Derivatives Oversight and Taxpayer Protection Act

Bill: 114-hr-5592
Sponsor: full_name: Rep. Cummings, Elijah E. [D-MD-7]
Introduced: 2016-06-28
Policy area: Finance and Financial Sector
Subjects: Administrative law and regulatory procedures

Appropriations

Banking and financial institutions regulation

Bankruptcy

Civil actions and liability

Commodities markets

Commodity Futures Trading Commission

Congressional oversight

Executive agency funding and structure

Fraud offenses and financial crimes

Government information and archives

International monetary system and foreign exchange

Securities

User charges and fees
Latest action: action_date: 2016-07-14
text: Referred to the Subcommittee on Commodity Exchanges, Energy, and Credit.

Summaries:
action_date: 2016-06-28
action_desc: Introduced in House
text: <p><b>Derivatives Oversight and Taxpayer Protection Act</b></p> <p>This bill amends the Commodity Exchange Act (CEA) to require the Commodity Futures Trading Commission (CFTC) to collect fees to recover the costs of its regulatory services and its annual appropriation from Congress. </p> <p>The bill increases penalties for CEA violations, removes the Department of the Treasury's authority to exempt foreign exchange swaps or forwards from CFTC regulation, and requires collection of margin on inter-affiliate swaps.</p> <p>Swaps requirements enacted by the Wall Street Transparency and Accountability Act of 2010 that ordinarily do not apply to activities outside the United States are made applicable to swaps transactions in which a financial entity domiciled or organized in the United States bears swaps-related risks. But the CFTC may allow a swaps transaction involving a subsidiary entity that is majority owned or controlled by a financial entity domiciled or organized in the United States to be conducted under a foreign jurisdiction's rules and oversight if the foreign rules are no less stringent than U.S. rules.</p> <p>The CFTC must: (1) make data concerning swap data repository registrations available to other financial regulatory agencies, and (2) revoke the license of swap dealers that the CFTC and the Securities and Exchange Commission have found are not providing accurate data in standardized formats that allow aggregated analysis by regulators. </p> <p>The bill repeals a safe harbor provision under federal bankruptcy law that protects a contractual right to liquidate the amount due on a swap agreement because of a debtor's bankruptcy case. The removal of this safe harbor subjects swap agreements to the regular bankruptcy procedures that automatically stay claims against a debtor.</p> <p>The bill amends the Financial Stability Act of 2010 to require Federal Reserve Board (FRB) risk-based capital requirements and leverage limits for nonbank financial companies supervised by the FRB and bank holding companies with total consolidated assets of $50 billion or more to include the fair value and potential future exposure of derivatives exposures, without recognizing the benefits of netting arrangements. Exceptions are provided for certain formal netting agreements with counterparties or with clearing organizations that meet financial standards approved by the FRB and the Federal Deposit Insurance Corporation (FDIC).</p> <p>The CFTC, the Comptroller of the Currency, the FDIC, and the FRB must report on the ability of clearinghouses to endure systemic stress events. </p>

tv_txt: I 114th CONGRESS 2d Session H. R. 5592 IN THE HOUSE OF REPRESENTATIVES June 28, 2016 Mr. Cummings introduced the following bill; which was referred to the Committee on Agriculture , and in addition to the Committees on Financial Services , and the Judiciary , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend the Commodity Exchange Act to clarify which fees the Commodity Futures Trading Commission may assess and collect, and for other purposes.

1. Short title This Act may be cited as the Derivatives Oversight and Taxpayer Protection Act . I Strengthening oversight and enforcement 101. Fees to recover costs (a) In general The Commodity Exchange Act is amended by inserting after section 10 ( 7 U.S.C. 17 ) the following: 11. Fees to recover costs (a) Recovery of certain costs of annual appropriation (1) In general Effective beginning October 1, 2016, so as to recover the costs to the Federal Government of the annual appropriation to the Commission by Congress, the Commission shall assess and collect fees under this subsection. (2) Requirements Subject to paragraph (3), the Commission may— (A) assess fees to recover the costs of the regulatory services provided by the Commission; and (B) assess fees from registered entities and persons registered under this Act. (3) Service fees The Commission may assess fees to recover the costs of the following regulatory services provided by the Commission: (A) Designated contract market compliance examinations. (B) Foreign board of trade registration reviews. (C) Swap execution facility designation reviews. (D) Swap data repository registration reviews. (E) Designated contract market designation reviews. (F) Swap execution facility compliance examinations. (G) Swap data repository compliance reviews. (H) Designated contract market contract review and approvals. (I) Swap execution facility contract review and approvals. (J) Designated contract market contract certification and rule reviews. (K) Swap execution facility contract certification and rule reviews. (L) Swap data repository rule reviews. (M) Reviews of mergers, transfers, and other action requests from designated contract markets, swap execution facilities, and swap data repositories. (N) Designated self-regulatory organization financial surveillance reviews. (O) Registered futures association compliance program reviews. (P) Derivatives clearing organization reviews. (Q) Futures commission merchant examinations. (R) Registered foreign exchange dealer examinations. (S) Swap dealer registration reviews. (T) Swap dealer examinations. (U) Other entity registration, reviews, or examinations, or other regulatory services provided by the Commission. (4) Fee rates Fees assessed shall— (A) be reasonably related to the cost to the Commission of providing the services of the Commission; (B) take into consideration the full-time equivalent number of employees performing the services, overhead costs, and other factors that the Commission determines are necessary in the public interest; (C) support market access for smaller market participants hedging or mitigating commercial or agricultural risk, including farmers and ranchers; and (D) minimize negative impacts on market liquidity and maintain the efficiency, competitiveness, and financial integrity of futures and swaps markets in the United States. (5) Collection of fees The Commission shall collect fees paid in accordance with paragraph (2) in a manner and within such time as determined by the Commission. (b) Publication Not later than 60 days after the date on which a law providing a regular appropriation to the Commission for a fiscal year is enacted, the Commission shall publish in the Federal Register— (1) notices of the fee rates for the fiscal year, including any estimates or projections on which the fees are based; and (2) a schedule of fees for the fiscal year, including an explanation of the method used for calculating applicable fee rates. (c) Deposit of fees (1) Offsetting collections Fees collected under subsection (a) for any fiscal year— (A) shall be deposited and credited as offsetting collections to the account providing appropriations to the Commission; and (B) except as provided in subsection (e), shall not be collected or available for obligation for any fiscal year except to the extent provided in advance in appropriation Acts. (2) General revenues prohibited No fees collected under subsection (a) shall be deposited and credited as general revenue of the Treasury. (d) Fee orders (1) Annual adjustment For each fiscal year, the Commission shall by order set the fees applicable under subsection (a) for the fiscal year at rates that are reasonably likely to produce aggregate fee collections under this section that are equal to the costs to the Federal Government of the annual appropriation to the Commission by Congress. (2) Mid-year adjustment (A) In general For each fiscal year, the Commission shall determine, not later than March 1 of the fiscal year, whether, based on the actual fees collected during the first 5 months of the fiscal year, the collections generated under the fee rates determined under paragraph (1) for the fiscal year are reasonably likely to be 10 percent (or more) greater or less than the annual appropriation to the Commission for the fiscal year. (B) Adjustment (i) In general If the Commission makes an affirmative determination, the Commission shall by order, not later than March 1, adjust the fees for the fiscal year to rates that are reasonably likely to produce aggregate fee collections under this section that are equal to the cost to the Federal Government of the annual appropriation to the Commission by Congress. (ii) Factors The fee rates shall be assessed based on the same factors described in subsection (a). (e) Lapse of appropriation If on the first day of a fiscal year a regular appropriation to the Commission has not been enacted, the Commission shall continue to collect (as offsetting collections) the fees and assessments under subsection (a) at the rates in effect on September 30 of the preceding fiscal year, until 90 days after the date a regular appropriation is enacted. . (b) Conforming amendments (1) Section 2(d) of the Commodity Exchange Act ( 7 U.S.C. 2(d) ) is amended by striking and 9 and inserting 9, and 11 . (2) Section 4(c)(1)(A)(i)(I) of the Commodity Exchange Act ( 7 U.S.C. 6(c)(1)(A)(i)(I) ) is amended by inserting 11, after 8e, . (3) Section 15(a)(3) of the Commodity Exchange Act ( 7 U.S.C. 19(a)(3) ) is amended by adding at the end the following: (D) An action under section 11. . 102. Civil penalties and fines under the Commodity Exchange Act and related enforcement actions (a) Civil penalties generally Section 6(c)(10) of the Commodity Exchange Act ( 7 U.S.C. 9(10) ) is amended by striking subparagraph (C) and inserting the following: (C) assess such person— (i) a civil penalty of not more than an amount equal to the greater of— (I) $1,000,000, in the case of a person who is an individual, for each violation; (II) $10,000,000, in the case of any person other than an individual, for each violation; (III) triple the monetary gain to the person and all other persons acting in concert with the person, for each such violation; or (IV) triple the total amount of losses to persons proximately caused by each such violation; or (ii) a civil penalty of triple the maximum amount otherwise available under clause (i) if the person, within 5 years preceding the violation, has been— (I) found in a proceeding brought by the Commission, or by agreement of settlement to which the Commission is a party, to have recklessly, knowingly, or willfully violated any provision of this Act or of the rules, regulations, or orders of the Commission thereunder; (II) found in a proceeding brought by the Securities and Exchange Commission, or by agreement of settlement to which the Securities and Exchange Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; (III) found in a proceeding brought by the Federal Energy Regulatory Commission, or by agreement of settlement to which the Federal Energy Regulatory Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Federal Power Act ( 16 U.S.C. 792 et seq. ), the Natural Gas Act ( 15 U.S.C. 717 et seq. ), the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. 2601 et seq. ), the Natural Gas Policy Act of 1978 ( 15 U.S.C. 3301 et seq. ), or the rules, regulations, or orders of the Federal Energy Regulatory Commission issued thereunder; (IV) convicted of any criminal violation of this Act or of the rules, regulations, or orders of the Commission thereunder; (V) convicted of any criminal violation of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; or (VI) convicted of any other criminal offense that involves any conduct, transaction, advice or activity related to any commodity interest, as that term is defined by the Commission, or security-based swap; and . (b) Fines and civil penalties related to violation of cease and desist order Section 6(d) of the Commodity Exchange Act ( 7 U.S.C. 13b ) is amended— (1) by inserting (1) after (d) ; (2) by striking $140,000 or triple the monetary gain to such person, and inserting (A) $1,000,000, in the case of a person who is an individual, for each violation, (B) $10,000,000, in the case of any person other than an individual, for each violation, (C) triple the monetary gain to the person and all other persons acting in concert with the person, for each such violation, or (D) triple the total amount of losses to persons proximately caused by each such violation, ; and (3) by adding at the end the following: (2) A person may be held liable for a civil penalty in triple the amount otherwise available for a violation under this subsection if the person, within 5 years preceding such violation, has been— (A) found in a proceeding brought by the Commission, or by agreement of settlement to which the Commission is a party, to have recklessly, knowingly, or willfully violated any provision of this Act or the rules, regulations, or orders of the Commission thereunder; (B) found in a proceeding brought by the Securities and Exchange Commission, or by agreement of settlement to which the Securities and Exchange Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; (C) found in a proceeding brought by the Federal Energy Regulatory Commission, or by agreement of settlement to which the Federal Energy Regulatory Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Federal Power Act ( 16 U.S.C. 792 et seq. ), the Natural Gas Act ( 15 U.S.C. 717 et seq. ), the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. 2601 et seq. ), the Natural Gas Policy Act of 1978 ( 15 U.S.C. 3301 et seq. ), or the rules, regulations, or orders of the Federal Energy Regulatory Commission issued thereunder; (D) convicted of any criminal violation of this Act or the rules, regulations, or orders of the Commission thereunder; (E) convicted of any criminal violation of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; or (F) convicted of any other criminal offense that involves any conduct, transaction, advice or activity related to any commodity interest, as that term is defined by the Commission, or security-based swap. . (c) Nonenforcement of rules of government or other violations Section 6b of the Commodity Exchange Act ( 7 U.S.C. 13a ) is amended— (1) in the first sentence, by striking $500,000 for each such violation, or, in any case of manipulation or attempted manipulation in violation of section 6(c), 6(d), or 9(a)(2), a civil penalty of not more than $1,000,000 for each such violation and inserting (A) $1,000,000, in the case of a person who is an individual, for each violation, (B) $10,000,000, in the case of any person other than an individual, for each violation, (C) triple the monetary gain to the person and all other persons acting in concert with the person, for each such violation, or (D) triple the total amount of losses to persons proximately caused by each such violation, and such civil penalty shall be assessed for each violation on which a failure to enforce or other violation occurs or has occurred; provided that such registered entity, director, officer, agent, or employee may be assessed a civil penalty of triple the amount otherwise available if the person, within 5 years of such violation, has been (i) found in a proceeding brought by the Commission, or by agreement of settlement to which the Commission is a party, to have recklessly, knowingly, or willfully violated any provision of this Act or the rules, regulations, or orders of the Commission thereunder, (ii) found in a proceeding brought by the Securities and Exchange Commission, or by agreement of settlement to which the Securities and Exchange Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder, (iii) found in a proceeding brought by the Federal Energy Regulatory Commission, or by agreement of settlement to which the Federal Energy Regulatory Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Federal Power Act ( 16 U.S.C. 792 et seq. ), the Natural Gas Act ( 15 U.S.C. 717 et seq. ), the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. 2601 et seq. ), the Natural Gas Policy Act of 1978 ( 15 U.S.C. 3301 et seq. ), or the rules, regulations, or orders of the Federal Energy Regulatory Commission issued thereunder; (iv) convicted of any criminal violation of this Act or the rules, regulations, or orders of the Commission thereunder; (v) convicted of any criminal violation of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; or (vi) convicted of any other criminal offense that involves any conduct, transaction, advice or activity related to any commodity interest, as that term is defined by the Commission, or security-based swap ; and (2) in the second sentence, by striking $500,000 and inserting $1,000,000 . (d) Action To enjoin or restrain violations Section 6c(d) of the Commodity Exchange Act ( 7 U.S.C. 13a–1(d) ) is amended— (1) in paragraph (1), by inserting a civil penalty in the amount of after violation ; and (2) by striking subparagraphs (A) and (B) of paragraph (1) and inserting the following: (A) not more than the greater of— (i) $1,000,000, in the case of a person who is an individual, for each violation; (ii) $10,000,000, in the case of any person other than an individual, for each violation; (iii) triple the monetary gain to the person and all other persons acting in concert with the person, for each such violation; or (iv) triple the total amount of losses by persons proximately caused by each such violation; or (B) triple the maximum amount otherwise available under subparagraph (A) if the person, within 5 years preceding the violation, has been— (i) found in a proceeding brought by the Commission, or by agreement of settlement to which the Commission is a party, to have recklessly, knowingly, or willfully violated any provision of this Act or of the rules, regulations, or orders of the Commission thereunder; (ii) found in a proceeding brought by the Securities and Exchange Commission, or by agreement of settlement to which the Securities and Exchange Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Commission thereunder; (iii) found in a proceeding brought by the Federal Energy Regulatory Commission, or by agreement of settlement to which the Federal Energy Regulatory Commission is a party, to have recklessly, knowingly, or willfully violated any provision of the Federal Power Act ( 16 U.S.C. 792 et seq. ), the Natural Gas Act ( 15 U.S.C. 717 et seq. ), the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. 2601 et seq. ), the Natural Gas Policy Act of 1978 ( 15 U.S.C. 3301 et seq. ), or the rules, regulations, or orders of the Federal Energy Regulatory Commission issued there­un­der; (iv) convicted of any criminal violation of this Act or of the rules, regulations, or orders of the Commission thereunder; (v) convicted of any criminal violation of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or of the rules, regulations, or orders of the Securities and Exchange Commission thereunder; or (vi) convicted of any other criminal offense that involves any conduct, transaction, advice or activity related to any commodity interest, as that term is defined by the Commission, or security-based swap. . (e) Criminal penalties Section 9(a) of the Commodity Exchange Act ( 7 U.S.C. 13(a) ) is amended in the matter preceding paragraph (1) by inserting after $1,000,000 the following: in the case of an individual for each violation or $10,000,000 in the case of any person other than an individual for each violation, . (f) Statute of limitations Section 9 of the Commodity Exchange Act ( 7 U.S.C. 13 ) is amended by adding at the end the following: (f) Statute of limitations (1) In general An action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within 10 years after the date when the cause of action first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon. (2) Accrual A cause of action accrues as of the date the Commission learns of facts sufficient to give the Commission notice that a violation has occurred. . (g) Effective date The amendments made by this section shall take effect on the date that is 90 days after the date of the enactment of this Act. 103. Closing the cross-border loophole Section 2(i) of the Commodity Exchange Act ( 7 U.S.C. 2(i) ) is amended— (1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; (2) in the matter preceding subparagraph (A), as so redesignated, by striking The provisions and inserting the following: (1) In general The provisions ; (3) in paragraph (1), as so designated— (A) in subparagraph (A), as so redesignated, by striking or at the end; (B) in subparagraph (B), as so redesignated, by striking the period at the end and inserting ; or ; and (C) by adding at the end the following: (C) except as provided in paragraph (2), involve a swaps transaction in which a financial entity that is domiciled or organized in the United States, or a subsidiary entity that is majority owned or controlled by a financial entity that is domiciled or organized in the United States, bears swaps-related risks. ; and (4) by adding at the end the following: (2) Substituted compliance Notwithstanding paragraph (1)(C), the Commission may allow a swaps transaction that involves a subsidiary entity that is majority owned or controlled by a financial entity that is domiciled or organized in the United States to be conducted in whole or in part under the rules and oversight of a foreign jurisdiction if the Commission determines, by rule, that— (A) the applicable elements of the foreign rules are substantively equivalent to, or offer greater protection than, the applicable rules in the United States; and (B) enforcement of and oversight with respect to the rules described in subparagraph (A) is not less stringent than enforcement of and oversight with respect to the applicable rules in the United States. . 104. Providing oversight of foreign exchange swaps Section 1a(47) of the Commodity Exchange Act ( 7 U.S.C. 1a(47) ) is amended by striking subparagraph (E) and inserting the following: (E) Treatment of foreign exchange swaps and forwards Foreign exchange swaps and foreign exchange forwards shall be considered swaps under this paragraph. . 105. Improving data sharing between regulators Section 21 of the Commodity Exchange Act ( 7 U.S.C. 24a ) is amended by adding at the end the following: (i) Data sharing The Commission shall make data with respect to any person that is required to be registered as a swap data repository under this section available to any other financial regulatory agency— (1) upon request; and (2) as soon as is practicable after receiving a request. . 106. Improving data quality and accessibility Section 4s of the Commodity Exchange Act ( 7 U.S.C. 6s ) is amended by adding at the end the following: (m) Data quality and accessibility (1) In general Not later than 2 years after the date of enactment of this subsection, the Commission and the Securities and Exchange Commission shall determine whether the data that swap dealers registered under this section provide to swap data repositories— (A) are accurate; and (B) use consistent and standardized formats that allow that data to be aggregated and analyzed by regulators. (2) Penalty The Commission shall revoke the license of any swap dealer that the Commission and the Securities and Exchange Commission has found violated paragraph (1). . II Shifting derivatives risks from taxpayers to financial institutions 201. Ending favorable treatment of derivatives in bankruptcy Section 560 of title 11, United States Code, is repealed. 202. Reversing the CFTC's interaffiliate margin exception Not later than 180 days after the date of enactment of this Act, the Commodity Futures Trading Commission shall modify the rule on margin requirements entitled Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (81 Fed. Reg. 636 (January 6, 2016)) to require entities to collect margin in all interaffiliate swaps. 203. Banning closeout netting for capital purposes; ensuring minimum capital Section 165(b)(1) of the Financial Stability Act of 2010 ( 12 U.S.C. 5365(b)(1) ) is amended by adding at the end the following: (C) Consolidated assets (i) Definition In this subparagraph, the term covered financial institution means— (I) a swap dealer registered under section 4s of the Commodity Exchange Act ( 7 U.S.C. 6s ); (II) a security-based swap dealer, as defined in section 3(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a) ); (III) an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 ); (IV) a nonbank financial company supervised by the Board of Governors; (V) a major swap participant, as defined in section 1a of the Commodity Exchange Act ( 7 U.S.C. 1a ); (VI) a bank holding company described in subsection (a); and (VII) any subsidiary of a bank holding company described in subsection (a). (ii) In general For purposes of determining the amount of capital required under the risk-based capital requirements and leverage limits required under subparagraph (A)(i), consolidated assets shall include the fair value and potential future exposure of derivatives exposures, without recognizing the benefits of any netting arrangement, unless the netting arrangement— (I) (aa) is documented under a formal master netting agreement or other formal arrangement with a derivatives clearing organization registered with a primary Federal financial regulatory agency; and (bb) meets financial standards approved by the Board of Governors and the Corporation; or (II) (aa) is documented under a formal master netting agreement with a counterparty; and (bb) requires the covered financial institution, as a matter of ongoing business practice, to— (AA) exchange collateral daily for the fulfillment of variation margin requirements on a net basis; and (BB) fulfill all contractual payment requirements, including payments for contract determination, on a net basis, with such net exchange of collateral and payments encompassing all derivatives exposures covered by the formal arrangement. (D) Total derivatives risk exposures For purposes of determining the amount of capital required under leverage limits required under subparagraph (A)(i)— (i) total derivatives risk exposures shall not be assessed at a level less than 2 percent of total gross notional derivatives contracts to which the covered financial institution, as defined in subparagraph (C)(i), is a party; and (ii) such leverage limits shall not vary for derivatives exposures as compared to other assets. . 204. Report on clearinghouses (a) In general Not later than 1 year after the date of enactment of this Act, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System shall jointly publish a report that answers the following questions: (1) Are prefunded default funds at major clearinghouses, along with prefunded liquidity resources, adequate to absorb losses and continue operations in the event of the failure of multiple large clearing members during a systemic stress event affecting the financial system as a whole? (2) Are capital and liquidity resources associated with cleared derivatives at clearinghouse members adequate to meet clearinghouse capital and margin calls that might occur during a systemic stress event associated with the failure of multiple large clearing members during a systemic stress event? (3) Based on planned resource levels at clearinghouses and major clearing members, in what ways might a lack of prefunded resources at a clearing house, or the level of member capital and liquidity resources associated with cleared derivatives, contribute to increased financial system stress during a systemic event? (4) How would the answers to the questions in paragraphs (1) through (3) be affected if portfolio correlation levels in clearinghouse margin and default fund models were significantly lower than those assumed in current risk models? (5) Are such lower correlation levels possible in a stress event? (6) Are capital levels held by clearinghouses currently adequate to align risk management incentives between clearinghouses themselves, their members, and end user clients of their members? (7) Do the fiduciary duties of clearinghouse management to their stockholders in any way conflict with the public interest? (b) Policy recommendations The report required under subsection (a) shall contain policy recommendations associated with the answers to the questions posed under paragraphs (1) through (7) of that subsection.