) a swap dealer.
                            ``(iv) Conditions on transactions.--With 
                        respect to an affiliate that qualifies for the 
                        exception in clause (i)--
                                    ``(I) the affiliate may not enter 
                                into any swap other than for the 
                                purpose of hedging or mitigating 
                                commercial risk; and
                                    ``(II) neither the affiliate nor 
                                any person affiliated with the 
                                affiliate that is not a financial 
                                entity may enter into a swap with or on 
                                behalf of any affiliate that is a 
                                financial entity or otherwise assume, 
                                net, combine, or consolidate the risk 
                                of swaps entered into by any such 
                                financial entity, except one that is an 
                                affiliate that qualifies for the 
                                exception under clause (i).''; and
            (3) by adding at the end the following:
                            ``(vi) Risk management program.--Any swap 
                        entered into by an affiliate that qualifies for 
                        the exception in clause (i) shall be subject to 
                        a centralized risk management program of the 
                        affiliate, which is reasonably designed both to 
                        monitor and manage the risks associated with 
                        the swap and to identify each of the affiliates 
                        on whose behalf a swap was entered into.''.
    (b) Securities Exchange Act of 1934 Amendment.--Section 3C(g)(4) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(4)) is 
amended--
            (1) by redesignating subparagraph (C) as subparagraph (E);
            (2) by striking subparagraphs (A) and (B) and inserting the 
        following:
                    ``(A) In general.--An affiliate of a person that 
                qualifies for an exception under this subsection 
                (including affiliate entities predominantly engaged in 
                providing financing for the purchase of the merchandise 
                or manufactured goods of the person) may qualify for 
                the exception only if the affiliate--
                            ``(i) enters into the security-based swap 
                        to hedge or mitigate the commercial risk of the 
                        person or other affiliate of the person that is 
                        not a financial entity, and the commercial risk 
                        that the affiliate is hedging or mitigating has 
                        been transferred to the affiliate;
                            ``(ii) is directly and wholly-owned by 
                        another affiliate qualified for the exception 
                        under this paragraph or an entity that is not a 
                        financial entity;
                            ``(iii) is not indirectly majority-owned by 
                        a financial entity;
                            ``(iv) is not ultimately owned by a parent 
                        company that is a financial entity; and
                            ``(v) does not provide any services, 
                        financial or otherwise, to any affiliate that 
                        is a nonbank financial company supervised by 
                        the Board of Governors (as defined under 
                        section 102 of the Financial Stability Act of 
                        2010).
                    ``(B) Limitation on qualifying affiliates.--The 
                exception in subparagraph (A) shall not apply if the 
                affiliate is--
                            ``(i) a swap dealer;
                            ``(ii) a security-based swap dealer;
                            ``(iii) a major swap participant;
                            ``(iv) a major security-based swap 
                        participant;
                            ``(v) a commodity pool;
                            ``(vi) a bank holding company;
                            ``(vii) a private fund, as defined in 
                        section 202(a) of the Investment Advisers Act 
                        of 1940 (15 U.S.C. 80-b-2(a));
                            ``(viii) an employee benefit plan or 
                        government plan, as defined in paragraphs (3) 
                        and (32) of section 3 of the Employee 
                        Retirement Income Security Act of 1974 (29 
                        U.S.C. 1002);
                            ``(ix) an insured depository institution;
                            ``(x) a farm credit system institution;
                            ``(xi) a credit union;
                            ``(xii) a nonbank financial company 
                        supervised by the Board of Governors (as 
                        defined under section 102 of the Financial 
                        Stability Act of 2010); or
                            ``(xiii) an entity engaged in the business 
                        of insurance and subject to capital 
                        requirements established by an insurance 
                        governmental authority of a State, a territory 
                        of the United States, the District of Columbia, 
                        a country other than the United States, or a 
                        political subdivision of a country other than 
                        the United States that is engaged in the 
                        supervision of insurance companies under 
                        insurance law.
                    ``(C) Limitation on affiliates' affiliates.--Unless 
                the Commission determines, by order, rule, or 
                regulation, that it is in the public interest, the 
                exception in subparagraph (A) shall not apply with 
                respect to an affiliate if such affiliate is itself 
                affiliated with--
                            ``(i) a major security-based swap 
                        participant;
                            ``(ii) a security-based swap dealer;
                            ``(iii) a major swap participant; or
                            ``(iv) a swap dealer.
                    ``(D) Conditions on transactions.--With respect to 
                an affiliate that qualifies for the exception in 
                subparagraph (A)--
                            ``(i) such affiliate may not enter into any 
                        security-based swap other than for the purpose 
                        of hedging or mitigating commercial risk; and
                            ``(ii) neither such affiliate nor any 
                        person affiliated with such affiliate that is 
                        not a financial entity may enter into a 
                        security-based swap with or on behalf of any 
                        affiliate that is a financial entity or 
                        otherwise assume, net, combine, or consolidate 
                        the risk of security-based swaps entered into 
                        by any such financial entity, except one that 
                        is an affiliate that qualifies for the 
                        exception under subparagraph (A).''; and
            (3) by adding at the end the following:
                    ``(F) Risk management program.--Any security-based 
                swap entered into by an affiliate that qualifies for 
                the exception in subparagraph (A) shall be subject to a 
                centralized risk management program of the affiliate, 
                which is reasonably designed both to monitor and manage 
                the risks associated with the security-based swap and 
                to identify each of the affiliates on whose behalf a 
                security-based swap was entered into.''.

            Passed the House of Representatives November 16, 2015.

            Attest:

                                                 KAREN L. HAAS,

                                                                 Clerk.

Summary: (This measure has not been amended since it was reported to the House on October 26, 2015.  (Sec. 1) This bill amends the Commodity Exchange Act and the Securities Exchange Act of 1934 regarding clearing requirements for certain affiliate swap transactions to revise the conditions under which an affiliate of a person that qualifies for an exception from clearing requirements may itself qualify for such exceptions. The affiliate must be:  directly and wholly-owned by another affiliate qualified for the exception or an entity that is not a financial entity; not indirectly majority-owned by a financial entity; not ultimately owned by a parent company that is a financial entity; and an affiliate that does not provide any services, financial or otherwise, to any affiliate that is a nonbank financial company supervised by the Board of Governors of the Federal Reserve System.  The bill disqualifies for the exceptions, however, any affiliate that is:  a swap dealer, a security-based swap dealer, a major swap participant, a major security-based swap participant, or a commodity pool (all disqualified under current law); a bank holding company (not, as under current law, only a bank holding company with over $50 billion in consolidated assets); a specified kind of private fund; an employee benefit plan or government plan under the Employee Retirement Income Security Act of 1974 (ERISA); an insured depository institution; a farm credit system institution; a credit union; a nonbank financial company supervised by the Federal Reserve Board; or an entity engaged in the business of insurance and subject to state or foreign government capital requirements.  Unless the Commodity Futures Trading Commission or the Securities and Exchange Commission determines it is in the public interest, however, the exception from clearing requirements shall not apply to an affiliate that is itself affiliated with: (1) a major security-based swap participant; (2) a security-based swap dealer; (3) a major swap participant; or (4) a swap dealer. An affiliate that does qualify for the exception from clearing requirements may not enter into any swap other than to hedge or mitigate commercial risk.  The bill also prohibits the affiliate, and any person affiliated with the affiliate that is not a financial entity, from:  entering into a swap with or on behalf of any affiliate that is a financial entity; or otherwise assuming, netting, combining, or consolidating the risk of swaps entered into by any such financial entity, except an affiliate that qualifies for the exception from clearing requirements.   Any swap entered into by an affiliate that qualifies for the exception from clearing requirements shall be subject to the affiliate's centralized risk management program, provided it is designed both to: (1) monitor and manage swap associated risks, and (2) identify each affiliate upon whose behalf a swap was entered into.